NOTE 17. Concentration of Credit Risk

Concentrations of credit risk arise when one or more tenants, operators or obligors related to the Company’s investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors various segments of its portfolio to assess potential concentrations of risks. The Company does not have significant foreign operations.

The following tables provide information regarding the Company’s concentrations with respect to certain tenants and operators; the information provided is presented for the gross assets and revenues that are associated with certain tenants and operators as percentages of their respective segment’s and total Company’s gross assets and revenues:


	Percentage of				Percentage of
	Senior Housing Gross Assets				Senior Housing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
Brookdale	27	%	28	%	21	%	25	%
HCRMC	12	%	12	%	6	%	8	%


	Percentage of Post-Acute/				Percentage of Post-Acute/
	Skilled Nursing Gross Assets				Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	77	%	64	%	78	%	80	%


	Percentage of				Percentage of
	Total Company Gross Assets				Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	24	%	23	%	18	%	25	%
Brookdale	13	%	12	%	10	%	10	%

HCRMC’s summarized consolidated financial information (in millions):


	March 31,		December 31,
	2016		2015
Real estate and other property, net	$	2,611.8	$	2,628.5
Cash and cash equivalents		173.8		125.0
Goodwill, intangible and other assets, net		4,526.9		4,598.3
Total assets	$	7,312.5	$	7,351.8

Debt and financing obligations	$	5,783.8	$	5,836.4
Accounts payable, accrued liabilities and other		1,006.7		982.9
Total equity		522.0		532.5
Total liabilities and equity	$	7,312.5	$	7,351.8


	Three Months Ended March 31,
	2016		2015
Revenues	$	984.5	$	1,054.0
Operating, general and administrative expense		(857.2)		(897.9)
Depreciation and amortization expense		(32.5)		(35.9)
Interest expense		(115.1)		(100.3)
Other income, net		3.5		2.8
Gain on disposal of assets		3.3		—
(Loss) income from continuing operations before income tax (expense) benefit		(13.5)		22.7
Income tax benefit (expense)		2.9		(10.1)
(Loss) income from continuing operations		(10.6)		12.6
Income from discontinued operations, net of taxes		0.1		1.1
Net (loss) income	$	(10.5)	$	13.7

As of March 31, 2016, Brookdale provided comprehensive facility management and accounting services with respect to 108 of the Company’s senior housing facilities and 15 CCRCs owned by the CCRC JV, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. Most of the management agreements have terms ranging from 10 to 15 years, with three to four 5-year renewals. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.

Brookdale is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale contained or referred to in this report has been derived from SEC filings made by Brookdale or other publicly available information, or was provided to the Company by Brookdale, and the Company has not verified this information through an independent investigation or otherwise. The Company has no reason to believe that this information is inaccurate in any material respect, but the Company cannot assure the reader of its accuracy. The Company is providing this data for informational purposes only, and encourages the reader to obtain Brookdale’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.

To mitigate the credit risk of leasing properties to certain senior housing and post-acute/skilled nursing operators, leases with operators are often combined into portfolios that contain cross-default terms, so that if a tenant of any of the properties in a portfolio defaults on its obligations under its lease, the Company may pursue its remedies under the lease with respect to any of the properties in the portfolio. Certain portfolios also contain terms whereby the net operating profits of the properties are combined for the purpose of securing the funding of rental payments due under each lease.