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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

 

Commission file number 1-08895

 

 

HCP, INC.

(Exact name of registrant as specified in its charter)

 

Maryland		33-0091377
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

3760 Kilroy Airport Way, Suite 300
Long Beach, CA 90806
(Address of principal executive offices)

 

(562) 733-5100
(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  x   NO  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).  YES  x   NO  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer  x		Accelerated Filer o
Non-accelerated Filer  o (Do not check if a smaller reporting company)		Smaller Reporting Company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  YES  o  NO  x

 

As of October 30, 2009, there were 293,138,580 shares of the registrant’s $1.00 par value common stock outstanding.

 

 

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HCP, INC.

INDEX

PART I. FINANCIAL INFORMATION

 

Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statement of Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	49
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 5.	Other Information	51
Item 6.	Exhibits	51
Signatures		55

 

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HCP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

		September 30,			December 31,
		2009			2008
		(Unaudited)
ASSETS
Real estate:
Buildings and improvements		$	7,804,118		$	7,747,015
Development costs and construction in progress		273,567			224,337
Land		1,548,845			1,548,248
Accumulated depreciation and amortization		(1,003,177		)	(819,980		)
Net real estate		8,623,353			8,699,620
Net investment in direct financing leases		634,233			648,234
Loans receivable, net		1,674,329			1,076,392
Investments in and advances to unconsolidated joint ventures		261,364			272,929
Accounts receivable, net of allowance of $17,430 and $18,413, respectively		36,824			33,834
Cash and cash equivalents		144,366			57,562
Restricted cash		31,988			35,078
Intangible assets, net		410,366			505,936
Real estate held for sale, net		3,783			27,058
Other assets, net		517,604			493,183
Total assets		$	12,338,210		$	11,849,826
LIABILITIES AND EQUITY
Bank line of credit		$	—		$	150,000
Term loan		200,000			200,000
Bridge loan		—			320,000
Senior unsecured notes		3,520,577			3,523,513
Mortgage and other secured debt		1,863,404			1,641,734
Other debt		99,487			102,209
Intangible liabilities, net		207,847			232,630
Accounts payable and accrued liabilities		310,493			211,715
Deferred revenue		86,925			60,185
Total liabilities		6,288,733			6,441,986
Commitments and contingencies
Preferred stock, $1.00 par value: 50,000,000 shares authorized; 11,820,000 shares issued and outstanding, liquidation preference of $25.00 per share		285,173			285,173
Common stock, $1.00 par value: 750,000,000 shares authorized; 293,145,064 and 253,601,454 shares issued and outstanding, respectively		293,145			253,601
Additional paid-in capital		5,708,534			4,873,727
Cumulative dividends in excess of earnings		(407,210		)	(130,068		)
Accumulated other comprehensive loss		(9,838		)	(81,162		)
Total stockholders’ equity		5,869,804			5,201,271
Joint venture partners		7,927			12,912
Non-managing member unitholders		171,746			193,657
Total noncontrolling interests		179,673			206,569
Total equity		6,049,477			5,407,840
Total liabilities and equity		$	12,338,210		$	11,849,826

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)
(Unaudited)

 

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2009			2008			2009			2008
Revenues:
Rental and related revenues		$	218,366		$	231,561		$	663,044		$	650,742
Tenant recoveries		22,464			20,225			67,124			61,817
Income from direct financing leases		13,173			14,543			39,302			43,646
Investment management fee income		1,326			1,523			4,133			4,448
Total revenues		255,329			267,852			773,603			760,653
Costs and expenses:
Depreciation and amortization		82,301			77,292			242,318			232,574
Operating		46,173			49,104			139,812			143,849
General and administrative		22,860			17,077			61,625			55,859
Litigation provision		101,973			—			101,973			—
Impairments		15,123			3,710			20,904			5,284
Total costs and expenses		268,430			147,183			566,632			437,566
Other income (expense):
Interest and other income, net		39,962			62,283			93,027			128,344
Interest expense		(74,039		)	(82,813		)	(226,053		)	(264,488		)
Total other income (expense)		(34,077		)	(20,530		)	(133,026		)	(136,144		)
Income (loss) before income tax (expense) benefit and equity income from unconsolidated joint ventures		(47,178		)	100,139			73,945			186,943
Income tax (expense) benefit		322			(853		)	(1,406		)	(4,327		)
Equity income from unconsolidated joint ventures		1,328			1,227			1,993			3,736
Income (loss) from continuing operations		(45,528		)	100,513			74,532			186,352
Discontinued operations:
Income (loss) before gain on sales of real estate, net of income taxes		(152		)	3,291			1,903			19,158
Impairments		—			—			(125		)	(8,141		)
Gain on sales of real estate, net of income taxes		2,460			27,752			34,357			228,395
Total discontinued operations		2,308			31,043			36,135			239,412
Net income (loss)		(43,220		)	131,556			110,667			425,764
Noncontrolling interests’ and participating securities’ share in earnings		(3,895		)	(6,659		)	(12,147		)	(19,559		)
Preferred stock dividends		(5,282		)	(5,282		)	(15,848		)	(15,848		)
Net income (loss) applicable to common shares		$	(52,397	)	$	119,615		$	82,672		$	390,357
Basic earnings (loss) per common share:
Continuing operations		$	(0.19	)	$	0.36		$	0.17		$	0.65
Discontinued operations		0.01			0.13			0.14			1.03
Net income (loss) applicable to common shares		$	(0.18	)	$	0.49		$	0.31		$	1.68
Diluted earnings (loss) per common share:
Continuing operations		$	(0.19	)	$	0.36		$	0.17		$	0.65
Discontinued operations		0.01			0.13			0.14			1.03
Net income (loss) applicable to common shares		$	(0.18	)	$	0.49		$	0.31		$	1.68
Weighted average shares used to calculate earnings (loss) per common share:
Basic		284,812			244,572			267,971			232,199
Diluted		284,812			245,482			268,041			233,036
Dividends declared per common share		$	0.46		$	0.455		$	1.38		$	1.365

