| Investment in Unconsolidated Joint Ventures |
6. | Investment in Unconsolidated Joint Ventures |
We have an acquisition, development and construction (“ADC”) loan that meets the accounting criteria to be considered a variable interest entity (“VIE”). We are not the primary beneficiary of the VIE as we do not have both: 1) the power to direct the activities that most significantly affect the VIE’s economic performance, and 2) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. However, we do have significant influence over the VIE. Therefore, we have accounted for the investment as a joint venture using the equity method of accounting. The following table provides information regarding our unconsolidated joint venture investments at March 31, 2026 (dollar amounts in thousands): | | | | | | | | | | | | | | | | | | | Type | | Type | | Total | | | Contractual | | | Number | | | | | | | of | | of | | Preferred | | | Cash | | | of | | | Carrying | | State | | Property | | Investment | | Return | | | Portion | | | Beds | | | Value | | Texas | | SNF | | Senior Loan | (1) | 9.2 | % | | 9.2 | % | | 104 | | $ | 12,558 | (1) |
| (1) | Represents a $12,700 mortgage loan, which is comprised of $11,164 funded at origination during the three months ended June 30, 2024, an interest reserve of $750 and a capital expenditure reserve of $786. In accordance with GAAP, this mortgage loan was determined to be an ADC loan and is accounted for as an unconsolidated JV. The five-year mortgage loan is interest-only at a current rate of 9.15%. During the three months ended March 31, 2026, the operator provided notice of its intent to pay off this mortgage loan. Subsequent to March 31, 2026, the mortgage loan was paid off. |
Additionally, we had two preferred equity investments that also met the accounting criteria to be considered a VIE based on the same factors discussed above for the ADC loan. During 2025, both preferred equity investments were redeemed. The following table summarizes income recognized, and cash interest received related to our investments in unconsolidated joint ventures during the three months ended March 31, 2026 and 2025 (in thousands): | | | | | | | | | | | | | | | Type | | | | | | | | | | | | | of | | | Income | | | Cash Income | | | Non-cash | | Year | | Properties | | | Recognized | | | Earned | | | Income Accrued | | 2026 | | SNF | | $ | 295 | | $ | 295 | | $ | — | | | | | | | | | | | | | | | 2025 | | SNF | | $ | 294 | | $ | 294 | | $ | — | | | | SH (1) | | | 145 | (1) | | 145 | (1) | | — | | | | SH (2) | | | 3,226 | (2) | | 3,172 | (2) | | 54 | | Total | | | | $ | 3,665 | | $ | 3,611 | | $ | 54 | |
| (1) | During the fourth quarter of 2025, our preferred equity investment in the JV that owns a 109-unit SH in Washington was redeemed for $8,140, which included a 12.0% exit IRR of $1,800. |
| (2) | During the first quarter of 2025, our preferred equity investment in the JV that owns a 267-unit SH in Washington was redeemed for $15,962, which included a 13% exit IRR of $2,962. |
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