# LTC PROPERTIES INC (LTC) FY 2021 MD&A Verbatim Item 7 Management's Discussion and Analysis from LTC PROPERTIES INC's 10-K for fiscal year 2021. SEC filing source: https://www.sec.gov/Archives/edgar/data/887905/000155837022001362/ltc-20211231x10k.htm Accession: 0001558370-22-001362 Filing date: 2022-02-17 Report date: 2021-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/LTC/ All MD&A years: /company/LTC/mda/ Next year: /company/LTC/mda/fy2022/ (FY 2022) Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Overview Business and Investment Strategy We are a real estate investment trust (“REIT”) that invests in seniors housing and health care properties through sale-leasebacks, mortgage financing, joint ventures and structured finance solutions including preferred equity and mezzanine lending. We seek to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniors housing and health care properties managed by experienced operators. Our primary seniors housing and health care property classifications include skilled nursing facilities (“SNF”), assisted living facilities (“ALF”), independent living facilities (“ILF”), memory care communities (“MC”) and combinations thereof. We also invest in other (“OTH”) types of properties, such as land parcels, projects under development (“UDP”) and behavioral health care hospitals. To meet these objectives, we attempt to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location, operator, property classification and form of investment. We conduct and manage our business as one operating segment for internal reporting and internal decision-making purposes. For purposes of this Annual Report on Form 10-K and other presentations, we generally include ALF, ILF, and MC in the ALF property classification. We have been operating since August 1992. The following graph summarizes our gross investments as of December 31, 2021: Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, interest earned on outstanding loans receivable and income from investments in unconsolidated joint ventures. Our investments in owned properties, mortgage loans, mezzanine loans and preferred equity investments represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon. To the extent that the operators experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by property type and operator. Our monitoring process includes periodic review of financial statements for each facility, periodic review of operator credit, scheduled property inspections and review of covenant compliance. 32 ​ Table of Contents In addition to our monitoring and research efforts, we also structure our investments to help mitigate payment risk. Some operating leases and loans are credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the operator and its affiliates. Depending upon the availability and cost of external capital, we anticipate making additional investments in health care related properties. New investments are generally funded from cash on hand, temporary borrowings under our unsecured revolving line of credit and internally generated cash flows. Our investments generate internal cash from rent and interest receipts and principal payments on mortgage loans receivable. Permanent financing for future investments, which replaces funds drawn under our unsecured revolving line of credit, is expected to be provided through a combination of public and private offerings of debt and equity securities and secured and unsecured debt financing. The timing, source and amount of cash flows provided by financing activities and used in investing activities are sensitive to the capital markets’ environment, especially to changes in interest rates. Changes in the capital markets’ environment may impact the availability of cost-effective capital. We believe our business model has enabled and will continue to enable us to maintain the integrity of our property investments, including in response to financial difficulties that may be experienced by operators. Traditionally, we have taken a conservative approach to managing our business, choosing to maintain liquidity and exercise patience until favorable investment opportunities arise. COVID-19 On March 11, 2020, the World Health Organization declared the outbreak of coronavirus (“COVID-19”) as a pandemic, and on March 13, 2020, the United States declared a national emergency with regard to COVID-19. The COVID-19 pandemic has had repercussions across regional and global economies and financial markets. The outbreak of COVID-19 in many countries, including the United States, has significantly and adversely impacted public health and economic activity, and has contributed to significant volatility, dislocations and liquidity disruptions in financial markets. The operations and occupancy levels at our properties have been adversely affected by COVID-19 and could be further adversely affected by COVID-19 or another pandemic especially if there are infections on a large scale at our properties. The impact of COVID-19 has included, and another pandemic could include, early resident move-outs, our operators delaying accepting new residents due to quarantines, potential occupants postponing moves to our operators’ facilities, and/or hospitals cancelling or significantly reducing elective surgeries thereby creating fewer people in need of skilled nursing care. Additionally, as our operators have responded to the pandemic, operating costs have begun to rise. A decrease in occupancy, ability to collect rents from residents and/or increase in operating costs could have a material adverse effect on the ability of our operators to meet their financial and other contractual obligations to us, including the payment of rent. In recognition of the pandemic impact affecting our operators, we have agreed to rent abatements totaling $4.5 million and rent deferrals for certain operators totaling $7.4 million between April 2020 and December 2021, of which $1.7 million subsequently has been paid. The $10.2 million in rent abatements and deferrals, net with repayments, represented approximately 4% of our April 2020 through December 2021 contractual rent, excluding Senior Lifestyle Corporation (“Senior Lifestyle”), Senior Care, LLC (“Senior Care”) and Senior Care’s parent company Abri Health, LLC (“Abri Health”). The remaining balance of deferred rent is due to LTC over the next 36 months or upon receipt of government funds from the U.S. Coronavirus Aid, Relief, and Economic Security (the “CARES Act”). During 2021, we proactively provided additional financial support to the majority of our operators by reducing by 50% 2021 rent escalations. This support was provided in the form of a credit to the majority of our operating partners. The one time rent escalation reduction had an approximate $0.5 million impact on our 2021 Generally Accepted Accounting Principles (“GAAP”) revenue and $1.3 million impact on cash revenue. 33 ​ Table of Contents Portfolio Overview The following tables summarize our real estate investment portfolio as of December 31, 2021 (dollar amounts in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Twelve Months Ended","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","December 31, 2021","\u200b"],["\u200b","\u200b","\u200b","\u200b","Number of","\u200b","\u200b","\u200b","\u200b","Percentage","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Percentage","\u200b","\u200b"],["\u200b","\u200b","Number of","\u200b","SNF","\u200b","ALF","\u200b","Gross","\u200b","of","\u200b","\u200b","Rental","\u200b","\u200b","of Total","\u200b","\u200b"],["Owned Properties","\u200b","Properties (1)","\u200b","Beds (2)","\u200b","Units (2)","\u200b","Investments","\u200b","Investments","\u200b","\u200b","Revenue","\u200b","\u200b","Revenues","\u200b","\u200b"],["Assisted Living","\u200b","102","\u200b","\u2014","\u200b","5,798","\u200b","$","844,301","\u200b","46.8","%","\u200b","$","54,449","\u200b","\u200b","38.2","%","\u200b"],["Skilled Nursing","\u200b","50","\u200b","6,154","\u200b","212","\u200b","\u200b","552,896","\u200b","30.7","%","\u200b","\u200b","51,668","\u200b","\u200b","36.3","%","\u200b"],["Other (3)","\u200b","1","\u200b","118","\u200b","\u2014","\u200b","\u200b","11,360","\u200b","0.6","%","\u200b","\u200b","967","\u200b","\u200b","0.7","%","\u200b"],["Total Owned Properties","\u200b","153","\u200b","6,272","\u200b","6,010","\u200b","\u200b","1,408,557","\u200b","78.1","%","\u200b","\u200b","107,084","(5)\u200b","\u200b","75.2","%","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","Number of","\u200b","\u200b","\u200b","\u200b","Percentage","\u200b","\u200b","Interest Income","\u200b","\u200b","Percentage","\u200b","\u200b"],["\u200b","\u200b","Number of","\u200b","SNF","\u200b","ALF","\u200b","\u200b","Gross","of","\u200b","\u200b","from Mortgage","\u200b","\u200b","of Total","\u200b","\u200b"],["Mortgage Loans","\u200b","Properties (1)","\u200b","Beds (2)","\u200b","Units (2)","\u200b","\u200b","Investments","Investments","\u200b","\u200b","Loans","\u200b","\u200b","Revenues","\u200b","\u200b"],["Assisted Living","\u200b","14","\u200b","\u2014","\u200b","591","\u200b","\u200b","59,886","\u200b","3.3","%","\u200b","\u200b","564","\u200b","\u200b","0.4","%","\u200b"],["Skilled Nursing","\u200b","23","\u200b","2,916","\u200b","\u2014","\u200b","\u200b","286,249","\u200b","15.9","%","\u200b","\u200b","32,213","\u200b","\u200b","22.7","%","\u200b"],["Other (4)","\u200b","\u2014","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","1,780","\u200b","0.1","%","\u200b","\u200b","34","\u200b","\u200b","\u2014","%","\u200b"],["Total Mortgage Loans","\u200b","37","\u200b","2,916","\u200b","591","\u200b","\u200b","347,915","\u200b","19.3","%","\u200b","\u200b","32,811","\u200b","\u200b","23.1","%","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","Number of","\u200b","\u200b","\u200b","\u200b","Percentage","\u200b","\u200b","Interest","\u200b","\u200b","Percentage","\u200b","\u200b"],["\u200b","\u200b","Number