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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HCP, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(In thousands)

(Unaudited)

 

															Cumulative			Accumulated
												Additional			Dividends			Other			Total			Total
		Preferred Stock					Common Stock					Paid-In			In Excess			Comprehensive			Stockholders’			Noncontrolling			Total
		Shares		Amount			Shares		Amount			Capital			Of Earnings			Income (Loss)			Equity			Interests			Equity
January 1, 2009		11,820		$	285,173		253,601		$	253,601		$	4,873,727		$	(130,068	)	$	(81,162	)	$	5,201,271		$	206,569		$	5,407,840
Comprehensive income:
Net income		—		—			—		—			—			99,656			—			99,656			11,011			110,667
Change in net unrealized gains (losses) on securities:
Unrealized gains		—		—			—		—			—			—			75,180			75,180			—			75,180
Less reclassification adjustment realized in net income		—		—			—		—			—			—			(2,797		)	(2,797		)	—			(2,797		)
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized losses		—		—			—		—			—			—			(910		)	(910		)	—			(910		)
Less reclassification adjustment realized in net income		—		—			—		—			—			—			685			685			—			685
Change in Supplemental Executive Retirement Plan obligation		—		—			—		—			—			—			66			66			—			66
Foreign currency translation  adjustment		—		—			—		—			—			—			(900		)	(900		)	—			(900		)
Total comprehensive income																					170,980			11,011			181,991
Issuance of common stock, net		—		—			39,639		39,639			830,617			—			—			870,256			(21,873		)	848,383
Repurchase of common stock		—		—			(95	)	(95		)	(2,153		)	—			—			(2,248		)	—			(2,248		)
Amortization of deferred  compensation		—		—			—		—			11,068			—			—			11,068			—			11,068
Preferred dividends		—		—			—		—			—			(15,849		)	—			(15,849		)	—			(15,849		)
Common dividends ($1.38 per share)		—		—			—		—			—			(360,949		)	—			(360,949		)	—			(360,949		)
Distributions to noncontrolling  interests		—		—			—		—			—			—			—			—			(11,662		)	(11,662		)
Purchase of noncontrolling interests		—		—			—		—			(4,725		)	—			—			(4,725		)	(4,372		)	(9,097		)
September 30, 2009		11,820		$	285,173		293,145		$	293,145		$	5,708,534		$	(407,210	)	$	(9,838	)	$	5,869,804		$	179,673		$	6,049,477

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

 

		Nine Months Ended September 30,
		2009			2008
Cash flows from operating activities:
Net income		$	110,667		$	425,764
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations		242,318			232,574
Discontinued operations		266			7,178
Amortization of above and below market lease intangibles, net		(12,657		)	(6,020		)
Stock-based compensation		11,068			10,637
Amortization of debt premiums, discounts and issuance costs, net		6,187			7,409
Straight-line rents		(38,751		)	(28,645		)
Interest accretion		(23,813		)	(20,134		)
Deferred rental revenue		10,507			16,227
Equity income from unconsolidated joint ventures		(1,993		)	(3,736		)
Distributions of earnings from unconsolidated joint ventures		5,444			3,736
Gain on sales of real estate		(34,357		)	(228,395		)
Marketable securities (gains) losses, net		(6,420		)	2,746
Derivative losses, net		922			1,803
Impairments		21,029			13,425
Changes in:
Accounts receivable		11,310			14,881
Other assets		(2,991		)	(4,843		)
Accrued liability for litigation provision		101,973			—
Accounts payable and other accrued liabilities		(10,989		)	10,776
Net cash provided by operating activities		389,720			455,383
Cash flows from investing activities:
Acquisitions and development of real estate		(71,009		)	(132,436		)
Lease commissions and tenant and capital improvements		(27,321		)	(44,734		)
Proceeds from sales of real estate, net		58,046			629,404
Contributions to unconsolidated joint ventures		(48		)	(2,620		)
Distributions in excess of earnings from unconsolidated joint ventures		5,775			8,727
Purchase of marketable securities		—			(26,101		)
Proceeds from the sale of marketable securities		119,665			10,700
Proceeds from the sales of interests in unconsolidated joint ventures		—			2,855
Principal repayments on loans receivable and direct financing leases		8,654			14,590
Investments in loans receivable, net		(165,506		)	(2,863		)
Decrease (increase) in restricted cash		3,090			(883		)
Net cash provided by (used in) investing activities		(68,654		)	456,639
Cash flows from financing activities:
Net repayments under bank line of credit		(150,000		)	(951,700		)
Repayments of bridge loan		(320,000		)	(830,000		)
Repayments of mortgage debt		(206,329		)	(63,740		)
Issuance of mortgage debt		1,942			579,078
Repurchase and repayments of senior unsecured notes		(7,735		)	(300,000		)
Settlement of cash flow hedge		—			(9,658		)
Debt issuance costs		(718		)	(10,068		)
Net proceeds from the issuance of common stock and exercise of options		846,135			1,060,236
Dividends paid on common and preferred stock		(376,798		)	(337,097		)
Purchase of noncontrolling interests		(9,097		)	—
Distributions to noncontrolling interests		(11,662		)	(28,290		)
Net cash used in financing activities		(234,262		)	(891,239		)
Net increase in cash and cash equivalents		86,804			20,783
Cash and cash equivalents, beginning of period		57,562			96,269
Cash and cash equivalents, end of period		$	144,366		$	117,052

