Item 8. Financial Statements and Supplementary Data

HCP, Inc.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	67
Consolidated Balance Sheets—December 31, 2017 and 2016	68
Consolidated Statements of Operations—for the years ended December 31, 2017, 2016 and 2015	69
Consolidated Statements of Comprehensive Income (Loss)—for the years ended December 31, 2017, 2016 and 2015	70
Consolidated Statements of Equity—for the years ended December 31, 2017, 2016 and 2015	71
Consolidated Statements of Cash Flows—for the years ended December 31, 2017, 2016 and 2015	72
Notes to Consolidated Financial Statements	73

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of HCP, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of HCP, Inc. and subsidiaries (the "Company") as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 13, 2018, expressed an unqualified opinion on the Company's internal control over financial reporting.

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for real estate acquisitions effective January 1, 2017 due to the adoption of Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

	/s/ Deloitte & Touche LLP

Los Angeles, California

February 13, 2018

We have served as the Company's auditor since 2010.

HCP, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2017				2016
ASSETS
Real estate:
Buildings and improvements	$	11,239,732			$	11,692,654
Development costs and construction in progress	447,976				400,619
Land	1,785,865				1,881,487
Accumulated depreciation and amortization	(2,741,695		)		(2,648,930		)
Net real estate	10,731,878				11,325,830
Net investment in direct financing leases	714,352				752,589
Loans receivable, net	313,326				807,954
Investments in and advances to unconsolidated joint ventures	800,840				571,491
Accounts receivable, net of allowance of $4,425 and $4,459, respectively	40,733				45,116
Cash and cash equivalents	55,306				94,730
Restricted cash	26,897				42,260
Intangible assets, net	410,082				479,805
Assets held for sale, net	417,014				927,866
Other assets, net	578,033				711,624
Total assets	$	14,088,461			$	15,759,265
LIABILITIES AND EQUITY
Bank line of credit	$	1,017,076			$	899,718
Term loans	228,288				440,062
Senior unsecured notes	6,396,451				7,133,538
Mortgage debt	144,486				623,792
Other debt	94,165				92,385
Intangible liabilities, net	52,579				58,145
Liabilities of assets held for sale, net	14,031				3,776
Accounts payable and accrued liabilities	401,738				417,360
Deferred revenue	144,709				149,181
Total liabilities	8,493,523				9,817,957
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 469,435,678 and 468,081,489 shares issued and outstanding, respectively	469,436				468,081
Additional paid-in capital	8,226,113				8,198,890
Cumulative dividends in excess of earnings	(3,370,520		)		(3,089,734		)
Accumulated other comprehensive income (loss)	(24,024		)		(29,642		)
Total stockholders' equity	5,301,005				5,547,595
Joint venture partners	117,045				214,377
Non-managing member unitholders	176,888				179,336
Total noncontrolling interests	293,933				393,713
Total equity	5,594,938				5,941,308
Total liabilities and equity	$	14,088,461			$	15,759,265

See accompanying Notes to Consolidated Financial Statements.

HCP, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31,
	2017				2016				2015
Revenues:
Rental and related revenues	$	1,071,153			$	1,159,791			$	1,116,830
Tenant recoveries	142,496				134,280				125,022
Resident fees and services	524,275				686,835				525,453
Income from direct financing leases	54,217				59,580				61,000
Interest income	56,237				88,808				112,184
Total revenues	1,848,378				2,129,294				1,940,489
Costs and expenses:
Interest expense	307,716				464,403				479,596
Depreciation and amortization	534,726				568,108				504,905
Operating	666,251				738,399				610,679
General and administrative	88,772				103,611				95,965
Transaction costs	7,963				9,821				27,309
Impairments (recoveries), net	166,384				—				108,349
Total costs and expenses	1,771,812				1,884,342				1,826,803
Other income (expense):
Gain (loss) on sales of real estate, net	356,641				164,698				6,377
Loss on debt extinguishments	(54,227		)		(46,020		)		—
Other income (expense), net	31,420				3,654				16,208
Total other income (expense), net	333,834				122,332				22,585
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	410,400				367,284				136,271
Income tax benefit (expense)	1,333				(4,473		)		9,807
Equity income (loss) from unconsolidated joint ventures	10,901				11,360				6,590
Income (loss) from continuing operations	422,634				374,171				152,668
Discontinued operations:
Income before impairments, transaction costs and income taxes	—				400,701				643,109
Impairments, net	—				—				(1,341,399		)
Transaction costs	—				(86,765		)		—
Income tax benefit (expense)	—				(48,181		)		(796		)
Total discontinued operations	—				265,755				(699,086		)
Net income (loss)	422,634				639,926				(546,418		)
Noncontrolling interests' share in earnings	(8,465		)		(12,179		)		(12,817		)
Net income (loss) attributable to HCP, Inc.	414,169				627,747				(559,235		)
Participating securities' share in earnings	(1,156		)		(1,198		)		(1,317		)
Net income (loss) applicable to common shares	$	413,013			$	626,549			$	(560,552	)
Basic earnings per common share:
Continuing operations	$	0.88			$	0.77			$	0.30
Discontinued operations	—				0.57				(1.51		)
Net income (loss) applicable to common shares	$	0.88			$	1.34			$	(1.21	)
Diluted earnings per common share:
Continuing operations	$	0.88			$	0.77			$	0.30
Discontinued operations	—				0.57				(1.51		)
Net income (loss) applicable to common shares	$	0.88			$	1.34			$	(1.21	)
Weighted average shares used to calculate earnings per common share:
Basic	468,759				467,195				462,795
Diluted	468,935				467,403				462,795

See accompanying Notes to Consolidated Financial Statements.

HCP, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

	Year Ended December 31,
	2017				2016				2015
Net income (loss)	$	422,634			$	639,926			$	(546,418	)
Other comprehensive income (loss):
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses)	(11,107		)		3,233				1,894
Reclassification adjustment realized in net income (loss)	799				707				148
Change in Supplemental Executive Retirement Plan obligation and other	64				220				121
Foreign currency translation adjustment	15,862				(3,332		)		(8,738		)
Total other comprehensive income (loss)	5,618				828				(6,575		)
Total comprehensive income (loss)	428,252				640,754				(552,993		)
Total comprehensive income (loss) attributable to noncontrolling interests	(8,465		)		(12,179		)		(12,817		)
Total comprehensive income (loss) attributable to HCP, Inc.	$	419,787			$	628,575			$	(565,810	)

See accompanying Notes to Consolidated Financial Statements.

HCP, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share data)

	Common Stock
	Shares			Amount				Additional Paid-In Capital				Cumulative Dividends In Excess Of Earnings				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interests				Total Equity
January 1, 2015	459,746			$	459,746			$	11,431,987			$	(1,132,541	)		$	(23,895	)		$	10,735,297			$	261,802			$	10,997,099
Net income (loss)	—			—				—				(559,235		)		—				(559,235		)		12,817				(546,418		)
Other comprehensive income (loss)	—			—				—				—				(6,575		)		(6,575		)		—				(6,575		)
Issuance of common stock, net	5,117			5,117				176,950				—				—				182,067				(3,183		)		178,884
Repurchase of common stock	(198	)		(198		)		(8,540		)		—				—				(8,738		)		—				(8,738		)
Exercise of stock options	823			823				26,764				—				—				27,587				—				27,587
Amortization of deferred compensation	—			—				26,127				—				—				26,127				—				26,127
Common Dividends ($2.260 per share)	—			—				—				(1,046,638		)		—				(1,046,638		)		—				(1,046,638		)
Distributions to noncontrolling interest	—			—				(263		)		—				—				(263		)		(18,884		)		(19,147		)
Issuances of noncontrolling interest	—			—				—				—				—				—				151,185				151,185
Purchase of noncontrolling interest	—			—				(5,986		)		—				—				(5,986		)		(1,063		)		(7,049		)
December 31, 2015	465,488			$	465,488			$	11,647,039			$	(2,738,414	)		$	(30,470	)		$	9,343,643			$	402,674			$	9,746,317
Net income (loss)	—			—				—				627,747				—				627,747				12,179				639,926
Other comprehensive income (loss)	—			—				—				—				828				828				—				828
Issuance of common stock, net	2,552			2,552				61,625				—				—				64,177				—				64,177
Conversion of DownREIT units to common stock	145			145				5,948				—				—				6,093				(6,093		)		—
Repurchase of common stock	(237	)		(237		)		(8,448		)		—				—				(8,685		)		—				(8,685		)
Exercise of stock options	133			133				3,340				—				—				3,473				—				3,473
Amortization of deferred compensation	—			—				22,884				—				—				22,884				—				22,884
Common dividends ($2.095 per share)	—			—				—				(979,542		)		—				(979,542		)		—				(979,542		)
Distribution of QCP, Inc.	—			—				(3,532,763		)		—				—				(3,532,763		)		—				(3,532,763		)
Distributions to noncontrolling interests	—			—				(36		)		—				—				(36		)		(26,311		)		(26,347		)
Issuances of noncontrolling interests	—			—				—				—				—				—				11,834				11,834
Deconsolidation of noncontrolling interests	—			—				(36		)		475				—				439				67				506
Purchase of noncontrolling interests	—			—				(663		)		—				—				(663		)		(637		)		(1,300		)
December 31, 2016	468,081			$	468,081			$	8,198,890			$	(3,089,734	)		$	(29,642	)		$	5,547,595			$	393,713			$	5,941,308
Net income (loss)	—			—				—				414,169				—				414,169				8,465				422,634
Other comprehensive income (loss)	—			—				—				—				5,618				5,618				—				5,618
Issuance of common stock, net	1,402			1,402				25,951				—				—				27,353				—				27,353
Conversion of DownREIT units to common stock	78			78				2,411				—				—				2,489				(2,489		)		—
Repurchase of common stock	(157	)		(157		)		(4,628		)		—				—				(4,785		)		—				(4,785		)
Exercise of stock options	32			32				736				—				—				768				—				768
Amortization of deferred compensation	—			—				14,258				—				—				14,258				—				14,258
Common Dividends ($1.480 per share)	—			—				—				(694,955		)		—				(694,955		)		—				(694,955		)
Distributions to noncontrolling interests	—			—				—				—				—				—				(26,129		)		(26,129		)
Issuances of noncontrolling interests	—			—				—				—				—				—				1,615				1,615
Deconsolidation of noncontrolling interests	—			—				—				—				—				—				(58,062		)		(58,062		)
Purchase of noncontrolling interests	—			—				(11,505		)		—				—				(11,505		)		(23,180		)		(34,685		)
December 31, 2017	469,436			$	469,436			$	8,226,113			$	(3,370,520	)		$	(24,024	)		$	5,301,005			$	293,933			$	5,594,938

See accompanying Notes to Consolidated Financial Statements.

HCP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2017				2016				2015
Cash flows from operating activities:
Net income (loss)	$	422,634			$	639,926			$	(546,418	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	534,726				568,108				504,905
Discontinued operations	—				4,890				5,880
Amortization of deferred compensation	14,258				22,884				26,127
Amortization of deferred financing costs	14,569				20,014				20,222
Straight-line rents	(23,933		)		(18,003		)		(28,859		)
Loan and direct financing lease non-cash interest, net:
Continuing operations	(613		)		599				(5,648		)
Discontinued operations	—				—				(90,065		)
Equity loss (income) from unconsolidated joint ventures	(10,901		)		(11,360		)		(57,313		)
Distributions of earnings from unconsolidated joint ventures	44,142				26,492				15,111
Loss (gain) on sales of real estate, net	(356,641		)		(164,698		)		(6,377		)
Lease and management fee termination loss (income), net	54,641				—				(1,103		)
Deferred income tax expense (benefit)	(5,523		)		47,195				—
Impairments (recoveries), net	166,384				—				1,449,748
Loss on extinguishment of debt	54,227				46,020				—
Casualty-related loss (recoveries), net	12,053				—				—
Loss (gain) on sale of marketable securities	(50,895		)		—				—
Other non-cash items	(2,122		)		(2,968		)		(11,286		)
Decrease (increase) in accounts receivable and other assets, net	(24,782		)		(6,992		)		(29,022		)
Increase (decrease) accounts payable and accrued liabilities	4,817				42,024				(23,757		)
Net cash provided by (used in) operating activities	847,041				1,214,131				1,222,145
Cash flows from investing activities:
Acquisition of RIDEA III, net	—				—				(768,413		)
Acquisitions of other real estate	(560,753		)		(467,162		)		(613,252		)
Development and redevelopment of real estate	(373,479		)		(421,322		)		(281,017		)
Leasing costs, tenant improvements, and recurring capital expenditures	(115,260		)		(91,442		)		(84,282		)
Proceeds from sales of real estate, net	1,314,325				647,754				73,149
Contributions to unconsolidated joint ventures	(46,334		)		(10,186		)		(69,936		)
Distributions in excess of earnings from unconsolidated joint ventures	37,023				28,366				30,989
Proceeds from the RIDEA II transaction, net	462,242				—				—
Proceeds from sales/principal repayments on debt investments and direct financing leases	558,769				231,990				628,049
Investments in loans receivable, direct financing leases and other	(30,276		)		(273,693		)		(575,652		)
Purchase of securities for debt defeasance	—				(73,278		)		—
Net cash provided by (used in) investing activities	1,246,257				(428,973		)		(1,660,365		)
Cash flows from financing activities:
Borrowings under bank line of credit, net	1,244,189				1,108,417				98,743
Repayments under bank line of credit	(1,150,596		)		(540,000		)		(511,521		)
Proceeds related to QCP Spin-Off, net	—				1,685,172				—
Issuance and borrowings of debt, excluding bank line of credit	5,395				—				2,269,031
Repayments and repurchase of debt, excluding bank line of credit	(1,468,446		)		(2,316,774		)		(457,845		)
Payments for debt extinguishment and deferred financing costs	(51,415		)		(54,856		)		(19,995		)
Issuance of common stock and exercise of options	28,121				67,650				206,471
Repurchase of common stock	(4,785		)		(8,685		)		(8,738		)
Dividends paid on common stock	(694,955		)		(979,542		)		(1,046,638		)
Issuance of noncontrolling interests	1,615				11,834				110,775
Distributions to and purchase of noncontrolling interests	(57,584		)		(27,481		)		(26,196		)
Net cash provided by (used in) financing activities	(2,148,461		)		(1,054,265		)		614,087
Effect of foreign exchanges on cash, cash equivalents and restricted cash	376				(1,019		)		(1,537		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(54,787		)		(270,126		)		174,330
Cash, cash equivalents and restricted cash, beginning of year	136,990				407,116				232,786
Cash, cash equivalents and restricted cash, end of year	$	82,203			$	136,990			$	407,116
Less: cash, cash equivalents and restricted cash of discontinued operations	—				—				(6,058		)
Cash, cash equivalents and restricted cash of continuing operations, end of year	$	82,203			$	136,990			$	401,058

See accompanying Notes to Consolidated Financial Statements.

HCP, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.	Business

Overview

HCP, Inc., an S&P 500 company, is a Maryland corporation that is organized to qualify as a 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 (“U.S.”). The Company acquires, develops, leases, and manages and disposes of healthcare real estate. The Company’s diverse portfolio is comprised of investments in the following reportable healthcare segments: (i) senior housing triple-net, (ii) senior housing operating portfolio (“SHOP”), (iii) life science and (iv) medical office.

NOTE 2.	Summary of Significant Accounting Policies

Use of Estimates

Management is required to make estimates and assumptions in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management’s estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of HCP, Inc., its wholly-owned subsidiaries, joint ventures and variable interest entities that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation.

The Company is required to continually evaluate its variable interest entity (“VIE”) relationships and consolidate these entities when it is determined to be the primary beneficiary of their operations. A VIE is broadly defined as an entity where either: (i) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) substantially all of an entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights, or (iii) the equity investors as a group lack any of the following: (a) the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of an entity, or (c) the right to receive the expected residual returns of an entity.

A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but is not limited to, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and its ability to replace the VIE manager and/or liquidate the entity.

For its investments in joint ventures that are not considered to be VIEs, the Company evaluates the type of ownership rights held by the limited partner(s) that may preclude consolidation by the sole general partner or majority interest holder. The assessment of limited partners’ rights and their impact on the control of a joint venture should be made at inception of the joint venture and should be reassessed if: (i) there is a change to the terms or in the ability to exercise the limited partner rights, (ii) the sole general partner increases or decreases its ownership interest in the limited partnership, 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.

Revenue Recognition

At the inception of a new lease arrangement, including new leases that arise from amendments, the Company assesses its terms and conditions to determine the proper lease classification. A lease arrangement is classified as an operating lease if none of the following criteria are met: (i) transfer of ownership to the lessee prior to or shortly after the end of the lease term, (ii) lessee has a bargain purchase option during or at the end of the lease term, (iii) the lease term is equal to 75% or more of the underlying property’s economic life, or (iv) the present value of future minimum lease payments (excluding executory costs) is equal to 90% or more of the excess fair value (over retained tax credits) of the leased property. If one of the four criteria is met and the minimum lease payments are determined to be reasonably predictable and collectible, the lease arrangement is generally accounted for as a direct financing lease (“DFL”).

The Company utilizes the direct finance method of accounting to record DFL income. For a lease accounted for as a DFL, the net investment in the DFL represents receivables for the sum of future minimum lease payments and the estimated residual value of the leased property, less the unamortized unearned income. Unearned income is deferred and amortized to income over the lease term to provide a constant yield when collectibility of the lease payments is reasonably assured.

The Company commences recognition of rental revenue for operating lease arrangements when the tenant has taken possession or controls the physical use of a leased asset; the tenant is not considered to have taken physical possession or have control of the leased asset until the Company-owned tenant improvements are substantially completed. If a lease arrangement provides for tenant improvements, the Company determines whether the tenant improvements are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, any tenant improvements funded by the tenant are treated as lease payments which are deferred and amortized into income over the lease term. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded by the Company is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Ownership of tenant improvements is determined based on various factors including, but not limited to, the following criteria:

•	lease stipulations of how and on what a tenant improvement allowance may be spent;

•	which party to the arrangement retains legal title to the tenant improvements upon lease expiration;

•	whether the tenant improvements are unique to the tenant or general purpose in nature;

•	if the tenant improvements are expected to have significant residual value at the end of the lease term;

•	the responsible party for construction cost overruns; and

•	which party constructs or directs the construction of the improvements.

Certain leases provide for additional rents that are 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, and only after any contingency has been removed (when the related thresholds are achieved). This may result in the recognition of rental revenue in periods subsequent to when such payments are received.

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

For operating 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 results in a difference in the timing of revenue amounts from what is contractually due from tenants. If the Company determines that collectibility of straight line rents is not reasonably assured, future revenue recognition is limited to amounts contractually owed and paid, and, when appropriate, an allowance for estimated losses is established.

Resident fee revenue is recorded when services are rendered and includes resident room and care charges, community fees and other resident charges. Residency agreements are generally for a term of 30 days to one year, with resident fees billed monthly. Revenue for certain care related services is recognized as services are provided and is billed monthly in arrears.

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 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, loan fees paid and received, using the interest method. The 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 term of the related loans.

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

Allowance for Doubtful Accounts

The Company evaluates the liquidity and creditworthiness of its tenants, operators and borrowers on a monthly and quarterly basis. The Company’s evaluation considers industry and economic conditions, individual and portfolio property performance, credit enhancements, liquidity and other factors. The Company’s tenants, borrowers and operators furnish property, portfolio and guarantor/operator-level financial statements, among other information, on a monthly or quarterly basis; the Company utilizes this financial information to calculate the lease or debt service coverages that it uses as a primary credit quality indicator. Lease and debt service coverage information is evaluated together with other property, portfolio and operator performance information, including revenue, expense, net operating income, occupancy, rental rate, reimbursement trends, capital expenditures and EBITDA (defined as earnings before interest, tax, and depreciation and amortization), along with other liquidity measures. The Company evaluates, on a monthly basis or immediately upon a significant change in circumstance, its tenants’, operators’ and borrowers’ ability to service their obligations with the Company.

The Company maintains an allowance for doubtful accounts for straight-line rent receivables resulting from tenants’ inability to make contractual rent and tenant recovery payments or lease defaults. For straight-line rent receivables, the Company’s assessment is based on amounts estimated to be recoverable over the lease term.

In connection with the Company’s quarterly review process or upon the occurrence of a significant event, loans receivable and DFLs (collectively, “Finance Receivables”), are reviewed and assigned an internal rating of Performing, Watch List or Workout. Finance Receivables that are deemed Performing meet all present contractual obligations, and collection and timing, of all amounts owed is reasonably assured. Watch List Finance Receivables are defined as Finance Receivables that do not meet the definition of Performing or Workout. Workout Finance Receivables are defined as Finance Receivables in which the Company has determined, based on current information and events, that: (i) it is probable it will be unable to collect all amounts due according to the contractual terms of the agreement, (ii) the tenant, operator, or borrower is delinquent on making payments under the contractual terms of the agreement and (iii) the Company has commenced action or anticipates pursuing action in the near term to seek recovery of its investment.

Finance Receivables are placed on nonaccrual status when management determines that the collectibility of contractual amounts is not reasonably assured (the asset will have an internal rating of either Watch List or Workout). Further, the Company performs a credit analysis to support the tenant’s, operator’s, borrower’s and/or guarantor’s repayment capacity and the underlying collateral values. The Company uses the cash basis method of accounting for Finance Receivables placed on nonaccrual status unless one of the following conditions exist whereby it utilizes the cost recovery method of accounting: (i) if the Company determines that it is probable that it will only recover the recorded investment in the Finance Receivable, net of associated allowances or charge-offs (if any), or (ii) the Company cannot reasonably estimate the amount of an impaired Finance Receivable. For cash basis method of accounting the Company applies payments received, excluding principal paydowns, to interest income so long as that amount does not exceed the amount that would have been earned under the original contractual terms. For cost recovery method of accounting any payment received is applied to reduce the recorded investment. Generally, the Company returns a Finance Receivable to accrual status when all delinquent payments become current under the terms of the loan or lease agreements and collectibility of the remaining contractual loan or lease payments is reasonably assured.

Allowances are established for Finance Receivables on an individual basis utilizing an estimate of probable losses, if they are determined to be impaired. Finance Receivables 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. An allowance is based upon the Company’s assessment of the lessee’s or borrower’s overall financial condition, economic resources, payment record, the prospects for support from any financially responsible guarantors and, if appropriate, the net realizable value of any collateral. These estimates consider all available evidence, including the expected future cash flows discounted at the Finance Receivable’s effective interest rate, fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors, as appropriate. Should a Finance Receivable be deemed partially or wholly uncollectible, the uncollectible balance is charged off against the allowance in the period in which the uncollectible determination has been made.

Real Estate

On January 1, 2017 the Company adopted Accounting Standards Update (“ASU”) No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the Financial Accounting Standards Board’s (“FASB”) definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset, or a group of assets, or a business (see “Accounting Pronouncements” section for complete details of the adoption of ASU 2017-01).

As a result of adopting ASU 2017-01, the majority of the Company’s real estate acquisitions subsequent to January 1, 2017 are classified as asset acquisitions for which the Company records identifiable assets acquired, liabilities assumed and any associated noncontrolling interests at cost on a relative fair value basis. In addition, for such asset acquisitions, no goodwill is recognized, third party transaction costs are capitalized and any associated contingent consideration is recorded when the contingency is resolved.

Prior to the adoption of ASU 2017-01, the majority of the Company’s real estate acquisitions were classified as business combinations and identifiable assets acquired, liabilities assumed and any associated noncontrolling interests were recorded at fair value, with any excess consideration recorded as goodwill. Transaction costs related to business combinations were expensed as incurred.

The Company assesses fair value based on available market information, such as capitalization and discount rates, comparable sale transactions and relevant per square foot or unit cost information. A real estate asset’s fair value may be determined utilizing cash flow projections that incorporate appropriate discount and/or capitalization rates or other available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, as well as market and economic conditions. The fair value of tangible assets of an acquired property is based on the value of the property as if it is vacant.

The Company records acquired “above and below market” leases at 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 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 bargain renewal options. Other intangible assets acquired include amounts for in-place lease values that are based on an evaluation of the specific characteristics of each property and the acquired tenant lease(s). 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 and expected trends. 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 development or construction of a real estate asset. 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 Company-owned tenant improvements, but no later than one year from cessation of significant 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 the cost for the construction and improvement incurred in connection with the redevelopment.

Costs previously capitalized related to abandoned developments/redevelopments 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 investing activities in the Company’s consolidated statement of cash flows.

The Company computes depreciation on properties using the straight-line method over the assets’ estimated useful lives. Depreciation is discontinued when a property is identified as held for sale. Buildings and improvements are depreciated over useful lives ranging up to 60 years. Market lease intangibles are amortized primarily to revenue over the remaining noncancellable lease terms and bargain renewal periods, if any. 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”) when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company tests its real estate assets for impairment by comparing the sum of the expected future undiscounted cash flows to the carrying value of the real estate assets. The expected future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. If the carrying value exceeds the expected future undiscounted cash flows, an impairment loss will be recognized to the extent that the carrying value of the real estate assets is greater than their fair value. If an asset is classified as held for sale, it is reported at the lower of its carrying value or fair value less costs to sell and no longer depreciated.

During the fourth quarter of 2017, the Company adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) which eliminates step two from the goodwill impairment test, as described below (see “Accounting Pronouncements” section for complete details of the adoption of ASU 2017-04). Effective October 1, 2017, if the Company concludes that it is more

likely than not that the fair value of a reporting unit is less than its carrying value, the Company recognizes an impairment loss for the amount by which the carrying value, including goodwill, exceeds the reporting unit’s fair value.

Prior to its adoption of ASU 2017-04, if the Company determined that it was more likely than not that the fair value of a reporting unit was less than its carrying value, the Company applied the required two-step quantitative approach. The quantitative procedures of the two-step approach: (i) compared the fair value of a reporting unit with its carrying value, including goodwill, and, if necessary, (ii) compared the implied fair value of reporting unit goodwill with the carrying value as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the fair value of assets and liabilities, excluding goodwill, is the implied value of goodwill and was used to determine the impairment loss amount, if any.

Assets Held for Sale and Discontinued Operations

The Company classifies a real estate property as held for sale when: (i) management has approved the disposal, (ii) the property is available for sale in its present condition, (iii) an active program to locate a buyer has been initiated, (iv) it is probable that the property will be disposed of within one year, (v) the property is being marketed at a reasonable price relative to its fair value, and (vi) it is unlikely that the disposal plan will significantly change or be withdrawn. A discontinued operation represents: (i) a component of an entity or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on the Company’s operations and financial results or (ii) an acquired business that is classified as held for sale on the date of acquisition. Examples of a strategic shift include disposing of: (i) a separate major line of business, (ii) a separate major geographic area of operations, or (iii) other major parts of the Company.

Investments in Unconsolidated Joint Ventures

Investments in entities which the Company does not consolidate, but has the ability to exercise significant influence over the operating and financial policies of, 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 is 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 fair 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 such amortization is 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 fair value of the equity method investment to its carrying value. When the Company determines a decline in the 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.

The Company’s fair values of its equity method investments are determined based on discounted cash flow models that include all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums or discounts. Capitalization rates, discount rates and credit spreads utilized in these valuation models are based upon assumptions that the Company believes to be within a reasonable range of current market rates for the respective investments.

Share-Based Compensation

Compensation expense for share-based awards granted to employees, including grants of employee stock options, are recognized in the consolidated statements of operations based on their grant date fair market value. Compensation expense for awards with graded vesting schedules is generally recognized on a straight-line basis over the vesting period. Forfeitures of share-based awards are recognized as they occur.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand and short-term investments with original maturities of three months or less when purchased. Restricted cash primarily consists of amounts held by mortgage lenders to provide for (i) real estate tax expenditures, tenant improvements and capital expenditures, (ii) security deposits, and (iii) net proceeds from property sales that were executed as tax-deferred dispositions.

Derivatives and Hedging

During its normal course of business, the Company uses certain types of derivative instruments for the purpose of managing interest rate and foreign currency 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.

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

Using certain of its British pound sterling (“GBP”) denominated debt, the Company applies net investment hedge accounting to hedge the foreign currency exposure from its net investment in GBP-functional subsidiaries. The variability of the GBP-denominated debt due to changes in the GBP to U.S. dollar (“USD”) exchange rate (“remeasurement value”) is recognized as part of the cumulative translation adjustment component of accumulated other comprehensive income (loss).

