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Investments in and Advances to Unconsolidated Joint Ventures (Tables)
9 Months Ended
Sep. 30, 2011
Investments in and Advances to Unconsolidated Joint Ventures 
HCP Ventures II purchase consideration

 

 

 

 

January 14, 2011

 

 

 

 

 

Cash paid for HCP Ventures II’s partnership interest

 

$

135,550

 

Fair value of HCP’s 35% interest in HCP Ventures II (carrying value of $65,223 at closing)(1)

 

72,992

 

Total purchase consideration

 

$

208,542

 

 

 

 

 

Estimated fees and costs

 

 

 

Legal, accounting and other fees and costs(2)

 

$

150

 

Debt assumption fees(3)

 

500

 

Total

 

$

650

 

 

(1)          The Company recognized a gain of approximately $8 million, included in other income (expense), net, which represents the fair value of the Company’s 35% interest in HCP Ventures II in excess of its carrying value on the acquisition date.

(2)          Represents estimated fees and costs that were expensed and included in general and administrative expenses. These charges are directly attributable to the transaction and represent non-recurring costs.

(3)         Represents debt assumption fees that were capitalized as deferred debt costs.

 

Summary of fair values of the HCP Ventures II assets acquired and liabilities assumed

The following table summarizes the fair values of the HCP Ventures II assets acquired and liabilities assumed as of the acquisition date of January 14, 2011 (in thousands):

 

Assets acquired

 

 

 

 

 

 

 

Buildings and improvements

 

 

 

 

 

$

 683,033

 

Land

 

 

 

 

 

80,180

 

Cash

 

 

 

 

 

2,585

 

Restricted cash

 

 

 

 

 

1,861

 

Intangible assets

 

 

 

 

 

78,293

 

Total assets acquired

 

 

 

 

 

$

 845,952

 

 

 

 

 

 

 

 

 

Liabilities assumed

 

 

 

 

 

 

 

Mortgage debt

 

 

 

 

 

$

 635,182

 

Other liabilities

 

 

 

 

 

2,228

 

Total liabilities assumed

 

 

 

 

 

637,410

 

Net assets acquired

 

 

 

 

 

$

 208,542

Company owned interests in entities, accounted under equity method:

The Company owns interests in the following entities which are accounted for under the equity method at September 30, 2011 (dollars in thousands):

 

Entity(1)

 

Properties/Segment

 

Investment(2)

 

Ownership%

 

HCRMC Operations, LLC

 

post-acute/skilled nursing

 

$

98,406

 

9.9(3)

 

HCP Ventures III, LLC

 

13 medical office

 

9,245

 

30

 

HCP Ventures IV, LLC

 

54 medical office and 4 hospital

 

36,065

 

20

 

HCP Life Science(4)

 

4 life science

 

66,335

 

50-63

 

Horizon Bay Hyde Park, LLC

 

1 senior housing

 

7,555

 

75

 

Suburban Properties, LLC

 

1 medical office

 

8,176

 

67

 

Advances to unconsolidated joint ventures, net

 

 

 

197

 

 

 

 

 

 

 

$

225,979

 

 

 

Edgewood Assisted Living Center, LLC

 

1 senior housing

 

$

(348

)

45

 

Seminole Shores Living Center, LLC

 

1 senior housing

 

(903

)

50

 

 

 

 

 

$

(1,251

)

 

 

 

(1)         These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures. See Note 2 to the Consolidated Financial Statements for the year ended December 31, 2010 in the Company’s Annual Report on Form 10-K filed with the SEC regarding the Company’s policy on consolidation.

(2)         Represents the carrying value of the Company’s investment in the unconsolidated joint venture. See Note 2 to the Consolidated Financial Statements for the year ended December 31, 2010 in the Company’s Annual Report on Form 10-K filed with the SEC regarding the Company’s policy for accounting for joint venture interests.

(3)         Subject to dilution of certain equity awards, the ownership percentage is approximately 9.3%. See discussion of the HCR ManorCare Acquisition in Note 3.

(4)         Includes three unconsolidated joint ventures between the Company and an institutional capital partner for which the Company is the managing member. HCP Life Science includes the following partnerships: (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

Summarized combined financial information for unconsolidated joint ventures:

 

 

 

 

September 30,

 

December 31,

 

 

 

2011(1)

 

2010(2)

 

Real estate, net

 

$

3,821,331

 

$

1,633,209

 

Goodwill

 

3,495,500

 

—

 

Other assets, net

 

3,234,931

 

131,714

 

Total assets

 

$

10,551,762

 

$

1,764,923

 

 

 

 

 

 

 

Capital lease obligations and other debt

 

$

6,494,000

 

$

—

 

Mortgage debt

 

499,336

 

1,148,839

 

Accounts payable

 

1,061,348

 

32,120

 

Other partners’ capital

 

2,234,366

 

415,697

 

HCP’s capital(3) 

 

262,712

 

168,267

 

Total liabilities and partners’ capital

 

$

10,551,762

 

$

1,764,923

 

 

(1)          Includes the financial information of HCRMC Operations, LLC, in which the Company acquired an interest for $95 million that represented a 9.9% equity interest at closing.

(2)          Includes the financial information of HCP Ventures II, which was consolidated on January 14, 2011.

(3)         The combined basis difference of the Company’s investments in these joint ventures of $38 million, as of September 30, 2011, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,(1)

 

 

 

2011(2)

 

2010(1)

 

2011(2)

 

2010

 

Total revenues

 

$

1,123,742

 

$

40,733

 

$

2,174,711

 

$

133,530

 

Net income (loss) (3)

 

31,076

 

(56,387

)

9,198

 

(51,992

)

HCP’s share in earnings(3) (4) 

 

17,050

 

209

 

32,798

 

4,078

 

HCP’s impairment of its investment in HCP Ventures II(3)

 

—

 

(71,693

)

—

 

(71,693

)

Fees earned by HCP

 

494

 

1,157

 

1,605

 

3,755

 

Distributions received by HCP

 

1,271

 

2,539

 

4,398

 

7,910

 

 

(1)          Includes the financial information of HCP Ventures II, which was consolidated on January 14, 2011.

(2)          Includes the financial information of HCRMC Operations, LLC, in which the Company acquired an interest for $95 million that represented a 9.9% equity interest at closing.

(3)          Net loss for the three and nine months ended September 30, 2010, includes an impairment of $54.5 million related to straight-line rent assets of HCP Ventures II (the “Ventures”). Concurrently, during the nine months ended September 30, 2010 HCP recognized a $71.7 million impairment of its investment in the Ventures that was primarily attributable to a reduction in the fair value of the Ventures’ real estate assets and includes the Company’s share of the impact of the Ventures’ impairment of its straight-line rent assets. Therefore, HCP’s share in earnings for the three and nine months ended September 30, 2010 does not include the impact of the Ventures’ impairment of its straight-line rent assets.

(4)          The Company’s joint venture interest in HCRMC Operations, LLC is accounted for using the equity method and results in an ongoing reduction of DFL income, proportional to HCP’s ownership in HCRMC Operations, LLC. Further, the Company’s share of earnings from HCRMC Operations, LLC (equity income) increases for the corresponding reduction of related lease expense recognized at the HCRMC Operations, LLC level.