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1)    Business

 

HCP, Inc. is a Maryland corporation that is organized to qualify as a self-administered real estate investment trust (“REIT”) which, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States. The Company acquires, develops, leases, disposes and manages healthcare real estate and provides financing to healthcare providers.

 

(2)    Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2008 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) as updated by the Company’s Current Report on Form 8-K filed with the SEC on May 4, 2009.

 

Use of Estimates

 

Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of HCP, its wholly-owned subsidiaries and joint ventures that it controls, through voting rights or other means. All material intercompany transactions and balances have been eliminated in consolidation.

 

At inception of joint venture transactions, the Company identifies entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and determines which business enterprise is the primary beneficiary of the VIE. A variable interest entity is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company consolidates investments in VIEs when it is determined to be the primary beneficiary at either the creation of the VIE or upon the occurrence of a qualifying reconsideration event. Qualifying reconsideration events include, but are not limited to, the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposal of all or a portion of an interest held by the primary beneficiary. At September 30, 2009, the Company did not consolidate any significant variable interest entities.

 

The Company uses qualitative and quantitative approaches when determining whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, the form of the Company’s ownership interest, its representation on the entity’s governing body, the size and seniority of its investment, various cash flow scenarios related to the VIE, its ability to participate in policy making decisions and the rights of the other investors to participate in the decision making process and to replace the Company as manager and/or liquidate the venture, if applicable .

 

At September 30, 2009, the Company had 60 properties leased to a total of eight tenants (‘‘VIE tenants’’) and a loan to a borrower where each tenant and borrower has been identified as a VIE. The Company acquired these leases and loan on October 5, 2006 in its merger with CNL Retirement Properties, Inc. (‘‘CRP’’). CRP determined it was not the primary

 

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beneficiary of these VIEs, and the Company is required to carry forward CRP’s accounting conclusions after the acquisition relative to their primary beneficiary assessments, provided the Company does not believe CRP’s accounting to be in error. The Company believes that its accounting for the VIEs is the appropriate application of GAAP. On December 21, 2007, the Company made an investment of approximately $900 million in mezzanine loans where each mezzanine borrower has been identified as a VIE. The Company has also determined that it is not the primary beneficiary of these VIEs.

 

The carrying value and classification of the related assets, liabilities and maximum exposure to loss as a result of the Company’s involvement with VIEs are presented below (in thousands):

 

VIE Type		Maximum Loss Exposure(1)			Asset/Liability Type		Carrying Value
VIE tenants—operating leases		$	483,758		Lease intangibles, net and straight- line rent receivables		$	7,550
VIE tenants—DFLs(2)		650,000			Net investment in DFLs		215,137
Senior secured loans		81,322			Loans receivable, net		81,322
Mezzanine loans		929,942			Loans receivable, net		929,942

 

(1)    The Company’s maximum loss exposure related to the VIE tenants represents the future minimum lease payments over the remaining term of the respective leases, which may be mitigated by re-leasing the properties to new tenants. The Company’s maximum loss exposure related to loans to VIEs represents their current aggregate carrying value.

(2)    Direct financing leases (“DFLs”).

 

See Notes 6 and 11 for additional description of the nature, purpose and activities of the Company’s VIEs and interests therein.

 

For its investments in joint ventures, the Company evaluates the type of rights held by the limited partner(s), which may preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the limited partnership. The assessment of limited partners’ rights and their impact on the presumption of control over limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners, (ii) the sole general partner increases or decreases its ownership in the limited partnership interests, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. The Company similarly evaluates the rights of managing members of limited liability companies.

 

Investments in Unconsolidated Joint Ventures

 

Investments in entities which the Company does not consolidate but for which the Company has the ability to exercise significant influence over operating and financial policies are reported under the equity method of accounting. Under the equity method of accounting, the Company’s share of the investee’s earnings or losses are included in the Company’s consolidated results of operations.

