Loans Receivable

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Loans Receivable

Loans Receivable

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

	June 30, 2018								December 31, 2017
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine(1)	$	—	$	22,153		$	22,153		$	—	$	269,299		$	269,299
Other(2)	16,611		—			16,611			188,418		—			188,418
Unamortized discounts, fees and costs	—		(73		)	(73		)	—		(596		)	(596		)
Allowance for loan losses(3)	—		—			—			—		(143,795		)	(143,795		)
	$	16,611	$	22,080		$	38,691		$	188,418	$	124,908		$	313,326

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(1) At June 30, 2018, the Company had $112 million remaining of commitments to fund a $115 million senior living development project.

(2) Primarily includes loans denominated in British pound sterling (“GBP”). At December 31, 2017, includes the U.K. Bridge Loan discussed below.

(3) Related to the Company’s mezzanine loan facility to Tandem Health Care discussed below.

Loans Receivable Internal Ratings

The following table summarizes the Company’s internal ratings for loans receivable at June 30, 2018 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	16,611	43	$	16,611	$	—	$	—
Other secured	22,080		57	22,080		—		—
	$	38,691	100	$	38,691	$	—	$	—

Four Seasons Health Care

In March 2017, the Company sold its investment in Four Seasons Health Care’s (“Four Seasons”) senior secured term loan at par plus accrued interest for £29 million ($35 million).

Additionally, in March 2017, pursuant to a shift in the Company’s investment strategy, the Company sold its £138.5 million par value Four Seasons senior notes (the “Four Seasons Notes”) for £83 million ($101 million). The disposition of the Four Seasons Notes generated a £42 million ($51 million) gain on sale, recognized in other income (expense), net, as the sales price was above the previously-impaired carrying value of £41 million ($50 million).

HC-One Facility

On June 30, 2017, the Company received £283 million ($367 million) from the repayment of its HC-One mezzanine loan.

Tandem Health Care Loan

From July 2012 through May 2015, the Company funded, in aggregate, $257 million under a collateralized mezzanine loan facility (the “Mezzanine Loan”) to certain affiliates of Tandem Health Care (together with its affiliates, “Tandem”). During 2017, the Company recorded impairment charges totaling $144 million on the Mezzanine Loan. The decline in fair value driving each impairment charge was based primarily on declining operating results of the collateral underlying the Mezzanine Loan, as well as market and industry data, which reflected a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector. The resulting carrying value of the Mezzanine Loan as of December 31, 2017 was $105 million. In conjunction with the declining operating results and industry trends, beginning in the first quarter of 2017, the Company elected to recognize interest income on a cash basis. During the three and six months ended June 30, 2017, the Company recognized interest income and received cash payments of $7 million and $14 million, respectively, from Tandem. During the six months ended June 30, 2018, the Company did not recognize interest income nor receive cash payments from Tandem.

In March 2018, the Company sold the Mezzanine Loan to a third party for approximately $112 million, resulting in an impairment recovery, net of transaction costs and fees, of $3 million included in other income (expense), net. The Company holds no further economic interest in the operations of Tandem.

U.K. Bridge Loan

In 2016, the Company provided a £105 million ($131 million at closing) bridge loan to MMCG to fund the acquisition of a portfolio of seven care homes in the U.K. Under the bridge loan, the Company retained a three-year call option to acquire those seven care homes at a future date for £105 million, subject to certain conditions precedent being met. In March 2018, upon resolution of all conditions precedent, the Company began the process of exercising its call option to acquire the seven care homes and concluded that it should consolidate the real estate. As a result, the Company derecognized the outstanding loan receivable of £105 million and recognized a £29 million ($41 million) loss on consolidation. Refer to Note 15 for the complete impact of consolidating the seven care homes during the first quarter of 2018.

In June 2018, the Company completed the process of exercising the above-mentioned call option. The seven care homes acquired through the call option were included in the U.K. JV transaction (see Note 4).