Loans Receivable

12 Months Ended

Dec. 31, 2019

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



	December 31,
	2019						2018
	Real Estate Secured		Other Secured		Total		Real Estate Secured		Other Secured			Total
Mezzanine	$	—	$	27,752	$	27,752	$	—	$	21,013		$	21,013
Participating development loans and other⁽¹⁾	161,964		—		161,964		42,037		—			42,037
Unamortized discounts, fees, and costs	—		863		863		—		(52		)	(52		)
	$	161,964	$	28,615	$	190,579	$	42,037	$	20,961		$	62,998

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(1)	At December 31, 2019, the Company had $25 million remaining of commitments to fund $174 million of senior housing development projects. At December 31, 2018, the Company had $73 million remaining of commitments to fund a $115 million senior housing development project.

Loans Receivable Internal Ratings

The following table summarizes the Company’s internal ratings for loans receivable at December 31, 2019 (dollars in thousands):



	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type	Carrying Amount		Percentage of Loan Portfolio	Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	161,964	85	$	161,964	$	—	$	—
Other secured	28,615		15	28,615		—		—
	$	190,579	100	$	190,579	$	—	$	—

Real Estate Secured Loans

The following table summarizes the Company’s loans receivable secured by real estate at December 31, 2019 (dollars in thousands):



Final Maturity Date	Number of Loans	Payment Terms	Principal Amount⁽¹⁾		Carrying Amount
2021	1	Monthly interest-only payments, accrues interest at 7.5% and secured by a senior housing facility under development in Texas	$	2,250	$	2,250
2021	1	Monthly interest-only payments, accrues interest at 7.5% and secured by a senior housing facility under development in Florida	8,290		8,290
2022	1	Monthly interest-only payments, accrues interest at 6.5% and secured by a senior housing facility under development in Washington⁽²⁾	102,412		102,412
2022	1	Monthly interest-only payments, accrues interest at 5.75% and secured by a senior housing facility in Illinois	4,200		4,200
2026	1	Monthly interest-only payments, accrues interest at the greater of 2% or LIBOR, plus 4.25% and secured by a senior housing facility in Florida	44,812		44,812
	5		$	161,964	$	161,964

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(1)	Represents future contractual principal payments to be received on loans receivable secured by real estate.


(2)	Contains a participation feature that allows the Company to participate in up to 20% of the appreciation of the asset through the time the loan is refinanced or repaid.

During the year ended December 31, 2019, the Company recognized $6 million in interest income related to loans secured by real estate.

SHOP Seller Financing

In December 2019, the Company sold two SHOP facilities in Florida for $56 million and provided the buyer with initial financing of $45 million. The remainder of the sales price was received in cash at the time of sale. Additionally, the Company has agreed to provide up to $10 million of redevelopment funding (80% of the estimated cost of redevelopment), none of which has been funded as of December 31, 2019. The initial and redevelopment financings are secured by the buyer's equity ownership in the property.

Four Seasons Health Care

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.

Other Secured Loans

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.

During the year ended December 31, 2017, the Company recognized aggregate impairment charges of $144 million related to the Mezzanine Loan, which reduced the carrying value to $105 million as of December 31, 2017. The aggregate impairment charges were the result of a variety of factors, including, but not limited to, poor operating results of the underlying real estate assets, market and industry data that reflected a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector, bids from prospective purchasers of the Mezzanine Loan, and eventually entering into an agreement with the borrower for a discounted repayment of the Mezzanine Loan. The calculations of the fair value were primarily based on an income approach and relied on forecasted EBITDAR and market data, including, but not limited to, sales price per unit/bed, rent coverage ratios, and real estate capitalization rates. All valuation inputs were considered to be Level 2 measurements within the fair value hierarchy.

In March 2018, the Company sold the Mezzanine Loan to a third party for approximately $112 million, which resulted 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.

Beginning in the first quarter of 2017, the Company elected to recognize interest income on a cash basis. During the years ended December 31, 2018 and 2017, the Company recognized interest income of zero and $23 million, respectively, and received cash payments of zero and $25 million, respectively, from Tandem.

U.K. Bridge Loan

In 2016, the Company provided a £105 million ($131 million at closing) bridge loan (the “U.K. Bridge Loan”) to Maria Mallaband Care Group Ltd. ("MMCG") to fund the acquisition of a portfolio of seven care homes in the U.K. Under the U.K. 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 18 for further discussion regarding 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).