ACQUISITIONS (Notes)

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

The following summarizes our acquisition and development activities during the nine months ended September 30, 2014 and the year ended December 31, 2013. We acquire and invest 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 location, asset type, business model or revenue source.

2014 Acquisitions

Holiday Canada Acquisition

In August 2014, we acquired 29 independent living communities located in Canada from Holiday Retirement (the “Holiday Canada Acquisition”) for a purchase price of CAD 957 million. We also paid CAD 26.9 million in early debt repayment costs relating to debt that was repaid in full at closing. The Holiday Canada Acquisition was funded initially through borrowings under a CAD 791 million unsecured term loan that we entered into in July 2014 and the assumption of CAD 193.7 million of debt.

Other 2014 Acquisitions

During the nine months ended September 30, 2014, we also acquired three triple-net leased private hospitals (located in the United Kingdom), seven triple-net leased seniors housing communities and four seniors housing communities that are being operated by independent third-party managers for aggregate consideration of approximately $519.8 million. We also paid $10.3 million in early debt repayment costs relating to debt that was repaid in full at closing of the applicable transactions.

Completed Developments

During 2014, we completed the development of one MOB. This completed development represents $10.5 million of net real estate property on our Consolidated Balance Sheets as of September 30, 2014.

Estimated Fair Value

We are accounting for our 2014 acquisitions under the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”). We have finalized our initial accounting for all acquisitions completed during the nine months ended September 30, 2013, and the remainder of our 2013 acquisitions is still subject to further adjustment. 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		Total
	(In thousands)
Land and improvements	$	25,771	$	92,192	$	117,963
Buildings and improvements	275,984		1,089,295		1,365,279
Acquired lease intangibles	18,336		36,452		54,788
Other assets	—		12,387		12,387
Total assets acquired	320,091		1,230,326		1,550,417
Notes payable and other debt	—		228,150		228,150
Other liabilities	4,630		124,897		129,527
Total liabilities assumed	4,630		353,047		357,677
Net assets acquired	315,461		877,279		1,192,740
Cash acquired	—		8,704		8,704
Total cash used	$	315,461	$	868,575	$	1,184,036

Aggregate Revenue and NOI

For the three months ended September 30, 2014, aggregate revenues and NOI derived from our 2014 real estate acquisitions were $25.3 million and $14.1 million, respectively. For the nine months ended September 30, 2014, aggregate revenues and NOI derived from our 2014 real estate acquisitions were $33.1 million and $20.2 million, respectively.

Transaction Costs

As of September 30, 2014, we had incurred a total of $24.9 million of acquisition-related costs related to our completed 2014 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 three and nine months ended September 30, 2014, we expensed $9.8 million and $22.6 million, respectively, of these acquisition-related costs related to our completed 2014 acquisitions.

2013 Acquisitions

During the year ended December 31, 2013, we acquired 27 triple-net leased seniors housing communities (eight of which we previously leased pursuant to a capital lease), 24 seniors housing communities that are being operated by independent third-party managers and 11 MOBs for aggregate consideration of approximately $1.8 billion.

Completed Developments

During the year ended December 31, 2013, we completed the development of two seniors housing communities, one MOB, and one hospital. These completed developments represented $65.5 million of net real estate property on our Consolidated Balance Sheets as of December 31, 2013.

Estimated Fair Value

We are accounting for our 2013 acquisitions under the acquisition method in accordance with ASC Topic 805, and have completed our initial accounting, which is 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	$	45,566	$	3,923	$	100,908
Buildings and improvements	803,227		579,577		138,792		1,521,596
Acquired lease intangibles	8,945		16,920		10,362		36,227
Other assets	3,285		2,607		2,453		8,345
Total assets acquired	866,876		644,670		155,530		1,667,076
Notes payable and other debt	36,300		5,136		—		41,436
Other liabilities	11,423		12,285		6,510		30,218
Total liabilities assumed	47,723		17,421		6,510		71,654
Noncontrolling interest assumed	10,113		—		1,672		11,785
Net assets acquired	809,040		627,249		147,348		1,583,637
Cash acquired	753		—		1,397		2,150
Total cash used	$	808,287	$	627,249	$	145,951	$	1,581,487

(1) Includes settlement of a $142.2 million capital lease obligation related to eight seniors housing communities.

Pending Acquisition

In June 2014, we announced that we had entered into a definitive agreement to acquire American Realty Capital Healthcare Trust, Inc. (“HCT”) in a stock and cash transaction valued at approximately $2.9 billion, or $11.33 per share of HCT common stock, including investments expected to be made by HCT prior to completion of our acquisition, substantially all of which have now been completed.  We expect to fund the transaction through the issuance of our common stock, valued at $67.13 per share (for aggregate consideration of between $1.8 billion and $2.0 billion), the assumption of debt and cash.  Completion of the transaction is subject to the approval of HCT stockholders and customary closing conditions.  We expect to complete the HCT transaction late in the fourth quarter of 2014, although we cannot provide any assurances as to whether or when the transaction will be completed.