Sabra Health Care REIT, Inc. [SBRA] Filings

10-Q 1 sbra-20220331.htm 10-Q sbra-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34950

SABRA HEALTH CARE REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)


Maryland						27-2560479
(State of Incorporation)						(I.R.S. Employer Identification No.)

18500 Von Karman Avenue, Suite 550

Irvine, CA 92612

(888) 393-8248

(Address, zip code and telephone number of Registrant)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value	SBRA	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 29, 2022, there were 230,954,777 shares of the registrant’s $0.01 par value Common Stock outstanding.

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SABRA HEALTH CARE REIT, INC. AND SUBSIDIARIES

Index


		Page Numbers
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Consolidated Balance Sheets	4

	Consolidated Statements of Income	5

	Consolidated Statements of Comprehensive Income	6

	Consolidated Statements of Equity	7

	Consolidated Statements of Cash Flows	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 6.	Exhibits	37

Signatures		39

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References throughout this document to “Sabra,” “we,” “our,” “ours” and “us” refer to Sabra Health Care REIT, Inc. and its direct and indirect consolidated subsidiaries and not any other person.

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q (this “10-Q”) contain “forward-looking” information as that term is defined by the Private Securities Litigation Reform Act of 1995. Any statements that do not relate to historical or current facts or matters are forward-looking statements. Examples of forward-looking statements include all statements regarding our expected future financial position, results of operations, cash flows, liquidity, financing plans, business strategy, tenants, operators and Senior Housing - Managed communities (as defined below), the expected amounts and timing of dividends and other distributions, projected expenses and capital expenditures, competitive position, growth opportunities, potential investments, potential dispositions, plans and objectives for future operations, and compliance with and changes in governmental regulations. You can identify some of the forward-looking statements by the use of forward-looking words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “may” and other similar expressions, although not all forward-looking statements contain these identifying words.

Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including, among others, the following:

•the ongoing COVID-19 pandemic and measures intended to prevent its spread, and the related impact on our tenants, operators and Senior Housing - Managed communities;

•operational risks with respect to our Senior Housing - Managed communities;

•competitive conditions in our industry;

•the loss of key management personnel;

•uninsured or underinsured losses affecting our properties and the possibility of environmental compliance costs and liabilities;

•potential impairment charges and adjustments related to the accounting of our assets;

•the potential variability of our reported rental and related revenues as a result of Accounting Standards Update (“ASU”) 2016-02, Leases, as amended by subsequent ASUs;

•risks associated with our investment in our unconsolidated joint venture;

•catastrophic weather and other natural or man-made disasters, the effects of climate change on our properties and a failure to implement sustainable and energy-efficient measures;

•increased operating costs for our tenants and operators;

•increased healthcare regulation and enforcement;

•our tenants’ dependency on reimbursement from governmental and other third-party payor programs;

•the effect of our tenants declaring bankruptcy or becoming insolvent;

•our ability to find replacement tenants and the impact of unforeseen costs in acquiring new properties;

•the impact of litigation and rising insurance costs on the business of our tenants;

•the impact of required regulatory approvals of transfers of healthcare properties;

•environmental compliance costs and liabilities associated with real estate properties we own;

•our tenants’ or operators’ failure to adhere to applicable privacy and data security laws, or a material breach of our or our tenants’ or operators’ information technology;

•our concentration in the healthcare property sector, particularly in skilled nursing/transitional care facilities and senior housing communities, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries;

• the significant amount of and our ability to service our indebtedness;

•covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms;

•increases in market interest rates;

•adverse changes in our credit ratings;

•our ability to make dividend distributions at expected levels;

•our ability to raise capital through equity and debt financings;

•changes in foreign currency exchange rates and other risks associated with our ownership of property outside the U.S.;

•the relatively illiquid nature of real estate investments;

•our ability to maintain our status as a real estate investment trust (“REIT”) under the federal tax laws;

•compliance with REIT requirements and certain tax and tax regulatory matters related to our status as a REIT;

•changes in tax laws and regulations affecting REITs (including the potential effects of the Tax Cuts and Jobs Act);

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•the ownership limits and takeover defenses in our governing documents and under Maryland law, which may restrict change of control or business combination opportunities; and

•the exclusive forum provisions in our bylaws.

We urge you to carefully consider these risks and review the additional disclosures we make concerning risks and other factors that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Annual Report on Form 10-K”), as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the “SEC”), including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. We caution you that any forward-looking statements made in this 10-Q are not guarantees of future performance, events or results, and you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this 10-Q or to reflect the occurrence of unanticipated events, unless required by law to do so.

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PART I. FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS

SABRA HEALTH CARE REIT, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)


	March 31, 2022		December 31, 2021
	(unaudited)
Assets
Real estate investments, net of accumulated depreciation of $873,795 and $831,324 as of March 31, 2022 and December 31, 2021, respectively	$	5,156,060	$	5,162,884
Loans receivable and other investments, net	397,074		399,086
Investment in unconsolidated joint venture	93,878		96,680
Cash and cash equivalents	24,836		111,996
Restricted cash	4,443		3,890

Lease intangible assets, net	52,877		54,063
Accounts receivable, prepaid expenses and other assets, net	155,764		138,108
Total assets	$	5,884,932	$	5,966,707

Liabilities
Secured debt, net	$	50,645	$	66,663
Revolving credit facility	16,792		—
Term loans, net	556,307		594,246
Senior unsecured notes, net	1,733,786		1,733,566

Accounts payable and accrued liabilities	118,296		142,989
Lease intangible liabilities, net	47,583		49,713

Total liabilities	2,523,409		2,587,177

Commitments and contingencies (Note 12)

Equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized, zero shares issued and outstanding as of March 31, 2022 and December 31, 2021	—		—
Common stock, $0.01 par value; 500,000,000 shares authorized, 230,954,777 and 230,398,655 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	2,310		2,304
Additional paid-in capital	4,481,634		4,482,451
Cumulative distributions in excess of net income	(1,124,095)		(1,095,204)
Accumulated other comprehensive income (loss)	1,674		(10,021)


Total equity	3,361,523		3,379,530
Total liabilities and equity	$	5,884,932	$	5,966,707

See accompanying notes to consolidated financial statements.

