NOTE 7. Loans Receivable

The following table summarizes the Company’s loans receivable (in thousands):


	December 31,
	2014						2013
	Real Estate		Other				Real Estate		Other
	Secured		Secured		Total		Secured		Secured		Total
Mezzanine	$	—	$	799,064	$	799,064	$	—	$	234,455	$	234,455
Other		135,363		—		135,363		147,669		—		147,669
Unamortized discounts, fees and costs		—		(14,056)		(14,056)		—		(2,713)		(2,713)
Allowance for loan losses		—		(13,410)		(13,410)		—		(13,410)		(13,410)
	$	135,363	$	771,598	$	906,961	$	147,669	$	218,332	$	366,001

The following table summarizes the Company’s internal ratings for loans receivable at December 31, 2014 (dollars in thousands):


			Percentage	Internal Ratings
	Carrying		of Loan	Performing		Watch List		Workout
Investment Type	Amount		Portfolio	Loans		Loans		Loans
Real estate secured	$	135,363	15	$	135,363	$	—	$	—
Other secured		771,598	85		754,128		—		17,470
	$	906,961	100	$	889,491	$	—	$	17,470

Real Estate Secured Loans

Following is a summary of loans receivable secured by real estate at December 31, 2014 (dollars in thousands):


Final	Number
Maturity	of			Principal		Carrying
Date	Loans		Payment Terms	Amount		Amount
2016	4		aggregate monthly interest-only payments, accrues interest at 8.5%, and secured by four senior housing facilities in Maryland, Pennsylvania, Tennessee and Texas	$	75,143	$	79,251
2017	2		aggregate monthly interest-only payments, accrues interest at 8.5%, and secured by two senior housing facilities in New Jersey and Pennsylvania		36,875		37,397
2018	1		monthly interest-only payments, accrues interest at 8.00% and secured by a senior housing facility in Pennsylvania		17,914		18,715
	7	(1)		$	129,932	$	135,363

(1)

Represents commitments to fund an aggregate of $141 million for seven development projects that are at or near completion as of December 31, 2014.

At December 31, 2014, future contractual principal payments to be received on loans receivable secured by real estate are $75 million in 2016, $37 million in 2017 and $18 million in 2018.

Other Secured Loans

U.K. Loan Facility. In November 2014, the Company was the lead investor in the financing for Formation Capital and Safanad’s acquisition of NHP, a company that, at closing, owned 273 nursing and residential care homes representing over 12,500 beds in the U.K. principally operated by HC-One. The Company provided a loan facility (the “U.K. Loan Facility”), secured by substantially all of NHP’s assets, totaling £395 million, with £363 million ($574 million) drawn at closing. The U.K. Loan Facility has a five-year term and was funded by a £355 million draw on the Company’s revolving line of credit facility that is discussed in Note 11.

Brookdale Receivable. In conjunction with the Brookdale Transaction, on August 29, 2014, the Company provided a $68 million interest-only loan, which was repaid in full in November 2014. See additional information regarding the Brookdale Transaction in Note 3.

Barchester Loan. On May 2, 2013, the Company acquired £121 million of subordinated debt at a discount for £109 million ($170 million). The loans were secured by an interest in facilities leased and operated by Barchester Healthcare (“Barchester”). On September 6, 2013, the Company received £129 million ($202 million) for the par payoff of these debt investments, recognizing interest income of $24 million for the related unamortized loan discounts.

Tandem Health Care Loan. On July 31, 2012, the Company closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), as part of the recapitalization of a post-acute/skilled nursing portfolio. At closing, this loan was subordinate to $400 million in senior mortgage debt and $137 million in other senior mezzanine debt. The Company funded $100 million (the “First Tranche”) at closing and funded an additional $102 million (the “Second Tranche”) in June 2013. The Second Tranche was used by Tandem to repay a portion of the senior mezzanine debt. At December 31, 2014, the loans were subordinate to $437 million of senior mortgage debt. The loans bear interest at fixed rates of 12% and 14% per annum for the First and Second Tranches, respectively. This loan facility matures in October 2017, is prepayable at the borrower’s option and is secured by real estate partnership interests. The loans are subject to prepayment premiums if repaid on or before the third anniversary from the First Tranche closing date.

Delphis Operations, L.P. Loan. The Company holds a secured term loan made to Delphis Operations, L.P. (“Delphis” or the “Borrower”) that is collateralized by all of the assets of the Borrower. The Borrower’s collateral is comprised primarily of interests in partnerships operating surgical facilities, of which one partnership leases a property owned by the Company. The Company has previously determined that the loan was impaired and placed the loan on cost-recovery status; accrual of interest income is suspended, and any payments received from the Borrower have been applied to reduce the recorded investment in this loan.

As part of a March 2012 agreement (the “2012 Agreement”) between Delphis, certain past and current principals of Delphis and the Cirrus Group, LLC (the “Guarantors”), and the Company, the Company agreed, among other things, to allow the distribution of $1.5 million to certain of the Guarantors from funds generated from sales of assets that were pledged as additional collateral for this loan. Further, the Company agreed to provide financial incentives to the Borrower regarding the liquidation of the primary collateral assets for this loan.

Pursuant to the 2012 Agreement, the Company has subsequently received cash and other consideration from the Guarantors and net proceeds from the sales of primary collateral assets, which proceeds, together with the cash payments and other consideration, were applied to reduce the carrying value of this loan. During the years ended December 31, 2014, 2013 and 2012, the Company received cash payments of $1 million, $13 million and $43 million, respectively. The carrying value of the loan, net of an allowance for loan losses, was $17 million and $18 million at December 31, 2014 and 2013, respectively. At December 31, 2014, 2013 and 2012 the allowance related to the Company’s senior secured loan to Delphis was $13 million with no additional allowances recognized in any of the three years ended December 31, 2014. At December 31, 2014, the Company believes the fair value of the collateral supporting this loan is in excess of the loan’s carrying value.