 

The initial carrying value of investments in unconsolidated joint ventures is based on the amount paid to purchase the joint venture interest or the carrying value of the assets prior to the sale of interests in the joint venture. To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is generally amortized over the lives of the related assets and liabilities and included in the Company’s share of equity in earnings of the joint venture. The Company evaluates its equity method investments for impairment based upon a comparison of the estimated fair value of the equity method investment to its carrying value. When the Company determines a decline in the estimated fair value of an investment in an unconsolidated joint venture below its carrying value is other-than-temporary, an impairment is recorded. The Company recognizes gains on the sale of interests in joint ventures to the extent the economic substance of the transaction is a sale.

 

Revenue Recognition

 

The Company recognizes rental revenue from tenants on a straight-line basis over the lease term when collectibility is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset. For assets acquired subject to leases, the Company recognizes revenue upon acquisition of the asset provided the tenant has taken possession or controls the physical use of the leased asset. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant

 

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improvements, any tenant improvement allowance that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:

 

·       whether the lease stipulates how and on what a tenant improvement allowance may be spent;

 

·       whether the tenant or landlord retains legal title to the improvements at the end of the lease term;

 

·       whether the tenant improvements are unique to the tenant or general-purpose in nature; and

 

·       whether the tenant improvements are expected to have any residual value at the end of the lease .

 

Certain leases provide for additional rents contingent upon a percentage of the facility’s revenue in excess of specified base amounts or other thresholds. Such revenue is recognized when actual results reported by the tenant, or estimates of tenant results, exceed the base amount or other thresholds. Such revenue is recognized only after the contingency has been removed (when the related thresholds are achieved), which may result in the recognition of rental revenue in periods subsequent to when such payments are received.

 

Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. The reimbursements are recognized and presented gross, as the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.

 

For leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue exceeding amounts contractually due from tenants. Such cumulative excess amounts are included in other assets and were $151 million and $112 million, net of allowances, at September 30, 2009 and December 31, 2008, respectively. If the Company determines that collectibility of straight-line rents is not reasonably assured, the Company limits future recognition to amounts contractually owed and paid, and, when appropriate, establishes an allowance for estimated losses . The results for the three and nine months ended September 30, 2008 include lease termination fees of $18 million from a tenant in connection with the early termination of three leases on July 30, 2008 in the Company’s life science segment.

 

The Company maintains an allowance for doubtful accounts, including an allowance for straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. The Company monitors the liquidity and creditworthiness of its tenants and operators on an ongoing basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent amounts, the Company’s assessment is based on amounts estimated to be recoverable over the term of the lease. At September 30, 2009 and December 31, 2008, the Company had an allowance of $54 million and $40 million, respectively, included in other assets, as a result of the Company’s determination that collectibility is not reasonably assured for certain straight-line rent amounts .

 

The Company receives management fees from its investments in certain joint venture entities for various services provided as the managing member of the entities. Management fees are recorded as revenue when management services have been performed. Intercompany profit for management fees is eliminated.

 

The Company recognizes gains on sales of properties upon the closing of the transaction with the purchaser. Gains on properties sold are recognized using the full accrual method when the collectibility of the sales price is reasonably assured, the Company is not obligated to perform significant activities after the sale, the initial investment from the buyer is sufficient and other profit recognition criteria have been satisfied. Gains on sales of properties may be deferred in whole or in part until the requirements for gain recognition have been met.

 

The Company uses the direct finance method of accounting to record income from DFLs. For leases accounted for as DFLs, future minimum lease payments are recorded as a receivable. The difference between the future minimum lease payments and the estimated residual values less the cost of the properties is recorded as unearned income. Unearned income is deferred and amortized to income over the lease terms to provide a constant yield when collectibility of the lease payments is reasonably assured. Investments in DFLs are presented net of unamortized unearned income.

 

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Loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. Loans held-for-investment are carried at amortized cost and are reduced by a valuation allowance for estimated credit losses as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, using the effective interest method. The effective interest method is applied on a loan-by-loan basis when collectibility of the future payments is reasonably assured. Premiums and discounts are recognized as yield adjustments over the life of the related loans. Loans are transferred from held-for-investment to held-for-sale when management’s intent is to no longer hold the loans for the foreseeable future. Loans held-for-sale are recorded at the lower of cost or estimated fair value.

 

Allowances are established for loans and DFLs based upon an estimate of probable losses for the individual loans and DFLs deemed to be impaired. Loans and DFLs are impaired when it is deemed probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the loan or lease. The allowance is based upon the Company’s assessment of the borrower’s or lessee’s overall financial condition, resources and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the realizable value of any collateral. These estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan’s or DFL’s effective interest rate, the estimated fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors.

 

Loans and DFLs are placed on non-accrual status when management determines that the collectibility of contractual amounts is not reasonably assured. While on non-accrual status, loans or DFLs are either accounted for on a cash basis, in which income is recognized only upon receipt of cash, or on a cost-recovery basis, in which all cash receipts reduce the carrying value of the loan or DFL, based on the Company’s judgment of future collectibility.