If it is determined that a derivative instrument ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, the Company discontinues its cash flow hedge accounting prospectively and records the appropriate adjustment to earnings based on the current fair value of the derivative instrument. For net investment hedge accounting, upon sale or liquidation of the hedged investment, the cumulative balance of the remeasurement value is reclassified to earnings.

Income Taxes

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. In addition, the Company has formed several consolidated subsidiaries, which have elected REIT status. HCP, Inc. and its consolidated REIT subsidiaries are each subject to the REIT qualification requirements under the Code. If any 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 its consolidated REIT subsidiaries are subject to state, local and foreign 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 that the Company undertakes may be conducted by entities which have elected to be treated as taxable REIT subsidiaries (“TRSs”). TRSs are subject to both federal and state income taxes. The Company recognizes tax penalties relating to unrecognized tax benefits as additional income tax expense. Interest relating to unrecognized tax benefits is recognized as interest expense.

Capital Raising Issuance Costs

Costs incurred in connection with the issuance of common shares are recorded as a reduction of additional paid-in capital. Debt issuance costs related to debt instruments excluding line of credit arrangements are deferred, recorded as a reduction of the related debt liability, and amortized to interest expense over the remaining term of the related debt liability utilizing the interest method. Debt issuance costs related to line of credit arrangements are deferred, included in other assets, and amortized to interest expense over the remaining term of the related line of credit arrangement utilizing the interest method.

Penalties incurred to extinguish debt and any remaining unamortized debt issuance costs, discounts and premiums are recognized as income or expense in the consolidated statements of operations at the time of extinguishment.

Segment Reporting

The Company’s reportable segments, based on how it evaluates its business and allocates resources, are as follows: (i) senior housing triple-net, (ii) SHOP, (iii) life science and (iv) medical office. During the fourth quarter of 2017, as a result of a change in how operating results are reported to the Company's chief operating decision makers, for the purpose of evaluating performance and allocating resources, unconsolidated joint ventures are now included in other non-reportable segments. Accordingly, all prior period segment information has been recast to conform to the current period presentation.

Noncontrolling Interests

Arrangements with noncontrolling interest holders are reported as a component of equity separate from the Company’s equity. Net income attributable to a noncontrolling interest is included in net income on the consolidated statements of operations and, upon a gain or loss of control, the interest purchased or sold, and any interest retained, is recorded at fair value with any gain or loss recognized in earnings. The Company accounts for purchases or sales of equity interests that do not result in a change in control as equity transactions.

The Company consolidates non-managing member limited liability companies (“DownREITs”) because it exercises control, and the noncontrolling interests in these entities are carried at cost. The non-managing member limited liability company (“LLC”) units (“DownREIT units”) are exchangeable for an amount of cash approximating the then-current market value of shares of 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). Upon exchange of DownREIT units for the Company’s common stock, the carrying amount of the DownREIT units is reclassified to stockholders’ equity.

Foreign Currency Translation and Transactions

Assets and liabilities denominated in foreign currencies that are translated into U.S. dollars use exchange rates in effect at the end of the period, and revenues and expenses denominated in foreign currencies that are translated into U.S. dollars use average rates of exchange in effect during the related period. Gains or losses resulting from translation are included in accumulated other comprehensive income (loss), a component of stockholders’ equity on the consolidated balance sheets. Gains or losses resulting from foreign currency transactions are translated into U.S. dollars at the rates of exchange prevailing at the dates of the transactions. The effects of transaction gains or losses are included in other income, net in the consolidated statements of operations.

Fair Value Measurement

The Company measures and discloses the fair value of nonfinancial and 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 fair value. 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 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 and/or market capitalization rates. 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 Level 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 models. The Company also considers its counterparty’s and own credit risk for derivative instruments and other liabilities measured at fair value. The Company has elected the mid-market pricing expedient when determining fair value.

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. The Company accounts for unvested share-based payment awards that contain non-forfeitable dividend rights or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share pursuant to the two-class method. Diluted earnings per common share is calculated by including the effect of dilutive securities.

Recent Accounting Pronouncements

During the year ended December 31, 2017, the Company adopted the following ASUs, each of which did not have a material impact to its consolidated financial position, results of operations, cash flows, or disclosures upon adoption:

•

On January 1, 2017 the Company adopted ASU 2017-01 which narrows the FASB’s definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset, or a group of assets, or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an acquired input and a substantive process that together significantly contribute to the ability to create outputs. In addition, ASU 2017-01 clarifies the requirements for

a set of activities to be considered a business and narrows the definition of an output. This ASU is to be applied prospectively and the Company expects that a majority of its real estate acquisitions and dispositions will be deemed asset transactions rather than business combinations. As a result of adopting ASU 2017-01, the majority of the Company’s real estate acquisitions subsequent to January 1, 2017 are classified as asset acquisitions for which the Company records identifiable assets acquired, liabilities assumed and any associated noncontrolling interests at cost on a relative fair value basis. In addition, for such asset acquisitions, no goodwill is recognized, third party transaction costs are capitalized and any associated contingent consideration is recorded when the contingency is resolved.

•

During the fourth quarter of 2017, the Company adopted ASU 2017-04 which eliminates the two-step approach to testing goodwill for impairment by requiring that an entity, upon concluding that it is more likely than not that the fair value of a reporting unit is less than its carrying value, recognize an impairment loss for the amount by which the carrying value, including goodwill, exceeds the reporting unit’s fair value.

•

During the fourth quarter of 2017, the Company adopted ASU No. 2016-18, Restricted Cash (“ASU 2016-18”) and ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) (collectively, the “Cash Flow ASUs”). ASU 2016-18 requires an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows and ASU 2016-15 provides guidance clarifying how certain cash receipts and cash payments should be classified. The full retrospective approach of adoption is required for the Cash Flow ASUs and, accordingly, certain line items in the Company’s consolidated statements of cash flows have been reclassified to conform to the current period presentation.

The following table illustrates changes in the Company’s cash flows as reported and as previously reported prior to the adopted the Cash Flow ASUs during the fourth quarter of 2017 (in thousands):

		Year Ended
		December 31, 2016								December 31, 2015
Net cash provided by (used in):		As Reported				As Previously Reported				As Reported				As Previously Reported
Net cash provided by (used in) investing activities		$	(428,973	)		$	(410,617	)		$	(1,660,365	)		$	(1,672,005	)
Net increase (decrease) in balance(1)		(270,126		)		(251,770		)		174,330				162,690
Balance - beginning of year(1)		407,116				346,500				232,786				183,810
Balance - end of year(1)		136,990				94,730				407,116				346,500
Balance - continuing operations, end of year(1)		136,990				94,730				401,058				340,442

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(1)	Amounts in the As Reported column include cash and cash equivalents and restricted cash as required upon the adoption of the Cash Flow ASUs. Amounts in the As Previously Reported column reflects only cash and cash equivalents.

In addition to the changes in the consolidated statements of cash flows as a result of the adoption the Cash Flow ASUs, certain amounts within the consolidated statements of cash flows have been reclassified for prior periods to conform to the current period presentation. Such reclassifications primarily combined line items of similar classes of transactions and had no impact on the cash flows from operating, investing, and financing activities.

Revenue Recognition. Between May 2014 and February 2017, the FASB issued four ASUs changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), and (iv) ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09. ASU 2017-05 clarifies the scope of the FASB’s recently established guidance on nonfinancial asset derecognition and aligns the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets with the guidance in ASU 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within, beginning after December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08, ASU 2016-12, and ASU 2017-05, assumed the deferred effective date enforced by ASU 2015-14. A reporting entity may apply the amendments in the Revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach. The

Company has elected to use the modified retrospective approach for its adoption of the Revenue ASUs and will adopt with an effective date of January 1, 2018.

As the primary source of revenue for the Company is generated through leasing arrangements, which are excluded from the Revenue ASUs (as it relates to the timing and recognition of revenue), the Company has narrowed the impacts, upon and subsequent to adoption, that the Revenue ASUs will have on its consolidated financial statements to the following:

•

A requirement to disclose, on an ongoing basis, ancillary resident fee revenue generated from its RIDEA structures. The Company will disclose that these represent fees received for additional services provided to the resident on an as-needed or desired basis, which are not included in the fees charged pursuant to the resident lease agreement, and that they are billed individually and collected one month in arrears. The Company anticipates its ancillary resident fee revenue to be immaterial.

•

A requirement, upon adoption, to reassess its partial sale of RIDEA II in the first quarter of 2017 (which was not a completed sale as of the Company's adoption date due to an immaterial obligation related to the interest sold), and record its retained 40% equity investment at fair value as of the sale date. The Company estimates the fair value of its retained equity investment as of the sale date to be $107 million which, upon adoption, will increase the Company’s investment to a carrying value of $121 million. However, such carrying value exceeds fair value at the date of adoption due to an other-than-temporary impairment of $30 million determined using the terms of the agreement to sell the Company’s remaining investment in RIDEA II (see Note 5) which are considered to be Level 2 measurements within the fair value hierarchy. As such, effective January 1, 2018, the Company reduced this carrying value to the agreed upon sales price of $91 million. Both the impact of the increase in value and the related $30 million impairment charge are recorded as a net adjustment to beginning retained earnings as of January 1, 2018 pursuant to the Company’s elected transition approach.

•	Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under historic guidance. As a result, the Company generally expects that the new guidance will result in more transactions qualifying as sales of real estate and revenue being recognized at an earlier date than under historical accounting guidance.

Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the current accounting for leases to: (i) require lessees to put most leases on their balance sheets, but continue recognizing expenses on their income statements in a manner similar to requirements under current accounting guidance, (ii) eliminate current real estate specific lease provisions and (iii) modify the classification criteria and accounting for sales-type leases for lessors. ASU 2016-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2018. Early adoption is permitted. The transition method required by ASU 2016-02 varies based on the specific amendment being adopted. As a result of adopting ASU 2016-02, the Company: (i) will recognize all of its significant operating leases for which it is the lessee, including corporate office leases and ground leases, on its consolidated balance sheets, (ii) will capitalize fewer legal costs related to the drafting and execution of its lease agreements, and (iii) may be required to increase its revenue and expense for the amount of real estate taxes and insurance paid by its tenants under triple-net leases.

Although not yet finalized, the FASB has proposed an option for lessors to elect a practical expedient allowing them to not separate lease and nonlease components in a contract for the purpose of revenue recognition and disclosure. This practical expedient is limited to circumstances in which (i) the timing and pattern of revenue recognition are the same for the nonlease component and the related lease component and (ii) the combined single lease component would be classified as an operating lease. If finalized, the Company plans to elect this practical expedient. In addition, ASU 2016-02 provides a practical expedient that allows an entity to not reassess the following upon adoption (must be elected as a group): (i) whether an expired or existing contract contains a lease arrangement, (ii) lease classification related to expired or existing lease arrangements, or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. The Company plans to elect this practical expedient. The Company is still evaluating the complete impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position, results of operations and disclosures.

Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amendments in ASU 2016-13 eliminate the “probable” initial threshold for recognition of credit losses in current accounting guidance and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument. Previously, when credit losses were measured under current accounting guidance, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. ASU 2016-13 is effective for fiscal years, and interim periods within, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within, beginning after December 15, 2018. A reporting entity is required to apply the amendments in ASU 2016-13 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A prospective transition approach is

required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Upon adoption of ASU 2016-13, the Company is required to reassess its financing receivables, including direct finance leases and loans receivable, and expects that application of ASU 2016-13 may result in the Company recognizing credit losses at an earlier date than would otherwise be recognized under current accounting guidance. The Company is evaluating the impact of the adoption of ASU 2016-13 on January 1, 2020 to its consolidated financial position and results of operations.

The following ASUs have been issued, but not yet adopted, and the Company does not expect a material impact to its consolidated financial position, results of operations, cash flows, or disclosures upon adoption:

•

ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 is effective for fiscal years, including interim periods within, beginning after December 15, 2018 and early adoption is permitted. For cash flow and net investment hedges existing at the date of adoption, a reporting entity must apply the amendments in ASU 2017-12 using the modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The presentation and disclosure amendments in ASU 2017-12 must be applied using a prospective approach.

•

ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). ASU 2016-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted as of the first interim period presented in any year following issuance. A reporting entity must apply the amendments in ASU 2016-16 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption.

•

ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted only for updates to certain disclosure requirements. A reporting entity is required to apply the amendments in ASU 2016-01 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The core principle of the amendments in ASU 2016-01 involves the measurement of equity investments (except those accounted for under the equity method of accounting or those that result in consolidation) at fair value and the recognition of changes in fair value of those investments during each reporting period in net income (loss). As a result, ASU 2016-01 eliminates the cost method of accounting for equity securities that do not have readily determinable fair values. Pursuant to the new guidance in ASU 2016-01, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

NOTE 3.	Master Transactions and Cooperation Agreement with Brookdale (“Brookdale Transactions”)

Master Transactions and Cooperation Agreement with Brookdale

On November 1, 2017, the Company and Brookdale Senior Living Inc. (“Brookdale”) entered into a Master Transactions and Cooperation Agreement (the “MTCA”) to provide the Company with the ability to significantly reduce its concentration of assets leased to and/or managed by Brookdale (the "Brookdale Transaction"). Through a series of dispositions and transitions of assets currently leased to and/or managed by Brookdale, as contemplated by the MTCA and further described below, the Company’s exposure to Brookdale is expected to be significantly reduced.

In connection with the overall transaction pursuant to the MTCA, the Company (through certain of its subsidiaries), and Brookdale (through certain of its subsidiaries) (the “Lessee”) entered into an Amended and Restated Master Lease and Security Agreement (the “Amended Master Lease”), which amended and restated the then-existing triple-net leases between the parties for 78 assets (before giving effect to the contemplated sale or transition of 34 assets discussed below), which account for primarily all of the assets subject to triple-net leases between the Company and the Lessee. Under the Amended Master Lease, the Company has the benefit of a guaranty from Brookdale of the Lessee’s obligations and, upon a change in control, will have various additional protections under the MTCA and the Amended Master Lease including:

•	A security deposit (which increases if specified leverage thresholds are exceeded);

•	A termination right if certain financial covenants and net worth test are not satisfied;

•	Enhanced reporting requirements and related remedies; and

•	The right to market for sale the CCRC portfolio.

Future changes in control of Brookdale are permitted pursuant to the Amended Master Lease, subject to certain conditions, including the purchaser either meeting experience requirements or retaining a majority of Brookdale’s principal officers.

The Amended Master Lease preserves the renewal terms and, with certain exceptions, the rents under the previously existing triple-net leases. In addition, the Company and Brookdale agreed to the following:

•

The Company has the right to sell, or transition to other operators, 32 triple-net assets. If such sale or transition does not occur within one year, the triple-net lease with respect to such assets will convert to a cash flow lease (under which the Company will bear the risks and rewards of operating the assets) with a term of two years, provided that the Company has the right to terminate the cash flow lease at any time during the term without penalty;

•	The Company has provided an aggregate $5 million annual reduction in rent on three assets, effective January 1, 2018; and

•	The Company will sell two triple-net assets to Brookdale or its affiliates for $35 million, which it anticipates completing during the first half of 2018.

Also pursuant to the MTCA, the Company and Brookdale agreed to the following:

•

The Company, which owned 90% of the interests in its RIDEA I and RIDEA III joint ventures with Brookdale at the time the MTCA was executed, agreed to purchase Brookdale’s 10% noncontrolling interest in each joint venture for an aggregate purchase price of $95 million. These joint ventures collectively own and operate 58 independent living, assisted living, memory care and/or skilled nursing facilities (the “RIDEA Facilities”). The Company completed its acquisition of the RIDEA III noncontrolling interest in December 2017 and anticipates completing its acquisition of the RIDEA I noncontrolling interest during the first half of 2018;

•

The Company has the right to sell, or transition to other managers, 36 of the RIDEA Facilities and terminate related management agreements with an affiliate of Brookdale without penalty. If the related management agreements are not terminated within one year, the base management fee (5% of gross revenues) increases by 1% of gross revenues per year over the following two years to a maximum of 7% of gross revenues;

•	The Company will sell four of the RIDEA Facilities to Brookdale or its affiliates for $239 million, one of which was sold in January 2018 for $27 million. The Company anticipates completing the sale of the remaining three RIDEA Facilities during the first half of 2018;

•

A Brookdale affiliate continues to manage the remaining 18 RIDEA Facilities pursuant to amended and restated management agreements, which provide for extended terms on select assets, modified performance hurdles for extensions and incentive fees, and modified termination rights (including stricter performance-based termination rights, a staggered right to terminate seven agreements over a 10 year period beginning in 2021, and a right to terminate at will upon payment of a termination fee, in lieu of sale-related termination rights), and two other existing facilities managed in separate RIDEA structures; and

•

The Company has the right to sell, to certain permitted transferees, its 49% ownership interest in joint ventures that own and operate a portfolio of continuing care retirement communities and in which Brookdale owns the other 51% interest (the “CCRC JV”), subject to certain conditions and a right of first offer in favor of Brookdale. Brookdale will have a corresponding right to sell its 51% interest in the CCRC JV to certain permitted transferees, subject to certain conditions, a right of first offer and a right to terminate management agreements following such sale of Brookdale’s interest, each in favor of HCP. Following a change in control of Brookdale, the Company will have the right to initiate a sale of the CCRC portfolio, subject to certain rights of first offer and first refusal in favor of Brookdale.

Fair Value Measurement Techniques and Quantitative Information

The Company performed a fair value assessment of each of the MTCA components that provided measurable economic benefit or detriment to the Company. Each fair value calculation is based on an income or market approach and relies on historical and forecasted EBITDAR (defined as earnings before interest, taxes, depreciation, amortization and rent) and revenue, as well as market data, including, but not limited to, a discount rate of 12%, a management fee rate of 5% of revenue, EBITDAR growth rates ranging from zero to 3%, and real estate capitalization rates ranging from 6% to 7%. All assumptions are supported by independent market data and considered to be Level 2 measurements within the fair value hierarchy.

As a result of the assessment, the Company recognized a $20 million net reduction of rental and related revenues related to the right to terminate leases for 32 triple-net assets and the write-off of unamortized lease intangible assets related to those same 32 triple-net assets. Additionally, the Company recognized $35 million of operating expense related to the right to terminate management agreements for 36 SHOP assets.

NOTE 4.	Other Real Estate Property Investments

2017 Real Estate Acquisitions

The following table summarizes real estate acquisitions for the year ended December 31, 2017 (in thousands):

		Consideration								Assets Acquired
Segment		Cash Paid				Net Liabilities Assumed				Real Estate				Net Intangibles
SHOP		$	44,258			$	797			$	37,940			$	7,115
Life science		315,255				3,524				305,760				13,019
Medical office		201,240				1,104				184,115				18,229
		$	560,753			$	5,425			$	527,815			$	38,363

2016 Real Estate Acquisitions

The following table summarizes real estate acquisitions for the year ended December 31, 2016 (in thousands):

		Consideration								Assets Acquired(1)
Segment		Cash Paid/ Debt Settled				Net Liabilities Assumed				Real Estate				Net Intangibles
Senior housing triple-net		$	76,362			$	1,200			$	71,875			$	5,687
SHOP		113,971				76,931				177,551				13,351
Life science		49,000				—				47,400				1,600
Medical office		209,920				4,854				209,178				5,596
Other non-reportable segments		17,909				—				16,596				1,313
		$	467,162			$	82,985			$	522,600			$	27,547

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(1)	Revenues and earnings since the acquisition dates, as well as the supplementary pro forma information, assuming these acquisitions occurred as of the beginning of the prior periods, were not material.

Construction, Tenant and Other Capital Improvements

The following table summarizes the Company’s expenditures for construction, tenant and other capital improvements (in thousands):

		Year Ended December 31,
Segment		2017				2016				2015
Senior housing triple-net		$	32,343			$	49,109			$	53,980
SHOP		49,473				74,158				77,425
Life science		240,901				200,122				122,319
Medical office		148,926				128,308				131,021
Other		135				7,203				37
		$	471,778			$	458,900			$	384,782

NOTE 5.	Discontinued Operations and Dispositions of Real Estate

Discontinued Operations - Quality Care Properties, Inc.

Quality Care Properties, Inc.

On October 31, 2016, the Company completed the spin-off (the “Spin-Off”) of its subsidiary, Quality Care Properties, Inc. (“QCP”) (NYSE: QCP). The Spin-Off assets included 338 properties, primarily comprised of the HCR ManorCare, Inc. (“HCRMC”) DFL investments and an equity investment in HCRMC. QCP is an independent, publicly-traded, self-managed and self-administrated REIT. As a result of the Spin-Off, the operations of QCP are now classified as discontinued operations for the years ended December 31, 2016 and 2015.

On October 17, 2016, subsidiaries of QCP issued $750 million in aggregate principal amount of senior secured notes due 2023 (the “QCP Notes”), the gross proceeds of which were deposited in escrow until they were released in connection with the consummation of the Spin-Off on October 31, 2016. The QCP Notes bear interest at a rate of 8.125% per annum, payable semiannually. From October 17, 2016 until the completion of the Spin-Off, QCP (a then wholly-owned subsidiary of HCP) incurred $2 million in interest expense. In addition, immediately prior to the effectiveness of the Spin-Off, subsidiaries of QCP received $1.0 billion of proceeds from their borrowings under a senior secured term loan, bearing interest at a rate at QCP’s option of either: (i) LIBOR plus 5.25%, subject to a 1% floor or (ii) a base rate specified in the first lien credit and guaranty agreement plus 4.25%, bringing the total gross proceeds raised by QCP and its subsidiaries under those financings to $1.75 billion. In connection with the consummation of the Spin-Off, QCP and its subsidiaries transferred $1.69 billion in cash and 94 million shares of QCP common stock to HCP and certain of its other subsidiaries, and HCP and its applicable subsidiaries transferred the assets comprising the QCP portfolio to QCP and its subsidiaries. HCP then distributed substantially all of the outstanding shares of QCP common stock to its stockholders, based on the distribution ratio of one share of QCP common stock for every five shares of HCP common stock held by HCP stockholders as of the October 24, 2016 record date for the distribution. The Company recorded the distribution of the assets and liabilities of QCP from its consolidated balance sheet on a historical cost basis as a dividend from stockholders’ equity of $3.5 billion, and zero gain or loss was recognized. The Company primarily used the $1.69 billion proceeds of the cash distribution it received from QCP upon consummation of the Spin-Off to pay down certain of the Company’s existing debt obligations.

The Company entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”) with QCP in connection with the Spin-Off. The Separation and Distribution Agreement divides and allocates the assets and liabilities of the Company prior to the Spin-Off between QCP and HCP, governs the rights and obligations of the parties regarding the Spin-Off, and contains other key provisions relating to the separation of QCP’s business from HCP.

In connection with the Spin-Off, the Company entered into a Transition Services Agreement ("TSA") with QCP. Per the terms of the TSA, the Company agreed to provide certain administrative and support services to QCP on a transitional basis for established fees. The TSA terminated on October 31, 2017.

From October 31, 2016 through June 2017, HCP was the sole lender to QCP of an unsecured revolving credit facility (the “Unsecured Revolving Credit Facility”) which had a total commitment of $100 million at inception. No amounts were drawn on the Unsecured Revolving Credit Facility and the total commitment was reduced to zero at June 30, 2017.

The results of discontinued operations through October 31, 2016, the Spin-Off date, are included in the consolidated results for the years ended December 31, 2016 and 2015. Summarized financial information for discontinued operations for the years ended December 31, 2016 and 2015 is as follows (in thousands):

	Year Ended December 31,
	2016				2015
Revenues:
Rental and related revenues	$	22,971			$	27,651
Tenant recoveries	1,233				1,464
Income from direct financing leases	384,752				572,835
Total revenues	408,956				601,950
Costs and expenses:
Depreciation and amortization	(4,892		)		(5,880		)
Operating	(3,367		)		(3,697		)
General and administrative	(67		)		(57		)
Transaction costs	(86,765		)		—
Impairments	—				(1,295,504		)
Other income (expense), net	71				70
Income (loss) before income taxes and income from impairments of equity method investments	313,936				(703,118		)
Income tax benefit (expense)	(48,181		)		(796		)
Income from equity method investment	—				50,723
Impairments of equity method investment	—				(45,895		)
Total discontinued operations	$	265,755			$	(699,086	)

During the fourth quarter of 2016, using proceeds from the Spin-Off, the Company repaid $500 million of 6.0% senior unsecured notes that were due to mature in January 2017, $600 million of 6.7% senior unsecured notes that were due to mature in January 2018 and $108 million of mortgage debt; incurring aggregate loss on debt extinguishments of $46 million.

HCR ManorCare, Inc.

Discontinued operations is primarily comprised of QCP’s HCRMC DFL investments and equity investment in HCRMC. During the years ended December 31, 2016 and 2015, the Company recognized DFL income of $385 million and $573 million, respectively, and received cash payments of $385 million and $483 million, respectively, from the HCRMC DFL investments. The carrying value of the HCRMC DFL investments was $5.2 billion at December 31, 2015.

The following summarizes the significant transactions and impairments related to HCRMC:

2015

During the three months ended March 31, 2015, the Company and HCRMC agreed to market for sale the real estate and operations associated with 50 non-strategic facilities that were under a master lease. During the year ended December 31, 2015, the Company completed sales of 22 non-strategic HCRMC facilities for $219 million. During the year ended December 31, 2016, the Company sold an additional 11 facilities for $62 million, bringing the total facilities sold to 33 at the time of the Spin-Off.

On March 29, 2015, certain subsidiaries of the Company entered into an amendment to the master lease (the “HCRMC Lease Amendment”) effective April 1, 2015 (the "HCRMC Amended Master Lease"). The HCRMC Lease Amendment reduced initial annual rent by a net $68 million and reset the minimum rent escalation to 3.0% for each lease year through the expiration of the initial term. The initial term was extended five years to an average of 16 years. As consideration for the rent reduction, the Company received a Deferred Rent Obligation (“DRO”) from the Lessee equal to an aggregate amount of $525 million. As a result of the HCRMC Lease Amendment, the Company recorded an impairment charge of $478 million related to its HCRMC DFL investments. The impairment charge reduced the carrying value of the HCRMC DFL investments from $6.6 billion to $6.1 billion, based on the present value of the future lease payments effective April 1, 2015 under the HCRMC Amended Master Lease discounted at the original DFL investments’ effective lease rate. Additionally, HCRMC agreed to sell, and HCP agreed to purchase, nine post-acute facilities for an aggregate purchase price of $275 million. Through December 31, 2015, HCRMC and HCP completed seven of the nine facility purchases for $184 million. Through Spin-Off, HCRMC and HCP completed the remaining two facility purchases

for $91 million, bringing the nine facility purchases to an aggregate $275 million, the proceeds of which were used to settle a portion of the DRO discussed above.

As of September 30, 2015, the Company concluded that its equity investment in HCRMC was other-than-temporarily impaired and recorded an impairment charge of $27 million. The impairment charge reduced the carrying amount of the Company’s equity investment in HCRMC from $48 million to its fair value of $21 million.

The fair value of the Company’s equity investment in HCRMC was based on a discounted cash flow valuation model and inputs were considered to be Level 3 measurements within the fair value hierarchy. The following is a summary of the quantitative information about fair value measurements for the impairment related to the Company’s equity ownership interest in HCRMC using a discounted cash flow valuation model:

Description of Input(s) to the Valuation		Valuation Inputs
Range of revenue growth rates(1)		(1.8%)-3.0%
Range of occupancy growth rates(1)		(0.8%)-0.2%
Range of operating expense growth rates(1)		(1.1%)-3.1%
Discount rate		15.20%
Range of earnings multiples		6.0x-7.0x

---

(1)	For growth rates, the value ranges provided represent the highest and lowest input utilized in the valuation model for any forecasted period.

As part of the Company’s fourth quarter 2015 review process, including its internal rating evaluation, it assessed the collectibility of all contractual rent payments under the HCRMC Amended Master Lease, as discussed below and assigned an internal rating of “Watch List” as of December 31, 2015. Further, the Company placed the HCRMC DFL investments on nonaccrual status and began utilizing a cash basis method of accounting in accordance with its policies (see Note 2).

