10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2017.

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission file number 001-08895

HCP, INC.

(Exact name of registrant as specified in its charter)

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

1920 Main Street, Suite 1200

Irvine, CA 92614

(Address of principal executive offices)

(949) 407-0700

(Registrant’s telephone number, including area code)

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

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

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

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

Large Accelerated Filer ☒	Accelerated Filer ☐
Non-accelerated Filer ☐	Smaller Reporting Company ☐
(Do not check if a smaller reporting company)
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

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

At October 27, 2017, there were 469,108,449 shares of the registrant’s $1.00 par value common stock outstanding.

HCP, INC.

INDEX

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income (Loss)	5
	Consolidated Statements of Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to the Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	60
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
Signatures

2

HCP, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	September 30, 2017			December 31, 2016
ASSETS
Real Estate:
Buildings and improvements	$	11,052,578		$	11,692,654
Development costs and construction in progress	429,459			400,619
Land	1,752,890			1,881,487
Accumulated depreciation and amortization	(2,699,174		)	(2,648,930		)
Net real estate	10,535,753			11,325,830
Net investment in direct financing leases	715,104			752,589
Loans receivable, net	402,152			807,954
Investments in and advances to unconsolidated joint ventures	822,369			571,491
Accounts receivable, net of allowance of $4,312 and $4,459, respectively	34,571			45,116
Cash and cash equivalents	133,887			94,730
Restricted cash	27,135			42,260
Intangible assets, net	400,867			479,805
Assets held for sale, net	216,074			927,866
Other assets, net	616,169			711,624
Total assets	$	13,904,081		$	15,759,265
LIABILITIES AND EQUITY
Bank line of credit	$	605,837		$	899,718
Term loans	226,205			440,062
Senior unsecured notes	6,393,926			7,133,538
Mortgage debt	145,417			623,792
Other debt	94,818			92,385
Intangible liabilities, net	53,427			58,145
Liabilities of assets held for sale, net	8,653			3,776
Accounts payable and accrued liabilities	381,189			417,360
Deferred revenue	140,378			149,181
Total liabilities	8,049,850			9,817,957
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 469,034,877 and 468,081,489 shares issued and outstanding, respectively	469,035			468,081
Additional paid-in capital	8,224,531			8,198,890
Cumulative dividends in excess of earnings	(3,137,642		)	(3,089,734		)
Accumulated other comprehensive income (loss)	(24,491		)	(29,642		)
Total stockholders' equity	5,531,433			5,547,595
Joint venture partners	145,496			214,377
Non-managing member unitholders	177,302			179,336
Total noncontrolling interests	322,798			393,713
Total equity	5,854,231			5,941,308
Total liabilities and equity	$	13,904,081		$	15,759,265

_______________________________________

See accompanying Notes to the Unaudited Consolidated Financial Statements.

3

HCP, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Rental and related revenues	$	266,109		$	290,280		$	816,147		$	872,828
Tenant recoveries	36,860			34,809			105,794			99,715
Resident fees and services	126,040			170,752			391,688			500,717
Income from direct financing leases	13,240			14,234			40,516			44,791
Interest income	11,774			20,482			50,974			71,298
Total revenues	454,023			530,557			1,405,119			1,589,349
Costs and expenses:
Interest expense	71,328			117,860			235,834			361,255
Depreciation and amortization	130,588			141,407			397,893			421,181
Operating	155,338			187,714			467,582			542,751
General and administrative	23,523			34,781			67,287			83,011
Acquisition and pursuit costs	580			2,763			2,504			6,061
Impairments (recoveries), net	25,328			—			82,010			—
Total costs and expenses	406,685			484,525			1,253,110			1,414,259
Other income (expense):
Gain (loss) on sales of real estate, net	5,182			(9		)	322,852			119,605
Loss on debt extinguishments	(54,227		)	—			(54,227		)	—
Other income (expense), net	(10,556		)	1,432			40,723			5,064
Total other income (expense), net	(59,601		)	1,423			309,348			124,669
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	(12,263		)	47,455			461,357			299,759
Income tax benefit (expense)	5,481			424			14,630			(1,101		)
Equity income (loss) from unconsolidated joint ventures	1,062			(2,053		)	4,571			(4,028		)
Income (loss) from continuing operations	(5,720		)	45,826			480,558			294,630
Discontinued operations:
Income (loss) before transaction costs and income taxes	—			121,229			—			360,226
Transaction costs	—			(14,805		)	—			(28,509		)
Income tax benefit (expense)	—			1,789			—			(47,721		)
Total discontinued operations	—			108,213			—			283,996
Net income (loss)	(5,720		)	154,039			480,558			578,626
Noncontrolling interests' share in earnings	(1,937		)	(2,789		)	(7,687		)	(9,540		)
Net income (loss) attributable to HCP, Inc.	(7,657		)	151,250			472,871			569,086
Participating securities' share in earnings	(131		)	(326		)	(560		)	(977		)
Net income (loss) applicable to common shares	$	(7,788	)	$	150,924		$	472,311		$	568,109
Basic earnings per common share:
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22
Diluted earnings per common share:
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22
Weighted average shares used to calculate earnings per common share:
Basic	468,975			467,628			468,642			466,931
Diluted	468,975			467,835			468,828			467,132
Dividends declared per common share	$	0.370		$	0.575		$	1.110		$	1.725

See accompanying Notes to the Unaudited Consolidated Financial Statements.

4

HCP, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	(5,720	)	$	154,039		$	480,558		$	578,626
Other comprehensive income (loss):
Change in net unrealized gains (losses) on securities	(8		)	4			(2		)	(1		)
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses)	(3,672		)	1,184			(10,105		)	1,532
Reclassification adjustment realized in net income (loss)	654			154			674			494
Change in Supplemental Executive Retirement Plan obligation	74			70			222			211
Foreign currency translation adjustment	5,750			(838		)	14,362			(1,930		)
Total other comprehensive income (loss)	2,798			574			5,151			306
Total comprehensive income (loss)	(2,922		)	154,613			485,709			578,932
Total comprehensive income (loss) attributable to noncontrolling interests	(1,937		)	(2,789		)	(7,687		)	(9,540		)
Total comprehensive income (loss) attributable to HCP, Inc.	$	(4,859	)	$	151,824		$	478,022		$	569,392

See accompanying Notes to the Unaudited Consolidated Financial Statements.

5

HCP, Inc.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share data)

(Unaudited)

	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
	Shares		Amount
January 1, 2017	468,081		$	468,081		$	8,198,890		$	(3,089,734	)	$	(29,642	)	$	5,547,595		$	393,713		$	5,941,308
Net income (loss)	—		—			—			472,871			—			472,871			7,687			480,558
Other comprehensive income (loss)	—		—			—			—			5,151			5,151			—			5,151
Issuance of common stock, net	998		998			16,352			—			—			17,350			—			17,350
Conversion of DownREIT units to common stock	68		68			2,003			—			—			2,071			(2,071		)	—
Repurchase of common stock	(144	)	(144		)	(4,315		)	—			—			(4,459		)	—			(4,459		)
Exercise of stock options	32		32			736			—			—			768			—			768
Amortization of deferred compensation	—		—			10,865			—			—			10,865			—			10,865
Common dividends ($1.110 per share)	—		—			—			(520,779		)	—			(520,779		)	—			(520,779		)
Distributions to noncontrolling interests	—		—			—			—			—			—			(19,520		)	(19,520		)
Issuances of noncontrolling interests	—		—			—			—			—			—			1,050			1,050
Deconsolidation of noncontrolling interests	—		—			—			—			—			—			(58,061		)	(58,061		)
September 30, 2017	469,035		$	469,035		$	8,224,531		$	(3,137,642	)	$	(24,491	)	$	5,531,433		$	322,798		$	5,854,231

	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
	Shares		Amount
January 1, 2016	465,488		$	465,488		$	11,647,039		$	(2,738,414	)	$	(30,470	)	$	9,343,643		$	402,674		$	9,746,317
Net income (loss)	—		—			—			569,086			—			569,086			9,540			578,626
Other comprehensive income (loss)	—		—			—			—			306			306			—			306
Issuance of common stock, net	2,290		2,290			53,421			—			—			55,711			—			55,711
Conversion of DownREIT units to common stock	145		145			5,948			—			—			6,093			(6,093		)	—
Repurchase of common stock	(236	)	(236		)	(8,431		)	—			—			(8,667		)	—			(8,667		)
Exercise of stock options	133		133			3,340			—			—			3,473			—			3,473
Amortization of deferred compensation	—		—			19,307			—			—			19,307			—			19,307
Common dividends ($1.725 per share)	—		—			—			(806,243		)	—			(806,243		)	—			(806,243		)
Distributions to noncontrolling interests	—		—			(36		)	—			—			(36		)	(18,651		)	(18,687		)
Issuances of noncontrolling interests	—		—			—			—			—			—			4,785			4,785
Deconsolidation of noncontrolling interests	—		—			(36		)	475			—			439			67			506
September 30, 2016	467,820		$	467,820		$	11,720,552		$	(2,975,096	)	$	(30,164	)	$	9,183,112		$	392,322		$	9,575,434

See accompanying Notes to the Unaudited Consolidated Financial Statements.

6

HCP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	480,558		$	578,626
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	397,893			421,181
Discontinued operations	—			4,401
Amortization of deferred compensation	10,865			19,307
Amortization of deferred financing costs	11,141			15,598
Straight-line rents	(12,236		)	(14,412		)
Equity loss (income) from unconsolidated joint ventures	(4,571		)	4,028
Distributions of earnings from unconsolidated joint ventures	27,692			5,919
Loss (gain) on sales of real estate, net	(322,852		)	(119,605		)
Allowance for loan losses	59,420			—
Deferred income tax expense (benefit)	(17,786		)	47,195
Impairments (recoveries), net	22,590			—
Loss on extinguishment of debt	54,227			—
Casualty-related loss (recoveries), net	9,912			—
Foreign exchange and other losses (gains), net	(986		)	(127		)
Gain (loss) on sale of marketable securities	(50,895		)	—
Other non-cash items	(543		)	(2,035		)
Changes in:
Accounts receivable, net	396			7,558
Other assets, net	(2,617		)	(9,674		)
Accounts payable and accrued liabilities	(24,312		)	40,672
Net cash provided by (used in) operating activities	637,896			998,632
Cash flows from investing activities:
Acquisitions of real estate	(135,816		)	(257,242		)
Development and redevelopment of real estate	(261,510		)	(304,818		)
Leasing costs, tenant improvements, and recurring capital expenditures	(75,211		)	(64,501		)
Proceeds from sales of real estate, net	1,249,993			211,810
Contributions to unconsolidated joint ventures	(25,776		)	(10,169		)
Distributions in excess of earnings from unconsolidated joint ventures	4,845			14,458
Net proceeds from the RIDEA II transaction	480,614			—
Proceeds from the sales of Four Seasons investments	135,538			—
Principal repayments on direct financing leases, loans receivable and other	414,732			221,179
Investments in loans receivable, direct financing leases and other	(28,339		)	(129,335		)
Decrease (increase) in restricted cash	(3,247		)	4,459
Net cash provided by (used in) investing activities	1,755,823			(314,159		)
Cash flows from financing activities:
Net borrowings (repayments) under bank line of credit	23,419			1,157,897
Repayments under bank line of credit	(339,826		)	(135,000		)
Repayment of term loans	(234,459		)	—
Repayments of senior unsecured notes	(750,000		)	(900,000		)
Issuance of mortgage and other debt	5,395			—
Repayments of mortgage and other debt	(482,487		)	(249,540		)
Debt extinguishment costs	(51,415		)	—
Deferred financing costs	—			(1,057		)
Issuance of common stock and exercise of options	18,118			59,184
Repurchase of common stock	(4,459		)	(8,667		)
Dividends paid on common stock	(520,779		)	(806,243		)
Issuance of noncontrolling interests	1,050			4,785
Distributions to noncontrolling interests	(19,520		)	(18,687		)
Net cash provided by (used in) financing activities	(2,354,963		)	(897,328		)
Effect of foreign exchange on cash and cash equivalents	401			(754		)
Net increase (decrease) in cash and cash equivalents	39,157			(213,609		)
Cash and cash equivalents, beginning of period	94,730			346,500
Cash and cash equivalents, end of period	$	133,887		$	132,891

See accompanying Notes to the Unaudited Consolidated Financial Statements.

7

HCP, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.  Business

Overview

HCP, Inc., a Standard & Poor’s (“S&P”) 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) which, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). The Company acquires, develops, leases, manages and disposes of healthcare real estate and provides financing to healthcare providers. The Company’s diverse portfolio is comprised of investments in the following reportable healthcare segments: (i) senior housing triple-net; (ii) senior housing operating portfolio (“SHOP”); (iii) life science and (iv) medical office.

Master Transactions and Cooperation Agreement with Brookdale

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

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

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

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

• Enhanced reporting requirements and related remedies; and

• The right to market for sale the CCRC portfolio.

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

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

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

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

• The Company will sell two triple-net assets to Brookdale or its affiliates for $35 million; and

• The Company will have the right to convert five assets to a cash flow lease by December 31, 2017. The Company has the right to terminate the cash flow lease without penalty to facilitate the sale or transition of these additional assets, at its option.

8

Joint Venture Transactions. Also pursuant to the MTCA, the Company and Brookdale agreed to the following:

• The Company, which currently owns 90% of the interests in its RIDEA I and RIDEA III joint ventures with Brookdale, will purchase Brookdale’s 10% noncontrolling interest in each joint venture. These joint ventures collectively own and operate 58 independent living, assisted living, memory care and/or skilled nursing facilities (the “RIDEA Facilities”);

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

• The Company will sell four of the RIDEA Facilities to Brookdale or its affiliates for $239 million;

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

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

RIDEA II Sale Transaction

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

On November 1, 2017, the Company entered into a definitive agreement with an investor group led by CPA to sell its remaining 40% ownership interest in RIDEA II. The Company expects the transaction to close in 2018. CPA has also agreed to cause refinancing of the Company’s $242 million loan receivables from RIDEA II within one year following the close of the transaction. Total expected proceeds to the Company from the transaction and refinancing of the loan receivables from RIDEA II are $332 million.

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 revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of HCP, 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. In the opinion of management, 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, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying unaudited interim financial information should be read

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in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).

Real Estate

On January 1, 2017 the Company adopted Accounting Standards Update (“ASU”) No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the Financial Accounting Standards Board’s (“FASB”) definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset, or a group of assets, or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an acquired input and a substantive process that together significantly contribute to the ability to create outputs. In addition, ASU 2017-01 clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. This ASU is to be applied prospectively and the Company expects that a majority of its future real estate acquisitions and dispositions will be deemed asset transactions rather than business combinations. As a result, for asset acquisitions the Company will record identifiable assets acquired, liabilities assumed and any associated noncontrolling interests at cost on a relative fair value basis. In addition, for such asset acquisitions, no goodwill will be recognized, third party transaction costs will be capitalized and any associated contingent consideration will be recorded when the contingency is resolved. 

Reclassifications

Certain amounts in the Company’s consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Certain prior period amounts have been reclassified on consolidated statements of operations for discontinued operations (see Note 4).

Recent Accounting Pronouncements

In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). The amendments in ASU 2017-05 clarify the scope of the FASB’s recently established guidance on nonfinancial asset derecognition which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets. In addition, ASU 2017-05 clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard (see below). ASU 2017-05 is effective for annual periods beginning after December 15, 2017, including interim periods within, and must be adopted in conjunction with the Revenue ASUs (as defined below). ASU 2017-05 can be adopted using a full retrospective approach or a modified retrospective approach, resulting in a cumulative-effect adjustment to equity as of the beginning of the fiscal year in which the guidance is effective. The Company has not yet elected a transition method and is evaluating the complete impact of the adoption of the Revenue ASUs (see below) on January 1, 2018 to its consolidated financial position, results of operations and disclosures. The Company expects to complete its evaluation of the impacts of the Revenue ASUs during the fourth quarter of 2017.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amendments in ASU 2016-13 eliminate the “probable” initial threshold for recognition of credit losses in current accounting guidance and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument. Previously, when credit losses were measured under current accounting guidance, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. ASU 2016-13 is effective for fiscal years, and interim periods within, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within, beginning after December 15, 2018. A reporting entity is required to apply the amendments in ASU 2016-13 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Upon adoption of ASU 2016-13, the Company is required to reassess its financing receivables, including direct finance leases and loans receivable, and expects that application of ASU 2016-13 may result in the Company recognizing credit losses at an earlier date than would otherwise be recognized under current accounting guidance. The Company is evaluating the impact of the adoption of ASU 2016-13 on January 1, 2020 to its consolidated financial position and results of operations.

Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”) and (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to

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improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers(Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within, beginning after December 15, 2017. All subsequent ASUs related to ASU 2014-09, including ASU 2016-08 and ASU 2016-12, assumed the deferred effective date enforced by ASU 2015-14. Early adoption of the Revenue ASUs is permitted for annual periods, and interim periods within, beginning after December 15, 2016. A reporting entity may apply the amendments in the Revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach.

As the primary source of revenue for the Company is generated through leasing arrangements, which are excluded from the Revenue ASUs (as it relates to the timing and recognition of revenue), the Company expects that it may be impacted in its recognition of non-lease revenue, such as certain resident fees in its RIDEA structures (a portion of which are not generated through leasing arrangements), non-lease components of revenue from lease agreements and its recognition of real estate sale transactions. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under current guidance. As a result, the Company generally expects that the new guidance will result in more transactions qualifying as sales of real estate and revenue being recognized at an earlier date than under current accounting guidance. Additionally, upon adoption of the Revenue ASUs in 2018, the Company anticipates that it will be required to separately disclose the components of its total revenue between lease revenue accounted for under existing lease guidance and service revenue accounted for under the new Revenue ASUs, including non-lease components such as certain services embedded in base leasing fees. The Company has not yet elected a transition method and is evaluating the complete impact of the adoption of the Revenue ASUs on January 1, 2018 to its consolidated financial position, results of operations and disclosures. The Company expects to complete its evaluation of the impacts of the Revenue ASUs during the fourth quarter of 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the current accounting for leases to: (i) require lessees to put most leases on their balance sheets, but continue recognizing expenses on their income statements in a manner similar to requirements under current accounting guidance, (ii) eliminate current real estate specific lease provisions and (iii) modify the classification criteria and accounting for sales-type leases for lessors. ASU 2016-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2018. Early adoption is permitted. The transition method required by ASU 2016-02 varies based on the specific amendment being adopted. As a result of adopting ASU 2016-02, the Company will recognize all of its significant operating leases for which it is the lessee, including corporate office leases and ground leases, on its consolidated balance sheets and will capitalize fewer legal costs related to the drafting and execution of its lease agreements. From a lessor perspective, the Company expects that it will be required to further bifurcate lease agreements to separately recognize and disclose non-lease components that are executory in nature. Lease components will continue to be recognized on a straight-line basis over the lease term and certain non-lease components will be accounted for under the Revenue ASUs. The disaggregated disclosure of lease and executory non-lease components (e.g., maintenance) will be required upon the adoption of ASU 2016-02 . The Company anticipates that it will elect a practical expedient offered in ASU 2016-02 that allows an entity to not reassess the following upon adoption (must be elected as a group): (i) whether an expired or existing contract contains a lease arrangement, (ii) lease classification related to expired or existing lease arrangements, or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. The Company does not expect the bifurcation of non-lease components from a lease agreement to significantly impact the existing revenue recognition pattern. The Company is still evaluating the complete impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position, results of operations and disclosures.

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

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

• ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 is effective for fiscal years, including interim periods within, beginning after December 15, 2019 (upon the first goodwill impairment test performed during that fiscal year). Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. A reporting entity must apply the amendments in ASU 2017-04 using a prospective approach. The Company plans to adopt ASU 2017-04 during the fourth quarter of 2017.

• ASU No. 2016-18, Restricted Cash (“ASU 2016-18”). ASU 2016-18 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments

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in ASU 2016-18 using a full retrospective approach. The Company plans to adopt ASU 2016-18 during the fourth quarter of 2017.

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

• ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-15 using a full retrospective approach. The Company plans to adopt ASU 2016-15 during the fourth quarter of 2017.

• ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted only for updates to certain disclosure requirements. A reporting entity is required to apply the amendments in ASU 2016-01 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption.

NOTE 3.  Real Estate Property Investments

Investments in Real Estate

The following table summarizes the Company’s real estate acquisitions for the nine months ended September 30, 2017 (in thousands):

	Consideration				Assets Acquired
Segment	Cash Paid/ Debt Settled		Liabilities Assumed		Real Estate		Net Intangibles
Life science	$	87,467	$	2,841	$	91,208	$	(900	)
Medical office	48,349		837		44,401		4,785
	$	135,816	$	3,678	$	135,609	$	3,885

The following table summarizes the Company’s real estate acquisitions for the nine months ended September 30, 2016 (in thousands):

	Consideration				Assets Acquired
Segment	Cash Paid/ Debt Settled		Liabilities Assumed		Real Estate		Net Intangibles
Senior housing triple-net	$	76,362	$	1,200	$	71,875	$	5,687
SHOP	113,971		76,931		177,551		13,351
Life science	49,000		—		47,400		1,600
Other non-reportable segments	17,909		—		16,596		1,313
	$	257,242	$	78,131	$	313,422	$	21,951

In October 2017, the Company entered into definitive agreements to acquire a $228 million life science campus known as the Hayden Research Campus located in the Boston suburb of Lexington, Massachusetts. The Company will own an interest in this campus through a consolidated joint venture with King Street Properties. The campus includes two existing buildings totaling 400,000 square feet and is currently 66% leased.

Impairments of Real Estate

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

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Casualty-Related Losses

As a result of Hurricane Harvey and Hurricane Irma during the third quarter of 2017, the Company recorded an estimated $11 million of casualty-related losses, net of a small insurance recovery. The losses are comprised of $6 million of property damage and (ii) $5 million of other associated costs, including storm preparation, clean up, relocation and other costs. Of the total $11 million casualty losses incurred, $10 million was recorded in Other income (expense), net, and $1 million was recorded in Equity income (loss) from unconsolidated joint ventures as it relates to casualty losses for properties owned by certain of our unconsolidated joint ventures. In addition, the Company recorded a $2 million deferred tax benefit associated with the casualty-related losses.

NOTE 4.  Discontinued Operations and Dispositions of Real Estate

Discontinued Operations - Quality Care Properties, Inc.

On October 31, 2016, the Company completed the spin-off (the “Spin-Off”) of its subsidiary, Quality Care Properties, Inc. (“QCP”). The Spin-Off included 338 properties, primarily comprised of the HCR ManorCare, Inc. (“HCRMC”) direct financing lease (“DFL”) investments and an equity investment in HCRMC. QCP is an independent, publicly-traded, self-managed and self-administrated REIT.