 

Real Estate

 

Real estate, consisting of land, buildings and improvements, is recorded at cost. The Company allocates the cost of the acquisition, including the assumption of liabilities, to the acquired tangible assets and identifiable intangibles based on their estimated fair values. The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The estimated fair value of tangible assets of an acquired property is based on the value of the property as if it was vacant .

 

The Company records acquired “above and below” market leases at an estimated fair value using discount rates which reflect the risks associated with the leases acquired. The amount recorded is based on the present value of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each in-place lease, measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the extended term for any leases with below market renewal options. Other intangible assets acquired include amounts for in-place lease values that are based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes estimates of lost rents at market rates during the hypothetical expected lease-up periods, which are dependent on local market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related costs .

 

The Company capitalizes direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a real estate project. The Company capitalizes construction and development costs while substantive activities are ongoing to prepare an asset for its intended use. The Company considers a construction project as substantially complete and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have ceased, are expensed as incurred. For redevelopment of existing operating properties, the Company capitalizes costs based on the net carrying value of the existing property under redevelopment plus the cost for the construction and improvement incurred in connection with the redevelopment. Costs previously capitalized related to abandoned acquisitions or developments are charged to earnings. Expenditures for repairs and maintenance are expensed as incurred . The Company considers costs incurred in conjunction with re-leasing properties, including tenant improvements and lease commissions, to represent the acquisition of productive assets and, accordingly, such costs are reflected as investment activities in the Company’s statement of cash flows.

 

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The Company computes depreciation on properties using the straight-line method over the assets’ estimated useful life. Depreciation is discontinued when a property is identified as held-for-sale. Buildings and improvements are depreciated over useful lives ranging up to 45 years. Above and below market lease intangibles are amortized primarily to revenue over the remaining noncancellable lease terms and bargain renewal periods, if any. Other in-place lease intangibles are amortized to expense over the remaining noncancellable lease term and bargain renewal periods, if any.

 

Impairment of Long-Lived Assets and Goodwill

 

The Company assesses the carrying value of real estate assets and related intangibles (“real estate assets”), whenever events or changes in circumstances indicate that the carrying value of such asset or asset group may not be recoverable. The Company tests its real estate assets for impairment by comparing the sum of the expected undiscounted cash flows to the carrying value of the real estate asset or asset group. If the carrying value exceeds the expected undiscounted cash flows, an impairment loss will be recognized by adjusting the carrying value of the real estate assets to their estimated fair value .

 

Goodwill is tested for impairment at least annually and whenever the Company identifies triggering events that may indicate an impairment has occurred by applying a two-step approach. Potential impairment indicators include a significant decline in real estate valuations, restructuring plans or a decline in the Company’s market capitalization below its carrying value. The Company tests for impairment of its goodwill by comparing the estimated fair value of a reporting unit containing goodwill to its carrying value. If the carrying value exceeds the estimated fair value, the second step of the test is needed to measure the amount of potential goodwill impairment. The second step requires the estimated fair value of the reporting unit to be allocated to all the assets and liabilities of the reporting unit as if it had been acquired in a business combination at the date of the impairment test. The excess estimated fair value of the reporting unit over the estimated fair value of assets and liabilities is the implied value of goodwill and is used to determine the amount of impairment. The Company selected the fourth quarter of each fiscal year to perform its annual impairment test .

 

Assets Held for Sale and Discontinued Operations

 

Certain long-lived assets are classified as held-for-sale and are reported at the lower of their carrying value or their estimated fair value less costs to sell and are no longer depreciated. Discontinued operations is a component of an entity that has either been disposed of or is deemed to be held for sale if, (i) the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction, and (ii) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

 

Stock-Based Compensation

 

Share-based compensation expense for share-based awards granted on or after January 1, 2006 to employees, including grants of employee stock options, are recognized in the statement of operations based on their estimated fair value. Compensation expense for awards with graded vesting is generally recognized ratably over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional services.

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist of cash on hand and short-term investments with original maturities of three months or less when purchased . The Company maintains cash deposits with major financial institutions which periodically exceed the Federal Deposit Insurance Corporation insurance limit. The Company has not experienced any losses to date related to cash or cash equivalents .

 

Restricted Cash

 

Restricted cash primarily consists of amounts held by mortgage lenders to provide for (i) future real estate tax expenditures, tenant improvements and capital expenditures, and (ii) security deposits and net proceeds from property sales that were executed as tax-deferred dispositions.

 

Derivatives

 

During its normal course of business, the Company uses certain types of derivative instruments for the purpose of managing interest rate risk. To qualify for hedge accounting, derivative instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with the Company’s related assertions.

 

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The Company recognizes all derivative instruments, including embedded derivatives required to be bifurcated, as assets or liabilities in the Company’s condensed consolidated balance sheets at their estimated fair value. Changes in the estimated fair value of derivative instruments that are not designated as hedges or that do not meet the criteria of hedge accounting are recognized in earnings. For derivatives designated in qualifying cash flow hedging relationships, the change in the estimated fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss), whereas the change in the estimated fair value of the ineffective portion is recognized in earnings. For derivatives designated in qualifying fair value hedging relationships, the change in the estimated fair value of the effective portion of the derivatives offsets the change in the estimated fair value of the hedged item, whereas the change in the estimated fair value of the ineffective portion is recognized in earnings.