of","\u200b","SNF","\u200b","ALF","\u200b","\u200b","Gross","of","\u200b","\u200b","and other","\u200b","\u200b","of Total","\u200b","\u200b"],["Notes Receivable","\u200b","Properties (1)","\u200b","Beds (2)","\u200b","Units (2)","\u200b","\u200b","Investments","Investments","\u200b","\u200b","Income","\u200b","\u200b","Revenues","\u200b","\u200b"],["Assisted Living (6)","\u200b","2","\u200b","\u2014","\u200b","340","\u200b","\u200b","18,586","\u200b","1.0","%","\u200b","\u200b","882","\u200b","\u200b","0.6","%","\u200b"],["Skilled Nursing (7)","\u200b","\u2014","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","10,037","\u200b","0.6","%","\u200b","\u200b","105","\u200b","\u200b","0.1","%","\u200b"],["Total Notes Receivable","\u200b","2","\u200b","\u2014","\u200b","340","\u200b","\u200b","28,623","\u200b","1.6","%","\u200b","\u200b","987","\u200b","\u200b","0.7","%","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","Number of","\u200b","\u200b","\u200b","\u200b","Percentage","\u200b","\u200b","Income from","\u200b","\u200b","Percentage","\u200b","\u200b"],["\u200b","\u200b","Number of","\u200b","SNF","\u200b","ALF","\u200b","\u200b","Gross","of","\u200b","\u200b","Unconsolidated","\u200b","\u200b","of Total","\u200b","\u200b"],["Unconsolidated Joint Ventures","\u200b","Properties (1)","\u200b","Beds (2)","\u200b","Units (2)","\u200b","\u200b","Investments","Investments","\u200b","\u200b","Joint Ventures","\u200b","\u200b","Revenues","\u200b","\u200b"],["Assisted Living (8)","\u200b","1","\u200b","\u2014","\u200b","95","\u200b","\u200b","6,340","\u200b","0.3","%","\u200b","\u200b","450","\u200b","\u200b","0.3","%","\u200b"],["Under Development (9)","\u200b","\u2014","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","13,000","\u200b","0.7","%","\u200b","\u200b","967","\u200b","\u200b","0.7","%","\u200b"],["Total Unconsolidated Joint Ventures","\u200b","1","\u200b","\u2014","\u200b","95","\u200b","\u200b","19,340","\u200b","1.0","%","\u200b","\u200b","1,417","\u200b","\u200b","1.0","%","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total Portfolio","\u200b","193","\u200b","9,188","\u200b","7,036","\u200b","$","1,804,435","\u200b","100.0","%","\u200b","$","142,299","\u200b","\u200b","100.0","%","\u200b"]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Number","\u200b","Number of","\u200b","\u200b","\u200b","\u200b","Percentage","\u200b","\u200b"],["\u200b","\u200b","of","\u200b","SNF","\u200b","ALF","\u200b","Gross","\u200b","of","\u200b","\u200b"],["Summary of Properties by Type","\u200b","Properties (1)","\u200b","Beds (2)","\u200b","Units (2)","\u200b","Investments","\u200b","Investments","\u200b","\u200b"],["Assisted Living","\u200b","119","\u200b","\u2014","\u200b","6,824","\u200b","$","929,113","\u200b","51.4","%","\u200b"],["Skilled Nursing","\u200b","73","\u200b","9,070","\u200b","212","\u200b","\u200b","849,182","\u200b","47.2","%","\u200b"],["Under Development","\u200b","\u2014","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","13,000","\u200b","0.7","%","\u200b"],["Other (3) (4)","\u200b","1","\u200b","118","\u200b","\u2014","\u200b","\u200b","13,140","\u200b","0.7","%","\u200b"],["Total Portfolio","\u200b","193","\u200b","9,188","\u200b","7,036","\u200b","$","1,804,435","\u200b","100.0","%","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","We have investments in owned properties, mortgage loans, notes receivable and unconsolidated joint ventures in 28 states to 35 different operators."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","See Item 2. Properties for discussion of bed/unit count."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Includes three parcels of land held-for-use and one behavioral health care hospital."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(4)","Includes one parcel of land securing a first mortgage held for future development of a post-acute skilled nursing center."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(5)","Excludes variable rental income from lessee reimbursement of our real estate taxes, adjustments for collectibility of rental income and sold properties."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(6)","Includes a mezzanine loan on a 204-unit ILF/ALF/MC in Georgia, a mezzanine loan on a 136-unit ILF in Oregon and six working capital loans with interest rates between 5% and 7.5% with maturities between 2023 and 2031."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(7)","Includes two working capital loans with interest between 4% and 6.5% and maturities between 2022 and 2030."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(8)","Includes a preferred equity investment in an entity that developed and owns a 95-unit ALF/MC in Washington. Our investment represents 15.5% of the total investment. The preferred equity investment earns an initial cash rate of 7% increasing to 9% in year four until the internal rate of return (\u201cIRR\u201d) is 8%. After achieving an 8% IRR, the cash rate drops to 8% with an IRR ranging between 12% to 14% depending on the timing of redemption."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(9)","Represents a preferred equity investment in an entity that will develop and own a 267-unit ILF/ALF in Washington. Our investment represents 11.6% of the estimated total investment. The preferred equity investment earns an initial cash rate of 8% with an IRR of 12%."]] [[/GREPCENT_TABLE]] 34 ​ Table of Contents As of December 31, 2021, we had $1.4 billion in carrying value of net investments, consisting of $1.0 billion or 72.5% invested in owned properties, $0.3 billion or 24.2% invested in mortgage loans secured by first mortgages, $28.3 million or 2.0% in notes receivable and $19.3 million or 1.3% in unconsolidated joint ventures. Rental income and interest income from mortgage loans represented 78.0% and 21.1%, respectively, of Total revenues on the Consolidated Statements of Income for the year ended December 31, 2021. In most instances, our lease structure contains annual rental escalations. Our leases that contain fixed annual rental escalations and/or have annual rental escalations that are contingent upon changes in the Consumer Price Index, are generally recognized on a straight-line basis over the minimum lease period. Certain leases have annual rental escalations that are contingent upon changes in the gross operating revenues of the property. This revenue is not recognized until the appropriate contingencies have been resolved. For the year ended December 31, 2021, we recognized $0.5 million in straight-line rental income and $0.6 million in amortization of lease incentives. For the remaining leases in place at December 31, 2021, assuming no modification or replacement of existing leases and no new leased investments are added to our portfolio, except for the potential subsequent lease extensions and the leases reported below under Update on Certain Operators, we currently expect that the non-cash straight-line rent portion of rental income will decrease from $0.5 million in 2021 to negative $1.3 million for projected annual 2022 which represents higher cash rent received than recorded as rental income. Our cash rental income is projected to increase from $122.0 million in 2021 to $126.9 million for projected annual 2022. At December 31, 2021, the straight-line rent receivable balance on the consolidated balance sheet was $24.1 million. 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 year ended December 31, 2021, we extended the Brookdale Senior Living Communities, Inc. (“Brookdale”) master lease by one year. See below under Update on Certain Operators and Former Operators below for further discussion of the Brookdale master lease. Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. See Item 8. FINANCIAL STATEMENTS— Note 5. Real Estate Investments. Owned Properties for a table that includes information about purchase options included in our lease agreements. Update on Certain Operators and Former Operators Senior Care Centers, LLC – Former Operator Senior Care and affiliates and subsidiaries filed for Chapter 11 bankruptcy in December 2018. During 2019, while in bankruptcy, Senior Care assumed LTC’s master lease and, in March 2020, Senior Care emerged from bankruptcy. Concurrent with their emergence from bankruptcy, in accordance with the order confirming Senior Care’s plan of reorganization, Abri Health was formed as the parent company of reorganized Senior Care and became co-tenant and co-obligor with reorganized Senior Care under our master lease. In March 2021, Senior Care and Abri Health (collectively, “Lessee”) defaulted the lease due to failure to pay rent and additional obligations owed under the master lease. Accordingly, we sent a notice of default and applied proceeds from letter of credit to certain obligations owed under the master lease. Furthermore, we sent the Lessee a notice of termination of the master lease to be effective April 17, 2021. On April 16, 2021, the Lessee filed for Chapter 11 bankruptcy. In August 2021, the United States Bankruptcy Court approved a settlement agreement between Lessee and LTC. The settlement provided for, among other things, a one-time payment of $3.3 million from LTC to the affiliates of Lessee in exchange for cooperation and assistance in facilitating an orderly transition of the 11 skilled nursing centers from the Lessee and its affiliates to affiliates of HMG Healthcare, LLC which occurred on October 1, 2021. At December 31, 2021, Senior Care and Abri Health do not operate any properties in our portfolio. ​ 35 ​ Table of Contents Senior Lifestyle Corporation During 2020, an affiliate of Senior Lifestyle paid us $13.8 million of their $18.4 million contractual rent and we applied their letter of credit and deposits totaling $3.7 million to past due rent of $3.6 million and to their