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

Summarized financial information for discontinued operations for the three and nine months ended September 30, 2016 is as follows (in thousands):

	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenues:
Rental and related revenues	$	6,898		$	20,620
Tenant recoveries	386			1,147
Income from direct financing leases	116,429			345,940
Total revenues	123,713			367,707
Costs and expenses:
Depreciation and amortization	(1,467		)	(4,401		)
Operating	(1,033		)	(3,076		)
General and administrative	(6		)	(68		)
Acquisition and pursuit costs	(14,805		)	(28,509		)
Other income (expense), net	22			64
Income (loss) before income taxes	106,424			331,717
Income tax benefit (expense)	1,789			(47,721		)
Total discontinued operations	$	108,213		$	283,996

HCR ManorCare, Inc.

Discontinued operations is primarily comprised of QCP’s HCRMC DFL investments. During the nine months ended September 30, 2016, the Company received cash payments of $346 million from the HCRMC DFL investments.

No accretion related to its HCRMC DFL investments was recognized in 2016 due to the Company utilizing a cash basis method of accounting beginning January 1, 2016.

The Company’s acquisition of the HCRMC DFL investments in 2011 was subject to federal and state built-in gain tax of up to $2 billion if all the assets were sold within 10 years of the acquisition date. At the time of acquisition, the Company intended to hold the assets for at least 10 years, at which time the assets would no longer be subject to the built-in gain tax. In December 2015, the U.S. Federal Government passed legislation which permanently reduced the holding period, for federal tax purposes, to 5 years, which the Company satisfied in April 2016. This legislation was not extended to certain states, which maintain a 10 year requirement. During the three months ended March 31, 2016, the Company determined that it may sell assets during the next five years and, therefore, recorded a deferred tax liability of $49 million representing its estimated exposure to state built-in gain tax.

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Dispositions of Real Estate

Held for Sale

At September 30, 2017, three senior housing triple-net facilities and four life science facilities were classified as held for sale, with an aggregate carrying value of $216 million, primarily comprised of real estate assets of $199 million.

At December 31, 2016, 64 senior housing triple-net facilities, four life science facilities and a SHOP facility were classified as held for sale, with an aggregate carrying value of $928 million, primarily comprised of real estate assets of $809 million. All facilities held for sale at December 31, 2016 were sold during the first quarter of 2017.

2017 Dispositions 

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

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

In April 2017, the Company sold a land parcel in San Diego, California for $27 million and one life science building in San Diego, California for $5 million and recognized a total net gain on sales of $1 million.

In August 2017, the Company sold two senior housing triple-net facilities for $15 million and recognized a gain on sale of $5 million.

2016 Dispositions

During the nine months ended September 30, 2016, the Company sold five post-acute/skilled nursing facilities and two senior housing triple-net facilities for $130 million, a life science facility for $74 million, three medical office buildings for $20 million and a SHOP facility for $6 million and recognized total gain on sales of $120 million.

NOTE 5.  Net Investment in Direct Financing Leases

Net investment in DFLs consisted of the following (dollars in thousands):

	September 30, 2017			December 31, 2016
Minimum lease payments receivable	$	1,076,049		$	1,108,237
Estimated residual value	504,457			539,656
Less unearned income	(865,402		)	(895,304		)
Net investment in direct financing leases	$	715,104		$	752,589
Properties subject to direct financing leases	29			30

Certain DFLs contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms.

In February 2017, the Company sold a hospital within a DFL in Palm Beach Gardens, Florida for $43 million to the current tenant and recognized a gain on sale of $4 million.

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Direct Financing Lease Internal Ratings

The following table summarizes the Company’s internal ratings for DFLs at September 30, 2017 (dollars in thousands):

	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment				Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing triple-net	$	630,500	88%	$	273,383	$	357,117	$	—
Other non-reportable segments	84,604		12	84,604		—		—
	$	715,104	100%	$	357,987	$	357,117	$	—

Beginning September 30, 2013, the Company placed a 14-property senior housing triple-net DFL (the “DFL Watchlist Portfolio”) on nonaccrual status and “Watch List” status. The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue for the DFL Watchlist Portfolio has been recognized on a cash basis. During the three months ended September 30, 2017 and 2016, the Company recognized income from DFLs of $4 million and $3 million, respectively, and received cash payments of $5 million from the DFL Watchlist Portfolio. During the nine months ended September 30, 2017 and 2016, the Company recognized income from DFLs of $10 million and received cash payments of $14 million and $15 million, respectively, from the DFL Watchlist Portfolio. The carrying value of the DFL Watchlist Portfolio was $357 million and $361 million at September 30, 2017 and December 31, 2016, respectively.

NOTE 6.  Loans Receivable

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

	September 30, 2017								December 31, 2016
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine(1)	$	—	$	277,299		$	277,299		$	—	$	615,188		$	615,188
Other(2)	184,880		—			184,880			195,946		—			195,946
Unamortized discounts, fees and costs(1)	—		(607		)	(607		)	413		(3,593		)	(3,180		)
Allowance for loan losses(3)	—		(59,420		)	(59,420		)	—		—			—
	$	184,880	$	217,272		$	402,152		$	196,359	$	611,595		$	807,954

_______________________________________

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

(2) At September 30, 2017 and December 31, 2016, included £122 million ($163 million) and £113 million ($140 million), respectively, outstanding primarily related to Maria Mallaband loans.

(3) Related to the Company’s mezzanine loan facility to Tandem Health Care discussed below.

Loans Receivable Internal Ratings

The following table summarizes the Company’s internal ratings for loans receivable at September 30, 2017 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	184,880	46%	$	184,880	$	—	$	—
Other secured	217,272		54	19,898		—		197,374
	$	402,152	100%	$	204,778	$	—	$	197,374

Real Estate Secured Loans

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

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Other Secured Loans

HC-One Facility. On June 30, 2017, the Company received £283 million ($367 million) from the repayment of its HC-One mezzanine loan.

Tandem Health Care Loan. On July 31, 2012, the Company closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), as part of the recapitalization of a post-acute/skilled nursing portfolio (the “Tandem Portfolio”). The Company funded $100 million (the “First Tranche”) at closing and funded an additional $102 million (the “Second Tranche”) in June 2013. In May 2015, the Company increased and extended the mezzanine loan facility with Tandem to: (i) fund $50 million (the “Third Tranche”) and $5 million (the “Fourth Tranche”), which proceeds were used to repay a portion of Tandem’s existing senior and mortgage debt, respectively; (ii) extend its maturity to October 2018; and (iii) extend the prepayment penalty period through January 2017. The tranches (collectively, the “Tandem Mezzanine Loan”) bear interest at fixed annual rates of 12%, 14%,  6% and 6% per annum for the First, Second, Third and Fourth Tranches, respectively. The blended rate for the Tandem Mezzanine Loan is 11.5% per year.

Tandem leases the entire Tandem Portfolio to Consulate Health Care (“Consulate”) under a master lease (the “Tandem and Consulate Lease”). At September 30, 2017, as a result of the Tandem Portfolio’s operating performance, there are outstanding events of default under the Tandem and Consulate Lease (“Events of Default”) due to: (i) Consulate’s failure to meet certain financial covenants under the Tandem and Consulate Lease and (ii) events of default under Consulate’s working capital facility, which, through a cross-default provision, are Events of Default. Starting in April 2017, Consulate failed to pay the full amount of its rent under the Tandem and Consulate Lease which triggered another Event of Default. Through cross-default provisions, these Events of Default are also events of default under the Tandem Mezzanine Loan and Tandem’s senior mortgage debt (each, a “Loan Event of Default”). The Tandem Mezzanine Loan requires Tandem to pay default interest at a rate of 16.5% per year during periods in which there is an outstanding Loan Event of Default. Tandem did not pay the additional 5% default interest rate spread above the 11.5% and, therefore, created a monetary event of default under the Tandem Mezzanine Loan.

Although Tandem continues to remain current on its non-default interest payment obligations under the Tandem Mezzanine Loan, the Company believes that it is probable it will be unable to collect all interest and principal payments, including default interest payments, according to the contractual terms of the Tandem Mezzanine Loan. As the Tandem Mezzanine Loan is deemed collateral-dependent and the carrying amount of the Tandem Mezzanine Loan exceeded the fair value of the underlying collateral at June 30, 2017, as part of its quarterly review process, the Company recorded an impairment charge and related allowance of $57 million during the three months ended June 30, 2017, reducing the carrying value to $200 million, which approximated the fair value of the collateral as of June 30, 2017. The decline in fair value of the collateral was driven by a variety of factors, including recent operating results of the underlying real estate assets, as well as market and industry data, that reflect a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector. The calculation of the fair value of the collateral was primarily based on an income approach and relies on forecasted EBITDAR (defined as earnings before interest, taxes, depreciation and amortization, and rent) and market data, including, but not limited to, sales price per unit/bed, rent coverage ratios, and real estate capitalization rates. All valuation inputs are considered to be Level 2 measurements within the fair value hierarchy.

The Company entered into a forbearance agreement with Tandem on May 1, 2017, pursuant to which it agreed to forbear from exercising remedies, including waiving default interest, with respect to the above-described Loan Events of Default under the Tandem Mezzanine Loan until June 30, 2017, which was subsequently extended to July 31, 2017 with certain modifications.

On July 31, 2017, subsequent to its second quarter 2017 quarterly review process and the aforementioned impairment, the Company entered into a binding agreement (“Agreement”) with the borrowers to provide an option to repay the Tandem Mezzanine Loan at a discounted value of $197 million (the “Repayment Value”). Upon execution of the Agreement, the borrowers posted a $2 million non-refundable deposit and secured the right to repay the Tandem Mezzanine Loan by October 25, 2017 (at the Repayment Value). A second non-refundable deposit of $2 million was posted by the borrowers on August 31, 2017. The borrowers also retained the option to extend the term of the Agreement to December 31, 2017 upon satisfaction of one of the following requirements: (i) posting of an additional $4 million non-refundable deposit, (ii) providing evidence of a commitment letter(s) for financing to satisfy the full Repayment Value, which is subject to the Company’s approval and may be granted or withheld in the Company’s sole discretion, or (iii) paying down the principal balance of the Tandem Mezzanine Loan by at least $50 million. On October 25, 2017, the borrowers exercised their option to extend the term of the Agreement to December 31, 2017 by posting an additional $4 million non-refundable deposit. The borrowers are obligated to continue making interest payments based on the $257 million par value of the Tandem Mezzanine Loan through the repayment date, adjusted for any principal payments received from Tandem. As part of the Agreement, the Company agreed to forbear from exercising remedies, including waiving default interest, with respect to the above-described Loan Events of Default under the Tandem Mezzanine Loan, through December 31, 2017. If the option is not exercised, the entire $257 million par value of the Tandem Mezzanine Loan is due on October 31, 2018.

During the third quarter of 2017, the Company recorded an additional $3 million impairment charge to write down the carrying value of the Tandem Mezzanine Loan to the Repayment Value and assigned the Tandem Mezzanine Loan an internal rating of

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Workout. The repayment of the Tandem Mezzanine Loan is subject to customary closing conditions and may not occur within the anticipated timeframe or at all.

Beginning in the first quarter of 2017, the Company elected to recognize interest income on a cash basis. During both the three months ended September 30, 2017 and 2016, the Company recognized interest income and received cash payments of $8 million from Tandem. During both the nine months ended September 30, 2017 and 2016, the Company recognized interest income and received cash payments of $23 million from Tandem. The carrying value of the Tandem Mezzanine Loan was $197 million and $256 million at September 30, 2017 and December 31, 2016, respectively.

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 (dollars in thousands):

				Carrying Amount
				September 30,		December 31,
Entity(1)	Segment	Ownership%		2017		2016
CCRC JV(2)	SHOP		49	$	427,159	$	439,449
RIDEA II	SHOP		40	257,766		—
Life Science JVs(3)	Life science		50 - 63	64,111		67,879
MBK JV(2)	SHOP		50	38,366		38,909
Development JVs(5)	SHOP		50 - 90	19,867		10,459
Medical Office JVs(4)	Medical office		20 - 67	13,620		13,438
K&Y JVs(6)	Other non-reportable segments		80	1,465		1,342
Advances to unconsolidated joint ventures, net				15		15
				$	822,369	$	571,491

_______________________________________

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

(2) Includes two unconsolidated JVs in a RIDEA structure (PropCo and OpCo).

(3) Includes the following unconsolidated partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

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

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

(6) Includes three unconsolidated joint ventures.

See Note 1 for further information on the deconsolidation of RIDEA II.

NOTE 8.  Intangibles

The following tables summarize the Company’s intangible lease assets and liabilities (in thousands):

Intangible lease assets	September 30, 2017			December 31, 2016
Gross intangible lease assets	$	775,848		$	911,697
Accumulated depreciation and amortization	(374,981		)	(431,892		)
Net intangible lease assets	$	400,867		$	479,805

Intangible lease liabilities	September 30, 2017			December 31, 2016
Gross intangible lease liabilities	$	124,454		$	163,924
Accumulated depreciation and amortization	(71,027		)	(105,779		)
Net intangible lease liabilities	$	53,427		$	58,145

17

NOTE 9.  Other Assets

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

	September 30, 2017		December 31, 2016
Straight-line rent receivables, net of allowance of $22,705 and $25,059, respectively	$	313,627	$	311,776
Leasing costs and inducements, net	102,557		156,820
Deferred tax assets	60,254		42,458
Goodwill	47,019		42,386
Marketable debt securities, net	18,567		68,630
Other	74,145		89,554
Total other assets, net	$	616,169	$	711,624

Four Seasons Health Care Senior Notes 

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

NOTE 10.  Debt

Bank Line of Credit and Term Loans

The Company’s $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on March 31, 2018 and contains a committed one-year extension option, at a cost of 30 basis points. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends on the Company’s credit ratings. The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings. Based on the Company’s credit ratings at September 30, 2017, the margin on the Facility was 1.05% and the facility fee was 0.20%. The Facility also includes a feature that allows the Company to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments. During the nine months ended September 30, 2017, the Company had net repayments of $316 million primarily using proceeds from the RIDEA II joint venture disposition, the sale of its Four Seasons Notes and the repayment of its HC-One Facility. At September 30, 2017, the Company had $606 million, including £105 million ($141 million), outstanding under the Facility, with a weighted average effective interest rate of 2.40%.

On October 19, 2017, the Company terminated the Facility and executed a new $2.0 billion unsecured revolving line of credit facility (the “New Facility”) maturing on October 19, 2021. Borrowings under the New Facility accrue interest at LIBOR plus a margin that depends on the Company’s credit ratings (1.00% initially). The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings (0.20% initially). The New Facility contains two, six-month extension options and 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.

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 million unsecured term loan (the “2012 Term Loan”). In March 2017, the Company repaid the 2012 Term Loan.

On June 30, 2017, the Company repaid £51 million of its four-year unsecured term loan entered into in January 2015 (the “2015 Term Loan”). Concurrently, the Company terminated its three-year interest rate swap which fixed the interest of the 2015 Term Loan, and therefore, beginning June 30, 2017, the 2015 Term Loan accrues interest at a rate of British pound sterling (“GBP”) LIBOR plus 1.15%, subject to adjustments based on the Company’s credit ratings. At September 30, 2017 the Company had £169 million ($226 million) outstanding on the 2015 Term Loan.

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

18

Senior Unsecured Notes

At September 30, 2017, the Company had senior unsecured notes outstanding with an aggregate principal balance of $6.5 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, 2017.

The following table summarizes the Company’s senior unsecured note payoffs for the nine months ended September 30, 2017 (dollars in thousands):

Date	Amount		Coupon Rate
May 1, 2017	$	250,000	5.625	%
July 27, 2017(1)	$	500,000	5.375	%

_______________________________________

(1) The Company recorded a $54 million loss on debt extinguishment related to the repurchase of senior notes.

The following table summarizes the Company’s senior unsecured notes payoffs for the year ended December 31, 2016 (dollars in thousands):

Date	Amount		Coupon Rate
February 1, 2016	$	500,000	3.750	%
September 15, 2016	$	400,000	6.300	%
November 30, 2016	$	500,000	6.000	%
November 30, 2016	$	600,000	6.700	%

There were no senior unsecured notes issuances for the nine months ended September 30, 2017 and the year ended December 31, 2016.

Mortgage Debt

At September 30, 2017, the Company had $139 million in aggregate principal of mortgage debt outstanding, which is secured by 16 healthcare facilities (including redevelopment properties) with a carrying value of $303 million. In March 2017, the Company paid off $472 million of mortgage debt.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at September 30, 2017 (in thousands):

Year	Bank Line of Credit(1)		2015 Term Loan(2)			Senior Unsecured Notes(3)			Mortgage Debt(4)		Total(5)
2017 (three months)	$	—	$	—		$	—		$	847	$	847
2018	605,837		—			—			3,512		609,349
2019	—		226,680			450,000			3,700		680,380
2020	—		—			800,000			3,758		803,758
2021	—		—			700,000			11,117		711,117
Thereafter	—		—			4,500,000			116,481		4,616,481
	605,837		226,680			6,450,000			139,415		7,421,932
(Discounts), premium and debt costs, net	—		(475		)	(56,074		)	6,002		(50,547		)
	$	605,837	$	226,205		$	6,393,926		$	145,417	$	7,371,385

_______________________________________

(1) Includes £105 million translated into U.S. dollars (“USD”). The Bank Line of Credit was terminated on October 19, 2017 and the Company executed a New Facility which matures in October 2021.

(2) Represents £169 million translated into USD.

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

(4) Interest rates on the mortgage debt ranged from 2.01% to 5.91% with a weighted average effective interest rate of 4.19% and a weighted average maturity of 20 years.

(5) Excludes $95 million of other debt that have no scheduled maturities.

19

NOTE 11.  Commitments and Contingencies

Commitments

From October 31, 2016 through June 2017, HCP was the sole lender to QCP of an unsecured revolving credit facility (the “Unsecured Revolving Credit Facility”) which had a total commitment of $100 million at inception. The Unsecured Revolving Credit Facility was available to be drawn upon by QCP through October 31, 2017 with any drawn amounts due on October 31, 2018. Commitments under the Unsecured Revolving Credit Facility automatically and permanently decreased each calendar month by an amount equal to 50% of QCP’s and its restricted subsidiaries’ retained cash flow for the prior calendar month. All borrowings under the Unsecured Revolving Credit Facility were subject to the satisfaction of certain conditions, including (i) QCP’s senior secured revolving credit facility being unavailable, (ii) the failure of HCRMC to pay rent and (iii) other customary conditions, including the absence of a default and the accuracy of representations and warranties. QCP could only draw on the Unsecured Revolving Credit Facility prior to the one-year anniversary of the completion of the Spin-Off. Borrowings under the Unsecured Revolving Credit Facility would have born interest at a rate equal to LIBOR, subject to a 1.00% floor, plus an applicable margin of 6.25%. In addition to paying interest on outstanding principal under the Unsecured Revolving Credit Facility, QCP was required to pay a facility fee equal to 0.50% per annum of the unused capacity under the Unsecured Revolving Credit Facility to HCP, payable quarterly. No amounts were drawn on the Unsecured Revolving Credit Facility and the total commitment was reduced to zero at June 30, 2017.

Legal Proceedings

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

Class Action

On May 9, 2016, a purported stockholder of the Company filed a putative class action complaint, Boynton Beach Firefighters’ Pension Fund v. HCP, Inc., et al., Case No. 3:16-cv-01106-JJH, in the U.S. District Court for the Northern District of Ohio against the Company, certain of its officers, HCRMC, and certain of its officers, asserting violations of the federal securities laws. The suit asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and alleges that the Company made certain false or misleading statements relating to the value of and risks concerning its investment in HCRMC by allegedly failing to disclose that HCRMC had engaged in billing fraud, as alleged by the U.S. Department of Justice in a pending suit against HCRMC arising from the False Claims Act. The plaintiff in the suit demands compensatory damages (in an unspecified amount), costs and expenses (including attorneys’ fees and expert fees), and equitable, injunctive, or other relief as the Court deems just and proper. As the Boynton Beach action is in its early stages and a lead plaintiff has not yet been named, the defendants have not yet responded to the complaint. The Company believes the suit to be without merit and intends to vigorously defend against it.

Derivative Actions

On June 16, 2016 and July 5, 2016, purported stockholders of the Company filed two derivative actions, respectively Subodh v. HCR ManorCare Inc., et al., Case No. 30-2016-00858497-CU-PT-CXC and Stearns v. HCR ManorCare, Inc., et al., Case No. 30-2016-00861646-CU-MC-CJC, in the Superior Court of California, County of Orange, against certain of the Company’s current and former directors and officers and HCRMC. The Company is named as a nominal defendant. As both derivative actions contained substantially the same allegations, they have been consolidated into a single action. The consolidated action alleges that the defendants engaged in various acts of wrongdoing, including, among other things, breaching fiduciary duties by publicly making false or misleading statements of fact regarding HCRMC’s finances and prospects, and failing to maintain adequate internal controls. As the Subodh/Stearns action is in the early stages, defendants have not yet responded to the complaint. On April 18, 2017, the Court approved the parties’ stipulation staying the action pending further developments, including in the related securities class action litigation. The Court also adjourned the status conference scheduled for April 27, 2017 to January 10, 2018.

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

20

On July 21, 2017, a purported stockholder of the Company filed another derivative action, Kelley v. HCR Manorcare, Inc., et al., Case No. 8:17-cv-01259, in federal court in the Central District of California, against certain of the Company’s current and former directors and officers and HCRMC. The Company is named as a nominal defendant. The Kelley complaint asserts similar claims to those asserted in Weldon and in the California derivative actions. Like Weldon, the Kelley complaint also additionally alleges that the Company made false statements in its 2016 proxy statement, and asserts a claim for a violation of Section 14(a) of the Exchange Act. The case is currently before Judge James V. Selna. On September 25, 2017, Defendants moved to transfer the action to the Northern District of Ohio (i.e., the court where the class action and other federal derivative action are pending) or, in the alternative, to stay the action.  Oral argument is currently scheduled for December 4, 2017. Judge Selna granted the Company’s joint stipulation to stay the time to respond to the complaint until 60 days after the transfer or stay motion is decided.

Welltower v. Scott M. Brinker

On May 15, 2017, Welltower, Inc. filed a complaint in the Court of Common Pleas in Lucas County, Ohio, against Scott M. Brinker, alleging that he violated his non-competition obligations to Welltower prior to and upon acceptance of an offer of employment with the Company. In connection with Mr. Brinker’s hiring, the Company agreed to indemnify him for legal fees and any losses that result from the action. The matter is scheduled to be heard the week of November 6, 2017. The Company believes the suit to be without merit.

