Commitments, Contingencies and Uncertainties
In the normal course of business, we enter into a variety of commitments, typically consisting of funding construction loans, mezzanine loans and revolving lines of credit with our tenants, operators, or affiliates of our tenants and operators, and other third parties. In our leasing operations, we may offer our tenants and the sellers of properties we acquire certain inducements that originate contractually as contingencies, but which may become commitments upon the satisfaction of the contingent event. Any contingent payments made by us are included in the respective lease base when funded.
As of December 31, 2025, we had loan commitments with nine operators or borrowers totaling $151.6 million of which we had funded $115.7 million toward these commitments. We also had development commitments with seven tenants totaling $23.6 million of which we had funded $12.1 million toward these commitments. Additionally, we had remaining contingency commitments totaling $15.7 million, which included lease inducement contingencies with three tenants and contingent consideration related to an acquisition in our SHOP segment. Each of these contingency commitments is based on the respective facility operating performance over a specified period.
We provide for expected credit loss liabilities on our unfunded loan commitments based on the estimated amounts we expect to fund using the same methodology as the one applied to provide for credit loss reserves on our mortgage and other notes receivable. The liabilities for expected credit losses on our unfunded loan commitments are included in accounts payable and other liabilities on our consolidated balance sheets. Reference the “Credit Loss Reserves” section in Note 4 for additional information.
The following table provides a summary of the changes in our expected credit loss liabilities for the year ended December 31, 2025 ($ in thousands):
| | | | | |
| Balance at the beginning of the year | $ | 147 | |
| Provision for expected credit losses | 5 | |
| Balance at the end of the year | $ | 152 | |
Bickford Contingent Note Arrangement
Related to the sale of six properties to Bickford in 2021, we reached an agreement with Bickford whereby Bickford would owe us up to $4.5 million under a contingent note arrangement. We have the one-time option to determine fair market value of the portfolio through April 30, 2026, at which time the amount owed under the contingent note arrangement, if any, will be determined as the lesser of (i) the difference between the fair market value of the portfolio and $52.1 million, which amount represents the purchase consideration for the portfolio of $52.9 million less $0.8 million in mortgage debt repayment fees previously paid by us associated with this portfolio and (ii) $4.5 million. Any amount due on the contingent note arrangement will accrue interest at an annual rate of 10.0% and will be due in five years from the determination date.
Litigation
From time to time, we are party to various lawsuits, investigations, claims and other legal and regulatory proceedings arising in connection with our business. Such claims may include, among other things, professional and general liability claims, as well as regulatory proceedings related to our SHOP segment. Further, from time to time, we are a party to certain legal proceedings for which third parties, such as our tenants, managers and borrowers, are contractually obligated to indemnify us from and against various claims, litigation and liabilities arising in connection with their respective businesses. Management believes that the ultimate resolution of all such pending proceedings will have no material adverse effect on our financial condition, results of operations or cash flows.