outstanding notes receivable of $0.1 million. Accordingly, we wrote-off a total of $17.7 million of straight-line rent receivable and lease incentives related to this master lease and transitioned rental revenue recognition to cash basis effective July 2020. During 2020, we recognized $17.4 million of rental revenue from Senior Lifestyle. In 2021, Senior Lifestyle defaulted on all rent obligations under the master lease. During 2021, we transitioned 18 assisted living communities previously leased to Senior Lifestyle to five operators. These communities are located in Illinois, Ohio, Wisconsin, Colorado, Pennsylvania and Nebraska. Also, during 2021, we sold three Wisconsin communities and a closed community in Nebraska previously leased to Senior Lifestyle for a combined total of $35.9 million. We received total proceeds of $34.8 million and recorded a net gain on sale of $5.4 million. Brookdale Senior Living Communities, Inc Brookdale’s master lease was scheduled to mature on December 31, 2021. During the first quarter of 2021, we extended their term by one year through an amended master lease, with a new maturity date of December 31, 2022. Also, the renewal options under the amended master lease remained the same which provides three renewal options consisting of a three-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, 2022 to April 30, 2022. During 2020, we extended a $4.0 million capital commitment to Brookdale at a 7% yield. During 2021, we fully funded the $4.0 million and extended an additional $2.0 million to Brookdale at a 7% yield, which is available through December 31, 2022. As of December 31, 2021, nothing was funded under this additional agreement and our remaining commitment is $2.0 million. Brookdale is current on rent payments through February 2022. Genesis Healthcare, Inc Genesis reported doubt regarding its ability to continue as a going concern on its Quarterly Report on Form 10-Q filed in August 2020. As a result, we wrote-off $4.3 million of straight-line rent receivable related to this master lease during the third quarter of 2020 and transitioned rental revenue recognition to cash basis effective September 2020. During the first quarter of 2021, Genesis delisted its Class A common stock from the New York Stock Exchange. Genesis is current on rent payments through February 2022. Other Operators During the third quarter of 2020, an operator failed to pay its full contractual rent. Accordingly, we wrote-off $1.2 million of straight-line rent receivable related to this master lease. During 2020, we consolidated our two master leases with this operator into one combined master lease and agreed to abate $0.7 million of rent and allow the operator to defer rent as needed through March 31, 2021. During 2021 and 2022, the combined master lease was amended to extend the rent deferral period through March 31, 2022. The operator deferred rent of $4.6 million for the year ended December 31, 2021, and $0.9 million for January through February 2022. The operator can defer rent up to $0.5 million for March 2022. Additionally, subsequent to December 31, 2021, an operator of two assisted living communities in California with a total of 232 units exercised the purchase option under their lease for approximately $43.7 million. The communities have a gross book value of $31.8 million and a net book value of $17.0 million. As a result of this transaction, we anticipate recognizing approximately $26.0 million of gain on sale of real estate in the second quarter of 2022. Also, we entered into an agreement with the current operator to sell a 74-unit assisted living community in Virginia for $16.9 million. The community has a gross book value of $16.9 million and a net book value of $15.7 million. As a result of this transaction, we anticipate recognizing approximately $1.3 million of gain on sale of real estate in the second quarter of 2022. In connection with the sale, the current operator will pay a $1.2 million lease termination fee. ​ 36 ​ Table of Contents 2021 Transactions Overview The following tables summarizes our transactions in 2021 (dollar amounts in thousand): Investment in Improvement Projects [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","Amount"],["Assisted Living Communities","\u200b","$","5,846"],["Skilled Nursing Centers","\u200b","\u200b","452"],["Total","\u200b","$","6,298"]] [[/GREPCENT_TABLE]] Sold Properties [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","Type","\u200b","Number","\u200b","Number","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","of","\u200b","of","\u200b","of","\u200b","\u200b","Sales","\u200b","\u200b","Carrying","\u200b","\u200b","Net","\u200b"],["Year (1)","\u200b","State","\u200b","Properties","\u200b","Properties","\u200b","Beds/Units","\u200b","\u200b","Price","\u200b","\u200b","Value","\u200b","\u200b","Gain (loss) (2)","\u200b"],["2021","\u200b","n/a","\u200b","n/a","\u200b","\u2014","\u200b","\u2014","\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","363","(3)\u200b"],["\u200b","\u200b","Florida","\u200b","ALF","\u200b","1","\u200b","\u2014","\u200b","\u200b","2,000","\u200b","\u200b","2,626","\u200b","\u200b","(858)","\u200b"],["\u200b","\u200b","Nebraska","\u200b","ALF","\u200b","1","\u200b","40","\u200b","\u200b","900","\u200b","\u200b","1,079","\u200b","\u200b","(200)","\u200b"],["\u200b","\u200b","Washington","\u200b","SNF","\u200b","1","\u200b","123","\u200b","\u200b","7,700","\u200b","\u200b","4,513","\u200b","\u200b","2,562","\u200b"],["\u200b","\u200b","Wisconsin","\u200b","ALF","\u200b","3","\u200b","263","\u200b","\u200b","35,000","\u200b","\u200b","28,295","\u200b","\u200b","5,595","\u200b"],["Total 2021","\u200b","\u200b","\u200b","\u200b","\u200b","6","\u200b","426","\u200b","$","45,600","\u200b","$","36,513","\u200b","$","7,462","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Subsequent to December 31, 2021, an operator of two ALFs in California with a total of 232 units, exercised the purchase option under the lease for approximately $43,700. The communities have a gross book value or $31,800 and a net book value of $17,000. As a result of this transaction, we anticipate recognizing approximately $26,000 of gain on sale of real estate in the second quarter of 2022. Additionally, we entered into an agreement to sell a 74-unit ALF in Virginia for $16,900. The community has a gross book value of $16,900 and a net book value of $15,700. As a result of this transaction, we anticipate recognizing approximately $1,300 of gain on sale of real estate in the second quarter of 2022. In connection with the sale, the current operator will pay a $1,200 lease termination fee."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Calculation of net gain (loss) includes cost of sales."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","We recognized additional gain due to the reassessment adjustment of the holdbacks related to properties sold during 2019 and 2020, under the expected value model per Accounting Standard Codification (\u201cASC\u201d) Topic 606, Contracts with Customers (\u201cASC 606\u201d)."]] [[/GREPCENT_TABLE]] Investment in Mortgage Loans [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b"],["Originations and funding under mortgage loans receivable","\u200b","$","88,955","(1)\u200b"],["Application of interest reserves","\u200b","\u200b","298","\u200b"],["Scheduled principal payments received","\u200b","\u200b","(1,175)","\u200b"],["Mortgage loan premium amortization","\u200b","\u200b","(6)","\u200b"],["Provision for loan loss reserve","\u200b","\u200b","(881)","\u200b"],["Net increase in mortgage loans receivable","\u200b","$","87,191","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","During 2021, we funded the following:"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","a.","$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%;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","b.","$27,047 mortgage loan secured by a 189-bed skilled nursing center 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%;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","c.","$11,724 mortgage loan secured by a 68-unit assisted living and memory care community 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;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","d.","$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 four years and includes a commitment of $6,097 for capital improvements and $650 for working capital; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","e.","$540 additional capital funding under our existing mortgage loans."]] [[/GREPCENT_TABLE]] 37 ​ Table of Contents Investment in Notes Receivable [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Advances under notes receivable","","$","16,353","(1)\u200b"],["Interest reserve withheld","\u200b","\u200b","353","\u200b","\u200b"],["Principal payments received under notes receivable","\u200b","\u200b","(2,694)","\u200b","\u200b"],["Notes receivable reserve","\u200b","\u200b","(140)","\u200b","\u200b"],["Net increase in notes receivable","\u200b","$","13,872","\u200b","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Funding under working capital notes and mezzanine loans with interest ranging between 4.0% and 8.0% and maturities between 2022 and 2031. During 2021, we originated a $4,355 mezzanine loan and withheld a $353 interest reserve. The mezzanine loan has a three-year term with two 12-month extensions. The initial rate is 8.0% for the first 18 months increasing to 10.5% thereafter with an 10.5% IRR. Additionally, we provided the operator a $25,000 secured working capital loan maturing in September 2022 to facilitate the transition of the 11 properties from Senior Care and Abri Health. During 2021, we funded $9,900 under this working capital loan and funded an additional $5,750 subsequent to December 31, 2021."]] [[/GREPCENT_TABLE]] 38 ​ Table of Contents Key Performance