As a result of assigning an internal rating of “Watch List” to its HCRMC DFL investments during the quarterly review process, the Company further evaluated the carrying amount of its HCRMC DFL investments and determined that it was probable that its HCRMC DFL investments were impaired. As a result of the significant decline in HCRMC’s fixed charge coverage ratio in the fourth quarter of 2015, combined with a lower growth outlook for the post-acute/skilled nursing business, the Company determined that it was probable that its HCRMC DFL investments were impaired. In the fourth quarter of 2015, the Company recorded an allowance for DFL losses (impairment charge) of $817 million, reducing the carrying amount of its HCRMC DFL investments from $6.0 billion to $5.2 billion. The allowance for credit losses was determined as the present value of expected future (i) in-place lease payments under the HCRMC Amended Master Lease and (ii) estimated market rate lease payments, each discounted at the original HCRMC DFL investments’ effective lease rate. Impairments related to an allowance for credit losses are included in impairments, net.

The market rate lease payments were based on an income approach utilizing a discounted cash flow valuation model. The significant inputs to this valuation model included forecasted EBITDAR, rent coverage ratios and real estate capitalization rates and are summarized as follows (dollars in thousands):

Description of Input(s) to the Valuation		Senior Housing DFL Valuation Inputs		Post-acute/ Skilled nursing DFL Valuation Inputs
Range of EBITDAR		$75,000-$85,000		$385,000-$435,000
Range of rent coverage ratio		1.05x-1.15x		1.25x-1.35x
Range of real estate capitalization rate		6.25%-7.25%		7.50%-8.50%

In December 2015, the Company concluded that its equity investment in HCRMC was other-than-temporarily impaired and recorded an impairment charge of $19 million, reducing its carrying value to zero. Beginning in January 2016, income was recognized only if cash distributions were received from HCRMC.

2016

The Company’s acquisition of the HCRMC DFL investments in 2011 was subject to federal and state built-in gain tax of up to $2 billion if all the assets were sold within 10 years. At the time of acquisition, the Company intended to hold the assets for at least 10 years, at which time the assets would no longer be subject to the built-in gain tax. In December 2015, the U.S. Federal Government passed legislation which permanently reduced the holding period, for federal tax purposes, to five years. The Company satisfied

the five year holding period requirement in April 2016. This legislation was not extended to certain states, which maintain a 10 year requirement.

During the year ended December 31, 2016, the Company determined that it may sell assets during the next five years and, therefore, recorded a deferred tax liability of $47 million, representing its estimated exposure to state built-in gain tax.

Dispositions of Real Estate

Held for Sale

At December 31, 2017, four life science facilities, two senior housing triple-net facilities and six SHOP facilities were classified as held for sale, with an aggregate carrying value of $417 million, primarily comprised of real estate assets of $393 million, net of accumulated depreciation of $93 million. At December 31, 2016, 64 senior housing triple-net facilities, four life science facilities and a SHOP facility were classified as held for sale, with an aggregate carrying value of $928 million, primarily comprised of real estate assets of $809 million, net of accumulated depreciation of $193 million. Liabilities of assets held for sale is primarily comprised of intangible and other liabilities at both December 31, 2017 and 2016.

RIDEA II Sale Transaction

In January 2017, the Company completed the contribution of its ownership interest in RIDEA II to an unconsolidated JV owned by HCP and an investor group led by Columbia Pacific Advisors, LLC (“CPA”) (“HCP/CPA PropCo” and “HCP/CPA OpCo,” together, the “HCP/CPA JV”). In addition, RIDEA II was recapitalized with $602 million of debt, of which $360 million was provided by a third-party and $242 million was provided by HCP. In return for both transaction elements, the Company received combined proceeds of $480 million from the HCP/CPA JV and $242 million in loan receivables and retained an approximately 40% ownership interest in RIDEA II (the note receivable and 40% ownership interest are herein referred to as the “RIDEA II Investments”). This transaction resulted in the Company deconsolidating the net assets of RIDEA II and recognizing a net gain on sale of $99 million. The RIDEA II Investments are currently recognized and accounted for as equity method investments.

On November 1, 2017, the Company entered into a definitive agreement with an investor group led by CPA to sell its remaining 40% ownership interest in RIDEA II for $91 million. The Company expects the transaction to close in the first half of 2018. CPA has also agreed to cause refinancing of the Company’s $242 million loan receivables from RIDEA II within one year following the close of the transaction.

2017 Dispositions

In January 2017, the Company sold four life science facilities in Salt Lake City, Utah for $76 million, resulting in a net gain on sale of $45 million.

In March 2017, the Company sold 64 senior housing triple-net assets, previously under triple-net leases with Brookdale, for $1.125 billion to affiliates of Blackstone Real Estate Partners VIII, L.P., resulting in a net gain on sale of $170 million.

Additionally, during the year ended December 31, 2017, the Company sold the following: (i) a life science land parcel in San Diego, California for $27 million, (ii) a life science building in San Diego, California for $5 million, (iii) four senior housing triple-net facilities for $27 million, (iv) five SHOP facilities for $43 million and (v) four medical office buildings (“MOBs”) for $15 million, and recorded a net gain on sale of $41 million.

2016 Dispositions

During the year ended December 31, 2016, the Company sold the following: (i) a portfolio of five post-acute/skilled nursing facilities and two senior housing triple-net facilities for $130 million, (ii) five life science facilities for $386 million, (iii) seven senior housing triple-net facilities for $88 million, (iv) three MOBs for $20 million and (v) three SHOP facilities for $41 million.

2015 Dispositions

During the year ended December 31, 2015, the Company sold the following: (i) nine senior housing triple-net facilities for $60 million resulting from Brookdale’s exercise of its purchase option received as part of a transaction with Brookdale in 2014, (ii) two parcels of land in its life science segment for $51 million and (iii) a MOB for $400,000.

NOTE 6.	Net Investment in Direct Financing Leases

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

	December 31,
	2017				2016
Minimum lease payments receivable	$	1,062,452			$	1,108,237
Estimated residual value	504,457				539,656
Less unearned income	(852,557		)		(895,304		)
Net investment in direct financing leases	$	714,352			$	752,589
Properties subject to direct financing leases	29				30

Certain DFLs 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.

The following table summarizes future minimum lease payments contractually due under DFLs at December 31, 2017 (in thousands):

Year		Amount
2018		$	102,983
2019		68,204
2020		62,781
2021		63,175
2022		57,762
Thereafter		707,547
		$	1,062,452

Direct Financing Lease Internal Ratings

The following table summarizes the Company’s internal ratings for net investment in DFLs at December 31, 2017 (dollars in thousands):

								Internal Ratings
Segment		Carrying Amount				Percentage of DFL Portfolio		Performing DFLs				Watch List DFLs				Workout DFLs
Senior housing triple-net		$	629,748			88		$	273,886			$	355,862			$	—
Other non-reportable segments		84,604				12		84,604				—				—
		$	714,352			100		$	358,490			$	355,862			$	—

Beginning September 30, 2013, the Company placed a 14 property senior housing DFL (the “DFL Portfolio”) on nonaccrual status and classified the DFL Portfolio on “Watch List” status. The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue for the DFL Portfolio has been recognized on a cash basis. The Company re-assessed the DFL Portfolio for impairment on December 31, 2017 and determined that the DFL Portfolio was not impaired based on its belief that: (i) it was not probable that it will not collect all of the rental payments under the terms of the lease; and (ii) the fair value of the underlying collateral exceeded the DFL Portfolio’s carrying amount. The fair value of the DFL Portfolio was estimated based on an income approach and utilizes inputs which are considered to be a Level 3 measurement within the fair value hierarchy. Inputs to this valuation model include real estate capitalization rates, industry growth rates, and operating margins, some of which influence the Company’s expectation of future cash flows from the DFL Portfolio and, accordingly, the fair value of its investment. During the years ended December 31, 2017, 2016 and 2015, the Company recognized DFL income of $13 million, $13 million and $15 million, respectively, and received cash payments of $18 million, $18 million and $20 million, respectively, from the DFL Portfolio. The carrying value of the DFL Portfolio was $356 million and $361 million at December 31, 2017 and 2016, respectively.

NOTE 7.	Loans Receivable

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

	December 31,
	2017												2016
	Real Estate Secured				Other Secured				Total				Real Estate Secured				Other Secured				Total
Mezzanine(1)(2)	$	—			$	269,299			$	269,299			$	—			$	615,188			$	615,188
Other(3)	188,418				—				188,418				195,946				—				195,946
Unamortized discounts, fees and costs(1)	—				(596		)		(596		)		413				(3,593		)		(3,180		)
Allowance for loan losses	—				(143,795		)		(143,795		)		—				—				—
	$	188,418			$	124,908			$	313,326			$	196,359			$	611,595			$	807,954

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(1)	At December 31, 2016, included £282 million ($348 million) outstanding and £2 million ($3 million) of associated unamortized discounts, fees and costs both related to the HC-One Facility, which paid off in June 2017.

(2)

At December 31, 2017, the Company had £2 million ($3 million) remaining under its commitments to fund development projects and capital expenditures under its development projects in the United Kingdom ("U.K."). In December 2017, the Company entered into a participating debt financing arrangement to fund a $115 million senior living development project, which remained unfunded at December 31, 2017.

(3)	At December 31, 2017 and 2016, included £123 million ($167 million) and £113 million ($140 million), respectively, outstanding primarily related to Maria Mallaband loans.

The following table summarizes the Company’s internal ratings for loans receivable at December 31, 2017 (dollars in thousands):

		Carrying Amount				Percentage of Loan Portfolio		Internal Ratings
Investment Type				Performing Loans				Watch List Loans				Workout Loans(1)
Real estate secured		$	188,418			60		$	188,418			$	—			$	—
Other secured		124,908				40		19,908				—				105,000
		$	313,326			100		$	208,326			$	—			$	105,000

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(1)	See Tandem Health Care Loan discussion below for additional information.

Real Estate Secured Loans

The following table summarizes the Company’s loans receivable secured by real estate at December 31, 2017 (dollars in thousands):

Final Maturity Date		Number of Loans		Payment Terms		Principal Amount(1)				Carrying Amount
2018		1		monthly interest-only payments, accrues interest at 8.0% and secured by a senior housing facility in Pennsylvania		$	21,458			$	21,597
2021		2		aggregate monthly interest-only payments, accrues interest at 8.0% and 9.75% and secured by two senior housing facility in the U.K.		22,706				24,001
2023		1		monthly interest-only payments, accrues interest at 7.22% and secured by seven senior housing facilities in the U.K.		142,820				142,820
		4				$	186,984			$	188,418

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(1)	Represents future contractual principal payments to be received on loans receivable secured by real estate.

During the year ended December 31, 2017, the Company recognized $13 million in interest income related to loans secured by real estate.

In March 2017, the Company sold its investment in Four Seasons Health Care’s (“Four Seasons”) senior secured term loan at par plus accrued interest for £29 million ($35 million).

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 owned nursing and residential care homes in the U.K. principally operated by HC-One and provided a loan facility (the “HC-One Facility”). 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. Through the year ended December 31, 2015, the Company received paydowns of £34 million ($52 million). On June 30, 2017, the Company received £283 million ($367 million) from the repayment of its HC-One mezzanine loan.

Tandem Health Care Loan

From July 2012 through May 2015, the Company funded, in aggregate, $257 million under a collateralized mezzanine loan facility (the “Mezzanine Loan”) to certain affiliates of Tandem Health Care (together with its affiliates, “Tandem”). The Mezzanine Loan matures in October 2018 and carries a weighted average interest rate of 11.5%. The fair value of the collateral supporting the Mezzanine Loan had included the value of an in-the-money purchase option (the “Purchase Option”) that is a term of a lease between Tandem and a lessor, which provided Tandem the right to buy the nine Leasehold Properties (as defined below) for a total of $82 million by January 4, 2018 (the “Purchase Option Expiration Date”).

In addition to the Mezzanine Loan outstanding to the Company, Tandem has outstanding to other lenders a $257 million syndicated senior loan (the “Senior Loan”) that matures in July 2018. Tandem owns and operates 32 post-acute/skilled nursing facilities, in addition to operating nine leasehold interests (the “Leasehold Properties”), which, in total, represents 4,766 beds (collectively, the “Tandem Portfolio”) located primarily throughout Florida, Pennsylvania and Virginia. Tandem leases the entire Tandem Portfolio to certain affiliates of Consulate Health Care (together with its affiliates, “Consulate”) under a master lease.

During the quarter ended June 30, 2017, as a result of multiple events of default under Tandem’s master lease with Consulate and operational struggles of Consulate, the Company concluded that it was probable that it would be unable to collect all interest and principal payments, including default interest payments, according to the contractual terms of the Mezzanine Loan. As such, as part of its quarterly review process, the Company recorded an impairment charge and related allowance of $57 million during the three months ended June 30, 2017, reducing the carrying value to $200 million. The decline in fair value was driven by a variety of factors, including recent operating results of the underlying real estate assets, as well as market and industry data, that reflect a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector. The calculation of the fair value was primarily based on an income approach and relies on forecasted EBITDAR and market data, including, but not limited to, sales price per unit/bed, rent coverage ratios, and real estate capitalization rates. All valuation inputs are considered to be Level 2 measurements within the fair value hierarchy.

Additionally, on July 31, 2017, subsequent to its second quarter 2017 quarterly review process and the aforementioned impairment, the Company entered into a binding agreement (the “Repurchase Agreement”) with the borrowers to provide an option to repay the Mezzanine Loan at a discounted value of $197 million (the “Repayment Value”) by October 25, 2017, which date was subsequently extended to December 31, 2017 (the “Agreement Maturity Date”). As a result of entering into the Repurchase Agreement, the Company recorded an additional impairment charge and related allowance of $3 million during the quarter ended September 30, 2017 to write down the carrying value of the Mezzanine Loan to the Repayment Value and assigned the loan an internal rating of Workout. As part of the Repurchase Agreement, Tandem posted, in aggregate, $8 million of non-refundable deposits (the “Deposits”), which the Company would be entitled to retain (without any credit against the Mezzanine Loan) if Tandem failed to make interest payments on the $257 million par value of the Mezzanine Loan through the repayment date or the Agreement Maturity Date, as applicable, adjusted for any principal payments received.

Consulate is facing operational and financial challenges and has failed to fully pay its contractual rent to Tandem since April 1, 2017. Tandem, which relies on contractual rent payments in order to service its interest payments to the Company under the Mezzanine Loan, failed to make its monthly interest payment thereunder on November 10, 2017. On November 17, 2017, the Company declared an event of default under the Mezzanine Loan and, as a result, the Repurchase Agreement became null and void and the Deposits were forfeited to the Company. Tandem also failed to make its December 2017, January 2018 and February 2018 interest payments to the Company. Tandem remains current on its interest payments under the Senior Loan.

Despite the Repurchase Agreement having terminated as a result of the event of default, Tandem nonetheless informed the Company that it was continuing to attempt to recapitalize so that it would be in a position to repay the Repayment Value (less the forfeited

Deposits) on or prior to the Agreement Maturity Date, should the Company be willing to do so at that time. For example, during the second half of 2017, Tandem sold assets and used proceeds to pay down the Senior Loan. Despite ongoing efforts to recapitalize, Tandem was unable to: (i) repay the Mezzanine Loan at the Repayment Value prior to the Agreement Maturity Date and (ii) close on the Purchase Option by the Purchase Option Expiration Date. The Deposits were applied to reduce the Company’s recorded carrying value of the Mezzanine Loan to $189 million.

As a result of the aforementioned events that occurred during the fourth quarter of 2017 and first quarter of 2018 (during the Company's fourth quarter 2017 financial statement close process), the Company concluded that the Mezzanine Loan was impaired and recorded an impairment charge and related allowance of $84 million, reducing the carrying value of the loan to $105 million as of December 31, 2017. Aggregate impairments on the Mezzanine Loan for the year ended December 31, 2017 were $144 million.

The decline in expected recoverable value of the Mezzanine Loan was primarily driven by the Company’s conclusion that the collateral supporting the Mezzanine Loan may no longer be the sole source in recovering the Company’s investment. The Company is actively evaluating and pursuing multiple alternatives, including, but not limited to: (i) selling all or a portion of the Mezzanine Loan to a third party or (ii) foreclosing on the underlying collateral. As a result, the Company utilized a discounted cash flow model to determine expected recoverability of the Mezzanine Loan. Additionally, a variety of factors further impacted the impairment analysis completed during the Company’s fourth quarter 2017 financial statement close process including recent operating results of the underlying real estate assets, as well as market and industry data, that reflect a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector. The calculation relies on: (i) forecasted EBITDAR and market data, including, but not limited to, sales price per unit/bed, rent coverage ratios, and real estate capitalization rates and (ii) recent bids for a sale of the Mezzanine Loan received on February 8, 2018, which incorporate market participant required rates of return and expected hold periods.

Beginning in the first quarter of 2017, the Company elected to recognize interest income on a cash basis. During the years ended December 31, 2017, 2016 and 2015, the Company recognized interest income of $23 million, $31 million and $29 million, respectively, and received cash payments of $25 million, $30 million and $29 million, respectively, from Tandem. The carrying value of the Mezzanine Loan was $105 million and $256 million at December 31, 2017 and 2016, respectively.

NOTE 8.	Investments in and Advances to Unconsolidated Joint Ventures

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

				Carrying Amount
				December 31,
Entity(1)		Ownership %		2017				2016
CCRC JV		49		$	400,241			$	439,449
RIDEA II		40		259,651				—
Life Science JVs(2)		50 - 63		65,581				67,879
MBK JV		50		38,005				38,909
Development JVs(3)		50 - 90		23,365				10,459
Medical Office JVs(4)		20 - 67		12,488				13,438
K&Y JVs(5)		80		1,283				1,342
Advances to unconsolidated joint ventures, net				226				15
				$	800,840			$	571,491

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(1)	These entities are not consolidated because the Company does not control, through voting rights or other means, the JV.

(2)	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%).

(3)	Includes four unconsolidated development partnerships (and the Company’s ownership percentage): (i) Vintage Park Development JV (85%); (ii) Waldwick JV (85%); (iii) Otay Ranch JV (90%); and (iv) MBK Development JV (50%).

(4)	Includes three unconsolidated medical office partnerships (and the Company’s ownership percentage): HCP Ventures IV, LLC (20%); HCP Ventures III, LLC (30%); and Suburban Properties, LLC (67%).

(5)	Includes three unconsolidated joint ventures.

HCP Ventures III, LLC and HCP Ventures IV, LLC

On December 30, 2015, HCP Ventures III, LLC (“HCP Ventures III”) and HCP Ventures IV, LLC sold 61 MOBs, three hospitals and a redevelopment property for total proceeds of $634 million, recognizing gain on sales of real estate of $59 million, of which the Company’s share was $15 million. As part of these sales, the Company received aggregate distributions of $45 million, including repayment of its loan receivable. During the quarter ended December 31, 2016, HCP Ventures III sold the remaining three assets in its portfolio for $31 million, recognizing gain on sales of real estate of $5 million, of which the Company’s share was $1 million. As part of this sale, the Company received aggregate distributions of $8 million.

See Note 5 for further information on the deconsolidation and pending sale of RIDEA II.

NOTE 9.	Intangibles

The following table summarizes the Company’s intangible lease assets (in thousands):

		December 31,
Intangible lease assets		2017				2016
Lease-up intangibles		$	645,143			$	719,788
Above market tenant lease intangibles		105,663				147,409
Below market ground lease intangibles		44,499				44,500
Gross intangible lease assets		795,305				911,697
Accumulated depreciation and amortization		(385,223		)		(431,892		)
Net intangible lease assets		$	410,082			$	479,805

The following table summarizes the Company’s intangible lease liabilities (in thousands):

		December 31,
Intangible lease liabilities		2017				2016
Below market lease intangibles		$	123,883			$	161,595
Above market ground lease intangibles		2,329				2,329
Gross intangible lease liabilities		126,212				163,924
Accumulated depreciation and amortization		(73,633		)		(105,779		)
Net intangible lease liabilities		$	52,579			$	58,145

The following table sets forth amortization related to deferred leasing costs and acquisition-related intangibles for the years ended December 31, 2017, 2016 and 2015 (in thousands):

		Year Ended December 31,
		2017				2016				2015
Depreciation and amortization expense related to amortization of lease-up intangibles		$	76,732			$	84,487			$	74,978
Rental and related revenues related to amortization of net below market lease liabilities		2,030				3,877				3,781
Operating expense related to amortization of net below market ground lease intangibles		740				664				664

The following table summarizes the estimated annual amortization for each of the five succeeding fiscal years and thereafter (in thousands):

	Rental and Related Revenues(1)				Operating Expense(2)				Depreciation and Amortization(3)
2018	$	4,099			$	763			$	66,651
2019	4,102				763				49,868
2020	3,418				759				40,151
2021	3,401				756				35,963
2022	4,199				756				30,490
Thereafter	17,133				31,782				135,153
	$	36,352			$	35,579			$	358,276

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(1)	The amortization of net below market lease intangibles is recorded as an increase to rental and related income.

(2)	The amortization of net below market ground lease intangibles is recorded as an increase to operating expense.

(3)	The amortization of lease-up intangibles is recorded to depreciation and amortization expense.

NOTE 10.	Debt

Bank Line of Credit and Term Loans

On October 19, 2017, the Company executed a $2.0 billion unsecured revolving line of credit facility (the “Facility”), which matures on October 19, 2021 and contains two, six-month extension options. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends upon the Company’s credit ratings. The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings. Based on the Company’s credit ratings at December 31, 2017, the margin on the Facility was 1.00%, and the facility fee was 0.20%. The Facility also includes a feature that allows the Company to increase the borrowing capacity by an aggregate amount of up to $750 million, subject to securing additional commitments. At December 31, 2017, the Company had $1.0 billion, including £105 million ($142 million), outstanding under the Facility with a weighted average effective interest rate of 2.74%.

In March 2017, the Company repaid a £137 million unsecured term loan.

On June 30, 2017, the Company repaid £51 million of its four-year unsecured term loan entered into in January 2015 (the "2015 Term Loan"). Concurrently, the Company terminated its three-year interest rate swap which fixed the interest of the 2015 Term Loan and therefore, beginning June 30, 2017, the 2015 Term Loan accrued interest at a rate of GBP LIBOR plus 1.15%, subject to adjustments based on the Company's credit ratings. At December 31, 2017 the Company had £169 million ($229 million) outstanding on the 2015 Term Loan. The 2015 Term Loan contains a one-year committed extension option. The Company has a one–time right to repay the outstanding GBP balance and re-borrow in USD with all other key terms unchanged.

The Facility and 2015 Term Loan contain certain financial restrictions and other customary requirements, including cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreements: (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Secured Debt to Consolidated Total Asset Value to 30%, (iii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 60%; (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times; and (v) require a Minimum Consolidated Tangible Net Worth of $6.5 billion at December 31, 2017. At December 31, 2017, the Company was in compliance with each of these restrictions and requirements of the Facility and 2015 Term Loan.

Senior Unsecured Notes

At December 31, 2017, the Company had senior unsecured notes outstanding with an aggregate principal balance of $6.45 billion. The senior unsecured notes contain certain covenants including limitations on debt, maintenance of unencumbered assets, cross-acceleration provisions and other customary terms. The Company believes it was in compliance with these covenants at December 31, 2017.

The following table summarizes the Company’s senior unsecured notes payoffs for the periods presented (dollars in thousands):

Period		Amount				Coupon Rate
Year ended December 31, 2017
May 1, 2017		$	250,000			5.625	%
July 27, 2017		$	500,000			5.375	%
Year ended December 31, 2016:
February 1, 2016		$	500,000			3.750	%
September 15, 2016		$	400,000			6.300	%
November 30, 2016		$	500,000			6.000	%
November 30, 2016		$	600,000			6.700	%

During the years ended December 31, 2017 and 2016, the Company recorded losses on debt extinguishment related to the repurchase of senior notes of $54 million and $46 million, respectively.

There were no senior unsecured notes issuances for either of the years ended December 31, 2017 and 2016.

Mortgage Debt

At December 31, 2017, the Company had $139 million in aggregate principal of mortgage debt outstanding, which is secured by 16 healthcare facilities (including redevelopment properties) with a carrying value of $299 million. In March 2017, the Company paid off $472 million of mortgage debt.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into or terminate material leases. Some of the mortgage debt is also cross-collateralized by multiple assets and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at December 31, 2017 (dollars in thousands):

		Bank Line of Credit(1)				Term Loan(2)				Senior Unsecured Notes(3)							Mortgage Debt(4)							Total(5)
Year				Amount				Interest Rate			Amount				Interest Rate
2018		$	—			$	—			$	—			—	%		$	3,512			—	%		$	3,512
2019		—				228,674				450,000				3.95	%		3,700				—	%		682,374
2020		—				—				800,000				2.79	%		3,758				5.08	%		803,758
2021		1,017,076				—				700,000				5.49	%		11,117				5.26	%		1,728,193
2022		—				—				900,000				3.93	%		2,861				—	%		902,861
Thereafter		—				—				3,600,000				4.36	%		113,619				4.09	%		3,713,619
		1,017,076				228,674				6,450,000							138,567							7,834,317
Discounts, premium and debt costs, net		—				(386		)		(53,549		)					5,919							(48,016		)
		$	1,017,076			$	228,288			$	6,396,451						$	144,486						$	7,786,301

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(1)	Includes £105 million translated into USD.

(2)	Represents £169 million translated into USD.

(3)	Interest rates on the notes ranged from 2.79% to 6.88% with a weighted average effective rate of 4.19% and a weighted average maturity of six years.

(4)	Interest rates on the mortgage debt ranged from 2.08% to 5.91% with a weighted average effective interest rate of 4.19% and a weighted average maturity of 20 years.

(5)	Excludes $94 million of other debt that have no scheduled maturities. Other debt represents (i) $61 million of non-interest bearing life care bonds and occupancy fee deposits at certain of the Company's senior housing facilities and (ii) $33 million of on-demand notes from the CCRC JV which bear interest at a rate of 3.6%.

NOTE 11.	Commitments and Contingencies

Legal Proceedings

From time to time, the Company is a party to, or has a significant relationship to, legal proceedings, lawsuits and other claims. Except as described below, the Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company’s policy is to expense legal costs as they are incurred.

Class Action. On May 9, 2016, a purported stockholder of the Company filed a putative class action complaint, Boynton Beach Firefighters’ Pension Fund v. HCP, Inc., et al., Case No. 3:16-cv-01106-JJH, in the U.S. District Court for the Northern District of Ohio against the Company, certain of its officers, HCRMC, and certain of its officers, asserting violations of the federal securities laws. The suit asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and alleges that the Company made certain false or misleading statements relating to the value of and risks concerning its investment in HCRMC by allegedly failing to disclose that HCRMC had engaged in billing fraud, as alleged by the U.S. Department of Justice in a pending suit against HCRMC arising from the False Claims Act. The plaintiff in the suit demands compensatory damages (in an unspecified amount), costs and expenses (including attorneys’ fees and expert fees), and equitable, injunctive, or other relief as the Court deems just and proper. On November 28, 2017, the Court appointed Societe Generale Securities GmbH (SGSS Germany) and the City of Birmingham Retirement and Relief Systems (Birmingham) as Co-Lead Plaintiffs in the class action. Co-Lead Plaintiffs must file a consolidated Amended Complaint by February 28, 2018. Defendants will then have until March 30, 2018 to respond to the Amended Complaint and file a motion to dismiss. The Company believes the suit to be without merit and intends to vigorously defend against it.

Derivative Actions. On June 16, 2016 and July 5, 2016, purported stockholders of the Company filed two derivative actions, respectively Subodh v. HCR ManorCare Inc., et al., Case No. 30-2016-00858497-CU-PT-CXC and Stearns v. HCR ManorCare, Inc., et al., Case No. 30-2016-00861646-CU-MC-CJC, in the Superior Court of California, County of Orange, against certain of the Company’s current and former directors and officers and HCRMC. The Company is named as a nominal defendant. As both derivative actions contained substantially the same allegations, they have been consolidated into a single action. The consolidated action alleges that the defendants engaged in various acts of wrongdoing, including, among other things, breaching fiduciary duties by publicly making false or misleading statements of fact regarding HCRMC’s finances and prospects, and failing to maintain

adequate internal controls. As the Subodh/Stearns action is in the early stages, defendants have not yet responded to the complaint. On April 18, 2017, the Court approved the parties’ stipulation staying the action pending further developments, including in the related securities class action litigation. The Court recently adjourned the status conference scheduled for January 10, 2018 to June 11, 2018.