The Company is unable to estimate the amount of loss or range of reasonably possible losses with respect to the matters discussed above at September 30, 2017.

NOTE 12.  Equity

Accumulated Other Comprehensive Income (Loss)

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

	September 30, 2017			December 31, 2016
Cumulative foreign currency translation adjustment	$	(8,455	)	$	(22,817	)
Unrealized gains (losses) on cash flow hedges, net	(13,073		)	(3,642		)
Supplemental Executive Retirement plan minimum liability	(2,907		)	(3,129		)
Unrealized gains (losses) on available for sale securities	(56		)	(54		)
Total other comprehensive income (loss)	$	(24,491	)	$	(29,642	)

21

NOTE 13.  Segment Disclosures

The Company evaluates its business and allocates resources based on its reportable business segments: (i) senior housing triple-net, (ii) SHOP, (iii) life science and (iv) medical office. Under the medical office and life science segments, the Company invests through the acquisition and development of medical office buildings (“MOBs”) and life science facilities, which generally require a greater level of property management. The Company’s senior housing facilities are managed utilizing triple-net leases and RIDEA structures. The Company has non-reportable segments that are comprised primarily of the Company’s debt investments, hospital properties and care homes in the United Kingdom (“U.K.”). The accounting policies of the segments are the same as those in Note 2 to the Consolidated Financial Statements in the Company’s 2016 Annual Report on Form 10-K filed with the SEC, as updated by Note 2 herein. During the year ended December 31, 2016, 17 senior housing triple-net facilities were transitioned to a RIDEA structure (reported in the Company’s SHOP segment). During the nine months ended September 30, 2017, four senior housing triple-net facilities were transferred to the Company’s SHOP segment, of which one was transitioned to a RIDEA structure. The Company evaluates performance based upon: (i) property net operating income from continuing operations (“NOI”) and (ii) Adjusted NOI of the combined consolidated and unconsolidated investments in each segment. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, non-refundable entrance fees, net of entrance fee amortization and lease termination fees and the impact of deferred community fee income and expense. The adjustments to NOI and resulting Adjusted NOI for SHOP have been restated for prior periods presented to conform to the current period presentation for the adjustment to exclude the impact of deferred community fee income and expense, resulting in recognition as cash is received and expenses are paid.

Non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, marketable equity securities and, if any, real estate held for sale. Interest expense, depreciation and amortization, and non-property specific revenues and expenses are not allocated to individual segments in evaluating the Company’s segment-level performance. See Note 17 for other information regarding concentrations of credit risk.

22

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

For the three months ended September 30, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	77,220		$	126,040		$	90,174		$	119,847		$	28,968		$	—		$	442,249
HCP share of unconsolidated JV revenues	—			81,936			2,031			496			421			—			84,884
Operating expenses	(934		)	(86,821		)	(19,960		)	(46,486		)	(1,137		)	—			(155,338		)
HCP share of unconsolidated JV operating expenses	—			(65,035		)	(433		)	(143		)	(20		)	—			(65,631		)
NOI	76,286			56,120			71,812			73,714			28,232			—			306,164
Adjustments to NOI(2)	(600		)	4,551			(751		)	(582		)	(1,283		)	—			1,335
Adjusted NOI	75,686			60,671			71,061			73,132			26,949			—			307,499
Addback adjustments	600			(4,551		)	751			582			1,283			—			(1,335		)
Interest income	—			—			—			—			11,774			—			11,774
Interest expense	(640		)	(933		)	(87		)	(126		)	(618		)	(68,924		)	(71,328		)
Depreciation and amortization	(25,547		)	(24,884		)	(30,851		)	(42,047		)	(7,259		)	—			(130,588		)
General and administrative	—			—			—			—			—			(23,523		)	(23,523		)
Acquisition and pursuit costs	—			—			—			—			—			(580		)	(580		)
Recoveries (impairments), net	—			—			—			—			(25,328		)	—			(25,328		)
Gain (loss) on sales of real estate, net	(6		)	5,180			8			—			—			—			5,182
Loss on debt extinguishments	—			—			—			—			—			(54,227		)	(54,227		)
Other income (expense), net	—			—			—			—			—			(10,556		)	(10,556		)
Income tax benefit (expense)	—			—			—			—			—			5,481			5,481
Less: HCP share of unconsolidated JV NOI	—			(16,901		)	(1,598		)	(353		)	(401		)	—			(19,253		)
Equity income (loss) from unconsolidated JVs	—			(245		)	789			274			244			—			1,062
Net income (loss)	$	50,093		$	18,337		$	40,073		$	31,462		$	6,644		$	(152,329	)	$	(5,720	)

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

23

For the three months ended September 30, 2016:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	104,262		$	170,739		$	90,847		$	113,653		$	30,574		$	—		$	510,075
HCP share of unconsolidated JV revenues	—			50,973			1,929			502			410			—			53,814
Operating expenses	(1,794		)	(121,502		)	(18,487		)	(44,738		)	(1,193		)	—			(187,714		)
HCP share of unconsolidated JV operating expenses	—			(42,463		)	(406		)	(148		)	(20		)	—			(43,037		)
NOI	102,468			57,747			73,883			69,269			29,771			—			333,138
Adjustments to NOI(2)	(1,003		)	4,081			(314		)	(814		)	(1,140		)	—			810
Adjusted NOI	101,465			61,828			73,569			68,455			28,631			—			333,948
Addback adjustments	1,003			(4,081		)	314			814			1,140			—			(810		)
Interest income	—			—			—			—			20,482			—			20,482
Interest expense	(644		)	(8,130		)	(634		)	(1,608		)	(2,260		)	(104,584		)	(117,860		)
Depreciation and amortization	(34,030		)	(26,837		)	(31,967		)	(41,111		)	(7,462		)	—			(141,407		)
General and administrative	—			—			—			—			—			(34,781		)	(34,781		)
Acquisition and pursuit costs	—			—			—			—			—			(2,763		)	(2,763		)
Gain (loss) on sales of real estate, net	—			—			—			(9		)	—			—			(9		)
Other income (expense), net	—			—			—			—			—			1,432			1,432
Income tax benefit (expense)	—			—			—			—			—			424			424
Less: HCP share of unconsolidated JV NOI	—			(8,510		)	(1,523		)	(354		)	(390		)	—			(10,777		)
Equity income (loss) from unconsolidated JVs	—			(3,517		)	778			462			224			—			(2,053		)
Discontinued operations	—			—			—			—			—			108,213			108,213
Net income (loss)	$	67,794		$	10,753		$	40,537		$	26,649		$	40,365		$	(32,059	)	$	154,039

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

24

For the nine months ended September 30, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	255,332		$	391,684		$	262,224		$	357,381		$	87,524		$	—		$	1,354,145
HCP share of unconsolidated JV revenues	—			239,667			5,975			1,481			1,256			—			248,379
Operating expenses	(2,927		)	(267,226		)	(56,024		)	(137,930		)	(3,475		)	—			(467,582		)
HCP share of unconsolidated JV operating expenses	—			(190,049		)	(1,234		)	(431		)	(58		)	—			(191,772		)
NOI	252,405			174,076			210,941			220,501			85,247			—			943,170
Adjustments to NOI(2)	(2,844		)	12,229			(1,094		)	(2,321		)	(3,164		)	—			2,806
Adjusted NOI	249,561			186,305			209,847			218,180			82,083			—			945,976
Addback adjustments	2,844			(12,229		)	1,094			2,321			3,164			—			(2,806		)
Interest income	—			—			—			—			50,974			—			50,974
Interest expense	(1,898		)	(6,950		)	(288		)	(382		)	(3,541		)	(222,775		)	(235,834		)
Depreciation and amortization	(77,478		)	(75,657		)	(95,648		)	(127,261		)	(21,849		)	—			(397,893		)
General and administrative	—			—			—			—			—			(67,287		)	(67,287		)
Acquisition and pursuit costs	—			—			—			—			—			(2,504		)	(2,504		)
Recoveries (impairments), net	—			—			—			—			(82,010		)	—			(82,010		)
Gain (loss) on sales of real estate, net	268,227			5,313			45,922			(406		)	3,796			—			322,852
Loss on debt extinguishments	—			—			—			—			—			(54,227		)	(54,227		)
Other income (expense), net	—			—			—			—			—			40,723			40,723
Income tax benefit (expense)	—			—			—			—			—			14,630			14,630
Less: HCP share of unconsolidated JV NOI	—			(49,618		)	(4,741		)	(1,050		)	(1,198		)	—			(56,607		)
Equity income (loss) from unconsolidated JVs	—			683			2,322			846			720			—			4,571
Net income (loss)	$	441,256		$	47,847		$	158,508		$	92,248		$	32,139		$	(291,440	)	$	480,558

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

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For the nine months ended September 30, 2016:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	319,989		$	500,704		$	269,994		$	331,881		$	95,483		$	—		$	1,518,051
HCP share of unconsolidated JV revenues	—			152,424			5,628			1,503			1,224			—			160,779
Operating expenses	(5,521		)	(350,949		)	(53,191		)	(129,715		)	(3,375		)	—			(542,751		)
HCP share of unconsolidated JV operating expenses	—			(125,244		)	(1,173		)	(452		)	(30		)	—			(126,899		)
NOI	314,468			176,935			221,258			203,217			93,302			—			1,009,180
Adjustments to NOI(2)	(8,464		)	14,648			(1,545		)	(2,361		)	(1,926		)	—			352
Adjusted NOI	306,004			191,583			219,713			200,856			91,376			—			1,009,532
Addback adjustments	8,464			(14,648		)	1,545			2,361			1,926			—			(352		)
Interest income	—			—			—			—			71,298			—			71,298
Interest expense	(8,859		)	(23,818		)	(1,904		)	(4,899		)	(7,067		)	(314,708		)	(361,255		)
Depreciation and amortization	(101,737		)	(78,124		)	(97,640		)	(120,432		)	(23,248		)	—			(421,181		)
General and administrative	—			—			—			—			—			(83,011		)	(83,011		)
Acquisition and pursuit costs	—			—			—			—			—			(6,061		)	(6,061		)
Gain (loss) on sales of real estate, net	23,940			—			29,428			8,333			57,904			—			119,605
Other income (expense), net	—			—			—			—			—			5,064			5,064
Income tax benefit (expense)	—			—			—			—			—			(1,101		)	(1,101		)
Less: HCP share of unconsolidated JV NOI	—			(27,180		)	(4,455		)	(1,051		)	(1,194		)	—			(33,880		)
Equity income (loss) from unconsolidated JVs	—			(8,477		)	2,263			1,541			645			—			(4,028		)
Discontinued operations	—			—			—			—			—			283,996			283,996
Net income (loss)	$	227,812		$	39,336		$	148,950		$	86,709		$	191,640		$	(115,821	)	$	578,626

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
Segment	2017		2016		2017		2016
Senior housing triple-net	$	77,220	$	104,262	$	255,332	$	319,989
SHOP	126,040		170,739		391,684		500,704
Life science	90,174		90,847		262,224		269,994
Medical office	119,847		113,653		357,381		331,881
Other non-reportable segments	40,742		51,056		138,498		166,781
Total revenues	$	454,023	$	530,557	$	1,405,119	$	1,589,349

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

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NOTE 14.  Earnings Per Common Share

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

For the three months ended September 30, 2017, diluted loss per share from continuing operations is calculated using the weighted-average common shares outstanding during the period, as the effect of shares issuable under employee compensation plans and upon DownREIT unit conversions would have been anti-dilutive. All DownREIT units and approximately 1 million stock options were anti-dilutive for all periods presented.

Additionally, during the three months ended September 30, 2016, 6 million shares, issuable upon conversion of 4 million DownREIT units, were not included because they are anti-dilutive. For the nine months ended September 30, 2017 and 2016, 7 million and 6 million shares, respectively, issuable upon conversion of 4 million and 4 million DownREIT units, were not included because they are anti-dilutive.

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,
	2017			2016			2017			2016
Numerator
Net income (loss) from continuing operations	$	(5,720	)	$	45,826		$	480,558		$	294,630
Noncontrolling interests' share in earnings	(1,937		)	(2,789		)	(7,687		)	(9,540		)
Net income (loss) attributable to HCP, Inc.	(7,657		)	43,037			472,871			285,090
Less: Participating securities' share in earnings	(131		)	(326		)	(560		)	(977		)
Income (loss) from continuing operations applicable to common shares	(7,788		)	42,711			472,311			284,113
Discontinued operations	—			108,213			—			283,996
Net income (loss) applicable to common shares	$	(7,788	)	$	150,924		$	472,311		$	568,109
Denominator
Basic weighted average shares outstanding	468,975			467,628			468,642			466,931
Dilutive potential common shares - equity awards	—			207			186			201
Diluted weighted average common shares	468,975			467,835			468,828			467,132
Basic earnings per common share
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22
Diluted earnings per common share
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22

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NOTE 15.  Supplemental Cash Flow Information

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

	Nine Months Ended September 30,
	2017			2016
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	261,799		$	401,628
Income taxes paid	9,897			5,734
Capitalized interest	12,607			8,490
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	63,515			60,897
Non-cash acquisitions and dispositions settled with receivables and restricted cash held in connection with Section 1031 transactions	—			15,570
Vesting of restricted stock units and conversion of non-managing member units into common stock	2,464			6,620
Mortgages and other liabilities assumed with real estate acquisitions	3,678			78,131
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	(56		)	1,531

NOTE 16.  Variable Interest Entities

Unconsolidated Variable Interest Entities

At September 30, 2017, the Company had investments in: (i) five unconsolidated VIE JVs, (ii) 48 properties leased to VIE tenants, (iii) marketable debt securities of one VIE and (iv) three loans to VIE borrowers. The Company has determined that it is not the primary beneficiary of and therefore does not consolidate these VIEs because it does not have the ability to control the activities that most significantly impact their economic performance. Except for the Company’s equity interest in the unconsolidated JVs (CCRC OpCo, RIDEA II PropCo, Vintage Park Development JV, Waldwick JV and the LLC investment discussed below), it has no formal involvement in these VIEs beyond its investments.

The Company holds a 49% ownership interest in CCRC OpCo, a joint venture entity formed in August 2014 that operates senior housing properties in a RIDEA structure and has been identified as a VIE (see Note 7). The equity members of CCRC OpCo “lack power” because they share certain operating rights with Brookdale, as manager of the CCRCs. The assets of CCRC OpCo primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable, and cash and cash equivalents; its obligations primarily consist of operating lease obligations to CCRC PropCo, debt service payments and capital expenditures for the properties, and accounts payable and expense accruals associated with the cost of its CCRCs’ operations. Assets generated by the CCRC operations (primarily rents from CCRC residents) of CCRC OpCo may only be used to settle its contractual obligations (primarily from debt service payments, capital expenditures, and rental costs and operating expenses incurred to manage such facilities).

In January 2017, as a result of the partial sale of its interest in RIDEA II, the Company concluded that it should deconsolidate RIDEA II as it is no longer the primary beneficiary of the joint venture. The HCP/CPA JV is the primary beneficiary of both RIDEA II PropCo and RIDEA II OpCo as it controls the significant activities of RIDEA II PropCo and, of the group that controls the significant activities of RIDEA II OpCo, is most closely associated to the entity. Furthermore, control over the HCP/CPA JV is shared between HCP and CPA, and as such, the Company does not consolidate the HCP/CPA JV. Subsequent to the partial sale of its interest in RIDEA II, the Company continues to hold a direct investment in RIDEA II PropCo, which has been identified as a VIE as Brookdale, the non-managing member, does not have any substantive participating rights or kick-out rights over the managing member, HCP/CPA PropCo (see Notes 4 and 7). The assets of RIDEA II PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a combination of third-party and HCP debt (see Note 4). Assets generated by RIDEA II PropCo (primarily from RIDEA II OpCo lease payments) may only be used to settle its contractual obligations (primarily debt service payments on the third-party and HCP debt).

The Company holds an 85% ownership interest in two development joint ventures (Vintage Park Development JV and Waldwick JV) (see Note 7), which have been identified as VIEs as power is shared with a member that does not have a substantive equity investment at risk. The assets of each joint venture primarily consist of an in-progress senior housing facility development project that it owns and cash and cash equivalents; its obligations primarily consist of accounts payable and expense accruals associated

28

with the cost of its development obligations. Any assets generated by each joint venture may only be used to settle its respective contractual obligations (primarily development expenses and debt service payments).

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

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

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

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

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

Between 2012 and 2015, the Company funded a $257 million mezzanine loan facility to Tandem as part of a recapitalization of the Tandem Portfolio (see Note 6). Due to a decline in the fair value of the Tandem Portfolio over time, there is no longer sufficient equity at risk in Tandem and it has become a “thinly capitalized” borrower.

The classification of the related assets and liabilities and the maximum loss exposure as a result of the Company’s involvement with these VIEs at September 30, 2017 was as follows (in thousands):

VIE Type	Asset/Liability Type	Maximum Loss Exposure and Carrying Amount(1)
VIE tenants - DFLs(2)	Net investment in DFLs	$	602,501
VIE tenants - operating leases(2)	Lease intangibles, net and straight-line rent receivables	5,183
CCRC OpCo	Investments in unconsolidated joint ventures	214,140
RIDEA II PropCo	Investments in unconsolidated joint ventures	251,419
Development JVs	Investments in unconsolidated joint ventures	11,202
Tandem Health Care	Loans Receivable, net	197,374
Loan - Senior Secured	Loans Receivable, net	141,574
Loan - Seller Financing	Loans Receivable, net	10,000
CMBS and LLC investment	Marketable debt and cost method investment	33,630

_______________________________________

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

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

At September 30, 2017, the Company had not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash shortfalls).

See Notes 4, 6, and 7 for additional descriptions of the nature, purpose and operating activities of the Company’s unconsolidated VIEs and interests therein.

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Consolidated Variable Interest Entities

HCP, Inc.’s consolidated total assets and total liabilities at September 30, 2017 and December 31, 2016 include certain assets of VIEs that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at September 30, 2017 and December 31, 2016 include VIE assets as follows (in thousands):

	September 30, 2017			December 31, 2016
Assets
Building and improvements	$	2,833,834		$	3,522,310
Developments in process	22,860			31,953
Land	227,682			327,241
Accumulated depreciation	(584,621		)	(676,276		)
Net real estate	2,499,755			3,205,228
Investments in and advances to unconsolidated joint ventures	2,119			3,641
Accounts receivable, net	9,964			19,996
Cash and cash equivalents	36,262			35,844
Restricted cash	2,137			22,624
Intangible assets, net	132,905			169,027
Other assets, net	56,854			69,562
Total assets	$	2,739,996		$	3,525,922
Liabilities
Mortgage debt	45,067			520,870
Intangible liabilities, net	9,170			8,994
Accounts payable and accrued expenses	102,780			120,719
Deferred revenue	18,162			23,456
Total liabilities	$	175,179		$	674,039

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

RIDEA III.  The Company holds a 90% ownership interest in JV entities formed in June 2015 that own and operate senior housing properties in a RIDEA structure. The Company has historically classified RIDEA III OpCo as a VIE and, as a result of the adoption of ASU 2015-02, also classifies RIDEA III PropCo as a VIE due to the non-managing member lacking substantive participation rights in the management of RIDEA III PropCo or kick-out rights over the managing member. The Company consolidates RIDEA III PropCo and RIDEA III OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of RIDEA III PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a note payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA III OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA III PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA III structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

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

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

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

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

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

NOTE 17.  Concentration of Credit Risk

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

The following tables provide information regarding the Company’s concentrations of credit risk with respect to certain tenants:

	Percentage of Gross Assets
	Total Company		Senior Housing Triple-Net
	September 30,	December 31,	September 30,	December 31,
Tenant	2017	2016	2017	2016
Brookdale(1)	11%	17%	42%	69%

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	Percentage of Revenues
	Total Company Revenues				Senior Housing Triple-Net Revenues
	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
Tenant	2017	2016	2017	2016	2017	2016	2017	2016
Brookdale(1)	8%	12%	10%	12%	48%	60%	53%	59%

_______________________________________

(1) Includes assets and revenues from 64 senior housing triple-net facilities that were classified as held for sale at December 31, 2016 and sold in March 2017. 

At September 30, 2017 and December 31, 2016, Brookdale managed or operated, in the Company’s SHOP segment, approximately 13% and 18%, respectively, of the Company’s real estate investments based on gross assets. Because an operator manages the Company’s facilities in exchange for the receipt of a management fee, the Company is not directly exposed to the credit risk of its operators in the same manner or to the same extent as its triple-net tenants. At September 30, 2017, Brookdale provided comprehensive facility management and accounting services with respect to 59 of the Company’s SHOP facilities and 62 SHOP facilities owned by its unconsolidated joint ventures, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. Most of the management agreements have terms ranging from 10 to 15 years, with three to four5-year renewal periods. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.

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

See Note 1 for further information on the reduction of concentration related to Brookdale.

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

NOTE 18.  Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis at September 30, 2017 in the consolidated balance sheets are immaterial.

32

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

	September 30, 2017(4)				December 31, 2016(4)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	402,152	$	402,267	$	807,954	$	807,505
Marketable debt securities(2)	18,567		18,567		68,630		68,630
Marketable equity securities(1)	74		74		76		76
Warrants(3)	58		58		19		19
Bank line of credit(2)	605,837		605,837		899,718		899,718
Term loans(2)	226,205		226,205		440,062		440,062
Senior unsecured notes(1)	6,393,926		6,769,010		7,133,538		7,386,149
Mortgage debt(2)	145,417		131,419		623,792		609,374
Other debt(2)	94,818		94,818		92,385		92,385
Interest-rate swap liabilities(2)	2,980		2,980		4,857		4,857
Currency swap asset(2)	—		—		2,920		2,920
Cross currency swap liability(2)	9,469		9,469		—		—

_______________________________________

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

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

(3) Level 3: Fair value determined based on significant unobservable market inputs using standardized derivative pricing models.