Indicators, Trends and Uncertainties We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results in making operating decisions and for budget planning purposes. Concentration Risk. We evaluate by gross real estate investment our concentration risk in terms of asset mix, real estate investment mix, operator mix and geographic mix. Concentration risk is valuable to understand what portion of our real estate investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our real estate investments that are real property or mortgage loans. Investment mix measures the portion of our investments that relate to our various property types. Operator mix measures the portion of our real estate investments that relate to our top five operators. Geographic mix measures the portion of our real estate investment that relate to our top five states. The following table reflects our recent historical trends of concentration risk (gross investment, in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","12/31/21","\u200b","9/30/21","\u200b","6/30/21","\u200b","3/31/21","\u200b","12/31/20"],["Asset mix:","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["Real property","\u200b","$","1,408,557","\u200b","$","1,407,098","\u200b","$","1,412,329","\u200b","$","1,449,062","\u200b","$","1,452,001","\u200b"],["Loans receivable","\u200b","\u200b","347,915","\u200b","\u200b","261,437","\u200b","\u200b","259,641","\u200b","\u200b","259,874","\u200b","\u200b","259,843","\u200b"],["Notes receivable","\u200b","\u200b","28,623","\u200b","\u200b","18,864","\u200b","\u200b","13,869","\u200b","\u200b","13,714","\u200b","\u200b","14,611","\u200b"],["Unconsolidated joint ventures","\u200b","\u200b","19,340","\u200b","\u200b","19,340","\u200b","\u200b","19,340","\u200b","\u200b","19,340","\u200b","\u200b","11,340","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Real estate investment mix:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Assisted living communities","\u200b","$","929,113","\u200b","$","868,081","\u200b","$","860,573","\u200b","$","897,154","\u200b","$","898,437","\u200b"],["Skilled nursing centers","\u200b","\u200b","849,182","\u200b","\u200b","812,518","\u200b","\u200b","820,246","\u200b","\u200b","820,476","\u200b","\u200b","822,063","\u200b"],["Under development","\u200b","\u200b","13,000","\u200b","\u200b","13,000","\u200b","\u200b","13,000","\u200b","\u200b","13,000","\u200b","\u200b","5,000","\u200b"],["Other (1)","\u200b","\u200b","13,140","\u200b","\u200b","13,140","\u200b","\u200b","11,360","\u200b","\u200b","11,360","\u200b","\u200b","12,295","\u200b"],["Operator mix:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Prestige Healthcare (1)","\u200b","$","272,453","\u200b","$","272,789","\u200b","$","272,773","\u200b","$","273,007","\u200b","$","272,976","\u200b"],["HMG Healthcare (2)","\u200b","\u200b","171,920","\u200b","\u200b","23,705","\u200b","\u200b","23,705","\u200b","\u200b","23,705","\u200b","\u200b","23,705","\u200b"],["Anthem Memory Care","\u200b","\u200b","139,176","\u200b","\u200b","139,176","\u200b","\u200b","139,176","\u200b","\u200b","139,176","\u200b","\u200b","139,176","\u200b"],["Brookdale Senior Living","\u200b","\u200b","102,921","\u200b","\u200b","102,261","\u200b","\u200b","101,240","\u200b","\u200b","101,012","\u200b","\u200b","100,613","\u200b"],["Carespring Health Care Management","\u200b","\u200b","102,520","\u200b","\u200b","102,520","\u200b","\u200b","102,520","\u200b","\u200b","102,520","\u200b","\u200b","102,520","\u200b"],["Remaining operators (2)","\u200b","\u200b","1,015,445","\u200b","\u200b","1,066,288","\u200b","\u200b","1,065,765","\u200b","\u200b","1,102,570","\u200b","\u200b","1,098,805","\u200b"],["Geographic mix:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Michigan","\u200b","$","281,512","\u200b","$","282,022","\u200b","$","281,762","\u200b","$","281,995","\u200b","$","281,963","\u200b"],["Texas","\u200b","\u200b","274,626","\u200b","\u200b","274,204","\u200b","\u200b","273,588","\u200b","\u200b","273,468","\u200b","\u200b","273,287","\u200b"],["Wisconsin","\u200b","\u200b","114,538","\u200b","\u200b","114,288","\u200b","\u200b","114,250","\u200b","\u200b","149,403","\u200b","\u200b","149,403","\u200b"],["California","\u200b","\u200b","106,129","\u200b","\u200b","105,997","\u200b","\u200b","105,892","\u200b","\u200b","105,352","\u200b","\u200b","105,163","\u200b"],["Colorado","\u200b","\u200b","104,514","\u200b","\u200b","104,445","\u200b","\u200b","104,347","\u200b","\u200b","104,307","\u200b","\u200b","104,090","\u200b"],["Remaining states","\u200b","\u200b","923,116","\u200b","\u200b","825,783","\u200b","\u200b","825,340","\u200b","\u200b","827,465","\u200b","\u200b","823,889","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","As of December 31, 2020, we have three parcels of land. These parcels are located adjacent to properties securing the Prestige Healthcare mortgage loan and are managed by Prestige."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","During the three months ended December 31, 2021, we transitioned 11 ALFs from Senior Care and Abri Health to HMG. As a result of this transaction, Senior Care and its parent company, Abri Health, do not operate any properties in our portfolio as of December 31, 2021 and are replaced by HMG. Accordingly, our \u201cSenior Care Centers/ Abri Health Services properties\u201d were reclassified to \u201cRemaining operators\u201d and our \u201cHMG Healthcare properties\u201d were reclassified from \u201cRemaining operators\u201d for all periods presented prior to December 31, 2021."]] [[/GREPCENT_TABLE]] ​ ​ Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to gross asset value and debt to market capitalization. The leverage ratios indicate how much of our Consolidated Balance Sheet capitalization is related to long-term obligations. Our coverage ratios include interest coverage ratio and fixed charge coverage ratio. The coverage ratios indicate our ability to service interest and fixed charges (interest). The coverage ratios are based on earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) as defined by National Association of Real Estate Investment Trusts (“NAREIT”). EBITDAre is calculated as net income available to common stockholders (computed in accordance with GAAP) excluding (i) interest expense, (ii) income tax expense, (iii) real estate depreciation and amortization, (iv) impairment write-downs of depreciable real estate, (v) gains or losses on the sale of depreciable real estate, and (vi) adjustments for unconsolidated 39 ​ Table of Contents partnerships and joint ventures. Adjusted EBITDAre is calculated as EBITDAre adjusted for non-recurring items. Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The following table reflects the recent historical trends for our credit strength measures: Balance Sheet Metrics [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","Quarter Ended","\u200b"],["\u200b","\u200b","12/31/21","\u200b","12/31/21","\u200b","\u200b","9/30/21","\u200b","\u200b","6/30/21","\u200b","\u200b","3/31/21","\u200b","\u200b","12/31/20","\u200b"],["Debt to gross asset value","\u200b","38.4","%","38.4","%","(1)\u200b","36.3","%","(1)\u200b","34.8","%","(3)\u200b","36.3","%","(1)\u200b","35.8","%"],["Debt to market capitalization ratio","\u200b","35.0","%","35.0","%","(2)\u200b","34.7","%","(2)\u200b","29.0","%","(4)\u200b","28.7","%","(6)\u200b","29.8","%"],["Interest coverage ratio (7)","\u200b","4.4","x","4.3","x","\u200b","4.3","x","\u200b","4.3","x","(5)\u200b","4.7","x","(5)\u200b","5.3","x"],["Fixed charge coverage ratio (7)","\u200b","4.4","x","4.3","x","\u200b","4.3","x","\u200b","4.3","x","(5)\u200b","4.7","x","(5)\u200b","5.3","x"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Increased due to increase in outstanding debt partially offset by increase in gross asset value."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Increased due to decrease in market capitalization and increase in outstanding debt primarily related to investments."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Decreased due to decrease in outstanding debt partially offset by decrease in gross asset value."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(4)","Increased due to decrease in market capitalization, partially offset by decrease in outstanding debt."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(5)","Decreased due to decrease in rental income partially offset by decrease in interest expense."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(6)","Decreased due to increase in market capitalization partially offset by increase in outstanding debt."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(7)","In calculating our interest coverage and fixed charge coverage ratios above, we use EBITDAre, which is a financial measure not derived in accordance with GAAP (non-GAAP financial measure). EBITDAre and Adjusted EBITDAre are not alternatives to net income, operating income or cash flows from operating activities as calculated and presented in accordance with GAAP. You should not rely on EBITDAre and Adjusted EBITDAre as a substitute for any such GAAP financial measures or consider it in isolation, for the purpose of analyzing our financial performance, financial position or cash flows. Net income is the most directly comparable GAAP measure to EBITDAre and Adjusted EBITDAre."