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SABRA HEALTH CARE REIT, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Revenues:
Rental and related revenues (Note 4)	$	109,886	$	113,383
Interest and other income	10,992		2,941
Resident fees and services	42,227		36,041

Total revenues	163,105		152,365

Expenses:
Depreciation and amortization	45,256		44,375
Interest	24,972		24,443
Triple-net portfolio operating expenses	5,011		5,135
Senior housing - managed portfolio operating expenses	33,104		28,945
General and administrative	10,396		8,938

Provision for loan losses and other reserves	475		2,025


Total expenses	119,214		113,861

Other (expense) income:
Loss on extinguishment of debt	(271)		(793)
Other income	68		133
Net gain on sales of real estate	—		1,313

Total other (expense) income	(203)		653

Income before loss from unconsolidated joint venture and income tax expense	43,688		39,157

Loss from unconsolidated joint venture	(2,802)		(5,010)
Income tax expense	(284)		(700)

Net income	$	40,602	$	33,447









Net income, per:

Basic common share	$	0.18	$	0.16

Diluted common share	$	0.18	$	0.16

Weighted-average number of common shares outstanding, basic	230,859,993		211,450,699

Weighted-average number of common shares outstanding, diluted	231,564,970		212,624,305

See accompanying notes to consolidated financial statements.

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SABRA HEALTH CARE REIT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021

Net income	$	40,602	$	33,447
Other comprehensive income:
Unrealized (loss) gain, net of tax:
Foreign currency translation loss	(644)		(251)
Unrealized gain on cash flow hedges	12,339		33,789

Total other comprehensive income	11,695		33,538

Comprehensive income	$	52,297	$	66,985

See accompanying notes to consolidated financial statements.

SABRA HEALTH CARE REIT, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(dollars in thousands, except per share data)

(unaudited)


		Three Months Ended March 31, 2021
	Common Stock		Additional Paid-in Capital			Cumulative Distributions in Excess of Net Income		Accumulated Other Comprehensive (Loss) Income				Total Equity
		Shares			Amounts
Balance, December 31, 2020		210,560,815	$	2,106		$	4,163,228	$	(716,195)	$	(39,911)		$	3,409,228

Net income		—	—			—		33,447		—			33,447
Other comprehensive income		—	—			—		—		33,538			33,538


Amortization of stock-based compensation		—	—			2,835		—		—			2,835

Common stock issuance, net		5,369,387	53			88,071		—		—			88,124


Common dividends ($0.30 per share)		—	—			—		(63,768)		—			(63,768)
Balance, March 31, 2021		215,930,202	$	2,159		$	4,254,134	$	(746,516)	$	(6,373)		$	3,503,404


		Three Months Ended March 31, 2022
	Common Stock		Additional Paid-in Capital			Cumulative Distributions in Excess of Net Income		Accumulated Other Comprehensive (Loss) Income				Total Equity
		Shares			Amounts
Balance, December 31, 2021		230,398,655	$	2,304		$	4,482,451	$	(1,095,204)	$	(10,021)		$	3,379,530

Net income		—	—			—		40,602		—			40,602
Other comprehensive income		—	—			—		—		11,695			11,695


Amortization of stock-based compensation		—	—			2,673		—		—			2,673

Common stock issuance, net		556,122	6			(3,490)		—		—			(3,484)

Common dividends ($0.30 per share)		—	—			—		(69,493)		—			(69,493)
Balance, March 31, 2022		230,954,777	$	2,310		$	4,481,634	$	(1,124,095)	$	1,674		$	3,361,523

See accompanying notes to consolidated financial statements.

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SABRA HEALTH CARE REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	40,602	$	33,447
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	45,256		44,375
Non-cash rental and related revenues	(4,474)		(5,713)
Non-cash interest income	(547)		(412)
Non-cash interest expense	2,698		1,896
Stock-based compensation expense	2,456		2,288


Loss on extinguishment of debt	271		793
Provision for loan losses and other reserves	475		2,025
Net gain on sales of real estate	—		(1,313)


Loss from unconsolidated joint venture	2,802		5,010

Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other assets, net	(5,457)		(2,873)
Accounts payable and accrued liabilities	(20,968)		(10,992)
Net cash provided by operating activities	63,114		68,531
Cash flows from investing activities:
Acquisition of real estate	(20,573)		(28,654)


Origination and fundings of preferred equity investments	(4,074)		—
Additions to real estate	(10,803)		(10,833)
Escrow deposits for potential investments	(3,217)		—
Repayments of loans receivable	696		628
Repayments of preferred equity investments	729		301

