April 15, 2014
VIA EDGAR AND FEDEX
Jennifer Monick
Senior Staff Accountant
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: HCP, Inc.
Form 10-K for fiscal year ended December 31, 2013
Filed on February 11, 2014
File Number: 001-08895
Dear Ms. Monick:
HCP, Inc. hereby submits this letter in response to the comment letter from the Staff of the Securities and Exchange Commission (the Staff) dated April 9, 2014. For your convenience, the Staffs comments have been reprinted in italics below and our responses are in regular print. References to we, our or the Company in this response are to HCP, Inc.
Form 10-K for the year ended December 31, 2013
Financial Statements, page F-2
Notes to Consolidated Financial Statements, page F-8
(7) Loans Receivable, page F-23
1. We note your response to prior comment one. We continue to be unclear how you have complied with paragraph 29b of ASC 310-10-50.
Response: We respectfully advise the Staff that our finance receivables consist of six direct financing leases (DFLs) and 10 loans, which are individually subjected to credit quality review quarterly or more often when the circumstances warrant. As of December 31, 2013, in Note 6, we identified that a Senior Housing DFL, with a carrying amount of $376 million, was placed on non-accrual status and accounted for on a cash basis; we internally identify this DFL as a Watch List finance receivable; all other DFLs disclosed in Note 6 were identified as Performing. As of December 31, 2013, in Note 7, we identified that our Delphis Loan, with a carrying amount of $18 million, had been placed on cost-recovery; we internally identify this loan as a Workout finance receivable; all other loans disclosed in Note 7 were identified as Performing. In future filings, to clarify our disclosures related to paragraph 29b of ASC 310-10-50, we will add the following:
Addition to Note 2:
In connection with the quarterly loan and DFL (Finance Receivables) review process, these Finance Receivables are assigned an internal rating of Performing, Watch List or Workout. Finance Receivables that are deemed Performing meet all present contractual obligations and collection of all amounts owed is reasonably assured. Watch List Finance Receivables meet all present contractual obligations; however, the timing and/or collection of all amounts owed may not be reasonably assured. Workout Finance Receivables are defined as DFLs or loans where the Company has determined, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the agreement.
Addition to Note 6 (DFLs):
The following table summarizes the Companys internal ratings for net investment in DFLs at March 31, 2014 (in thousands):
|
|
Carrying |
|
Percentage of |
|
Internal Ratings |
| ||||||||
Investment Type |
|
Amount |
|
Portfolio |
|
Performing DFLs |
|
Watch List DFLs |
|
Workout DFLs |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Senior housing |
|
$ |
1,484,656 |
|
21 |
|
$ |
1,111,264 |
|
$ |
373,392 |
|
$ |
|
|
Post-acute/skilled nursing |
|
5,581,853 |
|
77 |
|
5,581,853 |
|
|
|
|
| ||||
Hospital |
|
123,891 |
|
2 |
|
123,891 |
|
|
|
|
| ||||
|
|
$ |
7,190,400 |
|
100 |
|
$ |
6,817,008 |
|
$ |
373,392 |
|
$ |
|
|
Addition to Note 7 (Loans):
The following table summarizes the Companys internal ratings for loans receivable at March 31, 2014 (in thousands):
|
|
Carrying |
|
Percentage of |
|
Internal Ratings |
| ||||||||
Investment Type |
|
Amount |
|
Portfolio |
|
Performing Loans |
|
Watch List Loans |
|
Workout Loans |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate secured |
|
$ |
152,759 |
|
41 |
|
$ |
152,759 |
|
$ |
|
|
$ |
|
|
Other secured |
|
218,413 |
|
59 |
|
200,342 |
|
|
|
18,071 |
| ||||
|
|
$ |
371,172 |
|
100 |
|
$ |
353,101 |
|
$ |
|
|
$ |
18,071 |
|
In connection with responding to your comments, we acknowledge that:
· we are responsible for the adequacy and accuracy of the disclosure in the filings;
· Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filings; and
· we may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Thank you for your consideration of our response. Should you have any questions, please call the undersigned at (562) 733-5137.
|
Very truly yours, | |
|
| |
|
| |
|
| |
|
| |
|
|
/s/ TIMOTHY M. SCHOEN |
|
|
Timothy M. Schoen |
|
|
Executive Vice President and |
|
|
Chief Financial Officer |
cc: |
James W. Mercer, Esq. |
|
|
Scott A. Anderson |
|
|
Jose M. Castro |
|
|
Troy E. McHenry, Esq. |
|