On April 10, 2017, a purported stockholder of the Company filed a derivative action, Weldon v. Martin et al., Case No. 3:17-cv-755, in federal court in the Northern District of Ohio, Western Division, against certain of the Company’s current and former directors and officers and HCRMC. The Company is named as a nominal defendant. The Weldon complaint asserts similar claims to those asserted in the California derivative actions. In addition, the complaint asserts a claim under Section 14(a) of the Exchange Act, alleging that the Company made false statements in its 2016 proxy statement by not disclosing that the Company’s performance issues in 2015 were the direct result of billing fraud at HCRMC. On April 18, 2017, the Court re-assigned and transferred this action to the judge presiding over the related federal securities class action. Defendants have not yet been served or responded to the complaint. On July 11, 2017, the Court approved a stipulation by the parties to stay the case pending disposition of the motion to dismiss the class action.

On July 21, 2017, a purported stockholder of the Company filed another derivative action, Kelley v. HCR ManorCare, Inc., et al., Case No. 8:17-cv-01259, in federal court in the Central District of California, against certain of the Company’s current and former directors and officers and HCRMC. The Company is named as a nominal defendant. The Kelley complaint asserts similar claims to those asserted in Weldon and in the California derivative actions. Like Weldon, the Kelley complaint also additionally alleges that the Company made false statements in its 2016 proxy statement, and asserts a claim for a violation of Section 14(a) of the Exchange Act. On September 25, 2017, Defendants moved to transfer the action to the Northern District of Ohio (i.e., the court where the class action and other federal derivative action are pending) or, in the alternative, to stay the action. The Court granted Defendants’ motion to transfer on November 28, 2017, and Kelley is now before Judge Helmick in the Northern District of Ohio.

In a status conference on January 19, 2018 in the Kelley action, Judge Helmick requested briefing by the parties in both Weldon and Kelley concerning the potential consolidation of the two actions, the appointment of lead plaintiffs and counsel, and whether the stay should continue. Plaintiffs’ briefs will be due on February 23, 2018, defendants’ opposition will be due on March 9, 2018, and plaintiffs’ reply will be due on March 23, 2018. Judge Helmick indicated that he would issue an order explaining and memorializing these deadlines.

The Company’s Board of Directors received letters dated August 17, 2016, April 19, 2017, and April 20, 2017 from private law firms acting on behalf of clients who are purported stockholders of the Company, each asserting allegations similar to those made in the Subodh and Stearns matters discussed above. Each letter demands that the Board of Directors take action to assert the Company’s rights. The Board of Directors completed its evaluation and determined to reject the demand letters. Rejection notices were sent in December of 2017.

The Company believes that the lawsuits and demands are without merit and is unable to estimate the amount of loss or range of reasonably possible losses with respect to the matters discussed above as of December 31, 2017.

Welltower v. Scott M. Brinker. On May 15, 2017, Welltower, Inc. filed a complaint in the Court of Common Pleas in Lucas County, Ohio, against Scott M. Brinker, alleging that he violated his non-competition obligations to Welltower prior to and upon acceptance of an offer of employment with the Company. Mr. Brinker counterclaimed that the non-competition restrictions were unenforceable, and also asserted breach of contract and defamation counterclaims against Welltower, among others. In connection with Mr. Brinker’s hiring, the Company agreed to indemnify him for legal fees and any losses that result from the action. On November 5, 2017, Welltower, Mr. Brinker and the Company agreed to settle the lawsuit for an amount, recognized during the fourth quarter of 2017, that is not material to the Company's financial condition, results of operations or cash flows and file a joint dismissal of all claims and counterclaims.

DownREIT LLCs

In connection with the formation of certain DownREIT LLCs, members may contribute appreciated real estate to a DownREIT LLC in exchange for DownREIT units. These contributions are generally tax-deferred, so that the pre-contribution gain related to the property is not taxed to the member. However, if a contributed property is later sold by the DownREIT LLC, the unamortized pre-contribution gain that exists at the date of sale is specifically allocated and taxed to the contributing members. In many of the DownREITs, the Company has entered into indemnification agreements with those members who contributed appreciated property into the DownREIT LLC. Under these indemnification agreements, if any of the appreciated real estate contributed by the members is sold by the DownREIT LLC in a taxable transaction within a specified number of years, the Company will reimburse the affected members for the federal and state income taxes associated with the pre-contribution gain that is specially allocated to the affected member under the Code (“make-whole payments”). These make-whole payments include a tax gross-up provision. These indemnification agreements have expiration terms that range through 2033 on a total of 35 properties.

Commitments

The following table summarizes the Company’s material commitments, excluding debt servicing obligations (see Note 10) and operating leases (see disclosure below), at December 31, 2017 (in thousands):

	Total				2018				2019-2020				2021-2022				More than Five Years
U.K. loan commitments(1)	$	3,236			$	3,236			$	—			$	—			$	—
Construction loan commitments(2)	114,691				45,863				68,828				—				—
Development commitments(3)	133,371				128,101				2,228				3,042				—
Total	$	251,298			$	177,200			$	71,056			$	3,042			$	—

---

(1)	Represents £2 million translated into USD for commitments to fund the Company’s U.K. loan facilities.

(2)	Represents commitments to finance development projects.

(3)	Represents construction and other commitments for developments in progress.

Credit Enhancement Guarantee

At December 31, 2017, certain of the Company’s senior housing facilities serve as collateral for $83 million of debt (maturing May 1, 2025) that is owed by a previous owner of the facilities. This indebtedness is guaranteed by the previous owner who has an investment grade credit rating. These senior housing facilities, which are classified as DFLs, had a carrying value of $356 million as of December 31, 2017.

Environmental Costs

The Company monitors its properties for the presence of hazardous or toxic substances. The Company is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Company’s business, financial condition or results of operations. The Company carries environmental insurance and believes that the policy terms, conditions, limitations and deductibles are adequate and appropriate under the circumstances, given the relative risk of loss, the cost of such coverage and current industry practice.

General Uninsured Losses

The Company obtains various types of insurance to mitigate the impact of property, business interruption, liability, flood, windstorm, earthquake, environmental, cyber and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. There are, however, certain types of extraordinary losses, such as those due to acts of war or other events that may be either uninsurable or not economically insurable. In addition, the Company has a large number of properties that are exposed to earthquake, flood and windstorm occurrences for which the related insurances carry high deductibles.

Tenant Purchase Options

Certain leases, including DFLs contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable, are as follows (dollars in thousands):

Year		Annualized Base Rent(1)				Number of Properties
2018		$	8,534			8
2019		14,702				2
2020		14,201				4
2021		12,402				6
2022		10,459				3
Thereafter		33,964				22
		$	94,262			45

---

(1)	Represents the most recent month’s base rent including additional rent floors and cash income from DFLs annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight- line rents, amortization of market lease intangibles, DFL non-cash and deferred revenues).

Rental Expense

The Company’s rental expense attributable to continuing operations was $10 million for each of the years ended December 31, 2017, 2016 and 2015. These rental expense amounts include ground rent and other leases. Ground leases generally require fixed annual rent payments and may also include escalation clauses and renewal options. These leases have terms that are up to 99 years, excluding extension options.

Future minimum lease obligations under non-cancelable ground and other operating leases as of December 31, 2017 were as follows (in thousands):

Year		Amount
2018		$	6,619
2019		6,766
2020		6,668
2021		6,704
2022		6,820
Thereafter		362,219
		$	395,796

NOTE 12.	Equity

Common Stock

On February 1, 2018, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.37 per share. The common stock cash dividend will be paid on March 2, 2018 to stockholders of record as of the close of business on February 15, 2018.

During the years ended December 31, 2017, 2016 and 2015, the Company declared and paid common stock cash dividends of $1.480, $2.095 and $2.260 per share, respectively.

In June 2015, the Company established an at-the-market equity offering program (“ATM Program”). Under this program, the Company may sell shares of its common stock from time to time having an aggregate gross sales price of up to $750 million through a consortium of banks acting as sales agents or directly to the banks acting as principals. During the year ended December 31, 2015, the Company issued 1.8 million shares of common stock at a weighted average price of $40.14 for proceeds of $73 million, net of fees and commissions of $1 million. There was no activity during the years ended December 31, 2017 and 2016.

The following table summarizes the Company’s other common stock activities (shares in thousands):

	Year Ended December 31,
	2017			2016			2015
Dividend Reinvestment and Stock Purchase Plan	983			2,021			2,762
Conversion of DownREIT units	78			145			104
Exercise of stock options	32			133			823
Vesting of restricted stock units	419			529			409
Repurchase of common stock	157			237			198

Accumulated Other Comprehensive Loss

The following table summarizes the Company’s accumulated other comprehensive loss (in thousands):

	December 31,
	2017				2016
Cumulative foreign currency translation adjustment	$	(6,955	)		$	(22,817	)
Unrealized gains (losses) on cash flow hedges, net	(13,950		)		(3,642		)
Supplemental Executive Retirement plan minimum liability and other	(3,119		)		(3,183		)
Total accumulated other comprehensive loss	$	(24,024	)		$	(29,642	)

Noncontrolling Interests

On October 7, 2015, the Company issued a 49% noncontrolling interest in HCP Ventures V to an institutional capital investor for $110 million. HCP Ventures V owns a portfolio of 11 on-campus MOBs located in Texas and acquired through a sale-leaseback transaction with Memorial Hermann in June 2015.

At December 31, 2017, there were four million DownREIT units (seven million shares of HCP common stock are issuable upon conversion) outstanding in five DownREIT LLCs, all of which the Company is the managing member. At December 31, 2017, the carrying and market values of the four million DownREIT units were $177 million and $173 million, respectively.

See Note 5 for the deconsolidation of RIDEA II and Note 19 for the supplemental schedule of non-cash financing activities.

NOTE 13.	Segment Disclosures

The Company evaluates its business and allocates resources based on its reportable business segments: (i) senior housing triple-net, (ii) SHOP, (iii) life science and (iv) medical office. The Company has non-reportable segments that are comprised primarily of the Company’s debt investments, hospital properties, unconsolidated joint ventures (see below), and care homes in the U.K. The accounting policies of the segments are the same as those described under Summary of Significant Accounting Policies (see Note 2).

During the fourth quarter of 2017, as a result of a change in how operating results are reported to the chief operating decision makers, for the purpose of evaluating performance and allocating resources, the Company began excluding unconsolidated joint ventures from its evaluation of its segments' operating results. Unconsolidated joint ventures are now reflected in other non-reportable segments, and as a result, excluded from NOI and Adjusted NOI. Prior period NOI and Adjusted NOI have also been recast to conform to current period presentation, which excludes unconsolidated joint ventures.

During the year ended December 31, 2017, 42 senior housing triple-net facilities were transferred to the Company’s SHOP segment. During the year ended December 31, 2016, 17 senior housing triple-net facilities were transitioned to a RIDEA structure (reported in the Company’s SHOP segment). There were no intersegment sales or transfers during the year ended December 31, 2015.

The Company evaluates performance based upon: (i) property net operating income from continuing operations (“NOI”) and (ii) Adjusted NOI. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, lease termination fees and the impact of deferred community fee income and expense. The adjustments to NOI and resulting Adjusted NOI for SHOP have been recast for prior periods presented to conform to the current period presentation which excludes (i) the impact of deferred community fee income and expense, resulting in recognition as cash is received and expenses are paid and (ii) adjustments related to unconsolidated joint ventures (see above).

Non-segment assets consist of assets in the Company's other non-reportable segments (see above) and corporate non-segment assets. Corporate non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, marketable equity securities and, if any, real estate held for sale. See Note 22 for other information regarding concentrations of credit risk.

The following tables summarize information for the reportable segments (in thousands):

For the year ended December 31, 2017:

Segments		Senior Housing Triple-Net				SHOP				Life Science				Medical Office				Other Non-reportable				Corporate Non-segment				Total
Rental revenues(1)		$	313,547			$	525,473			$	358,816			$	477,459			$	116,846			$	—			$	1,792,141
Operating expenses		(3,819		)		(396,491		)		(78,001		)		(183,197		)		(4,743		)		—				(666,251		)
NOI		309,728				128,982				280,815				294,262				112,103				—				1,125,890
Adjustments to NOI(2)		17,098				33,227				(4,517		)		(2,952		)		(4,446		)		—				38,410
Adjusted NOI		326,826				162,209				276,298				291,310				107,657				—				1,164,300
Addback adjustments		(17,098		)		(33,227		)		4,517				2,952				4,446				—				(38,410		)
Interest income		—				—				—				—				56,237				—				56,237
Interest expense		(2,518		)		(7,920		)		(373		)		(506		)		(4,230		)		(292,169		)		(307,716		)
Depreciation and amortization		(103,820		)		(103,162		)		(128,864		)		(169,795		)		(29,085		)		—				(534,726		)
General and administrative		—				—				—				—				—				(88,772		)		(88,772		)
Transaction costs		—				—				—				—				—				(7,963		)		(7,963		)
Recoveries (impairments), net		(22,590		)		—				—				—				(143,794		)		—				(166,384		)
Gain (loss) on sales of real estate, net		280,349				17,485				45,916				9,095				3,796				—				356,641
Loss on debt extinguishment		—				—				—				—				—				(54,227		)		(54,227		)
Other income (expense), net		—				—				—				—				50,895				(19,475		)		31,420
Income tax benefit (expense)		—				—				—				—				—				1,333				1,333
Equity income (loss) from unconsolidated JVs		—				—				—				—				10,901				—				10,901
Net income (loss)		$	461,149			$	35,385			$	197,494			$	133,056			$	56,823			$	(461,273	)		$	422,634

---

(1)	Represents rental and related revenues, tenant recoveries, resident fees and services, and income from DFLs.

(2)	Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, deferral of community fees, net and termination fees.

For the year ended December 31, 2016:

Segments		Senior Housing Triple-Net				SHOP				Life Science				Medical Office				Other Non-reportable				Corporate Non-segment				Total
Rental revenues(1)		$	423,118			$	686,822			$	358,537			$	446,280			$	125,729			$	—			$	2,040,486
Operating expenses		(6,710		)		(480,870		)		(72,478		)		(173,687		)		(4,654		)		—				(738,399		)
NOI		416,408				205,952				286,059				272,593				121,075				—				1,302,087
Adjustments to NOI(2)		(7,566		)		(2,686		)		(2,954		)		(3,536		)		(3,022		)		—				(19,764		)
Adjusted NOI		408,842				203,266				283,105				269,057				118,053				—				1,282,323
Addback adjustments		7,566				2,686				2,954				3,536				3,022				—				19,764
Interest income		—				—				—				—				88,808				—				88,808
Interest expense		(9,499		)		(29,745		)		(2,357		)		(5,895		)		(9,153		)		(407,754		)		(464,403		)
Depreciation and amortization		(136,146		)		(108,806		)		(130,829		)		(161,790		)		(30,537		)		—				(568,108		)
General and administrative		—				—				—				—				—				(103,611		)		(103,611		)
Transaction costs		—				—				—				—				—				(9,821		)		(9,821		)
Gain (loss) on sales of real estate, net		48,744				675				49,042				8,333				57,904				—				164,698
Loss on debt extinguishment																						(46,020		)		(46,020		)
Other income (expense), net		—				—				—				—				—				3,654				3,654
Income tax benefit (expense)		—				—				—				—				—				(4,473		)		(4,473		)
Equity income (loss) from unconsolidated JVs		—				—				—				—				11,360				—				11,360
Discontinued operations		—				—				—				—				—				265,755				265,755
Net income (loss)		$	319,507			$	68,076			$	201,915			$	113,241			$	239,457			$	(302,270	)		$	639,926

---

(1)	Represents rental and related revenues, tenant recoveries, resident fees and services, and income from DFLs.

(2)	Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, deferral of community fees, net and termination fees.

For the year ended December 31, 2015:

Segments		Senior Housing Triple-Net				SHOP				Life Science				Medical Office				Other Non-reportable				Corporate Non-segment				Total
Rental revenues(1)		$	428,269			$	518,264			$	342,984			$	415,351			$	123,437			$	—			$	1,828,305
Operating expenses		(3,427		)		(371,016		)		(70,217		)		(162,054		)		(3,965		)		—				(610,679		)
NOI		424,842				147,248				272,767				253,297				119,472				—				1,217,626
Adjustments to NOI(2)		(9,716		)		8,145				(10,128		)		(4,933		)		(2,356		)		—				(18,988		)
Adjusted NOI		415,126				155,393				262,639				248,364				117,116				—				1,198,638
Addback adjustments		9,716				(8,145		)		10,128				4,933				2,356				—				18,988
Interest income		—				—				—				—				112,184				—				112,184
Interest expense		(16,899		)		(31,869		)		(2,878		)		(9,603		)		(9,745		)		(408,602		)		(479,596		)
Depreciation and amortization		(125,538		)		(80,981		)		(126,241		)		(143,682		)		(28,463		)		—				(504,905		)
General and administrative		—				—				—				—				—				(95,965		)		(95,965		)
Transaction costs		—				—				—				—				—				(27,309		)		(27,309		)
Recoveries (impairments), net		—				—				—				—				(108,349		)		—				(108,349		)
Gain (loss) on sales of real estate, net		6,325				—				—				52				—				—				6,377
Other income (expense), net		—				—				—				—				—				16,208				16,208
Income tax benefit (expense)		—				—				—				—				—				9,807				9,807
Equity income (loss) from unconsolidated JVs		—				—				—				—				6,590				—				6,590
Discontinued operations		—				—				—				—				—				(699,086		)		(699,086		)
Net income (loss)		$	288,730			$	34,398			$	143,648			$	100,064			$	91,689			$	(1,204,947	)		$	(546,418	)

---

(1)	Represents rental and related revenues, tenant recoveries, resident fees and services, and income from DFLs.

(2)	Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, deferral of community fees, net and termination fees.

The following table summarizes the Company’s revenues by segment (in thousands):

		Year Ended
		December 31,
Segments		2017				2016				2015
Senior housing triple-net		$	313,547			$	423,118			$	428,269
SHOP		525,473				686,822				518,264
Life science		358,816				358,537				342,984
Medical office		477,459				446,280				415,351
Other non-reportable segments		173,083				214,537				235,621
Total revenues		$	1,848,378			$	2,129,294			$	1,940,489

The following table summarizes the Company’s total assets by segment (in thousands):

		December 31,
Segments		2017				2016				2015
Senior housing triple-net		$	3,515,400			$	3,871,720			$	5,092,443
SHOP		2,392,130				3,135,115				2,684,675
Life science		4,154,372				3,961,623				3,613,726
Medical office		3,989,168				3,724,483				3,410,931
Gross reportable segment assets		14,051,070				14,692,941				14,801,775
Accumulated depreciation and amortization		(2,919,278		)		(2,900,060		)		(2,704,425		)
Net reportable segment assets		11,131,792				11,792,881				12,097,350
Other non-reportable segment assets		1,904,433				2,255,712				2,392,823
Assets held for sale and discontinued operations, net		417,014				927,866				5,654,326
Other non-segment assets		635,222				782,806				1,305,350
Total assets		$	14,088,461			$	15,759,265			$	21,449,849

As a result of the change in the composition of reportable segments during the fourth quarter of 2017, as further described above, the Company allocated goodwill to its revised reporting units using a relative fair value approach. The Company completed a goodwill impairment assessment for all reporting units immediately prior to the reallocation and determined that no impairment existed at September 30, 2017. Additionally, the Company completed the required annual goodwill impairment test during the fourth quarter of 2017 and no impairment was recognized. At December 31, 2017, goodwill of $47 million was allocated to segment assets as follows: (i) senior housing triple-net—$21 million, (ii) SHOP—$9 million, (iii) medical office—$11 million and (iv) other—$6 million. At December 31, 2016, goodwill of $42 million was allocated to segment assets as follows: (i) senior housing triple-net—$16 million, (ii) SHOP—$9 million, (iii) medical office—$11 million and (iv) other—$6 million.

NOTE 14.	Future Minimum Rents

The following table summarizes future minimum lease payments to be received, excluding operating expense reimbursements, from tenants under non-cancelable operating leases as of December 31, 2017 (in thousands):

Year		Amount
2018		$	1,021,212
2019		956,092
2020		874,617
2021		793,058
2022		691,352
Thereafter		2,807,315
		$	7,143,646

NOTE 15.	Compensation Plans

Stock Based Compensation

On May 11, 2006, the Company’s stockholders approved the 2006 Performance Incentive Plan, which was amended and restated in 2009 (“the 2006 Plan”). On May 1, 2014, the Company’s stockholders approved the 2014 Performance Incentive Plan (“the 2014 Plan”) (collectively, “the Plans”). Following the adoption of the 2014 Plan, no new awards will be issued under the 2006 Plan. The Plans provide for the granting of stock-based compensation, including stock options, restricted stock and restricted stock units to officers, employees and directors in connection with their employment with or services provided to the Company. The maximum number of shares reserved for awards under the 2014 Plan is 33 million shares, and as of December 31, 2017, 30 million of the reserved shares under the 2014 Plan are available for future awards of which 20 million shares may be issued as restricted stock and restricted stock units.

Total share-based compensation expense recognized during the years ended December 31, 2017, 2016 and 2015 was $14 million, $23 million and $26 million, respectively. The year ended December 31, 2016 includes a $7 million charge recognized in general and administrative expenses primarily resulting from the termination of the Company’s former chief executive officer (“CEO”) that was comprised of the accelerated vesting of restricted stock units in accordance with the terms of the former CEO’s employment agreement. As of December 31, 2017 and 2016, there was $20 million and $14 million, respectively, related to unvested share-based compensation arrangements granted under the Company’s incentive plans, which is expected to be recognized over a weighted average period of three years associated with future employee service.

Conversion of Equity Awards at the Spin-Off Date

The Plans were established with anti-dilution provisions, such that in the event of an equity restructuring of the Company (including spin-off transactions), equity awards would preserve their value post-transaction. In order to achieve an equitable modification of the existing awards following the Spin-Off, the Company converted pre-spin awards to their post-spin value, resulting in grants to remaining employees denominated solely in the Company’s common stock. The modification assumed a conversion ratio on all awards calculated as the final pre-spin closing price of the Company’s common stock divided by the five trading day average post-spin closing price (“Five Day Average Price”) of the Company’s common stock. The conversion impacted 133 participants, resulted in additional awards being granted and incremental fair value of unvested awards due to the difference between the Five Day Average Price and the pre-spin closing price on the Spin-Off date. The vesting periods were unchanged for unvested grants at the Spin-Off date. The incremental fair value of unvested awards was immaterial.

Stock Options

Stock options are granted with an exercise price per share equal to the closing market price of the Company’s common stock on the grant date. Stock options generally vest ratably over a three- to five-year period and have a 10-year contractual term. Vesting of certain stock options may accelerate, as provided in the Plans or in the applicable award agreement, upon retirement, a change in control or other specified events.

There have been no grants of stock options since 2014. Stock options outstanding and exercisable were 1.1 million at December 31, 2017, and 1.3 million and 1.2 million at December 31, 2016, respectively. Proceeds received from stock options exercised under the Plans for the years ended December 31, 2017, 2016 and 2015 were $1 million, $4 million and $28 million, respectively. Compensation expense related to stock options was immaterial for all periods presented.

Restricted Stock Awards

Under the Plans, restricted stock awards, including restricted stock units and performance stock units are granted subject to certain restrictions. Conditions of vesting are determined at the time of grant. Restrictions on certain awards generally lapse, as provided in the Plans or in the applicable award agreement, upon retirement, a change in control or other specified events. The fair market value of restricted stock awards, both time vesting and those subject to specific performance criteria, are expensed over the period of vesting. Restricted stock units, which vest based solely upon passage of time generally vest over a period of three to six years. The fair value of restricted stock units is determined based on the closing market price of the Company's shares on the grant date. Performance stock units, which are restricted stock awards that vest dependent upon attainment of various levels of performance that equal or exceed targeted levels, generally vest in their entirety at the end of a three year performance period. The number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of the performance criteria. The fair value of performance stock units is determined based on the Monte Carlo valuation model. The compensation expense recognized for all restricted stock awards is net of actual forfeitures.

Upon vesting of restricted stock awards, the participant is required to pay the related tax withholding obligation. Participants can generally elect to have the Company reduce the number of common stock shares delivered to pay the employee tax withholding obligation. The value of the shares withheld is dependent on the closing market price of the Company’s common stock on the trading date prior to the relevant transaction occurring. During the years ended December 31, 2017, 2016 and 2015, the Company withheld 157,000, 237,000 and 200,000 shares, respectively, to offset tax withholding obligations with respect to the vesting of the restricted stock and performance restricted stock unit awards.

Holders of restricted stock awards, including restricted stock units and performance stock units, are generally entitled to receive dividends equal to the amount that would be paid on an equivalent number of shares of common stock.

The following table summarizes restricted stock award activity, including performance stock units, for the year ended December 31, 2017 (units and shares in thousands):

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Unvested at January 1, 2017	962			$	37.39
Granted	844			33.57
Vested	(419	)		35.10
Forfeited	(248	)		35.04
Unvested at December 31, 2017	1,139			33.41

At December 31, 2017, the weighted average remaining vesting period of restricted stock and performance based units was two years. The total fair value (at vesting) of restricted stock and performance based units which vested for the years ended December 31, 2017, 2016 and 2015 was $15 million, $24 million and $21 million, respectively.

Subsequent events. The Company expects to record severance and related charges of approximately $9 million in the first quarter of 2018 related to the departure of our Executive Chairman, effective March 1, 2018.

NOTE 16.	Impairments

Casualty-Related

As a result of Hurricane Harvey and Hurricane Irma during the year ended December 31, 2017, the Company recorded an estimated $13 million of casualty-related losses, net of a small insurance recovery. The losses are comprised of $8 million of property damage and $5 million of other associated costs, including storm preparation, clean up, relocation and other costs. Of the total $13 million casualty losses incurred, $12 million was recorded in Other income (expense), net, and $1 million was recorded in equity income (loss) from unconsolidated joint ventures as it relates to casualty losses for properties owned by certain of our unconsolidated joint ventures. In addition, the Company recorded a $1 million deferred tax benefit associated with the casualty-related losses.

Real Estate

During the third quarter 2017, the Company determined that 11 underperforming senior housing triple-net assets that are candidates for potential future sale were impaired. Accordingly, the Company wrote-down the carrying amount of these 11 assets to their fair value, which resulted in an aggregate impairment charge of $23 million. The fair value of the assets was based on forecasted sales prices which are considered to be Level 2 measurements within the fair value hierarchy.

Other

See Note 7 for further information on the impairment charges related to the mezzanine loan facility to Tandem (the "Tandem Mezzanine Loan").

In June 2015 and September 2015, the Company determined that its Four Seasons senior notes (the “Four Seasons Notes”) were other-than-temporarily impaired resulting from a continued decrease in the fair value of its investment. Although the Company did not intend to sell and did not believe it would be required to sell the Four Seasons Notes before their maturity, the Company determined that a credit loss existed resulting from several factors including: (i) deterioration in Four Seasons’ operating performance since the fourth quarter of 2014 and (ii) credit downgrades to Four Seasons received during the first half of 2015. Accordingly, the Company recorded impairment charges during the three months ended June 30, 2015 and September 30, 2015 of $42 million and $70 million, respectively, reducing the carrying value of the Four Seasons Notes at September 30, 2015 to $100 million (£66 million).

The fair value of the Four Seasons Notes used to calculate the impairment charge was based on quoted market prices. However, because the Four Seasons Notes were not actively traded, these prices were considered to be Level 2 measurements within the fair value hierarchy. When calculating the fair value and determining whether a credit loss existed, the Company also evaluated Four Season’s ability to repay the Four Seasons Notes according to their contractual terms based on its estimate of future cash flows. The estimated future cash flow inputs included forecasted revenues, capital expenditures, operating expenses, care home occupancy and continued implementation of Four Seasons’ business plan which included executing on its business line segmentation and continuing to invest in its core real estate portfolio. This information was consistent with the results of the valuation technique

used by the Company to determine if a credit loss existed and to calculate the fair value of the Four Seasons Notes during its impairment review.

In March 2017, pursuant to a shift in the Company’s investment strategy, the Company sold its £138.5 million par value Four Seasons Notes for £83 million ($101 million). The disposition of the Four Seasons Notes generated a £42 million ($51 million) gain on sale, recognized in other income, net, as the sales price was above the previously-impaired carrying value of £41 million ($50 million).

Through October 2015, the Company held a secured term loan made to Delphis Operations, L.P. (“Delphis”). 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.

NOTE 17. Income Taxes

The Company has elected to be taxed as a REIT under the applicable provisions of the Code for every year beginning with the year ended December 31, 1985. The Company has also elected for certain of its subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”) which are subject to federal and state income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this Note 17. Certain REIT entities are also subject to state, local and foreign income taxes.