Net proceeds from the sales of real estate	—		3,202


Net cash used in investing activities	(37,242)		(35,356)
Cash flows from financing activities:
Net borrowings from revolving credit facility	16,577		—


Principal payments on term loans	(40,000)		(93,000)
Principal payments on secured debt	(16,067)		(709)
Payments of deferred financing costs	(6)		—



Issuance of common stock, net	(3,748)		87,654
Dividends paid on common stock	(69,275)		(63,221)
Net cash used in financing activities	(112,519)		(69,276)
Net decrease in cash, cash equivalents and restricted cash	(86,647)		(36,101)
Effect of foreign currency translation on cash, cash equivalents and restricted cash	40		65
Cash, cash equivalents and restricted cash, beginning of period	115,886		65,523
Cash, cash equivalents and restricted cash, end of period	$	29,279	$	29,487
Supplemental disclosure of cash flow information:
Interest paid	$	18,383	$	21,620

Supplemental disclosure of non-cash investing activities:



Decrease in loans receivable and other investments due to acquisition of real estate	$	5,623	$	—

See accompanying notes to consolidated financial statements.

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SABRA HEALTH CARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BUSINESS

Overview

Sabra Health Care REIT, Inc. (“Sabra” or the “Company”) was incorporated on May 10, 2010 as a wholly owned subsidiary of Sun Healthcare Group, Inc. (“Sun”) and commenced operations on November 15, 2010 following Sabra’s separation from Sun. Sabra elected to be treated as a real estate investment trust (“REIT”) with the filing of its United States (“U.S.”) federal income tax return for the taxable year beginning January 1, 2011. Sabra believes that it has been organized and operated, and it intends to continue to operate, in a manner to qualify as a REIT. Sabra’s primary business consists of acquiring, financing and owning real estate property to be leased to third-party tenants in the healthcare sector. Sabra primarily generates revenues by leasing properties to tenants and operators throughout the U.S. and Canada. Sabra owns substantially all of its assets and properties and conducts its operations through Sabra Health Care Limited Partnership, a Delaware limited partnership (the “Operating Partnership”), of which Sabra is the sole general partner and a wholly owned subsidiary of Sabra is currently the only limited partner, or by subsidiaries of the Operating Partnership. The Company’s investment portfolio is primarily comprised of skilled nursing/transitional care facilities, senior housing communities (“Senior Housing - Leased”), behavioral health facilities and specialty hospitals and other facilities, in each case leased to third-party operators; senior housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing - Managed”); investments in loans receivable; and preferred equity investments.

COVID-19

The ongoing COVID-19 pandemic and measures intended to prevent its spread have negatively impacted and are expected to continue to negatively impact the Company and its operations in a number of ways, including but not limited to:

•Decreased occupancy and increased operating costs for the Company’s tenants and borrowers, which have negatively impacted their operating results and may adversely impact their ability to make full and timely rental payments and debt service payments, respectively, to the Company. In some cases, the Company may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to the Company as those currently in place. Reduced or modified rental and debt service amounts could result in the determination that the full amounts of the Company’s investments are not recoverable, which could result in an impairment charge. To date, the impact of COVID-19 on the Company’s skilled nursing/transitional care facility and assisted living community tenants has been partially mitigated by the assistance they have received or expect to receive from state and federal assistance programs, including through the CARES Act (as defined and further described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Skilled Nursing Facility Reimbursement Rates” in Part I, Item 2), although these benefits on an individual tenant basis vary and may not provide enough relief to meet their rental obligations to the Company. From the beginning of the pandemic through March 31, 2022, the Company has agreed to temporary pandemic-related rent deferrals for six tenants of two to nine months of rent totaling $3.2 million, of which $0.5 million has been repaid. However, the longer the duration of the COVID-19 pandemic, the more likely that the Company’s tenants and borrowers will begin to default on these obligations, particularly if state and federal assistance is reduced or eliminated. Such defaults could materially and adversely affect the Company’s results of operations and liquidity, in addition to resulting in potential impairment charges.

•Decreased occupancy and increased operating costs within the Company’s Senior Housing - Managed portfolio, which have negatively impacted and are expected to continue to negatively impact the operating results of these investments. As noted above, the assistance received or expected to be received by eligible assisted living operators will partially mitigate the negative impact of COVID-19 on the Company’s Senior Housing - Managed portfolio. Prolonged deterioration in the operating results for the Company’s investments in its Senior Housing - Managed portfolio could result in the determination that the full amounts of the Company’s investments are not recoverable, which could result in an impairment charge.

•See Note 4, “Investment in Real Estate Properties,” for discussion of the impact on the Company’s investment in unconsolidated joint venture.

The Company’s financial results as of and for the three months ended March 31, 2022 reflect the results of the Company’s evaluation of the impact of COVID-19 on its business including, but not limited to, its evaluation of potential impairments of long-lived or other assets, measurement of credit losses on financial instruments, evaluation of any lease

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modifications, evaluation of lease accounting impact, estimates of fair value and the Company’s ability to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of Sabra and its wholly owned subsidiaries as of March 31, 2022 and December 31, 2021 and for the three month periods ended March 31, 2022 and 2021. All significant intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair statement of the results for such periods. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

GAAP requires the Company to identify entities for which control is achieved through voting rights or other means and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. If the Company were determined to be the primary beneficiary of the VIE, the Company would consolidate investments in the VIE. The Company may change its original assessment of a VIE due to events such as modifications of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposal of all or a portion of an interest held by the primary beneficiary.