(4) During the nine months ended September 30, 2017 and year ended December 31, 2016, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

NOTE 19.  Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and cross currency swap contracts at September 30, 2017 (dollars and GBP in thousands):

Date Entered	Maturity Date	Hedge Designation	Notional		Pay Rate	Receive Rate		Fair Value(1)
Interest rate:
July 2005(2)	July 2020	Cash Flow	$	44,000	3.82%	BMA Swap Index		$	(2,980	)
Cross currency swap:
April 2017(3)	February 2019	Net Investment	£105,000 / $131,400		2.58%	3.75	%	$	(9,469	)

_______________________________________

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

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

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

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

At September 30, 2017, £150 million of the Company’s GBP-denominated borrowings under the 2015 Term Loan and a £105 million cross currency swap are designated as a hedge of a portion of the Company’s net investments in GBP-functional subsidiaries

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to mitigate its exposure to fluctuations in the GBP to USD exchange rate. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to USD exchange rate of the instrument is recorded as part of the cumulative translation adjustment component of accumulated other comprehensive income (loss). Accordingly, the remeasurement value of the designated £150 million GBP-denominated borrowings and £105 million cross currency swap due to fluctuations in the GBP to USD exchange rate are reported in accumulated other comprehensive income (loss) as the hedging relationship is considered to be effective. The cumulative balance of the remeasurement value will be reclassified to earnings when the hedged investment is sold or substantially liquidated.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

All references in this report to “HCP,” “we,” “us” or “our” mean HCP, Inc., together with its consolidated subsidiaries. Unless the context suggests otherwise, references to “HCP, Inc.” mean the parent company without its subsidiaries.

Cautionary Language Regarding Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q that are not historical factual statements are “forward-looking statements.” We intend to have our forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with those provisions. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectation as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “forecast,” “plan,” “potential,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof. Forward-looking statements reflect our current expectations and views about future events and are subject to known and unknown risks and uncertainties that could significantly affect our future financial condition and results of operations. While forward-looking statements reflect our good faith belief and assumptions we believe to be reasonable based upon current information, we can give no assurance that our expectations or forecasts will be attained. As more fully set forth under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, risks and uncertainties that may cause our actual results to differ materially from the expectations contained in the forward-looking statements include, among other things:

• our reliance on a concentration of a small number of tenants and operators for a significant portion of our revenues, with our concentration of assets operated by Brookdale Senior Living, Inc. (“Brookdale”) increasing as a result of the consummation of the spin-off of Quality Care Properties, Inc. (“QCP”) on October 31, 2016 (the “Spin-Off”);

• the financial condition of our existing and future tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants’ and operators’ leases and borrowers’ loans;

• the ability of our existing and future tenants, operators and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan payments to us and our ability to recover investments made, if applicable, in their operations;

• competition for tenants and operators, including with respect to new leases and mortgages and the renewal or rollover of existing leases;

• our concentration in the healthcare property sector, particularly in senior housing, life sciences, medical office buildings and hospitals, which makes our profitability more vulnerable to a downturn in a specific sector that if we were investing in multiple industries;

• availability of suitable properties to acquire at favorable prices, the competition for the acquisition and financing of those properties, and the costs of associated property development;

• our ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or we exercise our right to foreclose on loan collateral or replace an existing tenant or operator upon default;

• the risks associated with our investments in joint ventures and unconsolidated entities, including our lack of sole decision making authority and our reliance on our partners’ financial condition and continued cooperation;

• our ability to achieve the benefits of investments within expected time frames or at all, or within expected cost projections;

• operational risks associated with third party management contracts, including the additional regulation and liabilities of our RIDEA lease structures;

• the potential impact on us and our tenants, operators and borrowers from current and future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments;

• the effect on our tenants and operators of legislation, executive orders and other legal requirements, including the Affordable Care Act and licensure, certification and inspection requirements, as well as laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements;

• changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations, of our tenants and operators;

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• volatility or uncertainty in the capital markets, the availability and cost of capital as impacted by interest rates, changes in our credit ratings, and the value of our common stock, and other conditions that may adversely impact our ability to fund our obligations or consummate transactions, or reduce the earnings from potential transactions;

• changes in global, national and local economic conditions, and currency exchange rates;

• our ability to manage our indebtedness level and changes in the terms of such indebtedness;

• competition for skilled management and other key personnel; and

• our ability to maintain our qualification as a real estate investment trust (“REIT”).

Except as required by law, we do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, which speak only as of the date on which they are made.

The information set forth in this Item 2 is intended to provide readers with an understanding of our financial condition, changes in financial condition and results of operations. We will discuss and provide our analysis in the following order:

• Executive Summary

• 2017 Transaction Overview

• Dividends

• Results of Operations

• Liquidity and Capital Resources

• Off-Balance Sheet Arrangements

• Non-GAAP Financial Measures Reconciliations

• Critical Accounting Policies

• Recent Accounting Pronouncements

Executive Summary

HCP, Inc., a Standard & Poor’s (“S&P”) 500 company, invests primarily in real estate serving the healthcare industry in the United States. We are a Maryland corporation organized in 1985 and qualify as a self-administered REIT. We acquire, develop, lease, manage and dispose of healthcare real estate. At September 30, 2017, our portfolio of investments, including properties in our unconsolidated joint ventures (“JVs”), consisted of interests in 818 properties.  

We invest and manage our real estate portfolio for the long-term to maximize the benefit to our stockholders and support the growth of our dividends. The core elements of our strategy are: (i) to acquire, develop, lease, own and manage a diversified portfolio of quality healthcare properties across multiple geographic locations and business segments including senior housing, medical office, and life science, among others; (ii) to align ourselves with leading healthcare companies, operators and service providers, which over the long-term, should result in higher relative rental rates, net operating cash flows and appreciation of property values; (iii) to maintain adequate liquidity with long-term fixed rate debt financing with staggered maturities, which supports the longer-term nature of our investments, while reducing our exposure to interest rate volatility and refinancing risk at any point in the interest rate or credit cycles; and (iv) to continue to manage our balance sheet with a targeted financial leverage of 40% relative to our assets.

We believe that our real estate portfolio holds the potential for increased future cash flows as it is well-maintained and in desirable locations within markets where new supply is generally limited by the lack of available sites and the difficulty of obtaining the necessary licensing, other approvals and/or financing. Our strategy for maximizing the benefits from these opportunities is to: (i) work with new or existing tenants and operators to address their space and capital needs and (ii) provide high-quality property management services in order to motivate tenants to renew, expand or relocate into our properties.

The delivery of healthcare services requires real estate and, as a result, tenants and operators depend on real estate, in part, to maintain and grow their businesses. We believe that the healthcare real estate market provides investment opportunities due to the: (i) compelling long-term demographics driving the demand for healthcare services; (ii) specialized nature of healthcare real estate investing; and (iii) ongoing consolidation of the fragmented healthcare real estate sector.

While we emphasize healthcare real estate ownership, we may also provide real estate secured financing to, or invest in equity or debt securities of, healthcare operators or other entities engaged in healthcare real estate ownership. We may also acquire all or substantially all of the securities or assets of other REITs, operating companies or similar entities where such investments would be consistent with our investment strategies. We may co-invest alongside institutional or development investors through partnerships or limited liability companies.

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We monitor, but do not limit, our investments based on the percentage of our total assets that may be invested in any one property type, investment vehicle or geographic location, the number of properties that may be leased to a single tenant or operator, or loans that may be made to a single borrower. In allocating capital, we target opportunities with the most attractive risk/reward profile for our portfolio as a whole. We may take additional measures to mitigate risk, including diversifying our investments (by sector, geography, tenant or operator), structuring transactions as master leases, requiring tenant or operator insurance and indemnifications, and obtaining credit enhancements in the form of guarantees, letters of credit or security deposits.

Our REIT qualification requires us to distribute at least 90% of our REIT taxable income (excluding net capital gains); therefore, we do not retain capital. As a result, we regularly access the public equity and debt markets to raise the funds necessary to finance acquisitions and debt investments, develop and redevelop properties, and refinance maturing debt.

We maintain a disciplined balance sheet by actively managing our debt to equity levels and maintaining multiple sources of liquidity. Our debt obligations are primarily long-term fixed rate with staggered maturities.

We finance our investments based on our evaluation of available sources of funding. For short-term purposes, we may utilize our revolving line of credit facility or arrange for other short-term borrowings from banks or other sources. We arrange for longer-term financing by offering debt and equity securities, placing mortgage debt and obtaining capital from institutional lenders and JV partners.

2017 Transaction Overview

Master Transactions and Cooperation Agreement with Brookdale

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

Master Lease Transactions

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

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

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

• Enhanced reporting requirements and related remedies; and

• The right to market for sale the CCRC portfolio.

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

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

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

• We will provide an aggregate $5 million annual reduction in rent on three assets, effective January 1, 2018;

• We will sell two triple-net assets to Brookdale or its affiliates for $35 million; and

• We will have the right to convert five assets to a cash flow lease by December 31, 2017. We have the right to terminate the cash flow lease without penalty to facilitate the sale or transition of these additional assets, at our option.

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Joint Venture Transactions

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

• HCP, which currently owns 90% of the interests in its RIDEA I and RIDEA III joint ventures with Brookdale, will purchase Brookdale’s 10% noncontrolling interest in each joint venture. These joint ventures collectively own and operate 58 independent living, assisted living, memory care and/or skilled nursing facilities (the “RIDEA Facilities”);

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

• We will sell four of the RIDEA Facilities to Brookdale or its affiliates for $239 million;

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

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

RIDEA II Sale Transaction

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

On November 1, 2017, we entered into a definitive agreement with an investor group led by CPA to sell our remaining 40% ownership interest in RIDEA II. We expect the transaction to close in 2018. CPA has also agreed to cause refinancing of our $242 million loan receivables from RIDEA II within one year following the closing of the transaction. Total expected proceeds to us from the transaction and refinancing of the loan receivables from RIDEA II are $332 million.

Acquisition Transactions

• During the second quarter of 2017, we acquired Wateridge, a 124,000 square foot campus in the Sorrento Mesa submarket of San Diego, California for $26 million. Upon acquisition, we commenced repositioning one of the buildings into class-A lab space following an office-to-lab conversion strategy.

• During the third quarter of 2017, we acquired a portfolio of three medical office buildings in Texas for $49 million and a life science facility in South San Francisco, California for $64 million.

• In October, we entered into definitive agreements to acquire a $228 million life science campus known as the Hayden Research Campus located in the Boston suburb of Lexington, Massachusetts. HCP will own a majority interest in this campus through a joint venture with King Street Properties (“King Street”). The campus includes two existing buildings totaling 400,000 square feet and is currently 66% leased, anchored by major life science tenants including Shire US, Inc., a subsidiary of Shire plc, and Merck, Sharp and Dohme, a subsidiary of Merck and Co., Inc. Additionally, King Street is currently seeking approvals for the joint venture to develop an additional 209,000 square feet of life science space on the campus.

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Disposition and Loan Repayment Transactions

During the first quarter of 2017, we completed the following disposition and loan repayment transactions:

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

• In February 2017, we sold a hospital within one of our DFLs in Palm Beach Gardens, Florida for $43 million to the current tenant and recognized a gain on sale of $4 million.

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

• In March 2017, we sold our aggregate £138.5 million par value Four Seasons senior notes (“Four Seasons Notes”) for £83 million ($101 million). The disposition of the Four Seasons Notes generated a £42 million ($51 million) gain on sale as the sales price was above the previously-impaired carrying value of £41 million ($50 million). In addition, we sold our Four Seasons senior secured term loan at par plus accrued interest for £29 million ($35 million).

During the second quarter of 2017, we completed the following disposition and loan repayment transactions:

• In April 2017, we sold a land parcel in San Diego, California for $27 million and one life science building in San Diego, California for $5 million.

• In June 2017, we received £283 million ($367 million) from the repayment of our HC-One Facility.

During the third quarter of 2017, we sold two senior housing triple-net facilities for $15 million and recognized a gain on sale of $5 million.

Financing Activities

• During the nine months ended September 30, 2017, we had net repayments of $316 million on our revolving line of credit (the “Facility”) primarily using proceeds from the RIDEA II joint venture disposition, the sale of our Four Seasons Notes and the repayment of our HC-One Facility.

• During the first quarter of 2017, we repaid our £137 million unsecured term loan (the “2012 Term Loan”) and $472 million of mortgage debt.

• During the second quarter of 2017, we repaid $250 million of maturing senior unsecured notes and paid down £51 million of our £220 million unsecured term loan (the “2015 Term Loan”).

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

• On October 19, 2017, we terminated the Facility and entered into a new $2.0 billion unsecured revolving line of credit facility (the “New Facility”) maturing on October 19, 2021. Borrowings under the New Facility accrue interest at LIBOR plus a margin that depends on our credit ratings (1.00% initially). We pay a facility fee on the entire revolving commitment that depends on our credit ratings (0.20% initially). The New Facility contains two, six-month extension options and includes a feature that allows us to increase the borrowing capacity by an aggregate amount of up to $750 million, subject to securing additional commitments.

Developments and Redevelopments

As of May 2017, we have leased 100% of The Cove Phase I and Phase II.

During the nine months ended September 30, 2017, we added $169 million of new projects to our development and redevelopment pipelines including:

• Commenced $22 million of redevelopment projects at two recently-acquired life science assets in the Sorrento Mesa submarket of San Diego.

• Commenced a $40 million redevelopment of a medical office building located in the University City submarket in Philadelphia near the University of Pennsylvania.

• Entered into a joint venture agreement and commenced development on a 111 unit senior housing facility in Otay Ranch, California (San Diego MSA) for $31 million. Our share of the total construction cost is approximately $28 million with an estimated completion in the second half of 2018.

• Commenced development on a 79 unit senior housing facility in Waldwick, New Jersey (New York MSA) for $31 million. Our share of the total construction costs is approximately $26 million with an estimated completion in late 2018.

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• Commenced a $16 million development expansion project in the Sorrento Mesa submarket of San Diego, California.

Dividends

The following table summarizes our common stock cash dividends declared in 2017:

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
February 2	February 15	$	0.37	March 2
April 27	May 8	0.37		May 23
July 27	August 7	0.37		August 22
October 26	November 6	0.37		November 21

Results of Operations

We evaluate our business and allocate resources among our reportable business segments: (i) senior housing triple-net; (ii) senior housing operating portfolio (“SHOP”); (iii) life science; and (iv) medical office. Under the medical office and life science segments, we invest through the acquisition and development of medical office buildings (“MOBs”) and life science facilities, which generally require a greater level of property management. Our senior housing facilities are managed utilizing triple-net leases and RIDEA structures. We have other non-reportable segments that are comprised primarily of our U.K. care homes, debt investments and hospitals. We evaluate performance based upon (i) property net operating income from continuing operations (“NOI”) and (ii) Adjusted NOI (cash NOI) of the combined consolidated and unconsolidated investments in each segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2 of our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the U.S. Securities and Exchange Commission (“SEC”), as updated by Note 2 herein.

Non-GAAP Financial Measures

Net Operating Income

NOI and Adjusted NOI are non-U.S. generally accepted accounting principles (“GAAP”) supplemental financial measures used to evaluate the operating performance of real estate. We include properties from our consolidated portfolio, as well as our pro-rata share of properties owned by our unconsolidated joint ventures, in our NOI and Adjusted NOI. We believe providing this information assists investors and analysts in estimating the economic interest in our total portfolio of real estate. Our pro-rata share information is prepared on a basis consistent with the comparable consolidated amounts, is intended to reflect our proportionate economic interest in the operating results of properties in our portfolio and is calculated by applying our actual ownership percentage for the period. We do not control the unconsolidated joint ventures, and the pro-rata presentations of revenues and expenses included in NOI (see below) do not represent our legal claim to such items. The joint venture members or partners are entitled to profit or loss allocations and distributions of cash flows according to the joint venture agreements, which provide for such allocations generally according to their invested capital.

The presentation of pro-rata information has limitations, which include, but are not limited to, the following: (i) the amounts shown on the individual line items were derived by applying our overall economic ownership interest percentage determined when applying the equity method of accounting and do not necessarily represent our legal claim to the assets and liabilities, or the revenues and expenses and (ii) other companies in our industry may calculate their pro-rata interest differently, limiting the usefulness as a comparative measure. Because of these limitations, the pro-rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the pro-rata financial information as a supplement.

NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss) as presented in Note 13 to the Consolidated Financial Statements. Management believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, non-refundable entrance fees, net of entrance fee amortization and lease termination fees and the impact of deferred community fee income and expense. The adjustments to NOI and resulting Adjusted NOI for SHOP have been restated for prior periods presented to conform to the current period presentation for the adjustment to exclude the impact of deferred community fee income and expense, resulting in recognition as cash is received and expenses are paid. Adjusted NOI is oftentimes referred to as “cash NOI.” We use NOI and Adjusted NOI to make decisions about resource allocations, to assess and

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compare property level performance, and to evaluate our same property portfolio (“SPP”), as described below. We believe that net income (loss) is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect various excluded items. Further, our definition of NOI may not be comparable to the definition used by other REITs or real estate companies, as they may use different methodologies for calculating NOI. For a reconciliation of NOI and Adjusted NOI to net income (loss) by segment, refer to Note 13 to the Consolidated Financial Statements.

Operating expenses generally relate to leased medical office and life science properties and SHOP facilities. We generally recover all or a portion of our leased medical office and life science property expenses through tenant recoveries. We present expenses as operating or general and administrative based on the underlying nature of the expense. Periodically, we review the classification of expenses between categories and make revisions based on changes in the underlying nature of the expenses.

Same Property Portfolio

SPP NOI and Adjusted NOI information allows us to evaluate the performance of our property portfolio under a consistent population by eliminating changes in the composition of our portfolio of properties. We include properties from our consolidated portfolio, as well as properties owned by our unconsolidated joint ventures in our SPP NOI and Adjusted NOI (see NOI above for further discussion regarding our use of pro-rata share information and its limitations). SPP NOI excludes (i) certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis and (ii) entrance fees and related activity such as deferred expenses, reserves and management fees related to entrance fees. SPP NOI for properties that undergo a change in ownership is reported based on the current ownership percentage.

Properties are included in our SPP once they are stabilized for the full period in both comparison periods. Newly acquired operating assets are generally considered stabilized at the earlier of lease-up (typically when the tenant(s) control(s) the physical use of at least 80% of the space) or 12 months from the acquisition date. Newly completed developments and redevelopments are considered stabilized at the earlier of lease-up or 24 months from the date the property is placed in service. Properties that experience a change in reporting structure, such as a transition from a triple-net lease to a RIDEA reporting structure, are considered stabilized after 12 months in operations under a consistent reporting structure. A property is removed from our SPP when it is classified as held for sale, sold, placed into redevelopment, experiences a casualty event that significantly impacts operations or changes its reporting structure (such as triple-net to SHOP).

For a reconciliation of SPP to total portfolio Adjusted NOI and other relevant disclosures by segment, refer to our Segment Analysis below.

Funds From Operations (“FFO”)

We believe FFO applicable to common shares, diluted FFO applicable to common shares, and diluted FFO per common share are important supplemental non-GAAP measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is net income (loss) applicable to common shares (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, including any current and deferred taxes directly associated with sales of depreciable property, impairments of, or related to, depreciable real estate, plus real estate and other depreciation and amortization, and adjustments to compute our share of FFO and FFO as adjusted (see below) from joint ventures. Adjustments for joint ventures are calculated to reflect our pro-rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of FFO for unconsolidated joint ventures by applying ouractual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated joint ventures in which we do not own 100% of the equity by adjusting our FFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods. Our pro-rata share information is prepared on a basis consistent with the comparable consolidated amounts, is intended to reflect our proportionate economic interest in the operating results of properties in our portfolio and is calculated by applying our actual ownership percentage for the period. We do not control the unconsolidated joint ventures, and the pro-rata presentations of reconciling items included in FFO (see above) do not represent our legal claim to such items. The joint venture members or partners are entitled to profit or loss allocations and distributions of cash flows according to the joint venture agreements, which provide for such allocations generally according to their invested capital. See NOI above for further discussion regarding our use of pro-rata share information and its limitations.

FFO does not represent cash generated from operating activities in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income (loss). We compute FFO in accordance

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with the current NAREIT definition; however, other REITs may report FFO differently or have a different interpretation of the current NAREIT definition from ours.

In addition, we present FFO before the impact of non-comparable items including, but not limited to, casualty-related charges (recoveries), severance and related charges, litigation costs, preferred stock redemption charges, impairments (recoveries) of non-depreciable assets, prepayment costs (benefits) associated with early retirement or payment of debt, foreign currency remeasurement losses (gains) and transaction-related items (“FFO as adjusted”). Prepayment costs (benefits) associated with early retirement of debt include the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of debt. Transaction-related items include expensed acquisition and pursuit costs and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. Management believes that FFO as adjusted provides a meaningful supplemental measurement of our FFO run-rate and is frequently used by analysts, investors and other interested parties in the evaluation of our performance as a REIT. At the same time that NAREIT created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” We believe stockholders, potential investors and financial analysts who review our operating performance are best served by an FFO run-rate earnings measure that includes, in addition to adjustments made to arrive at the NAREIT defined measure of FFO, other adjustments to net income (loss). FFO as adjusted is used by management in analyzing our business and the performance of our properties, and we believe it is important that stockholders, potential investors and financial analysts understand this measure used by management. We use FFO as adjusted to: (i) evaluate our performance in comparison with expected results and results of previous periods, relative to resource allocation decisions, (ii) evaluate the performance of our management, (iii) budget and forecast future results to assist in the allocation of resources, (iv) assess our performance as compared with similar real estate companies and the industry in general and (v) evaluate how a specific potential investment will impact our future results. Other REITs or real estate companies may use different methodologies for calculating an adjusted FFO measure, and accordingly, our FFO as adjusted may not be comparable to those reported by other REITs. For a reconciliation of net income (loss) to FFO and FFO as adjusted and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.

42

Funds Available for Distribution (“FAD”)

FAD is defined as FFO as adjusted after excluding the impact of the following: (i) amortization of acquired market lease intangibles, net, (ii) amortization of deferred compensation expense, (iii) amortization of deferred financing costs, net, (iv) straight-line rents, (v) non-cash interest and depreciation related to DFLs and lease incentive amortization (reduction of straight-line rents) and (vi) deferred revenues, excluding amounts amortized into rental income that are associated with tenant funded improvements owned/recognized by us and up-front cash payments made by tenants to reduce their contractual rents. Also, FAD: (i) is computed after deducting recurring capital expenditures, including leasing costs and second generation tenant and capital improvements, and (ii) includes lease restructure payments and adjustments to compute our share of FAD from our unconsolidated joint ventures and those related to CCRC non-refundable entrance fees. Certain amounts in the “Non-GAAP Financial Measures Reconciliation” below for FAD have been reclassified for prior periods to conform to the current period presentation. More specifically, we have combined wholly-owned and our share from unconsolidated joint ventures recurring capital expenditures, including leasing costs and second generation tenant and capital improvements (previously reported in “other”) into a single line item. In addition, we have combined cash CCRC JV entrance fees with CCRC JV entrance fee amortization into a single line item, separately disclosed deferred income taxes (previously reported in “other”) and collapsed immaterial line items into ‘other’. Adjustments for joint ventures are calculated to reflect our pro-rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of FAD for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated joint ventures in which we do not own 100% of the equity by adjusting our FAD to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods (see FFO above for further disclosure regarding our use of pro-rata share information and its limitations). Other REITs or real estate companies may use different methodologies for calculating FAD, and accordingly, our FAD may not be comparable to those reported by other REITs. Although our FAD computation may not be comparable to that of other REITs, management believes FAD provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. We believe FAD is an alternative run-rate earnings measure that improves the understanding of our operating results among investors and makes comparisons with: (i) expected results, (ii) results of previous periods and (iii) results among REITS more meaningful. FAD does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as it excludes the following items which generally flow through our cash flows from operating activities: (i) adjustments for changes in working capital or the actual timing of the payment of income or expense items that are accrued in the period, (ii) transaction-related costs, (iii) litigation settlement expenses, (iv) severance-related expenses and (v) actual cash receipts from interest income recognized on loans receivable (in contrast to our FAD adjustment to exclude non-cash interest and depreciation related to our investments in direct financing leases). Furthermore, FAD is adjusted for recurring capital expenditures, which are generally not considered when determining cash flows from operations or liquidity. FAD is a non-GAAP supplemental financial measure and should not be considered as an alternative to net income (loss) determined in accordance with GAAP. For a reconciliation of net income (loss) to FAD and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.

