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Real Estate Investments

3 Months Ended

Mar. 31, 2025

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 March 31, 2025 (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	$	719,428	54.1	%	70	—	4,236	$	169.84
Skilled Nursing		598,423	45.0	%	50	6,113	236	$	94.25
Other ⁽²⁾		12,005	0.9	%	1	118	—		—
Total	$	1,329,856	100.0	%	121	6,231	4,472

(1)	We own properties in 23 states that are leased to 22 different operators.

(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 the three months ended March 31, 2025, a master lease covering two skilled nursing centers in Tennessee that was scheduled to mature on December 31, 2025, was amended extending the maturity to December 31, 2026. Additionally, the master lease purchase option window, which expired on December 31, 2024, was extended for another year to December 31, 2025. Additionally, during the three months ended March 31, 2025, we terminated two existing leases with the same operator, and combined them into a single master lease. The new master lease has a five-year term with one 1-year extension option and four 5-year extension options. Annual cash rent is $2,547,000 for the first lease year escalating by 2% annually thereafter. In connection with the termination of these leases, we wrote-off straight-line rent receivable and lease incentive balances of $243,000 and $249,000, respectively.

Subsequent to March 31, 2025, we terminated our Anthem Memory Care, LLC (“Anthem”) triple-net master leases and transitioned the 12 memory care communities covered under the master leases into our new seniors housing operating portfolio (“SHOP”) under the RIDEA structure. In anticipation of this event, we wrote-off Anthem’s working capital note of $2,693,000 and the related interest receivable of $371,000 during the three months ended March 31, 2025.

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 March 31, 2025, we wrote-off straight-line rent receivable and lease incentive balances of $243,000 and $249,000, respectively, in connection with the termination of two existing leases with the same operator, and combining them into a master lease as discussed above. During the three months ended March 31, 2024, we wrote-off lease incentive balance of $191,000, as a result of property sales.

We continue to take into account the current financial condition of our operators in our estimation of uncollectible accounts at March 31, 2025. 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 months ended March 31, 2025 and 2024 (in thousands):


	March 31,
Rental Income		2025			2024
Contractual cash rental income	$	29,623	⁽¹⁾	$	30,951
Variable cash rental income ⁽²⁾		3,090			3,381
Straight-line rent		(578)			(550)
Adjustment of lease incentives and rental income		(492)	⁽³⁾		—
Amortization of lease incentives		(199)			(233)
Total	$	31,444		$	33,549

(1)	Decreased primarily due to a one-time revenue received in 2024 related to the repayment of $2,377 in rent credit and lower rent due to property sales, partially offset by rent increases from fair-market rent resets, annual escalations and amendments.

(2)	The variable rental income includes reimbursement of real estate taxes by our lessees.

(3)	In connection with the termination of two existing leases with the same operator, and combing them into a single master lease, we wrote-off a straight-line rent receivable of $243 and a lease incentive balance of $249.

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
Option			of	of		Gross		Net Book
Window		State	Property	Properties		Investments ⁽¹⁾		Value
2024-2028	⁽²⁾	North Carolina	ALF	4	$	41,000	$	41,000
2024-2028	⁽²⁾	North Carolina/ South Carolina	ILF/ALF/MC	13		122,460		122,460
2025	⁽³⁾	Tennessee	SNF	2		5,275		2,086
2025-2027	⁽⁴⁾	Florida	SNF	3		76,581		76,581
2025-2027		Ohio	ILF/ALF/MC	1		54,812		50,814
2025-2029	⁽⁵⁾	North Carolina	ALF/MC	11		121,419		121,419
2026		South Carolina	ALF	1		11,680		7,788
2027		Georgia/South Carolina	ALF/MC	2		32,266		24,623
2027-2029	⁽⁶⁾	Oklahoma	ALF/MC	4		9,052		3,200
2027-2029	⁽⁷⁾	Texas	SNF	4		52,726		48,628
2029		Colorado/Kansas/Ohio/Texas	ALF/MC	17		65,134		30,180
2029		North Carolina	ALF	5		15,161		7,144
		Total		67	$	607,566	$	535,923

(1)	Gross investments include previously recorded impairment losses, if any.