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year to Date","\u200b","Quarter Ended","\u200b"],["\u200b","\u200b","12/31/21","\u200b","12/31/21","\u200b","9/30/21","\u200b","6/30/21","\u200b","3/31/21","\u200b","12/31/20","\u200b"],["Net income","\u200b","$","56,224","\u200b","$","12,930","\u200b","$","11,114","\u200b","$","18,330","\u200b","$","13,850","\u200b","$","17,665","\u200b"],["Less (add): (Gain)/ loss on sale","\u200b","\u200b","(7,462)","\u200b","\u200b","(70)","\u200b","\u200b","(2,702)","\u200b","\u200b","(5,463)","\u200b","\u200b","773","\u200b","\u200b","(44)","\u200b"],["Add: Loss on unconsolidated joint ventures","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","138","\u200b"],["Add: Impairment loss","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","3,036","\u200b"],["Add: Interest expense","\u200b","\u200b","27,375","\u200b","\u200b","6,933","\u200b","\u200b","6,610","\u200b","\u200b","6,860","\u200b","\u200b","6,972","\u200b","\u200b","7,088","\u200b"],["Add: Depreciation and amortization","\u200b","\u200b","38,296","\u200b","\u200b","9,449","\u200b","\u200b","9,462","\u200b","\u200b","9,508","\u200b","\u200b","9,877","\u200b","\u200b","9,839","\u200b"],["EBITDAre","\u200b","$","114,433","\u200b","$","29,242","\u200b","$","24,484","\u200b","$","29,235","\u200b","$","31,472","\u200b","$","37,722","\u200b"],["Add: Non-recurring one-time items","\u200b","\u200b","5,947","(1)\u200b","\u200b","869","(2)\u200b","\u200b","3,895","(3)\u200b","\u200b","133","(4)\u200b","\u200b","1,050","(5)\u200b","\u200b","\u2014","\u200b"],["Adjusted EBITDAre","\u200b","$","120,380","\u200b","$","30,111","\u200b","$","28,379","\u200b","$","29,368","\u200b","$","32,522","\u200b","$","37,722","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest expense","\u200b","$","27,375","\u200b","$","6,933","\u200b","$","6,610","\u200b","$","6,860","\u200b","$","6,972","\u200b","$","7,088","\u200b"],["Interest incurred","\u200b","$","27,375","\u200b","$","6,933","\u200b","$","6,610","\u200b","$","6,860","\u200b","$","6,972","\u200b","$","7,088","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest coverage ratio","\u200b","\u200b","4.4","x","\u200b","4.3","x","\u200b","4.3","x","\u200b","4.3","x","\u200b","4.7","x","\u200b","5.3","x"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest incurred","\u200b","$","27,375","\u200b","$","6,933","\u200b","$","6,610","\u200b","$","6,860","\u200b","$","6,972","\u200b","$","7,088","\u200b"],["Total fixed charges","\u200b","$","27,375","\u200b","$","6,933","\u200b","$","6,610","\u200b","$","6,860","\u200b","$","6,972","\u200b","$","7,088","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fixed charge coverage ratio","\u200b","\u200b","4.4","x","\u200b","4.3","x","\u200b","4.3","x","\u200b","4.3","x","\u200b","4.7","x","\u200b","5.3","x"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Represents sum of (2) to (5) below."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Represents the provision for credit losses related to the origination of $86,900 of mortgage loans during the fourth quarter of 2021."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Represents the Senior Care and Abri Health settlement."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(4)","Represents the 50% reduction of rent escalations."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(5)","Represents the write-off of straight-line rent ($758) and the 50% reduction of rent and interest escalations ($292)."]] [[/GREPCENT_TABLE]] 40 ​ Table of Contents We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. This may be a result of various factors, including, but not limited to: [[GREPCENT_TABLE]] [["","\u25cf","The status of the economy;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","The status of capital markets, including prevailing interest rates;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Compliance with and changes to regulations and payment policies within the health care industry;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Changes in financing terms;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Competition within the health care and seniors housing industries;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Changes in federal, state and local legislation;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","The duration, spread and severity of the COVID-19 outbreak."]] [[/GREPCENT_TABLE]] Management regularly monitors the economic and other factors listed above. We develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends. ​ 41 ​ Table of Contents Operating Results Year ended December 31, 2021 compared to year ended December 31, 2020 (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years ended December 31,","\u200b","\u200b","\u200b"],["\u200b","\u200b","2021","\u200b","2020","\u200b","Difference","\u200b"],["Revenues:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Rental income","\u200b","$","121,125","\u200b","$","126,094","\u200b","$","(4,969)","(1)\u200b"],["Interest income from mortgage loans","\u200b","\u200b","32,811","\u200b","\u200b","31,396","\u200b","\u200b","1,415","(2)\u200b"],["Interest and other income","\u200b","\u200b","1,386","\u200b","\u200b","1,847","\u200b","\u200b","(461)","(3)\u200b"],["Total revenues","\u200b","\u200b","155,322","\u200b","\u200b","159,337","\u200b","\u200b","(4,015)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Expenses:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest expense","\u200b","\u200b","27,375","\u200b","\u200b","29,705","\u200b","\u200b","2,330","(4)\u200b"],["Depreciation and amortization","\u200b","\u200b","38,296","\u200b","\u200b","39,071","\u200b","\u200b","775","\u200b"],["Impairment loss from real estate investments","\u200b","\u200b","\u2014","\u200b","\u200b","3,977","(5)\u200b","\u200b","3,977","\u200b"],["Provision (recovery) for credit losses","\u200b","\u200b","1,021","\u200b","\u200b","(3)","\u200b","\u200b","(1,024)","(6)\u200b"],["Transaction costs","\u200b","\u200b","4,433","\u200b","\u200b","299","\u200b","\u200b","(4,134)","(7)\u200b"],["Property tax expense","\u200b","\u200b","15,392","\u200b","\u200b","15,065","\u200b","\u200b","(327)","\u200b"],["General and administrative expenses","\u200b","\u200b","21,460","\u200b","\u200b","19,710","\u200b","\u200b","(1,750)","(8)\u200b"],["Total expenses","\u200b","\u200b","107,977","\u200b","\u200b","107,824","\u200b","\u200b","(153)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Other operating income:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Gain on sale of real estate, net","\u200b","\u200b","7,462","(9)\u200b","\u200b","44,117","(10)\u200b","\u200b","(36,655)","\u200b"],["Operating income","\u200b","\u200b","54,807","\u200b","\u200b","95,630","\u200b","\u200b","(40,823)","\u200b"],["Gain from property insurance proceeds","\u200b","\u200b","\u2014","\u200b","\u200b","373","(11)\u200b","\u200b","(373)","\u200b"],["Loss on unconsolidated joint ventures","\u200b","\u200b","\u2014","\u200b","\u200b","(758)","(12)\u200b","\u200b","758","\u200b"],["Income from unconsolidated joint ventures","\u200b","\u200b","1,417","\u200b","\u200b","432","\u200b","\u200b","985","(13)\u200b"],["Net income","\u200b","\u200b","56,224","\u200b","\u200b","95,677","\u200b","\u200b","(39,453)","\u200b"],["Income allocated to non-controlling interests","\u200b","\u200b","(363)","\u200b","\u200b","(384)","\u200b","\u200b","21","\u200b"],["Net income attributable to LTC Properties, Inc.","\u200b","\u200b","55,861","\u200b","\u200b","95,293","\u200b","\u200b","(39,432)","\u200b"],["Income allocated to participating securities","\u200b","\u200b","(458)","\u200b","\u200b","(422)","\u200b","\u200b","(36)","\u200b"],["Net income available to common stockholders","\u200b","$","55,403","\u200b","$","94,871","\u200b","$","(39,468)","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Decreased primarily due to defaults of lease obligations from Senior Lifestyle and Senior Care and Abri Health, abated and deferred rent, net of repayment, a $758 straight-line rent receivable write-off during 2021, a decrease in property tax revenue, reduced rent from sold properties and 50% reduction of 2021 rent escalations partially offset by a $23,214 write-off of straight-line rent receivable and lease incentive balances related to three operators during 2020, increased rent from re-leasing 18 properties previously leased to Senior Lifestyle, completed development projects and contractual rent increases."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Increased due to mortgage loan originations and capital improvement funding offset by scheduled principal paydowns and 50% reduction of 2021 interest escalations."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Decreased primarily due to the payoff of a mezzanine loan offset by additional notes receivable funding."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(4)","Decreased due to scheduled principal payments on our senior unsecured notes and lower interest rates under our unsecured revolving line of credit partially offset by higher interest rates on $100,000 of new term loans in fourth quarter of 2021 and higher outstanding balances under our unsecured revolving line of credit."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(5)","Represents impairment losses related to a 48-unit ALF in Colorado and a 61-unit ALF in Florida."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(6)","Increased primarily due to mortgage originations and capital improvement funding offset by scheduled principal paydowns."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(7)","Increased due to Senior Care and Abri Health settlement and related fees."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(8)","Increased primarily due to higher incentive compensation expense, an increase in non-cash restricted stock and performance-based stock vesting expense and additional employees."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(9)","Represents the net gain on sale of $2,562 related to a SNF in Washington, $5,595 related to three ALFs in Wisconsin and $363 of quarterly reassessment of the prior years\u2019 sale holdbacks partially offset by the net loss on sale of $200 related to a closed ALF in Nebraska and the net loss on sale of $858 related to a closed property in Florida."