Loans Receivable

12 Months Ended

Dec. 31, 2012

Loans Receivable

Loans Receivable

(7)   Loans Receivable

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

	December 31,
	2012								2011
	Real Estate Secured		Other Secured			Total			Real Estate Secured			Other Secured			Total
Mezzanine	$	—	$	145,150		$	145,150		$	—		$	90,148		$	90,148
Other		147,264		—			147,264			35,643			—			35,643
Unamortized discounts, fees and costs		—		(2,974	)		(2,974	)		(1,040	)		(1,088	)		(2,128	)
Allowance for loan losses		—		(13,410	)		(13,410	)		—			(13,410	)		(13,410	)
	$	147,264	$	128,766		$	276,030		$	34,603		$	75,650		$	110,253

• Real Estate Secured Loans

        Following is a summary of loans receivable secured by real estate at December 31, 2012:

Final Maturity Date	Number of Loans			Payment Terms	Principal Amount		Carrying Amount
					(in thousands)
2013		1		monthly payments of $99,200, accrues interest at 11.5% and secured by three skilled nursing facilities in Michigan	$	8,492	$	7,982
2015		1		monthly interest-only payments beginning in 2013, accrues interest at 8.00% and secured by a hospital in Louisiana		15,640		15,640
2016		4	(1)	aggregate monthly interest-only payments of $400,700, accrues interest at 8.25% and secured by four senior housing facilities located in Tennessee, Maryland, Pennsylvania and Texas		57,350		59,900
2016		1		monthly payments of $273,000, accrues interest at 6.1%, and secured by nine senior housing facilities located in Alabama, Arizona, Minnesota, Maryland, Texas and Wisconsin		52,000		52,000
2017		2	(1)	monthly interest-only payments of $71,742, accrues interest at 8.25%, and secured by two senior housing facilities in New Jersey and Pennsylvania		11,404		11,742
		9			$	144,886	$	147,264

(1)

Represents commitments to fund an aggregate of $119 million for six senior housing development projects.

        At December 31, 2012, future contractual principal payments to be received on loans receivable secured by real estate are $8 million in 2013, $16 million in 2015, $112 million in 2016 and $11 million in 2017. The Company recognized $6 million in interest income related to loans secured by real estate. At December 31, 2012, the Company accrued $3 million of interest receivables related to real estate secured loans.

• Other Secured Loans

        Tandem Health Care Loan.    On July 31, 2012, the Company closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care ("Tandem"), an affiliate of Formation Capital, as part of the recapitalization of a post-acute/skilled nursing portfolio. The Company funded $100 million (the "First Tranche") at closing and has a commitment to fund an additional $105 million (the "Second Tranche") between February 2013 and August 2013. The Second Tranche will be used to repay debt senior to the Company's loan. At closing, the loan was subordinate to $400 million in senior mortgage debt and $137 million in senior mezzanine debt. The loan bears interest at a fixed rate of 12% and 14% per annum for the First and Second Tranche, respectively. The facility has a total term of up to 63 months from the initial closing, is prepayable at the borrower's option and is secured by real estate partnership interests.

        Delphis Operations, L.P. Loan.    The Company holds a secured term loan made to Delphis Operations, L.P. ("Delphis" or the "Borrower") that is collateralized by all of the assets of the Borrower. The Borrower's collateral is comprised primarily of interests in partnerships operating surgical facilities, some of which are on the premises of properties owned by the Company or HCP Ventures IV, LLC, an unconsolidated joint venture of the Company. In December 2009, the Company determined that the loan was impaired. Further, in January 2011 the Company placed the loan on cost-recovery status, whereby accrual of interest income was suspended and any payments received from the Borrower are applied to reduce the recorded investment in the loan.

        As part of a March 2012 agreement (the "2012 Agreement") between Delphis, certain past and current principals of Delphis and the Cirrus Group, LLC (the "Guarantors"), and the Company, the Company agreed, among other things, to allow the distribution of $1.5 million to certain of the Guarantors from funds generated from sales of assets that were pledged as additional collateral for this loan. Further, the Company, as part of the 2012 Agreement, agreed to provide financial incentives to the Borrower regarding the liquidation of the primary collateral assets for this loan.

        Pursuant to the aforementioned 2012 Agreement, the Company received the remaining cash ($4.8 million, after reducing this amount by $0.5 million for related legal expenses) and other consideration ($2.1 million) of $6.9 million from the Guarantors. In addition, during 2012 the Company received $38.1 million in net proceeds from the sales of two of the primary collateral assets, which proceeds, together with the cash payments and other consideration, have been applied to reduce the carrying value of the loan. At December 31, 2012 and 2011, the carrying value of the loan was $30.7 million and $75.7 million, respectively. At December 31, 2012, the Company believes the fair value of the collateral supporting this loan is in excess of its carrying value. During the year ended December 31, 2012 and 2011, the Company received cash payments of $43 million and $2.1 million, respectively.

        A reconciliation of the Company's allowance for the losses related to the Company's senior secured loan to Delphis follows (in thousands):

	Amount
Balance at January 1, 2011	$	3,397
Additions(1)		10,013
Balance at December 31, 2011		13,410
Additions		—
Balance at December 31, 2012	$	13,410

(1)

In September 2011 the Company recognized a total provision for losses of $15.4 million related to its Delphis loan that is discussed above; $10.0 million of this provision reduced the carrying value of the loan and the remaining $5.4 million provision reduced the carrying value of the related accrued interest receivable (accrued interest on loans is presented in other assets; see Note 10 for additional information).

        HCR ManorCare Loans.    In December 2007, the Company made a $900 million investment (at a discount of $100 million) in HCR ManorCare mezzanine loans, which paid interest at a floating rate of one-month London Interbank Offered Rate ("LIBOR") plus 4.0%. Also, in August 2009 and January 2011, the Company purchased $720 million (at a discount of $130 million) and $360 million, respectively, in participations in HCR ManorCare first mortgage debt, which paid interest at LIBOR plus 1.25%.

        On April 7, 2011, upon closing of the HCR ManorCare Acquisition, the Company's $2.0 billion of loans to HCR ManorCare were settled, which resulted in additional interest income of $23 million, which represents the excess of the loans' fair values above their carrying values at the acquisition date. See Note 3 for additional discussion related to the HCR ManorCare Acquisition.

        Genesis HealthCare Loans.    In September and October 2010, the Company purchased participations in a senior loan and mezzanine note of Genesis HealthCare ("Genesis") with par values of $278 million (at a discount of $28 million) and $50 million (at a discount of $10 million), respectively. The Genesis senior loan paid interest at LIBOR (subject to a floor of 1.5%, increasing to 2.5% by maturity) plus a spread of 4.75%, increasing to 5.75% by maturity. The senior loan was secured by all of Genesis' assets. The mezzanine note paid interest at LIBOR plus a spread of 7.50%. In addition to the coupon interest payments, the mezzanine note required the payment of a termination fee, of which the Company's share prior to the early repayment of this loan was $2.3 million.

        On April 1, 2011, the Company received $330.4 million from the early repayment of its loans to Genesis, and recognized additional interest income of $34.8 million, which represents the related unamortized discounts and termination fee.