NOTE 7. Investments in and Advances to Unconsolidated Joint Ventures

The Company owns interests in the following entities that are accounted for under the equity method at September 30, 2016 (dollars in thousands):


Entity(1)	Segment	Carrying Amount		Ownership%
CCRC JV(2)	SHOP	$	450,188		49
HCRMC	QCP		—		9
MBK JV(3)	SHOP		39,876		50
HCP Ventures III, LLC	Medical office		9,492		30
HCP Ventures IV, LLC	Medical office		7,220		20
HCP Life Science(4)	Life science		68,251	50	–	63
Vintage Park Development JV	SHOP		8,088		85
MBK Development JV(3)	SHOP		2,464		50
Suburban Properties, LLC	Medical office		4,667		67
K&Y(5)	Other		1,324		80
Advances to unconsolidated JVs, net and other			527
		$	592,097

(1)

These entities are not consolidated because the Company does not control, through voting rights or other means, the JVs.

(2)

Includes two unconsolidated JVs in a RIDEA structure (CCRC PropCo and CCRC OpCo).

(3)

Includes two unconsolidated JVs in a RIDEA structure.

(4)

Includes the following unconsolidated partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

(5)

Includes three unconsolidated JVs.

The following tables summarize combined financial information for the Company’s equity method investments (in thousands):


	September 30,		December 31,
	2016		2015
Real estate, net	$	4,434,643	$	4,470,249
Goodwill and other assets, net		4,945,250		4,935,343
Assets held for sale		67,817		94,866
Total assets	$	9,447,710	$	9,500,458

Capital lease obligations and mortgage debt	$	6,419,016	$	6,575,531
Accounts payable		1,314,659		1,111,350
Liabilities and mortgage debt held for sale		1,593		6,318
Other partners’ capital		1,078,758		1,163,501
HCP’s capital(1)		633,684		643,758
Total liabilities and partners’ capital	$	9,447,710	$	9,500,458

(1)

The combined basis difference of the Company’s investments in these JVs of $42 million, as of September 30, 2016, is attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease-related net intangibles.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Total revenues	$	1,057,213	$	1,106,667	$	3,210,868	$	3,375,747
Income (loss) from discontinued operations		904		(1,794)		3,476		(15,696)
Net loss		(43,248)		(65,819)		(81,214)		(77,529)
HCP’s share of earnings(1)		(2,053)		8,314		(4,028)		33,916
Fees earned by HCP		76		454		248		1,372
Distributions received by HCP		10,754		16,186		20,377		20,673

(1)

The Company’s JV interest in HCRMC is accounted for using the equity method and results in an elimination of DFL income proportional to HCP’s ownership in HCRMC. The elimination of the respective proportional lease expense at the HCRMC level in substance resulted in $14 million and $44 million of DFL income that was recharacterized to the Company’s share of earnings from HCRMC (equity income from unconsolidated JVs) for the three and nine months ended September 30, 2015. Beginning in January 2016, income will be recognized only if cash distributions are received from HCRMC; as a result, the Company no longer recharacterizes (eliminates) its proportional ownership share of income from DFLs to equity income (loss) from unconsolidated JVs.

HCRMC. The Company concluded that its equity investment in HCRMC was other-than-temporarily impaired as of December 2014, September 2015 and December 2015 and recorded impairment charges of $36 million, $27 million and $19 million, respectively. Beginning in January 2016, equity income is recognized only if cash distributions are received from HCRMC (see Note 5). In determining the fair value of the Company’s equity investment in HCRMC, the fair value was based on a discounted cash flow valuation model and inputs were considered to be Level 3 measurements within the fair value hierarchy. Inputs to this valuation model include earnings multiples, discount rate and industry growth rates of revenue, operating expenses and facility occupancy, some of which influence the Company’s expectation of future cash flows from its investment in HCRMC and, accordingly, the fair value of its investment.

MBK JVs. On March 30, 2015, the Company and MBK Senior Living (“MBK”), a subsidiary of Mitsui & Co. Ltd., formed a new RIDEA JV (“MBK JV”) that owns three senior housing facilities with the Company and MBK each owning a 50% equity interest. MBK manages these communities on behalf of the JV and receives cash payments. The Company contributed $27 million of cash and MBK contributed the three senior housing facilities with a fair value of $126 million, which were encumbered by $78 million of mortgage debt at closing.

On September 25, 2015, the Company and MBK formed a new RIDEA JV (“MBK Development JV”), which acquired a $3 million parcel of land for the purpose of developing a 74-unit class A senior housing facility in Santa Rosa, California. The parcel of land is located adjacent to the Oakmont Gardens independent living facility currently owned and operated by the MBK JV.