Distributions with respect to our common stock can be characterized for federal income tax purposes as taxable ordinary dividends, capital gain dividends, nondividend distributions or a combination thereof. Following is the characterization of our annual common stock distributions per share:

	Year Ended December 31,
	2017				2016				2015
Ordinary dividends	$	1.4800			$	1.5561			$	2.1184
Capital gain dividends	—				—				0.0316
Nondividend distributions	—				6.7089				0.1100
	$	1.4800			$	8.2650		(1)	$	2.2600

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(1)	Consists of $2.095 per common share of quarterly cash dividends and $6.17 per common share of stock dividends related to the Spin-Off (see Note 5).

HCP common stockholders on October 24, 2016, the record date for the Spin-Off (the “Record Date”), received upon the Spin-Off on October 31, 2016 one share of QCP common stock for every five shares of HCP common stock they held (the “Distributed Shares”) and cash in lieu of fractional shares of QCP. For U.S. federal income tax purposes, HCP reported the fair market value of the QCP common stock distributed per each share of HCP common stock outstanding on the Record Date was $6.17, or $30.85 for each share of QCP common stock.

The TRS entities subject to tax reported losses before income taxes from continuing operations of $58 million, $9 million and $22 million for the years ended December 31, 2017, 2016 and 2015, respectively. The REIT’s losses from continuing operations before income taxes from the U.K. were $4 million, $4 million and $15 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The total income tax expense (benefit) from continuing operations consists of the following components (in thousands):

	Year Ended December 31,
	2017				2016				2015
Current
Federal	$	949			$	8,525			$	4,948
State	1,504				8,307				1,988
Foreign	1,737				1,332				828
Total current	$	4,190			$	18,164			$	7,764
Deferred
Federal	$	2,730			$	(10,241	)		$	(11,317	)
State	(5,889		)		(1,401		)		(1,382		)
Foreign	(2,364		)		(2,049		)		(4,872		)
Total deferred	$	(5,523	)		$	(13,691	)		$	(17,571	)
Total income tax expense (benefit)	$	(1,333	)		$	4,473			$	(9,807	)

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. As a result of the reduced U.S. federal corporate tax rate, the Company recorded a tax expense of $17 million, due to a remeasurement of deferred tax assets and liabilities, which is included in total deferred tax expense in the table above.

The Company’s income tax expense from discontinued operations was $0, $48 million and $1 million for the years ended December 31, 2017, 2016 and 2015, respectively (see Note 5).

The following table reconciles the income tax expense (benefit) from continuing operations at statutory rates to the actual income tax expense recorded (in thousands):

	Year Ended December 31,
	2017				2016				2015
Tax benefit at U.S. federal statutory income tax rate on income or loss subject to tax	$	(21,085	)		$	(4,581	)		$	(12,630	)
State income tax expense, net of federal tax	(1,222		)		6,081				(606		)
Gross receipts and margin taxes	1,716				1,847				1,383
Foreign rate differential	632				647				2,269
Effect of permanent differences	6				(280		)		(298		)
Return to provision adjustments	1,597				287				(368		)
Re-measurement of deferred tax assets and liabilities	17,080				—				—
Increase (decrease) in valuation allowance	(57		)		472				443
Total income tax expense (benefit)	$	(1,333	)		$	4,473			$	(9,807	)

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table summarizes the significant components of the Company’s deferred tax assets and liabilities from continuing operations (in thousands):

	December 31,
	2017				2016				2015
Property, primarily differences in depreciation and amortization, the basis of land, and the treatment of interest and certain costs	$	31,691			$	28,940			$	19,862
Net operating loss carryforward	10,720				8,784				3,703
Expense accruals and other	229				(847		)		(753		)
Valuation allowance	(548		)		(606		)		(531		)
Net deferred tax assets	$	42,092			$	36,271			$	22,281

Deferred tax assets and liabilities are included in other assets, net and accounts payable and accrued liabilities.

At December 31, 2017 the Company had a net operating loss (“NOL”) carryforward of $42 million related to the TRS entities. These amounts can be used to offset future taxable income, if any. The NOL carryforwards begin to expire in 2033 with respect to the TRS entities.

The Company records a valuation allowance against deferred tax assets in certain jurisdictions when it cannot sustain a conclusion that it is more likely than not that it can realize the deferred tax assets during the periods in which these temporary differences become deductible. The deferred tax asset valuation allowance is adequate to reduce the total deferred tax assets to an amount that the Company estimates will “more-likely-than-not” be realized.

The Company files numerous U.S. federal, state and local income and franchise tax returns. With a few exceptions, the Company is no longer subject to U.S. federal, state or local tax examinations by taxing authorities for years prior to 2014.

For the years ended December 31, 2017 and 2016, the tax basis of the Company’s net assets was less than the reported amounts by $1.7 billion and $2.0 billion, respectively. The difference between the reported amounts and the tax basis was primarily related to the Slough Estates USA, Inc. (“SEUSA”) acquisition, which occurred in 2007. For the year ended December 31, 2015, the tax basis of the Company’s net assets was less than the reported amounts by $6.5 billion. The difference between the reported amounts and the tax basis was primarily related to the SEUSA and HCRMC acquisitions which occurred in 2007 and 2011, respectively. Both SEUSA and HCRMC were corporations subject to federal and state income taxes. As a result of these acquisitions, the Company succeeded to the tax attributes of SEUSA and HCRMC, including the tax basis in the acquired company’s assets and liabilities.

The Company is no longer subject to federal corporate-level tax on the taxable disposition of SEUSA pre-acquisition assets.

NOTE 18.	Earnings Per Common Share

The following table illustrates the computation of basic and diluted earnings per share (dollars in thousands, except per share data):

	Year Ended December 31,
	2017				2016				2015
Numerator
Net income (loss) from continuing operations	$	422,634			$	374,171			$	152,668
Noncontrolling interests' share in earnings	(8,465		)		(12,179		)		(12,817		)
Net income (loss) attributable to HCP, Inc.	414,169				361,992				139,851
Less: Participating securities' share in earnings	(1,156		)		(1,198		)		(1,317		)
Income (loss) from continuing operations applicable to common shares	413,013				360,794				138,534
Discontinued operations	—				265,755				(699,086		)
Net income (loss) applicable to common shares	$	413,013			$	626,549			$	(560,552	)
Denominator
Basic weighted average shares outstanding	468,759				467,195				462,795
Dilutive potential common shares - equity awards	176				208				—
Diluted weighted average common shares	468,935				467,403				462,795
Basic earnings per common share
Continuing operations	$	0.88			$	0.77			$	0.30
Discontinued operations	—				0.57				(1.51		)
Net income (loss) applicable to common shares	$	0.88			$	1.34			$	(1.21	)
Diluted earnings per common share
Continuing operations	$	0.88			$	0.77			$	0.30
Discontinued operations	—				0.57				(1.51		)
Net income (loss) applicable to common shares	$	0.88			$	1.34			$	(1.21	)

Restricted stock and certain performance restricted stock units are considered participating securities because dividend payments are not forfeited even if the underlying award does not vest and require use of the two-class method when computing basic and diluted earnings per share.

For the year ended December 31, 2015, diluted loss per share from continuing operations is calculated using the weighted-average common shares outstanding during the period, as the effect of shares issuable under employee compensation plans and upon DownREIT unit conversions would have been anti-dilutive. All DownREIT units and approximately 1 million stock options were anti-dilutive for all periods presented.

NOTE 19.	Supplemental Cash Flow Information

The following table summarizes supplemental cash flow information (in thousands):

	Year Ended December 31,
	2017				2016				2015
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	309,111			$	489,453			$	451,615
Income taxes paid	10,045				13,727				6,959
Capitalized interest	16,937				11,108				8,798
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	67,425				49,999				52,511
Non-cash impact of QCP Spin-Off, net	—				3,539,584				—
Securities transferred for debt defeasance	—				73,278				—
Settlement of loans receivable as consideration for real estate acquisition	—				—				299,297
Vesting of restricted stock units and conversion of non-managing member units into common stock	2,908				6,622				3,388
Noncontrolling interest and other liabilities, net assumed in connection with the RIDEA III acquisition	—				—				61,219
Deconsolidation of noncontrolling interest in connection with RIDEA II transaction	58,061				—				—
Noncontrolling interest issued in connection with real estate and other acquisitions	—				—				10,971
Mortgages and other liabilities assumed with real estate acquisitions	5,425				82,985				23,218
Foreign currency translation adjustment	15,862				(3,332		)		(8,738		)
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	(10,315		)		3,171				1,889

See discussions related to the Brookdale Transaction in Note 3 and the Spin-Off in Note 5.

The following table summarizes cash, cash equivalents and restricted cash (in thousands):

		December 31,
		2017				2016
Cash and cash equivalents		$	55,306			$	94,730
Restricted cash		26,897				42,260
Cash, cash equivalents and restricted cash		$	82,203			$	136,990

NOTE 20.	Variable Interest Entities

On January 1, 2016, the Company adopted ASU 2015-2 using the modified retrospective method as permitted by the ASU. As a result of the adoption, the Company identified additional assets and liabilities of certain VIEs in its consolidated total assets and total liabilities at December 31, 2015 of $543 million and $651 million, respectively. Refer to the specific VIE descriptions below for detail on which entities were classified as consolidated VIEs subsequent to the adoption of ASU 2015-2. Additionally, the Company deconsolidated three JVs and recognized $0.5 million as a cumulative-effect adjustment to cumulative dividends in excess of earnings.

Unconsolidated Variable Interest Entities

At December 31, 2017, the Company had investments in: (i) five unconsolidated VIE joint ventures; (ii) 48 properties leased to VIE tenants; (iii) marketable debt securities of one VIE and (iv) three loans to VIE borrowers. The Company has determined that it is not the primary beneficiary of and therefore does not consolidate these VIEs because it does not have the ability to control

the activities that most significantly impact their economic performance. Except for the Company’s equity interest in the unconsolidated JVs (CCRC OpCo, RIDEA II PropCo, Vintage Park Development JV, Waldwick JV and the LLC investment discussed below), it has no formal involvement in these VIEs beyond its investments.

The Company holds a 49% ownership interest in CCRC OpCo, a joint venture entity formed in August 2014 that operates senior housing properties in a RIDEA structure and has been identified as a VIE. The equity members of CCRC OpCo “lack power” because they share certain operating rights with Brookdale, as manager of the CCRCs. The assets of CCRC OpCo primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable, and cash and cash equivalents; its obligations primarily consist of operating lease obligations to CCRC PropCo, debt service payments and capital expenditures for the properties, and accounts payable and expense accruals associated with the cost of its CCRCs’ operations. Assets generated by the CCRC operations (primarily rents from CCRC residents) of CCRC OpCo may only be used to settle its contractual obligations (primarily from debt service payments, capital expenditures, and rental costs and operating expenses incurred to manage such facilities).

In January 2017, as a result of the partial sale of its interest in RIDEA II, the Company concluded that it should deconsolidate RIDEA II as it is no longer the primary beneficiary of the joint venture. The HCP/CPA JV is the primary beneficiary of both RIDEA II PropCo and RIDEA II OpCo as it controls the significant activities of RIDEA II PropCo and, of the group that controls the significant activities of RIDEA II OpCo, is most closely associated to the entity. Furthermore, control over the HCP/CPA JV is shared between HCP and CPA, and as such, the Company does not consolidate the HCP/CPA JV. Subsequent to the partial sale of its interest in RIDEA II, the Company continues to hold a direct investment in RIDEA II PropCo, which has been identified as a VIE as Brookdale, the non-managing member, does not have any substantive participating rights or kick-out rights over the managing member, HCP/CPA PropCo. The assets of RIDEA II PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a combination of third-party and HCP debt (see Note 5). Assets generated by RIDEA II PropCo (primarily from RIDEA II OpCo lease payments) may only be used to settle its contractual obligations (primarily debt service payments on the third-party and HCP debt).

The Company holds an 85% ownership interest in two development joint ventures (Vintage Park Development JV and Waldwick JV) (see Note 8), which have been identified as VIEs as power is shared with a member that does not have a substantive equity investment at risk. The assets of each joint venture primarily consist of an in-progress senior housing facility development project that it owns and cash and cash equivalents; its obligations primarily consist of accounts payable and expense accruals associated with the cost of its development obligations. Any assets generated by each joint venture may only be used to settle its respective contractual obligations (primarily development expenses and debt service payments).

The Company holds a limited partner ownership interest in an unconsolidated LLC that has been identified as a VIE. The Company’s involvement in the entity is limited to its equity investment as a limited partner, and it does not have any substantive participating rights or kick-out rights over the general partner. The assets and liabilities of the entity primarily consist of those associated with its senior housing real estate and development activities. Any assets generated by the entity may only be used to settle its contractual obligations (primarily development expenses and debt service payments).

The Company leases 48 properties to a total of seven tenants that have also been identified as VIEs (“VIE tenants”). These VIE tenants are “thinly capitalized” entities that rely on the operating cash flows generated from the senior housing facilities to pay operating expenses, including the rent obligations under their leases.

The Company holds commercial mortgage-backed securities (“CMBS”) issued by Federal Home Loan Mortgage Corporation (commonly referred to as Freddie MAC) through a special purpose entity that has been identified as a VIE because it is “thinly capitalized.” The CMBS issued by the VIE are backed by mortgage debt obligations on real estate assets.

The Company provided a £105 million ($131 million) bridge loan to Maria Mallaband Care Group Ltd. (“MMCG”) to fund the acquisition of a portfolio of care homes in the U.K. MMCG created a special purpose entity to acquire the portfolio and funded it entirely using the Company’s bridge loan. As such, the special purpose entity has been identified as a VIE because it is “thinly capitalized.” The Company retains a three-year call option to acquire all the shares of the special purpose entity, which it can only exercise upon the occurrence of certain events.

The Company provided seller financing of $10 million related to its sale of seven senior housing triple-net facilities. The financing was provided in the form of a secured five-year mezzanine loan to a “thinly capitalized” borrower created to acquire the facilities.

Between 2012 and 2015, the Company funded a $257 million mezzanine loan facility to Tandem as part of a recapitalization of the Tandem Portfolio (see Note 7). Due to a decline in the fair value of the Tandem Portfolio over time, there is no longer sufficient equity at risk in Tandem and it has become a “thinly capitalized” borrower.

The classification of the related assets and liabilities and their maximum loss exposure as a result of the Company’s involvement with these VIEs at December 31, 2017 are presented below (in thousands):

VIE Type		Asset/Liability Type		Maximum Loss Exposure and Carrying Amount(1)
VIE tenants - DFLs (2)		Net investment in DFLs		$	601,723
VIE tenants - operating leases (2)		Lease intangibles, net and straight-line rent receivables		5,519
CCRC OpCo		Investments in unconsolidated joint ventures		190,454
RIDEA II PropCo		Investments in unconsolidated joint ventures		252,743
Development JVs		Investments in unconsolidated joint ventures		12,563
Tandem Health Care		Loans Receivable, net		105,000
MMCG Loan		Loans Receivable, net		142,820
Loan - Seller Financing		Loans Receivable, net		10,000
CMBS and LLC investment		Marketable debt and cost method investment		33,750

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(1)	The Company’s maximum loss exposure represents the aggregate carrying amount of such investments (including accrued interest).

(2)	The Company’s maximum loss exposure may be mitigated by re-leasing the underlying properties to new tenants upon an event of default.

As of December 31, 2017, the Company had not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash shortfalls). See Notes 3, 6, 7 and 8 for additional descriptions of the nature, purpose and operating activities of the Company’s unconsolidated VIEs and interests therein.

Consolidated Variable Interest Entities

HCP, Inc.'s consolidated total assets and total liabilities at December 31, 2017 and December 31, 2016 include certain assets of VIEs that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at December 31, 2017 and December 31, 2016 include VIE assets as follows (in thousands):

		December 31,
		2017				2016
Assets
Building and Improvements		$	2,436,414			$	3,522,310
Developments in Process		32,285				31,953
Land		227,162				327,241
Accumulated Depreciation		(542,091		)		(676,276		)
Net Real Estate		2,153,770				3,205,228
Investments in and advances to unconsolidated joint ventures		2,231				3,641
Accounts Receivable, Net		10,242				19,996
Cash and Cash Equivalents		15,861				35,844
Restricted Cash		2,619				22,624
Intangible Assets, Net		125,475				169,027
Other Assets, Net		33,749				69,562
Total Assets		$	2,343,947			$	3,525,922
Liabilities
Mortgage Debt		45,016				520,870
Intangible Liabilities, Net		10,672				8,994
Accounts Payable and Accrued Expenses		87,759				120,719
Other Liabilities		29,034				—
Intercompany Accounts		331				—
Fixed Asset Push Down		152,156				—
Deferred Revenue		14,432				23,456
Total Liabilities		$	339,400			$	674,039

RIDEA I. The Company holds a 90% ownership interest in JV entities formed in September 2011 that own and operate senior housing properties in a RIDEA structure (“RIDEA I”). The Company has historically classified RIDEA I OpCo as a VIE and, as a result of the adoption of ASU No. 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), also classifies RIDEA I PropCo as a VIE due to the non-managing member lacking substantive participation rights in the management of RIDEA I PropCo or kick-out rights over the managing member. The Company consolidates RIDEA I PropCo and RIDEA I OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of RIDEA I PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of notes payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA I OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA I PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA I structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

HCP Ventures V, LLC. The Company holds a 51% ownership interest in and is the managing member of a JV entity formed in October 2015 that owns and leases MOBs (“HCP Ventures V”). Upon adoption of ASU 2015-02, the Company classified HCP Ventures V as a VIE due to the non-managing member lacking substantive participation rights in the management of HCP Ventures V or kick-out rights over the managing member. The Company consolidates HCP Ventures V as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of HCP Ventures V primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by HCP Ventures V may only be used to settle its contractual obligations (primarily from capital expenditures).

Vintage Park JV. The Company holds a 90% ownership interest in a JV entity formed in January 2015 (“Vintage Park JV”) that owns an 85% interest in an unconsolidated development VIE. Upon adoption of ASU 2015-02, the Company classified Vintage Park JV as a VIE due to the non-managing member lacking substantive participation rights in the management of the Vintage Park JV or kick-out rights over the managing member. The Company consolidates Vintage Park JV as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of Vintage Park JV primarily consist of an investment in the Vintage Park Development JV and cash and cash equivalents; its obligations primarily consist of funding the ongoing development of the Vintage Park Development JV. Assets generated by the Vintage Park JV may only be used to settle its contractual obligations (primarily from the funding of the Vintage Park Development JV).

Watertown JV. The Company holds a 95% ownership interest in JV entities formed in November 2017 that own and operate a senior housing property in a RIDEA structure (“Watertown JV”). Watertown PropCo is a VIE as the Company and the non-managing member share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. Watertown OpCo is a VIE as the non-managing member, through its equity interest, lacks substantive participation rights in the management of Watertown OpCo or kick-out rights over the managing member. The Company consolidates Watertown PropCo and Watertown OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of Watertown PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of notes payable to a non-VIE consolidated subsidiary of the Company. The assets of Watertown OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to Watertown PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the Watertown structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

Hayden JV. The Company holds a 99% ownership interest in a JV entity formed in December 2017 that owns and leases a life science complex (“Hayden JV”). The Hayden JV is a VIE as the members share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. The Company consolidates the Hayden JV as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the Hayden JV primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by Hayden JV may only be used to settle its contractual obligations (primarily from capital expenditures).

Consolidated Lessees. The Company leases 21 senior housing properties to lessee entities under cash flow leases through which the Company receives monthly rent equal to the residual cash flows of the properties. The lessee entities are classified as VIEs as they are "thinly capitalized" entities. The Company consolidates the lessee entities as it has the ability to control the activities that most significantly impact the economic performance of the lessee entities. The lessee entities' assets primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to the Company and operating expenses of the senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

DownREITs. The Company holds a controlling ownership interest in and is the managing member of five DownREITs. Upon adoption of ASU 2015-02, the Company classified the DownREITs as VIEs due to the non-managing members lacking substantive participation rights in the management of the DownREITs or kick-out rights over the managing member. The Company consolidates the DownREITs as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the DownREITs primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; their obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by the DownREITs (primarily from resident rents) may only be used to settle their contractual obligations (primarily from debt service and capital expenditures).

Other Consolidated Real Estate Partnerships. The Company holds a controlling ownership interest in and is the general partner (or managing member) of multiple partnerships that own and lease real estate assets (the “Partnerships”). Upon adoption of ASU 2015-02, the Company classified the Partnerships as VIEs due to the limited partners (non-managing members) lacking substantive participation rights in the management of the Partnerships or kick-out rights over the general partner (managing member). The Company consolidates the Partnerships as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the Partnerships primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; their obligations primarily consist of debt service payments and capital

expenditures for the properties. Assets generated by the Partnerships (primarily from resident rents) may only be used to settle their contractual obligations (primarily from debt service and capital expenditures).

Other consolidated VIEs. The Company made a loan to an entity that entered into a tax credit structure (“Tax Credit Subsidiary”) and a loan to an entity that made an investment in a development JV (“Development JV”) both of which are considered VIEs. The Company consolidates the Tax Credit Subsidiary and Development JV as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIEs’ economic performance. The assets and liabilities of the Tax Credit Subsidiary and Development JV substantially consist of a development in progress, notes receivable, prepaid expenses, notes payable, and accounts payable and accrued liabilities generated from their operating activities. Any assets generated by the operating activities of the Tax Credit Subsidiary and Development JV may only be used to settle their contractual obligations.

Exchange Accommodation Titleholder. During the year ended December 31, 2017, the Company acquired a portfolio of 11 MOBs (the "acquired properties") using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a "reverse 1031 exchange"). As of December 31, 2017, the Company had not completed the reverse 1031 exchange and as such, the acquired properties remained in the possession of an Exchange Accommodation Titleholder ("EAT"). The EAT is classified as a VIE as it is a “thinly capitalized” entity. The Company consolidates the EAT because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the EAT's economic performance. The properties held by the EAT are reflected as real estate with an aggregate carrying value of $153 million as of December 31, 2017. The assets of the EAT primarily consist of a leased property (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by the EAT may only be used to settle its contractual obligations (primarily from capital expenditures).

NOTE 21.	Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis at December 31, 2017 in the consolidated balance sheets are immaterial.

The table below summarizes the carrying amounts and fair values of the Company’s financial instruments (in thousands):

	December 31,
	2017(3)								2016(3)
	Carrying Value				Fair Value				Carrying Value				Fair Value
Loans receivable, net(2)	$	313,326			$	313,242			$	807,954			$	807,505
Marketable debt securities(2)	18,690				18,690				68,630				68,630
Bank line of credit(2)	1,017,076				1,017,076				899,718				899,718
Term loans(2)	228,288				228,288				440,062				440,062
Senior unsecured notes(1)	6,396,451				6,737,825				7,133,538				7,386,149
Mortgage debt(2)	144,486				125,984				623,792				609,374
Other debt(2)	94,165				94,165				92,385				92,385
Interest-rate swap liabilities(2)	2,483				2,483				4,857				4,857
Currency swap asset(2)	—				—				2,920				2,920
Cross currency swap liability(2)	10,968				10,968				—				—

---

(1)	Level 1: Fair value calculated based on quoted prices in active markets.

(2)

Level 2: Fair value based on (i) for marketable debt securities, quoted prices for similar or identical instruments in active or inactive markets, respectively, or (ii) or for loans receivable, net, mortgage debt, and swaps, calculated utilizing standardized pricing models in which significant inputs or value drivers are observable in active markets. For bank line of credit, term loans and other debt, the carrying values are a reasonable estimate of fair value because the borrowings are primarily based on market interest rates and the Company’s credit rating.

(3)	During the years ended December 31, 2017 and 2016, there were no transfers of financial assets or liabilities within the fair value hierarchy.

NOTE 22.	Concentration of Credit Risk

Concentrations of credit risk arise when one or more tenants, operators or obligors related to the Company’s investments are engaged in similar business activities or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors various segments of its portfolio to assess potential concentrations of credit risks.

The following tables provide information regarding the Company’s concentrations with respect to Brookdale as a tenant as of and for the periods presented:

		Percentage of Gross Assets
		Total Company				Senior Housing Triple-Net
		December 31,				December 31,
Tenant		2017		2016		2017		2016
Brookdale(1)		10		17		39		69

		Percentage of Revenues
		Total Company Revenues						Senior Housing Triple-Net Revenues
		Year Ended December 31,						Year Ended December 31,
Tenant		2017		2016		2015		2017		2016		2015
Brookdale(1)		8		12		13		47		59		58

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(1)	The Company's concentration with respect to Brookdale as a tenant is expected to decrease with the completion of the Brookdale Transaction (see Note 3). Includes revenues from 64 senior housing triple-net facilities that were classified as held for sale at December 31, 2016. Excludes senior housing facilities operated by Brookdale in the Company’s SHOP segment, as discussed below.

As of December 31, 2017 and 2016, Brookdale managed or operated, in the Company’s SHOP segment, approximately 13% and 18%, respectively, of the Company’s real estate investments based on total assets. Because an operator manages the Company’s facilities in exchange for the receipt of a management fee, the Company is not directly exposed to the credit risk of its operators in the same manner or to the same extent as its triple-net tenants. As of December 31, 2017, Brookdale provided comprehensive facility management and accounting services with respect to 78 of the Company’s senior housing facilities and 62 SHOP facilities owned by its unconsolidated joint ventures, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. The Company's concentration with respect to Brookdale as an operator in its SHOP segment is expected to decrease with the completion of the Brookdale Transaction (see Note 3) and the sale of its remaining 40% ownership interest in RIDEA II (see Note 5). Most of the management agreements have terms ranging from 10 to 15 years, with three to four 5-year renewals. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.

Brookdale is subject to the registration and reporting requirements of the U.S. Securities and Exchange Commission (“SEC”) and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale contained or referred to in this report has been derived from SEC filings made by Brookdale or other publicly available information, or was provided to the Company by Brookdale, and the Company has not verified this information through an independent investigation or otherwise. The Company has no reason to believe that this information is inaccurate in any material respect, but the Company cannot assure the reader of its accuracy. The Company is providing this data for informational purposes only, and encourages the reader to obtain Brookdale’s publicly available filings, which can be found on the SEC’s website at www.sec.gov.

See Note 3 for further information on the reduction of concentration related to Brookdale.

To mitigate the credit risk of leasing properties to certain senior housing and post-acute/skilled nursing operators, leases with operators are often combined into portfolios that contain cross-default terms, so that if a tenant of any of the properties in a portfolio defaults on its obligations under its lease, the Company may pursue its remedies under the lease with respect to any of the properties in the portfolio. Certain portfolios also contain terms whereby the net operating profits of the properties are combined for the purpose of securing the funding of rental payments due under each lease.

The following table provides information regarding the Company’s concentrations with respect to certain states; the information provided is presented for the gross assets and revenues that are associated with certain real estate assets as percentages of total Company’s total assets and revenues:

		Percentage of Total Company Assets				Percentage of Total Company Revenues
		December 31,				Year Ended December 31,
State		2017		2016		2017		2016		2015
California		31		29		26		26		27
Texas		14		14		17		17		16

NOTE 23.	Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of December 31, 2017 (dollars and GBP in thousands):

Date Entered		Maturity Date		Hedge Designation		Notional			Pay Rate		Receive Rate			Fair Value(1)
Interest rate:
July 2005(2)		July 2020		Cash Flow		44,000			3.820%		BMA Swap Index			(2,483	)
Cross currency swap:
April 2017(3)		February 2019		Net Investment		£105,000 / $131,000			2.584%		3.750	%		(10,968	)

---

(1)	Derivative assets are recorded in other assets, net and derivative liabilities are recorded in accounts payable and accrued liabilities on the consolidated balance sheets.

(2)	Represents three interest-rate swap contracts, which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(3)

Represents a cross currency swap to pay 2.584% on £105 million and receive 3.75% on $131 million through February 1, 2019, with an initial and final exchange of principals at origination and maturity at a rate of 1.251 USD/GBP. Hedges the risk of changes in the USD equivalent value of a portion of the Company’s net investment in its consolidated GBP subsidiaries’ attributable to changes in the USD/GBP exchange rate.