Comparison of the Three and Nine Months Ended September 30, 2017 to the Three and Nine Months Ended September 30, 2016

Overview

Three Months Ended September 30, 2017 and 2016

The following table summarizes results for the three months ended September 30, 2017 and 2016 (dollars in thousands, except per share data):

	Three Months Ended						Three Months Ended
	September 30, 2017						September 30, 2016
	Amount			Diluted Per Share			Amount		Diluted Per Share		Per Share Change
Net income (loss) applicable to common shares	$	(7,788	)	$	(0.02	)	$	150,924	$	0.32	$	(0.34	)
FFO	155,248			0.33			304,387		0.65		(0.32		)
FFO as adjusted	227,769			0.48			336,513		0.72		(0.24		)
FAD	202,407						317,540

Net income applicable to common shares (“EPS”) decreased primarily as a result of the following:

• a reduction in net income from discontinued operations due to the spinoff of QCP on October 31, 2016;

43

• a loss on debt extinguishment, representing a premium for early payment on the repurchase of our senior notes, in July 2017;

• a reduction of NOI primarily as a result of the sale of 64 senior housing triple-net assets;

• a reduction in resident fees and services, partially offset by a reduction in operating expenses, due to the partial sale and deconsolidation of RIDEA II during the first quarter of 2017;

• impairments related to (i) our mezzanine loan facility to Tandem Health Care (the “Tandem Mezzanine Loan”) and (ii) 11 underperforming senior housing triple-net facilities in the third quarter of 2017;

• casualty-related charges due to hurricanes in the third quarter of 2017; and

• a reduction in interest income due to the payoff of: (i) our HC-One Facility in June 2017 and (ii) a participating development loan during the third quarter of 2016.

The decrease in EPS was partially offset by:

• a reduction in interest expense as a result of debt repayments in the fourth quarter of 2016 and year-to-date 2017;

• a reduction in severance and related charges primarily related to the departure of our former President and Chief Executive Officer in the third quarter of 2016 compared to severance and related charges primarily related to the departure of our former Executive Vice President and Chief Accounting Officer in the third quarter of 2017; and

• a net gain on sales of real estate during the third quarter of 2017 compared to no sales during the third quarter of 2016.

FFO decreased primarily as a result of the aforementioned events impacting EPS, except for gain on sales of real estate and impairments of real estate, which are excluded from FFO.

FFO as adjusted decreased primarily as a result of the aforementioned events impacting FFO, except for the following, which are excluded from FFO as adjusted:

• a loss on debt extinguishment from the repurchase of our senior notes in July 2017; and

• casualty-related charges due to hurricanes in the third quarter of 2017; partially offset by

• a reduction in severance and related charges; and

• an impairment related to our Tandem Mezzanine Loan in the third quarter of 2017.

Beginning in the third quarter of 2017, casualty-related charges (recoveries), net are excluded from FFO as adjusted.

FAD decreased primarily as a result of the aforementioned events impacting FFO as adjusted and increased leasing costs and tenant capital improvements.

Nine Months EndedSeptember 30, 2017 and 2016

The following table summarizes results for the nine months ended September 30, 2017 and 2016 (dollars in thousands, except per share data):

	Nine Months Ended				Nine Months Ended
	September 30, 2017				September 30, 2016
	Amount		Diluted Per Share		Amount		Diluted Per Share		Per Share Change
Net income (loss) applicable to common shares	$	472,311	$	1.01	$	568,109	$	1.22	$	(0.21	)
FFO	608,162		1.30		956,864		2.05		(0.75		)
FFO as adjusted	692,726		1.47		1,006,166		2.15		(0.68		)
FAD	621,109				964,437

EPS decreased primarily as a result of the following:

• a reduction in net income from discontinued operations due to the spinoff of QCP on October 31, 2016;

• a loss on debt extinguishment, representing a premium for early payment on the repurchase of our senior notes, in July 2017;

• a reduction of NOI primarily as a result of the sale of 64 senior housing triple-net assets, and property sales in our life science and medical office segments;

44

• a reduction in resident fees and services, partially offset by a reduction in operating expenses, due to the partial sale and deconsolidation of RIDEA II during the first quarter of 2017;

• impairments of our Tandem Mezzanine Loan in the second and third quarter of 2017;

• impairments related to 11 underperforming senior housing triple-net facilities in the third quarter of 2017;

• casualty-related charges due to hurricanes in the third quarter of 2017; and

• a reduction in interest income due to the payoff of three participating development loans during the second and third quarters of 2016.

The decrease in EPS was partially offset by the following:

• an increased net gain on sales of real estate during the first three quarters of 2017 compared to the first three quarters of 2016;

• a reduction in interest expense as a result of debt repayments during the second half of 2016 and year-to-date 2017;

• a gain on sale of our Four Seasons Notes in the first quarter of 2017;

• increased NOI from our 2016 acquisitions, developments placed in service, and annual rent escalations;

• decreased depreciation and amortization expense as a result of the sale of 64 senior housing triple-net assets and the deconsolidation of RIDEA II during the first quarter of 2017, partially offset by depreciation and amortization of assets acquired during 2016 and year-to-date 2017;

• a reduction in severance and related charges primarily related to the departure of our former President and Chief Executive Officer in the third quarter of 2016 compared to severance and related charges primarily related to the departure of our former Executive Vice President and Chief Accounting Officer in the third quarter of 2017; and

• increased tax benefit primarily associated with state built-in gain tax for the disposition of certain real estate assets during 2016 and from the sale of a 40% interest in RIDEA II in 2017.

FFO decreased primarily as a result of the aforementioned events impacting EPS, except for depreciation and amortization, gain on sales of real estate and impairments of real estate, which are excluded from FFO.

FFO as adjusted decreased primarily as a result of the aforementioned events impacting FFO, except for the following which are excluded from FFO as adjusted:

• a loss on debt extinguishment from the repurchase of our senior notes in July 2017;

• impairments of our Tandem Mezzanine Loan in the second and third quarter of 2017; and

• casualty-related charges due to hurricanes in the third quarter of 2017; partially offset by

• a reduction in severance and related charges; and

• gain on sale of our Four Seasons Notes in the first quarter of 2017.

FAD decreased primarily as a result of the aforementioned events impacting FFO as adjusted, increased leasing costs and tenant capital improvements, and lower lease restructure payments.

Segment Analysis 

The tables below provide selected operating information for our SPP and total property portfolio for each of our business segments. Our SPP for the three months ended September 30, 2017 consists of 729 properties representing properties acquired or placed in service and stabilized on or prior to July 1, 2016 and that remained in operation under a consistent reporting structure through September 30, 2017. Our SPP for the nine months ended September 30, 2017 consists of 721 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 2016 and that remained in operation under a consistent reporting structure through September 30, 2017. Our total property portfolio consists of 818 and 881 properties at September 30, 2017 and 2016, respectively, excluding properties in the Spin-Off.

45

Senior Housing Triple-Net

The following table summarizes results at and for the three months ended September 30, 2017 and 2016 (dollars in thousands, except per unit data):

	SPP									Total Portfolio
	Three Months Ended September 30,									Three Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	76,588		$	74,306		$	2,282		$	77,220		$	104,262		$	(27,042	)
Operating expenses	(188		)	(160		)	(28		)	(934		)	(1,794		)	860
NOI	76,400			74,146			2,254			76,286			102,468			(26,182		)
Adjustments to NOI	(252		)	(10		)	(242		)	(600		)	(1,003		)	403
Adjusted NOI	$	76,148		$	74,136		$	2,012		75,686			101,465			(25,779		)
Non-SPP adjusted NOI										462			(27,329		)	27,791
SPP adjusted NOI										$	76,148		$	74,136		$	2,012
Adjusted NOI % change							2.7		%
Property count(2)	201			201						204			292
Average capacity (units)(3)	20,041			20,054						20,311			28,378
Average annual rent per unit	$	15,236		$	14,819					$	15,089		$	14,555

_______________________________________

(1) Represents rental and related revenues and income from DFLs.

(2) From our 2016 presentation of SPP, we removed 73 senior housing properties from SPP that were sold, three senior housing properties that were classified as held for sale, and 15 senior housing properties that we transitioned to SHOP.

(3) Represents average capacity as reported by the respective tenants or operators for the 12-month period and a quarter in arrears from the periods presented.

SPP adjusted NOI increased primarily as a result of the following:

• annual rent escalations; and

• higher cash rent received from our portfolio of assets leased to Sunrise Senior Living. 

Total Portfolio NOI and Adjusted NOI decreased primarily as a result of the following Non-SPP impacts:

• senior housing triple-net facilities sold during 2016 and 2017; and

• the transfer of 21 senior housing triple-net facilities to our SHOP segment, of which 18 were transitioned to a RIDEA structure during the fourth quarter of 2016 and year-to-date 2017.

The decrease to Total Portfolio NOI and Adjusted NOI is partially offset by the aforementioned increases to SPP.

The following table summarizes results at and for the nine months ended September 30, 2017 and 2016 (dollars in thousands, except per unit data):

	SPP									Total Portfolio
	Nine Months Ended September 30,									Nine Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	224,872		$	220,775		$	4,097		$	255,332		$	319,989		$	(64,657	)
Operating expenses	(470		)	(483		)	13			(2,927		)	(5,521		)	2,594
NOI	224,402			220,292			4,110			252,405			314,468			(62,063		)
Adjustments to NOI	(1,345		)	(5,585		)	4,240			(2,844		)	(8,464		)	5,620
Adjusted NOI	$	223,057		$	214,707		$	8,350		249,561			306,004			(56,443		)
Non-SPP adjusted NOI										(26,504		)	(91,297		)	64,793
SPP adjusted NOI										$	223,057		$	214,707		$	8,350
Adjusted NOI % change							3.9		%
Property count(2)	196			196						204			292
Average capacity (units)(3)	19,643			19,655						22,409			28,863
Average annual rent per unit	$	15,173		$	14,598					$	15,023		$	14,391

_______________________________________

(1) Represents rental and related revenues and income from DFLs.

(2) From our 2016 presentation of SPP, we removed 73 senior housing properties from SPP that were sold, three senior housing properties that were classified as held for sale, and 15 senior housing properties that we transitioned to SHOP.

(3) Represents average capacity as reported by the respective tenants or operators for the 12-month period and a quarter in arrears from the periods presented.

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SPP Adjusted NOI increased primarily as a result of the following:

• annual rent escalations; and

• higher cash rent received from our portfolio of assets leased to Sunrise Senior Living.

Total Portfolio NOI and Adjusted NOI decreased primarily as a result of the following Non-SPP impacts:

• senior housing triple-net facilities sold during 2016 and 2017; and

• the transfer of 21 senior housing triple-net facilities to our SHOP segment, of which 18 were transitioned to a RIDEA structure during the fourth quarter of 2016 and year-to-date 2017.

The decrease to Total Portfolio NOI and Adjusted NOI is partially offset by (i) increased non-SPP income from five senior housing triple-net facilities acquired in the first quarter of 2016 and (ii) the aforementioned increases to SPP.

Senior Housing Operating Portfolio

The following table summarizes results at and for the three months ended September 30, 2017 and 2016 (dollars in thousands, except per unit data):

	SPP									Total Portfolio
	Three Months Ended September 30,									Three Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	89,386		$	89,274		$	112		$	126,040		$	170,739		$	(44,699	)
HCP share of unconsolidated JV revenues	77,932			75,534			2,398			81,936			50,973			30,963
Operating expenses	(57,058		)	(57,796		)	738			(86,821		)	(121,502		)	34,681
HCP share of unconsolidated JV operating expenses	(64,688		)	(63,132		)	(1,556		)	(65,035		)	(42,463		)	(22,572		)
NOI	45,572			43,880			1,692			56,120			57,747			(1,627		)
Adjustments to NOI	200			(406		)	606			4,551			4,081			470
Adjusted NOI	$	45,772		$	43,474		$	2,298		60,671			61,828			(1,157		)
Non-SPP adjusted NOI										(14,899		)	(18,354		)	3,455
SPP adjusted NOI										$	45,772		$	43,474		$	2,298
Adjusted NOI % change							5.3		%
Property count(2)	122			122						158			145
Average capacity (units)(3)	22,105			16,761						25,678			23,575
Average annual rent per unit	$	50,847		$	49,678					$	52,667		$	56,895

_______________________________________

(1) Represents resident fees and services.

(2) From our past presentation of SPP, we have recast the components of SPP to reflect our retained 40% equity interest in RIDEA II within HCP share of unconsolidated JV revenues and operating expenses resulting from our deconsolidation of RIDEA II during the first quarter of 2017. Our 2016 total portfolio property count has been adjusted to include two properties classified as held for sale as of September 30, 2016.

(3) Represents average capacity as reported by the respective tenants or operators for the 12-month period and a quarter in arrears from the periods presented.

SPP NOI and Adjusted NOI increased primarily as a result of the following:

• increased rates for resident fees and service and lower expense growth; partially offset by

• occupancy declines.

Total Portfolio NOI and Adjusted NOI decreased primarily as a result of the following:

• decreased non-SPP income from our partial sale of RIDEA II; partially offset by

• non-SPP income for 21 senior housing triple-net assets transferred to SHOP during the fourth quarter of 2016 and year-to-date 2017; and

• the aforementioned increases to SPP.

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The following table summarizes results at and for the nine months ended September 30, 2017 and 2016 (dollars in thousands, except per unit data):

	SPP									Total Portfolio
	Nine Months Ended September 30,									Nine Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	271,301		$	268,663		$	2,638		$	391,684		$	500,704		$	(109,020	)
HCP share of unconsolidated JV revenues	231,604			225,093			6,511			239,667			152,424			87,243
Operating expenses	(172,414		)	(170,467		)	(1,947		)	(267,226		)	(350,949		)	83,723
HCP share of unconsolidated JV operating expenses	(190,843		)	(185,368		)	(5,475		)	(190,049		)	(125,244		)	(64,805		)
NOI	139,648			137,921			1,727			174,076			176,935			(2,859		)
Adjustments to NOI	3			(1,693		)	1,696			12,229			14,648			(2,419		)
Adjusted NOI	$	139,651		$	136,228		$	3,423		186,305			191,583			(5,278		)
Non-SPP adjusted NOI										(46,654		)	(55,355		)	8,701
SPP adjusted NOI										$	139,651		$	136,228		$	3,423
Adjusted NOI % change							2.5		%
Property count(2)	121			121						158			145
Average capacity (units)(3)	21,643			16,631						25,683			23,447
Average annual rent per unit	$	51,620		$	49,519					$	53,385		$	55,632

_______________________________________

(1) Represents rental and related revenues.

(2) From our past presentation of SPP, we have recast the components of SPP to reflect our retained 40% equity interest in RIDEA II within HCP share of unconsolidated JV revenues and operating expenses resulting from our deconsolidation of RIDEA II during the first quarter of 2017. Our 2016 total portfolio property count has been adjusted to include two properties classified as held for sale as of September 30, 2016.

(3) Represents average capacity as reported by the respective tenants or operators for the 12-month period and a quarter in arrears from the periods presented.

SPP NOI and Adjusted NOI increased primarily as a result of the following:

• increased rates for resident fees and services; partially offset by

• higher expense growth and a decline in occupancy.

Total Portfolio NOI and Adjusted NOI decreased primarily as a result of the following:

• decreased non-SPP income from our partial sale of RIDEA II; partially offset by

• non-SPP income for 21 senior housing triple-net assets transferred to SHOP during the fourth quarter of 2016 and year-to-date 2017; and

• the aforementioned increases to SPP.

48

Life Science

The following table summarizes results at and for the three months ended September 30, 2017 and 2016 (dollars and square feet in thousands, except per square foot data):

	SPP									Total Portfolio
	Three Months Ended September 30,									Three Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	76,259		$	73,515		$	2,744		$	90,174		$	90,847		$	(673	)
HCP share of unconsolidated JV revenues	2,002			1,904			98			2,031			1,929			102
Operating expenses	(16,453		)	(14,970		)	(1,483		)	(19,960		)	(18,487		)	(1,473		)
HCP share of unconsolidated JV operating expenses	(433		)	(406		)	(27		)	(433		)	(406		)	(27		)
NOI	61,375			60,043			1,332			71,812			73,883			(2,071		)
Adjustments to NOI	1,545			453			1,092			(751		)	(314		)	(437		)
Adjusted NOI	$	62,920		$	60,496		$	2,424		71,061			73,569			(2,508		)
Non-SPP adjusted NOI										(8,141		)	(13,073		)	4,932
SPP adjusted NOI										$	62,920		$	60,496		$	2,424
Adjusted NOI % change							4.0		%
Property count(2)	112			112						131			133
Average occupancy	96.6		%	97.6		%				96.9		%	96.8		%
Average occupied square feet	6,395			6,457						7,143			7,675
Average annual total revenues per occupied square foot	$	51		$	48					$	52		$	48
Average annual base rent per occupied square foot	$	41		$	39					$	43		$	40

_______________________________________

(1) Represents rental and related revenues and tenant recoveries.

(2) From our past presentation of SPP for the three months ended September 30, 2016, we removed four life science facilities that were classified as held for sale and a facility that was sold. Our 2016 total portfolio property count has been adjusted to include seven properties in development and eight properties classified as held for sale as of September 30, 2016.

SPP NOI and adjusted NOI increased primarily as a result of the following:

• new leasing activity; and

• specific to adjusted NOI, annual rent escalations.

Total Portfolio NOI and adjusted NOI decreased primarily as a result of the following impacts to Non-SPP:

• decreased income from the sale of life science facilities in 2016 and 2017; partially offset by

• increased income from (i) increased occupancy in portions of a development placed in operations in 2016 and 2017 and (ii) life science acquisitions in 2016 and 2017.

The decrease in Total Portfolio NOI and adjusted NOI was also partially offset by the aforementioned increases to SPP. 

49

The following table summarizes results at and for the nine months ended September 30, 2017 and 2016 (dollars and square feet in thousands, except per square foot data):

	SPP									Total Portfolio
	Nine Months Ended September 30,									Nine Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	226,803		$	217,906		$	8,897		$	262,224		$	269,994		$	(7,770	)
HCP share of unconsolidated JV revenues	5,890			5,569			321			5,975			5,628			347
Operating expenses	(46,770		)	(42,890		)	(3,880		)	(56,024		)	(53,191		)	(2,833		)
HCP share of unconsolidated JV operating expenses	(1,234		)	(1,180		)	(54		)	(1,234		)	(1,173		)	(61		)
NOI	184,689			179,405			5,284			210,941			221,258			(10,317		)
Adjustments to NOI	3,055			890			2,165			(1,094		)	(1,545		)	451
Adjusted NOI	$	187,744		$	180,295		$	7,449		209,847			219,713			(9,866		)
Non-SPP adjusted NOI										(22,103		)	(39,418		)	17,315
SPP adjusted NOI										$	187,744		$	180,295		$	7,449
Adjusted NOI % change							4.1		%
Property count(2)	112			112						131			133
Average occupancy	96.6		%	97.8		%				96.5		%	97.6		%
Average occupied square feet	6,391			6,466						7,032			7,651
Average annual total revenues per occupied square foot	$	50		$	47					$	52		$	48
Average annual base rent per occupied square foot	$	41		$	38					$	43		$	39

_______________________________________

(1) Represents rental and related revenues and tenant recoveries.

(2) From our past presentation of SPP for the nine months ended September 30, 2016, we removed four life science facilities that were classified as held for sale and a facility that was sold. Our 2016 total portfolio property count has been adjusted to include seven properties in development and eight properties classified as held for sale as of September 30, 2016.

SPP NOI and Adjusted NOI increased primarily as a result of the following:

• mark-to-market lease renewals;

• new leasing activity; and

• specific to adjusted NOI, annual rent escalations.

Total Portfolio NOI and Adjusted NOI decreased primarily as a result of the following impacts to Non-SPP:

• decreased income from the sale of life science facilities in 2016 and 2017; partially offset by

• increased income from (i) increased occupancy in portions of a development placed in operations in 2016 and 2017 and (ii) life science acquisitions in 2016 and 2017.

The decrease in Total Portfolio NOI and Adjusted NOI was also partially offset by the aforementioned increases to SPP. 

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Medical Office

The following table summarizes results at and for the three months ended September 30, 2017 and 2016 (dollars and square feet in thousands, except per square foot data):

	SPP									Total Portfolio
	Three Months Ended September 30,									Three Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	101,804		$	100,211		$	1,593		$	119,847		$	113,653		$	6,194
HCP share of unconsolidated JV revenues	474			469			5			496			502			(6		)
Operating expenses	(38,587		)	(37,926		)	(661		)	(46,486		)	(44,738		)	(1,748		)
HCP share of unconsolidated JV operating expenses	(143		)	(147		)	4			(143		)	(148		)	5
NOI	63,548			62,607			941			73,714			69,269			4,445
Adjustments to NOI	650			4			646			(582		)	(814		)	232
Adjusted NOI	$	64,198		$	62,611		$	1,587		73,132			68,455			4,677
Non-SPP adjusted NOI										(8,934		)	(5,844		)	(3,090		)
SPP adjusted NOI										$	64,198		$	62,611		$	1,587
Adjusted NOI % change							2.5		%
Property count(2)	214			214						245			230
Average occupancy	91.7		%	92.1		%				91.8		%	91.6		%
Average occupied square feet	14,357			14,509						16,707			15,817
Average annual total revenues per occupied square foot	$	29		$	28					$	29		$	29
Average annual base rent per occupied square foot	$	24		$	23					$	24		$	24

_______________________________________

(1) Represents rental and related revenues and tenant recoveries.

