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Real Estate Investments | 9 Months Ended
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Sep. 30, 2024
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 (collectively “ALF”). Any reference to the number of properties or facilities, number of units, number of beds, number of operators 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. Our owned properties are leased pursuant to non-cancelable operating leases. 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 majority of our leases contain provisions for specified annual increases over the rents of the prior year. The following table summarizes our investments in owned properties at September 30, 2024 (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 | ​ | $ | 732,120 | ​ | 54.5 | % | 73 | ​ | — | ​ | 4,341 | ​ | $ | 168.65 | ​
Skilled Nursing | ​ | ​ | 598,063 | ​ | 44.6 | % | 50 | ​ | 6,113 | ​ | 236 | ​ | $ | 94.20 | ​
Other (2) | ​ | ​ | 12,005 | ​ | 0.9 | % | 1 | ​ | 118 | ​ | — | ​ | ​ | — | ​
Total | ​ | $ | 1,342,188 | ​ | 100.0 | % | 124 | ​ | 6,231 | ​ | 4,577 | ​ | ​ | ​ | ​
(1) | We own properties in 23 states that are leased to 23 different operators.
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(2) | Includes three parcels of land held-for-use, and one behavioral health care hospital.
Many of our existing leases contain renewal options that, if exercised, could result in the amount of rent payable upon renewal being greater or less than that currently being paid. During 2023, Brookdale Senior Living Communities, Inc. (“Brookdale”) elected not to exercise its renewal option under a master lease that matured on December 31, 2023. The 35-property assisted living portfolio was apportioned as follows (dollar amounts in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Type | ​ | Number | ​ | ​ | Number | ​ | ​ | First | ​ | ​ | ​ | ​ | ​
Lease | ​ | ​ | ​ | of | ​ | of | ​ | ​ | of | ​ | ​ | Year | ​ | ​ | Lease | ​ | ​
Commencement | ​ | State | ​ | Property | ​ | Properties | ​ | ​ | Units | ​ | ​ | Rent | ​ | ​ | Term | ​ | ​
November 2023 | ​ | OK | ​ | ALF | ​ | 5 | (1) | ​ | 184 | ​ | $ | 960 | ​ | ​ | Three years | ​ | ​
January 2024 | ​ | CO, KS, OH, TX | ​ | ALF | ​ | 17 | (2) | ​ | 738 | ​ | ​ | 9,325 | ​ | ​ | Six years | ​ | ​
January 2024 | ​ | NC | ​ | ALF | ​ | 5 | (3) | ​ | 210 | ​ | ​ | 3,300 | ​ | ​ | Six years | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | 27 | ​ | ​ | 1,132 | ​ | $ | 13,585 | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Type | ​ | Number | ​ | ​ | Number | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | of | ​ | of | ​ | ​ | of | ​ | ​ | Sales | ​ | ​ | Net | ​ | ​
Year sold | ​ | State | ​ | Property | ​ | Properties | ​ | ​ | Units | ​ | ​ | Price | ​ | ​ | Proceeds (4) | ​ | ​
2023 | ​ | FL | ​ | ALF | ​ | 4 | ​ | ​ | 176 | ​ | $ | 18,750 | ​ | $ | 14,310 | (5) | ​
2023 | ​ | OK | ​ | ALF | ​ | 1 | ​ | ​ | 37 | ​ | ​ | 800 | ​ | ​ | 769 | ​ | ​
2023 | ​ | SC | ​ | ALF | ​ | 3 | ​ | ​ | 128 | ​ | ​ | 8,409 | ​ | ​ | 8,153 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | 8 | ​ | ​ | 341 | ​ | $ | 27,959 | ​ | $ | 23,232 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total | ​ | ​ | ​ | ​ | ​ | 35 | ​ | ​ | 1,473 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(1) | These communities were transitioned to an existing LTC operator. The new master lease includes a purchase option that can be exercised starting in November 2027 through October 2029 if the lessee exercises its four-year extension option. Rent increases to $984 in the second year, and $1,150 in the third year.
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(2) | These communities were re-leased to Brookdale under a new master lease. Rent escalates by approximately 2.0% annually. The new master lease includes a purchase option that can be exercised in 2029. We also agreed to fund $7,200 for capital expenditures for the first two years of the lease at an initial rate of 8.0% escalating by approximately 2.0% annually thereafter.
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(3) | These communities were transitioned to an operator new to us. Rent escalates by approximately 3.0% annually.
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(4) | Net of transaction costs and seller financing, if any.
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(5) | We provided seller financing collateralized by two of the Florida properties, with a total of 92 units. The $4,000 seller-financed mortgage loan has a two-year term, with a one-year extension, at an interest rate of 8.75%.