The Company uses derivative instruments to mitigate the effects of interest rate and foreign currency fluctuations on specific forecasted transactions as well as recognized financial obligations or assets. Utilizing derivative instruments allows the Company to manage the risk of fluctuations in interest and foreign currency rates related to the potential impact these changes could have on future earnings and forecasted cash flows. The Company does not use derivative instruments for speculative or trading purposes. Assuming a one percentage point shift in the underlying interest rate curve, the estimated change in fair value of each of the underlying derivative instruments would not exceed $2 million. Assuming a one percentage point shift in the underlying foreign currency exchange rates, the estimated change in fair value of each of the underlying derivative instruments would not exceed $2 million.

As of December 31, 2017, £150 million of the Company’s GBP-denominated borrowings under the 2015 Term Loan and a £105 million cross currency swap are designated as a hedge of a portion of the Company’s net investments in GBP-functional subsidiaries to mitigate its exposure to fluctuations in the GBP to USD exchange rate. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to USD exchange rate of the instrument is recorded as part of the cumulative translation adjustment component of accumulated other comprehensive income (loss). Accordingly, (i) the remeasurement value of the designated £150 million GBP-denominated borrowings and (ii) the change in fair value of the £105 million cross currency swap due primarily to fluctuations in the GBP to USD exchange rate are reported in accumulated other comprehensive income (loss) as the hedging relationship is considered to be effective. The balance in accumulated other comprehensive income (loss) will be reclassified to earnings when the hedged investment is sold or substantially liquidated.

NOTE 24.	Selected Quarterly Financial Data (Unaudited)

The following table summarizes selected quarterly information for the years ended December 31, 2017 and 2016 (in thousands, except per share amounts):

	Three Months Ended 2017
	March 31				June 30				September 30				December 31
Total revenues	$	492,168			$	458,928			$	454,023			$	443,259
Income (loss) before income taxes and equity income from investments in unconsolidated joint ventures	454,746				18,874				(12,263		)		(50,957		)
Net income (loss)	464,177				22,101				(5,720		)		(57,924		)
Net income (loss) applicable to HCP, Inc.	461,145				19,383				(7,657		)		(58,702		)
Dividends paid per common share	0.37				0.37				0.37				0.37
Basic earnings per common share	0.98				0.04				(0.02		)		(0.13		)
Diluted earnings per common share	0.97				0.04				(0.02		)		(0.13		)

	Three Months Ended 2016
	March 31				June 30				September 30				December 31
Total revenues	$	520,457			$	538,332			$	530,555			$	539,950
Total discontinued operations	68,408				107,378				108,215				(18,246		)
Income (loss) before income taxes and equity income from investments in unconsolidated joint ventures	55,949				196,352				47,453				67,530
Net (loss) income	119,745				304,842				154,039				61,300
Net (loss) income applicable to HCP, Inc.	116,119				301,717				151,250				58,661
Dividends paid per common share	0.58				0.58				0.58				0.37
Basic earnings per common share	0.25				0.65				0.32				0.12
Diluted earnings per common share	0.25				0.64				0.32				0.12

The above selected quarterly financial data includes the following significant transactions:

2017

•	During the quarter ended December 31, 2017, the Company recognized $20 million net reduction of rental and related revenues and $35 million of operating expense related to the Brookdale Transaction.

•	During the quarter ended December 31, 2017, the Company recorded an impairment charge of $84 million related to the Tandem Mezzanine Loan.

•	During the quarter ended December 31, 2017, the Company recognized a tax expense of $17 million due to a re-measurement of deferred tax assets and liabilities.

•	During the quarter ended September 30, 2017, the Company repurchased $500 million of our 5.375% senior notes due 2021 and recorded a $54 million loss on debt extinguishment.

•	During the quarter ended June 30, 2017, the Company recorded an impairment charge of $57 million related to the Tandem Mezzanine Loan.

•	The quarter ended March 31, 2017, the Company deconsolidated the net assets of RIDEA II and recognized a net gain on sale of $99 million.

•	The quarter ended March 31, 2017, the Company sold 64 senior housing triple-net assets, resulting in a net gain on sale of $170 million.

•	The quarter ended March 31, 2017, the Company sold its Four Seasons Notes, which generated a £42 million ($51 million) gain on sale.

2016

•	The quarter ended December 31, 2016 includes the following related to the Spin-Off: (i) $46 million of loss on debt extinguishment and (ii) $58 million of transaction costs.

•	The quarter ended June 30, 2016 includes $120 million of gain on sales from real estate dispositions.

•	The quarter ended March 31, 2016 includes $53 million of income tax expense associated with state built-in gain tax payable upon the disposition of specific real estate assets, of which $49 million relates to the HCRMC real estate portfolio.

Schedule II: Valuation and Qualifying Accounts

Allowance Accounts(1)						Additions								Deductions
Year Ended December 31,		Balance at Beginning of Year				Amounts Charged Against Operations, net				Acquired Properties				Uncollectible Accounts Written-off				Disposed Properties				Balance at End of Year
2017		$	29,518			$	144,135			$	—			$	(2,732	)		$	(1,547	)		$	169,374
2016		36,180				1,177				—				(2,843		)		(4,996		)		29,518
2015		50,531				3,174				—				(17,209		)		(316		)		36,180

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(1)	Includes allowance for doubtful accounts, straight-line rent reserves, and allowances for loan and direct financing lease losses and excludes discontinued operations of $818 million for the year ended December 31, 2015.

Schedule III: Real Estate and Accumulated Depreciation

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
Senior housing triple-net
1107		Huntsville		AL		$	—			$	307			$	5,813			$	—			$	307			$	5,453			$	5,760			$	(1,534	)		2006
0786		Douglas		AZ		—				110				703				—				110				703				813				(365		)		2005
0518		Tucson		AZ		—				2,350				24,037				—				2,350				24,037				26,387				(11,418		)		2002
1238		Beverly Hills		CA		—				9,872				32,590				9,188				9,872				41,030				50,902				(12,043		)		2006
0883		Carmichael		CA		—				4,270				13,846				—				4,270				13,236				17,506				(3,668		)		2006
2204		Chino Hills		CA		—				3,720				41,183				24				3,720				41,205				44,925				(4,931		)		2014
0851		Citrus Heights		CA		—				1,180				8,367				—				1,180				8,037				9,217				(3,102		)		2006
0790		Concord		CA		25,000				6,010				39,601				—				6,010				38,301				44,311				(11,877		)		2005
0787		Dana Point		CA		—				1,960				15,946				—				1,960				15,466				17,426				(4,801		)		2005
0798		Escondido		CA		14,340				5,090				24,253				—				5,090				23,353				28,443				(7,250		)		2005
0791		Fremont		CA		—				2,360				11,672				—				2,360				11,192				13,552				(3,475		)		2005
0788		Granada Hills		CA		—				2,200				18,257				—				2,200				17,637				19,837				(5,475		)		2005
0227		Lodi		CA		—				732				5,453				—				732				5,453				6,185				(3,008		)		1997
0226		Murietta		CA		—				435				5,729				—				435				5,729				6,164				(3,093		)		1997
1165		Northridge		CA		—				6,718				26,309				2,710				6,752				27,780				34,532				(7,981		)		2006
0789		Pleasant Hill		CA		6,270				2,480				21,333				—				2,480				20,633				23,113				(6,405		)		2005
2205		Roseville		CA		—				3,844				33,527				—				3,844				33,527				37,371				(3,938		)		2014
1167		Santa Rosa		CA		—				3,582				21,113				2,230				3,627				22,003				25,630				(6,189		)		2006
0793		South San Francisco		CA		—				3,000				16,586				—				3,000				16,056				19,056				(4,978		)		2005
0792		Ventura		CA		—				2,030				17,379				—				2,030				16,749				18,779				(5,200		)		2005
0512		Denver		CO		—				2,810				36,021				1,885				2,810				37,686				40,496				(17,547		)		2002
1000		Greenwood Village		CO		—				3,367				43,610				2,894				3,367				45,708				49,075				(12,039		)		2006
2144		Glastonbury		CT		—				1,658				16,046				378				1,658				16,423				18,081				(2,600		)		2012
0730		Torrington		CT		—				166				11,001				3,686				166				14,277				14,443				(3,947		)		2005
0861		Apopka		FL		—				920				4,816				854				920				5,570				6,490				(1,770		)		2006
0852		Boca Raton		FL						4,730				17,532				5,471				4,730				22,390				27,120				(7,570		)		2006
2467		Ft Myers		FL		—				2,782				21,827				—				2,782				21,827				24,609				(1,577		)		2016
1095		Gainesville		FL		—				1,221				12,226				—				1,221				12,001				13,222				(3,375		)		2006
0490		Jacksonville		FL		—				3,250				25,936				6,170				3,250				32,106				35,356				(12,779		)		2002
1096		Jacksonville		FL		—				1,587				15,616				—				1,587				15,298				16,885				(4,303		)		2006
1017		Palm Harbor		FL		—				1,462				16,774				500				1,462				16,888				18,350				(4,842		)		2006
0732		Port Orange		FL		—				2,340				9,898				1,177				2,340				10,555				12,895				(3,299		)		2005
2194		Springtree		FL		—				1,066				15,874				1,447				1,066				17,321				18,387				(3,186		)		2013
0802		St. Augustine		FL		—				830				11,627				1,288				830				12,515				13,345				(4,322		)		2005
1097		Tallahassee		FL		—				1,331				19,039				—				1,331				18,695				20,026				(5,258		)		2006
1605		Vero Beach		FL		—				700				16,234				—				700				15,484				16,184				(3,097		)		2010
1257		Vero Beach		FL		—				2,035				34,993				201				2,035				33,634				35,669				(9,457		)		2006
2108		Buford		GA		—				562				3,604				499				562				4,103				4,665				(788		)		2012
2109		Buford		GA		—				536				3,142				343				536				3,486				4,022				(638		)		2012
2053		Canton		GA		—				401				17,888				473				401				18,361				18,762				(2,366		)		2012
2165		Hartwell		GA		—				368				6,337				300				368				6,637				7,005				(1,009		)		2012
2066		Lawrenceville		GA		—				581				2,669				417				581				3,085				3,666				(654		)		2012
1241		Lilburn		GA		—				907				17,340				325				907				17,102				18,009				(4,841		)		2006
2086		Newnan		GA		—				1,227				4,202				503				1,227				4,705				5,932				(933		)		2012
1005		Oak Park		IL		—				3,476				35,259				1,862				3,476				36,575				40,051				(9,556		)		2006
1162		Orland Park		IL		—				2,623				23,154				1,614				2,623				23,992				26,615				(6,697		)		2006
1237		Wilmette		IL		—				1,100				9,373				774				1,100				9,922				11,022				(2,711		)		2006
1105		Louisville		KY		—				1,499				26,252				240				1,513				25,813				27,326				(7,379		)		2006
2115		Murray		KY		—				288				7,400				299				288				7,698				7,986				(1,286		)		2012
1158		Plymouth		MA		—				2,434				9,027				879				2,438				9,105				11,543				(2,554		)		2006
1249		Frederick		MD		—				609				9,158				840				609				9,665				10,274				(2,830		)		2006
0281		Westminster		MD		—				768				5,251				1,451				768				6,758				7,526				(2,544		)		1998
0546		Cape Elizabeth		ME		—				630				3,524				93				630				3,617				4,247				(1,337		)		2003
0545		Saco		ME		—				80				2,363				155				80				2,518				2,598				(928		)		2003
1258		Auburn Hills		MI		—				2,281				10,692				—				2,281				10,692				12,973				(3,007		)		2006
1248		Farmington Hills		MI		—				1,013				12,119				939				1,013				12,418				13,431				(3,530		)		2006
1259		Sterling Heights		MI		—				1,593				11,500				—				1,593				11,181				12,774				(3,145		)		2006
1235		Des Peres		MO		—				4,361				20,664				1,225				4,361				21,271				25,632				(5,760		)		2006
1236		Richmond Heights		MO		—				1,744				24,232				368				1,744				23,915				25,659				(6,701		)		2006
0853		St. Louis		MO		—				2,500				20,343				—				2,500				19,853				22,353				(7,665		)		2006
2074		Oxford		MS		—				2,003				14,140				231				2,003				14,371				16,374				(2,089		)		2012
0878		Charlotte		NC		—				710				9,559				—				710				9,159				9,869				(2,538		)		2006
2465		Charlotte		NC		—				1,373				10,774				—				1,373				10,774				12,147				(778		)		2016
2468		Franklin		NC		—				1,082				8,489				—				1,082				8,489				9,571				(613		)		2016
2126		Mooresville		NC		—				2,538				37,617				1,684				2,538				39,302				41,840				(5,390		)		2012
2466		Raeford		NC		—				1,304				10,230				—				1,304				10,230				11,534				(739		)		2016
1254		Raleigh		NC		—				1,191				11,532				489				1,191				11,681				12,872				(3,429		)		2006
2127		Minot		ND		—				685				16,047				676				685				16,723				17,408				(2,486		)		2012
1599		Cherry Hill		NJ		—				2,420				11,042				2,294				2,420				12,785				15,205				(3,685		)		2010
1239		Cresskill		NJ		—				4,684				53,927				501				4,684				53,406				58,090				(15,063		)		2006
0734		Hillsborough		NJ		—				1,042				10,042				491				1,042				10,066				11,108				(3,125		)		2005
1242		Madison		NJ		—				3,157				19,909				179				3,157				19,468				22,625				(5,475		)		2006
0733		Manahawkin		NJ		—				921				9,927				691				921				10,152				11,073				(3,191		)		2005
1231		Saddle River		NJ		—				1,784				15,625				612				1,784				15,640				17,424				(4,452		)		2006
0245		Voorhees Township		NJ		—				900				7,629				520				900				8,149				9,049				(3,287		)		1998
0796		Las Vegas		NV		—				1,960				5,816				—				1,960				5,426				7,386				(1,685		)		2005
1252		Brooklyn		NY		—				8,117				23,627				1,057				8,117				23,577				31,694				(6,701		)		2006
1256		Brooklyn		NY		—				5,215				39,052				1,079				5,215				39,197				44,412				(11,181		)		2006
2174		Orchard Park		NY		—				726				17,735				—				726				17,735				18,461				(2,957		)		2012
1386		Marietta		OH		—				1,069				11,435				668				1,069				11,898				12,967				(4,322		)		2007

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
1253		Youngstown		OH		—				695				10,444				744				695				10,842				11,537				(3,113		)		2006
2083		Oklahoma City		OK		—				2,116				28,007				1,939				2,116				29,946				32,062				(4,569		)		2012
2131		Keizer		OR		2,431				551				6,454				—				551				6,454				7,005				(938		)		2013
2152		McMinnville		OR		—				3,203				24,909				5,381				3,203				28,796				31,999				(5,040		)		2012
2089		Newberg		OR		—				1,889				16,855				837				1,889				17,692				19,581				(2,428		)		2012
2133		Portland		OR		—				1,615				12,030				169				1,615				12,199				13,814				(1,592		)		2012
2171		Portland		OR		—				—				16,087				311				—				16,398				16,398				(2,069		)		2012
2050		Redmond		OR		—				1,229				21,921				809				1,229				22,731				23,960				(2,932		)		2012
2084		Roseburg		OR		—				1,042				12,090				134				1,042				12,223				13,265				(1,918		)		2012
2134		Scappoose		OR		—				353				1,258				17				353				1,275				1,628				(264		)		2012
2153		Scappoose		OR		—				971				7,116				142				971				7,258				8,229				(1,311		)		2012
2056		Stayton		OR		—				48				569				19				48				588				636				(160		)		2012
2058		Stayton		OR		—				253				8,621				140				253				8,762				9,015				(1,370		)		2012
2088		Tualatin		OR		—				—				6,326				375				—				6,701				6,701				(1,376		)		2012
2180		Windfield Village		OR		2,722				580				9,817				—				580				9,817				10,397				(1,424		)		2013
1163		Haverford		PA		—				16,461				108,816				12,128				16,461				116,731				133,192				(33,431		)		2006
2063		Selinsgrove		PA		—				529				9,111				237				529				9,349				9,878				(1,625		)		2012
1973		South Kingstown		RI		—				1,390				12,551				630				1,390				12,918				14,308				(3,187		)		2011
1975		Tiverton		RI		—				3,240				25,735				651				3,240				25,938				29,178				(6,242		)		2011
1104		Aiken		SC		—				357				14,832				151				363				14,395				14,758				(4,081		)		2006
1109		Columbia		SC		—				408				7,527				131				412				7,414				7,826				(2,123		)		2006
0306		Georgetown		SC		—				239				3,008				—				239				3,008				3,247				(1,236		)		1998
0879		Greenville		SC		—				1,090				12,558				—				1,090				12,058				13,148				(3,341		)		2006
0305		Lancaster		SC		—				84				2,982				—				84				2,982				3,066				(1,142		)		1998
0880		Myrtle Beach		SC		—				900				10,913				—				900				10,513				11,413				(2,913		)		2006
0312		Rock Hill		SC		—				203				2,671				—				203				2,671				2,874				(1,077		)		1998
1113		Rock Hill		SC		—				695				4,119				322				795				4,074				4,869				(1,313		)		2006
0313		Sumter		SC		—				196				2,623				—				196				2,623				2,819				(1,078		)		1998
2073		Kingsport		TN		—				1,113				8,625				322				1,113				8,947				10,060				(1,418		)		2012
1003		Nashville		TN		—				812				16,983				2,524				812				18,759				19,571				(4,691		)		2006
0843		Abilene		TX		—				300				2,830				—				300				2,710				3,010				(785		)		2006
2107		Amarillo		TX		—				1,315				26,838				582				1,315				27,417				28,732				(3,790		)		2012
1116		Arlington		TX		—				2,494				12,192				249				2,540				11,847				14,387				(3,472		)		2006
0511		Austin		TX		—				2,960				41,645				—				2,960				41,645				44,605				(19,781		)		2002
2075		Bedford		TX		—				1,204				26,845				1,599				1,204				28,444				29,648				(4,134		)		2012
0844		Burleson		TX		—				1,050				5,242				—				1,050				4,902				5,952				(1,420		)		2006
0848		Cedar Hill		TX		—				1,070				11,554				—				1,070				11,104				12,174				(3,215		)		2006
1325		Cedar Hill		TX		—				440				7,494				—				440				6,974				7,414				(1,874		)		2007
0506		Friendswood		TX		—				400				7,354				174				400				7,528				7,928				(2,582		)		2002
0217		Houston		TX		—				835				7,195				454				835				7,649				8,484				(3,306		)		1997
1106		Houston		TX		—				1,008				15,333				183				1,020				15,052				16,072				(4,314		)		2006
0845		North Richland Hills		TX		—				520				5,117				—				520				4,807				5,327				(1,392		)		2006
0846		North Richland Hills		TX		—				870				9,259				—				870				8,819				9,689				(2,919		)		2006
2162		Portland		TX		—				1,233				14,001				1,353				1,233				15,354				16,587				(2,520		)		2012
2116		Sherman		TX		—				209				3,492				377				209				3,870				4,079				(647		)		2012
0847		Waxahachie		TX		—				390				3,879				—				390				3,659				4,049				(1,059		)		2006
2470		Abingdon		VA		—				1,584				12,431				—				1,584				12,431				14,015				(898		)		2016
1244		Arlington		VA		—				3,833				7,076				882				3,833				7,630				11,463				(2,248		)		2006
1245		Arlington		VA		—				7,278				37,407				3,185				7,278				39,481				46,759				(10,900		)		2006
0881		Chesapeake		VA		—				1,090				12,444				—				1,090				11,944				13,034				(3,310		)		2006
1247		Falls Church		VA		—				2,228				8,887				677				2,228				9,240				11,468				(2,734		)		2006
1164		Fort Belvoir		VA		—				11,594				99,528				11,862				11,594				108,676				120,270				(31,972		)		2006
1250		Leesburg		VA		—				607				3,236				206				607				3,230				3,837				(3,196		)		2006
1246		Sterling		VA		—				2,360				22,932				1,059				2,360				23,228				25,588				(6,672		)		2006
2077		Sterling		VA		—				1,046				15,788				385				1,046				16,173				17,219				(2,214		)		2012
0225		Woodbridge		VA		—				950				6,983				1,459				950				8,442				9,392				(3,516		)		1997
1173		Bellevue		WA		—				3,734				16,171				645				3,737				16,094				19,831				(4,541		)		2006
2095		College Place		WA		—				758				8,051				701				758				8,752				9,510				(1,437		)		2012
1240		Edmonds		WA		—				1,418				16,502				105				1,418				16,102				17,520				(4,552		)		2006
2160		Kenmore		WA		—				3,284				16,641				638				3,284				17,278				20,562				(2,406		)		2012
0797		Kirkland		WA		—				1,000				13,403				—				1,000				13,043				14,043				(4,049		)		2005
1251		Mercer Island		WA		—				4,209				8,123				581				4,209				8,202				12,411				(2,334		)		2006
2096		Poulsbo		WA		—				1,801				18,068				224				1,801				18,292				20,093				(2,734		)		2012
2102		Richland		WA		—				249				5,067				135				249				5,202				5,451				(764		)		2012
0794		Shoreline		WA		—				1,590				10,671				—				1,590				10,261				11,851				(3,185		)		2005
0795		Shoreline		WA		—				4,030				26,421				42				4,030				25,691				29,721				(7,898		)		2005
2061		Vancouver		WA		—				513				4,556				246				513				4,802				5,315				(888		)		2012
2062		Vancouver		WA		—				1,498				9,997				192				1,498				10,189				11,687				(1,477		)		2012
2052		Yakima		WA		—				557				5,897				176				557				6,074				6,631				(931		)		2012
2078		Yakima		WA		—				353				5,668				27				353				5,695				6,048				(781		)		2012
2117		Bridgeport		WV		—				3,174				15,437				493				3,174				15,930				19,104				(3,028		)		2012
2148		Sheridan		WY		—				915				12,047				1,242				915				13,289				14,204				(2,149		)		2012
						$	50,763			$	289,180			$	2,387,674			$	123,120			$	289,448			$	2,457,872			$	2,747,320			$	(641,170	)

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
Senior housing operating portfolio
1974		Sun City		AZ		—				2,640				33,223				2,685				2,640				35,378				38,018				(9,041		)		2011
2729		Clearlake		CA		—				354				4,799				306				354				4,635				4,989				(898		)		2012
1965		Fresno		CA		—				1,730				31,918				2,117				1,730				33,605				35,335				(8,408		)		2011
2726		Fortuna		CA		—				818				3,295				63				818				3,358				4,176				(1,582		)		2012
2728		Fortuna		CA		—				1,346				11,856				176				1,346				10,618				11,964				(3,568		)		2012
2593		Irvine		CA		—				8,220				14,104				539				8,220				14,103				22,323				(3,465		)		2006
2725		Palm Springs		CA		—				1,005				5,183				619				1,005				5,263				6,268				(2,097		)		2006
1966		Sun City		CA		—				2,650				22,709				3,863				2,650				26,118				28,768				(7,323		)		2011
2727		Yreka		CA		—				565				9,184				419				565				6,633				7,198				(1,675		)		2012
2505		Arvada		CO		—				1,788				29,896				1,016				1,788				30,912				32,700				(2,694		)		2015
2506		Boulder		CO		—				2,424				36,746				674				2,424				37,421				39,845				(2,492		)		2015
2515		Denver		CO		—				2,311				18,645				1,995				2,311				20,639				22,950				(2,519		)		2015
2508		Lakewood		CO		—				4,384				60,795				1,988				4,384				62,782				67,166				(4,928		)		2015
2509		Lakewood		CO		—				2,296				37,236				1,523				2,296				38,760				41,056				(2,538		)		2015
2603		Boca Raton		FL		—				2,415				17,923				858				2,415				17,726				20,141				(4,534		)		2006
1963		Boynton Beach		FL		—				2,550				31,521				3,665				2,550				34,521				37,071				(9,003		)		2011
1964		Boynton Beach		FL		—				570				5,649				2,826				570				8,282				8,852				(2,799		)		2011
2602		Boynton Beach		FL		—				1,270				4,773				1,918				1,270				4,775				6,045				(1,278		)		2003
2520		Clearwater		FL		—				2,250				2,627				1,588				2,250				3,635				5,885				(1,095		)		2015
2604		Coconut Creek		FL		—				2,461				16,006				2,461				2,461				15,712				18,173				(3,933		)		2006
2601		Delray Beach		FL		—				850				6,637				1,598				850				6,907				7,757				(1,891		)		2002
2517		Ft Lauderdale		FL		—				2,867				43,126				2,927				2,867				45,896				48,763				(4,652		)		2015
2518		Lake Worth		FL		—				1,669				13,267				1,180				1,669				14,447				16,116				(1,916		)		2015
2592		Lantana		FL		—				3,520				26,452				377				3,520				26,029				29,549				(9,790		)		2006
1968		Largo		FL		—				2,920				64,988				12,399				2,920				76,167				79,087				(20,269		)		2011
2522		Lutz		FL		—				902				15,169				55				902				16,152				17,054				(1,213		)		2015
2523		Orange City		FL		—				912				9,724				894				912				10,618				11,530				(1,092		)		2015
2524		Port St Lucie		FL		—				893				10,333				827				893				11,161				12,054				(1,252		)		2015
1971		Sarasota		FL		—				3,050				29,516				6,239				3,050				35,325				38,375				(9,497		)		2011
2525		Sarasota		FL		—				1,426				16,079				1,304				1,426				17,383				18,809				(1,854		)		2015
2526		Tamarac		FL		—				970				16,037				924				970				16,968				17,938				(1,324		)		2015
2513		Venice		FL		—				1,140				20,662				1,647				1,140				22,309				23,449				(1,838		)		2015
2527		Vero Beach		FL		—				1,048				17,392				1,342				1,048				18,733				19,781				(1,440		)		2015
2200		Deer Park		IL		—				4,172				2,417				44,534				4,229				44,478				48,707				(2,244		)		2014
2594		Mount Vernon		IL		—				296				15,935				4,340				512				19,728				20,240				(5,122		)		2006
1969		Niles		IL		—				3,790				32,912				5,884				3,790				38,024				41,814				(10,772		)		2011
1961		Olympia Fields		IL		—				4,120				29,400				3,832				4,120				32,706				36,826				(8,523		)		2011
1952		Vernon Hills		IL		—				4,900				45,854				5,999				4,900				51,157				56,057				(13,321		)		2011
2595		Indianapolis		IN		—				1,197				7,718				1,084				1,197				8,570				9,767				(2,137		)		2006
2596		W Lafayette		IN		—				813				10,876				1,324				813				11,949				12,762				(3,023		)		2006
2746		Watertown		MA		—				8,828				29,112				53				8,828				29,165				37,993				(129		)		2017
2583		Ellicott City		MD		19,469				3,607				31,720				1,239				3,607				32,959				36,566				(1,280		)		2016
2584		Hanover		MD		9,065				4,513				25,625				867				4,513				26,492				31,005				(1,009		)		2016
2585		Laurel		MD		5,879				3,895				13,331				993				3,895				14,323				18,218				(709		)		2016
2541		Olney		MD		—				1,580				33,802				158				1,580				33,960				35,540				(2,247		)		2015
2586		Parkville		MD		21,008				3,854				29,061				902				3,854				29,963				33,817				(1,356		)		2016
2587		Waldorf		MD		8,501				392				20,514				650				392				21,164				21,556				(799		)		2016
2741		Lexington		NE		—				474				8,405				474				474				6,362				6,836				(1,657		)		2012
2589		Albuquerque		NM		—				767				9,324				253				767				9,079				9,846				(4,059		)		1996
2740		Rio Rancho		NM		—				1,154				13,726				495				1,154				14,221				15,375				(2,259		)		2012
2735		Roswell		NM		—				618				7,038				1,010				618				7,741				8,359				(1,578		)		2012
2738		Roswell		NM		—				837				8,614				997				837				9,288				10,125				(1,979		)		2012
2733		Las Vegas		NV		—				667				14,469				509				667				10,347				11,014				(2,592		)		2012
2743		Clifton Park		NY		—				2,257				11,470				4				2,257				11,484				13,741				(1,926		)		2012
2742		Orchard Park		NY		—				478				11,961				—				478				11,961				12,439				(1,984		)		2012
2516		Centerville		OH		—				1,065				10,901				1,520				1,065				12,421				13,486				(1,643		)		2015
2512		Cincinnati		OH		—				1,180				6,157				1,393				1,180				7,549				8,729				(1,442		)		2015
2597		Fairborn		OH		—				298				10,704				3,895				298				14,368				14,666				(3,732		)		2006
2736		Gresham		OR		—				465				6,403				265				465				6,668				7,133				(1,563		)		2012
2744		Hermiston		OR		2,327				582				8,087				—				582				8,087				8,669				(1,400		)		2013
2739		Portland		OR		—				1,677				9,469				374				1,677				6,940				8,617				(2,306		)		2012
2730		Cumberland		RI		—				2,630				19,050				803				2,630				13,145				15,775				(4,644		)		2011
1959		East Providence		RI		—				1,890				13,989				1,447				1,890				15,183				17,073				(4,117		)		2011
1960		Greenwich		RI		—				450				11,845				1,846				450				13,414				13,864				(3,796		)		2011
2511		Johnston		RI		—				2,037				12,724				3,724				2,037				16,448				18,485				(2,468		)		2015
2731		Smithfield		RI		—				1,250				17,816				656				1,250				17,192				18,442				(4,724		)		2011
1962		Warwick		RI		—				1,050				17,389				6,772				1,050				23,804				24,854				(5,580		)		2011
2401		Germantown		TN		—				3,640				64,588				264				3,640				64,852				68,492				(5,393		)		2015
2608		Arlington		TX		—				2,002				19,110				128				2,002				18,857				20,859				(5,035		)		2006
2531		Austin		TX		—				607				15,972				424				607				16,396				17,003				(1,126		)		2015
2588		Beaumont		TX		—				145				10,404				324				145				10,282				10,427				(4,679		)		1995
2438		Dallas		TX		—				2,091				11,698				2,091				2,091				12,307				14,398				(2,074		)		2015
2528		Graham		TX		—				754				8,803				782				754				9,586				10,340				(1,088		)		2015
2529		Grand Prairie		TX		—				865				10,650				1,118				865				11,768				12,633				(1,196		)		2015
1955		Houston		TX		—				9,820				50,079				10,526				9,820				59,293				69,113				(16,391		)		2011
1957		Houston		TX		—				8,170				37,285				5,658				8,170				42,112				50,282				(11,285		)		2011
1958		Houston		TX		—				2,910				37,443				7,685				2,910				44,233				47,143				(11,666		)		2011
2402		Houston		TX		—				1,740				32,057				95				1,740				32,153				33,893				(2,801		)		2015
2606		Houston		TX		—				2,470				21,710				2,176				2,470				23,036				25,506				(10,451		)		2002
2530		N Richland Hills		TX		—				1,190				17,756				1,104				1,190				18,859				20,049				(1,659		)		2015
2532		San Antonio		TX		—				613				5,874				990				613				6,863				7,476				(931		)		2015
2607		San Antonio		TX		—				730				3,961				375				730				4,022				4,752				(1,391		)		2002
2533		San Marcos		TX		—				765				18,175				898				765				19,073				19,838				(1,380		)		2015

