Item 1. Financial Statements (Unaudited)

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Item 1. Financial Statements (Unaudited)

Healthpeak Properties, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)


	September 30, 2022		December 31, 2021
ASSETS
Real estate:
Buildings and improvements	$	12,633,935	$	12,025,271
Development costs and construction in progress	744,711		877,423
Land	2,647,430		2,603,964
Accumulated depreciation and amortization	(3,148,019)		(2,839,229)
Net real estate	12,878,057		12,667,429
Net investment in direct financing leases	—		44,706
Loans receivable, net of reserves of $5,115 and $1,813	383,991		415,811
Investments in and advances to unconsolidated joint ventures	698,903		403,634
Accounts receivable, net of allowance of $2,521 and $1,870	53,964		48,691
Cash and cash equivalents	112,452		158,287
Restricted cash	54,500		53,454
Intangible assets, net	444,215		519,760
Assets held for sale and discontinued operations, net	51,495		37,190
Right-of-use asset, net	232,155		233,942
Other assets, net	752,224		674,615
Total assets	$	15,661,956	$	15,257,519

LIABILITIES AND EQUITY
Bank line of credit and commercial paper	$	1,585,333	$	1,165,975

Senior unsecured notes	4,657,651		4,651,933
Mortgage debt	347,987		352,081
Intangible liabilities, net	162,874		177,232
Liabilities related to assets held for sale and discontinued operations, net	12,831		15,056
Lease liability	200,813		204,547
Accounts payable, accrued liabilities, and other liabilities	732,895		755,384
Deferred revenue	835,223		789,207
Total liabilities	8,535,607		8,111,415

Commitments and contingencies (Note 10)

Redeemable noncontrolling interests	127,583		87,344


Common stock, $1.00 par value: 750,000,000 shares authorized; 537,533,719 and 539,096,879 shares issued and outstanding	537,534		539,097
Additional paid-in capital	10,014,707		10,100,294
Cumulative dividends in excess of earnings	(4,114,806)		(4,120,774)
Accumulated other comprehensive income (loss)	29,526		(3,147)
Total stockholders’ equity	6,466,961		6,515,470
Joint venture partners	330,749		342,234
Non-managing member unitholders	201,056		201,056
Total noncontrolling interests	531,805		543,290
Total equity	6,998,766		7,058,760
Total liabilities and equity	$	15,661,956	$	15,257,519

See accompanying Notes to the Unaudited Consolidated Financial Statements.

Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Rental and related revenues	$	392,301	$	353,516	$	1,149,530	$	1,022,130
Resident fees and services	122,142		119,022		369,062		352,458
Income from direct financing leases	—		2,179		1,168		6,522
Interest income	5,963		6,748		16,950		31,869
Total revenues	520,406		481,465		1,536,710		1,412,979
Costs and expenses:
Interest expense	44,078		35,905		123,531		121,429
Depreciation and amortization	173,190		177,175		531,412		506,172
Operating	220,208		202,139		642,499		574,032
General and administrative	24,549		23,270		73,161		72,260
Transaction costs	728		—		1,636		1,417

Impairments and loan loss reserves (recoveries), net	3,407		285		3,678		4,458
Total costs and expenses	466,160		438,774		1,375,917		1,279,768
Other income (expense):
Gain (loss) on sales of real estate, net	(4,149)		14,635		10,047		189,873
Gain (loss) on debt extinguishments	—		(667)		—		(225,824)
Other income (expense), net	305,678		1,670		326,855		5,604
Total other income (expense), net	301,529		15,638		336,902		(30,347)
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	355,775		58,329		497,695		102,864
Income tax benefit (expense)	3,834		649		3,775		1,404
Equity income (loss) from unconsolidated joint ventures	(325)		2,327		2,141		4,517
Income (loss) from continuing operations	359,284		61,305		503,611		108,785
Income (loss) from discontinued operations	(1,298)		601		2,011		384,569
Net income (loss)	357,986		61,906		505,622		493,354
Noncontrolling interests’ share in continuing operations	(4,016)		(7,195)		(11,701)		(14,036)
Noncontrolling interests’ share in discontinued operations	—		—		—		(2,539)
Net income (loss) attributable to Healthpeak Properties, Inc.	353,970		54,711		493,921		476,779

Participating securities’ share in earnings	(604)		(269)		(2,523)		(3,001)
Net income (loss) applicable to common shares	$	353,366	$	54,442	$	491,398	$	473,778

Basic earnings (loss) per common share:
Continuing operations	$	0.66	$	0.10	$	0.91	$	0.17
Discontinued operations	0.00		0.00		0.00		0.71
Net income (loss) applicable to common shares	$	0.66	$	0.10	$	0.91	$	0.88
Diluted earnings (loss) per common share:
Continuing operations	$	0.65	$	0.10	$	0.91	$	0.17
Discontinued operations	0.00		0.00		0.00		0.71
Net income (loss) applicable to common shares	$	0.65	$	0.10	$	0.91	$	0.88



Weighted average shares outstanding:
Basic	538,417		539,021		539,105		538,879
Diluted	546,015		539,388		544,852		539,159

See accompanying Notes to the Unaudited Consolidated Financial Statements.

Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	357,986	$	61,906	$	505,622	$	493,354
Other comprehensive income (loss):
Net unrealized gains (losses) on derivatives	30,744		—		32,373		332
Change in Supplemental Executive Retirement Plan obligation and other	100		108		300		323
Reclassification adjustment realized in net income (loss)	—		—		—		(251)
Total other comprehensive income (loss)	30,844		108		32,673		404
Total comprehensive income (loss)	388,830		62,014		538,295		493,758
Total comprehensive (income) loss attributable to noncontrolling interests’ share in continuing operations	(4,016)		(7,195)		(11,701)		(14,036)
Total comprehensive (income) loss attributable to noncontrolling interests’ share in discontinued operations	—		—		—		(2,539)
Total comprehensive income (loss) attributable to Healthpeak Properties, Inc.	$	384,814	$	54,819	$	526,594	$	477,183

See accompanying Notes to the Unaudited Consolidated Financial Statements.

Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

(In thousands, except per share data)

(Unaudited)

For the three months ended September 30, 2022:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


July 1, 2022	539,580	$	539,580	$	10,073,712	$	(4,306,762)	$	(1,318)	$	6,305,212	$	535,176	$	6,840,388	$	115,877
Net income (loss)	—	—		—		353,970		—		353,970		4,003		357,973		13
Other comprehensive income (loss)	—	—		—		—		30,844		30,844		—		30,844		—
Issuance of common stock, net	16	16		359		—		—		375		—		375		—

Repurchase of common stock	(2,062)	(2,062)		(53,966)		—		—		(56,028)		—		(56,028)		—

Amortization of stock-based compensation	—	—		6,030		—		—		6,030		—		6,030		—
Common dividends ($0.30 per share)	—	—		—		(162,014)		—		(162,014)		—		(162,014)		—
Distributions to noncontrolling interests	—	—		—		—		—		—		(7,374)		(7,374)		(42)
Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		307
Adjustments to redemption value of redeemable noncontrolling interests	—	—		(11,428)		—		—		(11,428)		—		(11,428)		11,428



September 30, 2022	537,534	$	537,534	$	10,014,707	$	(4,114,806)	$	29,526	$	6,466,961	$	531,805	$	6,998,766	$	127,583

For the three months ended September 30, 2021:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


July 1, 2021	538,955	$	538,955	$	10,147,230	$	(3,880,253)	$	(3,389)	$	6,802,543	$	548,867	$	7,351,410	$	85,367
Net income (loss)	—	—		—		54,711		—		54,711		7,172		61,883		23
Other comprehensive income (loss)	—	—		—		—		108		108		—		108		—
Issuance of common stock, net	20	20		358		—		—		378		—		378		—

Repurchase of common stock	(2)	(2)		(71)		—		—		(73)		—		(73)		—
Exercise of stock options	93	93		3,073		—		—		3,166		—		3,166		—
Amortization of stock-based compensation	—	—		5,666		—		—		5,666		—		5,666		—
Common dividends ($0.30 per share)	—	—		—		(161,995)		—		(161,995)		—		(161,995)		—
Distributions to noncontrolling interests	—	—		—		—		—		—		(7,602)		(7,602)		(43)



Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		100

Adjustments to redemption value of redeemable noncontrolling interests	—	—		(34,144)		—		—		(34,144)		—		(34,144)		34,144
September 30, 2021	539,066	$	539,066	$	10,122,112	$	(3,987,537)	$	(3,281)	$	6,670,360	$	548,437	$	7,218,797	$	119,591

For the nine months ended September 30, 2022:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


January 1, 2022	539,097	$	539,097	$	10,100,294	$	(4,120,774)	$	(3,147)	$	6,515,470	$	543,290	$	7,058,760	$	87,344
Net income (loss)	—	—		—		493,921		—		493,921		11,663		505,584		38
Other comprehensive income (loss)	—	—		—		—		32,673		32,673		—		32,673		—
Issuance of common stock, net	847	847		184		—		—		1,031		—		1,031		—

Repurchase of common stock	(2,410)	(2,410)		(65,232)		—		—		(67,642)		—		(67,642)		—

Amortization of stock-based compensation	—	—		18,895		—		—		18,895		—		18,895		—
Common dividends ($0.90 per share)	—	—		—		(487,953)		—		(487,953)		—		(487,953)		—

Distributions to noncontrolling interests	—	—		—		—		—		—		(23,148)		(23,148)		(127)


Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		894
Adjustments to redemption value of redeemable noncontrolling interests	—	—		(39,434)		—		—		(39,434)		—		(39,434)		39,434



September 30, 2022	537,534	$	537,534	$	10,014,707	$	(4,114,806)	$	29,526	$	6,466,961	$	531,805	$	6,998,766	$	127,583

For the nine months ended September 30, 2021:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


January 1, 2021	538,405	$	538,405	$	10,175,235	$	(3,976,232)	$	(3,685)	$	6,733,723	$	556,227	$	7,289,950	$	57,396
Net income (loss)	—	—		—		476,779		—		476,779		16,552		493,331		23
Other comprehensive income (loss)	—	—		—		—		404		404		—		404		—
Issuance of common stock, net	974	974		448		—		—		1,422		—		1,422		—

Repurchase of common stock	(410)	(410)		(12,143)		—		—		(12,553)		—		(12,553)		—
Exercise of stock options	97	97		3,194		—		—		3,291		—		3,291		—
Amortization of stock-based compensation	—	—		17,224		—		—		17,224		—		17,224		—
Common dividends ($0.90 per share)	—	—		—		(488,084)		—		(488,084)		—		(488,084)		—

Distributions to noncontrolling interests	—	—		—		—		—		—		(24,277)		(24,277)		(95)

Purchase of noncontrolling interests	—	—		(5)		—		—		(5)		(65)		(70)		—
Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		426

Adjustments to redemption value of redeemable noncontrolling interests	—	—		(61,841)		—		—		(61,841)		—		(61,841)		61,841


September 30, 2021	539,066	$	539,066	$	10,122,112	$	(3,987,537)	$	(3,281)	$	6,670,360	$	548,437	$	7,218,797	$	119,591

_______________________________________

See accompanying Notes to the Unaudited Consolidated Financial Statements.

Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	505,622	$	493,354
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of real estate, in-place lease, and other intangibles	531,412		506,172
Stock-based compensation amortization expense	14,635		13,895
Amortization of deferred financing costs	8,069		6,677
Straight-line rents	(36,837)		(23,627)

Amortization of nonrefundable entrance fees and above/below market lease intangibles	(75,635)		(68,854)
Equity loss (income) from unconsolidated joint ventures	(2,205)		(9,508)
Distributions of earnings from unconsolidated joint ventures	708		4,731

Loss (gain) on sale of real estate under direct financing leases	(22,693)		—
Deferred income tax expense (benefit)	(5,199)		(3,999)
Impairments and loan loss reserves (recoveries), net	3,678		37,194
Loss (gain) on debt extinguishments	—		225,824
Loss (gain) on sales of real estate, net	(11,408)		(598,531)
Loss (gain) upon change of control, net	(311,438)		(1,042)
Casualty-related loss (recoveries), net	6,457		1,632


Other non-cash items	(1,029)		(8,640)
Changes in:
Decrease (increase) in accounts receivable and other assets, net	(2,751)		27,576
Increase (decrease) in accounts payable, accrued liabilities, and deferred revenue	91,920		(31,519)
Net cash provided by (used in) operating activities	693,306		571,335
Cash flows from investing activities:
Acquisitions of real estate	(159,199)		(978,473)
Development, redevelopment, and other major improvements of real estate	(616,803)		(430,510)
Leasing costs, tenant improvements, and recurring capital expenditures	(75,103)		(72,112)
Proceeds from sales of real estate, net	47,797		2,383,017
Proceeds from the South San Francisco JVs transaction, net	125,985		—

Contributions to unconsolidated joint ventures	(9,259)		(12,828)
Distributions in excess of earnings from unconsolidated joint ventures	8,746		37,139





Proceeds from sales/principal repayments on loans receivable and direct financing leases	105,040		291,223
Investments in loans receivable and other	(5,317)		(13,781)

Net cash provided by (used in) investing activities	(578,113)		1,203,675
Cash flows from financing activities:
Borrowings under bank line of credit and commercial paper	12,220,955		12,931,450
Repayments under bank line of credit and commercial paper	(11,801,597)		(12,037,040)
Issuance and borrowings of debt, excluding bank line of credit and commercial paper	—		591,546
Repayments and repurchase of debt, excluding bank line of credit and commercial paper	(3,759)		(2,421,598)

Payments for debt extinguishment and deferred financing costs	(4,171)		(232,306)

Issuance of common stock and exercise of options, net of offering costs	38		4,713
Repurchase of common stock	(67,642)		(12,553)
Dividends paid on common stock	(486,960)		(488,084)

Distributions to and purchase of noncontrolling interests	(23,275)		(24,443)
Contributions from and issuance of noncontrolling interests	894		426
Net cash provided by (used in) financing activities	(165,517)		(1,687,889)

Net increase (decrease) in cash, cash equivalents and restricted cash	(50,324)		87,121
Cash, cash equivalents and restricted cash, beginning of period	219,448		181,685
Cash, cash equivalents and restricted cash, end of period	$	169,124	$	268,806

See accompanying Notes to the Unaudited Consolidated Financial Statements.

Healthpeak Properties, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. Business

Overview

Healthpeak Properties, Inc., a Standard & Poor’s 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) that, together with its consolidated entities (collectively, “Healthpeak” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). Healthpeak® acquires, develops, owns, leases, and manages healthcare real estate. The Company’s diverse portfolio is comprised of investments in the following reportable healthcare segments: (i) life science; (ii) medical office; and (iii) continuing care retirement community (“CCRC”).

The Company’s corporate headquarters are in Denver, Colorado and it has additional offices in California, Tennessee, and Massachusetts.

NOTE 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of Healthpeak Properties, Inc., its wholly-owned subsidiaries, joint ventures (“JVs”), and variable interest entities (“VIEs”) that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. All adjustments (consisting of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations, and cash flows have been included. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (“SEC”).

Government Grant Income

On March 27, 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to provide financial aid to individuals, businesses, and state and local governments. During the three and nine months ended September 30, 2022 and 2021, the Company received government grants under the CARES Act primarily to cover increased expenses and lost revenue during the coronavirus pandemic. Grant income is recognized to the extent that qualifying expenses and lost revenues exceed grants received and the Company will comply with all conditions attached to the grant. As of September 30, 2022, the amount of qualifying expenditures and lost revenue exceeded grant income recognized and the Company believes it has complied and will continue to comply with all grant conditions. In the event of non-compliance, all such amounts received are subject to recapture.

The following table summarizes information related to government grant income received and recognized by the Company (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Government grant income recorded in other income (expense), net	$	4	$	15	$	6,765	$	1,412
Government grant income recorded in equity income (loss) from unconsolidated joint ventures	183		—		831		1,010
Government grant income recorded in income (loss) from discontinued operations	10		—		216		3,660
Total government grants received	$	197	$	15	$	7,812	$	6,082

Discontinued Operations

Senior Housing Triple-Net and Senior Housing Operating Portfolio Dispositions

During 2020, the Company established and began executing a plan to dispose of its senior housing triple-net and Senior Housing Operating Property (“SHOP”) properties and concluded that the planned dispositions represented a strategic shift that had and will have a major effect on the Company’s operations and financial results. Therefore, senior housing triple-net and SHOP assets meeting the held for sale criteria are classified as discontinued operations in all periods presented herein. In September 2021, the Company successfully completed the disposition of the remaining senior housing triple-net and SHOP properties. See Note 4 for further information.

Recent Accounting Pronouncements

Adopted

Government Assistance. In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”), which increases the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for assistance, and the effect of the assistance on an entity’s financial statements. The adoption of ASU 2021-10 on January 1, 2022 did not have a material impact on the Company’s consolidated financial position, results of operations, cash flows, or disclosures.

Not Yet Adopted

Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional guidance for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which amends the scope of ASU 2020-04 to include derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments in ASU 2020-04 and ASU 2021-01 were effective immediately and may be applied through December 31, 2022. During 2022, the Company elected to apply certain hedge accounting expedients provided by ASU 2020-04 and ASU 2021-01, which preserves the hedging relationship of derivatives. The expedients provided by ASU 2020-04 and ASU 2021-01 and the effects of reference rate reform have not had, and are not expected to have, a material impact on the Company’s consolidated financial position, results of operations, cash flows, or disclosures.

NOTE 3. Real Estate

2022 Real Estate Investment Acquisitions

67 Smith Place

In January 2022, the Company closed a life science acquisition in Cambridge, Massachusetts for $72 million.

Vista Sorrento Phase II

In January 2022, the Company closed a life science acquisition in San Diego, California for $24 million.

Webster MOB Portfolio

In March 2022, the Company acquired a portfolio of two medical office buildings (“MOBs”) in Houston, Texas for $43 million.

Northwest Medical Plaza

In May 2022, the Company acquired one MOB in Bentonville, Arkansas for $26 million.

2021 Real Estate Investment Acquisitions

In 2021, the Company closed the following life science acquisitions: (i) eight acquisitions in Cambridge, Massachusetts for $498 million, (ii) one acquisition in San Diego, California for $20 million, and (iii) 12 acres of land for $128 million in South San Francisco, California.

Also during 2021, the Company closed the following MOB acquisitions: (i) one MOB in Nashville, Tennessee for $13 million, (ii) one MOB in Denver, Colorado for $38 million, (iii) a portfolio of 14 MOBs for $371 million (the “MOB Portfolio”), (iv) one MOB in Fort Lauderdale, Florida for $16 million; (v) one MOB in Wichita, Kansas for $50 million, (vi) three MOBs in Morristown, New Jersey for $155 million, (vii) two MOBs in Dallas, Texas for $60 million, (viii) one MOB in Seattle, Washington for $43 million, (ix) one MOB in New Orleans, Louisiana for $34 million, and (x) one MOB in Cambridge, Massachusetts for $55 million. In conjunction with the acquisition of the MOB Portfolio, the Company originated $142 million of secured mortgage debt.

Development Activities

The Company’s commitments, which are primarily related to development and redevelopment projects and tenant improvements, decreased by $49 million, to $421 million at September 30, 2022, when compared to December 31, 2021, primarily as a result of construction spend on existing projects in the first three quarters of 2022 thereby decreasing the remaining commitment.

NOTE 4. Dispositions of Real Estate and Discontinued Operations

2022 Dispositions of Real Estate

In January 2022, the Company sold one life science facility in Salt Lake City, Utah for $14 million, resulting in a gain on sale of $4 million.

During the three months ended June 30, 2022, the Company sold three MOBs and one MOB land parcel for $27 million, resulting in total gain on sales of $10 million.

In July 2022, the Company sold two MOBs for $9 million, resulting in total gain on sales of $1 million.

2021 Dispositions of Real Estate

Sunrise Senior Housing Portfolio

In January 2021, the Company sold a portfolio of 32 SHOP assets (the “Sunrise Senior Housing Portfolio”) for $664 million, resulting in an immaterial loss on sale, which is recognized in income (loss) from discontinued operations, and provided the buyer with: (i) financing of $410 million (see Note 6) and (ii) a commitment to finance up to $92 million of additional debt for capital expenditures. The commitment to finance additional debt for capital expenditures was subsequently reduced to $56 million in June 2021, $47 million in February 2022, and $40 million in July 2022 (see Note 6). As of September 30, 2022, $0.4 million of the additional financing has been funded. Upon completion of the license transfer process in June 2021, the Company sold the two remaining Sunrise senior housing triple-net assets for $80 million, resulting in a gain on sale of $22 million, which is recognized in income (loss) from discontinued operations.

Brookdale Triple-Net Portfolio

In January 2021, the Company sold 24 senior housing assets in a triple-net lease with Brookdale Senior Living Inc. for $510 million, resulting in total gain on sale of $169 million, which is recognized in income (loss) from discontinued operations.

Additional SHOP Portfolio

In January 2021, the Company sold a portfolio of 16 SHOP assets for $230 million, resulting in total gain on sale of $59 million, which is recognized in income (loss) from discontinued operations. The Company provided the buyer with financing of $150 million (see Note 6).

HRA Triple-Net Portfolio

In February 2021, the Company sold eight senior housing assets in a triple-net lease with Harbor Retirement Associates for $132 million, resulting in total gain on sale of $33 million, which is recognized in income (loss) from discontinued operations.

Oakmont SHOP Portfolio

In April 2021, the Company sold a portfolio of 12 SHOP assets for $564 million. In conjunction with the sale, mortgage debt held on two properties with a carrying value of $64 million was repaid and the remaining mortgage debt held on four properties with a carrying value of $107 million was assumed by the buyer. The transaction resulted in total gain on sale of $80 million, which is recognized in income (loss) from discontinued operations.

Discovery SHOP Portfolio

In April 2021, the Company sold a portfolio of 10 SHOP assets for $334 million, resulting in total gain on sale of $9 million, which is recognized in income (loss) from discontinued operations. Also included in this transaction was the sale of two mezzanine loans and two preferred equity investments for $21 million, resulting in no gain or loss on sale of the investments (collectively, the “Discovery SHOP Portfolio”).

Sonata SHOP Portfolio

In April 2021, the Company sold a portfolio of five SHOP assets for $64 million, resulting in total gain on sale of $3 million, which is recognized in income (loss) from discontinued operations.

SLC SHOP Portfolio

In May 2021, the Company sold seven SHOP assets for $113 million and repaid $70 million of mortgage debt that was held on six of the assets, resulting in total gain on sale of $1 million, which is recognized in income (loss) from discontinued operations.

Hoag Hospital

In May 2021, the Company sold one hospital for $226 million through the exercise of a purchase option by a tenant, resulting in gain on sale of $172 million.