The Company identifies the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. The Company performs this analysis on an ongoing basis. As of March 31, 2022, the Company determined that it was not the primary beneficiary of any VIEs.

As it relates to investments in loans, in addition to the Company’s assessment of VIEs and whether the Company is the primary beneficiary of those VIEs, the Company evaluates the loan terms and other pertinent facts to determine whether the loan investment should be accounted for as a loan or as a real estate joint venture. If an investment has the characteristics of a real estate joint venture, including if the Company participates in the majority of the borrower’s expected residual profit, the Company would account for the investment as an investment in a real estate joint venture and not as a loan investment. Expected residual profit is defined as the amount of profit, whether called interest or another name, such as an equity kicker, above a reasonable amount of interest and fees expected to be earned by a lender. At March 31, 2022, none of the Company’s investments in loans were accounted for as real estate joint ventures.

As it relates to investments in joint ventures, the Company assesses any limited partners’ rights and their impact on the presumption of control of the limited partnership by any single partner. The Company also applies this guidance to managing member interests in limited liability companies. The Company reassesses its determination of which entity controls the joint venture if: there is a change to the terms or in the exercisability of the rights of any partners or members, the sole general partner or managing member increases or decreases its ownership interests, or there is an increase or decrease in the number of outstanding ownership interests. As of March 31, 2022, the Company’s determination of which entity controls its investments in joint ventures has not changed as a result of any reassessment.

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Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Recently Issued Accounting Standards Update

Issued but Not Yet Adopted

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides temporary optional guidance that provides transition relief for reference rate reform, including optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or a reference rate that is expected to be discontinued as a result of reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2024. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refines the scope of Topic 848 and clarifies some of its guidance. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

3. RECENT REAL ESTATE ACQUISITIONS

During the three months ended March 31, 2022, the Company acquired one Senior Housing - Managed community. The investment was part of the Company’s proprietary development pipeline and was previously reflected as a preferred equity investment which had a book value of $5.6 million at the time of acquisition. During the three months ended March 31, 2021, the Company acquired one behavioral health facility and one Senior Housing - Managed community. The consideration was allocated as follows (in thousands):


	Three Months Ended March 31,
	2022		2021
Land	$	3,691	$	917
Building and improvements	21,168		26,389
Tenant origination and absorption costs intangible assets	1,337		1,338
Tenant relationship intangible assets	—		10
Total consideration	$	26,196	$	28,654

The tenant origination and absorption costs intangible assets had an amortization period as of the date of acquisition of one year, for the acquisition completed during the three months ended March 31, 2022. The tenant origination and absorption costs intangible assets and tenant relationship intangible assets had weighted-average amortization periods as of the respective dates of acquisition of two years and 26 years, respectively, for acquisitions completed during the three months ended March 31, 2021.

For the three months ended March 31, 2022, the Company recognized $0.9 million of total revenues and $0.1 million of net loss from the facility acquired during the three months ended March 31, 2022. For the three months ended March 31, 2021, the Company recognized $0.4 million of total revenues and $0.1 million of net income from the facilities acquired during the three months ended March 31, 2021.

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4. INVESTMENT IN REAL ESTATE PROPERTIES

The Company’s real estate properties held for investment consisted of the following (dollars in thousands):

As of March 31, 2022


Property Type	Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation		Total Real Estate Investments, Net
Skilled Nursing/Transitional Care	279	30,920	$	3,623,501	$	(499,510)	$	3,123,991
Senior Housing - Leased	59	4,072	718,178		(108,364)		609,814
Senior Housing - Managed	50	5,266	1,043,235		(183,148)		860,087
Behavioral Health	13	795	418,625		(44,309)		374,316
Specialty Hospitals and Other	15	392	225,443		(37,977)		187,466
	416	41,445	6,028,982		(873,308)		5,155,674
Corporate Level			873		(487)		386
			$	6,029,855	$	(873,795)	$	5,156,060

As of December 31, 2021


Property Type	Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation		Total Real Estate Investments, Net
Skilled Nursing/Transitional Care	279	30,920	$	3,617,359	$	(474,534)	$	3,142,825
Senior Housing - Leased	60	4,099	720,581		(104,046)		616,535
Senior Housing - Managed	49	5,140	1,012,398		(174,098)		838,300
Behavioral Health	13	795	417,659		(41,556)		376,103
Specialty Hospitals and Other	15	392	225,348		(36,623)		188,725
	416	41,346	5,993,345		(830,857)		5,162,488
Corporate Level			863		(467)		396
			$	5,994,208	$	(831,324)	$	5,162,884


	March 31, 2022		December 31, 2021
Building and improvements	$	5,175,057	$	5,145,096
Furniture and equipment	265,312		262,969
Land improvements	4,003		4,295
Land	585,483		581,848
Total real estate at cost	6,029,855		5,994,208
Accumulated depreciation	(873,795)		(831,324)
Total real estate investments, net	$	5,156,060	$	5,162,884