During the three months ended March 31, 2024, a master lease covering 11 skilled nursing centers, that was scheduled to mature in January 2024, was renewed for seven months extending the maturity to August 2024. The centers have a total of 1,444 beds and are located in Texas. During the three months ended June 30, 2024, this master lease was amended to extend the lease term to December 31, 2028, with two five-year renewal options. The annual rent increased from $8,000,000 to $9,000,000 for 2024. Rent will increase to $9,500,000 for 2025, and $10,000,000 for 2026, escalating 3.3% annually thereafter. As a condition of the amended master lease, the operator paid $11,986,000 during 2024, towards its $13,531,000 working capital note. The remaining $1,545,000 balance of the working capital note is interest-free and will be repaid in installments through 2028. Additionally, during 2024, another operator exercised its renewal option under its master lease for five years, from March 2025 through February 2030. Annual cash rent for 2024 is $8,004,000 escalating 2.5% annually. The master lease covers 666 beds across four skilled nursing centers, three in Texas and one in Wisconsin, and a behavioral health care hospital in Nevada. We monitor the collectability of our receivable balances, including deferred rent receivable balances, on an ongoing basis. We write-off uncollectible operator receivable balances, including straight- line rent receivable and lease incentives balances, as a reduction to rental income in the period such balances are no longer probable of being collected. Therefore, recognition of rental income is limited to the lesser of the amount of cash collected or rental income reflected on a “straight-line” basis for those customer receivable balances deemed uncollectible. During the three months ended September 30, 2024 and 2023, we had no uncollectible lease incentives or straight-line rent receivables to write-off. During the nine months ended September 30, 2024 and 2023, we wrote-off uncollectible straight-line rent receivable and lease incentive balances of $321,000 and $26,000, respectively. We continue to take into account the current financial condition of our operators, in our estimation of uncollectible accounts at September 30, 2024. We are closely monitoring the collectability of such rents and will adjust future estimations as appropriate as further information becomes known. The following table summarizes components of our rental income for the three and nine months ended September 30, 2024 and 2023 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Nine Months Ended
​ | ​ | September 30, | ​ | September 30,
Rental Income | ​ | ​ | 2024 | ​ | ​ | 2023 | ​ | ​ | 2024 | ​ | ​ | 2023 | ​
Contractual cash rental income | ​ | $ | 29,215 | ​ | $ | 29,065 | ​ | $ | 89,142 | (1) | $ | 87,204 | (1)
Variable cash rental income | ​ | ​ | 3,194 | ​ | ​ | 3,442 | ​ | ​ | 9,830 | ​ | ​ | 9,902 | ​
Straight-line rent | ​ | ​ | 37 | (2) | ​ | (747) | (2) | ​ | (561) | (2) | ​ | (1,635) | (2)
Adjustment of lease incentives and rental income | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (321) | (3) | ​ | (26) | (4)
Amortization of lease incentives | ​ | ​ | (188) | ​ | ​ | (171) | ​ | ​ | (626) | ​ | ​ | (584) | ​
Total | ​ | $ | 32,258 | ​ | $ | 31,589 | ​ | $ | 97,464 | ​ | $ | 94,861 | ​
(1) | Increased primarily due to $2,377 repayment of rent credit in connection with the sale of our interest in a consolidated joint venture (“JV), rental income from 2023 acquisitions and annual rent escalations and contractual rent increases, partially offset by property sales and transitioned portfolios.
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(2) | Straight-line rent income increased due to lease extensions and more leases accounted for on a straight-line basis.
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(3) | Represents a straight-line rent receivable write-off related to a lease converting to periodic fair market rent resets.
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(4) | Represents lease incentive balance write-offs related to lease terminations.