2021 Other Dispositions

The Company sold the following during the three months ended September 30, 2021: (i) eight SHOP assets for $120 million, (ii) four senior housing triple-net assets for $12 million, and (iii) three MOBs for $36 million, resulting in total gain on sales of $42 million ($27 million of which is recognized in income (loss) from discontinued operations). In conjunction with one of the SHOP asset sales, mortgage debt held on the property with a carrying value of $36 million was assumed by the buyer.

In addition to the portfolio and individual sales discussed above, the Company sold the following during the nine months ended September 30, 2021: (i) 15 SHOP assets for $169 million, (ii) 7 senior housing triple-net assets for $24 million, and (iii) 7 MOBs for $57 million, resulting in total gain on sales of $52 million ($34 million of which is recognized in income (loss) from discontinued operations).

During the fourth quarter of 2021, the Company sold three MOBs and a portion of one MOB land parcel for $11 million, resulting in total gain on sales of $1 million.

Held for Sale and Discontinued Operations

During 2020, the Company established and began executing a plan to dispose of its senior housing triple-net and SHOP properties. As of December 31, 2020, the Company concluded that the planned dispositions represented a strategic shift that had and will have a major effect on the Company’s operations and financial results. Therefore, senior housing triple-net and SHOP assets meeting the held for sale criteria are classified as discontinued operations in all periods presented herein. In September 2021, the Company successfully completed the disposition of the remaining senior housing triple-net and SHOP properties.

The following summarizes the assets and liabilities classified as held for sale or as discontinued operations at September 30, 2022 and December 31, 2021, which are included in assets held for sale and discontinued operations, net and liabilities related to assets held for sale and discontinued operations, net, respectively, on the Consolidated Balance Sheets (in thousands):


	September 30, 2022		December 31, 2021
ASSETS







Accounts receivable, net of allowance of $260 and $4,138	$	367	$	2,446
Cash and cash equivalents	2,172		7,707


Right-of-use asset, net	—		26
Other assets, net	285		3,237
Total assets of discontinued operations, net	2,824		13,416
Assets held for sale, net(1)	48,671		23,774
Assets held for sale and discontinued operations, net	$	51,495	$	37,190
LIABILITIES

Lease liability	$	—	$	26
Accounts payable, accrued liabilities, and other liabilities	8,668		14,843
Deferred revenue	—		92
Total liabilities of discontinued operations, net	8,668		14,961
Liabilities related to assets held for sale, net(1)	4,163		95
Liabilities related to assets held for sale and discontinued operations, net	$	12,831	$	15,056

_______________________________________

(1)As of September 30, 2022, included two life science assets primarily comprised of net real estate assets of $43 million. As of December 31, 2021, included four MOBs and one life science facility primarily comprised of net real estate assets of $23 million.

The results of discontinued operations during the three and nine months ended September 30, 2022 and 2021, or through the disposal date of each asset or portfolio of assets held within discontinued operations if sold during such periods, as applicable, are presented below (in thousands) and are included in the consolidated results of operations for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Rental and related revenues	$	—	$	694	$	—	$	7,535
Resident fees and services	1,284		8,507		6,765		111,777

Total revenues	1,284		9,201		6,765		119,312
Costs and expenses:
Interest expense	—		47		—		3,900

Operating	1,334		13,010		6,451		118,175
Transaction costs	—		—		—		76
Impairments and loan loss reserves (recoveries), net	—		21,740		—		32,736
Total costs and expenses	1,334		34,797		6,451		154,887
Other income (expense):
Gain (loss) on sales of real estate, net	(1,131)		26,758		1,361		408,658
Other income (expense), net	(7)		(863)		12		5,150
Total other income (expense), net	(1,138)		25,895		1,373		413,808
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	(1,188)		299		1,687		378,233
Income tax benefit (expense)	(110)		221		260		1,345
Equity income (loss) from unconsolidated joint ventures	—		81		64		4,991

Income (loss) from discontinued operations	$	(1,298)	$	601	$	2,011	$	384,569

Impairments of Real Estate

2022

During the three and nine months ended September 30, 2022, the Company did not recognize any impairment charges.

2021

During the three and nine months ended September 30, 2021, the Company recognized an aggregate impairment charge of $2 million, which is reported in impairments and loan loss reserves (recoveries), net, related to two MOBs classified as held for sale. The Company wrote down the two properties’ aggregate carrying value of $13 million to their aggregate fair value, less estimated costs to sell, of $11 million.

Additionally, during the nine months ended September 30, 2021, the Company recognized an impairment charge of $4 million related to one SHOP asset classified as held for sale, which is reported in income (loss) from discontinued operations. Following a reduction in the expected sales price of the asset occurring in the second quarter of 2021, the Company wrote down its carrying value of $20 million to its fair value, less estimated costs to sell, of $16 million.

The fair values of the impaired assets were based on the forecasted sales prices, which are considered to be a Level 3 measurement within the fair value hierarchy. The Company’s forecasted sales prices are typically determined using an income approach and/or a market approach (comparable sales model), which rely on certain assumptions by management, including: (i) market capitalization rates, (ii) comparable market transactions, (iii) estimated prices per unit, (iv) negotiations with prospective buyers, and (v) forecasted cash flow streams (lease revenue rates, expense rates, growth rates, etc.). There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations during the three and nine months ended September 30, 2021, the Company’s fair value estimates primarily relied on a market approach and utilized comparable market transactions and negotiations with prospective buyers.

Goodwill Impairment

When testing goodwill for impairment, 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 charge for the amount by which the carrying value, including goodwill, exceeds the reporting unit’s fair value.

Following the disposition of the Company’s remaining senior housing triple-net and SHOP assets in September 2021, the Company performed an impairment assessment to evaluate the fair value of its reporting units as of September 30, 2021. During the three months ended September 30, 2021, the Company recognized a $22 million goodwill impairment charge reported in income (loss) from discontinued operations to reduce the associated goodwill balance to zero as no assets remained in the reporting units associated with the senior housing triple-net and SHOP portfolios as of the assessment date.

During the nine months ended September 30, 2021, the Company recognized a $29 million goodwill impairment charge reported in income (loss) from discontinued operations, $7 million of which was recognized during the second quarter of 2021, as the fair value of the remaining senior housing triple-net assets (based on forecasted sales prices) was less than the carrying value of the assets, including the related goodwill as of the assessment date.

During the three and nine months ended September 30, 2021, the fair value of the assets within each of the Company’s other reporting units was greater than the respective carrying value of the assets and related goodwill, and as a result, no impairment loss was recognized with respect to the other reporting units.

These fair value estimates primarily relied on a market approach, utilizing comparable market transactions, forecasted sales prices, and negotiations with prospective buyers. These estimates are considered to be a Level 3 measurement within the fair value hierarchy, and are subject to inherent uncertainties.

Other Losses

During the first quarter of 2022, the Company recognized $14 million of expenses for tenant relocation and other costs associated with the demolition of an MOB. These expenses are included in other income (expense), net on the Consolidated Statements of Operations for the nine months ended September 30, 2022.

NOTE 5. Leases

Lease Income

The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021



Fixed income from operating leases	$	298,680	$	276,430	$	882,700	$	807,677
Variable income from operating leases	93,621		77,086		266,830		214,453
Interest income from direct financing leases	—		2,179		1,168		6,522

Direct Financing Leases

2022 Direct Financing Lease Sale

During the first quarter of 2022, the Company sold its remaining hospital classified as a direct financing lease (“DFL”) for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net.

Net investment in DFLs consists of the following (in thousands):


	September 30, 2022		December 31, 2021
Present value of minimum lease payments receivable	$	—	$	1,220
Present value of estimated residual value	—		44,706
Less deferred selling profits	—		(1,220)


Net investment in direct financing leases	$	—	$	44,706

Direct Financing Lease Internal Ratings

At September 30, 2022, the Company had no properties classified as a DFL. At December 31, 2021, the Company had one hospital classified as a DFL with a carrying amount of $45 million and an internal rating of “performing”.

NOTE 6. Loans Receivable

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


	September 30, 2022		December 31, 2021
Secured loans(1)	$	360,092	$	396,281
Mezzanine and other	30,579		25,529
Unamortized discounts, fees, and costs	(1,565)		(4,186)
Reserve for loan losses	(5,115)		(1,813)
Loans receivable, net	$	383,991	$	415,811

_______________________________________

(1)At September 30, 2022, the Company had $41 million remaining of commitments to fund additional loans for senior housing redevelopment and capital expenditure projects. At December 31, 2021, the Company had $58 million remaining of commitments to fund additional loans for senior housing redevelopment and capital expenditure projects.

SHOP Seller Financing

In conjunction with the sale of 32 SHOP facilities in the Sunrise Senior Housing Portfolio for $664 million in January 2021 (see Note 4), the Company provided the buyer with initial financing of $410 million. The remainder of the sales price was received in cash at the time of sale. Additionally, the Company agreed to provide up to $92 million of additional financing for capital expenditures (up to 65% of the estimated cost of capital expenditures). The additional financing was subsequently reduced to $56 million in June 2021, $47 million in February 2022, and $40 million in July 2022 in conjunction with the principal repayments discussed below. Through September 30, 2022, $0.4 million of the additional financing had been funded. The initial and additional financing is secured by the buyer's equity ownership in each property.

In June 2021, the Company received principal repayments of $246 million on the initial financing provided in conjunction with the sale of the Sunrise Senior Housing Portfolio. In connection with the June 2021 principal repayment, the Company accelerated recognition of $7 million of the related mark-to-market discount, which is included in interest income in the Consolidated Statements of Operations. Additionally, in February 2022 and July 2022, the Company received principal repayments of $8 million and $27 million, respectively, in conjunction with the disposition of the underlying collateral. As of September 30, 2022 and December 31, 2021, this secured loan had an outstanding balance of $130 million and $165 million, respectively.

In conjunction with the sale of 16 additional SHOP facilities for $230 million in January 2021 (see Note 4), the Company provided the buyer with financing of $150 million. The remainder of the sales price was received in cash at the time of sale. The financing is secured by the buyer's equity ownership in each property.

During the first quarter of 2021, the Company reduced the consideration and reported gain on sales of real estate and recognized a mark-to-market discount of $16 million for certain transactions with seller financing. The Company’s discount is based on the difference between the stated interest rates (ranging from 3.50% to 4.50%) and corresponding prevailing market rates of approximately 5.25% as of the transaction dates. The discount is recognized as interest income over the term of the discounted loans (ranging from one to three years) using the effective interest rate method. During the three and nine months ended September 30, 2022, the Company recognized $1 million and $3 million, respectively, of non-cash interest income related to the amortization of its mark-to-market discounts. During the three and nine months ended September 30, 2021, the Company recognized $1 million and $12 million, respectively, of non-cash interest income related to the amortization of its mark-to-market discounts, of which $7 million was recognized during the nine months ended September 30, 2021 as a result of the accelerated recognition discussed above related to the Sunrise Senior Housing Portfolio.

2022 Other Loans Receivable Transactions

In May 2022, the Company received full repayment of the outstanding balance of a $2 million secured loan.