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(10)","Represents net gain on sale of 21 SNFs and additional gain due to quarterly reassessment of prior years\u2019 sale holdbacks."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(11)","Represents gain on insurance proceeds related to a 114-bed SNF in Texas sold during the first quarter of 2020."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(12)","Relates to the sale of properties comprising a joint venture in which we had a preferred equity investment with Senior Lifestyle."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(13)","Increased due to preferred equity investments in two unconsolidated joint ventures."]] [[/GREPCENT_TABLE]] ​ 42 ​ Table of Contents ​ Year ended December 31, 2020 compared to year ended December 31, 2019 (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years ended December 31,","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","2020","\u200b","2019","\u200b","Difference","\u200b"],["Revenues:","","\u200b","","","\u200b","","","\u200b","","\u200b"],["Rental income","\u200b","$","126,094","\u200b","$","152,755","\u200b","$","(26,661)","(1)\u200b"],["Interest income from mortgage loans","\u200b","","31,396","\u200b","","29,991","\u200b","","1,405","(2)\u200b"],["Interest and other income","\u200b","","1,847","\u200b","","2,558","\u200b","","(711)","(3)\u200b"],["Total revenues","\u200b","","159,337","\u200b","","185,304","\u200b","","(25,967)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Expenses:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest expense","\u200b","","29,705","\u200b","","30,582","\u200b","","877","(4)\u200b"],["Depreciation and amortization","\u200b","","39,071","\u200b","","39,216","\u200b","","145","\u200b"],["Impairment on real estate for sale","\u200b","","3,977","\u200b","","\u2014","\u200b","","(3,977)","(5)\u200b"],["(Recovery) provision for credit losses","\u200b","\u200b","(3)","\u200b","\u200b","166","\u200b","\u200b","169","\u200b"],["Transaction costs","\u200b","\u200b","299","\u200b","\u200b","365","\u200b","\u200b","66","\u200b"],["Property tax expense","\u200b","\u200b","15,065","\u200b","\u200b","16,755","\u200b","\u200b","1,690","(6)\u200b"],["General and administrative expenses","\u200b","","19,710","\u200b","","18,453","\u200b","","(1,257)","(7)\u200b"],["Total expenses","\u200b","","107,824","\u200b","","105,537","\u200b","","(2,287)","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Other operating income:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Gain on sale of real estate, net","\u200b","\u200b","44,117","(8)\u200b","\u200b","2,106","(9)\u200b","\u200b","42,011","\u200b"],["Operating income","\u200b","\u200b","95,630","\u200b","","81,873","\u200b","","13,757","\u200b"],["Gain from property insurance proceeds","\u200b","\u200b","373","(10)\u200b","\u200b","2,111","(10)\u200b","\u200b","(1,738)","\u200b"],["Loss on unconsolidated joint ventures","\u200b","\u200b","(758)","(11)\u200b","\u200b","\u2014","\u200b","\u200b","(758)","\u200b"],["Impairment loss from investments in unconsolidated joint ventures","\u200b","\u200b","\u2014","\u200b","\u200b","(5,500)","(12)\u200b","\u200b","5,500","\u200b"],["Income from unconsolidated joint ventures","\u200b","\u200b","432","\u200b","\u200b","2,388","\u200b","\u200b","(1,956)","(13)\u200b"],["Net income","\u200b","","95,677","\u200b","","80,872","\u200b","","14,805","\u200b"],["Income allocated to non-controlling interests","\u200b","","(384)","\u200b","","(346)","\u200b","","(38)","\u200b"],["Net income attributable to LTC Properties, Inc.","\u200b","","95,293","\u200b","","80,526","\u200b","","14,767","\u200b"],["Income allocated to participating securities","\u200b","","(422)","\u200b","","(391)","\u200b","","(31)","\u200b"],["Net income available to common stockholders","\u200b","$","94,871","\u200b","$","80,135","\u200b","$","14,736","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Decreased primarily due to the $23,214 write-off of straight-line rent receivable and lease incentive balances during 2020, reduction in rent related to the sale of the Preferred Care, Inc. portfolio, reduced revenue from Senior Lifestyle, and abated and deferred rent, partially offset by increased rent from contractual escalations, acquisitions and completed development projects."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Increased primarily due to additional mortgage and capital improvement funding offset by scheduled principal paydowns."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Decreased primarily due to the partial paydown of a mezzanine loan."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(4)","Decreased primarily due to lower outstanding balance and interest rates on our line of credit in 2020, partially offset by increased interest from sale of $100,000 senior unsecured notes during the fourth quarter of 2019."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(5)","Represents impairment losses related to a 48-unit ALF in Colorado and a 61-unit ALF in Florida."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(6)","Decreased primarily due to the timing of Senior Lifestyle property tax escrow receipts and the payment of related taxes."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(7)","Increased primarily due to higher incentive compensation expense in 2020 and a legal fee reimbursement from Senior Care in 2019."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(8)","Represents gain on sale of 21 SNFs within the Preferred Care, Inc. portfolio and additional gain due to quarterly reassessment of prior years\u2019 sale holdbacks."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(9)","Represents the net gain resulting from sale of three SNFs and an ALF during 2019. Additionally, represents an additional $500 net gain on sale due to receipt of funds held in escrow related to a portfolio of six ALFs sold in 2018."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(10)","Relates to insurance proceeds related to properties sold."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(11)","Relates to the sale of properties comprising a joint venture in which we had a preferred equity investment with Senior Lifestyle. Also, see (12) below."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(12)","Relates to a preferred equity investment in a joint venture comprised of four ALFs which we wrote-down to its estimated fair value."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(13)","Decreased due to (12) above and payoff of a mezzanine loan in 2019 offset by two preferred equity investments in 2020."]] [[/GREPCENT_TABLE]] ​ 43 ​ Table of Contents Funds From Operations Funds from Operations (“FFO”) attributable to common stockholders, basic FFO attributable to common stockholders per share and diluted FFO attributable to common stockholders per share are supplemental measures of a REIT’s financial performance that are not defined by GAAP. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO facilitates comparisons of operating performance between periods. We use FFO as a supplemental performance measurement of our cash flow generated by operations. FFO does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders. We calculate and report FFO in accordance with the definition and interpretive guidelines issued by NAREIT. FFO, as defined by NAREIT, means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that have a different interpretation of the current NAREIT definition from us; therefore, caution should be exercised when comparing our FFO to that of other REITs. The following table reconciles net income available to common stockholders to FFO attributable to common stockholders (unaudited, amounts in thousands, except per share amounts): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","For the year ended December 31,"],["\u200b","\u200b","2021","\u200b","2020","\u200b","2019"],["GAAP net income available to common stockholders","\u200b","$","55,403","","$","94,871","","$","80,135","\u200b"],["Add: Depreciation and amortization","\u200b","","38,296","\u200b","","39,071","\u200b","","39,216","\u200b"],["Add: Impairment loss from investments","\u200b","\u200b","\u2014","\u200b","\u200b","3,977","\u200b","\u200b","5,500","\u200b"],["Add: Loss on unconsolidated joint ventures","\u200b","\u200b","\u2014","\u200b","\u200b","758","\u200b","\u200b","\u2014","\u200b"],["Less: Gain on sale of real estate, net","\u200b","","(7,462)","\u200b","","(44,117)","\u200b","","(2,106)","\u200b"],["NAREIT FFO attributable to common stockholders","\u200b","$","86,237","\u200b","$","94,560","\u200b","$","122,745","\u200b"],["NAREIT FFO attributable to common stockholders per share:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Basic","\u200b","$","2.20","\u200b","$","2.41","\u200b","$","3.10","\u200b"],["Diluted","\u200b","$","2.20","\u200b","$","2.41","\u200b","$","3.08","(1)\u200b"],["Weighted average shares used to calculate NAREIT FFO per share:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Basic","\u200b","","39,156","\u200b","","39,179","\u200b","","39,571","\u200b"],["Diluted","\u200b","","39,156","\u200b","","39,264","(2)\u200b","","39,921","(3)\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Includes the effect of participating securities."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Diluted weighted average shares used to calculate FFO per share includes the effect of performance-based stock units."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Diluted weighted average shares used to calculate FFO per share includes the effect of stock option equivalents, participating securities and performance-based stock units."]] [[/GREPCENT_TABLE]] Critical Accounting Policies and Estimates Our accounting policies are more fully described under Item 8. FINANCIAL STATEMENTS—Footnote 2. Summary of Significant Accounting Policies. As discussed in Footnote 2, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Listed below are those policies and estimates that we believe are critical and require the use of significant judgement in their application. 