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 amounts in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Type | ​ | Number | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | of | ​ | of | ​ | ​ | Gross | ​ | ​ | Net Book | ​ | Option | ​
State | ​ | Property | ​ | Properties | ​ | ​ | Investments (1) | ​ | ​ | Value | ​ | Window | ​
California | ​ | ALF/MC | ​ | 2 | ​ | $ | 38,895 | ​ | $ | 32,072 | ​ | 2020-2029 | ​
Colorado/Kansas/Ohio/Texas | ​ | ALF/MC | ​ | 17 | ​ | ​ | 63,576 | ​ | ​ | 29,928 | ​ | 2029 | (2)
Florida | ​ | SNF | ​ | 3 | ​ | ​ | 76,625 | ​ | ​ | 76,625 | ​ | 2025-2027 | ​
Georgia/South Carolina | ​ | ALF/MC | ​ | 2 | ​ | ​ | 31,904 | ​ | ​ | 24,721 | ​ | 2027 | ​
North Carolina | ​ | ALF/MC | ​ | 11 | ​ | ​ | 121,419 | ​ | ​ | 121,419 | ​ | 2025-2028 | (3)
North Carolina | ​ | ALF | ​ | 5 | ​ | ​ | 14,654 | ​ | ​ | 6,876 | ​ | 2029 | (4)
North Carolina | ​ | ALF | ​ | 4 | ​ | ​ | 41,000 | ​ | ​ | 41,000 | ​ | 2024-2028 | (5)
North Carolina/ South Carolina | ​ | ALF/MC | ​ | 13 | ​ | ​ | 122,460 | ​ | ​ | 122,460 | ​ | 2024-2028 | (6)
Ohio | ​ | MC | ​ | 1 | ​ | ​ | 16,161 | ​ | ​ | 13,158 | ​ | 2024-2025 | ​
Ohio | ​ | ILF/ALF/MC | ​ | 1 | ​ | ​ | 54,782 | ​ | ​ | 51,877 | ​ | 2025-2027 | ​
Oklahoma | ​ | ALF/MC | ​ | 5 | ​ | ​ | 11,221 | ​ | ​ | 4,170 | ​ | 2027-2029 | (7)
Tennessee | ​ | SNF | ​ | 2 | ​ | ​ | 5,275 | ​ | ​ | 2,157 | ​ | 2023-2024 | ​
Texas | ​ | SNF | ​ | 4 | ​ | ​ | 52,726 | ​ | ​ | 49,332 | ​ | 2027-2029 | (8)
Texas | ​ | MC | ​ | 1 | ​ | ​ | 12,743 | ​ | ​ | 9,440 | ​ | 2026-2028 | (9)
Total | ​ | ​ | ​ | ​ | ​ | $ | 663,441 | ​ | $ | 585,235 | ​ | ​ | ​
(1) | Gross investments include previously recorded impairment losses, if any.
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(2) | During 2023, we re-leased 17 ALFs with a total of 738 units to Brookdale under a new six-year master lease. The new master lease commenced in January 2024 and includes a purchase option that can be exercised in 2029. See above for more information.
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(3) | During 2023, we entered into a JV that purchased 11 ALFs and MCs with a total of 523 units and leased the communities under a 10-year master lease. The master lease provides the operator with the option to buy up to 50% of the properties at the beginning of the third lease year, and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit Internal Rate of Return (“IRR”) of 9.0% on any portion of the properties being purchased. For more information regarding this transaction see Financing Receivables below.
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(4) | During 2023, we transferred five ALFs with a total of 210 units from Brookdale to an operator new to us. The new master lease commenced in January 2024 and includes a purchase option that can be exercised in 2029. See above for more information.
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(5) | During 2024, we entered into a joint venture agreement with ALG Senior Living (“ALG”) and obtained a 92.7% controlling interest in the $41,000 newly formed JV that owns four ALFs in North Carolina with a total of 217 units. The JV leased the communities back to an affiliate of the seller under a 10-year master lease agreement. The master lease includes a purchase option that can be exercised through 2028, with an exit IRR of 8.0%. For more information regarding this transaction see Financing Receivables below.
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(6) | During 2024, we entered into a joint venture agreement with ALG and obtained a 52.6% controlling interest in the $122,460 newly formed JV that owns 13 ALFs and MCs in North Carolina (12) and South Carolina (1) with a total of 523 units. The JV leased the communities back to an affiliate of the seller under a 10-year master lease agreement. The master lease includes a purchase option that can be exercised through 2028, with an exit IRR of 8.0%. For more information regarding this transaction see Financing Receivables below.
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(7) | During 2023, we transferred five ALFs in Oklahoma with a total of 184 units from Brookdale to an existing operator. The new master lease commenced in November 2023 and includes a purchase option that can be exercised starting in November 2027 through October 2029 if the lessee exercises its four-year extension option. See above for more information.
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(8) | During 2022, we purchased four skilled nursing centers 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 option is elected within the timeframe defined in the lease, both elections are terminated. For more information regarding the earn-out see Note 9. Commitments and Contingencies.
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(9) | During 2024, we transferred this community to an operator new to us. The new master lease commenced in April 2024 and includes a purchase option that can be exercised in May 2026 through April 2028, if the lessee exercises its one-year extension option.
Impairment Loss. During the three and nine months ended September 30, 2024, we did not record an impairment loss. During the first and second quarter of 2023, in conjunction with ongoing negotiations and planned sale of two assisted living communities located in Florida and one assisted living community located in Mississippi, we performed recoverability analysis on the carrying value of these communities and concluded that their carrying values may not be recoverable through future undiscounted cash flows. Accordingly, during the three and nine months ended September 30, 2023, we recorded impairment loss of $0 and $12,510,000, respectively. The following table summarizes information regarding impairment losses recorded during the nine months ended September 30, 2024 and 2023 (dollar amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Type | ​ | Number | ​ | Number | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | of | ​ | of | ​ | of | ​ | Impairment | ​
Year | ​ | State | ​ | Properties | ​ | Properties | ​ | Beds/Units | ​ | Loss | ​
2024 | ​ | n/a | ​ | n/a | ​ | — | ​ | — | ​ | $ | — | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2023 | ​ | Florida | ​ | ALF | ​ | 1 | ​ | 70 | ​ | $ | 434 | (1)
​ | ​ | Florida | ​ | ALF | ​ | 1 | ​ | 60 | ​ | ​ | 7,522 | ​
​ | ​ | Mississippi | ​ | ALF | ​ | 1 | ​ | 67 | ​ | ​ | 4,554 | (2)
​ | ​ | ​ | ​ | ​ | ​ | 3 | ​ | 197 | ​ | $ | 12,510 | ​
(1) | In conjunction with the ongoing negotiations to sell this community, we recorded a $434 impairment loss during the three months ended March 31, 2023, and a $1,222 impairment loss during the fourth quarter of 2022. This community was sold during the second quarter of 2023 for $4,850 and we recorded a net gain on sale of real estate of $64 as a result of this transaction.
