NOTE 8. Investments in and Advances to Unconsolidated Joint Ventures

On August 29, 2014, as part of the Brookdale Transaction discussed in Note 3, HCP and Brookdale formed unconsolidated joint ventures that own 14 CCRC campuses in a RIDEA structure. At closing, Brookdale contributed eight of its owned campuses; the Company contributed two campuses previously leased to Brookdale valued at $162 million (carrying value of $92 million) and $370 million of cash. At closing, the CCRC JV campuses were encumbered by $569 million of mortgage and entrance fee obligations. See additional information in Notes 3 and 5.

The Company owns interests in the following entities that are accounted for under the equity method at December 31, 2014 (dollars in thousands):


Entity(1)	Segment	Investment(2)		Ownership %
CCRC JV(3)	senior housing	$	456,796	49
HCRMC(4)	post-acute/skilled nursing operations		38,915	9.4
HCP Ventures III, LLC	medical office		6,778	30
HCP Ventures IV, LLC	medical office and hospital		26,876	20
HCP Life Science(5)	life science		70,333	50-63
Suburban Properties, LLC	medical office		5,510	67
Advances to unconsolidated joint ventures, net			240
		$	605,448
Edgewood Assisted Living Center, LLC	senior housing	$	(392)	45
Seminole Shores Living Center, LLC	senior housing		(568)	50
		$	(960)

(1)

These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures.

(2)

Represents the carrying value of the Company’s investment in the unconsolidated joint ventures. Negative balances are recorded in accounts payable and accrued liabilities on the Company’s Consolidated Balance Sheets. Includes a 72% interest in a senior housing partnership that has a zero investment balance.

(3)

Includes two unconsolidated joint ventures between the Company and Brookdale: (i) CCRC PropCo ($210 million) and (ii) CCRC OpCo ($250 million). See additional information regarding the CCRC JV and the Brookdale Transaction in Note 3.

(4)

In December 2014, the Company recognized an impairment charge of $36 million reducing its investment in HCRMC to $39 million. See Note 17 for additional information regarding this impairment charge; also, see Note 6 regarding the Company’s related HCRMC DFL investment.

(5)

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 (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

Summarized combined financial information for the Company’s unconsolidated joint ventures follows (in thousands):


	December 31,
	2014(1)		2013
Real estate, net	$	5,134,587	$	3,662,450
Goodwill and other assets, net		4,986,310		5,384,553
Total assets	$	10,120,897	$	9,047,003
Capital lease obligations and mortgage debt	$	7,197,940	$	6,768,815
Accounts payable and other		1,015,912		1,045,260
Other partners’ capital		1,281,413		1,098,228
HCP’s capital(2)		625,632		134,700
Total liabilities and partners’ capital	$	10,120,897	$	9,047,003

(1)

Includes the financial information of the CCRC JV, which the Company formed on August 29, 2014.

(2)

The combined basis difference of the Company’s investments in these joint ventures of $22 million, as of December 31, 2014, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease-related net intangibles.


	Year Ended December 31,
	2014(1)		2013		2012
Total revenues	$	4,363,815	$	4,269,156	$	4,260,319
Loss from discontinued operations		(9,000)		(8,300)		—
Net loss(2)		(411,385)		(354,079)		(15,865)
HCP’s share in earnings(2)		49,570		64,433		54,455
Fees earned by HCP		1,809		1,847		1,895
Distributions received by HCP		7,702		18,091		6,299

(1)

Includes the financial information of the CCRC JV, which the Company formed on August 29, 2014.

(2)

The net loss in 2014 includes impairments, net of the related tax benefit, of $396 million related to HCRMC’s deferred tax assets and trademark intangible assets. The impairments at HCRMC were the result of a continued shift in patient payor sources from Medicare to Medicare Advantage, which negatively impact reimbursement rates and length of stay for HCRMC’s skilled nursing segment and a shift in HCRMC’s marketing and branding strategy. The net loss in 2013 includes a charge of $400 million related to recording of a valuation allowance that reduced the carrying value of HCRMC’s deferred tax assets to an amount that is more likely than not to be realized as determined by HCRMC’s management. HCRMC’s goodwill, intangible assets and deferred tax assets were not previously considered in the Company’s initial investments in the operations of HCRMC; therefore, the related impairments and valuation allowance against the carrying value of the deferred tax assets do not impact the Company’s recorded investment or impact on the Company’s share of earnings from or its investment in HCRMC; however, the circumstances that led to HCRMC’s management to reach the determination that it was necessary to reduce the carrying value of their deferred tax and trademark intangible assets in 2014 are consistent with the Company’s determination that its investment in HCRMC was impaired in December 2014 (see Note 17). The Company’s joint venture interest in HCRMC is accounted for using the equity method and results in an ongoing reduction of DFL income, proportional to HCP’s ownership in HCRMC. The elimination of the respective proportional lease expense at the HCRMC level in substance results in $62 million, $62 million and $59 million of DFL income that is recharacterized to the Company’s share of earnings from HCRMC (equity income from unconsolidated joint ventures) for the years ended December 31, 2014, 2013 and 2012, respectively.