2021 Other Loans Receivable Transactions

The Company classifies a loan receivable as held for sale when management no longer has the intent or ability to hold the loan receivable for the foreseeable future or until maturity. If a loan receivable is classified as held for sale, previously recorded reserves for loan losses are reversed and the loan is reported at the lower of amortized cost or fair value. During the second quarter of 2021, two loans receivable with a total amortized cost of $64 million were classified as held for sale. Upon the transfer of these two loans to held for sale, the carrying value was decreased by $11 million to an estimated fair value of $53 million, $8 million of which was previously recognized as a reserve for loan losses. As a result, a $3 million net loss was recognized in impairments and loan loss reserves (recoveries), net during the nine months ended September 30, 2021. In September 2021, the Company sold one of the loans receivable previously classified as held for sale for its carrying value of $2 million. In November 2021, the Company sold the other loan receivable previously classified as held for sale for its carrying value of $51 million.

These fair value estimates were made for each individual loan classified as held for sale and primarily relied on a market approach, utilizing comparable market transactions, forecasted sales prices, and negotiations with prospective buyers. These estimates are considered to be a Level 3 measurement within the fair value hierarchy, and are subject to inherent uncertainties.

Additionally, in April 2021, the Company sold two mezzanine loans as part of the Discovery SHOP Portfolio disposition (see Note 4), resulting in no gain or loss on sale of the mezzanine loans.

In May 2021, the Company received a $10 million principal repayment related to one of its secured loans. In September 2021, the Company received repayment of the remaining $15 million balance.

In July 2021, the Company received full repayment of the outstanding balance of an $8 million secured loan.

CCRC Resident Loans

For certain residents that qualify, CCRCs may offer to lend residents the necessary funds to satisfy the entrance fee requirements so that they are able to move into a community while still continuing the process of selling their previous home. The loans are due upon sale of the previous residence. At September 30, 2022 and December 31, 2021, the Company held $29 million and $24 million, respectively, of such notes receivable, which are included in mezzanine and other in the table above.

Loans Receivable Internal Ratings

In connection with the Company’s quarterly review process or upon the occurrence of a significant event, loans receivable are reviewed and assigned an internal rating of Performing, Watch List, or Workout. Loans that are deemed Performing meet all present contractual obligations, and collection and timing of all amounts owed is reasonably assured. Watch List Loans are defined as loans that do not meet the definition of Performing or Workout. Workout Loans are defined as loans 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 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.

The following table summarizes, by year of origination, the Company’s internal ratings for loans receivable, net of unamortized discounts, fees, and reserves for loan losses, as of September 30, 2022 (in thousands):


Investment Type		Year of Origination																Total
	2022			2021			2020			2019			2018	Prior
Secured loans
Risk rating:
Performing loans		$	—		$	275,634		$	77,794		$	—		$	—	$	—	$	353,428
Watch list loans		—			—			—			—			—		—		—
Workout loans		—			—			—			—			—		—		—
Total secured loans		$	—		$	275,634		$	77,794		$	—		$	—	$	—	$	353,428



Mezzanine and other
Risk rating:
Performing loans		$	25,846		$	3,493		$	1,224		$	—		$	—	$	—	$	30,563
Watch list loans		—			—			—			—			—		—		—
Workout loans		—			—			—			—			—		—		—
Total mezzanine and other		$	25,846		$	3,493		$	1,224		$	—		$	—	$	—	$	30,563

Reserve for Loan Losses

The Company evaluates the liquidity and creditworthiness of its borrowers on a quarterly basis to determine whether any updates to the future expected losses recognized upon inception are necessary. The Company’s evaluation considers industry and economic conditions, individual and portfolio property performance, credit enhancements, liquidity, and other factors. The determination of loan losses also considers concentration of credit risk associated with the senior housing industry to which its loans receivable relate. The Company’s borrowers furnish property, portfolio, and guarantor/operator-level financial statements, among other information, on a monthly or quarterly basis, which the Company utilizes to calculate the debt service coverages used in its assessment of internal ratings, which is a primary credit quality indicator. Debt service coverage information is evaluated together with other property, portfolio, and operator performance information, including revenue, expense, NOI, occupancy, rental rates, capital expenditures, and EBITDA (defined as earnings before interest, tax, and depreciation and amortization), along with other liquidity measures.

In its assessment of current expected credit losses for loans receivable and unfunded loan commitments, the Company utilizes past payment history of its borrowers, current economic conditions, and forecasted economic conditions through the maturity date of each loan to estimate a probability of default and a resulting loss for each loan receivable. Future economic conditions are based primarily on near-term economic forecasts from the Federal Reserve and reasonable assumptions for long-term economic trends.

The following table summarizes the Company’s reserve for loan losses (in thousands):


	September 30, 2022						December 31, 2021
	Secured Loans		Mezzanine and Other		Total		Secured Loans		Mezzanine and Other		Total
Reserve for loan losses, beginning of period	$	1,804	$	9	$	1,813	$	3,152	$	7,128	$	10,280

Provision for expected loan losses	3,346		7		3,353		793		896		1,689
Expected loan losses related to loans sold or repaid(1)	(51)		—		(51)		(2,141)		(8,015)		(10,156)



Reserve for loan losses, end of period	$	5,099	$	16	$	5,115	$	1,804	$	9	$	1,813

_______________________________________

(1)Includes one loan repaid during the nine months ended September 30, 2022 and six loans sold or repaid during the year ended December 31, 2021.

Additionally, at September 30, 2022 and December 31, 2021, a liability of $0.7 million and $0.3 million, respectively, related to expected credit losses for unfunded loan commitments was included in accounts payable, accrued liabilities, and other liabilities.

NOTE 7. Investments in and Advances to Unconsolidated Joint Ventures

The Company owns interests in the following entities that are accounted for under the equity method, excluding investments classified as discontinued operations (dollars in thousands):


				Carrying Amount
				September 30,		December 31,
Entity(1)	Segment	Property Count(2)	Ownership %(2)	2022		2021
SWF SH JV	Other	19	54	$	348,906	$	355,394
South San Francisco JVs(3)	Life science	7	70	298,806		—
Life Science JV	Life science	1	49	27,009		25,605
Needham Land Parcel JV(4)	Life science	—	38	15,342		13,566
Medical Office JVs(5)	Medical office	3	20 - 67	8,840		9,069




				$	698,903	$	403,634

_______________________________________

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

(2)Property counts and ownership percentages are as of September 30, 2022.

(3)Includes seven unconsolidated life science joint ventures in South San Francisco, California in which the Company holds a 70% ownership percentage in each joint venture. These joint ventures have been aggregated herein due to similarity of the investments and operations. See “South San Francisco Joint Ventures” below for further information.

(4)In December 2021, the Company acquired a 38% interest in a life science development joint venture in Needham, Massachusetts for $13 million. Land held for development is excluded from the property count as of September 30, 2022.

(5)Includes two unconsolidated medical office joint ventures in which the Company holds an ownership percentage as follows: (i) Ventures IV (20%) and (ii) Suburban Properties, LLC (67%). During 2021, the Company also held a 30% interest in Ventures III, which issued its final distribution and was dissolved. These joint ventures have been aggregated herein due to similarity of the investments and operations.

In April 2021, the Company sold its two preferred equity investments for their carrying value as part of the Discovery SHOP Portfolio disposition (see Note 4). Prior to the sale, the Company’s ownership percentage in these two unconsolidated joint ventures was as follows: (i) Discovery Naples JV (41%) and (ii) Discovery Sarasota JV (47%).

In May 2021, the two remaining CCRCs in the CCRC joint venture were sold for $38 million, $19 million of which represents the Company’s 49% interest, resulting in an immaterial gain on sale recorded within equity income (loss) from unconsolidated joint ventures during the year ended December 31, 2021.

South San Francisco Joint Ventures

On August 1, 2022, the Company sold a 30% interest in seven life science assets in South San Francisco, California to a sovereign wealth fund (“SWF Partner”) for cash of $126 million. Following this transaction, the Company and the SWF Partner share in key decisions of the assets through their voting rights, resulting in the Company deconsolidating the assets, recognizing its retained 70% investment in the South San Francisco joint ventures (the “South San Francisco JVs”) at fair value, and accounting for its investment using the equity method. The fair values of the Company’s retained investment were based on a market approach, utilizing an agreed-upon contractual sales price, which is considered to be a Level 3 measurement within the fair value hierarchy. The Company recognized a gain upon change of control of $311 million, which is recorded in other income (expense), net.

The Company is entitled to a preferred return, a promote, and certain fees in exchange for development and asset management services provided to the South San Francisco JVs when certain conditions are met.

Concurrently, the Company entered into a master equity transaction agreement with the SWF Partner that provides the Company the opportunity to sell interests of up to 30% in certain future development projects owned by the Company.

NOTE 8. Intangibles

Intangible assets primarily consist of lease-up intangibles and above market tenant lease intangibles. The following table summarizes the Company’s intangible lease assets (dollars in thousands):


Intangible lease assets	September 30, 2022		December 31, 2021
Gross intangible lease assets	$	802,180	$	797,675
Accumulated depreciation and amortization	(357,965)		(277,915)
Intangible assets, net(1)	$	444,215	$	519,760

Weighted average remaining amortization period in years	5		6

_______________________________________

(1)Excludes intangible assets reported in assets held for sale and discontinued operations, net of $2 million and zero as of September 30, 2022 and December 31, 2021, respectively.

Intangible liabilities consist of below market lease intangibles. The following table summarizes the Company’s intangible lease liabilities (dollars in thousands):


Intangible lease liabilities	September 30, 2022		December 31, 2021
Gross intangible lease liabilities	$	240,733	$	234,917
Accumulated depreciation and amortization	(77,859)		(57,685)
Intangible liabilities, net	$	162,874	$	177,232

Weighted average remaining amortization period in years	8		8

During the nine months ended September 30, 2022, in conjunction with the Company’s acquisitions of real estate, the Company acquired intangible assets of $7 million and intangible liabilities of $6 million. The intangible assets and liabilities acquired had a weighted average amortization period at acquisition of 7 years and 11 years, respectively.

During the year ended December 31, 2021, in conjunction with the Company’s acquisitions of real estate, the Company acquired intangible assets of $109 million and intangible liabilities of $57 million. The intangible assets and intangible liabilities acquired each had a weighted average amortization period at acquisition of 9 years.

NOTE 9. Debt

Bank Line of Credit and Term Loan

On May 23, 2019, the Company executed a $2.5 billion unsecured revolving line of credit facility, with a maturity date of May 23, 2023 and two six-month extension options, subject to certain customary conditions. Also in May 2019, the Company entered into a $250 million unsecured term loan facility, with a maturity date of May 23, 2024 (the “2019 Term Loan”). In July 2021, the Company repaid the $250 million 2019 Term Loan.

In September 2021, the Company executed an amended and restated unsecured revolving line of credit (the “Revolving Facility”) to increase total revolving commitments from $2.5 billion to $3.0 billion and extend the maturity date to January 20, 2026. This maturity date may be further extended pursuant to two six-month extension options, subject to certain customary conditions. Borrowings under the Revolving Facility accrue interest at the London Interbank Offered Rate (“LIBOR”) plus a margin that depends on the credit ratings of the Company’s senior unsecured long-term debt. The Company also pays a facility fee on the entire revolving commitment that depends on its credit ratings. Additionally, the Revolving Facility includes a sustainability-linked pricing component whereby the applicable margin may be reduced by up to 0.025% based on the Company’s achievement of specified sustainability-linked metrics, subject to certain conditions. Based on the Company’s credit ratings at September 30, 2022, and inclusive of achievement of a sustainability-linked metric during the three months ended September 30, 2022, the margin on the Revolving Facility was 0.75% and the facility fee was 0.15%. At September 30, 2022 and December 31, 2021, the Company had no balance outstanding under the Revolving Facility.