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(2) | This community was sold during the fourth quarter of 2023 for $1,650 and we recorded a net loss on sale of real estate of $219 as a result of this transaction.
Properties Held -for-Sale. The following summarizes our held-for-sale properties as of September 30, 2024 and December 31, 2023 (dollar amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Type | ​ | Number | ​ | Number | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | of | ​ | of | ​ | of | ​ | ​ | Gross | ​ | ​ | Accumulated | ​ | ​ | ​
​ | ​ | State | ​ | Property | ​ | Properties | ​ | Beds/units | ​ | ​ | Investment | ​ | ​ | Depreciation | ​ | ​ | ​
At September 30, 2024 | ​ | CO | ​ | ALF | (1) | 1 | ​ | — | (1) | $ | 5,852 | ​ | $ | (1,794) | ​ | ​ | ​
At December 31, 2023 | ​ | WI | ​ | ALF | (2) | 1 | ​ | 110 | ​ | $ | 22,007 | ​ | $ | (3,616) | ​ | ​ | ​
(1) | Subsequent to September 30, 2024, this closed property was sold for $5,250.
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(2) | This community was sold during the three months ended March 31, 2024.
Acquisitions. The following table summarizes our acquisitions for the nine months ended September 30, 2024 and 2023 (dollar amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Cash | ​ | ​ | ​ | ​ | Non- | ​ | ​ | ​ | ​ | ​ | ​ | Number | ​ | Number
​ | ​ | ​ | ​ | Paid at | ​ | Assumed | ​ | ​ | Controlling | ​ | Transaction | ​ | ​ | Assets | ​ | of | ​ | of
Year | ​ | Type of Property | ​ | Acquisition | ​ | Liabilities | ​ | ​ | Interest | ​ | Costs | ​ | ​ | Acquired | ​ | Properties | ​ | Beds/Units
2024 | ​ | OTH (1) | ​ | $ | 300 | ​ | $ | — | ​ | $ | — | ​ | $ | 19 | ​ | $ | 319 | ​ | — | ​ | —
2023 | ​ | ALF (2) | ​ | ​ | 43,759 | ​ | ​ | 9,767 | ​ | ​ | 9,133 | ​ | ​ | 363 | ​ | ​ | 63,022 | (3) | 1 | ​ | 242
(1) | We acquired a parcel of land in Kansas adjacent to an existing community operated by Brookdale. Rent was increased by 8.0% of our total cost of the investment.
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(2) | We entered into a $54,134 JV and contributed $45,000 into the JV that purchased an ILF/ALF/MC in Ohio. Under the JV agreement, the seller, our JV partner, has the option to purchase the campus between the third and fourth lease years for LTC’s allocation of the JV investment plus an IRR of 9.75%. The campus was leased to Encore Senior Living (“Encore”) under a 10-year term with an initial yield of 8.25% on LTC’s allocation of the JV investment. LTC committed to fund $2,100 of lease incentives under the Encore lease.
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(3) | Includes $8,585 tax abatement intangible included in the Prepaid expenses and other assets line item in our Consolidated Balance Sheets.
Intangible Assets. We make estimates as part of our allocation of the purchase price of acquisitions to various components of acquisition based upon the fair value of each component. In determining fair value, we use current appraisals or other third-party opinions of value. The most significant components of our allocations are typically the allocation of fair value to land and buildings, and for certain of our acquisitions, in-place leases and other intangible assets. In the case of the value of in-place leases, we make the best estimates based on the evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during the hypothetical expected lease-up periods, market conditions and costs to execute similar leases. The following is a summary of the carrying amount of intangible assets as of September 30, 2024 and December 31, 2023 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2024 | ​ | December 31, 2023
​ | ​ | ​ | ​ | ​ | ​ | ​ | Accumulated | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Accumulated | ​ | ​ | ​ | ​
Assets | ​ | ​ | Cost | ​ | ​ | ​ | Amortization | ​ | ​ | ​ | Net | ​ | ​ | Cost | ​ | ​ | ​ | Amortization | ​ | ​ | ​ | Net
In-place leases | ​ | $ | 11,155 | (1) | ​ | $ | (6,650) | (2) | ​ | $ | 4,505 | ​ | $ | 11,348 | (1) | ​ | $ | (6,109) | (2) | ​ | $ | 5,239
Tax abatement intangible | ​ | $ | 8,309 | (3) | ​ | $ | (924) | (3) | ​ | $ | 7,385 | ​ | $ | 8,309 | (3) | ​ | $ | (405) | (3) | ​ | $ | 7,904
(1) | Included in the Buildings and improvements line item in our Consolidated Balance Sheets.