 

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all derivatives that are part of a hedging relationship to specific forecasted transactions as well as recognized obligations or assets in the balance sheet. The Company also assesses and documents, both at inception of the hedging relationship and on a quarterly basis thereafter, whether the derivatives that are designated in hedging transactions are highly effective in offsetting the designated risks associated with the respective hedged items. When it is determined that a derivative ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, the Company discontinues hedge accounting prospectively and records the appropriate adjustment to earnings based on the current estimated fair value of the derivative.

 

Income Taxes

 

In 1985, HCP, Inc. elected REIT status and believes it has always operated so as to continue to qualify as a REIT under Sections 856 to 860 of the Internal Revenue code of 1986, as amended (the “Code”). Accordingly, HCP, Inc. will not be subject to U.S. federal income tax, provided that it continues to qualify as a REIT and makes distributions to stockholders equal to or in excess of its taxable income. On July 27, 2007, the Company formed HCP Life Science REIT, a consolidated subsidiary, which elected REIT status for the year ended December 31, 2007. HCP, Inc., along with its consolidated REIT subsidiary, are each subject to the REIT qualification requirements under Sections 856 to 860 of the Code. If either REIT fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates and may be ineligible to qualify as a REIT for four subsequent tax years .

 

HCP, Inc. and HCP Life Science REIT are subject to state and local income taxes in some jurisdictions, and in certain circumstances each REIT may also be subject to federal excise taxes on undistributed income. In addition, certain activities the Company undertakes must be conducted by entities which elect to be treated as taxable REIT subsidiaries (“TRSs”). TRSs are subject to both federal and state income taxes.

 

Marketable Securities

 

The Company classifies its marketable equity and debt securities as available-for-sale. These securities are carried at their estimated fair value with unrealized gains and losses recognized in stockholders’ equity as a component of accumulated other comprehensive income (loss). Gains or losses on securities sold are determined based on the specific identification method. When the Company determines declines in the estimated fair value of marketable securities are other-than-temporary, a loss is recognized in earnings.

 

Capital Raising Issuance Costs

 

Costs incurred in connection with the issuance of common shares are recorded as a reduction of additional paid-in capital. Costs incurred in connection with the issuance of preferred shares are recorded as a reduction of the preferred stock amount. Debt issuance costs are deferred, included in other assets and amortized to interest expense over the remaining term of the related debt based on the effective interest method.

 

Segment Reporting

 

The Company’s segments are based on its internal method of reporting which classifies operations by healthcare sector. The Company’s business operations include five segments: (i) senior housing, (ii) life science, (iii) medical office, (iv) hospital and (v) skilled nursing.

 

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Noncontrolling Interests and Mandatorily Redeemable Financial Instruments

 

The Company reports arrangements with noncontrolling interests as a component of equity separate from the parent’s equity. The Company accounts for purchases or sales of equity interests that do not result in a change in control as equity transactions. In addition, net income attributable to the noncontrolling interest is included in consolidated net income (loss) on the face of the statement of operations and, upon a gain or loss of control, the interest purchased or sold, as well as any interest retained, is recorded at its estimated fair value with any gain or loss recognized in earnings.

 

As of September 30, 2009, there were 4.3 million non-managing member units outstanding in six limited liability companies (“LLC”), for all of which the Company is the managing member: (i) HCPI/Tennessee, LLC; (ii) HCPI/Utah, LLC; (iii) HCPI/Utah II, LLC; (iv) HCP DR California, LLC; (v) HCP DR Alabama, LLC; and (vi) HCP DR MCD, LLC. The Company consolidates these entities since it exercises control and carries the noncontrolling interests at cost. The non-managing member LLC Units (“DownREIT units”) are exchangeable for an amount of cash approximating the then-current market value of shares in the Company’s common stock or, at the Company’s option, shares of the Company’s common stock (subject to certain adjustments, such as stock splits and reclassifications). At September 30, 2009, the carrying and market values of the 4.3 million DownREIT units were $172 million and $170 million, respectively. The market value of DownREIT units correlates to the changes in market value of our common stock and not the market value of the respective assets owned by the DownREIT LLCs.

 

Life Care Bonds Payable

 

Two of the Company’s continuing care retirement communities (“CCRCs”) issue non-interest bearing life care bonds payable to certain residents of the CCRCs. Generally, the bonds are refundable to the resident or to the resident’s estate upon termination or cancellation of the CCRC agreement. An additional senior housing facility owned by the Company collects non-interest bearing occupancy fee deposits that are refundable to the resident or the resident’s estate upon the earlier of the re-letting of the unit or after two years of vacancy. Proceeds from the issuance of new bonds are used to retire existing bonds, and since the maturity of the obligations for the three facilities is not determinable, no interest is imputed. These amounts are included in other debt in the Company’s condensed consolidated balance sheets.