The Revolving Facility 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. Further, the Revolving Facility includes customary LIBOR replacement language, including, but not limited to, the use of rates based on the Secured Overnight Financing Rate (“SOFR”) administered by the Federal Reserve Bank of New York.

The Revolving Facility also contains certain financial restrictions and other customary requirements, including financial covenants and cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreement: (i) limit the ratio of Enterprise Total Indebtedness to Enterprise Gross Asset Value to 60%; (ii) limit the ratio of Enterprise Secured Debt to Enterprise Gross Asset Value to 40%; (iii) limit the ratio of Enterprise Unsecured Debt to Enterprise 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 $7.7 billion. The Company believes it was in compliance with each of these covenants at September 30, 2022.

On August 22, 2022, the Company executed a term loan agreement (the “2022 Term Loan Agreement”) that provides for two senior unsecured delayed draw term loans in an aggregate principal amount of up to $500 million (the “2022 Term Loan Facilities”). The 2022 Term Loan Facilities were available to be drawn from time to time during a 180-day period after closing, subject to customary borrowing conditions. $250 million of the 2022 Term Loan Facilities has an initial stated maturity of 4.5 years, which may be extended for a one-year period subject to certain customary conditions. The other $250 million of the 2022 Term Loan Facilities has a stated maturity of 5 years with no option to extend.

Loans outstanding under the 2022 Term Loan Facilities accrue interest at adjusted SOFR plus a margin that depends on the credit ratings of the Company’s senior unsecured long-term debt. The 2022 Term Loan Agreement also includes a sustainability-linked pricing component whereby the applicable margin under the 2022 Term Loan Facilities may be reduced by 0.01% based on the Company’s achievement of specified sustainability-linked metrics. Based on the Company’s credit ratings as of September 30, 2022, the margin on the 2022 Term Loan Facilities was 0.85%. Commencing on October 21, 2022, 60 days after closing, the Company became obligated to pay a fee on the daily amount of undrawn commitments under the 2022 Term Loan Facilities at a rate per annum equal to 0.15%. The 2022 Term Loan Agreement includes a feature that allows the Company to increase the borrowing capacity by an aggregate amount of up to an additional $500 million, subject to securing additional commitments.

The 2022 Term Loan Agreement also contains certain financial restrictions and other customary requirements, including financial covenants and cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreement: (i) limit the ratio of Enterprise Total Indebtedness to Enterprise Gross Asset Value to 60%; (ii) limit the ratio of Enterprise Secured Debt to Enterprise Gross Asset Value to 40%; (iii) limit the ratio of Enterprise Unsecured Debt to Enterprise 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 $7.7 billion. The Company believes it was in compliance with each of these covenants at September 30, 2022.

As of September 30, 2022, the Company had no borrowings outstanding under the 2022 Term Loan Facilities. In October 2022, the entirety of the $500 million under the 2022 Term Loan Facilities was drawn.

In August 2022, the Company entered into two forward-starting interest rate swap instruments that are designated as cash flow hedges (see Note 17). The 2022 Term Loan Facilities associated with these interest rate swap instruments will be reported as fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instruments. As of October 31, 2022, the 2022 Term Loan Facilities had a fixed effective interest rate of 3.76%, inclusive of the impact of these interest rate swap instruments and amortization of the related debt issuance costs.

Commercial Paper Program

In September 2019, the Company established an unsecured commercial paper program (the “Commercial Paper Program”). Under the terms of the Commercial Paper Program, the Company may issue, from time to time, unsecured short-term debt securities with varying maturities. Amounts available under the Commercial Paper Program may be borrowed, repaid, and re-borrowed from time to time. At December 31, 2021, the maximum aggregate face or principal amount that could be outstanding at any one time was $1.5 billion. In July 2022, the Company increased the maximum aggregate face or principal amount that can be outstanding at any one time to $2.0 billion. Amounts borrowed under the Commercial Paper Program will be sold on terms that are customary for the U.S. commercial paper market and will be at least equal in right of payment with all of the Company’s other unsecured and unsubordinated indebtedness. The Company uses its Revolving Facility as a liquidity backstop for the repayment of unsecured short-term debt securities issued under the Commercial Paper Program. At September 30, 2022, the Company had $1.59 billion of securities outstanding under the Commercial Paper Program, with original maturities of approximately 42 days and a weighted average interest rate of 3.41%. At December 31, 2021, the Company had $1.17 billion of securities outstanding under the Commercial Paper Program, with original maturities of approximately two months and a weighted average interest rate of 0.32%.

Senior Unsecured Notes

At each of September 30, 2022 and December 31, 2021, the Company had senior unsecured notes outstanding with an aggregate principal balance of $4.7 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 September 30, 2022.

During the three and nine months ended September 30, 2022, the Company did not issue, repurchase, or redeem any senior unsecured notes.

The following table summarizes the Company’s senior unsecured notes repurchases and redemptions during the year ended December 31, 2021 (dollars in thousands):


Payoff Date(1)	Amount		Coupon Rate		Maturity Year
May 19, 2021	$	251,806	3.40	%	2025
May 19, 2021	298,194		4.00	%	2025
February 26, 2021	188,000		4.25	%	2023
February 26, 2021	149,000		4.20	%	2024
February 26, 2021	331,000		3.88	%	2024
January 28, 2021	112,000		4.25	%	2023
January 28, 2021	201,000		4.20	%	2024
January 28, 2021	469,000		3.88	%	2024

_______________________________________

(1)As a result of the repurchases and redemptions of these senior unsecured notes, the Company recognized an aggregate $225 million loss on debt extinguishment during the nine months ended September 30, 2021.

In 2021, the Company completed two green bond offerings. The net proceeds from both green bonds have been allocated to eligible green projects, and the Company may choose to re-allocate net proceeds from such offerings to one or more other eligible green projects. The following table summarizes these senior unsecured note issuances for the year ended December 31, 2021 (dollars in thousands):


Issue Date	Amount		Coupon Rate		Maturity Year
November 24, 2021	$	500,000	2.13	%	2028
July 12, 2021	450,000		1.35	%	2027

Mortgage Debt

At September 30, 2022 and December 31, 2021, the Company had $347 million and $350 million, respectively, in aggregate principal of mortgage debt outstanding, which was secured by 18 healthcare facilities, with an aggregate carrying value of $796 million and $811 million, respectively.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets, and is 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 insurance on the assets, and includes conditions to obtain lender consent to enter into or terminate material leases. Some of the mortgage debt may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

During each of the three months ended September 30, 2022 and 2021, the Company made aggregate principal repayments of mortgage debt of $1 million (excluding mortgage debt on assets held for sale and discontinued operations). During each of the nine months ended September 30, 2022 and 2021, the Company made aggregate principal repayments of mortgage debt of $4 million (excluding mortgage debt on assets held for sale and discontinued operations).

In April 2021, in conjunction with the acquisition of the MOB Portfolio, the Company originated $142 million of secured mortgage debt (see Note 3) that matures in May 2026. In April 2022, the Company terminated its existing interest rate cap instruments associated with this variable rate mortgage debt and entered into two interest rate swap instruments that are designated as cash flow hedges and mature in May 2026 (see Note 17). The variable rate mortgage debt associated with these interest rate swap instruments is reported as fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instrument.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at September 30, 2022 (dollars in thousands):


					Senior Unsecured Notes(2)				Mortgage Debt(3)
Year	Bank Line of Credit		Commercial Paper(1)		Amount		Interest Rate		Amount		Interest Rate		Total
2022	$	—	$	—	$	—	—	%	$	1,289	3.80	%	$	1,289
2023	—		—		—		—	%	90,089		3.80	%	90,089
2024	—		—		—		—	%	7,024		5.49	%	7,024
2025	—		—		800,000		3.93	%	3,209		3.80	%	803,209
2026	—		1,585,333		650,000		3.39	%	244,523		4.48	%	2,479,856
Thereafter	—		—		3,250,000		3.24	%	366		5.91	%	3,250,366
	—		1,585,333		4,700,000				346,500				6,631,833
(Discounts), premium and debt costs, net	—		—		(42,349)				1,487				(40,862)


	$	—	$	1,585,333	$	4,657,651			$	347,987			$	6,590,971

_______________________________________

(1)Commercial Paper Program borrowings are backstopped by the Revolving Facility. As such, the Company calculates the weighted average remaining term of its Commercial Paper Program borrowings using the maturity date of the Revolving Facility.

(2)Effective interest rates on the senior unsecured notes range from 1.54% to 6.91% with a weighted average effective interest rate of 3.39% and a weighted average maturity of 6 years.

(3)Effective interest rates on the mortgage debt range from 3.57% to 6.70% with a weighted average effective interest rate of 4.35% and a weighted average maturity of 3 years. These interest rates include the impact of designated interest rate swap instruments, which effectively fix the interest rate on certain variable rate debt.

NOTE 10. Commitments and Contingencies

Legal Proceedings

From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Company’s business. 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.

DownREITs and Other Partnerships

In connection with the formation of certain limited liability companies (“DownREITs”), members may contribute appreciated real estate to a DownREIT 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, 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. Under these indemnification agreements, if any of the appreciated real estate contributed by the members is sold by the DownREIT 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 Internal Revenue Code (“make-whole payments”). These make-whole payments include a tax gross-up provision. These indemnification agreements have expirations terms that range through 2039 on a total of 29 properties.

Additionally, the Company owns a 49% interest in the Life Science JV (see Note 7). If the property in the joint venture is sold in a taxable transaction, the Company is generally obligated to indemnify its joint venture partner for its federal and state income taxes associated with the gain that existed at the time of the contribution to the joint venture.

NOTE 11. Equity and Redeemable Noncontrolling Interests

Dividends

On October 27, 2022, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.30 per share. The common stock cash dividend will be paid on November 18, 2022 to stockholders of record as of the close of business on November 7, 2022.

During each of the three months ended September 30, 2022 and 2021, the Company declared and paid common stock cash dividends of $0.30 per share. During each of the nine months ended September 30, 2022 and 2021, the Company declared and paid common stock cash dividends of $0.90 per share.

At-The-Market Equity Offering Program

In February 2020, the Company established an at-the-market equity offering program (as amended from time to time, the “ATM Program”), which was most recently amended in May 2021 to increase the size of the program from $1.25 billion to $1.5 billion, pursuant to which shares of common stock having an aggregate gross sales price of up to $1.5 billion may be sold (i) by the Company through a consortium of banks acting as sales agents or directly to the banks acting as principals or (ii) by a consortium of banks acting as forward sellers on behalf of any forward purchasers pursuant to a forward sale agreement (each, an “ATM forward contract”). The use of ATM forward contracts allows the Company to lock in a share price on the sale of shares at the time the ATM forward contract is effective, but defer receiving the proceeds from the sale of shares until a later date.

ATM forward contracts generally have a one to two year term. At any time during the term, the Company may settle a forward sale by delivery of physical shares of common stock to the forward seller or, at the Company’s election, in cash or net shares. The forward sale price the Company expects to receive upon settlement of outstanding ATM forward contracts will be the initial forward price established upon the effective date, subject to adjustments for: (i) accrued interest, (ii) the forward purchasers’ stock borrowing costs, and (iii) certain fixed price reductions during the term of the ATM forward contract.

At September 30, 2022, $1.18 billion of the Company’s common stock remained available for sale under the ATM Program.