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(2) | Included in the Accumulated depreciation and amortization line item in our Consolidated Balance Sheets.
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(3) | Included in the Prepaid expenses and other assets line item in our Consolidated Balance Sheets.
Improvements. During the nine months ended September 30, 2024 and 2023, we invested in the following capital improvement projects (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30,
Type of Property | ​ | 2024 | ​ | 2023 | ​
Assisted Living Communities | ​ | $ | 8,663 | ​ | $ | 2,418 | ​
Skilled Nursing Centers | ​ | ​ | 1,245 | ​ | ​ | 2,548 | ​
Other | ​ | ​ | — | ​ | ​ | 87 | ​
Total | ​ | $ | 9,908 | ​ | $ | 5,053 | ​
​ Properties Sold. During the three and nine months ended September 30, 2024, we recorded a net gain on sale of real estate of $3,663,000 and $6,882,000, respectively. During the three and nine months ended September 30, 2023, we recorded a net gain on sale of real estate of $4,870,000 and $20,545,000, respectively. The following table summarizes property sales during the nine months ended September 30, 2024 and 2023 (dollar amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Type | ​ | Number | ​ | Number | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | of | ​ | of | ​ | of | ​ | ​ | Sales | ​ | ​ | Carrying | ​ | ​ | Net | ​
Year | ​ | State | ​ | Properties | ​ | Properties | ​ | Beds/Units | ​ | ​ | Price | ​ | ​ | Value | ​ | ​ | (Loss) Gain (1) | ​
2024 | ​ | Florida | ​ | ALF | ​ | 1 | ​ | 60 | ​ | $ | 4,500 | ​ | $ | 4,579 | ​ | $ | (289) | ​
​ | ​ | Texas | ​ | ALF | ​ | 5 | ​ | 208 | ​ | ​ | 1,600 | ​ | ​ | 1,282 | ​ | ​ | (390) | ​
​ | ​ | Texas | ​ | ALF | ​ | 2 | ​ | — | ​ | ​ | 500 | ​ | ​ | 389 | ​ | ​ | — | ​
​ | ​ | Texas | ​ | ALF | ​ | 1 | ​ | 80 | ​ | ​ | 7,959 | (2) | ​ | 4,314 | ​ | ​ | 3,635 | ​
​ | ​ | Wisconsin | ​ | ALF | ​ | 1 | ​ | 110 | ​ | ​ | 20,193 | (3) | ​ | 16,195 | ​ | ​ | 3,986 | ​
​ | ​ | n/a | ​ | n/a | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (60) | (4)
Total (5) | ​ | ​ | ​ | ​ | ​ | 10 | ​ | 458 | ​ | $ | 34,752 | ​ | $ | 26,759 | ​ | $ | 6,882 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2023 | ​ | Florida | ​ | ALF | ​ | 1 | ​ | 70 | ​ | $ | 4,850 | ​ | $ | 4,082 | ​ | $ | 65 | ​
​ | ​ | Kentucky | ​ | ALF | ​ | 1 | ​ | 60 | ​ | ​ | 11,000 | ​ | ​ | 10,720 | ​ | ​ | 57 | ​
​ | ​ | New Jersey | ​ | ALF | ​ | 1 | ​ | 39 | ​ | ​ | 2,000 | ​ | ​ | 1,552 | ​ | ​ | 266 | ​
​ | ​ | New Mexico | ​ | SNF | ​ | 2 | ​ | 235 | ​ | ​ | 21,250 | ​ | ​ | 5,523 | ​ | ​ | 15,287 | ​
​ | ​ | Nebraska | ​ | ALF | ​ | 3 | ​ | 117 | ​ | ​ | 2,984 | ​ | ​ | 2,934 | ​ | ​ | — | ​
​ | ​ | Pennsylvania | ​ | ALF | ​ | 2 | ​ | 130 | ​ | ​ | 11,128 | ​ | ​ | 6,054 | ​ | ​ | 4,870 | ​
Total | ​ | ​ | ​ | ​ | ​ | 10 | ​ | 651 | ​ | $ | 53,212 | ​ | $ | 30,865 | ​ | $ | 20,545 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(
(1) | Calculation of net gain includes cost of sales and write-off of straight-line receivable and lease incentives, when applicable.