Operating Leases

As of March 31, 2022, the substantial majority of the Company’s real estate properties (excluding 50 Senior Housing - Managed communities) were leased under triple-net operating leases with expirations ranging from less than one year to 20 years. As of March 31, 2022, the leases had a weighted-average remaining term of seven years. The leases generally include provisions to extend the lease terms and other negotiated terms and conditions. The Company, through its subsidiaries, retains substantially all of the risks and benefits of ownership of the real estate assets leased to the tenants. The Company may receive additional security under these operating leases in the form of letters of credit and security deposits from the lessee or guarantees from the parent of the lessee. Security deposits received in cash related to tenant leases are included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets and totaled $11.2 million and $28.6 million as of March 31, 2022 and December 31, 2021, respectively, and letters of credit deposited with the Company totaled approximately $82 million and $63 million as of March 31, 2022 and December 31, 2021, respectively. In addition, the Company’s tenants have deposited with the Company $16.7 million and $16.8 million as of March 31, 2022 and December 31, 2021, respectively, for future real estate taxes, insurance expenditures and tenant improvements related to the Company’s

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properties and their operations, and these amounts are included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

Lessor costs that are paid by the lessor and reimbursed by the lessee are included in the measurement of variable lease revenue and the associated expense. As a result, the Company recognized variable lease revenue and the associated expense of $5.1 million and $4.8 million during the three months ended March 31, 2022 and 2021, respectively.

The Company monitors the creditworthiness of its tenants by evaluating the ability of the tenants to meet their lease obligations to the Company based on the tenants’ financial performance, including, as applicable and appropriate, the evaluation of any parent guarantees (or the guarantees of other related parties) of such lease obligations. The primary basis for the Company’s evaluation of the credit quality of its tenants (and more specifically the tenant’s ability to pay their rent obligations to the Company) is the tenant’s lease coverage ratio as supplemented by the parent’s fixed charge coverage ratio for those entities with a parent guarantee. These coverage ratios include earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) to rent and earnings before interest, taxes, depreciation, amortization, rent and management fees (“EBITDARM”) to rent at the lease level and consolidated EBITDAR to total fixed charges at the parent guarantor level when such a guarantee exists. The Company obtains various financial and operational information from the majority of its tenants each month and reviews this information in conjunction with the above-described coverage metrics to identify financial and operational trends, evaluate the impact of the industry’s operational and financial environment (including the impact of government reimbursement), and evaluate the management of the tenant’s operations. These metrics help the Company identify potential areas of concern relative to its tenants’ credit quality and ultimately the tenant’s ability to generate sufficient liquidity to meet its obligations, including its obligation to continue to pay the rent due to the Company.

The Avamere Family of Companies (“Avamere”) leases 27 facilities from the Company and has been impacted by census declines, labor cost increases and cash flow constraints as a result of the COVID-19 pandemic. In 2021, the Company concluded that its lease with Avamere should no longer be accounted for on an accrual basis and used Avamere’s $11.9 million letter of credit to fund rent. In 2022, Avamere’s lease was amended to, among other things, reduce Avamere’s annual base rent to $30.7 million from $44.1 million effective February 1, 2022.

For the three months ended March 31, 2022, no tenant relationship represented 10% or more of the Company’s total revenues.

As of March 31, 2022, the future minimum rental payments from the Company’s properties held for investment under non-cancelable operating leases were as follows and may materially differ from actual future rental payments received (in thousands):


April 1 through December 31, 2022	$	305,189
2023	394,427
2024	394,817
2025	387,304
2026	370,067
Thereafter	1,410,722
	$	3,262,526

Senior Housing - Managed Communities

The Company’s Senior Housing - Managed communities offer residents certain ancillary services that are not contemplated in the lease with each resident (i.e., housekeeping, laundry, guest meals, etc.). These services are provided and paid for in addition to the standard services included in each resident lease (i.e., room and board, standard meals, etc.). The Company bills residents for ancillary services one month in arrears and recognizes revenue as the services are provided, as the Company has no continuing performance obligation related to those services. Resident fees and services include ancillary service revenue of $0.3 million for each of the three months ended March 31, 2022 and 2021.

Investment in Unconsolidated Joint Venture

The Company has a 49% equity interest in a joint venture (the “Enlivant Joint Venture”) with affiliates of TPG Real Estate, the real estate platform of TPG. TPG also owns Enlivant, the senior housing management platform that manages the portfolio owned by the Enlivant Joint Venture. As of March 31, 2022, the Enlivant Joint Venture owned 158 senior housing communities.

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During the second quarter of 2021, the Company re-evaluated its plans with respect to the Enlivant Joint Venture and determined that it intends to eventually exit its 49% stake. The Company revisited its estimate of the fair value of its investment in the Enlivant Joint Venture and concluded that the carrying value exceeded the estimated fair value of the investment and deemed the decline to be other-than-temporary. This resulted in the Company recording an impairment charge totaling $164.1 million during the three months ended June 30, 2021.

As of March 31, 2022, the book value of the Company’s investment in the Enlivant Joint Venture was $93.9 million which includes an unamortized basis difference of $291.8 million. The unamortized basis difference is related to the difference between the amount the Company purchased its interest in the Enlivant Joint Venture for and the historical cost basis of the assets. The Company’s book value of the Enlivant Joint Venture is presented net of the debt at the joint venture level.

The ongoing operating performance of the Enlivant Joint Venture, as well as whether TPG is able to secure a buyer on favorable terms or at all, will impact the ultimate amounts realized from the Enlivant Joint Venture and may require the Company to recognize an additional impairment charge in the future with respect to this investment. Accordingly, the amount ultimately realized by the Company for its investment in the Enlivant Joint Venture could materially differ from its estimated fair value as reflected in the consolidated balance sheets as of March 31, 2022.

