Portfolio Activity

3 Months Ended

Mar. 31, 2019

Note 4 – Portfolio Activity

Texas Ten Portfolio Master Lease Update

Effective January 1, 2019, a new 15-year triple net master lease commenced with certain affiliates of Creative Solutions in Healthcare, Inc. (“Creative Solutions”) for the Company’s portfolio of ten skilled nursing facilities located throughout Texas (the “Texas Ten Portfolio”) previously leased to affiliates of OnPointe (the “Prior Texas Ten Tenant”). The lease with the Prior Texas Ten Tenant was terminated on December 31, 2018. The initial annual base rent under the lease is approximately $7.7 million with annual lease escalators of 2.0% and two, five-year tenant renewal options. The Texas Ten Portfolio accounted for approximately 24.1% of the Company’s total real estate properties, net as of March 31, 2019.

Fundamental Healthcare Master Lease Update

The Company leases a portfolio of four properties to subsidiaries of Fundamental Healthcare (“Fundamental”) pursuant to a triple-net master lease with expected base rent of approximately $9.6 million for 2019. Effective October 6, 2018, the Company amended the master lease to defer approximately $2.4 million in base rent for May 2018 through March 2019 associated with Mountain’s Edge Hospital, which has undergone an expansion. The amendment requires the deferred rent amount to be paid in equal monthly installments over the remainder of 2019 beginning in April 2019. Interest on the outstanding deferred rent accrues interest at 9.0% during the deferral and repayment periods. As of March 31, 2019, the deferred rent balance was $2.3 million, which is recorded in other assets on the Company’s consolidated balance sheet.

In April 2019, Fundamental requested to continue the deferral of $0.2 million in monthly rent and a delay in the commencement of repaying the Total Abatement Amount, including any additional deferred rent amounts, until operations of the expansion begin at the Mountain’s Edge facility, which is currently expected to be in June 2019. The Company is currently in discussions with Fundamental regarding this request. There can be no assurances that it will be resolved prior to the closing of the merger with Omega.

Concentrations of Credit Risks

The following table contains information regarding tenant concentration in the Company’s portfolio, based on the percentage of revenue for the three months ended March 31, 2019 and 2018, related to tenants, or affiliated tenants, that exceed 10% of revenues:

	% of Total Revenue for the three months ended March 31,
	2019	2018
Baylor Scott & White Health	22.0%	21.9%
Vibra Healthcare	15.4%	11.4%
Fundamental Healthcare	14.9%	15.3%
Creative Solutions in Healthcare ⁽¹⁾	14.5%	-
Life Generations Healthcare	12.9%	12.9%
Prior Texas Ten Tenant ⁽¹⁾	-	21.4%

⁽¹⁾

On December 31, 2018, the lease with the Prior Texas Ten Tenant was terminated. The Company entered into a 15-year triple-net master lease agreement with certain affiliates of Creative Solutions for the Texas Ten Portfolio, which commenced on January 1, 2019. See “Texas Ten Portfolio Master Lease Update” above.

The following table contains information regarding the geographic concentration of the properties in the Company’s portfolio as of March 31, 2019, which includes percentage of rental income for the three months ended March 31, 2019 and 2018 (dollars in thousands):

				% of Total	% of Rental Income
State	Number of Properties	Gross Investment		Real Estate Property Investments	Three months ended March 31, 2019	Three months ended March 31, 2018
Texas	17	$	300,259	50.1%	52.4%	59.1%
California	7		154,726	25.8%	22.9%	21.6%
Nevada	4		69,268	11.6%	12.4%	12.1%
South Carolina	1		20,000	3.3%	3.2%	3.2%
Indiana	3		38,415	6.4%	6.4%	2.4%
Connecticut	1		10,133	1.7%	1.6%	1.6%
Tennessee	1		6,386	1.1%	1.1%	-
	34	$	599,187	100.0%	100.0%	100.0%

MedEquities Realty Trust, Inc. 10-Q