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(2) | Additionally, as part of the negotiated sale, we received an additional $441 representing rental income through lease maturity in January 2025.
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(3) | Represents the price to sell our portion of interest in a JV, net of the JV partner’s $2,305 contributions in the joint venture.
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(4) | We recognized additional loss due to additional incurred costs related to properties sold during 2023.
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(5) | Subsequent to September 30, 2024, we sold a closed ALF located in Colorado for $5,250. At September 30, 2024, the community was classified as held-for-sale and had a gross book value of $5,852 and a net book value of $4,058.
Financing Receivables. As part of our acquisitions, we may invest in sale and leaseback transactions. In accordance with the accounting guidance, we must determine whether each sale and leaseback transaction qualifies as a sale. Generally, an option for the seller-lessee to repurchase a real estate asset precludes accounting for the transfer of the asset as a sale and the purchased assets should be presented as financing receivables. During 2022 through 2024, we entered into joint venture agreements and contributed into these JVs for the purchase of properties through sale and leaseback transactions. Concurrently, each of these JVs leased the purchased properties back to an affiliate of the seller and provided the seller-lessee with purchase options. Accordingly, these sale and leaseback transactions meet the accounting criteria to be presented as financing receivables. Furthermore, we determined that we exercise power over and receive benefits from each of these joint ventures. Therefore, we consolidated the joint ventures as Financing Receivables on our Consolidated Balance Sheets and recorded the rental revenue from these joint ventures as Interest income from financing receivables on our Consolidated Statements of Income. ​ The following tables provide information regarding our investments in financing receivables (dollar amounts in thousands):
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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Type | ​ | Number | ​ | Number | ​ | ​ | Investment
Interest | ​ | Investment | ​ | ​ | ​ | ​ | ​ | ​ | Gross | ​ | ​ | LTC | ​ | of | ​ | of | ​ | of | ​ | ​ | per
Rate | ​ | Year | ​ | Maturity | ​ | State | ​ | ​ | Investments | ​ | ​ | Investment | ​ | Properties | ​ | Properties | ​ | Beds/Units | ​ | ​ | Bed/Unit
7.25% | (1) | 2022 | ​ | 2032 | ​ | FL | ​ | $ | 76,626 | ​ | $ | 62,301 | ​ | SNF | ​ | 3 | ​ | 299 | ​ | $ | 256.27
7.25% | (2) | 2023 | ​ | 2033 | ​ | NC | ​ | ​ | 121,419 | ​ | ​ | 117,588 | ​ | ALF/MC | ​ | 11 | ​ | 523 | ​ | $ | 232.16
7.25% | (3) | 2024 | ​ | 2034 | ​ | NC/SC | ​ | ​ | 122,460 | ​ | ​ | 64,450 | ​ | ALF/MC | ​ | 13 | ​ | 523 | ​ | $ | 234.15
7.25% | (4) | 2024 | ​ | 2034 | ​ | NC | ​ | ​ | 41,000 | ​ | ​ | 37,985 | ​ | ALF | ​ | 4 | ​ | 217 | ​ | $ | 188.94
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 361,505 | ​ | $ | 282,324 | ​ | ​ | ​ | 31 | ​ | 1,562 | ​ | ​ | ​
(1) | During 2022, we entered into a JV with an operator new to us. The JV purchased three SNFs and leased the centers back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option, exercisable at the beginning of the fourth year through the end of the fifth year.
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(2) | During 2023, we entered into a JV with ALG. The JV purchased 11 ALFs and MCs and leased these communities back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options. The contractual initial cash yield of 7.25% increases to 7.5% in year three then escalates thereafter based on Consumer Price Index(“CPI”) subject to a floor of 2.0% and a ceiling of 4.0%. The JV provided the seller-lessee with a purchase option to buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit IRR of 9.0%. During 2024, we deferred a total of $2,240 consolidated JV interest income from financing receivables for May through September 2024 and agreed to defer up to approximately $258 per month for October through December 2024 consolidated JV interest income from financing receivables.
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(3) | During the second quarter of 2024, we funded an additional $5,546 under a mortgage loan receivable due from an ALG affiliate secured by 13 ALFs and MCs located in North Carolina (12) and South Carolina (1). We then entered into a newly formed $122,460 JV with ALG, whereby we exchanged our $64,450 mortgage loan receivable for a 53% controlling interest in the JV. Concurrently, ALG contributed these properties to the joint venture for a 47% non-controlling interest. The JV leased the properties to an ALG affiliate under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option exercisable through 2028, with an exit IRR of 8.0%.
