Variable Interest Entities and Investment in Unconsolidated Ventures

Variable Interest Entities

As of December 31, 2017, the Company has equity interests in unconsolidated VIEs. The Company has determined that it does not have the power to direct the activities of the VIEs that most significantly impact the VIEs' economic performance and is not the primary beneficiary of these VIEs in accordance with ASC 810. The Company's interests in the VIEs are, therefore, accounted for under the equity method of accounting.

The Company holds a 51% equity interest, and HCP owns a 49% interest, in a venture that owns and operates entry fee CCRCs (the "CCRC Venture"). The CCRC Venture's opco has been identified as a VIE. The equity members of the CCRC Venture's opco share certain operating rights, and the Company acts as manager to the CCRC Venture opco. However, the Company does not consolidate this VIE because it does not have the ability to control the activities that most significantly impact this VIE's economic performance. The assets of the CCRC Venture opco primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable and cash and cash equivalents. The obligations of the CCRC Venture opco primarily consist of community lease obligations, mortgage debt, accounts payable, accrued expenses and refundable entrance fees.

The Company holds an equity ownership interest in each of the propco and opco of two ventures ("RIDEA Ventures") that operate senior housing communities in a RIDEA structure. As of December 31, 2017, the Company's equity ownership interest is 10% for each of the RIDEA Ventures. The RIDEA Ventures have been identified as VIEs. The equity members of the RIDEA Ventures share certain operating rights, and the Company acts as manager to the opcos of the RIDEA Ventures. However, the Company does not consolidate these VIEs because it does not have the ability to control the activities that most significantly impact the economic performance of these VIEs. The assets of the RIDEA Ventures primarily consist of the senior housing communities that the RIDEA Ventures own, resident fees receivable, and cash and cash equivalents. The obligations of the RIDEA Ventures primarily consist of notes payable, accounts payable and accrued expenses.

The Company holds a 15% equity ownership interest in the Blackstone Venture. The Blackstone Venture has been identified as a VIE due to the Company lacking substantive participation rights in the management of the venture and the Company lacking kick-out rights over the managing member. The equity members of the Blackstone Venture share certain operating rights and the Company acts as manager to 60 communities owned by the Blackstone Venture. However, the Company does not consolidate this VIE because it does not have the ability to control the activities that most significantly impact the economic performance of the VIE. The assets of the Blackstone Venture primarily consist of senior housing communities, resident fees receivable and cash and cash equivalents. The assets of the Blackstone Venture primarily consist of senior housing communities, resident fees receivable and cash and cash equivalents. The obligations of the Blackstone Venture primarily consist of long-term mortgage debt, accounts payable and accrued expenses. In addition to $636.2 million of long-term mortgage debt, the Blackstone Venture initially obtained $66.8 million of mortgage debt that was payable in 2017. In the event that refinancing proceeds for the $66.8 million of mortgage debt were insufficient to repay the debt principal amount, the Company may have been required to lend the amount of the shortfall, up to $12.0 million, to the Blackstone Venture. In June 2017, the Blackstone Venture completed the refinancing of the $66.8 million mortgage debt payable in 2017 and the Company was not required to lend any amounts to the Blackstone Venture. As of December 31, 2017, the Company leases two communities from the Blackstone Venture with annual lease payments of approximately $2.6 million. Under the terms of the lease agreements, the Company may be required to purchase the two leased communities for an amount equal to the greater of the fair market value of the communities or $33.8 million if there is an event of default under the lease agreement. See Note 4 for more information about the Company's entry into the Blackstone Venture.

The carrying value and classification of the related assets, liabilities and maximum exposure to loss as a result of the Company's involvement with these VIEs are summarized below as of December 31, 2017 (in millions):



VIE Type	Asset Type	Maximum Exposure to Loss		Carrying Amount
CCRC Venture opco	Investment in unconsolidated ventures	$	29.6	$	29.6
RIDEA Ventures	Investment in unconsolidated ventures	$	41.3	$	41.3
Blackstone Venture	Investment in unconsolidated ventures	$	37.1	$	37.1

As of December 31, 2017, the Company is not required to provide financial support, through a liquidity arrangement or otherwise, to its unconsolidated VIEs.

Investment in Unconsolidated Ventures

The Company owns interests in the following ventures that are accounted for under the equity method as of December 31, 2017:



Venture	Ownership Percentage
CCRC Venture	51%
BKD-HCN Venture opco and propco	20%
Blackstone Venture	15%
HCP 49 Venture	10%
S-H Twenty-One Venture opco and propco	10%

Combined summarized financial information of the unconsolidated ventures accounted for under the equity method.



(in millions)	For the Years Ended December 31,
Statement of Operations Information	2017			2016			2015
Resident fee revenue	$	1,354		$	1,133		$	964
Facility operating expenses	(946		)	(779		)	(679		)
Net income (loss)	$	(81	)	$	(4	)	$	(18	)



(in millions)	As of December 31,
Balance Sheet Information	2017		2016
Current assets	$	164	$	128
Noncurrent assets	4,050		3,932
Current liabilities	672		1,153
Noncurrent liabilities	$	2,813	$	2,215

During the year ended December 31, 2016, the CCRC Venture obtained non-recourse mortgage financing on certain communities and received proceeds of $434.5 million. The CCRC Venture distributed the net proceeds to its investors and the Company received proceeds of $221.6 million. As a result of the distribution, the Company's carrying value of its equity method investment in the CCRC Venture propco was reduced below zero and the Company has recorded a $49.5 million and $60.2 million equity method liability within other liabilities within the consolidated balance sheet as of December 31, 2017 and 2016, respectively.

In January 2017, the Company completed the sale of a 10% ownership interest in the HCP 49 Venture for $26.8 million of net cash proceeds. The Company retained a 10% ownership interest in the HCP 49 Venture.

In December 2017, the Company completed the sale of certain of its ownership interests in unconsolidated ventures for $36.0 million of net cash proceeds and recognized a $9.4 million gain within gain on sale of assets for the year ended December 31, 2017.

Refer to Note 5 for information on impairment expense for investment in unconsolidated ventures.