44 ​ Table of Contents Impairment of Long-Lived Assets Assets that are classified as held-for-use are periodically evaluated for impairment when events or changes in circumstances indicate that the asset may be impaired or the carrying amount of the asset may not be recoverable through future undiscounted cash flows. The expected future undiscounted cash flows reflect external market factors and are probability weighted to reflect multiple possible cash flow scenarios. Additionally, the estimated future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. In order to review our real estate assets for recoverability, we make assumptions regarding external market conditions (including capitalization rates and growth rates), forecasted cash flows and sales prices, whether the management modifies the lease with the existing operator versus identifying a replacement operator and our intent with respect to holding or disposing of the asset. If our analysis indicates that the carrying value of the real estate assets is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the carrying value exceeds the fair value of the real estate asset. Our ability to accurately predict operating results and projected cash flows impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our consolidated financial statements. Collectibility of operator obligations We assess the collectibility of substantially all our lease payments through maturity. If collectibility is not probable, all or a portion of our straight-line rent receivables and other lease receivables may be written-off. In order to assess our lease payments for collectibility, we make assumptions that include evaluating lessee’s payment history, the financial strength of the lessee, future market conditions and contractual rents, and timing of expected payments. Our ability to accurately predict collectibility of substantially all of our lease payments impacts the timing of straight-line rent and other lease receivable write-offs, if any. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our consolidated financial statements. Liquidity and Capital Resources Sources and Uses of Cash As of December 31, 2021, we had a total of $5.2 million of cash and cash equivalents, $289.1 million available under our unsecured revolving line of credit and the potential ability to access the capital markets through the issuance of $200.0 million of common stock under our Equity Distribution Agreements. Furthermore, we have the ability to access the capital markets through the issuance of debt and/or equity securities under an automatic shelf registration statement. We believe that our current cash balance, cash flow from operations available for distribution or reinvestment, our borrowing capacity and our potential ability to access the capital markets are sufficient to provide for payment of our current operating costs, meet debt obligations and pay common dividends at least sufficient to maintain our REIT status and repay borrowings at, or prior to, their maturity. The timing, source and amount of cash flows used by financing and investing activities are sensitive to the capital markets’ environment, especially to changes in interest rates. In addition, COVID-19 has adversely affected and is expected to continue to adversely affect our operators’ business, results of operations, cash flows and financial condition which could, in turn, adversely affect our financial position. The operating results of the properties will be impacted by various factors over which the operators/owners may have no control. Those factors include, without limitation, the health of the economy, changes in supply of or demand for competing seniors housing and health care properties, ability to hire and maintain qualified staff, ability to control rising operating costs, the potential for significant reforms in the health care industry, and the impact of COVID-19. In addition, our future growth in net income and cash flow may be adversely impacted by various proposals for changes in the governmental regulations and financing of the health care industry, and the impact of COVID-19 or other pandemic level viruses. We cannot presently predict what impact these potential events may have, if any. We believe that adequate provision has been made for the possibility of loans proving uncollectible but we will continually evaluate the financial status of the operations of the seniors housing and health care properties. In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and will make future revisions to the provision, if considered necessary. 45 ​ Table of Contents Depending on the duration, spread and the severity of the COVID-19 outbreak, our borrowing capacity, compliance with financial covenants, ability to access the capital markets, and the payment of dividends may be negatively impacted. We continuously evaluate the availability of cost-effective capital and believe we have sufficient liquidity for our current dividend, corporate expenses and additional capital investments in 2022. Our investments, principally our investments in owned properties and mortgage loans, are subject to the possibility of loss of their carrying values as a result of changes in market prices, interest rates and inflationary expectations. The effects on interest rates may affect our costs of financing our operations and the fair market value of our financial assets. Generally, our leases have agreed upon annual increases and our loans have predetermined increases in interest rates. Inasmuch as we may initially fund some of our investments with variable interest rate debt, we would be at risk of net interest margin deterioration if medium and long-term rates were to increase. Our primary sources of cash include rent and interest receipts, borrowings under our unsecured credit facility, public and private issuance of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures and construction advances), loan advances and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows as summarized below (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,","\u200b","\u200b","Change","\u200b"],["Cash provided by (used in):","\u200b","2021","\u200b","2020","\u200b","\u200b","$","\u200b"],["Operating activities","\u200b","$","91,184","\u200b","$","116,101","\u200b","$","(24,917)","\u200b"],["Investing activities","\u200b","\u200b","(69,786)","\u200b","\u200b","43,931","\u200b","\u200b","(113,717)","\u200b"],["Financing activities","\u200b","\u200b","(24,009)","\u200b","\u200b","(156,504)","\u200b","\u200b","132,495","\u200b"],["(Decrease) increase in cash, cash equivalents and restricted cash","\u200b","\u200b","(2,611)","\u200b","\u200b","3,528","\u200b","\u200b","(6,139)","\u200b"],["Cash, cash equivalents and restricted cash, beginning of period","\u200b","\u200b","7,772","\u200b","\u200b","4,244","\u200b","\u200b","3,528","\u200b"],["Cash, cash equivalents and restricted cash, end of period","\u200b","$","5,161","\u200b","$","7,772","\u200b","$","(2,611)","\u200b"]] [[/GREPCENT_TABLE]] Debt Obligations Unsecured Credit Facility. We had an unsecured credit agreement (the “Original Credit Agreement”) that provided for a revolving aggregate commitment of the lenders of up to $600.0 million with the opportunity to increase the commitment size of the credit agreement up to a total of $1.0 billion. The Original Credit Agreement’s maturity was on June 27, 2022 and provided for a one-year extension option at our discretion, subject to customary conditions. In advance of expiration of the Original Credit Agreement, during the fourth quarter of 2021, we entered into the Third Amended and Restated credit agreement (the “Credit Agreement”) to replace the Original Credit Agreement. The Credit Agreement decreased the aggregate commitment of the lenders under the Original Credit Agreement to $500.0 million comprised of a $400.0 million revolving credit facility (the “Revolving Line of Credit”) and two $50.0 million term loans (the “Term Loans”). The Credit Agreement permits us to request increases to the Revolving Line of Credit and Term Loans commitments up to a total of $1.0 billion, extends the maturity of the Revolving Line of Credit to November 19, 2025 and provides for a one-year extension option at our discretion, subject to customary conditions. The Term Loans mature on November 19, 2025 and November 19, 2026. Based on our leverage at December 31, 2021, the Revolving Line of Credit provides for interest annually at LIBOR plus 115 points and a facility fee of 20 basis point and the Term Loans provide for interest annually at LIBOR plus 135 points. Interest Rate Swap Agreement. In connection with entering into the Term Loans as discussed above, we entered into two receive variable/pay fixed interest rate swap agreements (“Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loan borrowings over the four and five year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on our Consolidated Balance Sheets at fair value, with changes in the fair value of these instruments recognized in Accumulated other comprehensive income (loss) on our Consolidated Balance Sheets. During the three months ended December 31, 2021, we recorded a $0.2 million decrease in fair value of Interest Rate Swaps. Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with interest rates ranging from 3.85% to 5.03%. The senior unsecured notes mature between 2024 and 2032. 