ATM Forward Contracts

During the three and nine months ended September 30, 2021, the Company utilized the forward provisions under the ATM Program to allow for the sale of an aggregate of 9.1 million shares of its common stock at an initial weighted average net price of $35.25 per share, after commissions. The Company did not utilize the forward provisions under the ATM program during the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2022 and 2021, no shares were settled under ATM forward contracts. Therefore, at September 30, 2022 and 2021, 9.1 million shares remained outstanding under ATM forward contracts. These ATM forward contracts mature in the first quarter of 2023.

ATM Direct Issuances

During the three and nine months ended September 30, 2022 and September 30, 2021, there were no direct issuances of shares of common stock under the ATM Program.

Share Repurchase Program

On August 1, 2022, the Company’s Board of Directors approved a share repurchase program under which the Company may acquire shares of its common stock in the open market up to an aggregate purchase price of $500 million (the “Share Repurchase Program”). Purchases of common stock under the Share Repurchase Program may be exercised at the Company’s discretion with the timing and number of shares repurchased depending on a variety of factors, including price, corporate and regulatory requirements, and other corporate liquidity requirements and priorities. The Share Repurchase Program expires in August 2024 and may be suspended or terminated at any time without prior notice. During the three and nine months ended September 30, 2022, the Company repurchased 2.1 million shares of its common stock at a weighted average price of $27.16 per share for a total of $56 million. Therefore, at September 30, 2022, $444 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program.

Accumulated Other Comprehensive Income (Loss)

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


	September 30, 2022		December 31, 2021

Unrealized gains (losses) on derivatives, net	$	32,373	$	—
Supplemental Executive Retirement Plan minimum liability	(2,847)		(3,147)

Total accumulated other comprehensive income (loss)	$	29,526	$	(3,147)

Redeemable Noncontrolling Interests

Arrangements with noncontrolling interest holders are assessed for appropriate balance sheet classification based on the redemption and other rights held by the noncontrolling interest holder. Certain of the Company’s noncontrolling interest holders have the ability to put their equity interests to the Company upon specified events or after the passage of a predetermined period of time. Each put option is payable in cash and subject to increases in redemption value in the event that the underlying property generates specified returns for the Company and meets certain promote thresholds pursuant to the respective agreements. Accordingly, the Company records redeemable noncontrolling interests outside of permanent equity and presents the redeemable noncontrolling interests at the greater of their carrying amount or redemption value at the end of each reporting period.

During the year ended December 31, 2021, one of the redeemable noncontrolling interests met the conditions for redemption and the related put option was exercised during the year then ended. Accordingly, the Company made a cash payment for the redemption value of $60 million to the related noncontrolling interest holder during the year ended December 31, 2021 and acquired the redeemable noncontrolling interest associated with this entity. The remaining redeemable noncontrolling interests had not yet met the conditions for redemption as of September 30, 2022 or December 31, 2021. Three of the interests will become redeemable following the passage of a predetermined amount of time, one of which will occur in the fourth quarter of 2022, and the remaining two in 2023 and 2024. The fourth interest will become redeemable at the earlier of a predetermined passage of time or stabilization of the underlying development property, which is expected to occur in 2023. The redemption values are subject to change based on the assessment of redemption value at each redemption date.

NOTE 12. Earnings Per Common Share

Basic income (loss) per common share (“EPS”) is computed based on the weighted average number of common shares outstanding. Diluted income (loss) per common share is computed based on the weighted average number of common shares outstanding plus the impact of forward equity sales agreements using the treasury stock method and common shares issuable from the assumed conversion of DownREIT units, stock options, certain performance restricted stock units, and unvested restricted stock units. Only those instruments having a dilutive impact on the Company’s basic income (loss) per share are included in diluted income (loss) per share during the periods presented.

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.

Refer to Note 11 for a discussion of the sale of shares under and settlement of forward sales agreements during the periods presented. The Company considered the potential dilution resulting from the forward agreements to the calculation of earnings per share. At inception, the agreements do not have an effect on the computation of basic EPS as no shares are delivered until settlement. However, the Company uses the treasury stock method to calculate the dilution, if any, resulting from the forward sales agreements during the period of time prior to settlement. The aggregate effect on the Company’s diluted weighted-average common shares for each of the three and nine months ended September 30, 2022 and 2021 was zero weighted-average incremental shares from the forward equity sales agreements.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator
Income (loss) from continuing operations	$	359,284	$	61,305	$	503,611	$	108,785
Noncontrolling interests' share in continuing operations	(4,016)		(7,195)		(11,701)		(14,036)
Income (loss) from continuing operations attributable to Healthpeak Properties, Inc.	355,268		54,110		491,910		94,749
Less: Participating securities' share in continuing operations	(604)		(269)		(2,523)		(3,001)
Income (loss) from continuing operations applicable to common shares	354,664		53,841		489,387		91,748
Income (loss) from discontinued operations	(1,298)		601		2,011		384,569
Noncontrolling interests' share in discontinued operations	—		—		—		(2,539)
Net income (loss) applicable to common shares	$	353,366	$	54,442	$	491,398	$	473,778
Numerator - Dilutive
Net income (loss) applicable to common shares	$	353,366	$	54,442	$	491,398	$	473,778
Add: distributions on dilutive convertible units and other	2,355		—		4,943		—
Dilutive net income (loss) available to common shares	$	355,721	$	54,442	$	496,341	$	473,778
Denominator
Basic weighted average shares outstanding	538,417		539,021		539,105		538,879
Dilutive potential common shares - equity awards(1)	281		367		255		280

Dilutive potential common shares - DownREIT conversions	7,317		—		5,492		—
Diluted weighted average common shares	546,015		539,388		544,852		539,159
Basic earnings (loss) per common share
Continuing operations	$	0.66	$	0.10	$	0.91	$	0.17
Discontinued operations	0.00		0.00		0.00		0.71
Net income (loss) applicable to common shares	$	0.66	$	0.10	$	0.91	$	0.88
Diluted earnings (loss) per common share
Continuing operations	$	0.65	$	0.10	$	0.91	$	0.17
Discontinued operations	0.00		0.00		0.00		0.71
Net income (loss) applicable to common shares	$	0.65	$	0.10	$	0.91	$	0.88

_______________________________________

(1)For all periods presented, represents the dilutive impact of 1 million outstanding equity awards (restricted stock units and stock options).

For all periods presented in the table above, the 9.1 million shares under forward sales agreements that have not been settled as of September 30, 2022 and 2021 were anti-dilutive.

For the three and nine months ended September 30, 2022, 7 million and 5 million shares issuable upon conversion of DownREIT units, respectively, were dilutive and are presented as diluted potential common shares in the table above. For the three and nine months ended September 30, 2021, all 7 million shares issuable upon conversion of DownREIT units were not included because they were anti-dilutive.

NOTE 13. Segment Disclosures

The Company’s reportable segments, based on how its chief operating decision makers (“CODMs”) evaluate the business and allocate resources, are as follows: (i) life science, (ii) medical office, and (iii) CCRC. The Company has non-reportable segments that are comprised primarily of the Company’s interests in an unconsolidated JV that owns 19 senior housing assets (the “SWF SH JV”), loans receivable, and marketable debt securities. The accounting policies of the segments are the same as those described in Note 2 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC, as updated by Note 2 herein.

The Company evaluates performance based on property Adjusted NOI. NOI is defined as real estate revenues (inclusive of rental and related revenues, resident fees and services, income from direct financing leases, and government grant income and exclusive of interest income), less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss). Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, actuarial reserves for insurance claims that have been incurred but not reported, and the impact of deferred community fee income and expense.

NOI and Adjusted NOI are non-GAAP supplemental measures that are calculated as NOI and Adjusted NOI from consolidated properties, plus the Company’s share of NOI and Adjusted NOI from unconsolidated joint ventures (calculated by applying the Company’s actual ownership percentage for the period), less noncontrolling interests’ share of NOI and Adjusted NOI from consolidated joint ventures (calculated by applying the Company’s actual ownership percentage for the period). Management utilizes its share of NOI and Adjusted NOI in assessing its performance as the Company has various joint ventures that contribute to its performance. The Company does not control its unconsolidated joint ventures, and the Company’s share of amounts from unconsolidated joint ventures do not represent the Company’s legal claim to such items. The Company’s share of NOI and Adjusted NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP. Management believes that Adjusted NOI is an important supplemental measure because it provides relevant and useful information by reflecting only income and operating expense items that are incurred at the property level and presenting it on an unlevered basis. Additionally, management believes that net income (loss) is the most directly comparable GAAP measure to NOI and Adjusted NOI. NOI and Adjusted NOI should not be viewed as alternative measures of operating performance to net income (loss) as defined by GAAP since they do not reflect various excluded items.

Non-segment assets consist of assets in the Company’s other non-reportable segments and corporate non-segment assets. Corporate non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, loans receivable, marketable equity securities, other assets, real estate assets held for sale and discontinued operations, and liabilities related to assets held for sale.

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

For the three months ended September 30, 2022:


	Life Science		Medical Office		CCRC		Other Non-reportable		Corporate Non-segment		Total
Total revenues	$	207,795	$	184,506	$	122,142	$	5,963	$	—	$	520,406
Government grant income(1)	—		—		4		—		—		4
Less: Interest income	—		—		—		(5,963)		—		(5,963)
Healthpeak’s share of unconsolidated joint venture total revenues	2,938		756		—		18,656		—		22,350
Healthpeak’s share of unconsolidated joint venture government grant income	—		—		—		183		—		183
Noncontrolling interests’ share of consolidated joint venture total revenues	(55)		(8,968)		—		—		—		(9,023)
Operating expenses	(55,162)		(64,782)		(100,264)		—		—		(220,208)
Healthpeak’s share of unconsolidated joint venture operating expenses	(777)		(313)		—		(14,599)		—		(15,689)
Noncontrolling interests’ share of consolidated joint venture operating expenses	21		2,558		—		—		—		2,579

Adjustments to NOI(2)	(15,221)		(4,079)		—		76		—		(19,224)
Adjusted NOI	139,539		109,678		21,882		4,316		—		275,415
Plus: Adjustments to NOI(2)	15,221		4,079		—		(76)		—		19,224
Interest income	—		—		—		5,963		—		5,963
Interest expense	—		(1,964)		(1,887)		—		(40,227)		(44,078)
Depreciation and amortization	(70,141)		(70,917)		(32,132)		—		—		(173,190)
General and administrative	—		—		—		—		(24,549)		(24,549)
Transaction costs	(40)		(94)		(594)		—		—		(728)
Impairments and loan loss reserves	—		—		—		(3,407)		—		(3,407)
Gain (loss) on sales of real estate, net	—		554		—		(4,703)		—		(4,149)

Other income (expense), net	311,912		154		(7,086)		—		698		305,678
Less: Government grant income	—		—		(4)		—		—		(4)
Less: Healthpeak’s share of unconsolidated joint venture NOI	(2,161)		(443)		—		(4,240)		—		(6,844)
Plus: Noncontrolling interests’ share of consolidated joint venture NOI	34		6,410		—		—		—		6,444
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	394,364		47,457		(19,821)		(2,147)		(64,078)		355,775
Income tax benefit (expense)	—		—		—		—		3,834		3,834
Equity income (loss) from unconsolidated joint ventures	(877)		206		—		346		—		(325)

Income (loss) from continuing operations	393,487		47,663		(19,821)		(1,801)		(60,244)		359,284
Income (loss) from discontinued operations	—		—		—		—		(1,298)		(1,298)
Net income (loss)	$	393,487	$	47,663	$	(19,821)	$	(1,801)	$	(61,542)	$	357,986

______________________________________________________________________________

(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations (see Note 2).