Net Investment in Sales-Type Lease

As of March 31, 2022, the Company had a $25.3 million net investment in one skilled nursing/transitional care facility leased to an operator under a sales-type lease, as the tenant is obligated to purchase the property at the end of the lease term. The net investment in sales-type lease is recorded in accounts receivable, prepaid expenses and other assets, net on the accompanying consolidated balance sheets and represents the present value of total rental payments of $2.5 million, plus the estimated purchase price of $25.6 million, less the unearned lease income of $2.6 million and allowance for credit losses of $0.2 million as of March 31, 2022. Unearned lease income represents the excess of the minimum lease payments and residual value over the cost of the investment. Unearned lease income is deferred and amortized to income over the lease term to provide a constant yield when collectability of the lease payments is reasonably assured. Income from the Company’s net investment in sales-type lease was $0.6 million for each of the three months ended March 31, 2022 and 2021, and is reflected in interest and other income on the accompanying consolidated statements of income. During the three months ended March 31, 2022 and 2021, the Company reduced its allowance for credit losses by $32,000 and increased its allowance for credit losses by $0.1 million, respectively. During the three months ended March 31, 2021, the Company was required to recognize a $1.0 million gain on sale of real estate prior to the sale to the tenant as a result of a lease modification and reassessing the classification of the lease and determining it should be accounted for as a sales-type lease. Future minimum lease payments contractually due under the sales-type lease at March 31, 2022 were as follows: $1.8 million for the remainder of 2022 and $0.8 million for 2023.

5. ASSET HELD FOR SALE AND DISPOSITIONS

Asset Held for Sale

As of March 31, 2022, the Company determined that one senior housing community with an aggregate net book value of $2.0 million met the criteria to be classified as an asset held for sale, and this balance is included in accounts receivable, prepaid expenses and other assets, net on the consolidated balance sheets. Subsequent to March 31, 2022, the Company completed the sale of the facility for a gross sales price of $2.6 million.

Dispositions

No dispositions were completed during the three months ended March 31, 2022. The following table summarizes the Company’s dispositions for the three months ended March 31, 2021 (dollars in millions):


	Three Months Ended March 31,
	2021
Number of facilities	2
Consideration, net of closing costs	$	5.3
Net carrying value	5.0
Net gain on sale	$	0.3

Net income	$	0.3

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The sale of the disposition facilities does not represent a strategic shift that has or will have a major effect on the Company’s operations and financial results, and therefore the results of operations attributable to these facilities have remained in continuing operations.

6. LOANS RECEIVABLE AND OTHER INVESTMENTS

As of March 31, 2022 and December 31, 2021, the Company’s loans receivable and other investments consisted of the following (dollars in thousands):


									As of March 31, 2022
Investment	Quantity as of March 31, 2022	Property Type	Principal Balance as of March 31, 2022 (1)		Book Value as of March 31, 2022		Book Value as of December 31, 2021		Weighted Average Contractual Interest Rate / Rate of Return		Weighted Average Annualized Effective Interest Rate / Rate of Return		Maturity Date as of March 31, 2022
Loans Receivable:
Mortgage	2	Behavioral Health	$	309,000	$	309,000	$	309,000	7.7	%	7.7	%	11/01/26 - 01/31/27
Construction	1	Senior Housing	3,343		3,345		3,347		8.0	%	7.8	%	09/30/22



Other	13	Multiple	39,120		35,330		36,028		6.8	%	6.1	%	04/01/22 - 08/31/28
	16		351,463		347,675		348,375		7.6	%	7.5	%
Allowance for loan losses			—		(6,851)		(6,344)
			$	351,463	$	340,824	$	342,031
Other Investments:
Preferred Equity	7	Skilled Nursing / Senior Housing	56,034		56,250		57,055		11.0	%	10.9	%	N/A
Total	23		$	407,497	$	397,074	$	399,086	8.0	%	8.0	%

(1) Principal balance includes amounts funded and accrued but unpaid interest / preferred return and excludes capitalizable fees.

As of March 31, 2022, the Company has committed to provide up to $58.9 million of future funding related to one preferred equity investment and two loan receivable investments with maturity dates ranging from September 2022 to November 2026.

As of March 31, 2022 and December 31, 2021, the Company had four loans receivable investments, with an aggregate principal balance of $1.7 million and $1.8 million, respectively, that were considered to have deteriorated credit quality. As of March 31, 2022 and December 31, 2021, the book value of the outstanding loans with deteriorated credit quality was $0.1 million and $0.2 million, respectively.

During the three months ended March 31, 2022 and 2021, the Company increased its allowance for loan losses by $0.5 million and $1.9 million, respectively.

As of March 31, 2022 and December 31, 2021, the Company had a $6.9 million and $6.3 million allowance for loan losses, respectively, and three loans receivable investments with no book value were on nonaccrual status. As of March 31, 2022 and December 31, 2021, the Company did not consider any preferred equity investments to be impaired, and no preferred equity investments were on nonaccrual status.

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7. DEBT

Secured Indebtedness

The Company’s secured debt consists of the following (dollars in thousands):


					As of March 31, 2022
Interest Rate Type	Principal Balance as of March 31, 2022 (1)		Principal Balance as of December 31, 2021 (1)		Weighted Average Interest Rate		Weighted Average Effective Interest Rate (2)		Maturity Date
Fixed Rate	$	51,572	$	67,602	2.84	%	3.33	%	May 2031 - August 2051

(1) Principal balance does not include deferred financing costs, net of $0.9 million as of each of March 31, 2022 and December 31, 2021.

(2) Weighted average interest rate includes private mortgage insurance.