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(4) | During the second quarter of 2024, we funded an additional $2,766 under a mortgage loan receivable due from an ALG affiliate secured by four ALFs located in North Carolina. We then entered into a newly formed $41,000 JV with ALG, whereby we exchanged $37,985 mortgage loan receivables for a 93% controlling interest in the JV. Concurrently, ALG contributed these properties and a parcel of land to the joint venture for a 7% non-controlling interest. The JV leased the properties to an ALG affiliate under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option exercisable through 2028, with an exit IRR of 8.0%.
The following table summarizes our financing receivables activities for the nine months ended September 30, 2024 and 2023 (dollar amounts in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30, | ​
​ | ​ | 2024 | ​ | 2023 | ​
Investment and funding under financing receivables | ​ | $ | 163,557 | (1) | $ | 121,332 | (2)
Amortization of capital costs | ​ | ​ | (65) | ​ | ​ | (65) | ​
Provision for loan loss reserve | ​ | ​ | (1,635) | (1) | ​ | (1,213) | (2)
​ | ​ | $ | 161,857 | ​ | $ | 120,054 | ​
(1) | During 2024, we entered into two joint venture agreements with affiliates of ALG. We recorded an aggregate Provision for Credit losses of $1,635 equal to 1.0% of the investment balance. See above for more information.
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(2) | During 2023, we entered into a joint venture agreement with an affiliate of ALG. We recorded Provision for credit losses of $1,213 equal to 1.0% of the investment balance. See above for more information.
Mortgage Loans. During 2024, we committed to fund a $26,120,000 mortgage loan for the construction of a 116-unit independent living, assisted living and memory care community in Illinois. The borrower contributed $12,300,000 of equity which will initially fund the construction. The loan term is approximately six years at a current rate of 9.0% and an IRR of 9.5%. The following table sets forth information regarding our investments in mortgage loans secured by first mortgages at September 30, 2024 (dollar amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Type | ​ | Percentage | ​ | Number of | ​ | Investment
​ | ​ | ​ | ​ | ​ | ​ | Gross | ​ | of | ​ | of | ​ | ​ | ​ | ​ | ​ | SNF | ​ | ALF | ​ | per
Interest Rate | ​ | Maturity | ​ | State | ​ | Investment | ​ | Property | ​ | Investment | ​ | Loans (1) | ​ | Properties (2) | ​ | Beds | ​ | Units | ​ | Bed/Unit
7.5% | ​ | 2024 | ​ | GA | ​ | $ | 51,111 | (3) | ALF | ​ | 14.0 | % | 1 | ​ | 1 | ​ | — | ​ | 203 | ​ | $ | 251.78
8.8% | ​ | 2025 | ​ | FL | ​ | ​ | 4,000 | ​ | ALF | ​ | 1.1 | % | 1 | ​ | 2 | ​ | — | ​ | 92 | ​ | $ | 43.48
7.8% | ​ | 2025 | ​ | FL | ​ | ​ | 16,706 | ​ | ALF | ​ | 4.7 | % | 1 | ​ | 1 | ​ | — | ​ | 112 | ​ | $ | 149.16
7.3% | ​ | 2025 | ​ | NC | ​ | ​ | 10,750 | ​ | ALF | ​ | 2.9 | % | 1 | ​ | 1 | ​ | — | ​ | 45 | ​ | $ | 238.89
8.8% (4) | ​ | 2026 | ​ | MI | ​ | ​ | 9,999 | ​ | UDP | ​ | 2.7 | % | 1 | ​ | — | (4) | — | ​ | — | ​ | $ | n/a
8.8% | ​ | 2028 | ​ | IL | ​ | ​ | 16,500 | ​ | SNF | ​ | 4.5 | % | 1 | ​ | 1 | ​ | 150 | ​ | — | ​ | $ | 110.00
10.8% (5) | ​ | 2043 | ​ | MI | ​ | ​ | 180,973 | ​ | SNF | ​ | 49.7 | % | 1 | ​ | 14 | ​ | 1,749 | ​ | — | ​ | $ | 103.47
9.9% (5) | ​ | 2045 | ​ | MI | ​ | ​ | 39,850 | ​ | SNF | ​ | 10.9 | % | 1 | ​ | 4 | ​ | 480 |  | — | ​ | $ | 83.02
10.3% (5) | ​ | 2045 | ​ | MI | ​ |  | 19,700 | ​ | SNF | ​ | 5.4 | % | 1 | ​ | 2 | ​ | 201 |  | — | ​ | $ | 98.01
10.5% (5) | ​ | 2045 | ​ | MI | ​ | ​ | 14,825 | ​ | SNF | ​ | 4.1 | % | 1 | ​ | 1 | ​ | 146 | ​ | — | ​ | $ | 101.54
Total | ​ | ​ | ​ | ​ | ​ | $ | 364,414 | ​ | ​ | ​ | 100.0 | % | 10 | ​ | 27 | ​ | 2,726 |  | 452 | ​ | $ | 114.67
(1) | Some loans contain certain guarantees and provide for certain facility fees.