(2)Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, actuarial reserves for insurance claims that have been incurred but not reported, deferral of community fees, and termination fees. Includes the Company’s share of income (loss) generated by unconsolidated joint ventures and excludes noncontrolling interests’ share of income (loss) generated by consolidated joint ventures.

For the three months ended September 30, 2021:


	Life Science		Medical Office		CCRC		Other Non-reportable		Corporate Non-segment		Total
Total revenues	$	184,213	$	171,482	$	119,022	$	6,748	$	—	$	481,465
Government grant income(1)	—		—		15		—		—		15
Less: Interest income	—		—		—		(6,748)		—		(6,748)
Healthpeak’s share of unconsolidated joint venture total revenues	1,521		737		—		17,109		—		19,367

Noncontrolling interests’ share of consolidated joint venture total revenues	(82)		(8,954)		—		—		—		(9,036)
Operating expenses	(44,923)		(58,430)		(98,799)		13		—		(202,139)
Healthpeak’s share of unconsolidated joint venture operating expenses	(463)		(305)		(32)		(13,450)		—		(14,250)
Noncontrolling interests’ share of consolidated joint venture operating expenses	25		2,659		—		—		—		2,684

Adjustments to NOI(2)	(11,021)		(3,626)		724		(100)		—		(14,023)
Adjusted NOI	129,270		103,563		20,930		3,572		—		257,335
Plus: Adjustments to NOI(2)	11,021		3,626		(724)		100		—		14,023
Interest income	—		—		—		6,748		—		6,748
Interest expense	(46)		(1,104)		(1,936)		—		(32,819)		(35,905)
Depreciation and amortization	(79,570)		(66,189)		(31,416)		—		—		(177,175)
General and administrative	—		—		—		—		(23,270)		(23,270)

Impairments and loan loss reserves	—		(1,952)		—		1,667		—		(285)
Gain (loss) on sales of real estate, net	—		14,635		—		—		—		14,635
Gain (loss) on debt extinguishments	—		—		—		—		(667)		(667)
Other income (expense), net	22		(30)		114		1		1,563		1,670
Less: Government grant income	—		—		(15)		—		—		(15)
Less: Healthpeak’s share of unconsolidated joint venture NOI	(1,058)		(432)		32		(3,659)		—		(5,117)
Plus: Noncontrolling interests’ share of consolidated joint venture NOI	57		6,295		—		—		—		6,352
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	59,696		58,412		(13,015)		8,429		(55,193)		58,329
Income tax benefit (expense)	—		—		—		—		649		649
Equity income (loss) from unconsolidated joint ventures	630		220		845		632		—		2,327

Income (loss) from continuing operations	60,326		58,632		(12,170)		9,061		(54,544)		61,305
Income (loss) from discontinued operations	—		—		—		—		601		601
Net income (loss)	$	60,326	$	58,632	$	(12,170)	$	9,061	$	(53,943)	$	61,906

______________________________________________________________________________

(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations (see Note 2).

For the nine months ended September 30, 2022:


	Life Science		Medical Office		CCRC		Other Non-reportable		Corporate Non-segment		Total
Total revenues	$	609,620	$	541,078	$	369,062	$	16,950	$	—	$	1,536,710
Government grant income(1)	—		—		6,765		—		—		6,765
Less: Interest income	—		—		—		(16,950)		—		(16,950)
Healthpeak’s share of unconsolidated joint venture total revenues	5,637		2,249		—		54,918		—		62,804
Healthpeak’s share of unconsolidated joint venture government grant income	—		—		334		497		—		831
Noncontrolling interests’ share of consolidated joint venture total revenues	(174)		(26,732)		—		—		—		(26,906)
Operating expenses	(152,796)		(189,274)		(300,429)		—		—		(642,499)
Healthpeak’s share of unconsolidated joint venture operating expenses	(1,744)		(912)		—		(42,804)		—		(45,460)
Noncontrolling interests’ share of consolidated joint venture operating expenses	59		7,886		—		—		—		7,945

Adjustments to NOI(2)	(50,977)		(10,574)		—		120		—		(61,431)
Adjusted NOI	409,625		323,721		75,732		12,731		—		821,809
Plus: Adjustments to NOI(2)	50,977		10,574		—		(120)		—		61,431
Interest income	—		—		—		16,950		—		16,950
Interest expense	—		(4,931)		(5,629)		—		(112,971)		(123,531)
Depreciation and amortization	(227,952)		(207,563)		(95,897)		—		—		(531,412)
General and administrative	—		—		—		—		(73,161)		(73,161)
Transaction costs	(367)		(168)		(658)		—		(443)		(1,636)
Impairments and loan loss reserves	—		—		—		(3,678)		—		(3,678)
Gain (loss) on sales of real estate, net	3,856		10,894		—		(4,703)		—		10,047

Other income (expense), net	311,932		12,354		55		(13)		2,527		326,855
Less: Government grant income	—		—		(6,765)		—		—		(6,765)
Less: Healthpeak’s share of unconsolidated joint venture NOI	(3,893)		(1,337)		(334)		(12,611)		—		(18,175)
Plus: Noncontrolling interests’ share of consolidated joint venture NOI	115		18,846		—		—		—		18,961
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	544,293		162,390		(33,496)		8,556		(184,048)		497,695
Income tax benefit (expense)	—		—		—		—		3,775		3,775
Equity income (loss) from unconsolidated joint ventures	237		617		539		748		—		2,141

Income (loss) from continuing operations	544,530		163,007		(32,957)		9,304		(180,273)		503,611
Income (loss) from discontinued operations	—		—		—		—		2,011		2,011
Net income (loss)	$	544,530	$	163,007	$	(32,957)	$	9,304	$	(178,262)	$	505,622

______________________________________________________________________________

(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations (see Note 2).

For the nine months ended September 30, 2021:


	Life Science		Medical Office		CCRC		Other Non-reportable		Corporate Non-segment		Total
Total revenues	$	531,674	$	496,978	$	352,458	$	31,869	$	—	$	1,412,979
Government grant income(1)	—		—		1,412		—		—		1,412
Less: Interest income	—		—		—		(31,869)		—		(31,869)
Healthpeak’s share of unconsolidated joint venture total revenues	4,270		2,162		6,903		50,602		—		63,937
Healthpeak’s share of unconsolidated joint venture government grant income	—		—		200		810		—		1,010
Noncontrolling interests’ share of consolidated joint venture total revenues	(222)		(26,704)		—		—		—		(26,926)
Operating expenses	(125,108)		(164,198)		(284,739)		13		—		(574,032)
Healthpeak’s share of unconsolidated joint venture operating expenses	(1,316)		(915)		(6,985)		(38,496)		—		(47,712)
Noncontrolling interests’ share of consolidated joint venture operating expenses	66		7,714		—		—		—		7,780

Adjustments to NOI(2)	(35,197)		(7,553)		1,971		(15)		—		(40,794)
Adjusted NOI	374,167		307,484		71,220		12,914		—		765,785
Plus: Adjustments to NOI(2)	35,197		7,553		(1,971)		15		—		40,794
Interest income	—		—		—		31,869		—		31,869
Interest expense	(196)		(1,985)		(5,778)		—		(113,470)		(121,429)
Depreciation and amortization	(224,958)		(187,512)		(93,702)		—		—		(506,172)
General and administrative	—		—		—		—		(72,260)		(72,260)
Transaction costs	(11)		(295)		(1,090)		(21)		—		(1,417)
Impairments and loan loss reserves	—		(1,952)		—		(2,506)		—		(4,458)
Gain (loss) on sales of real estate, net	—		189,873		—		—		—		189,873
Gain (loss) on debt extinguishments	—		—		—		—		(225,824)		(225,824)
Other income (expense), net	54		(2,483)		2,456		482		5,095		5,604
Less: Government grant income	—		—		(1,412)		—		—		(1,412)
Less: Healthpeak’s share of unconsolidated joint venture NOI	(2,954)		(1,247)		(118)		(12,916)		—		(17,235)
Plus: Noncontrolling interests’ share of consolidated joint venture NOI	156		18,990		—		—		—		19,146
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	181,455		328,426		(30,395)		29,837		(406,459)		102,864
Income tax benefit (expense)	—		—		—		—		1,404		1,404
Equity income (loss) from unconsolidated joint ventures	648		549		1,484		1,836		—		4,517

Income (loss) from continuing operations	182,103		328,975		(28,911)		31,673		(405,055)		108,785
Income (loss) from discontinued operations	—		—		—		—		384,569		384,569
Net income (loss)	$	182,103	$	328,975	$	(28,911)	$	31,673	$	(20,486)	$	493,354

______________________________________________________________________________

(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations (see Note 2).

See Notes 3, 4, 5, and 7 for significant transactions impacting the Company’s segment assets during the periods presented.

NOTE 14. Supplemental Cash Flow Information

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


	Nine Months Ended September 30,
	2022		2021
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	138,972	$	167,062
Income taxes paid (refunded)	(2,003)		4,258
Capitalized interest	26,970		17,022
Supplemental schedule of non-cash investing and financing activities:
Retained investment in connection with South San Francisco JVs transaction	293,265		—
Increase in ROU asset in exchange for new lease liability related to operating leases	954		15,329
Decrease in ROU asset with corresponding change in lease liability related to operating leases	—		8,410
Seller financing provided on disposition of real estate asset	—		559,745
Accrued construction costs	160,937		150,204
Vesting of restricted stock units and conversion of non-managing member units into common stock	803		907


Carrying value of mortgages assumed by buyer in real estate dispositions	—		143,676

The following table summarizes certain cash flow information related to assets classified as discontinued operations (in thousands):


	Nine Months Ended September 30,
	2022		2021

Leasing costs, tenant improvements, and recurring capital expenditures	$	21	$	2,609
Development, redevelopment, and other major improvements of real estate	18		5,361
Depreciation and amortization of real estate, in-place lease, and other intangibles	—		—

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


	Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021
	Continuing operations				Discontinued operations				Total
Beginning of period:
Cash and cash equivalents	$	158,287	$	44,226	$	7,707	$	53,085	$	165,994	$	97,311
Restricted cash	53,454		67,206		—		17,168		53,454		84,374
Cash, cash equivalents and restricted cash	$	211,741	$	111,432	$	7,707	$	70,253	$	219,448	$	181,685
End of period:
Cash and cash equivalents	$	112,452	$	201,099	$	2,172	$	14,005	$	114,624	$	215,104
Restricted cash	54,500		53,699		—		3		54,500		53,702
Cash, cash equivalents and restricted cash	$	166,952	$	254,798	$	2,172	$	14,008	$	169,124	$	268,806

NOTE 15. Variable Interest Entities

Unconsolidated Variable Interest Entities

At September 30, 2022 and December 31, 2021, the Company had investments in: (i) two unconsolidated VIE joint ventures and (ii) marketable debt securities of one VIE. The Company determined 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 joint ventures (the LLC investment and Needham Land Parcel JV discussed below), it has no formal involvement in these VIEs beyond its investments.

Debt Securities Investment. 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. These securities are classified as held-to-maturity because the Company has the intent and ability to hold the securities until maturity.

LLC Investment. 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. Any assets generated by the entity may only be used to settle its contractual obligations (primarily capital expenditures and debt service payments).