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
1954		Sugar Land		TX		—				3,420				36,846				5,097				3,420				41,242				44,662				(11,131		)		2011
2510		Temple		TX		—				2,354				52,859				1,144				2,354				54,004				56,358				(3,819		)		2015
2400		Victoria		TX		—				1,032				7,743				339				1,032				7,186				8,218				(906		)		2015
2605		Victoria		TX		—				175				4,290				3,642				175				6,477				6,652				(2,661		)		1995
1953		Webster		TX		—				4,780				30,854				4,628				4,780				29,464				34,244				(8,264		)		2011
2534		Wichita Falls		TX		—				430				2,856				804				430				3,745				4,175				(642		)		2015
2582		Fredericksburg		VA		—				2,370				19,725				87				2,370				19,811				22,181				(689		)		2016
2581		Leesburg		VA		12,345				1,340				17,605				907				1,340				18,512				19,852				(664		)		2016
2514		Richmond		VA		—				2,981				54,203				1,894				2,981				56,097				59,078				(3,675		)		2015
2737		Moses Lake		WA		—				429				4,417				189				429				4,606				5,035				(1,328		)		2012
2732		Spokane		WA		—				903				5,363				171				903				5,228				6,131				(1,073		)		2012
2734		Yakima		WA		—				721				8,872				1,518				721				10,390				11,111				(2,168		)		2012
2745		Madison		WI		—				834				10,050				445				834				10,495				11,329				(1,732		)		2012
						$	78,594			$	194,278			$	1,866,536			$	216,811			$	194,551			$	2,024,260			$	2,218,811			$	(359,316	)

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
Life science
1482		Brisbane		CA		—				31,160				1,789				20,319				31,160				22,103				53,263				—				2007
1486		Brisbane		CA		—				11,331				—				20,529				11,331				20,529				31,860				—				2007
1487		Brisbane		CA		—				8,498				—				6,812				8,498				6,812				15,310				—				2007
1401		Hayward		CA		—				900				7,100				1,045				900				8,145				9,045				(2,705		)		2007
1402		Hayward		CA		—				1,500				6,400				3,682				1,719				9,863				11,582				(4,280		)		2007
1403		Hayward		CA		—				1,900				7,100				4,666				1,900				11,512				13,412				(2,709		)		2007
1404		Hayward		CA		—				2,200				17,200				1,434				2,200				18,634				20,834				(4,485		)		2007
1405		Hayward		CA		—				1,000				3,200				7,478				1,000				10,678				11,678				(6,391		)		2007
1549		Hayward		CA		—				1,006				4,259				3,463				1,055				6,409				7,464				(2,493		)		2007
1550		Hayward		CA		—				677				2,761				5,583				710				4,954				5,664				(3,401		)		2007
1551		Hayward		CA		—				661				1,995				4,264				693				6,227				6,920				(4,220		)		2007
1552		Hayward		CA		—				1,187				7,139				1,346				1,222				8,094				9,316				(3,385		)		2007
1553		Hayward		CA		—				1,189				9,465				7,361				1,225				16,791				18,016				(5,675		)		2007
1554		Hayward		CA		—				1,246				5,179				1,867				1,283				6,133				7,416				(2,739		)		2007
1555		Hayward		CA		—				1,521				13,546				6,401				1,566				19,889				21,455				(7,177		)		2007
1556		Hayward		CA		—				1,212				5,120				3,049				1,249				5,216				6,465				(2,098		)		2007
1424		La Jolla		CA		—				9,600				25,283				8,220				9,719				31,414				41,133				(9,072		)		2007
1425		La Jolla		CA		—				6,200				19,883				152				6,276				19,958				26,234				(5,264		)		2007
1426		La Jolla		CA		—				7,200				12,412				5,493				7,291				15,961				23,252				(6,509		)		2007
1427		La Jolla		CA		—				8,700				16,983				6,177				8,767				21,859				30,626				(7,302		)		2007
1949		La Jolla		CA		—				2,686				11,045				743				2,686				11,458				14,144				(2,690		)		2011
2229		La Jolla		CA		—				8,753				32,528				6,228				8,777				38,732				47,509				(3,923		)		2014
1488		Mountain View		CA		—				7,300				25,410				1,901				7,567				27,044				34,611				(7,597		)		2007
1489		Mountain View		CA		—				6,500				22,800				1,866				6,500				24,666				31,166				(7,030		)		2007
1490		Mountain View		CA		—				4,800				9,500				442				4,800				9,942				14,742				(2,746		)		2007
1491		Mountain View		CA		—				4,200				8,400				1,249				4,209				8,998				13,207				(2,458		)		2007
1492		Mountain View		CA		—				3,600				9,700				862				3,600				9,835				13,435				(2,527		)		2007
1493		Mountain View		CA		—				7,500				16,300				2,142				7,500				17,842				25,342				(4,942		)		2007
1494		Mountain View		CA		—				9,800				24,000				203				9,800				24,203				34,003				(6,362		)		2007
1495		Mountain View		CA		—				6,900				17,800				3,245				6,900				21,045				27,945				(6,313		)		2007
1496		Mountain View		CA		—				7,000				17,000				6,364				7,000				17,332				24,332				(4,595		)		2007
1497		Mountain View		CA		—				14,100				31,002				10,111				14,100				31,487				45,587				(8,280		)		2007
1498		Mountain View		CA		—				7,100				25,800				8,101				7,100				33,901				41,001				(14,611		)		2007
2017		Mountain View		CA		—				—				20,240				1,117				—				21,255				21,255				(4,000		)		2013
1470		Poway		CA		—				5,826				12,200				6,048				5,826				12,542				18,368				(3,199		)		2007
1471		Poway		CA		—				5,978				14,200				4,253				5,978				18,453				24,431				(7,951		)		2007
1472		Poway		CA		—				8,654				—				11,906				8,654				11,906				20,560				(1,286		)		2007
1473		Poway		CA		—				11,024				2,405				9,148				11,024				11,553				22,577				—				2007
1474		Poway		CA		—				5,051				—				5,522				5,051				5,522				10,573				—				2007
1475		Poway		CA		—				5,655				—				5,697				5,655				5,697				11,352				—				2007
1477		Poway		CA		—				25,359				2,475				14,835				25,359				17,310				42,669				—				2007
1478		Poway		CA		—				6,700				14,400				6,145				6,700				14,400				21,100				(3,750		)		2007
1499		Redwood City		CA		—				3,400				5,500				2,564				3,407				7,177				10,584				(2,476		)		2007
1500		Redwood City		CA		—				2,500				4,100				1,220				2,506				4,563				7,069				(1,508		)		2007
1501		Redwood City		CA		—				3,600				4,600				860				3,607				5,024				8,631				(1,722		)		2007
1502		Redwood City		CA		—				3,100				5,100				954				3,107				5,801				8,908				(1,937		)		2007
1503		Redwood City		CA		—				4,800				17,300				3,300				4,818				20,582				25,400				(6,253		)		2007
1504		Redwood City		CA		—				5,400				15,500				949				5,418				16,431				21,849				(4,246		)		2007
1505		Redwood City		CA		—				3,000				3,500				826				3,006				4,115				7,121				(1,646		)		2007
1506		Redwood City		CA		—				6,000				14,300				7,503				6,018				21,178				27,196				(4,637		)		2007
1507		Redwood City		CA		—				1,900				12,800				13,559				1,912				26,347				28,259				(7,202		)		2007
1508		Redwood City		CA		—				2,700				11,300				12,120				2,712				23,409				26,121				(5,871		)		2007
1509		Redwood City		CA		—				2,700				10,900				10,476				2,712				20,840				23,552				(7,349		)		2007
1510		Redwood City		CA		—				2,200				12,000				5,395				2,212				13,501				15,713				(3,543		)		2007
1511		Redwood City		CA		—				2,600				9,300				1,828				2,612				10,561				13,173				(2,708		)		2007
1512		Redwood City		CA		—				3,300				18,000				12,361				3,300				30,361				33,661				(8,155		)		2007
1513		Redwood City		CA		—				3,300				17,900				14,839				3,326				32,713				36,039				(9,544		)		2007
0678		San Diego		CA		—				2,603				11,051				3,143				2,603				14,194				16,797				(4,623		)		2002
0679		San Diego		CA		—				5,269				23,566				16,072				5,669				35,937				41,606				(12,274		)		2002
0837		San Diego		CA		—				4,630				2,028				8,982				4,630				11,010				15,640				(6,567		)		2006
0838		San Diego		CA		—				2,040				903				5,111				2,040				6,014				8,054				(2,208		)		2006
0839		San Diego		CA		—				3,940				3,184				5,733				4,047				5,591				9,638				(1,769		)		2006
0840		San Diego		CA		—				5,690				4,579				720				5,830				4,734				10,564				(1,566		)		2006
1418		San Diego		CA		—				11,700				31,243				6,403				11,700				37,646				49,346				(12,927		)		2007
1420		San Diego		CA		—				6,524				—				4,986				6,524				4,986				11,510				—				2007
1421		San Diego		CA		—				7,000				33,779				1,209				7,000				34,988				41,988				(9,021		)		2007
1422		San Diego		CA		—				7,179				3,687				4,521				7,184				8,202				15,386				(2,287		)		2007
1423		San Diego		CA		—				8,400				33,144				18				8,400				33,162				41,562				(8,637		)		2007
1514		San Diego		CA		—				5,200				—				—				5,200				—				5,200				—				2007
1558		San Diego		CA		—				7,740				22,654				2,371				7,888				23,645				31,533				(6,279		)		2007
1947		San Diego		CA		—				2,581				10,534				3,952				2,581				14,486				17,067				(3,154		)		2011
1948		San Diego		CA		—				5,879				25,305				2,559				5,879				27,861				33,740				(7,790		)		2011
2197		San Diego		CA		—				7,621				3,913				6,549				7,626				9,167				16,793				(2,459		)		2007
2476		San Diego		CA		—				7,661				9,918				3,359				7,661				13,277				20,938				(189		)		2016
2477		San Diego		CA		—				9,207				14,613				6,484				9,207				21,097				30,304				(649		)		2016
2478		San Diego		CA		—				6,000				—				—				6,000				—				6,000				—				2016
2617		San Diego		CA		—				2,734				5,195				777				2,734				5,971				8,705				—				2017
2618		San Diego		CA		—				4,100				12,395				—				4,100				12,395				16,495				(317		)		2017
2622		San Diego		CA		—				—				—				1,070				—				1,070				1,070				—				2004
1407		South San Francisco		CA		—				7,182				12,140				9,612				7,182				17,860				25,042				(8,032		)		2007
1408		South San Francisco		CA		—				9,000				17,800				1,260				9,000				19,060				28,060				(5,588		)		2007
1409		South San Francisco		CA		—				18,000				38,043				4,692				18,000				42,735				60,735				(10,828		)		2007
1410		South San Francisco		CA		—				4,900				18,100				157				4,900				18,257				23,157				(4,793		)		2007

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
1411		South San Francisco		CA		—				8,000				27,700				313				8,000				28,013				36,013				(7,288		)		2007
1412		South San Francisco		CA		—				10,100				22,521				2,156				10,100				24,437				34,537				(6,066		)		2007
1413		South San Francisco		CA		—				8,000				28,299				3,743				8,000				32,042				40,042				(7,468		)		2007
1414		South San Francisco		CA		—				3,700				20,800				2,248				3,700				22,845				26,545				(5,965		)		2007
1430		South San Francisco		CA		—				10,700				23,621				3,519				10,700				27,140				37,840				(7,606		)		2007
1431		South San Francisco		CA		—				7,000				15,500				876				7,000				16,375				23,375				(4,109		)		2007
1435		South San Francisco		CA		—				13,800				42,500				37,029				13,800				79,529				93,329				(19,435		)		2008
1436		South San Francisco		CA		—				14,500				45,300				36,865				14,500				82,165				96,665				(19,964		)		2008
1437		South San Francisco		CA		—				9,400				24,800				46,308				9,400				69,539				78,939				(14,428		)		2008
1439		South San Francisco		CA		—				11,900				68,848				48				11,900				68,896				80,796				(17,948		)		2007
1440		South San Francisco		CA		—				10,000				57,954				10				10,000				57,964				67,964				(15,094		)		2007
1441		South San Francisco		CA		—				9,300				43,549				8				9,300				43,557				52,857				(11,342		)		2007
1442		South San Francisco		CA		—				11,000				47,289				91				11,000				47,380				58,380				(12,371		)		2007
1443		South San Francisco		CA		—				13,200				60,932				2,645				13,200				63,576				76,776				(15,600		)		2007
1444		South San Francisco		CA		—				10,500				33,776				360				10,500				34,135				44,635				(8,995		)		2007
1445		South San Francisco		CA		—				10,600				34,083				9				10,600				34,092				44,692				(8,877		)		2007
1458		South San Francisco		CA		—				10,900				20,900				8,294				10,909				23,962				34,871				(7,082		)		2007
1459		South San Francisco		CA		—				3,600				100				223				3,600				323				3,923				(94		)		2007
1460		South San Francisco		CA		—				2,300				100				118				2,300				218				2,518				(100		)		2007
1461		South San Francisco		CA		—				3,900				200				221				3,900				421				4,321				(200		)		2007
1462		South San Francisco		CA		—				7,117				600				4,927				7,117				5,179				12,296				(2,140		)		2007
1463		South San Francisco		CA		—				10,381				2,300				20,527				10,381				22,827				33,208				(5,749		)		2007
1464		South San Francisco		CA		—				7,403				700				11,638				7,403				7,987				15,390				(1,479		)		2007
1468		South San Francisco		CA		—				10,100				24,013				4,774				10,100				26,642				36,742				(7,801		)		2007
1480		South San Francisco		CA		—				32,210				3,110				11,217				32,210				14,327				46,537				—				2007
1559		South San Francisco		CA		—				5,666				5,773				12,966				5,695				18,641				24,336				(10,250		)		2007
1560		South San Francisco		CA		—				1,204				1,293				517				1,210				1,789				2,999				(1,456		)		2007
1983		South San Francisco		CA		—				8,648				—				95,860				8,648				95,860				104,508				(6,072		)		2016
1984		South San Francisco		CA		—				7,845				—				84,569				7,844				84,569				92,413				(1,692		)		2017
1985		South San Francisco		CA		—				6,708				—				98,300				6,708				98,301				105,009				(1,212		)		2017
1986		South San Francisco		CA		—				6,708				—				107,084				6,708				107,084				113,792				—				2011
1987		South San Francisco		CA		—				8,544				—				47,227				8,544				47,228				55,772				—				2011
1988		South San Francisco		CA		—				10,120				—				414				10,120				414				10,534				—				2011
1989		South San Francisco		CA		—				9,169				—				3,649				9,169				3,649				12,818				—				2011
2553		South San Francisco		CA		—				2,897				8,691				1,160				2,897				9,852				12,749				(735		)		2015
2554		South San Francisco		CA		—				995				2,754				50				995				2,804				3,799				(166		)		2015
2555		South San Francisco		CA		—				2,202				10,776				589				2,202				11,365				13,567				(675		)		2015
2556		South San Francisco		CA		—				2,962				15,108				168				2,962				15,276				18,238				(908		)		2015
2557		South San Francisco		CA		—				2,453				13,063				128				2,453				13,191				15,644				(783		)		2015
2558		South San Francisco		CA		—				1,163				5,925				58				1,163				5,983				7,146				(356		)		2015
2614		South San Francisco		CA		—				5,079				8,584				1,330				5,079				9,914				14,993				(3,383		)		2007
2615		South San Francisco		CA		—				7,984				13,495				3,243				7,984				16,739				24,723				(5,481		)		2007
2616		South San Francisco		CA		—				8,355				14,121				1,876				8,355				15,998				24,353				(5,598		)		2007
2624		South San Francisco		CA		—				25,502				41,293				181				25,502				41,474				66,976				(382		)		2017
9999		Denton		TX		—				100				—				—				100				—				100				—				2016
2630		Lexington		MA		—				15,966				48,444				—				15,966				48,444				64,410				(187		)		2017
2631		Lexington		MA		—				10,940				139,201				28				10,940				139,229				150,169				(367		)		2017
2011		Durham		NC		6,118				448				6,152				21,379				448				27,494				27,942				(5,000		)		2011
2030		Durham		NC		—				1,920				5,661				34,120				1,920				39,781				41,701				(7,054		)		2012
0464		Salt Lake City		UT		—				630				6,921				2,562				630				9,483				10,113				(3,123		)		2001
0465		Salt Lake City		UT		—				125				6,368				68				125				6,436				6,561				(2,379		)		2001
0466		Salt Lake City		UT		—				—				14,614				7				—				14,621				14,621				(4,872		)		2001
0507		Salt Lake City		UT		—				280				4,345				226				280				4,572				4,852				(1,694		)		2002
0799		Salt Lake City		UT		—				—				14,600				90				—				14,690				14,690				(3,976		)		2005
1593		Salt Lake City		UT		—				—				23,998				—				—				23,998				23,998				(5,393		)		2010
						$	6,118			$	880,878			$	2,044,568			$	1,131,979			$	883,075			$	3,094,702			$	3,977,777			$	(635,314	)

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
Medical office
0638		Anchorage		AK		—				1,456				10,650				12,309				1,456				22,907				24,363				(6,114		)		2006
2572		Springdale		AR		—				—				27,714				—				—				27,714				27,714				(916		)		2016
0520		Chandler		AZ		—				3,669				13,503				2,538				3,669				15,751				19,420				(5,883		)		2002
2040		Mesa		AZ		—				—				17,314				896				—				18,181				18,181				(2,567		)		2012
0468		Oro Valley		AZ		—				1,050				6,774				925				1,050				7,124				8,174				(2,857		)		2001
0356		Phoenix		AZ		—				780				3,199				2,271				780				4,550				5,330				(1,884		)		1999
0470		Phoenix		AZ		—				280				877				120				280				961				1,241				(351		)		2001
1066		Scottsdale		AZ		—				5,115				14,064				3,553				4,839				17,035				21,874				(5,539		)		2006
2021		Scottsdale		AZ		—				—				12,312				1,818				—				14,046				14,046				(3,839		)		2012
2022		Scottsdale		AZ		—				—				9,179				1,222				—				10,270				10,270				(2,942		)		2012
2023		Scottsdale		AZ		—				—				6,398				1,570				—				7,848				7,848				(1,871		)		2012
2024		Scottsdale		AZ		—				—				9,522				663				—				10,184				10,184				(2,438		)		2012
2025		Scottsdale		AZ		—				—				4,102				1,482				—				5,492				5,492				(1,650		)		2012
2026		Scottsdale		AZ		—				—				3,655				1,211				—				4,826				4,826				(1,118		)		2012
2027		Scottsdale		AZ		—				—				7,168				1,455				—				8,605				8,605				(2,140		)		2012
2028		Scottsdale		AZ		—				—				6,659				1,285				—				7,944				7,944				(1,937		)		2012
0453		Tucson		AZ		—				215				6,318				1,390				326				7,073				7,399				(3,414		)		2000
0556		Tucson		AZ		—				215				3,940				1,285				267				4,745				5,012				(1,541		)		2003
1041		Brentwood		CA		—				—				30,864				3,002				187				33,138				33,325				(9,716		)		2006
1200		Encino		CA		—				6,151				10,438				4,583				6,646				13,736				20,382				(5,095		)		2006
0436		Murietta		CA		—				400				9,266				4,140				638				11,876				12,514				(5,682		)		1999
0239		Poway		CA		—				2,700				10,839				3,710				2,887				12,438				15,325				(6,698		)		1997
2654		Riverside		CA		—				2,758				9,908				—				2,758				9,908				12,666				—				2017
0318		Sacramento		CA		—				2,860				37,566				27,137				2,911				63,801				66,712				(10,335		)		1998
2404		Sacramento		CA		—				1,268				5,109				374				1,299				5,453				6,752				(649		)		2015
0234		San Diego		CA		—				2,848				5,879				1,450				3,009				5,053				8,062				(3,231		)		1997
0235		San Diego		CA		—				2,863				8,913				2,913				3,068				8,297				11,365				(5,276		)		1997
0236		San Diego		CA		—				4,619				19,370				4,023				4,711				16,760				21,471				(10,173		)		1997
0421		San Diego		CA		—				2,910				19,984				16,343				2,964				34,954				37,918				(8,524		)		1999
0564		San Jose		CA		—				1,935				1,728				2,616				1,935				3,302				5,237				(1,348		)		2003
0565		San Jose		CA		—				1,460				7,672				527				1,460				7,721				9,181				(3,004		)		2003
0659		Los Gatos		CA		—				1,718				3,124				622				1,758				3,592				5,350				(1,336		)		2000
1209		Sherman Oaks		CA		—				7,472				10,075				5,915				7,943				14,851				22,794				(7,274		)		2006
0439		Valencia		CA		—				2,300				6,967				3,761				2,404				8,727				11,131				(3,716		)		1999
1211		Valencia		CA		—				1,344				7,507				733				1,383				7,969				9,352				(2,377		)		2006
0440		West Hills		CA		—				2,100				11,595				4,182				2,259				12,225				14,484				(5,826		)		1999
0728		Aurora		CO		—				—				8,764				2,807				—				8,997				8,997				(3,157		)		2005
1196		Aurora		CO		—				210				12,362				6,074				210				17,720				17,930				(4,037		)		2006
1197		Aurora		CO		—				200				8,414				5,398				200				13,482				13,682				(3,541		)		2006
0882		Colorado Springs		CO		—				—				12,933				10,716				—				22,506				22,506				(7,988		)		2006
1199		Denver		CO		—				493				7,897				1,865				622				9,401				10,023				(3,494		)		2006
0808		Englewood		CO		—				—				8,616				9,322				11				16,830				16,841				(6,146		)		2005
0809		Englewood		CO		—				—				8,449				3,767				—				10,997				10,997				(4,304		)		2005
0810		Englewood		CO		—				—				8,040				7,711				—				14,746				14,746				(5,510		)		2005
0811		Englewood		CO		—				—				8,472				4,743				—				11,614				11,614				(3,760		)		2005
2658		Highlands Ranch		CO		—				1,637				10,063				—				1,637				10,063				11,700				—				2017
0812		Littleton		CO		—				—				4,562				2,405				257				5,803				6,060				(2,317		)		2005
0813		Littleton		CO		—				—				4,926				1,910				106				6,089				6,195				(2,126		)		2005
0570		Lone Tree		CO		—				—				—				20,096				—				19,400				19,400				(6,614		)		2003
0666		Lone Tree		CO		—				—				23,274				2,663				—				25,414				25,414				(8,551		)		2000
2233		Lone Tree		CO		—				—				6,734				27,690				—				34,424				34,424				(1,641		)		2014
1076		Parker		CO		—				—				13,388				1,048				8				14,215				14,223				(4,262		)		2006
0510		Thornton		CO		—				236				10,206				3,648				454				13,289				13,743				(5,213		)		2002
0434		Atlantis		FL		—				—				2,027				352				5				2,219				2,224				(1,141		)		1999
0435		Atlantis		FL		—				—				2,000				931				—				2,566				2,566				(1,346		)		1999
0602		Atlantis		FL		—				455				2,231				991				455				2,958				3,413				(984		)		2000
0604		Englewood		FL		—				170				1,134				486				198				1,398				1,596				(522		)		2000
0609		Kissimmee		FL		—				788				174				649				788				721				1,509				(217		)		2000
0610		Kissimmee		FL		—				481				347				793				494				975				1,469				(452		)		2000
0671		Kissimmee		FL		—				—				7,574				2,521				—				8,525				8,525				(2,817		)		2000
0603		Lake Worth		FL		—				1,507				2,894				1,807				1,507				4,569				6,076				(1,962		)		2000
0612		Margate		FL		—				1,553				6,898				1,499				1,553				8,204				9,757				(2,827		)		2000
0613		Miami		FL		—				4,392				11,841				4,300				4,392				14,622				19,014				(5,453		)		2000
2202		Miami		FL		—				—				13,123				4,193				—				17,207				17,207				(2,767		)		2014
2203		Miami		FL		—				—				8,877				2,793				—				11,671				11,671				(1,607		)		2014
1067		Milton		FL		—				—				8,566				269				—				8,816				8,816				(2,544		)		2006
2577		Naples		FL		—				—				29,186				—				—				29,186				29,186				(903		)		2016
2578		Naples		FL		—				—				18,819				—				—				18,819				18,819				(494		)		2016
0563		Orlando		FL		—				2,144				5,136				6,662				2,343				10,110				12,453				(3,982		)		2003
0833		Pace		FL		—				—				10,309				3,217				26				11,206				11,232				(2,918		)		2006
0834		Pensacola		FL		—				—				11,166				478				—				11,644				11,644				(3,316		)		2006
0614		Plantation		FL		—				969				3,241				1,595				1,017				4,151				5,168				(1,475		)		2000
0673		Plantation		FL		—				1,091				7,176				1,979				1,091				8,714				9,805				(2,579		)		2002
2579		Punta Gorda		FL		—				—				9,379				—				—				9,379				9,379				(280		)		2016
0701		St. Petersburg		FL		—				—				13,754				8,866				—				21,181				21,181				(5,713		)		2006
1210		Tampa		FL		—				1,967				6,602				6,482				2,194				10,646				12,840				(4,722		)		2006
1058		Blue Ridge		GA		—				—				3,231				228				—				3,459				3,459				(934		)		2006
2576		Statesboro		GA		—				—				10,234				—				—				10,234				10,234				(412		)		2016
1065		Marion		IL		—				99				11,484				775				100				12,090				12,190				(3,723		)		2006
1057		Newburgh		IN		—				—				14,019				4,265				—				18,278				18,278				(5,266		)		2006
2039		Kansas City		KS		—				440				2,173				17				448				2,181				2,629				(369		)		2012
2043		Overland Park		KS		—				—				7,668				366				—				8,034				8,034				(1,283		)		2012
0483		Wichita		KS		—				530				3,341				716				530				3,620				4,150				(1,214		)		2001