 

Fair Value Measurements

 

The Company measures and discloses the estimated fair value of financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:

 

·       Level 1 — quoted prices for identical instruments in active markets;

 

·       Level 2 — quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

 

·       Level 3 — fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable .

 

The Company measures fair value using a set of standardized procedures that are outlined herein for all assets and liabilities which are required to be measured at their estimated fair value on either a recurring or non-recurring basis. When available, the Company utilizes quoted market prices from an independent third party source to determine fair value and classifies such items in Level 1. In some instances where a market price is available, but the instrument is in an inactive or over-the-counter market, the Company consistently applies the dealer (market maker) pricing estimate and classifies the asset or liability in Level 2.

 

If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads, market capitalization rates, etc. Items valued using such internally-generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified in either Level 2 or 3 even though there may be some significant inputs that are readily observable. Internal fair value models and techniques used by the Company include discounted cash flow and Black Scholes valuation models. The Company also considers its counterparty’s and own credit risk on derivatives and other liabilities measured at fair value.  The Company has elected the mid-market pricing expedient when determining fair value.

 

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Earnings per Share

 

Basic earnings per common share is computed by dividing net income applicable to common shares by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated by including the effect of dilutive securities.

 

On January 1, 2009, the Company adopted the participating securities provision of Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 260-10, Earnings Per Share - Overall (“ASC 260-10”). ASC 260-10 addresses whether instruments granted in share-based payment awards are participating securities prior to vesting, and therefore, need to be included in the earnings allocation when computing earnings per share under the two-class method as described in ASC 260-10. In accordance with ASC 260-10, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Upon adoption, all prior-period earnings per share data presented was adjusted retrospectively with no material impact.

 

Recent Accounting Pronouncements

 

In April 2009, the FASB issued additional disclosure provisions of ASC 825-10, Financial Instruments — Overall (“ASC 825-10”). ASC 825-10 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies in addition to the annual financial statements. ASC 825-10 is effective for interim periods ending after June 15, 2009. Prior period presentation is not required for comparative purposes at initial adoption. The adoption of ASC 825-10 on June 30, 2009 did not have a material impact on the Company’s consolidated financial position or results of operations.

 

In April 2009, the FASB issued an amendment to ASC 320-10, Investment-Debt and Equity Securities — Overall (“ASC 320-10”). ASC 320-10 amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The amended provision of ASC 320-10 is effective for fiscal years and interim periods ending after June 15, 2009. The adoption of ASC 320-10 on June 30, 2009 did not have a material impact on the Company’s consolidated financial position or results of operations.

 

In April 2009, the FASB issued an amendment to ASC 820-10, Fair Value Measurements and Disclosures — Overall (“ASC 820-10”). ASC 820-10 provides additional guidance for estimating fair value when the volume and level of activity for both financial and nonfinancial assets or liabilities have significantly decreased. ASC 820-10 is effective for fiscal years and interim periods ending after June 15, 2009 and shall be applied prospectively. The adoption of ASC 820-10 on June 30, 2009 did not have a material impact on the Company’s consolidated financial position or results of operations.

 

In May 2009, the FASB issued ASC 855, Subsequent Events (“ASC 855”). ASC 855 provides general guidelines to account for the disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. These guidelines are consistent with current accounting requirements, but clarify the period, circumstances, and disclosures for properly identifying and accounting for subsequent events. ASC 855 is effective for interim periods and fiscal years ending after June 15, 2009. The adoption of ASC 855 on June 30, 2009 did not have a material impact on the Company’s consolidated financial position or results of operations.

 

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R)  (“SFAS No. 167”). SFAS No. 167 requires enterprises to perform a more qualitative approach to determining whether or not a variable interest entity will need to be consolidated on a quarterly basis. This evaluation will be based on an enterprise’s ability to direct and influence the activities of a variable interest entity that most significantly impact its economic performance. SFAS No. 167 is effective for interim periods and fiscal years beginning after November 15, 2009. Early adoption is not permitted. The Company is currently evaluating the impact of SFAS No. 167 on its consolidated financial position and results of operations.

 

In June 2009, the FASB Accounting Standards Codification (the “Codification”) was issued in the form of ASC 105, Generally Accepted Accounting Principles (“ASC 105”). Upon issuance, the Codification became the single source of authoritative, nongovernmental US GAAP. The Codification reorganized U.S. GAAP pronouncements into accounting topics, which are displayed using a single structure. Certain SEC guidance is also included in the Codification and will follow a similar topical structure in separate SEC sections. ASC 150 is effective for interim periods and fiscal years ending after September 15, 2009. The adoption of the Codification on September 30, 2009 did not have a material impact on the Company’s consolidated financial position or results of operations.

 

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Reclassifications

 

Certain amounts in the Company’s condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and operating results reclassified from continuing to discontinued operations (see Note 4). All prior period noncontrolling interests on the condensed consolidated balance sheets have been reclassified as a component of equity and all prior period noncontrolling interests’ share of earnings on the condensed consolidated statements of operations have been reclassified to clearly identify net income attributable to the non-controlling interest.

