ACQUISITIONS OF REAL ESTATE PROPERTY

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

ACQUISITIONS OF REAL ESTATE PROPERTY

The following summarizes our acquisitions in 2013 and 2012. We make acquisitions and investments in seniors housing and healthcare properties primarily to achieve an expected yield on investment, to grow and diversify our portfolio and revenue base, and to reduce our dependence on any single tenant, operator or manager, geographic area, asset type, business model or revenue source.

2013 Acquisitions

Triple-Net Leased Properties

During the nine months ended September 30, 2013, we acquired 27 seniors housing communities (including one property acquired through a joint venture) for approximately $860 million.

Senior Living Operations

During the nine months ended September 30, 2013, we acquired 22 seniors housing communities for approximately $700 million. We were previously the tenant under a capital lease with respect to eight of the acquired properties (see “Note 10—Senior Notes Payable and Other Debt”), and all of the acquired properties were transitioned to Atria at the time of closing.

MOB Operations

During the nine months ended September 30, 2013, we acquired ten MOBs (including two MOBs previously owned through a joint venture that we account for as an equity method investment) for approximately $150 million.

Completed Developments

During the nine months ended September 30, 2013, we completed the development of two seniors housing communities, one MOB, and one hospital. These completed developments represent $65.2 million of net real estate property on our Consolidated Balance Sheets as of September 30, 2013.

Estimated Fair Value

We are accounting for our 2013 acquisitions under the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”), and have completed our initial accounting, subject to further adjustment. We accounted for the acquisition of the eight seniors housing communities that we previously leased pursuant to a capital lease in accordance with ASC Topic 840, Leases. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which we determined using level two and level three inputs:

	Triple-Net Leased Properties		Senior Living Operations (1)		MOB Operations		Total
	(In thousands)
Land and improvements	$	51,419	$	43,405	$	3,923	$	98,747
Buildings and improvements	803,227		507,534		134,474		1,445,235
Acquired lease intangibles	8,945		14,700		10,362		34,007
Other assets	3,285		2,497		2,453		8,235
Total assets acquired	866,876		568,136		151,212		1,586,224
Notes payable and other debt	36,300		5,136		—		41,436
Other liabilities	11,423		9,668		6,510		27,601
Total liabilities assumed	47,723		14,804		6,510		69,037
Noncontrolling interest assumed	10,113		—		1,672		11,785
Net assets acquired	809,040		553,332		143,030		1,505,402
Cash acquired	753		—		1,397		2,150
Total cash used	$	808,287	$	553,332	$	141,633	$	1,503,252

(1) Includes settlement of a $142.4 million capital lease obligation for eight seniors housing communities.

Transaction Costs

As of September 30, 2013, we had incurred a total of $11.3 million of acquisition-related costs related to our 2013 acquisitions, all of which were expensed as incurred and included in merger-related expenses and deal costs in our Consolidated Statements of Income for the applicable periods. For the nine months ended September 30, 2013, we expensed $10.4 million of acquisition-related costs related to our 2013 acquisitions.

2012 Acquisitions

Funds Acquisition

In December 2012, we acquired 100% of certain private equity funds (the “Funds”) previously managed by Lazard Frères Real Estate Investments LLC or its affiliates. The acquired Funds primarily own a 34% interest in Atria, which is recorded as an investment in unconsolidated entities on our Consolidated Balance Sheets, and approximately 3.7 million shares of our common stock. In conjunction with this acquisition, we also extinguished our obligation related to the “earnout,” a contingent performance-based payment arising out of our 2011 acquisition of the real estate assets of Atria Senior Living Group, Inc. (together with its affiliates, “ASLG”), for an additional $44 million. This amount represented the discounted net present value of the potential future payment, which was previously reflected on our Consolidated Balance Sheets as a liability.

Cogdell Acquisition

In April 2012, we acquired Cogdell Spencer Inc. (together with its subsidiaries, “Cogdell”), including its 71 real estate assets (including properties owned through joint ventures) and its MOB property management business, which had existing agreements with third parties to manage 44 MOBs, in an all-cash transaction. At closing, our investment in Cogdell, including our share of debt, was approximately $760 million. In addition, our joint venture partners' share of net debt assumed was $36.3 million at the time of the acquisition.

Pursuant to the terms of, and subject to the conditions set forth in, the agreement and plan of merger, at the effective time of the merger, (a) each outstanding share of Cogdell common stock, and each outstanding unit of limited partnership interest in Cogdell's operating partnership, Cogdell Spencer LP, that was not owned by subsidiaries of Cogdell was converted into the right to receive $4.25 in cash, and (b) each outstanding share of Cogdell's 8.500% Series A Cumulative Redeemable Perpetual Preferred Stock was converted into the right to receive an amount in cash equal to $25.00, plus accrued and unpaid dividends through the date of closing. We financed our acquisition of Cogdell through the assumption of $203.8 million of existing Cogdell mortgage debt (including $36.3 million of our joint venture partners' share) and borrowings under our unsecured revolving credit facility. Prior to the closing, Cogdell completed the sale of its design-build and development business to an unaffiliated third party.

As of December 31, 2012, we had incurred a total of $28.6 million of acquisition-related costs related to the Cogdell acquisition, all of which were expensed as incurred and included in merger-related expenses and deal costs in our Consolidated Statements of Income for the applicable periods.

Completed Developments

During 2012, we completed the development of three MOBs and two seniors housing communities. These completed developments represent $116.9 million of net real estate property on our Consolidated Balance Sheets as of December 31, 2012.

Other 2012 Acquisitions

In May 2012, we acquired 16 seniors housing communities managed by Sunrise in an all-cash transaction. Sunrise continues to manage the acquired assets under existing long-term management agreements. During 2012, we also invested in 21 seniors housing communities, two skilled nursing facilities and 44 MOBs, including 36 MOBs that we had previously accounted for as investments in unconsolidated entities.

Fair Value

We accounted for our 2012 acquisitions under the acquisition method in accordance with ASC 805. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which we determined using level two and level three inputs:

	Triple-Net Leased Properties		Senior Living Operations		MOB Operations (1)		Total
	(In thousands)
Land and improvements	$	21,881	$	60,662	$	112,504	$	195,047
Buildings and improvements	225,950		413,750		1,085,148		1,724,848
Construction in progress	—		—		25,579		25,579
Acquired lease intangibles	2,323		18,070		182,406		202,799
Other assets	1,519		832		43,747		46,098
Total assets acquired	251,673		493,314		1,449,384		2,194,371
Notes payable and other debt	57,219		—		355,606		412,825
Other liabilities	13,851		11,806		106,367		132,024
Total liabilities assumed	71,070		11,806		461,973		544,849
Noncontrolling interest assumed	7,292		—		30,361		37,653
Net assets acquired	173,311		481,508		957,050		1,611,869
Cash acquired	1,250		—		24,115		25,365
Total cash used	$	172,061	$	481,508	$	932,935	$	1,586,504

(1) Includes the Cogdell acquisition.