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
1064		Lexington		KY		—				—				12,726				1,323				—				13,835				13,835				(4,443		)		2006
0735		Louisville		KY		—				936				8,426				5,714				936				11,622				12,558				(9,574		)		2005
0737		Louisville		KY		—				835				27,627				6,376				878				32,459				33,337				(11,571		)		2005
0738		Louisville		KY		—				780				8,582				5,857				851				12,321				13,172				(7,304		)		2005
0739		Louisville		KY		—				826				13,814				1,842				832				14,195				15,027				(4,774		)		2005
0740		Louisville		KY		—				2,983				13,171				4,853				2,991				16,849				19,840				(7,188		)		2005
1944		Louisville		KY		—				788				2,414				—				788				2,414				3,202				(676		)		2010
1945		Louisville		KY		—				3,255				28,644				971				3,291				29,278				32,569				(7,073		)		2010
1946		Louisville		KY		—				430				6,125				152				430				6,277				6,707				(1,461		)		2010
2237		Louisville		KY		—				1,519				15,386				2,941				1,542				18,304				19,846				(2,233		)		2014
2238		Louisville		KY		—				1,334				12,172				1,660				1,511				13,654				15,165				(1,896		)		2014
2239		Louisville		KY		—				1,644				10,832				4,947				1,718				15,704				17,422				(1,762		)		2014
1324		Haverhill		MA		—				800				8,537				2,191				869				9,373				10,242				(2,817		)		2007
1213		Ellicott City		MD		—				1,115				3,206				2,692				1,222				4,979				6,201				(2,094		)		2006
0361		GlenBurnie		MD		—				670				5,085				—				670				5,085				5,755				(2,712		)		1999
1052		Towson		MD		—				—				14,233				3,611				—				15,132				15,132				(6,086		)		2006
2650		Biddeford		ME		—				1,949				12,244				—				1,949				12,244				14,193				—				2017
0240		Minneapolis		MN		—				117				13,213				3,095				117				15,773				15,890				(8,465		)		1997
0300		Minneapolis		MN		—				160				10,131				4,653				160				13,649				13,809				(6,940		)		1997
2032		Independence		MO		—				—				48,025				1,220				—				49,245				49,245				(6,371		)		2012
1078		Flowood		MS		—				—				8,413				762				—				9,148				9,148				(3,005		)		2006
1059		Jackson		MS		—				—				8,868				122				—				8,990				8,990				(2,534		)		2006
1060		Jackson		MS		—				—				7,187				2,189				—				9,376				9,376				(3,271		)		2006
1068		Omaha		NE		—				—				16,243				1,309				17				17,465				17,482				(5,270		)		2006
2651		Charlotte		NC		—				2,001				11,217				—				2,001				11,217				13,218				—				2017
2655		Wilmington		NC		—				1,341				17,376				—				1,341				17,376				18,717				—				2017
2656		Wilmington		NC		—				2,071				11,592				—				2,071				11,592				13,663				—				2017
2657		Shallotte		NC		—				918				3,609				—				918				3,609				4,527				—				2017
2647		Concord		NH		—				1,961				23,018				—				1,961				23,018				24,979				—				2017
2648		Concord		NH		—				815				8,749				—				815				8,749				9,564				—				2017
2649		Epsom		NH		—				919				5,758				—				919				5,758				6,677				—				2017
0729		Albuquerque		NM		—				—				5,380				700				—				5,758				5,758				(1,750		)		2005
0348		Elko		NV		—				55				2,637				12				55				2,649				2,704				(1,432		)		1999
0571		Las Vegas		NV		—				—				—				19,276				—				17,895				17,895				(6,235		)		2003
0660		Las Vegas		NV		—				1,121				4,363				5,809				1,328				7,991				9,319				(3,289		)		2000
0661		Las Vegas		NV		—				2,305				4,829				5,304				2,447				8,897				11,344				(3,992		)		2000
0662		Las Vegas		NV		—				3,480				12,305				5,502				3,480				15,360				18,840				(5,449		)		2000
0663		Las Vegas		NV		—				1,717				3,597				10,833				1,724				12,732				14,456				(2,176		)		2000
0664		Las Vegas		NV		—				1,172				—				631				1,803				—				1,803				(53		)		2000
0691		Las Vegas		NV		—				3,244				18,339				7,583				3,273				24,434				27,707				(9,610		)		2004
2037		Mesquite		NV		—				—				5,559				470				34				5,983				6,017				(875		)		2012
1285		Cleveland		OH		—				823				2,726				925				853				2,713				3,566				(1,105		)		2006
0400		Harrison		OH		—				—				4,561				300				—				4,861				4,861				(2,577		)		1999
1054		Durant		OK		—				619				9,256				1,925				659				11,120				11,779				(3,115		)		2006
0817		Owasso		OK		—				—				6,582				1,521				—				5,592				5,592				(1,450		)		2005
0404		Roseburg		OR		—				—				5,707				700				—				6,407				6,407				(3,180		)		1999
2570		Limerick		PA		—				925				20,072				51				925				20,123				21,048				(779		)		2016
2234		Philadelphia		PA		—				24,264				99,904				20,524				24,288				120,324				144,612				(9,466		)		2014
2403		Philadelphia		PA		—				26,063				97,646				10,578				26,110				108,177				134,287				(11,345		)		2015
2571		Wilkes-Barre		PA		—				—				9,138				—				—				9,138				9,138				(364		)		2016
2573		Florence		SC		—				—				12,090				91				—				12,181				12,181				(380		)		2016
2574		Florence		SC		—				—				12,190				88				—				12,278				12,278				(383		)		2016
2575		Florence		SC		—				—				11,243				56				—				11,299				11,299				(435		)		2016
0252		Clarksville		TN		—				203				841				60				210				893				1,103				(495		)		1998
2634		Clarksville		TN		—				259				1,555				—				259				1,555				1,814				(877		)		2017
0624		Hendersonville		TN		—				256				1,530				1,827				256				2,864				3,120				(1,093		)		2000
0559		Hermitage		TN		—				830				5,036				6,314				851				10,014				10,865				(4,011		)		2003
0561		Hermitage		TN		—				596				9,698				5,893				596				14,332				14,928				(5,958		)		2003
0562		Hermitage		TN		—				317				6,528				2,925				317				8,579				8,896				(3,891		)		2003
0154		Knoxville		TN		—				700				4,559				4,984				700				9,087				9,787				(4,349		)		1994
0625		Nashville		TN		—				955				14,289				3,901				955				16,560				17,515				(5,510		)		2000
0626		Nashville		TN		—				2,050				5,211				4,334				2,055				8,695				10,750				(3,334		)		2000
0627		Nashville		TN		—				1,007				181				724				1,060				791				1,851				(427		)		2000
0628		Nashville		TN		—				2,980				7,164				2,756				2,980				9,506				12,486				(4,166		)		2000
0630		Nashville		TN		—				515				848				400				528				1,048				1,576				(334		)		2000
0631		Nashville		TN		—				266				1,305				1,552				266				2,441				2,707				(922		)		2000
0632		Nashville		TN		—				827				7,642				4,072				827				10,270				11,097				(3,912		)		2000
0633		Nashville		TN		—				5,425				12,577				6,113				5,425				18,199				23,624				(7,312		)		2000
0634		Nashville		TN		—				3,818				15,185				9,661				3,818				23,722				27,540				(9,437		)		2000
0636		Nashville		TN		—				583				450				309				583				759				1,342				(296		)		2000
2611		Allen		TX		—				1,330				5,960				76				1,330				6,036				7,366				(231		)		2016
2612		Allen		TX		—				1,310				4,165				84				1,310				4,249				5,559				(173		)		2016
0573		Arlington		TX		—				769				12,355				4,310				769				15,677				16,446				(5,592		)		2003
2621		Cedar Park		TX		—				1,617				11,640				—				1,617				11,640				13,257				(142		)		2017
0576		Conroe		TX		—				324				4,842				2,528				324				6,139				6,463				(2,117		)		2000
0577		Conroe		TX		—				397				7,966				2,461				397				9,924				10,321				(3,702		)		2000
0578		Conroe		TX		—				388				7,975				4,103				388				10,549				10,937				(3,375		)		2006
0579		Conroe		TX		—				188				3,618				1,337				188				4,807				4,995				(1,721		)		2000
0581		Corpus Christi		TX		—				717				8,181				5,663				717				11,673				12,390				(4,090		)		2000
0600		Corpus Christi		TX		—				328				3,210				3,945				328				6,632				6,960				(3,044		)		2000
0601		Corpus Christi		TX		—				313				1,771				1,923				325				3,193				3,518				(1,173		)		2000
2244		Cypress		TX		—				—				7,705				25,335				—				33,039				33,039				(2,054		)		2015
0582		Dallas		TX		—				1,664				6,785				4,053				1,746				9,839				11,585				(3,861		)		2000
1314		Dallas		TX		—				15,230				162,971				33,595				23,882				185,238				209,120				(54,567		)		2006

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
0583		Fort Worth		TX		—				898				4,866				2,334				898				6,607				7,505				(2,403		)		2000
0805		Fort Worth		TX		—				—				2,481				1,211				2				3,290				3,292				(1,625		)		2005
0806		Fort Worth		TX		—				—				6,070				690				5				6,566				6,571				(2,065		)		2005
2231		Fort Worth		TX		—				902				—				44				946				—				946				(12		)		2014
2619		Fort Worth		TX		—				1,180				13,432				6				1,180				13,437				14,617				(153		)		2017
2620		Fort Worth		TX		—				1,961				14,139				72				1,961				14,211				16,172				(166		)		2017
1061		Granbury		TX		—				—				6,863				1,090				—				7,882				7,882				(2,083		)		2006
0430		Houston		TX		—				1,927				33,140				13,211				2,151				44,381				46,532				(18,994		)		1999
0446		Houston		TX		—				2,200				19,585				18,770				2,209				32,783				34,992				(18,259		)		1999
0589		Houston		TX		—				1,676				12,602				5,972				1,706				15,878				17,584				(5,555		)		2000
0670		Houston		TX		—				257				2,884				1,378				318				3,659				3,977				(1,406		)		2000
0702		Houston		TX		—				—				7,414				2,005				7				8,410				8,417				(2,880		)		2004
1044		Houston		TX		—				—				4,838				3,339				—				6,481				6,481				(1,929		)		2006
2542		Houston		TX		—				304				17,764				—				304				17,764				18,068				(1,364		)		2015
2543		Houston		TX		—				116				6,555				—				116				6,555				6,671				(595		)		2015
2544		Houston		TX		—				312				12,094				—				312				12,094				12,406				(1,105		)		2015
2545		Houston		TX		—				316				13,931				—				316				13,931				14,247				(970		)		2015
2546		Houston		TX		—				408				18,332				—				408				18,332				18,740				(2,003		)		2015
2547		Houston		TX		—				470				18,197				—				470				18,197				18,667				(1,684		)		2015
2548		Houston		TX		—				313				7,036				—				313				7,036				7,349				(834		)		2015
2549		Houston		TX		—				530				22,711				—				530				22,711				23,241				(1,394		)		2015
0590		Irving		TX		—				828				6,160				2,834				828				8,600				9,428				(3,351		)		2000
0700		Irving		TX		—				—				8,550				3,620				8				11,154				11,162				(4,592		)		2006
1202		Irving		TX		—				1,604				16,107				1,030				1,633				17,007				18,640				(5,268		)		2006
1207		Irving		TX		—				1,955				12,793				1,904				1,986				14,617				16,603				(4,520		)		2006
2613		Kingwood		TX		—				3,035				28,373				212				3,035				28,584				31,619				(1,161		)		2016
1062		Lancaster		TX		—				172				2,692				1,119				185				3,733				3,918				(1,550		)		2006
2195		Lancaster		TX		—				—				1,138				679				131				1,686				1,817				(387		)		2006
0591		Lewisville		TX		—				561				8,043				2,120				561				9,727				10,288				(3,315		)		2000
0144		Longview		TX		—				102				7,998				715				102				8,270				8,372				(4,258		)		1992
0143		Lufkin		TX		—				338				2,383				80				338				2,423				2,761				(1,239		)		1992
0568		Mckinney		TX		—				541				6,217				2,364				541				7,876				8,417				(2,842		)		2003
0569		Mckinney		TX		—				—				636				8,418				—				8,174				8,174				(2,665		)		2003
1079		Nassau Bay		TX		—				—				8,942				1,384				—				10,116				10,116				(3,279		)		2006
0596		N Richland Hills		TX		—				812				8,883				3,050				812				11,487				12,299				(3,998		)		2000
2048		North Richland Hills		TX		—				1,385				10,213				2,135				1,400				12,150				13,550				(2,613		)		2012
1048		Pearland		TX		—				—				4,014				4,306				—				7,326				7,326				(2,395		)		2006
2232		Pearland		TX		—				—				3,374				13,919				—				17,293				17,293				(713		)		2014
0447		Plano		TX		—				1,700				7,810				6,394				1,792				13,329				15,121				(6,390		)		1999
0597		Plano		TX		—				1,210				9,588				4,693				1,224				13,176				14,400				(4,565		)		2000
0672		Plano		TX		—				1,389				12,768				2,545				1,389				13,984				15,373				(4,617		)		2002
1284		Plano		TX		—				2,049				18,793				2,377				2,101				18,958				21,059				(7,525		)		2006
1286		Plano		TX		—				3,300				—				—				3,300				—				3,300				—				2006
2653		Rockwall		TX		—				788				9,020				—				788				9,020				9,808				—				2017
0815		San Antonio		TX		—				—				9,193				2,654				12				11,039				11,051				(3,584		)		2006
0816		San Antonio		TX		3,376				—				8,699				2,872				175				10,675				10,850				(3,770		)		2006
1591		San Antonio		TX		—				—				7,309				641				12				7,906				7,918				(2,086		)		2010
1977		San Antonio		TX		—				—				26,191				1,536				—				27,482				27,482				(6,622		)		2011
2559		Shenandoah		TX		—				—				—				27,194				—				27,194				27,194				(401		)		2016
0598		Sugarland		TX		—				1,078				5,158				2,774				1,170				7,077				8,247				(2,729		)		2000
0599		Texas City		TX		—				—				9,519				169				—				9,532				9,532				(2,864		)		2000
0152		Victoria		TX		—				125				8,977				394				125				9,370				9,495				(4,846		)		1994
2550		The Woodlands		TX		—				115				5,141				—				115				5,141				5,256				(403		)		2015
2551		The Woodlands		TX		—				296				18,282				—				296				18,282				18,578				(1,235		)		2015
2552		The Woodlands		TX		—				374				25,125				—				374				25,125				25,499				(1,513		)		2015
1592		Bountiful		UT		—				999				7,426				674				999				8,101				9,100				(1,991		)		2010
0169		Bountiful		UT		—				276				5,237				1,447				363				6,159				6,522				(2,940		)		1995
0346		Castle Dale		UT		—				50				1,818				73				50				1,828				1,878				(983		)		1998
0347		Centerville		UT		—				300				1,288				276				300				1,394				1,694				(704		)		1999
2035		Draper		UT		5,088				—				10,803				183				—				10,879				10,879				(1,455		)		2012
0469		Kaysville		UT		—				530				4,493				226				530				4,719				5,249				(1,786		)		2001
0456		Layton		UT		—				371				7,073				1,265				389				8,034				8,423				(3,704		)		2001
2042		Layton		UT		—				—				10,975				412				—				11,388				11,388				(1,503		)		2012
0359		Ogden		UT		—				180				1,695				240				180				1,814				1,994				(993		)		1999
0357		Orem		UT		—				337				8,744				2,041				306				8,268				8,574				(4,302		)		1999
0371		Providence		UT		—				240				3,876				618				282				4,163				4,445				(2,057		)		1999
0353		Salt Lake City		UT		—				190				779				164				201				885				1,086				(477		)		1999
0354		Salt Lake City		UT		—				220				10,732				2,204				220				12,421				12,641				(6,638		)		1999
0355		Salt Lake City		UT		—				180				14,792				2,647				180				16,688				16,868				(8,675		)		1999
0467		Salt Lake City		UT		—				3,000				7,541				2,274				3,145				9,323				12,468				(3,784		)		2001
0566		Salt Lake City		UT		—				509				4,044				2,510				509				6,121				6,630				(2,320		)		2003
2041		Salt Lake City		UT		—				—				12,326				335				—				12,661				12,661				(1,682		)		2012
2033		Sandy		UT		—				867				3,513				842				1,153				4,069				5,222				(1,245		)		2012
0482		Stansbury		UT		—				450				3,201				1,147				529				3,944				4,473				(1,245		)		2001
0351		Washington Terrace		UT		—				—				4,573				2,493				17				6,279				6,296				(3,509		)		1999
0352		Washington Terrace		UT		—				—				2,692				1,309				15				3,306				3,321				(1,657		)		1999
2034		West Jordan		UT		—				—				12,021				264				—				12,285				12,285				(1,604		)		2012
2036		West Jordan		UT		547				—				1,383				1,522				—				2,905				2,905				(610		)		2012
0495		West Valley City		UT		—				410				8,266				1,002				410				9,268				9,678				(4,567		)		2002
0349		West Valley City		UT		—				1,070				17,463				128				1,036				17,581				18,617				(9,488		)		1999
1208		Fairfax		VA		—				8,396				16,710				10,434				8,494				26,168				34,662				(8,694		)		2006
2230		Fredericksburg		VA		—				1,101				8,570				—				1,101				8,570				9,671				(837		)		2014
0572		Reston		VA		—				—				11,902				967				—				12,026				12,026				(4,458		)		2003
0448		Renton		WA		—				—				18,724				3,092				—				20,685				20,685				(10,299		)		1999

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
0781		Seattle		WA		—				—				52,703				15,806				—				64,279				64,279				(22,985		)		2004
0782		Seattle		WA		—				—				24,382				12,686				126				34,881				35,007				(13,765		)		2004
0783		Seattle		WA		—				—				5,625				1,375				183				6,690				6,873				(6,322		)		2004
0785		Seattle		WA		—				—				7,293				6,215				—				12,213				12,213				(4,804		)		2004
1385		Seattle		WA		—				—				45,027				3,619				—				48,471				48,471				(15,524		)		2007
2038		Evanston		WY		—				—				4,601				222				—				4,823				4,823				(681		)		2012
						$	9,011			$	279,168			$	2,785,660			$	822,680			$	295,620			$	3,434,989			$	3,730,609			$	(924,333	)

						Encumbrances at December 31, 2017				Initial Cost to Company								Costs Capitalized Subsequent to Acquisition				Gross Amount at Which Carried As of December 31, 2017												Accumulated Depreciation				Year Acquired/ Constructed
City				State			Land				Buildings and Improvements					Land				Buildings and Improvements				Total(1)
Other non-reportable segments
Other-Hospitals
0126		Sherwood		AR		—				709				9,604				—				709				9,587				10,296				(5,723		)		1989
0113		Glendale		AZ		—				1,565				7,050				20				1,565				7,050				8,615				(4,277		)		1988
1038		Fresno		CA		—				3,652				29,113				21,935				3,652				51,048				54,700				(16,338		)		2006
0423		Irvine		CA		—				18,000				70,800				—				18,000				70,800				88,800				(36,755		)		1999
0127		Colorado Springs		CO		—				690				8,338				—				690				8,338				9,028				(4,960		)		1989
0887		Atlanta		GA		—				4,300				13,690				—				4,300				11,890				16,190				(6,440		)		2007
0112		Overland Park		KS		—				2,316				10,681				24				2,316				10,680				12,996				(6,712		)		1988
1383		Baton Rouge		LA		—				690				8,545				87				690				8,496				9,186				(4,139		)		2007
2031		Slidell		LA		—				3,000				—				643				3,643				—				3,643				—				2012
0886		Dallas		TX		—				1,820				8,508				26				1,820				7,454				9,274				(2,019		)		2007
1319		Dallas		TX		—				18,840				155,659				1,557				18,840				157,216				176,056				(48,404		)		2007
1384		Plano		TX		—				6,290				22,686				5,706				6,290				28,203				34,493				(13,334		)		2007
2198		Webster		TX		—				2,220				9,602				—				2,220				9,602				11,822				(1,850		)		2013
Other-Post-acute/skilled nursing
2469		Rural Retreat		VA		—				1,876				14,720				—				1,876				14,720				16,596				(1,064		)		2013
Other-United Kingdom
2210		Adlington		EG		—				548				7,108				1,951				650				8,961				9,611				(757		)		2014
2211		Adlington		EG		—				568				4,318				—				568				4,318				4,886				(359		)		2014
2216		Alderley Edge		EG		—				1,252				8,719				—				1,252				8,719				9,971				(656		)		2014
2217		Alderley Edge		EG		—				1,218				6,827				—				1,218				6,828				8,046				(539		)		2014
2340		Altrincham		EG		—				1,745				18,693				—				1,745				18,694				20,439				(1,218		)		2015
2312		Armley		EG		—				447				2,670				—				447				2,670				3,117				(278		)		2015
2313		Armley		EG		—				1,001				3,114				—				1,001				3,114				4,115				(335		)		2015
2309		Ashton under Lyne		EG		—				649				4,507				—				649				4,507				5,156				(472		)		2015
2206		Bangor		EG		—				386				2,064				—				385				2,064				2,449				(213		)		2014
2207		Batley		EG		—				649				3,203				—				649				3,203				3,852				(454		)		2014
2336		Birmingham		EG		—				677				2,451				601				677				3,052				3,729				(522		)		2015
2320		Bishopbriggs		EG		—				907				4,166				—				907				4,166				5,073				(452		)		2015
2323		Bonnyrigg		EG		—				947				6,239				—				947				6,239				7,186				(644		)		2015
2335		Cardiff		EG		—				1,434				4,838				744				1,434				5,581				7,015				(771		)		2015
2223		Catterick Garrison		EG		—				798				1,467				—				798				1,467				2,265				(294		)		2014
2226		Christleton		EG		—				528				5,103				—				528				5,103				5,631				(401		)		2014
2327		Croydon		EG		—				1,597				2,494				17				1,596				2,511				4,107				(296		)		2015
2221		Disley		EG		—				345				1,621				—				345				1,620				1,965				(175		)		2014
2227		Disley		EG		—				690				3,964				—				690				3,964				4,654				(319		)		2014
2306		Dukinfield		EG		—				758				4,054				—				758				4,053				4,811				(412		)		2015
2316		Dukinfield		EG		—				392				2,491				—				392				2,491				2,883				(236		)		2015
2317		Dukinfield		EG		—				528				2,811				—				528				2,811				3,339				(309		)		2015
2318		Dumbarton		EG		—				920				3,825				—				920				3,825				4,745				(429		)		2015
2303		Eckington		EG		—				501				1,638				—				500				1,638				2,138				(213		)		2015
2333		Edinburgh		EG		—				4,533				24,135				558				4,533				24,693				29,226				(2,431		)		2015
2208		Elstead		EG		—				893				3,061				—				893				3,060				3,953				(346		)		2014
2328		Forfar		EG		—				852				6,200				427				853				6,626				7,479				(746		)		2015
2214		Gilroyd		EG		—				998				1,691				—				998				1,691				2,689				(322		)		2014
2330		Glasgow		EG		—				1,854				6,645				1,207				1,854				7,853				9,707				(1,136		)		2015
2307		Hyde		EG		—				1,394				5,144				—				1,394				5,144				6,538				(581		)		2015
2324		Lewisham		EG		—				1,921				7,113				604				1,922				7,717				9,639				(933		)		2015
2332		Linlithgow		EG		—				1,448				7,434				599				1,448				8,033				9,481				(933		)		2015
2213		Ilkley		EG		—				954				2,518				—				954				2,518				3,472				(403		)		2014
2209		Kingswood		EG		—				1,042				3,884				—				1,042				3,884				4,926				(405		)		2014
2212		Kirk Hammerton		EG		—				438				561				—				438				561				999				(131		)		2014
2310		Kirkby		EG		—				568				2,712				—				568				2,712				3,280				(302		)		2015
2304		Knotty Ash		EG		—				649				2,275				—				649				2,274				2,923				(270		)		2015
2322		Laindon		EG		—				1,191				2,771				—				1,191				2,771				3,962				(329		)		2015
2215		Leeds		EG		—				503				795				—				504				795				1,299				(196		)		2014
2326		Limehouse		EG		—				2,219				3,168				23				2,219				3,191				5,410				(409		)		2015
2321		Luton		EG		—				1,069				3,169				—				1,069				3,169				4,238				(336		)		2015
2339		Manchester		EG		—				1,685				15,136				—				1,685				15,136				16,821				(1,004		)		2015
2225		N Wadebridge		EG		—				298				6,158				—				298				6,159				6,457				(518		)		2014
2331		Paisley		EG		—				1,231				3,995				13				1,232				4,007				5,239				(444		)		2015
2308		Prescot		EG		—				541				1,934				—				541				1,934				2,475				(248		)		2015
2305		Prescot		EG		—				636				2,382				—				636				2,382				3,018				(284		)		2015
2219		Ripon		EG		—				189				906				—				189				906				1,095				(130		)		2014
2319		Sheffield		EG		—				744				2,705				—				745				2,704				3,449				(303		)		2015
2314		Stalybridge		EG		—				704				3,608				—				704				3,608				4,312				(380		)		2015
2315		Stalybridge		EG		—				555				1,887				—				555				1,887				2,442				(212		)		2015
2218		Stapeley		EG		—				995				6,491				—				994				6,491				7,485				(567		)		2014
2325		Stirling		EG		—				907				4,929				451				907				5,380				6,287				(640		)		2015
2329		Stirling		EG		—				1,110				4,041				646				1,109				4,687				5,796				(673		)		2015
2224		Stockton-on-Tees		EG		—				292				2,086				—				292				2,086				2,378				(240		)		2014
2220		Thornton-Cleveleys		EG		—				913				4,566				—				913				4,566				5,479				(482		)		2014
2228		Upper Wortley		EG		—				455				3,366				—				454				3,366				3,820				(334		)		2014
2311		Wigan		EG		—				717				2,660				—				717				2,661				3,378				(366		)		2015
2337		Wigan		EG		—				541				1,820				16				534				1,843				2,377				(247		)		2015
2338		Wigan		EG		—				474				3,788				23				474				3,811				4,285				(399		)		2015
2222		Woolmer Green		EG		—				832				6,062				—				832				6,061				6,893				(577		)		2014
2334		Wotton under Edge		EG		—				636				2,490				164				636				2,654				3,290				(378		)		2015
						$	—			$	122,434			$	641,667			$	38,042			$	123,171			$	675,704			$	798,875			$	(181,404	)
Total operations properties						$	144,486			$	1,765,938			$	9,726,105			$	2,332,632			$	1,785,865			$	11,687,527			$	13,473,392			$	(2,741,537	)
Corporate and other assets						—				—				—				—				—				181				181				(158		)
Total						$	144,486			$	1,765,938			$	9,726,105			$	2,332,632			$	1,785,865			$	11,687,708			$	13,473,573			$	(2,741,695	)

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1.	Buildings and improvements are depreciated over useful lives ranging up to 60 years.

2.	At December 31, 2017, the tax basis of the Company’s net real estate assets is less than the reported amounts by $900 million (unaudited).

(b)	A summary of activity for real estate and accumulated depreciation follows (in thousands):

	Year ended December 31,
	2017				2016				2015
Real estate:
Balances at beginning of year	$	13,974,760			$	14,330,257			$	12,931,832
Acquisition of real estate and development and improvements	995,443				987,135				1,930,931
Sales and/or transfers to assets held for sale and discontinued operations	(589,391		)		(1,227,614		)		(473,057		)
Deconsolidation of real estate	(825,074		)		(10,306		)		—
Impairments	(37,274		)		—				(3,118		)
Other(1)	(44,891		)		(104,712		)		(56,331		)
Balances at end of year	$	13,473,573			$	13,974,760			$	14,330,257
Accumulated depreciation:
Balances at beginning of year	$	2,648,930			$	2,476,015			$	2,190,486
Depreciation expense	436,085				465,945				418,591
Sales and/or transfers to assets held for sale and discontinued operations	(115,195		)		(239,112		)		(86,001		)
Deconsolidation of real estate	(152,572		)		(5,868		)		—
Other(1)	(75,553		)		(48,050		)		(47,061		)
Balances at end of year	$	2,741,695			$	2,648,930			$	2,476,015

---

(1)	Represents real estate and accumulated depreciation related to fully depreciated assets written off, foreign exchange translation or where the lease classification has changed to direct financing leases.