(2) From our past presentation of SPP, we removed a MOB that was sold and four MOBs that were placed into redevelopment. Our 2016 property count has been adjusted to include four properties in development as of September 30, 2016.

SPP NOI and adjusted NOI increased primarily as a result of mark-to-market lease renewals and new leasing activity. Additionally, SPP adjusted NOI increased as a result of annual rent escalations.

Total Portfolio NOI and adjusted NOI increased primarily as a result of the aforementioned increases to SPP and the following impacts to Non-SPP:

• increased income from our 2016 and 2017 acquisitions; and

• increased occupancy in former redevelopment and development properties that have been placed into operations; partially offset by

• decreased income from the sale of four MOBs during 2016 and 2017 and the placement of a MOB into redevelopment.

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The following table summarizes results at and for the nine months ended September 30, 2017 and 2016 (dollars and square feet in thousands, except per square foot data):

	SPP									Total Portfolio
	Nine Months Ended September 30,									Nine Months Ended September 30,
	2017			2016			Change			2017			2016			Change
Rental revenues(1)	$	299,808		$	293,138		$	6,670		$	357,381		$	331,881		$	25,500
HCP share of unconsolidated JV revenues	1,414			1,406			8			1,481			1,503			(22		)
Operating expenses	(112,491		)	(109,929		)	(2,562		)	(137,930		)	(129,715		)	(8,215		)
HCP share of unconsolidated JV operating expenses	(431		)	(452		)	21			(431		)	(452		)	21
NOI	188,300			184,163			4,137			220,501			203,217			17,284
Adjustments to NOI	1,652			(175		)	1,827			(2,321		)	(2,361		)	40
Adjusted NOI	$	189,952		$	183,988		$	5,964		218,180			200,856			17,324
Non-SPP adjusted NOI										(28,228		)	(16,868		)	(11,360		)
SPP adjusted NOI										$	189,952		$	183,988		$	5,964
Adjusted NOI % change							3.2		%
Property count(2)	213			213						245			230
Average occupancy	91.9		%	92.1		%				91.9		%	91.4		%
Average occupied square feet	14,358			14,410						16,767			15,719
Average annual total revenues per occupied square foot	$	28		$	27					$	28		$	28
Average annual base rent per occupied square foot	$	24		$	23					$	24		$	23

_______________________________________

(1) Represents rental and related revenues and tenant recoveries.

(2) From our past presentation of SPP, we removed a MOB that was sold and four MOBs that were placed into redevelopment. Our 2016 property count has been adjusted to include four properties in development as of September 30, 2016.

SPP NOI and Adjusted NOI increased primarily as a result of mark-to-market lease renewals and new leasing activity. Additionally, SPP Adjusted NOI increased as a result of annual rent escalations.

Total Portfolio NOI and Adjusted NOI increased primarily as a result of the aforementioned increases to SPP and the following impacts to Non-SPP:

• increased income from our 2016 and 2017 acquisitions; and

• increased occupancy in former redevelopment and development properties that have been placed into operations; partially offset by

• decreased income from the sale of four MOBs during 2016 and 2017 and the placement of a MOB into redevelopment.

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Other Income and Expense Items

The following table summarizes the results of our other income and expense items for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,									Nine months ended September 30,
	2017			2016			Change			2017			2016			Change
Interest income	$	11,774		$	20,482		$	(8,708	)	$	50,974		$	71,298		$	(20,324	)
Interest expense	71,328			117,860			(46,532		)	235,834			361,255			(125,421		)
Depreciation and amortization	130,588			141,407			(10,819		)	397,893			421,181			(23,288		)
General and administrative	23,523			34,781			(11,258		)	67,287			83,011			(15,724		)
Acquisition and pursuit costs	580			2,763			(2,183		)	2,504			6,061			(3,557		)
Impairments (recoveries), net	25,328			—			25,328			82,010			—			82,010
Gain (loss) on sales of real estate, net	5,182			(9		)	5,191			322,852			119,605			203,247
Loss on debt extinguishments	(54,227		)	—			(54,227		)	(54,227		)	—			(54,227		)
Other income (expense), net	(10,556		)	1,432			(11,988		)	40,723			5,064			35,659
Income tax benefit (expense)	5,481			424			5,057			14,630			(1,101		)	15,731
Equity income (loss) from unconsolidated joint ventures	1,062			(2,053		)	3,115			4,571			(4,028		)	8,599
Total discontinued operations	—			108,213			(108,213		)	—			283,996			(283,996		)
Noncontrolling interests’ share in earnings	(1,937		)	(2,789		)	852			(7,687		)	(9,540		)	1,853

Interest income

Interest income decreased for the three months ended September 30, 2017 as a result of the payoff of: (i) our HC-One Facility in June 2017 and (ii) a participating development loan during the third quarter of 2016.

Interest income decreased for the nine months ended September 30, 2017 as a result of (i) the payoff of our HC-One Facility in June 2017 and (ii) incremental interest income received during the second quarter of 2016 due to the payoff of three participating development loans.

Interest expense

Interest expense decreased for the three and nine months ended September 30, 2017 as a result of senior unsecured notes and mortgage debt repayments, which occurred primarily in the second half of 2016 and third quarter of 2017.

Approximately 89% and 86% of our total debt, inclusive of $44 million and $356 million of variable rate debt swapped to fixed through interest rate swaps, was fixed rate debt as of September 30, 2017 and 2016, respectively. At September 30, 2017, our fixed rate debt and variable rate debt had weighted average interest rates of 4.19% and 2.17%, respectively. At September 30, 2016, our fixed rate debt and variable rate debt had weighted average interest rates of 4.65% and 1.84%, respectively. For a more detailed discussion of our interest rate risk, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 3 below.

Depreciation and amortization expense

Depreciation and amortization expense decreased for the three and nine months ended September 30, 2017 primarily as a result of the sale of 64 senior housing triple-net assets and the deconsolidation of RIDEA II during the first quarter of 2017, partially offset by depreciation and amortization of assets acquired during 2016 and year-to-date 2017.

General and administrative expenses

General and administrative expenses decreased for the three and nine months ended September 30, 2017 primarily as a result of severance and related charges primarily resulting from the departure of our former President and Chief Executive Officer in the third quarter of 2016 compared to severance and related charges primarily related to the departure of our former Executive Vice President and Chief Accounting Officer in the third quarter of 2017.

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Impairments (recoveries), net

We recognized $23 million of impairments on 11 underperforming senior housing triple-net facilities and a $3 million impairment on our Tandem Mezzanine Loan for the three months ended September 30, 2017. During the nine months ended September 30, 2017, we recognized $59 million of impairments on our Tandem Mezzanine Loan and the aforementioned senior housing triple-net facility impairments. For the three and nine months ended September 30, 2016, there were no impairments recognized.

See Notes 3 and 6 to the Consolidated Financial Statements for further information related to our real estate impairments and Tandem Mezzanine Loan, respectively.

Gain (loss) on sales of real estate, net

During the nine months ended September 30, 2017 (primarily in the first quarter of 2017), we sold 66 senior housing triple-net assets, five life science facilities, a SHOP facility, a MOB and a 40% interest in RIDEA II and recognized total net gain on sales of real estate of $323 million. During the nine months ended September 30, 2016, we sold a portfolio of five facilities in one of our non-reportable segments and two senior housing triple-net facilities, a life science facility, three MOBs and a SHOP facility and recognized total gain on sales of $120 million.

Loss on debt extinguishments

During the three and nine months ended September 30, 2017, we repurchased $500 million of our 5.375% senior notes due 2021 and recognized a $54 million loss on debt extinguishment, primarily related to a premium for early payment.

Other income (expense), net

Other income (expense), net, decreased for the three months ended September 30, 2017 primarily as a result of $10 million of casualty-related charges due to hurricanes in the third quarter of 2017. Other income, net, increased for the nine months ended September 30, 2017 primarily as a result of the £42 million ($51 million) gain on sale of our Four Seasons Notes, partially offset by the aforementioned casualty-related charges in the third quarter of 2017.

Income tax benefit (expense)

The increase in income tax benefit for the three months ended September 30, 2017 was primarily the result of (i) a $2 million deferred tax benefit from the casualty-related charges recognized in the third quarter of 2017 and (ii) a $2 million income tax expense associated with state built-in gain tax for the disposition of certain real estate assets during 2016. The increase in income tax benefit for the nine months ended September 30, 2017 was primarily the result of: (i) a $6 million income tax expense associated with state built-in gain tax for the disposition of certain real estate assets during 2016, (ii) a $5 million tax benefit from the sale of a 40% interest in RIDEA II in 2017 and (iii) a $2 million deferred tax benefit from the casualty-related charges recognized in the third quarter of 2017.

Equity income (loss) from unconsolidated joint ventures

The increase in equity income from unconsolidated joint ventures for the three and nine months ended September 30, 2017 was primarily the result of income from our investment in RIDEA II which was deconsolidated in the first quarter of 2017.

Total discontinued operations

For the three and nine months ended September 30, 2017, there were no discontinued operations. Discontinued operations for the three and nine months ended September 30, 2016 relate to income from the operations of QCP.

Liquidity and Capital Resources

We anticipate that our cash flow from operations, available cash balances and cash from our various financing activities will be adequate for at least the next 12 months for purposes of: (i) funding recurring operating expenses; (ii) meeting debt service requirements, including principal payments and maturities; and (iii) satisfying our distributions to our stockholders and non-controlling interest members.  

Our principal investing needs for the next 12 months are to:

• fund capital expenditures, including tenant improvements and leasing costs; and

• fund future acquisition, transactional and development activities.

We anticipate satisfying these future investing needs using one or more of the following:

• issuance of common or preferred stock;

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• issuance of additional debt, including unsecured notes and mortgage debt;

• draws on our credit facilities; and/or

• sale or exchange of ownership interests in properties.

Access to capital markets impacts our cost of capital and ability to refinance maturing indebtedness, as well as our ability to fund future acquisitions and development through the issuance of additional securities or secured debt. Credit ratings impact our ability to access capital and directly impact our cost of capital as well. For example, our revolving line of credit facility accrues interest at a rate per annum equal to LIBOR plus a margin that depends upon our credit ratings. We also pay a facility fee on the entire revolving commitment that depends upon our credit ratings. At October 27, 2017, we had a credit rating of BBB from Fitch, Baa2 from Moody’s and BBB from S&P Global on our senior unsecured debt securities.

Cash Flow Summary

The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Cash and cash equivalents were $134 million and $95 million at September 30, 2017 and December 31, 2016, respectively, representing an increase of $39 million. The following table sets forth changes in cash flows (in thousands):

	Nine Months Ended September 30,
	2017			2016			Change
Net cash provided by (used in) operating activities	$	637,896		$	998,632		$	(360,736	)
Net cash provided by (used in) investing activities	1,755,823			(314,159		)	2,069,982
Net cash provided by (used in) financing activities	(2,354,963		)	(897,328		)	(1,457,635		)

The decrease in operating cash flow is primarily the result of (i) decreased Adjusted NOI related to the QCP Spin-Off and dispositions in the fourth quarter of 2016 and first three quarters of 2017 and (ii) decreased interest received as a result of loan repayments during 2017; partially offset by (i) 2016 acquisitions, (ii) annual rent increases, and (iii) decreased interest paid as a result of lower balances on our senior unsecured notes, term loans and line of credit. Our cash flow from operations is dependent upon the occupancy levels of our buildings, rental rates on leases, our tenants’ performance on their lease obligations, the level of operating expenses and other factors.

The following are significant investing and financing activities for the nine months ended September 30, 2017:

• received net proceeds of $1.7 billion from the sale of real estate, including the sale and recapitalization of RIDEA II;

• received net proceeds of $550 million primarily from the sale of our Four Seasons investments, the repayment of our HC-One Facility, and a DFL repayment;

• made investments of $527 million primarily for the development of real estate;

• repaid $1.8 billion, net under our bank line of credit, 2012 Term Loan, 2015 Term Loan, senior unsecured notes and mortgage debt; and

• paid dividends on common stock of $521 million.

Debt

See Note 10 in the Consolidated Financial Statements for information about our outstanding debt.

See “2017 Transaction Overview” for further information regarding our significant financing activities through October 31, 2017.

Equity

At September 30, 2017, we had 469 million shares of common stock outstanding, equity totaled $5.9 billion, and our equity securities had a market value of $13.2 billion.

At September 30, 2017, non-managing members held an aggregate of 4 million units in five limited liability companies (“DownREITs”) for which we are the managing member. The DownREIT units are exchangeable for an amount of cash

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approximating the then-current market value of shares of our common stock or, at our option, shares of our common stock (subject to certain adjustments, such as stock splits and reclassifications). At September 30, 2017, the DownREIT units were convertible into 7 million shares of our common stock.

At-The-Market Program

In June 2015, we established an at-the-market program, in connection with the renewal of our shelf registration statement. Under this program, we may sell shares of our common stock from time to time having an aggregate gross sales price of up to $750 million through a consortium of banks acting as sales agents or directly to the banks acting as principals. There was no activity during the nine months ended September 30, 2017 and, at September 30, 2017, shares of our common stock having an aggregate gross sales price of $676 million were available for sale under the at-the-market program. Actual future sales will depend upon a variety of factors, including but not limited to market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under our program.

Shelf Registration

We filed a prospectus with the SEC as part of a registration statement on Form S-3ASR, using a shelf registration process. Our current shelf registration statement expires in June 2018, at which time we expect to file a new shelf registration statement. Under the “shelf” process, we may sell any combination of the securities described in the prospectus through one or more offerings. The securities described in the prospectus include common stock, preferred stock, depositary shares, debt securities and warrants.

Off-Balance Sheet Arrangements

We own interests in certain unconsolidated joint ventures as described in Note 7 to the Consolidated Financial Statements. Except in limited circumstances, our risk of loss is limited to our investment in the joint venture and any outstanding loans receivable. In addition, we have certain properties which serve as collateral for debt that is owed by a previous owner of certain of our facilities. Our risk of loss for these certain properties is limited to the outstanding debt balance plus penalties, if any. We have no other material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources except for commitments and operating leases included in our Annual Report on Form 10-K for the year ended December 31, 2016 in “Contractual Obligations” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Non-GAAP Financial Measures Reconciliations

The following is a reconciliation from net income (loss) applicable to common shares, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO, FFO as adjusted and FAD (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss) applicable to common shares	$	(7,788	)	$	150,924		$	472,311		$	568,109
Real estate related depreciation and amortization	130,588			142,874			397,893			425,582
Real estate related depreciation and amortization on unconsolidated joint ventures	16,358			12,607			47,711			36,347
Real estate related depreciation and amortization on noncontrolling interests and other	(3,678		)	(5,270		)	(11,711		)	(15,708		)
Other depreciation and amortization(1)	2,360			2,986			7,718			8,922
Loss (gain) on sales of real estate, net	(5,182		)	9			(322,852		)	(119,605		)
Loss (gain) on sales of real estate, net on unconsolidated joint ventures	—			—			—			(215		)
Loss (gain) on sales of real estate, net on noncontrolling interests	—			—			—			(2		)
Taxes associated with real estate dispositions(2)	—			257			(5,498		)	53,434
Impairments (recoveries) of real estate, net(3)	22,590			—			22,590			—
FFO applicable to common shares	$	155,248		$	304,387		$	608,162		$	956,864
Distributions on dilutive convertible units and other	—			2,376			5,250			10,622
Diluted FFO applicable to common shares	$	155,248		$	306,763		$	613,412		$	967,486
Weighted average shares used to calculate diluted FFO per common share	469,156			471,994			473,519			473,011
Impact of adjustments to FFO:
Transaction-related items(4)	$	580		$	17,568		$	2,476		$	34,570
Other impairments (recoveries), net(5)	2,738			—			8,526			—
Severance and related charges(6)	3,889			14,464			3,889			14,464
Loss on debt extinguishment(7)	54,227			—			54,227			—
Litigation costs	2,303			—			7,507			—
Casualty-related charges (recoveries), net(8)	8,925			—			8,925			—
Foreign currency remeasurement losses (gains)	(141		)	94			(986		)	268
	$	72,521		$	32,126		$	84,564		$	49,302
FFO as adjusted applicable to common shares	$	227,769		$	336,513		$	692,726		$	1,006,166
Distributions on dilutive convertible units and other	1,493			3,467			5,095			10,549
Diluted FFO as adjusted applicable to common shares	$	229,262		$	339,980		$	697,821		$	1,016,715
Weighted average shares used to calculate diluted FFO as adjusted per common share	473,836			473,692			473,519			473,011

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
FFO as adjusted applicable to common shares	$	227,769		$	336,513		$	692,726		$	1,006,166
Amortization of deferred compensation(9)	3,237			3,389			10,329			12,894
Amortization of deferred financing costs	3,439			5,037			11,141			15,598
Straight-line rents	(4,060		)	(3,295		)	(12,236		)	(14,412		)
Other depreciation and amortization	(2,360		)	(2,986		)	(7,718		)	(8,921		)
Leasing costs, tenant improvements, and recurring capital expenditures(10)	(28,783		)	(23,822		)	(79,903		)	(66,176		)
Lease restructure payments	311			1,868			1,165			14,480
CCRC entrance fees(11)	6,074			4,975			14,436			16,524
Deferred income taxes(12)	(3,807		)	(3,431		)	(10,523		)	(8,977		)
Other FAD adjustments	587			(708		)	1,692			(2,739		)
FAD applicable to common shares	$	202,407		$	317,540		$	621,109		$	964,437
Distributions on dilutive convertible units and other	1,596			3,513			5,250			10,622
Diluted FAD applicable to common shares	$	204,003		$	321,053		$	626,359		$	975,059

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Diluted earnings per common share	(0.02		)	0.32		1.01			1.22
Depreciation and amortization	0.31			0.33		0.93			0.97
Loss (gain) on sales of real estate, net	(0.01		)	—		(0.68		)	(0.25		)
Taxes associated with real estate dispositions(2)	—			—		(0.01		)	0.11
Impairments (recoveries) of real estate, net(3)	0.05			—		0.05			—
Diluted FFO per common shares	$	0.33		$	0.65	$	1.30		$	2.05
Transaction-related items(4)	—			0.04		—			0.07
Other impairments (recoveries), net(5)	0.01			—		0.02			—
Severance and related charges(6)	0.01			0.03		0.01			0.03
Loss on debt extinguishment(7)	0.11			—		0.11			—
Litigation costs	—			—		0.01			—
Casualty-related charges (recoveries), net(8)	0.02			—		0.02			—
Diluted FFO as adjusted per common shares	$	0.48		$	0.72	$	1.47		$	2.15

_______________________________________

(1) Other depreciation and amortization includes DFL depreciation and lease incentive amortization (reduction of straight-line rents) for the consideration given to terminate the 30 purchase options on the 153-property amended lease portfolio in the 2014 Brookdale transaction.

(2) For the nine months ended September 30, 2017, represents income tax benefit associated with the disposition of real estate assets in our RIDEA II transaction. For the nine months ended September 30, 2016, represents income tax expense associated with the state built-in gain tax payable upon the disposition of specific real estate assets, of which $49 million relates to the HCRMC real estate portfolio.

(3) Represents impairments on 11 senior housing triple-net facilities.

(4) On January 1, 2017, we early adopted the Financial Accounting Standards Board Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which prospectively results in recognizing the majority of our real estate acquisitions as asset acquisitions rather than business combinations. Acquisition and pursuit costs relating to completed asset acquisitions are capitalized, including those costs incurred prior to January 1, 2017. Real estate acquisitions completed prior to January 1, 2017 were deemed business combinations and the related acquisition and pursuit costs were expensed as incurred. For the three and nine months ended September 30, 2016, primarily relates to the QCP spin-off.

(5) For the three months ended September 30, 2017, relates to the impairment of our Tandem Mezzanine Loan. For the nine months ended September 30, 2017, relates to the impairments of our Tandem Mezzanine Loan, net of the impairment recovery upon the sale of our Four Seasons Notes in the first quarter of 2017.

(6) For the three months ended September 30, 2017, primarily relates to the departure of our former Executive Vice President and Chief Accounting Officer. For the three months ended September 30, 2016, primarily relates to the departure of our former President and Chief Executive Officer.

(7) Represents the premium associated with the prepayment of $500 million of senior unsecured notes.

(8) Includes $11 million of casualty-related charges and a $2 million deferred income tax benefit.

(9) Excludes $0.5 million related to the acceleration of deferred compensation for restricted stock units that vested upon the departure of our former Executive Vice President and Chief Accounting Officer, which is included in the severance and related charges for the three and nine months ended September 30, 2017. Excludes $6 million related to the acceleration of deferred compensation for restricted stock units and stock options that vested upon the departure of our former President and Chief Executive Officer, which is included in severance and related charges for the three and nine months ended September 30, 2016.

(10) Includes our share of leasing costs and tenant and capital improvements from unconsolidated joint ventures.

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(11) Represents our 49% share of non-refundable entrance fees as the fees are collected by our CCRC JV, net of reserves and CCRC JV entrance fee amortization.

(12) Excludes $2 million of deferred tax benefit from the casualty-related charges, which is included in casualty-related charges (recoveries), net for the three and nine months ended September 30, 2017.

For a reconciliation of NOI and Adjusted NOI to net income (loss), refer to Note 13 to the Consolidated Financial Statements. For a reconciliation of SPP NOI and Adjusted NOI to total portfolio NOI and Adjusted NOI by segment, refer to the analysis of each segment in “Results of Operations” above.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our consolidated financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2016 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to the Consolidated Financial Statements. There have been no significant changes to our critical accounting policies during 2017.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements for the impact of new accounting standards.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign currency exchange rates, specifically the GBP. We use derivative financial instruments in the normal course of business to mitigate interest rate and foreign currency risk. We do not use derivative financial instruments for speculative or trading purposes. Derivatives are recorded on the consolidated balance sheets at fair value (see Note 19 to the Consolidated Financial Statements).

To illustrate the effect of movements in the interest rate and foreign currency markets, we performed a market sensitivity analysis on our hedging instruments. We applied various basis point spreads to the underlying interest rate curves and foreign currency exchange rates of the derivative portfolio in order to determine the change in fair value. Assuming a one percentage point change in the underlying interest rate curve, the estimated change in fair value of each of the underlying derivative instruments would not exceed $2 million. Assuming a one percentage point change in the underlying foreign currency exchange rates, the estimated change in fair value of each of the underlying derivative instruments would not exceed $2 million.

Interest Rate Risk.  At September 30, 2017, our exposure to interest rate risk is primarily on our variable rate debt. At September 30, 2017, $44 million of our variable-rate debt was hedged by interest rate swap transactions. The interest rate swaps are designated as cash flow hedges, with the objective of managing the exposure to interest rate risk by converting the interest rates on our variable-rate debt to fixed interest rates.

Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and assets until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs. However, interest rate changes will affect the fair value of our fixed rate instruments. A one percentage point increase in interest rates would change the fair value of our fixed rate debt and investments by approximately $255 million and $0.8 million, respectively, and would not materially impact earnings or cash flows. Conversely, changes in interest rates on variable rate debt and investments would change our future earnings and cash flows, but not materially impact the fair value of those instruments. Assuming a one percentage point increase in the interest rate related to the variable-rate debt and variable-rate investments, and assuming no other changes in the outstanding balance at September 30, 2017, our annual interest expense and interest income would increase by approximately $9 million and $1 million, respectively.

Foreign Currency Risk.  At September 30, 2017, our exposure to foreign currencies primarily relates to U.K. investments in leased real estate, loans receivables and related GBP denominated cash flows. Our foreign currency exposure is partially mitigated through the use of GBP-denominated borrowings and a foreign currency swap contract. Based solely on our operating results for the three

59

months ended September 30, 2017, including the impact of existing hedging arrangements, if the value of the GBP relative to the U.S. dollar were to increase or decrease by 10% compared to the average exchange rate during the quarter ended September 30, 2017, our cash flows would have decreased or increased, as applicable, by less than $1 million.

Market Risk.  We have investments in marketable debt securities classified as held-to-maturity because we have the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are recorded at amortized cost and adjusted for the amortization of premiums and discounts through maturity. We consider a variety of factors in evaluating an other-than-temporary decline in value, such as: the length of time and the extent to which the market value has been less than our current adjusted carrying value; the issuer’s financial condition, capital strength and near-term prospects; any recent events specific to that issuer and economic conditions of its industry; and our investment horizon in relationship to an anticipated near-term recovery in the market value, if any. At September 30, 2017, both the fair value and carrying value of marketable debt securities was $19 million.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures.  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017. Based upon that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2017.

Changes in Internal Control Over Financial Reporting.  There were no changes in our internal control over financial reporting (as such term as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See the “Legal Proceedings” section of Note 11 to the consolidated financial statements for information regarding legal proceedings, which information is incorporated by reference in this Item 1.

Item 1A.  Risk Factors

There are no material changes to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as updated by Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None.

(b)

None.

(c)

The following table sets forth information with respect to purchases of our common stock made by us or on our behalf or by any “affiliated purchaser,” as such term is defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended September 30, 2017.

Period Covered	Total Number Of Shares Purchased(1)	Average Price Paid Per Share		Total Number Of Shares (Or Units) Purchased As Part Of Publicly Announced Plans Or Programs	Maximum Number (Or Approximate Dollar Value) Of Shares (Or Units) That May Yet Be Purchased Under The Plans Or Programs
July 1-31, 2017	2,807	$	31.94	—	—
August 1-31, 2017	181	31.00		—	—
September 1-30, 2017	100	29.47		—	—
Total	3,088	31.80		—	—

_______________________________________

(1) Represents shares of our common stock withheld under our equity incentive plans to offset tax withholding obligations that occur upon vesting of restricted shares and restricted stock units. The value of the shares withheld is based on the closing price of our common stock on the last trading day prior to the date the relevant transaction occurs.

Item 5. Other Information

(a)

None.

(b)

None.

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Item 6. Exhibits

2.1	Separation and Distribution Agreement, dated October 31, 2016, by and between HCP and Quality Care Properties, Inc. (incorporated herein by reference to Exhibit 2.1 to HCP’s Current Report on Form 8-K (File No. 001-08895) filed October 31, 2016)
3.1	Articles of Restatement of HCP, dated June 1, 2012, as supplemented by the Articles Supplementary, dated July 31, 2017.*
3.2	Fifth Amended and Restated Bylaws of HCP, as amended through July 27, 2017.*
31.1	Certification by Thomas M. Herzog, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(a).*
31.2	Certification by Peter A. Scott, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(a).*
32.1	Certification by Thomas M. Herzog, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.**
32.2	Certification by Peter A. Scott, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.**
101.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema Document.*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.*

_______________________________________

*       Filed herewith.

**     Furnished herewith. 

62

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 2, 2017	HCP, Inc.
	(Registrant)
	/s/ THOMAS M. HERZOG
	Thomas M. Herzog
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ PETER A. SCOTT
	Peter A. Scott
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)
	/s/ SHAWN G. JOHNSTON
	Shawn G. Johnston
	Senior Vice President and
	Chief Accounting Officer
	(Principal Accounting Officer)

63

EX-3.1

HCP, INC.

ARTICLES OF RESTATEMENT

HCP, INC., a Maryland corporation (the “Corporation”), having its principal office in the State of Maryland at ℅ CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202 hereby certifies to the State Department of Assessments and Taxation of Maryland (the “Department”) that:

FIRST:    The Corporation desires to and does hereby restate in its entirety the charter of the Corporation (the “Charter”) as currently in effect pursuant to Section 2-608 of the Maryland General Corporation Law (the “MGCL”).

SECOND:    The following provisions are all the provisions of the Charter currently in effect, as restated herein:

ARTICLE I

NAME

The name of this corporation shall be HCP, INC.

ARTICLE II

PURPOSES

The purpose for which this corporation is formed is to engage in the ownership of real property and any other lawful act or activity for which corporations may be organized under the General Corporation Law of Maryland as now or hereinafter in force.

ARTICLE III

PRINCIPAL OFFICE AND RESIDENT AGENT

The post office address of the principal office of the corporation in the State of Maryland is ℅ CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202. The name of the resident agent of the corporation in the State of Maryland is CSC-Lawyers Incorporating Service Company and the post office address is 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202, but this corporation may maintain an office or offices in such other place or places as may be from time to time fixed by its Board of Directors or as may be fixed by the Bylaws of the corporation.

ARTICLE IV

CAPITAL STOCK

Section 1.    The total number of shares of capital stock which the corporation shall have the authority to issue is Eight Hundred Million (800,000,000), of which Seven Hundred Fifty Million (750,000,000) shall be shares of Common Stock having a par value of $1.00 per share and Fifty Million (50,000,000) shall be shares of Preferred Stock having a par value of $1.00 per share. The aggregate par value of all of said shares shall be Eight Hundred Million Dollars ($800,000,000).

Section 2.    The Board of Directors shall have authority to issue the Preferred Stock from time to time in one or more series and by resolution shall designate with respect to any series of Preferred Stock:

(1)    the number of shares constituting such series and the distinctive designation thereof;

(2)    the voting rights, if any, of such series;

(3)    the rate of dividends payable on such series, the time or times when such dividends will be payable, the preference to, or any relation to, the payment of dividends to any other class or series of stock and whether the dividends will be cumulative or non-cumulative;

(4)    whether there shall be a sinking or similar fund for the purchase of shares of such series and, if so, the terms and provisions that shall govern such fund;

(5)    the rights of the holders of shares of such series upon the liquidation, dissolution or winding up of the corporation;

2

(6)    the rights, if any, of holders of shares of such series to convert such shares into or to exchange such shares for, shares of any other class or classes or any other series of the same or of any other class or classes of stock of the corporation, the price or prices or rate or rates of exchange, with such adjustments as shall be provided, at which such shares shall be convertible or exchangeable, whether such rights of conversion or exchange shall be exercisable at the option of the holder of the shares of the corporation or upon the happening of a specified event and any other terms or conditions of such conversion or exchange; and

(7)    any other preferences, powers and relative participating, optional or other special rights and qualifications, limitations or restrictions of shares of such series.

ARTICLE V

PROVISIONS FOR DEFINING, LIMITING AND REGULATING

CERTAIN POWERS OF THE CORPORATION AND

THE BOARD OF DIRECTORS AND STOCKHOLDERS

Section 1.    The Board of Directors shall have the authority without stockholder approval to designate capital gain allocation to holders of any series or all series of Preferred Stock.

Section 2.    The affirmative vote of the holders of not less than 90% of the outstanding shares of “voting stock” (as hereinafter defined) of the corporation shall be required for the approval or authorization of any “Business Combination” (as hereinafter defined) of the corporation with any “Related Person” (as hereinafter defined). However, such 90% voting requirement shall not be applicable if (1) the Board of Directors of the corporation by unanimous vote or written consent shall have expressly approved in advance the acquisition of outstanding shares of voting stock of the corporation that caused the Related Person to become a Related Person or shall have approved the Business Combination prior to the Related Person involved in the Business Combination having become a Related Person; or (2) the Business Combination is solely between the corporation and another corporation, one hundred percent of the voting stock of which is owned directly or indirectly by the corporation.

For purposes of this Article V, Section 2:

3

(i)    The term “Business Combination” shall mean (a) any merger or consolidation of the corporation with or into a Related Person, (b) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device, of all or any “Substantial Part” (as hereinafter defined) of the assets of the corporation (including without limitation any voting securities of a subsidiary) to a Related Person, (c) any merger or consolidation of a Related Person with or into the corporation, (d) any sale, lease, exchange, transfer or other disposition of all or any Substantial Part of the assets of a Related Person to the corporation, (e) the issuance of any securities (other than by way of pro rata distribution to all stockholders) of the corporation to a Related Person, and (f) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination.

(ii)    The term “Related Person” shall mean and include any individual, corporation, partnership or other person or entity which, together with its “Affiliates” and “Associates” (as defined on October 1, 1982 in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), “Beneficially Owns” (as defined on October 1, 1982 in Rule 13d-3 under the Exchange Act) in the aggregate 10% or more of the outstanding voting stock of the corporation, and any Affiliate or Associate of any such individual, corporation, partnership or other person or entity.

(iii)    The term “Substantial Part” shall mean more than 10% of the book value of the total assets of the corporation as of the end of its most recent fiscal year ending prior to the time the determination is being made.

(iv)    Without limitation, any shares of Common Stock of the corporation that any Related Person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed beneficially owned by the Related Person.

(v)    The term “voting stock” shall mean the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors. In a vote required by or provided for in this Article V, Section 2, each share of voting stock shall have the number of votes granted to it generally in the election of directors.

Section 3.    The number of Board of Directors shall be not less than three (3) nor more than ten (10) until changed by an amendment to the Bylaws.

The number of Directors may be increased or decreased from time to time in such manner as shall be provided in the Bylaws, provided that the number shall not be reduced to less than three (3). In case of any increase in the number of Directors, the additional Directors may be elected by the stockholders at any annual or special meeting, or by the Directors as shall be provided by the Bylaws. A Director may be removed by the vote or written consent of the holders of two-thirds of the

4

outstanding shares or by a unanimous vote of all other members of the Board of Directors. Special meetings of the stockholders may be called in a manner consistent with the Bylaws of the corporation for the purpose of removing a Director.

Section 4.    If the Board of Directors shall, at any time and in good faith, be of the opinion that direct or indirect ownership of at least 9.9% or more of the voting shares of stock of the corporation has or may become concentrated in the hands of one “beneficial owner” (as defined on October 1, 1982 in Rule 13d-3 under the Exchange Act), the Board of Directors shall have the power (i) by lot or other means deemed equitable by them to call for the purchase from any stockholder of the corporation a number of voting shares sufficient, in the opinion of the Board of Directors, to maintain or bring the direct or indirect ownership of voting shares of stock of the corporation of such beneficial owner to no more than 9.9% of the outstanding voting shares of stock of the corporation, and (ii) to refuse to transfer or issue voting shares of stock of the corporation to any person whose acquisition of such voting shares would, in the opinion of the Board of Directors, result in the direct or indirect ownership of more than 9.9% of the outstanding voting shares of stock of the corporation. The purchase price for any voting shares of stock shall be equal to the fair market value of the shares reflected in the closing sales price for the shares, if then listed on a national securities exchange, or the average of the closing sales prices for the shares if then listed on more than one national securities exchange, or if the shares are not then listed on a national securities exchange, the latest bid quotation for the shares if then traded over-the-counter on the last business day immediately preceding the day on which notices of such acquisition are sent, or, if no such closing sales prices or quotations are available, then the purchase price shall be equal to the net asset value of such stock as determined by the Board of Directors in accordance with the provisions of applicable law. Payment of the purchase price shall be made in cash by the corporation at such time and in such manner as may be determined by the Board of Directors of the corporation. From and after the date fixed for purchase by the Board of Directors, the holder of any shares so called for purchase shall cease to be entitled to distributions, voting rights and other benefits with respect to such shares, excepting only the right to payment of the purchase price fixed as aforesaid. If the Board of Directors fails to grant an exemption from the ownership limitation described in this Section 4, then any transfer of shares, options, warrants or other securities convertible into voting shares that would create a beneficial owner of more than 9.9% of the outstanding shares of stock of this corporation shall be deemed void ab initio and the intended transferee shall be deemed never to have had an interest therein. If the foregoing provision is determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the transferee of such shares, options, warrants or other securities convertible into voting shares shall be deemed, at the option of the corporation, to have acted as agent on behalf of the corporation in acquiring such shares and to hold such shares on behalf of the corporation.

5

Section 5.    The holders of stock of the corporation shall have no preemptive or preferential right to subscribe for or purchase any stock or securities of the corporation.

Section 6.    Restrictions on Ownership and Transfer to Preserve Tax Benefits.

(a)    Definitions.    For the purposes of Section 6 of this Article V, the following terms shall have the following meanings:

“Beneficial Ownership” shall mean ownership of Common Stock by a Person who is or would be treated as an owner of such Common Stock either actually or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner,” “Beneficially Own,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

“Charitable Beneficiary” shall mean one or more beneficiaries of a Trust, as determined pursuant to Subsection 6(c)(vi) of this Article V.

“Code” shall mean the Internal Revenue Code of 1986, as amended. All section references to the Code shall include any successor provisions thereof as may be adopted from time to time.

“Common Stock” shall mean that Common Stock that may be issued pursuant to Article IV, Section 1, of the Articles of Restatement.

“Constructive Ownership” shall mean ownership of Common Stock by a Person who is or would be treated as an owner of such Common Stock either actually or constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Own,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

“Corporation” shall have the meaning set forth in the preamble to the Articles of Restatement.

“Filing Date” shall mean the date this Amendment to the Articles of Restatement is filed with the Department.

“Individual” means an individual, a trust qualified under section 401(a) or 501(c)(17) of the Code, a portion of a trust permanently set aside for or to be used exclusively for the purposes described in

6

section 642(c) of the Code, or a private foundation within the meaning of section 509(a) of the Code.

“IRS” means the United States Internal Revenue Service.

“Market Price” shall mean the last reported sales price reported on the New York Stock Exchange of the Common Stock on the trading day immediately preceding the relevant date, or if the Common Stock is not then traded on the New York Stock Exchange, the last reported sales price of the Common Stock on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the Common Stock may be traded, or if the Common Stock is not then traded over any exchange or quotation system, then the market price of the Common Stock on the relevant date as determined in good faith by the Board of Directors of the Corporation.

“Ownership Limit” shall mean 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding Common Stock of the Corporation. The number and value of shares of outstanding Common Stock of the Corporation shall be determined by the Board of Directors in good faith, which determination shall be conclusive for all purposes hereof.

“Person” shall mean an individual, corporation, partnership, limited liability company, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity; but does not include an underwriter acting in a capacity as such in a public offering of shares of Common Stock provided that the ownership of such shares of Common Stock by such underwriter would not result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, or otherwise result in the Corporation failing to qualify as a REIT.

“Purported Beneficial Transferee” shall mean, with respect to any purported Transfer (or other event) which results in a transfer to a Trust, as provided in Subsection 6(b)(ii) of this Article V, the Purported Record Transferee, unless the Purported Record Transferee would have acquired or owned shares of Common Stock for another Person who is the beneficial transferee or owner of such shares, in which case the Purported Beneficial Transferee shall be such Person.

7

“Purported Record Transferee” shall mean, with respect to any purported Transfer (or other event) which results in a transfer to a Trust, as provided in Subsection 6(b)(ii) of this Article V, the record holder of the shares of Common Stock if such Transfer had been valid under Subsection 6(b)(i) of this Article V.

“REIT” shall mean a real estate investment trust under Sections 856 through 860 of the Code.

“Restriction Termination Date” shall mean the first day on which the Board of Directors of the Corporation determines that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT.

“Transfer” shall mean any sale, transfer, gift, assignment, devise or other disposition of Common Stock, including (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Common Stock or (ii) the sale, transfer, assignment or other disposition of any securities (or rights convertible into or exchangeable for Common Stock), whether voluntary or involuntary, whether such transfer has occurred of record or beneficially or Beneficially or Constructively (including but not limited to transfers of interests in other entities which result in changes in Beneficial or Constructive Ownership of Common Stock), and whether such transfer has occurred by operation of law or otherwise.

“Trust” shall mean each of the trusts provided for in Subsection 6(c) of this Article V.

“Trustee” shall mean any Person unaffiliated with the Corporation, or a Purported Beneficial Transferee, or a Purported Record Transferee, that is appointed by the Corporation to serve as trustee of a Trust.

(b)    Restriction on Ownership and Transfers.

(i)    From the Filing Date and prior to the Restriction Termination Date:

(A)    except as provided in Subsection 6(i) of this Article V, no Person shall Beneficially Own Common Stock in excess of the Ownership Limit;

8

(B)    except as provided in Subsection 6(i) of this Article V, no Person shall Constructively Own Common Stock in excess of the Ownership Limit; and

(C)    no Person shall Beneficially or Constructively Own Common Stock to the extent that such Beneficial or Constructive Ownership would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, or otherwise failing to qualify as a REIT (including but not limited to ownership that would result in the Corporation owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation (either directly or indirectly through one or more partnerships or limited liability companies) from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

(ii)    If, during the period commencing on the Filing Date and prior to the Restriction Termination Date, any Transfer or other event occurs that, if effective, would result in any Person Beneficially or Constructively Owning Common Stock in violation of Subsection 6(b)(i) of this Article V, (i) then that number of shares of Common Stock that otherwise would cause such Person to violate Subsection 6(b)(i) of this Article V (rounded up to the nearest whole share) shall be automatically transferred to a Trust for the benefit of a Charitable Beneficiary, as described in Subsection 6(c), effective as of the close of business on the business day prior to the date of such Transfer or other event, and such Purported Beneficial Transferee shall thereafter have no rights in such shares or (ii) if, for any reason, the transfer to the Trust described in clause (i) of this sentence is not automatically effective as provided therein to prevent any Person from Beneficially or Constructively Owning Common Stock in violation of Subsection 6(b)(i) of this Article V, then the Transfer of that number of shares of Common Stock that otherwise would cause any Person to violate Subsection 6(b)(i) shall, subject to Section 9, be void ab initio, and the Purported Beneficial Transferee shall have no rights in such shares.

(iii)    Subject to Section 9 of this Article V and notwithstanding any other provisions contained herein, during the period commencing on the Filing Date and prior to the Restriction Termination Date, any Transfer of Common Stock that, if effective, would result in the capital stock of the Corporation being beneficially owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio, and the intended transferee shall acquire no rights in such Common Stock.

(iv)    It is expressly intended that the restrictions on ownership and Transfer described in this Subsection 6(b) of Article V shall apply to restrict the rights of any members or partners in limited liability companies or

9

partnerships to exchange their interest in such entities for Common Stock of the Company.

(c)    Transfers of Common Stock in Trust.

(i)    Upon any purported Transfer or other event described in Subsection 6(b)(ii) of this Article V, such Common Stock shall be deemed to have been transferred to the Trustee in his capacity as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the business day prior to the purported Transfer or other event that results in a transfer to the Trust pursuant to Subsection 6(b)(ii). The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation, any Purported Beneficial Transferee, and any Purported Record Transferee. Each Charitable Beneficiary shall be designated by the Corporation as provided in Subsection 6(c)(vi) of this Article V.

(ii)    Common Stock held by the Trustee shall be issued and outstanding Common Stock of the Corporation. The Purported Beneficial Transferee or Purported Record Transferee shall have no rights in the shares of Common Stock held by the Trustee. The Purported Beneficial Transferee or Purported Record Transferee shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends and shall not possess any rights to vote or other rights attributable to the shares of Common Stock held in the Trust.

(iii)    The Trustee shall have all voting rights and rights to dividends with respect to Common Stock held in the Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or distribution paid prior to the discovery by the Corporation that shares of Common Stock have been transferred to the Trustee shall be paid to the Trustee upon demand, and any dividend or distribution declared but unpaid shall be paid when due to the Trustee with respect to such Common Stock. Any dividends or distributions so paid over to the Trustee shall be held in trust for the Charitable Beneficiary. The Purported Record Transferee and Purported Beneficial Transferee shall have no voting rights with respect to the Common Stock held in the Trust and, subject to Maryland law, effective as of the date the Common Stock has been transferred to the Trustee, the Trustee shall have the authority (at the Trustee's sole discretion) (i) to rescind as void any vote cast by a Purported Record Transferee with respect to such Common Stock prior to the discovery by the Corporation that the Common Stock has been transferred to the Trustee and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Corporation has already taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Article V, until the Corporation has received notification that the Common Stock has been transferred into a Trust, the Corporation shall be entitled to rely on

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its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.

(iv)    Within 20 days of receiving notice from the Corporation that shares of Common Stock have been transferred to the Trust, the Trustee of the Trust shall sell the shares of Common Stock held in the Trust to a person, designated by the Trustee, whose ownership of the shares of Common Stock will not violate the ownership limitations set forth in Subsection 6(b)(i). Upon such sale, the interest of the Charitable Beneficiary in the shares of Common Stock sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Purported Record Transferee and to the Charitable Beneficiary as provided in this Subsection 6(c)(iv). The Purported Record Transferee shall receive the lesser of (i) the price paid by the Purported Record Transferee for the shares of Common Stock in the transaction that resulted in such transfer to the Trust (or, if the event which resulted in the transfer to the Trust did not involve a purchase of such shares of Common Stock at Market Price, the Market Price of such shares of Common Stock on the day of the event which resulted in the transfer of such shares of Common Stock to the Trust) and (ii) the price per share received by the Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the shares of Common Stock held in the Trust. Any net sales proceeds in excess of the amount payable to the Purported Record Transferee shall be immediately paid to the Charitable Beneficiary together with any dividends or other distributions thereon. If, prior to the discovery by the Corporation that shares of such Common Stock have been transferred to the Trustee, such shares of Common Stock are sold by a Purported Record Transferee then (x) such shares of Common Stock shall be deemed to have been sold on behalf of the Trust and (y) to the extent that the Purported Record Transferee received an amount for such shares of Common Stock that exceeds the amount that such Purported Record Transferee was entitled to receive pursuant to this Subsection 6(c)(iv), such excess shall be paid to the Trustee upon demand.