 

(3)          Real Estate Property Investments

 

During the nine months ended September 30, 2009, the Company funded an aggregate of $86 million for construction, tenant and other capital improvement projects primarily in the life science segment.

 

During the nine months ended September 30, 2008, the Company acquired a senior housing facility for $11 million, purchased a joint venture interest valued at $29 million and funded an aggregate of $126 million for construction, tenant and capital improvement projects primarily in the life science and medical office segments.

 

(4)    Dispositions of Real Estate and Discontinued Operations

 

Dispositions of Real Estate

 

During the three months ended September 30, 2009, the Company sold two medical office buildings (“MOBs”) for approximately $6 million and recognized gain on sales of real estate of $2.5 million. During the three months ended September 30, 2008, the Company sold three hospitals for approximately $ 116 million and recognized gain on sales of real estate of approximately $28 million. The hospitals sold in 2008 included a hospital located in Tarzana, California, which was sold for $89 million resulting in a gain on sale of real estate of $18 million.

 

During the nine months ended September 30, 2009, the Company sold 11 properties for $58 million and recognized gain on sales of real estate of $34.4 million. The Company’s sales of properties during the nine months ended September 30, 2009 were made from the following segments: (i) 81% hospital; (ii) 18% medical office; and (iii) 1% senior housing. During the nine months ended September 30, 2008, the Company sold 47 properties for approximately $ 629 million and recognized gain on sales of real estate of approximately $228 million. The Company’s sales of properties during the nine months ended September 30, 2008 were made from the following segments: (i) 68% hospital; (ii) 15% skilled nursing; (iii) 14% medical office; and (iv) 3% senior housing.

 

Properties Held for Sale

 

At September 30, 2009, the Company held for sale one property with a carrying value of $4 million. At December 31, 2008, the Company held for sale 12 properties with an aggregate carrying value of $27 million.

 

Results from Discontinued Operations

 

The following table summarizes operating income from discontinued operations and gain on sales of real estate included in discontinued operations (dollars in thousands):

 

		Three Months Ended September 30,						Nine Months Ended September 30,
		2009			2008			2009			2008
Rental and related revenues		$	150		$	5,912		$	2,836		$	34,792
Other revenues		—			29			—			51
		150			5,941			2,836			34,843
Depreciation and amortization expenses		56			414			266			7,178
Operating expenses		225			1,282			617			6,687
Other costs and expenses		21			954			50			1,820
Income (loss) before gain on sales of real estate, net of income taxes		$	(152	)	$	3,291		$	1,903		$	19,158
Impairments		$	—		$	—		$	125		$	8,141
Gain on sales of real estate		$	2,460		$	27,752		$	34,357		$	228,395
Number of properties held for sale		1			16			1			16
Number of properties sold		2			3			11			47
Number of properties included in discontinued operations		3			19			12			63

 

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(5)          Net Investment in Direct Financing Leases

 

The components of net investment in DFLs consist of the following (dollars in thousands ):

 

		September 30,			December 31,
		2009			2008
Minimum lease payments receivable		$	1,330,836		$	1,373,283
Estimated residual values		467,248			467,248
Allowance for DFL losses (impairments)		(15,123		)	—
Unearned income		(1,148,728		)	(1,192,297		)
Net investment in direct financing leases		$	634,233		$	648,234
Properties subject to direct financing leases		30			30

 

The DFLs were acquired in the Company’s merger with CRP. CRP determined that these leases were DFLs, and the Company is required to carry forward CRP’s accounting conclusions after the acquisition date relative to their assessment of these leases, provided that the Company does not believe CRP’s accounting to be in error. The Company believes that its accounting for the leases is appropriate and in accordance with GAAP. Certain leases contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms.

 

Lease payments due to the Company relating to three DFLs with a carrying value of $38 million at September 30, 2009, are subordinate to, and along with the Company’s interest in the land, serve as collateral for first mortgage construction loans entered into by the tenants to fund development costs related to the properties. During the three months ended December 31, 2008, the Company determined that two of these DFLs were impaired and began recognizing income on a cost-recovery basis. During the three months ended September 30, 2009, the Company recognized provisions for DFL losses of $15.1 million, which reduces the carrying value of these DFLs to $19 million. These provisions for DFL losses reflect the anticipated restructure of these leases resulting from the bankruptcy of the lessee. On October 19, 2009, the lessees of all three DFLs filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. The Company includes provisions for DFL losses in impairments in its consolidated statements of operations.

 

(6)    Loans Receivable

 

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

 

		September 30, 2009									December 31, 2008
		Real Estate Secured			Other			Total			Real Estate Secured			Other			Total
Mezzanine		$	—		$	999,118		$	999,118		$	—		$	999,891		$	999,891
Joint venture partners		—			778			778			—			7,055			7,055
Other		785,636			83,700			869,336			71,224			81,725			152,949
Unamortized discounts, fees and costs		(123,920		)	(70,983		)	(194,903		)	—			(83,262		)	(83,262		)
Loan loss allowance		—			—			—			—			(241		)	(241		)
		$	661,716		$	1,012,613		$	1,674,329		$	71,224		$	1,005,168		$	1,076,392

 

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