46 ​ Table of Contents The debt obligations by component as of December 31, 2021 are as follows (dollar amounts in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Applicable","\u200b","\u200b","\u200b","\u200b","Available"],["\u200b","\u200b","Interest","\u200b","Outstanding","\u200b","for"],["Debt Obligations","\u200b","Rate (1)","\u200b","Balance","\u200b","Borrowing"],["Bank borrowings (2)","\u200b","1.36%","\u200b","$","110,900","\u200b","$","289,100"],["Term loans, net of debt issue costs","\u200b","2.63%","\u200b","\u200b","99,363","\u200b","\u200b","\u2014"],["Senior unsecured notes, net of debt issue costs (3)","\u200b","4.35%","\u200b","\u200b","512,456","\u200b","\u200b","\u2014"],["Total","\u200b","3.65%","\u200b","$","722,719","\u200b","$","289,100"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Represents weighted average of interest rate as of December 31, 2021."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Subsequent to December 31, 2021, we borrowed $22,000 under our Revolving Line of Credit. Accordingly, we have $132,900 outstanding and $267,100 available for borrowing under our Revolving Line of Credit."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Subsequent to December 31, 2021, we paid $7,000 under our senior unsecured notes. Accordingly, we have $505,456 outstanding, net of debt issue costs, under our senior unsecured notes."]] [[/GREPCENT_TABLE]] Our debt borrowings and repayments during the year ended December 31, 2021, are as follows (in thousands): ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Debt Obligations","\u200b","\u200b","Borrowings","\u200b","\u200b","Repayments","\u200b"],["Revolving line of credit","\u200b","$","204,400","(1)\u200b","$","(183,400)","\u200b"],["Term loans","\u200b","\u200b","100,000","\u200b","\u200b","\u2014","\u200b"],["Senior unsecured notes","\u200b","\u200b","\u2014","\u200b","\u200b","(47,160)","(2)\u200b"],["Total","\u200b","$","304,400","\u200b","$","(230,560)","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Subsequent to December 31, 2021, we borrowed $22,000 under our Revolving Line of Credit. Accordingly, we have $132,900 outstanding and $267,100 available for borrowing under our Revolving Line of Credit."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Subsequent to December 31, 2021, we paid $7,000 under our senior unsecured notes. Accordingly, we have $505,456 outstanding, net of debt issue costs, under our senior unsecured notes."]] [[/GREPCENT_TABLE]] Equity Non-controlling Interests. We may, enter into partnerships to develop and/or own real estate. Given that our limited members do not have substantive kick-out rights, liquidation rights, or participation rights, we have concluded that the partnerships are VIEs. Since we exercise power over and receive benefits from the VIEs, we are considered the primary beneficiary. Accordingly, we consolidate the VIEs and record the non-controlling interests at cost. At December 31, 2021, we had 39,374,044 shares of common stock outstanding, equity on our balance sheet totaled $745.1 million and our equity securities had a market value of $1.3 billion. During the year ended December 31, 2021, we declared and paid $90.5 million of cash dividends. Common Stock. We have an equity distribution agreement with sales agents to issue and sell, from time to time, up to $200.0 million in aggregate offering price of our common shares. The equity distribution agreement provides for sales of common shares to be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings. At December 31, 2021, we had $200.0 million available under our equity distribution agreement. During 2021, we acquired 87,249 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2021, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 2022, payable on January 31, February 28 and March 31, 2022, respectively, to stockholders of record on January 21, February 18, and March 23, 2022, respectively. Stock Based Compensation Plans. During 2021, we adopted, and our shareholders approved the 2021 Equity Participation Plan (the “2021 Plan”) which replaces the 2015 Equity Participation Plan (the “2015 Plan”). Under the 2021 Plan, 1,900,000 shares of common stock have been authorized and reserved for awards, less one share for every one share that was subject to an award granted under the 2015 Plan after December 31, 2020 and prior to adoption. In addition, any shares that are not issued under outstanding awards under the 2015 Plan because the shares were forfeited 47 ​ Table of Contents or cancelled after December 31, 2020 will be added to and again be available for awards under the 2021 Plan. Under the 2021 Plan, the shares were authorized and reserved for awards to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2021 Plan and the 2015 Plan are set by our compensation committee at its discretion. Restricted Stock and Performance-based Stock Units. During 2021, we granted 182,240 shares of restricted common stock and performance-based stock units under the 2021 Plan as follows: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["No. of","\u200b","Price per","\u200b","\u200b","\u200b"],["Shares","\u200b","Share","\u200b","Vesting Period","\u200b"],["95,293","\u200b","$","42.27","\u200b","ratably over 3 years","\u200b"],["71,892","\u200b","$","42.27","\u200b","TSR targets (1)","\u200b"],["12,055","\u200b","$","39.40","\u200b","May 26, 2022","\u200b"],["3,000","\u200b","$","43.14","\u200b","April 1, 2022","\u200b"],["182,240","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Vesting is based on achieving certain total shareholder return (\u201cTSR\u201d) targets in 4 years with acceleration opportunity in 3 years."]] [[/GREPCENT_TABLE]] At December 31, 2021, the total number of restricted common stock shares that are scheduled to vest, and performance-based stock units that could possibly vest and remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock and performance-based stock units are as follows (dollar amounts in thousands): ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Number","\u200b","Remaining"],["\u200b","\u200b","of","\u200b","Compensation"],["Vesting Date","\u200b","Awards","","Expense"],["2022","\u200b","164,232","(1)\u200b","\u200b","5,447"],["2023","\u200b","128,282","(2)\u200b","\u200b","2,855"],["2024","\u200b","103,663","(3)\u200b","\u200b","303"],["Total","\u200b","396,177","\u200b","$","8,605"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Includes 60,836 performance-based stock units. The performance-based stock units are valued utilizing a lattice-binomial option pricing model based on Monte Carlo simulations. The company recognizes the fair value of the awards over the applicable vesting period as compensation expense."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Includes 66,027 performance-based stock units. See (1) above for valuation methodology."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(3)","Includes 71,892 performance-based stock units. See (1) above for valuation methodology."]] [[/GREPCENT_TABLE]] Stock Options. We did not issue any stock options during the year ended December 31, 2021. At December 31, 2021, we have 15,000 stock options outstanding and exercisable. Material Cash Requirements We monitor our contractual obligations and commitments detailed above to ensure funds are available to meet obligations when due. The following table represents our long-term contractual obligations (scheduled principal payments and amounts due at maturity) as of December 31, 2021, excluding the effects of interest and debt issue costs (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Total","\u200b","2022","\u200b","2023","\u200b","2024","\u200b","2025","\u200b","2026","\u200b","Thereafter"],["Revolving line of credit","\u200b","$","110,900","(1)\u200b","$","\u2014","(1)\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","110,900","\u200b","$","\u2014","\u200b","$","\u2014","\u200b"],["Term loans","\u200b","\u200b","100,000","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","50,000","\u200b","\u200b","50,000","\u200b","\u200b","\u2014","\u200b"],["Senior unsecured notes","\u200b","","512,980","(2)\u200b","","48,160","(2)\u200b","","49,160","\u200b","","49,160","\u200b","","49,500","\u200b","\u200b","51,500","\u200b","","265,500","\u200b"],["\u200b","\u200b","$","723,880","\u200b","$","48,160","\u200b","$","49,160","\u200b","$","49,160","\u200b","$","210,400","\u200b","$","101,500","\u200b","$","265,500","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Subsequent to December 31, 2021, we borrowed $22,000 under our unsecured revolving line of credit. Accordingly, we have $132,900 outstanding and $267,100 available for borrowing under our unsecured revolving line of credit."]] [[/GREPCENT_TABLE]] ​ [[GREPCENT_TABLE]] [["(2)","Subsequent to December 31, 2021, we paid $7,000 under our senior unsecured notes, accordingly we have $505,456 outstanding, net of debt issue costs, under our senior unsecured notes."]] [[/GREPCENT_TABLE]] 48 ​ Table of Contents ​ The following table represents our projected interest expense, excluding capitalized interest, amortization of debt issue costs and bank fees, as of December 31, 2021 (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Total","","2022","","2023","","2024","","2025","","2026","","Thereafter"],["Revolving line of credit","\u200b","$","9,072","\u200b","$","2,344","\u200b","$","2,344","\u200b","$","2,351","\u200b","$","2,033","\u200b","$","\u2014","\u200b","$","\u2014","\u200b"],["Term loans","\u200b","\u200b","11,712","\u200b","\u200b","2,664","\u200b","\u200b","2,664","\u200b","\u200b","2,671","\u200b","\u200b","2,510","\u200b","\u200b","1,203","\u200b","\u200b","\u2014","\u200b"],["Senior unsecured notes","\u200b","","111,829","\u200b","","21,281","\u200b","","19,003","\u200b","","16,747","\u200b","","14,536","\u200b","","12,473","\u200b","","27,789","\u200b"],["\u200b","\u200b","$","132,613","\u200b","$","26,289","\u200b","$","24,011","\u200b","$","21,769","\u200b","$","19,079","\u200b","$","13,676","\u200b","$","27,789","\u200b"]] [[/GREPCENT_TABLE]] Also, see Item 8. FINANCIAL STATEMENTS— Note 11. Commitments and Contingencies for additional information regarding our contractual commitments. ​