Needham Land Parcel JV. In December 2021, the Company acquired a 38% interest in a life science development joint venture in Needham, Massachusetts for $13 million. Current equity at risk is not sufficient to finance the joint venture’s activities. The assets and liabilities of the entity primarily consist of real estate and debt service obligations. Any assets generated by the entity may only be used to settle its contractual obligations (primarily development costs and debt service payments).

The classification of the related assets and liabilities and the maximum loss exposure as a result of the Company’s involvement with these VIEs at September 30, 2022 was as follows (in thousands):


VIE Type	Asset Type	Maximum Loss Exposure and Carrying Amount(1)



CMBS and LLC investment	Other assets, net	$	36,775

Needham Land Parcel JV	Investments in and advances to unconsolidated joint ventures	15,342

_______________________________________

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

As of September 30, 2022, the Company had not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including under circumstances in which it could be exposed to further losses (e.g., cash shortfalls).

See Notes 3, 4, and 7 for additional descriptions of the nature, purpose, and operating activities of the Company’s unconsolidated VIEs and interests therein.

Consolidated Variable Interest Entities

The Company’s consolidated total assets and total liabilities at September 30, 2022 and December 31, 2021 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 the Company.

Ventures V, LLC. The Company holds a 51% ownership interest in and is the managing member of a joint venture entity formed in October 2015 that owns and leases MOBs (“Ventures V”). The Company classifies Ventures V as a VIE due to the non-managing member lacking substantive participation rights in the management of Ventures V or kick-out rights over the managing member. The Company consolidates 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 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 Ventures V may only be used to settle its contractual obligations (primarily from capital expenditures).

Life Science JVs. The Company holds a 99% ownership interest in multiple joint venture entities that own and lease life science assets (the “Life Science JVs”). The Life Science JVs are VIEs as the members share in certain decisions of the entities, but substantially all of the activities are performed on behalf of the Company. The Company consolidates the Life Science JVs 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 Life Science JVs 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 Life Science JVs may only be used to settle their contractual obligations (primarily from capital expenditures). Refer to Note 11 for a discussion of certain put options associated with the Life Science JVs.

MSREI MOB JV. The Company holds a 51% ownership interest in, and is the managing member of, a joint venture entity formed in August 2018 that owns and leases MOBs (the “MSREI JV”). The MSREI JV is a VIE due to the non-managing member lacking substantive participation rights in the management of the joint venture or kick-out rights over the managing member. The Company consolidates the MSREI 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 the MSREI JV 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 the MSREI JV may only be used to settle its contractual obligations (primarily from capital expenditures).

DownREITs. The Company holds a controlling ownership interest in and is the managing member of seven DownREITs. The Company classifies 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”). The Company classifies 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).

Exchange Accommodation Titleholder. During the three months ended June 30, 2022, the Company acquired one MOB using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a “reverse 1031 exchange”). Additionally, during the three months ended March 31, 2022, the Company acquired two MOBs using a reverse 1031 exchange. As of September 30, 2022, the acquired properties were no longer identified as a reverse 1031 exchange and were therefore released from possession of the Exchange Accommodation Titleholder (“EAT”).

During the year ended December 31, 2021, the Company acquired two MOBs using reverse 1031 exchanges. As of December 31, 2021, the Company had not completed the reverse 1031 exchanges and as such, the acquired properties remained in the possession of the EAT. The EAT was classified as a VIE as it was a “thinly capitalized” entity. The Company consolidated the EAT because it had the ability to control the activities that most significantly impacted the economic performance of the EAT and was, therefore, the primary beneficiary of the EAT. These properties held by the EAT had a carrying value of $77 million as of December 31, 2021. The assets of the EAT primarily consisted of leased properties (net real estate, including intangibles) and rents receivable; their obligations primarily consisted of capital expenditures for the properties. Assets generated by the EAT may only be used to settle its contractual obligations (primarily from capital expenditures). These reverse 1031 exchanges were completed in February 2022.

Total assets and total liabilities include VIE assets and liabilities as follows (in thousands):


	September 30, 2022		December 31, 2021
Assets
Buildings and improvements	$	2,204,074	$	2,303,920
Development costs and construction in progress	162,658		82,303
Land	324,444		548,168
Accumulated depreciation and amortization	(598,285)		(551,097)
Net real estate	2,092,891		2,383,294

Accounts receivable, net	8,211		5,455
Cash and cash equivalents	38,152		22,295
Restricted cash	260		114
Intangible assets, net	78,458		117,180
Assets held for sale and discontinued operations, net	30,398		754
Right-of-use asset, net	99,824		107,993
Other assets, net	66,904		62,886
Total assets	$	2,415,098	$	2,699,971
Liabilities
Mortgage debt	$	144,533	$	144,350

Intangible liabilities, net	15,926		23,909
Liabilities related to assets held for sale and discontinued operations, net	2,020		1,677
Lease liability	98,855		99,213
Accounts payable, accrued liabilities, and other liabilities	76,685		58,440
Deferred revenue	26,872		21,546
Total liabilities	$	364,891	$	349,135

Total assets and liabilities related to assets held for sale and discontinued operations include VIE assets and liabilities as follows (in thousands):


	September 30, 2022		December 31, 2021
Assets
Buildings and improvements	$	39,934	$	—
Development costs and construction in progress	6		—
Land	1,920		—
Accumulated depreciation and amortization	(15,612)		—
Net real estate	26,248		—
Accounts receivable, net	—		62
Cash and cash equivalents	82		59

Intangible assets, net	215		—

Other assets, net	3,853		633
Total assets	$	30,398	$	754
Liabilities



Accounts payable, accrued liabilities, and other liabilities	$	1,619	$	1,677
Deferred revenue	401		—
Total liabilities	$	2,020	$	1,677

NOTE 16. Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis in the Consolidated Balance Sheets were immaterial at September 30, 2022 and December 31, 2021.

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


	September 30, 2022(3)				December 31, 2021(3)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	383,991	$	378,525	$	415,811	$	437,607
Marketable debt securities(2)	21,522		21,522		21,003		21,003
Interest rate swap instruments(2)	32,487		32,487		—		—
Interest rate cap instruments(2)	—		—		397		397
Bank line of credit and commercial paper(2)	1,585,333		1,585,333		1,165,975		1,165,975

Senior unsecured notes(1)	4,657,651		4,163,646		4,651,933		5,054,747
Mortgage debt(2)	347,987		331,832		352,081		352,800

_______________________________________

(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) for loans receivable, net, mortgage debt, interest rate swap instruments, and interest rate cap instruments, standardized pricing models in which significant inputs or value drivers are observable in active markets. For bank line of credit and commercial paper, 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 nine months ended September 30, 2022 and year ended December 31, 2021, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

NOTE 17. Derivative Financial Instruments

The Company uses derivative instruments to mitigate the effects of interest rate 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 rates and their related potential impact on future earnings and cash flows. The Company does not use derivative instruments for speculative or trading purposes. At September 30, 2022, a one percentage point increase or decrease in the underlying interest rate curve would result in a corresponding increase or decrease in the fair value of the derivative instruments by approximately $24 million.

In March 2021, the Company repaid $39 million of variable rate secured debt on two SHOP assets and terminated the two associated interest rate swap instruments. Therefore, at December 31, 2021, the Company had no interest rate swap instruments.

In April 2021, the Company executed two interest rate cap instruments on its $142 million of variable rate mortgage debt issued in conjunction with the acquisition of the MOB Portfolio (see Note 3).

In April 2022, the Company terminated these interest rate cap instruments and entered into two interest rate swap instruments that are designated as cash flow hedges and mature in May 2026.

In August 2022, the Company entered into two forward-starting interest rate swap instruments on the $500 million aggregate principal amount of the 2022 Term Loan Facilities (see Note 9). The forward-starting interest rate swap instruments are designated as cash flow hedges.

The following table summarizes the Company’s interest rate swap instruments as of September 30, 2022 (in thousands):


							Fair Value(1)
Date Entered	Maturity Date	Hedge Designation	Notional Amount		Pay Rate	Receive Rate	September 30, 2022		December 31, 2021

April 2022(2)	May 2026	Cash flow	$	51,100	5.08 %	1 mo. USD-LIBOR-BBA + 2.50%	$	2,444	$	—
April 2022(2)	May 2026	Cash flow	91,000		4.63 %	1 mo. USD-LIBOR-BBA + 2.05%	4,352		—
August 2022(2)	February 2027	Cash flow	250,000		2.60 %	1 mo. USD-SOFR CME Term	12,173		—
August 2022(2)	August 2027	Cash flow	250,000		2.54 %	1 mo. USD-SOFR CME Term	13,518		—

(1)At September 30, 2022, the interest rate swap instruments were in an asset position. Derivative assets are recorded in other assets, net on the Consolidated Balance Sheets.

(2)Represents interest rate swap instruments that hedge fluctuations in interest payments on variable rate debt by converting the interest rates to fixed interest rates. The changes in fair value of designated derivatives that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.

The following table summarizes the Company’s interest rate cap instruments as of September 30, 2022 (in thousands):


							Fair Value(1)
Date Entered	Maturity Date	Hedge Designation	Notional Amount		Strike Rate	Index	September 30, 2022		December 31, 2021

April 2021(2)	May 2024	Non-designated	$	142,100	2.00 %	1 mo. USD-LIBOR-BBA	$	—	$	397

(1)At December 31, 2021, the interest rate cap instruments were in an asset position. Derivative assets are recorded in other assets, net on the Consolidated Balance Sheets.

(2)Represents two interest rate cap instruments that manage the Company’s exposure to variable cash flows on certain mortgage debt borrowings by limiting interest rates. These interest rate cap instruments were terminated in April 2022.

During the three and nine months ended September 30, 2022, the Company recognized a zero and $2 million increase, respectively, in the fair value of the interest rate cap instruments within other income (expense), net.

NOTE 18. Accounts Payable, Accrued Liabilities, and Other Liabilities

The following table summarizes the Company’s accounts payable, accrued liabilities, and other liabilities, excluding accounts payable, accrued liabilities, and other liabilities related to assets classified as discontinued operations (in thousands):


	September 30, 2022		December 31, 2021
Refundable entrance fees(1)	$	271,675	$	288,409
Accrued construction costs	160,937		179,995
Accrued interest	35,832		59,342
Other accounts payable and accrued liabilities	264,451		227,638
Accounts payable, accrued liabilities, and other liabilities	$	732,895	$	755,384

_______________________________________

(1)At September 30, 2022 and December 31, 2021, unamortized nonrefundable entrance fee liabilities were $512 million and $496 million, respectively, which are recorded within deferred revenue on the Consolidated Balance Sheets. During the three and nine months ended September 30, 2022, the Company collected nonrefundable entrance fees of $24 million and $74 million, respectively, and recognized amortization of $20 million and $58 million, respectively. During the three and nine months ended September 30, 2021, the Company collected nonrefundable entrance fees of $25 million and $63 million, respectively, and recognized amortization of $19 million and $57 million, respectively. The amortization of nonrefundable entrance fees is included within resident fees and services on the Consolidated Statements of Operations.

Departure of Executives

On October 6, 2022, the Company and Thomas M. Herzog mutually agreed that Mr. Herzog would step down from his position as Chief Executive Officer and from the board of directors of the Company, effective immediately. On November 1, 2022, the Company and Troy E. McHenry mutually agreed that Mr. McHenry would step down from his position as Chief Legal Officer and General Counsel, effective immediately. In connection with these departures and the related release agreements, the Company expects to recognize total severance-related charges of approximately $30 million in the fourth quarter of 2022.

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