Real Estate-Related Notes Receivables

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Real Estate-Related Notes Receivables

Real Estate-Related Notes Receivables

As of June 30, 2015, the Company had investments in two real estate-related notes receivables, which are loans that the Company intends to hold to maturity. Accordingly, real estate-related notes receivables are recorded at stated principal amounts net of any discount or premium and deferred loan origination costs or fees. The related discounts or premiums are accreted or amortized over the lives of the real estate-related notes receivables, as applicable. The Company defers certain loan origination and commitment fees and amortizes them as an adjustment of yield over the term of the real estate-related note receivable. The related accretion of discounts and/or amortization of premiums and origination costs are recorded in real estate-related notes receivables interest income in the accompanying condensed consolidated statements of comprehensive income. Real estate-related notes receivables interest income for the three months ended June 30, 2015 and 2014 was $216,000 and $1,280,000, respectively, and $355,000 and $2,431,000 for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, the Company had fixed rate notes receivables with interest rates ranging from 8.0% to 12.0% per annum and a weighted average interest rate of 8.2% per annum.

Real estate-related notes receivables consisted of the following as of June 30, 2015 and December 31, 2014 (amounts in thousands):

				Outstanding Balance as of
Real Estate-Related Notes Receivables	Interest Rate		Maturity Date	June 30, 2015		December 31, 2014
Medistar Loan	8.0	%	(1)	$	9,500	$	9,500
MM Peachtree Holdings (2)	12.0	%	12/31/2021	514		514
Landmark Loan (3)	9.0	%	12/17/2015	—		13,521
				$	10,014	$	23,535

(1) The Medistar Loan, previously known as the Walnut Hill Bridge Loan, matures upon the earlier to occur of: (i) the sale or refinancing of the property under construction for which proceeds from the loan were used and (ii) October 30, 2015. If interest payments are not received prior to October 30, 2015, an additional amount of interest in the amount of $498,000 will be due and payable, calculated based on 8.0% of the outstanding principal amount of the loan from April 1, 2015 through July 31, 2015 and 10.0% thereafter. On July 1, 2015, the borrower paid off the outstanding balance of the Medistar Loan. See Note 17—“Subsequent Events” for additional information.

(2) Unconsolidated Variable Interest Entity, or VIE. The maximum exposure to loss related to the Company’s variable interest in the unconsolidated VIE is limited to the outstanding balance of the real estate-related note receivables. The Company may be subject to additional losses to the extent of any receivables relating to future funding.

(3) On January 15, 2015, in connection with the acquisition of the Landmark Hospital of Savannah, located in Savannah, Georgia, the Company applied the outstanding balance to reduce the cash paid at acquisition.

The Company evaluates the collectability of both interest and principal on each real estate-related note receivable to determine whether it is collectible, primarily through the evaluation of the credit quality indicators, such as underlying collateral and payment history. The Company does not intend to sell its investments in real estate-related notes receivables and it is not likely that the Company will be required to sell its investments in real estate-related notes receivables before recovery of their amortized cost basis, which may be at maturity. No impairment losses were recorded related to investments in real estate-related notes receivables for the three and six months ended June 30, 2015 and 2014. In addition, no allowances for uncollectability were recorded related to investments in real estate-related notes receivables as of June 30, 2015 and December 31, 2014.