NOTE 7. Loans Receivable

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


	December 31,
	2015						2014
	Real Estate		Other				Real Estate		Other
	Secured		Secured		Total		Secured		Secured		Total
Mezzanine	$	—	$	660,138	$	660,138	$	—	$	799,064	$	799,064
Other		114,322		—		114,322		135,363		—		135,363
Unamortized premiums (discounts), fees and costs, net		961		(6,678)		(5,717)		—		(14,056)		(14,056)
Allowance for loan losses		—		—		—		—		(13,410)		(13,410)
	$	115,283	$	653,460	$	768,743	$	135,363	$	771,598	$	906,961

The following table summarizes the Company’s internal ratings for loans receivable at December 31, 2015 (dollars in thousands):


			Percentage	Internal Ratings
	Carrying		of Loan	Performing		Watch List		Workout
Investment Type	Amount		Portfolio	Loans		Loans		Loans
Real estate secured	$	115,283	15	$	115,283	$	—	$	—
Other secured		653,460	85		653,460		—		—
	$	768,743	100	$	768,743	$	—	$	—

Real Estate Secured Loans

Following is a summary of loans receivable secured by real estate at December 31, 2015 (dollars in thousands):


Final	Number
Maturity	of		Principal		Carrying
Date	Loans	Payment Terms	Amount		Amount
2016	1	aggregate monthly interest-only payments, accrues interest at 8.5%, and secured by a senior housing facility in Pennsylvania(1)	$	15,135	$	15,244
2017	3	aggregate monthly interest-only payments, accrues interest at 8.5%, and secured by two senior housing facilities in New Jersey and Pennsylvania;(1) and aggregate monthly interest-only payments, accrues interest at LIBOR plus 6.0%, and secured by, among other things, the issuer's real estate assets		78,329		79,291
2018	1	monthly interest-only payments, accrues interest at 8.0% and secured by a senior housing facility in Pennsylvania(1)		20,078		20,748
	5		$	113,542	$	115,283

(1)

Represents commitments to fund an aggregate of $2 million for four development projects that are at or near completion as of December 31, 2015.

At December 31, 2015, future contractual principal payments to be received on loans receivable secured by real estate are $15 million in 2016, $79 million in 2017 and $20 million in 2018. During the year ended December 31, 2015, the Company recognized $27 million in interest income related to loans secured by real estate. At December 31, 2015, the Company accrued $1 million of interest receivables related to real estate secured loans.

In December 2015, the Company purchased £28 million ($42 million) of Four Seasons Health Care’s (“Four Seasons”) £40 million senior secured term loan. The loan is secured by, among other things, the real estate assets of Four Seasons, and represents the most senior debt tranche. The loan bears interest at a rate of LIBOR plus 6.0% per annum and matures in December 2017.

Other Secured Loans

HC-One Facility

In November 2014, the Company was the lead investor in the financing for Formation Capital and Safanad’s acquisition of NHP, a company that, at closing, owned 273 nursing and residential care homes representing over 12,500 beds in the U.K. principally operated by HC-One. The Company provided a loan facility (the “HC-One Facility”), secured by substantially all of NHP’s assets, totaling £395 million, with £363 million ($574 million) drawn at closing. The HC-One Facility has a five-year term and was funded by a £355 million draw on the Company’s revolving line of credit facility that is discussed in Note 11. In February 2015, the Company increased the HC-One Facility by £108 million ($164 million) to £502 million ($795 million), in conjunction with HC-One’s acquisition of Meridian Healthcare. In April 2015, the Company converted £174 million of the HC-One Facility into a sale-leaseback transaction for 36 nursing and residential care homes located throughout the U.K. (see Note 4). In September 2015, the Company amended and increased its commitment under the HC-One Facility by £11 million primarily for the funding of capital expenditures and a development project. As part of the amendments, the Company shortened the non-call period by 17 months and provided consent for (i) the pay down of £34 million from disposition proceeds without a prepayment premium and (ii) the spinoff of 36 properties into a separate joint venture. In return, the Company retained security over the spinoff properties for a period of two years. Through December 31, 2015, the Company received paydowns of £34 million ($52 million).

Brookdale Receivable

In conjunction with the Brookdale Transaction, on August 29, 2014, the Company provided a $68 million interest-only loan, which was repaid in full in November 2014. See additional information regarding the Brookdale Transaction in Note 3.

Barchester Loan

On May 2, 2013, the Company acquired £121 million of subordinated debt at a discount for £109 million ($170 million). The loans were secured by an interest in facilities leased and operated by Barchester Healthcare (“Barchester”). On September 6, 2013, the Company received £129 million ($202 million) for the par payoff of these debt investments, recognizing interest income of $24 million for the related unamortized loan discounts.

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”), as part of the recapitalization of a post-acute/skilled nursing portfolio. The Company funded $100 million (the “First Tranche”) at closing and funded an additional $102 million (the “Second Tranche”) in June 2013. In May 2015, the Company increased and extended the mezzanine loan facility with Tandem to (i) fund $50 million (the “Third Tranche”) and $5 million (the “Fourth Tranche”), which proceeds were used to repay a portion of Tandem’s existing senior and mortgage debt, respectively; (ii) extend its maturity to October 2018; and (iii) extend the prepayment penalty period to January 2017. The loans bear interest at fixed rates of 12%, 14%, 6% and 6% per annum for the First, Second, Third and Fourth Tranches, respectively. At December 31, 2015, the facility had an outstanding balance of $256 million at an 11.5% blended interest rate and was subordinate to $381 million of senior mortgage debt.

Delphis Operations, L.P. Loan

Through October 2015, the Company held a secured term loan made to Delphis Operations, L.P. (“Delphis” or the “Borrower”) that was collateralized by all of the assets of the Borrower. In October 2015, the Company received $23 million in cash proceeds from the sale of Delphis’ collateral and recognized an impairment recovery of $6 million for the amount received in excess of the loan’s carrying value. The carrying value of the loan, net of an allowance for loan losses, was $17 million at December 31, 2014. At December 31, 2014, the allowance related to the Company’s senior secured term loan to Delphis was $13 million with no additional allowances recognized during the year ended December 31, 2015. During the years ended December 31, 2015 and 2014, the Company received cash payments from the Borrower of $23 million and $1 million, respectively.