(2)	The purchase option can be exercised through 2028, with an exit Internal Rate of Return (“IRR”) of 8.0%. These assets are accounted for as financing receivables. For more information see Financing Receivables below.

(3)	The purchase option window which expired on December 31, 2024, was extended for another year to December 31, 2025.

(4)	These assets are accounted for as financing receivables. For more information see Financing Receivables below.

(5)	The operator has the option to buy the properties in multiple tranches and in serial closings approved by LTC with an exit IRR of 9.0% on any portion of the properties being purchased. These assets are accounted for as financing receivables. For more information see Financing Receivables below.

(6)	The purchase option can be exercised starting in November 2027 through October 2029 if the lessee exercises its four-year extension option under the master lease.

(7)	The operator may elect to either receive an earn-out payment or exercise its 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.

Properties Held -for-Sale. The following summarizes our held-for-sale properties as of March 31, 2025 and December 31, 2024 (dollar amounts in thousands):

Type

Number

Gross

Accumulated

State

Property

Properties

Beds/units

Investment

Depreciation

At March 31, 2025

CA/FL/VA

SNF

⁽¹⁾

896

71,742

(29,284)

At December 31, 2024

ALF

⁽²⁾

2,016

(1,346)

(1)

During the three months ended March 31, 2025, we engaged a broker to sell seven SNFs under a master lease, following the operator’s election not to exercise the renewal option available under the master lease. The master lease covers SNFs in California (1), Florida (2) and Virginia (4) and matures in January 2026. At March 31, 2025, these centers met the criteria under GAAP as held-for-sale. The operator is obligated to pay rent on the portfolio through maturity and is current on rent obligations through May 2025.

(2)	This community was sold during the first quarter of 2025. Upon sale, the community was removed from a master lease covering five ALFs in Oklahoma and rent under the master lease was not reduced as a result of the sale.

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 March 31, 2025 and December 31, 2024 (in thousands):


	March 31, 2025								December 31, 2024
					Accumulated								Accumulated
Assets		Cost			Amortization			Net		Cost			Amortization			Net
In-place leases	$	11,047	⁽¹⁾	$	(6,969)	⁽²⁾	$	4,078	$	11,047	⁽¹⁾	$	(6,758)	⁽²⁾	$	4,289
Tax abatement intangible	$	8,309	⁽³⁾	$	(1,271)	⁽³⁾	$	7,038	$	8,309	⁽³⁾	$	(1,097)	⁽³⁾	$	7,212

(1)	Included in the Buildings and improvements line item in our Consolidated Balance Sheets.

(2)	Included in the Accumulated depreciation and amortization line item in our Consolidated Balance Sheets.

(3)	Included in the Prepaid expenses and other assets line item in our Consolidated Balance Sheets.

Improvements. During the three months ended March 31, 2025 and 2024, we invested in the following capital improvement projects (in thousands):


		Three Months Ended March 31,
Type of Property	2025		2024
Assisted Living Communities	$	966	$	1,133
Skilled Nursing Centers		360		196
Total	$	1,326	$	1,329

Properties Sold. During the three months ended March 31, 2025 and 2024 we recorded a net gain on sale of real estate of $171,000 and $3,251,000, respectively. The following table summarizes property sales during the three months ended March 31, 2025 and 2024 (dollar amounts in thousands):


		Type	Number	Number
		of	of	of		Sales			Carrying		Net
Year	State	Properties	Properties	Beds/Units		Price			Value		(Loss) Gain ⁽¹⁾
2025	Ohio	ALF	1	39	$	1,000		$	670	$	267
	Oklahoma	ALF	1	29		670			670		(96)
Total			2	68	$	1,670		$	1,340	$	171

2024	Florida	ALF	1	60		4,500			4,579		(319)
	Texas	ALF	5	208		1,600			1,282		(356)
	Wisconsin	ALF	1	110		20,193	⁽²⁾		16,195		3,986
	n/a	n/a	—	—		—			—		(60)	⁽³⁾
Total			7	378	$	26,293		$	22,056	$	3,251

(

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

(2)	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.

(3)	We recognized additional loss due to additional incurred costs related to properties sold during 2023.

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.