During the three months ended March 31, 2022, the Company repaid $15.4 million of debt secured by three facilities.

Senior Unsecured Notes

The Company’s senior unsecured notes consist of the following (dollars in thousands):


		Principal Balance as of
Title	Maturity Date	March 31, 2022 (1)		December 31, 2021 (1)
5.125% senior unsecured notes due 2026 (“2026 Notes”)	August 15, 2026	$	500,000	$	500,000
5.88% senior unsecured notes due 2027 (“2027 Notes”)	May 17, 2027	100,000		100,000
3.90% senior unsecured notes due 2029 (“2029 Notes”)	October 15, 2029	350,000		350,000
3.20% senior unsecured notes due 2031 (“2031 Notes”)	December 1, 2031	800,000		800,000
		$	1,750,000	$	1,750,000

(1) Principal balance does not include discount, net of $3.0 million and deferred financing costs, net of $13.2 million as of March 31, 2022 and does not include discount, net of $2.9 million and deferred financing costs, net of $13.6 million as of December 31, 2021. In addition, the weighted average effective interest rate as of March 31, 2022 was 4.01%.

The 2026 Notes and the 2027 Notes were assumed as a result of the Company’s merger with Care Capital Properties, Inc. in 2017 and accrue interest at a rate of 5.125% and 5.88%, respectively, per annum. Interest is payable semiannually on February 15 and August 15 of each year for the 2026 Notes and on May 17 and November 17 of each year for the 2027 Notes.

The 2029 Notes were issued by the Operating Partnership and Sabra Capital Corporation, wholly owned subsidiaries of the Company, and accrue interest at a rate of 3.90% per annum. Interest is payable semiannually on April 15 and October 15 of each year.

The 2031 Notes were issued by the Operating Partnership, a wholly owned subsidiary of the Company, and accrue interest at a rate of 3.20% per annum. Interest is payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2022.

The obligations under the 2027 Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by Sabra and one of its non-operating subsidiaries, subject to release under certain customary circumstances. The obligations under the 2026 Notes, 2029 Notes and 2031 Notes are fully and unconditionally guaranteed, on an unsecured basis, by Sabra; provided, however, that such guarantee is subject to release under certain customary circumstances.

The indentures and agreements (the “Senior Notes Indentures”) governing the 2026 Notes, 2027 Notes, 2029 Notes and 2031 Notes (collectively, the “Senior Notes”) include customary events of default and require the Company to comply with specified restrictive covenants. As of March 31, 2022, the Company was in compliance with all applicable financial covenants under the Senior Notes Indentures.

Credit Agreement

On September 9, 2019, the Operating Partnership and Sabra Canadian Holdings, LLC (together, the “Borrowers”), Sabra and the other parties thereto entered into a fifth amended and restated unsecured credit agreement (the “Credit Agreement”).

The Credit Agreement includes a $1.0 billion revolving credit facility (the “Revolving Credit Facility”), a $460.0 million U.S. dollar term loan and a CAD $125.0 million Canadian dollar term loan (collectively, the “Term Loans”). Further, up to $175.0 million of the Revolving Credit Facility may be used for borrowings in certain foreign currencies. The Credit

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Agreement also contains an accordion feature that can increase the total available borrowings to $2.75 billion, subject to terms and conditions.

The Revolving Credit Facility has a maturity date of September 9, 2023, and includes two six-month extension options. The Term Loans have a maturity date of September 9, 2024.

During the three months ended March 31, 2022, the Company recognized $0.3 million of loss on extinguishment of debt related to write-offs of deferred financing costs in connection with the partial pay down of the U.S. dollar Term Loan.

As of March 31, 2022, there was $16.8 million (comprised of CAD $21.0 million) outstanding under the Revolving Credit Facility and $983.2 million available for borrowing.

Borrowings under the Revolving Credit Facility bear interest on the outstanding principal amount at a rate equal to a ratings-based applicable interest margin plus, Canadian Dollar Offered Rate (“CDOR”) for Canadian dollar borrowings, or at the Operating Partnership’s option for U.S. dollar borrowings, either (a) LIBOR or (b) a base rate determined as the greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate, and (iii) one-month LIBOR plus 1.0% (the “Base Rate”). The ratings-based applicable interest margin for borrowings will vary based on the Debt Ratings, as defined in the Credit Agreement, and will range from 0.775% to 1.45% per annum for CDOR or LIBOR based borrowings and 0.00% to 0.45% per annum for borrowings at the Base Rate. As of March 31, 2022, the weighted average interest rate on the Revolving Credit Facility was 2.06%. In addition, the Operating Partnership pays a facility fee ranging between 0.125% and 0.300% per annum based on the aggregate amount of commitments under the Revolving Credit Facility regardless of amounts outstanding thereunder.

The U.S. dollar Term Loan bears interest on the outstanding principal amount at a rate equal to a ratings-based applicable interest margin plus, at the Operating Partnership’s option, either (a) LIBOR or (b) the Base Rate. The ratings-based applicable interest margin for borrowings will vary based on the Debt Ratings and will range from 0.85% to 1.65% per annum for LIBOR based borrowings and 0.00% to 0.65% per annum for borrowings at the Base Rate. As of March 31, 2022, the interest rate on the U.S. dollar Term Loan was 1.70%. The Canadian dollar Term Loan bears interest on the outstanding principal amount at a rate equal to CDOR plus an interest margin that ranges from 0.85% to 1.65% depending on the Debt Ratings. As of March 31, 2022, the interest rate on the Canadian dollar Term Loan was 2.21%.

