Healthcare-Related Securities |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Healthcare-Related Securities | Healthcare-Related Securities In October 2016, the Company purchased the Class B certificates in a $575.1 million securitization trust (Freddie Mac 2016-KS06 Mortgage Trust), which is secured by a pool of 41 mortgage loans related to senior housing facilities. The securitization trust issued $517.6 million of permanent, non-recourse, investment grade securitization bonds, or Class A certificates, which were purchased by unrelated third parties, and $57.5 million of subordinate Class B certificates which were purchased by the Company at a discount to par of $27.0 million, or 47.0%, and have a fixed coupon of 4.47% and produces a bond equivalent yield of 13.1%. The Company is the securitization trust’s directing certificate holder and has the ability to appoint and replace the special servicer, on a majority of the mortgage loans. The remaining mortgage loans relate to properties in which the Company has an equity interest and therefore the Company is not the directing certificate holder. As such, U.S. GAAP requires the Company to consolidate the assets, liabilities, income and expenses of the securitization trust as an Investing VIE. Refer to Note 2. “Summary of Significant Accounting Policies” for further discussion on Investing VIEs. Other than the securities represented by the Company’s Class B certificates, the Company does not have any claim to the assets or exposure to the liabilities of the securitization trust. The original issuer, an unrelated third party, guarantees the interest and principal payments related to the investment grade securitization bonds in the securitization trust, therefore these obligations do not have any recourse to the general credit of the Company as the consolidator of the securitization trust. The Company’s maximum exposure to loss as of December 31, 2016 would not exceed the carrying value of its retained investment in the securitization trust, or the Class B Certificates. The following table presents the assets and liabilities recorded on the consolidated balance sheets attributable to the securitization trust as of December 31, 2016 (dollars in thousands):
As of December 31, 2016, the senior housing mortgage loans and the related mortgage obligations held in the securitization trust had an unpaid principal balance of $574.5 million and $517.0 million, respectively. The Company has elected the fair value option to measure the assets and liabilities of the securitization trust, which requires that changes in valuations of the securitization trust be reflected in the Company’s consolidated statements of operations. The net fair value of the Company’s investment or retained investment in the securitization trust of $31.0 million, which represents the difference between the carrying values of the senior housing mortgage loans held in the securitization trust less the carrying value of the securitized mortgage obligations, approximates the fair value of the Company’s underlying securities. Refer to Note 12. “Fair Value” for a description of the valuation techniques used to measure fair value of assets and liabilities of the Investing VIE. The following table presents the activity recorded for the year ending December 31, 2016 related to the consolidated securitization trust on the consolidated statement of operations and the net income attributable to NorthStar Healthcare Income, Inc. common stockholders which represents the net income attributable to the Company’s investment in Class B certificates (dollars in thousands):
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