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(2) | Our mortgage loans are secured by properties located in five states with seven borrowers.
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(3) | Subsequent to September 30, 2024, we received the payoff of this mortgage loan receivable.
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(4) | During the third quarter of 2023, we committed to fund a $19,500 mortgage loan for the construction of an 85-unit ALF and MC in Michigan. The borrower contributed $12,100 of equity, which initially funded the construction. In 2024, once all of the borrower’s equity was drawn, we began funding the commitment. Our remaining commitment is $9,500. The 8.75% interest-only loan matures in September 2026 and includes two, one-year extensions, each of which is contingent on certain coverage thresholds.
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(5) | Mortgage loans provide for 2.25% annual increases in the interest rate.
​ ​ The following table summarizes our mortgage loan activity for the nine months ended September 30, 2024 and 2023 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30,
​ | ​ | 2024 | ​ | ​ | 2023 | ​
Originations and funding under mortgage loans receivable | ​ | $ | 19,078 | (1) | ​ | $ | 83,383 | (5)
Exchange of mortgage loans for controlling interests in joint ventures accounted for as financing receivables | ​ | ​ | (102,435) | (3) | ​ | ​ | — | ​
Pay-offs received | ​ | ​ | (34,094) | (2) | ​ | ​ | — | ​
Application of interest reserve | ​ | ​ | 169 | ​ | ​ | ​ | 1,609 | ​
Scheduled principal payments received | ​ | ​ | (380) | ​ | ​ | ​ | (301) | ​
Mortgage loan premium amortization | ​ | ​ | (4) | ​ | ​ | ​ | (5) | ​
Recovery (provision) for loan loss reserve | ​ | ​ | 1,176 | ​ | ​ | ​ | (847) | ​
Net (decrease) increase in mortgage loans receivable | ​ | $ | (116,490) | (4) | ​ | $ | 83,839 | ​
(1) | The following funding occurred:
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| (a) | $9,999 under a $19,500 mortgage loan commitment for the construction of an 85-unit ALF and MC in Michigan. The borrower contributed $12,100 of equity upon origination in July 2023, which was used to initially fund the construction. Our remaining commitment is $9,500. The interest-only loan term is approximately three years at a rate of 8.75%, and includes two, one-year extensions, each of which is contingent on certain coverage thresholds;
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| (b) | $5,546 of additional funding under a mortgage loan receivable agreement with an ALG affiliate secured by 13 ALFs and MCs in North Carolina (12) and South Carolina (1). During the three months ended June 30, 2024, we exchanged this $64,450 mortgage loan receivable for a controlling interest in a JV investment with an ALG affiliate. See Financing Receivables above for more information;
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| (c) | $2,766 of additional funding under a mortgage loan receivable agreement with an ALG affiliate secured by four ALFs in North Carolina. During the three months ended June 30, 2024, we exchanged this $37,985 mortgage loan receivable for a controlling interest in a JV investment with an ALG affiliate. See Financing Receivables above for more information; and
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| (d) | $767 of additional funding under various loans.
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(2) | We received the payoff of a $29,347 mortgage loan secured by a 189-bed SNF in Louisiana and a $2,013 mortgage loan secured by a parcel of land in Missouri. Additionally, we received a partial principal paydown of $2,734 related to the sale of a SNF securing the mortgage loan previously secured by 15-SNFs in Michigan.
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(3) | The following occurred:
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| (a) | $64,450 mortgage loan receivable due from an ALG affiliate was exchanged for a controlling interest in a JV. See (1)(b) above for more information; and
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| (b) | $37,985 mortgage loan receivable due from an ALG affiliate was exchanged for a controlling interest in a JV. See (1)(c) above for more information.
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(4) | Subsequent to September 30 2024, we received the payoff of a $51,111 mortgage loan receivable secured by a 203-unit ALF in Georgia.
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(5) | The following funding and originations occurred:
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| (a) | $10,750 mortgage loan secured by a 45-unit 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%;
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| (b) | $51,111 mortgage loan investment secured by a 203-unit ILF, ALF and MC located in Georgia. We acquired a participating interest owned by existing lenders for $42,251 in addition to converting our $7,461 mezzanine loan in the property into a participating interest in the mortgage loan. The mortgage loan matures in October 2024 and our investment is at an initial rate of 7.5% with an IRR of 7.75%. We recorded $1,380 of additional interest income in connection with the effective prepayment of the mezzanine loan in the first quarter of 2023. Subsequent to September 30, 2024, the $51,111 mortgage loan was paid off. See (4) above;
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| (c) | $16,500 senior loan for the purchase of a 150-bed Medicare focused SNF in Illinois. The mortgage loan matures in June 2028 and our investment is at an interest rate of 8.75%; and
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| (d) | $5,022 of additional funding under other mortgage loans receivable.
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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/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Section 45 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org/1943274/2147481990/310-10-45-3 + Details
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