We have 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):


									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	$	76,581	$	62,256	SNF	3	299	$	256.12
7.25%	⁽²⁾	2023	2033	NC		121,419		118,503	ALF/MC	11	523	$	232.16
7.25%	⁽³⁾	2024	2034	NC/SC		122,460		64,450	ILF/ALF/MC	13	523	$	234.15
7.25%	⁽⁴⁾	2024	2034	NC		41,000		37,985	ALF	4	217	$	188.94
					$	361,460	$	283,194		31	1,562

(1)	A purchase option available to the seller-lessee is exercisable at the beginning of the fourth lease year (2025) through the end of the fifth lease year (2027).

(2)	The seller-lessee has the option to buy the properties in multiple tranches and in serial closings approved by LTC with an exit IRR of 9.0% on any portion of the properties being purchased.

(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%.

(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%.

Mortgage Loans. The following table sets forth information regarding our investments in mortgage loans secured by first mortgages at March 31, 2025 (dollar amounts in thousands):


						Type	Percentage		Number of				Investment
			Gross			of	of				SNF	ALF	per
Interest Rate	Maturity	State	Investment			Property	Investment		Loans ⁽²⁾	Properties ⁽³⁾	Beds	Units	Bed/Unit
8.8%	2025	FL	$	4,000		ALF	1.2	%	1	2	—	92	$	43.48
7.8%	2025	FL		16,706		ALF	5.3	%	1	1	—	112	$	149.16
7.3%	2025	NC		10,750		ALF	3.4	%	1	1	—	45	$	238.89
8.8%	2026	MI		14,672		ALF	4.6	%	1	1	—	85	$	172.61
8.8%	2028	IL		16,500		SNF	5.2	%	1	1	150	—	$	110.00
11.1% ⁽⁴⁾	2043	MI		180,699		SNF	56.9	%	1	14	1,749	—	$	103.32
10.0% ⁽⁵⁾	2045	MI		39,700		SNF	12.5	%	1	4	480	—	$	82.71
10.3% ⁽⁵⁾	2045	MI		19,700		SNF	6.2	%	1	2	201	—	$	98.01
10.8% ⁽⁵⁾	2045	MI		14,800		SNF	4.7	%	1	1	146	—	$	101.37
Total			$	317,527	⁽¹⁾		100.0	%	9	27	2,726	334	$	103.77

(1)	Excludes the impact of the credit loss reserve.

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

(3)

Our mortgage loans are secured by properties located in four states with six borrowers. Additionally, during 2024, we committed to fund a $26,120 mortgage loan for the construction of a 116-unit ILF, ALF and MC located in Illinois. The borrower contributed $12,300 of equity which will initially fund the construction. Once all of the borrower’s equity has been drawn, we will begin funding the commitment. The loan term is approximately six years at a current rate of 9.0% and an IRR of 9.5%.

(4)

Minimum interest payable is based on an annual current pay interest rate of 8.5% on the outstanding loan balance. The difference between the contractual interest rate and the current pay interest rate of 8.5% on the outstanding loan balance remains an obligation of the borrower and is payable through the application of security deposits held by LTC on behalf of the borrower or payable upon maturity. During the 2025 first quarter, we received full contractual cash interest of $4,991, through $3,826 of cash receipts and application of $1,165 of security deposits. The loan provides for 2.25% annual interest rate increases.

(5)	Mortgage loans provide for 2.25% annual increases in the interest rate.

The following table summarizes our mortgage loan activity for the three months ended March 31, 2025 and 2024 (in thousands):


	Three Months Ended March 31,
	2025			2024
Originations and funding under mortgage loans receivable	$	1,919	⁽¹⁾	$	3,128	⁽²⁾
Application of interest reserve		—			14
Scheduled principal payments received		(124)			(125)
Mortgage loan premium amortization		(2)			(2)
Provision for loan loss reserve		(18)			(31)
Net increase in mortgage loans receivable	$	1,775		$	2,984

(1)

Funding relates to 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 $4,828. 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.

(2)	We funded the following:

(a)

$2,940 under our $19,500 mortgage loan commitment. For an explanation of the terms and other relevant information related to this mortgage loan, see (1) above; and

(b)

$188 of additional funding under other mortgage loan receivables.