The Company has interest rate swaps that fix the LIBOR portion of the interest rate for $436.3 million of LIBOR-based borrowings under its U.S. dollar Term Loan at a weighted average rate of 1.14% and interest rate swaps that fix the CDOR portion of the interest rate for CAD $125.0 million of CDOR-based borrowings under its Canadian dollar Term Loan at a rate of 1.10%. As of March 31, 2022, the effective interest rate on both the U.S. dollar and Canadian dollar Term Loans was 2.35%. In addition, CAD $125.0 million of the Canadian dollar Term Loan is designated as a net investment hedge. See Note 8, “Derivative and Hedging Instruments,” for further information.

The obligations of the Borrowers under the Credit Agreement are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by Sabra and one of its non-operating subsidiaries, subject to release under certain customary circumstances.

The Credit Agreement contains customary covenants that include restrictions or limitations on the ability to pay dividends, incur additional indebtedness, engage in non-healthcare related business activities, enter into transactions with affiliates and sell or otherwise transfer certain assets as well as customary events of default. The Credit Agreement also requires Sabra, through the Operating Partnership, to comply with specified financial covenants, which include a maximum total leverage ratio, a minimum secured debt leverage ratio, a minimum fixed charge coverage ratio, a maximum unsecured leverage ratio, a minimum tangible net worth requirement and a minimum unsecured interest coverage ratio. As of March 31, 2022, the Company was in compliance with all applicable financial covenants under the Credit Agreement.

Interest Expense

The Company incurred interest expense of $25.0 million and $24.4 million during the three months ended March 31, 2022 and 2021, respectively. Interest expense includes non-cash interest expense of $2.7 million and $1.9 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and December 31, 2021, the Company had $25.4 million and $21.5 million, respectively, of accrued interest included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

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Maturities

The following is a schedule of maturities for the Company’s outstanding debt as of March 31, 2022 (in thousands):


	Secured Indebtedness		Revolving Credit Facility (1)		Term Loans		Senior Notes		Total
April 1 through December 31, 2022	$	1,449	$	—	$	—	$	—	$	1,449
2023	1,979		16,792		—		—		18,771
2024	2,034		—		559,950		—		561,984
2025	2,089		—		—		—		2,089
2026	2,147		—		—		500,000		502,147
Thereafter	41,874		—		—		1,250,000		1,291,874
Total Debt	51,572		16,792		559,950		1,750,000		2,378,314
Discount, net	—		—		—		(3,043)		(3,043)
Deferred financing costs, net	(927)		—		(3,643)		(13,171)		(17,741)
Total Debt, Net	$	50,645	$	16,792	$	556,307	$	1,733,786	$	2,357,530

(1) Revolving Credit Facility is subject to two six-month extension options.

8. DERIVATIVE AND HEDGING INSTRUMENTS

The Company is exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign exchange rates. The Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates and foreign exchange rates. The Company’s derivative financial instruments are used to manage differences in the amount of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value in the Company’s functional currency, the U.S. dollar, of the Company’s investment in foreign operations, the cash receipts and payments related to these foreign operations and payments of interest and principal under Canadian dollar denominated debt. The Company enters into derivative financial instruments to protect the value of its foreign investments and fix a portion of the interest payments for certain debt obligations. The Company does not enter into derivatives for speculative purposes.

Cash Flow Hedges

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. As of March 31, 2022, approximately $4.7 million of losses, which are included in accumulated other comprehensive income, are expected to be reclassified into earnings in the next 12 months.

Net Investment Hedges

The Company is exposed to fluctuations in foreign exchange rates on investments it holds in Canada. The Company uses cross currency interest rate swaps to hedge its exposure to changes in foreign exchange rates on these foreign investments.

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The following presents the notional amount of derivative instruments as of the dates indicated (in thousands):


	March 31, 2022		December 31, 2021
Derivatives designated as cash flow hedges:
Denominated in U.S. Dollars (1)	$	436,250	$	436,250
Denominated in Canadian Dollars	$	125,000	$	125,000
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	50,414	$	50,859
Financial instrument designated as net investment hedge:
Denominated in Canadian Dollars	$	125,000	$	125,000
Derivatives not designated as net investment hedges:
Denominated in Canadian Dollars	$	5,886	$	5,441

(1) Balance includes swaps with an aggregate notional amount of $175.0 million, which accretes to $262.5 million in January 2023.

Derivative and Financial Instruments Designated as Hedging Instruments

The following is a summary of the derivative and financial instruments designated as hedging instruments held by the Company at March 31, 2022 and December 31, 2021 (dollars in thousands):


		Count as of March 31, 2022	Fair Value as of				Maturity Dates
Type	Designation		March 31, 2022		December 31, 2021			Balance Sheet Location
Assets:

Interest rate swaps	Cash flow	6	$	6,307	$	1,481	2023 - 2024	Accounts receivable, prepaid expenses and other assets, net
Interest rate collars	Cash flow	2	2,359		—		2024	Accounts receivable, prepaid expenses and other assets, net

Cross currency interest rate swaps	Net investment	2	743		1,849		2025	Accounts receivable, prepaid expenses and other assets, net
			$	9,409	$	3,330
Liabilities:
Interest rate swaps	Cash flow	—	$	—	$	3,522	2023 - 2024	Accounts payable and accrued liabilities
Interest rate collars	Cash flow	—	—