(v)    Common Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price paid by the Purported Record Transferee for the shares of Common Stock in the transaction that resulted in such transfer to the Trust (or, if the event which resulted in the transfer to the Trust did not involve a purchase of such shares of Common Stock at Market Price, the Market Price of such shares of Common Stock on the day of the event which resulted in the transfer of such shares of Common Stock to the Trust) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer until the Trustee has sold the shares of Common Stock held in the Trust pursuant to Subsection 6(c)(iv). Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares of Common Stock sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Purported

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Record Transferee and any dividends or other distributions held by the Trustee with respect to such Common Stock shall thereupon be paid to the Charitable Beneficiary.

(vi)    By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust such that (i) the shares of Common Stock held in the Trust would not violate the restrictions set forth in Subsection 6(b)(i) in the hands of such Charitable Beneficiary and (ii) each Charitable Beneficiary is an organization described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.

(d)    Remedies For Breach. If the Board of Directors or a committee thereof or other designees if permitted by the MGCL shall at any time determine in good faith that a Transfer or other event has taken place in violation of Subsection 6(b) of this Article V or that a Person intends to acquire, has attempted to acquire or may acquire beneficial ownership (determined without reference to any rules of attribution), Beneficial Ownership or Constructive Ownership of any shares of the Corporation in violation of Subsection 6(b) of this Article V, the Board of Directors or a committee thereof or other designees if permitted by the MGCL shall take such action as it deems advisable to refuse to give effect or to prevent such Transfer, including, but not limited to, causing the Corporation to redeem shares of Common Stock, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer; provided, however, that any Transfers (or, in the case of events other than a Transfer, ownership or Constructive Ownership or Beneficial Ownership) in violation of Subsection 6(b)(i) of this Article V, shall automatically result in the transfer to a Trust as described in Subsection 6(b)(ii) and any Transfer in violation of Subsection 6(b)(iii) shall, subject to Section 9, automatically be void ab initio irrespective of any action (or non-action) by the Board of Directors.

(e)    Notice of Restricted Transfer. Any Person who acquires or attempts to acquire shares in violation of Subsection 6(b) of this Article V, or any Person who is a Purported Beneficial Transferee such that an automatic transfer to a Trust results under Subsection 6(b)(ii) of this Article V, shall immediately give written notice to the Corporation of such event and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer or attempted Transfer on the Corporation's status as a REIT.

(f)    Owners Required to Provide Information. From the Filing Date and prior to the Restriction Termination Date, each Person who is a beneficial owner or Beneficial Owner or Constructive Owner of shares of Common Stock and each Person (including the stockholder of record) who is holding shares of Common Stock for a beneficial owner or Beneficial Owner or Constructive Owner shall, on demand, provide to the Corporation a completed questionnaire containing the information regarding their ownership of such shares, as set forth in the regulations

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(as in effect from time to time) of the U.S. Department of Treasury under the Code. In addition, each Person who is a beneficial owner or Beneficial Owner or Constructive Owner of shares of Common Stock and each Person (including the stockholder of record) who is holding shares of Common Stock for a beneficial owner or Beneficial Owner or Constructive Owner shall, on demand, be required to disclose to the Corporation in writing such information as the Corporation may request in order to determine the effect, if any, of such stockholder's actual and constructive ownership of shares of Common Stock on the Corporation's status as a REIT and to ensure compliance with the Ownership Limit, or as otherwise permitted by the Board of Directors.

(g)    Remedies Not Limited. Nothing contained in this Article V (but subject to Section 9 of this Article V) shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders by preservation of the Corporation's status as a REIT.

(h)    Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Section 6 of this Article V, including any definition contained in Subsection 6(a), the Board of Directors shall have the power to determine the application of the provisions of this Section 6 with respect to any situation based on the facts known to it (subject, however, to the provisions of Section 9 of this Article V). In the event Section 6 requires an action by the Board of Directors and the Articles of Restatement or this Amendment to the Articles of Restatement fail to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Section 6. Absent a decision to the contrary by the Board of Directors (which the Board may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Subsection 6(b)(ii)) acquired Beneficial or Constructive Ownership of Common Stock in violation of Subsection 6(b)(i), such remedies (as applicable) shall apply first to the shares of Common Stock which, but for such remedies, would have been actually owned by such Person, and second to shares of Common Stock which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such shares of Common Stock based upon the relative number of the shares of Common Stock held by each such Person.

(i)    Exceptions.

(i)    Subject to Subsection 6(b)(i)(C) of this Article V, the Board of Directors, in its sole discretion, may exempt a Person from the limitation on a Person Beneficially Owning shares of Common Stock in excess of the Ownership Limit if the Board determines that such exemption will not cause any Individual's Beneficial Ownership of shares of Common Stock to violate the

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Ownership Limit or that any such violation will not cause the Corporation to fail to qualify as a REIT under the Code.

(ii)    Subject to Subsection 6(b)(i)(C) of this Article V, the Board of Directors, in its sole discretion, may exempt a Person from the limitation on a Person Constructively Owning Common Stock in excess of the Ownership Limit, as set forth in Subsection 6(b)(i)(B), of this Article V, if the Board determines that such Person does not and will not own, actually or Constructively, an interest in a tenant of the Corporation (or a tenant of any entity owned in whole or in part by the Corporation) that would cause the Corporation to own, actually or Constructively, more than a 9.8% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant or that any such ownership would not cause the Corporation to fail to qualify as a REIT under the Code.

(iii)    In granting a person an exemption under (i) or (ii) above, the Board of Directors may require such Person to make certain representations or undertakings or to agree that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in Subsection 6(b) of this Article V) will result in such Common Stock being transferred to a Trust in accordance with Subsection 6(b)(ii) of this Article V. Prior to granting any exception pursuant to Subsection 6(i)(i) or (ii) of this Article V, the Board of Directors may require a ruling from the IRS, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the Corporation's status as a REIT.

Section 7.    Legends. Each certificate for Common Stock and Preferred Stock shall bear the following legends:

Classes of Stock

THE CORPORATION IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE THAN ONE CLASS, CONSISTING OF COMMON STOCK AND ONE OR MORE CLASSES OF PREFERRED STOCK. THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF ANY CLASS OF PREFERRED STOCK BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF PREFERRED STOCK. THE CORPORATION WILL FURNISH, WITHOUT CHARGE, TO ANY STOCKHOLDER MAKING A WRITTEN REQUEST THEREFOR, A COPY OF THE CORPORATION'S ARTICLES OF RESTATEMENT AND A WRITTEN STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, CONVERSION OR OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE CORPORATION HAS THE

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AUTHORITY TO ISSUE AND, IF THE CORPORATION IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. REQUESTS FOR SUCH WRITTEN STATEMENT MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.

Restriction on Ownership and Transfer

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE CORPORATION'S ARTICLES OF RESTATEMENT, (i) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE CORPORATION; (ii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING “CLOSELY HELD” UNDER SECTION 856(h) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REIT; AND (iii) NO PERSON MAY TRANSFER SHARES OF COMMON STOCK IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF COMMON STOCK IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE VIOLATED, THE SHARES OF COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN

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VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT ARE DEFINED IN THE ARTICLES OF RESTATEMENT OF THE CORPORATION SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE ARTICLES OF RESTATEMENT OF THE CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SHARES OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.

Section 8.    Severability. If any provision of this Article V or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provision shall not be affected and other applications of such provisions shall be affected only to the extent necessary to comply with the determination of such court.

Section 9.    New York Stock Exchange. Nothing in this Article V shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange. The shares of Common Stock that are the subject of such a transaction shall continue to be subject to the provisions of this Article V after such settlement.

ARTICLE VI

AMENDMENTS AND EXTRAORDINARY ACTIONS

Section 1.    Notwithstanding any other provisions of these Articles or the Bylaws of the corporation (and notwithstanding any provision of law requiring a different proportion of the votes entitled to be cast by the stockholders in order to take or approve any such action) the affirmative vote of two-thirds of all votes entitled to be cast by the stockholders upon the matter shall be required to repeal any provision of, or adopt an amendment inconsistent with, Section 2, Section 3 or Section 4 of Article V.

Section 2.    The corporation reserves the right from time to time to amend, alter or repeal any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are subject to this reservation.

Section 3.    Except as specifically required in Sections 2 and 3 of Article V and in Section 1 of this Article VI of the charter of the corporation, notwithstanding any provision of law requiring a greater proportion of the votes entitled to be cast by the stockholders in order to take or approve any action, such action shall be valid

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and effective if taken or approved by the affirmative vote of a majority of all votes entitled to be cast by the stockholders on the matter.

ARTICLE VII

PERPETUAL EXISTENCE

The period of the existence of the corporation is to be perpetual.

ARTICLE VIII

LIMITATION ON PERSONAL LIABILITY

OF DIRECTORS AND OFFICERS

A director or officer shall not be personally liable to the corporation or its stockholders for money damages unless (i) it is proved that the person actually received an improper benefit or profit in money, property, or services, for the amount of the benefit or profit in money, property, or services actually received or (ii) a judgment or other final adjudication adverse to the person is entered in a proceeding, based on a finding in the proceeding that the person's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

If the General Corporation Law of the State of Maryland is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors or officers or expanding such liability, then the liability of directors or officers to the corporation or its stockholders shall be limited or eliminated to the fullest extent permitted by the Maryland General Corporation Law, as so amended from time to time. Any repeal or modification of this Article VIII by the stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the corporation existing at the time of such repeal or modification.

THIRD:    These Articles of Restatement do not amend the Charter.

FOURTH:    Under Section 2-608(c) of the MGCL, upon any restatement of the Charter, the Corporation may omit from such restatement all provisions thereof that relate solely to a class of stock if, at the time, there are no shares of the class outstanding and the Corporation

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has no authority to issue any shares of such class.There are no shares of the Corporation’s 7-7/8% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), 8.70% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”), 8.60% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”), Series D Junior Participating Preferred Stock (the “Series D Preferred Stock”), 7.25% Series E Cumulative Redeemable Preferred Stock (the “Series E Preferred Stock”) or 7.1% Series F Cumulative Redeemable Preferred Stock (the “Series F Preferred Stock”) outstanding and the Corporation has no authority to issue any shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock. All Charter provisions that relate solely to the Corporation’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock have been omitted from the foregoing restatement of the Charter.

FIFTH:    The foregoing restatement of the Charter has been approved by a majority of the entire Board of Directors.

SIXTH:    The current address of the principal office of the Corporation is as set forth in Article III of the foregoing restatement of the Charter.

SEVENTH:    The name and address of the Corporation's current resident agent is as set forth in Article III of the foregoing restatement of the Charter.

EIGHTH:    There are currently eight directors of the Corporation, and the names of those directors currently in office are as follows: James F. Flaherty III, Christine N. Garvey, David B. Henry, Lauralee E. Martin, Michael D. McKee, Peter L. Rhein, Kenneth B. Roath and Joseph P. Sullivan.

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NINTH:    The undersigned Executive Vice President and Chief Financial Officer acknowledges these Articles of Restatement to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Executive Vice President and Chief Financial Officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Corporation has caused these Articles of Restatement to be signed in its name and on its behalf by its Executive Vice President and Chief Financial Officer and attested to by its Executive Vice President, General Counsel & Corporate Secretary on this 1^st day of June, 2012.

ATTEST:		HCP, INC.
/s/ James W. Mercer	By:	/s/ Timothy M. Schoen	(SEAL)
James W. Mercer		Timothy M. Schoen
Executive Vice President		Executive Vice President and
General Counsel & Corporate Secretary		Chief Financial Officer

HCP, INC.

ARTICLES SUPPLEMENTARY

HCP, INC., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “Department”) that:

FIRST:    Pursuant to Section 3-802(c) of the Maryland General Corporation Law (the “MGCL”), the Board of Directors of the Corporation (the “Board of Directors”), by resolutions duly adopted at a meeting duly called and held on July 27, 2017, prohibited the Corporation from electing to be subject to Section 3-803 of the MGCL unless such election is first approved by the stockholders of the Corporation by the affirmative vote of a majority of all the votes entitled to be cast on the matter.

SECOND:    These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.

THIRD:    These Articles Supplementary shall be effective upon filing with the Department.

FOURTH:    The undersigned President and Chief Executive Officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President and Chief Executive Officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed under seal in its name and on its behalf by its President and Chief Executive Officer, and attested to by its Corporate Secretary, on this 31 day of July, 2017.

ATTEST:		HCP, INC.
/s/ Troy E. McHenry	By:	/s/ Thomas M. Herzog
Name: Troy E. McHenry		Name: Thomas M. Herzog
Title: Corporate Secretary		Title: President and Chief Executive Officer

EX-3.2

As Amended and RestatedFebruary 8, 2015

As Further Amended

January 28, 2016

As Further Amended

July 27, 2017

FIFTH AMENDED AND RESTATED BYLAWS
OFHCP, INC.

ARTICLE I
OFFICES

SECTION 1.PRINCIPAL OFFICE -- The principal office of the Corporation in the State of Maryland shall be established and maintained at the office of CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202, and CSC-Lawyers Incorporating Service Company shall be the resident agent of this Corporation.

SECTION 2.OTHER OFFICES -- The Corporation may establish such other offices, within or without the State of Maryland, at such place or places as the Board of Directors from time to time may designate, or which the business of the Corporation may require.

ARTICLE II
STOCKHOLDERS

SECTION 1.ANNUAL MEETINGS -- Annual meetings of stockholders for the election of directors to succeed directors whose terms are expiring and the transaction of any business within the powers of the Corporation, shall be held on a date and at a time between April 15 and May 15, inclusive, as designated by the Board of Directors at such place, within or without the State of Maryland, as the Board of Directors by resolution shall determine, and as set forth in the notice of the meeting.

SECTION 2.SPECIAL MEETINGS -- Special meetings of the stockholders, for any purpose or purposes, may be called by the Chief Executive Officer, the President, or a majority of the Board of Directors, and shall be called by the Secretary or any other officer upon written request of stockholders holding in the aggregate not less than 50% of the outstanding shares entitled to vote on the business proposed to be transacted thereat. Any such request of the stockholders shall state the purpose of the meeting and the matters proposed to be acted on at such meeting. The Secretary or other officer of the Corporation shall inform the requesting stockholders of the reasonably

estimated cost of preparing and mailing notice of the proposed special meeting and, upon payment to the Corporation of such estimated costs, the Secretary or other officer of the Corporation shall give notice to each stockholder entitled to notice of the special meeting. Unless requested by stockholders entitled to cast a majority of all votes entitled to be cast at a meeting of stockholders, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of the stockholders of the Corporation held during the preceding twelve months. Special meetings of stockholders may be held at such time and place, within or without the State of Maryland, as shall be stated in the notice of the meeting. The notice of a special meeting shall state the nature of the business to be transacted and no other business shall be considered at the meeting.

SECTION 3.NOTICE OF MEETINGS -- Written or printed notice, stating the place, date and time of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the Corporation by United States mail, postage prepaid, not less than ten (10) nor more than ninety (90) days before the date of the meeting, unless any provisions of the laws of the State of Maryland shall prescribe a differing elapsed period of time. No business other than that stated in the notice shall be transacted at any special meeting.

SECTION 4.VOTING -- At each annual meeting the stockholders entitled to vote shall elect directors to succeed the directors whose terms are expiring, and the stockholders may transact such other corporate business as may be within the powers of the Corporation, subject to Section 7 of this Article II. The vote for directors, and, upon the demand of any stockholder entitled to vote on any such matter, the vote upon any question before the meeting, shall be by ballot.

Except as otherwise provided in the Charter of the Corporation (the “Charter”) with respect to directors to be elected by the holders of any class or series of preferred stock of the Corporation and in these Bylaws with respect to the filling of vacancies on the Board of Directors, each director shall be elected by a majority of the votes cast with respect to such director at any meeting of stockholders duly called and at which a quorum is present and directors are to be elected; provided, however, that the directors shall be elected by a plurality of the votes cast at a meeting of the stockholders duly called and at which a quorum is present and directors are to be elected if, in connection with such meeting (i) the Secretary of the Corporation shall have received one or more notices that a stockholder or group of stockholders has nominated or proposes to nominate a person or persons for election as a director, which notice(s) purports to be in compliance with the advance notice requirements set forth in Section 7 of this Article II of the Bylaws, the proxy access requirements set forth in Section 8 of this Article II of the Bylaws or applicable rules promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, irrespective of whether the Board of Directors thereafter determines that any such notice(s) is not in compliance with such requirements, and (ii) as of the fourteenth (14th) day preceding the date on which notice of such meeting of the stockholders is first mailed or otherwise given in accordance with applicable law to the stockholders of the Corporation, such nomination or proposed nomination has not been withdrawn by such stockholder or group of stockholders and would thereby cause the number of nominees and proposed nominees to exceed the number of directors to be elected at such meeting, as determined by the Secretary of the Corporation, irrespective of whether such nomination

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or proposed nomination is thereafter withdrawn by such stockholder or group of stockholders (a “Contested Election”). If the directors are to be elected by a plurality of the votes cast pursuant to the provisions of the immediately preceding sentence, stockholders shall not be permitted to vote “against” any one or more nominees but shall only be permitted to vote “for” one or more nominees or withhold their votes with respect to one or more nominees. For purposes hereof, a majority of the votes cast means the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that director nominee, with abstentions and broker non-votes not counted as a vote cast either “for” or “against” that director nominee.

In the election of directors, each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to vote. Stockholders are not entitled to cumulative voting in the election of directors.

All other matters shall be decided by a majority of the votes cast, except as otherwise provided by the Charter or these Bylaws, or by the laws of the State of Maryland.

The directors may fix a day not more than ninety (90) days nor less than ten (10) days prior to the holding of any meeting of stockholders as the date as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice of or to vote at any such meeting.

Unless otherwise provided by the Charter or by the laws of the State of Maryland, each stockholder entitled to vote shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder.

If, in any election of directors of the Corporation which is not a Contested Election, an incumbent director does not receive a majority of the votes cast and therefore is not re-elected, such incumbent director shall promptly tender his or her resignation as a director, subject to acceptance thereof by the Board, for consideration by the Nominating and Corporate Governance Committee of the Board of Directors.

The Nominating and Corporate Governance Committee will promptly consider any such tendered resignation and will make a recommendation to the Board of Directors as to whether such tendered resignation should be accepted or rejected, or whether other action should be taken with respect to such offer to resign. Any incumbent director whose tendered resignation is under consideration may not participate in any deliberation or vote of the Nominating and Corporate Governance Committee or the Board of Directors regarding such tendered resignation. The Nominating and Corporate Governance Committee and the Board of Directors may consider any factors they deem relevant in deciding whether to accept, reject or take other action with respect to any such tendered resignation. Within ninety (90) days after the date on which certification of the stockholder vote on the election of directors is made, the Board of Directors will publicly disclose its decision and rationale regarding whether to accept, reject or take other action with respect to the tendered resignation in a press release, a periodic or current report filed with the Securities and Exchange Commission or by other public announcement. If any director’s tendered resignation is not accepted by the Board of Directors, such director will continue to serve until the next annual meeting of stockholders and until his or her successor is elected and qualified or his or her earlier

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death, resignation or removal. If any director’s tendered resignation is accepted by the Board of Directors, then such director will thereupon cease to be a director of the Corporation, and the Board, in its sole discretion, may fill the resulting vacancy pursuant to the provisions of the Charter and applicable law or may decrease the size of the Board of Directors pursuant to the provisions of Section 1 of Article III of these Bylaws.

SECTION 5.QUORUM -- Except as provided in the next section hereof, any number of stockholders together holding a majority of the stock issued and outstanding and entitled to vote thereat, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If, at any meeting less than a quorum shall be present or represented, the chairman of the meeting or the stockholders entitled to vote at such meeting, either in person or by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting to the extent permitted by the laws of the State of Maryland, until the requisite amount of stock shall be present, at which time any business may be transacted which might have been transacted at the meeting as originally noticed.

SECTION 6.ACTION WITHOUT MEETING -- Any action to be taken by the stockholders may be taken without a meeting, if, prior to such action, all stockholders entitled to vote thereon shall consent in writing to such action being taken, and such consent shall be treated for all purposes as a vote at a meeting.

SECTION 7.NOMINATIONS AND STOCKHOLDER BUSINESS

(a)Annual Meetings of Stockholders.

(1)Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors, (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section 7(a), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 7(a) or (iv) by any stockholder (or group of stockholders) who meets the requirements of and complies with all of the procedures set forth in Section 8 of this Article II.

(2)For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 7, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. Such stockholder’s notice shall set forth (i) as to each person whom the stockholder proposes

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to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (x) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner and (y) the class and number of shares of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner.

(3)Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section 7 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least seventy (70) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 7(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.

(b)Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 7(b), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 7(b). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (a)(2) of this Section 7 (together with the information and consents required pursuant to clauses (i) and (iii) of paragraph (a)(2)) shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth (90th) day prior to such special meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.

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(c)General.

(1)Except as otherwise provided in Section 8 of this Article II, only such persons who are nominated in accordance with the procedures set forth in this Section 7 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 7. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 7 and, if any proposed nomination or business is not in compliance with this Section 7, to declare that such defective nomination or proposal be disregarded.

(2)For purposes of this Section 7, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(3)Notwithstanding the foregoing provisions of this Section 7, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 7. Nothing in this Section 7 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

SECTION 8.PROXY ACCESS

(a)Whenever the Board of Directors solicits proxies with respect to the election of directors at an annual meeting of stockholders, subject to the provisions of this Section 8, the Corporation shall include in its proxy statement for such annual meeting, in addition to any persons nominated for election by the Board of Directors or any committee thereof, the name, together with the Required Information (defined below), of any person nominated for election (a “Stockholder Nominee”) to the Board of Directors by an Eligible Stockholder (defined below) that expressly elects at the time of providing the notice required by this Section 8 (the “Notice of Proxy Access Nomination”) to have such nominee included in the Corporation’s proxy materials pursuant to this Section 8. For purposes of this Section 8, the “Required Information” that the Corporation will include in its proxy statement is the information provided to the Secretary of the Corporation concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Corporation’s proxy statement by the regulations promulgated under the Exchange Act and, if the Eligible Stockholder so elects, a Supporting Statement (defined below). For the avoidance of doubt, nothing in this Section 8 shall limit the Corporation’s ability to solicit votes against any Stockholder Nominee or include in its proxy materials the Corporation’s own statements or other information relating to any Eligible Stockholder or Stockholder Nominee, including any information provided to the Corporation pursuant to this Section 8. Subject to the provisions of this Section 8, the name of any Stockholder Nominee included in the Corporation’s proxy statement for an annual

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meeting of stockholders shall also be set forth on the form of proxy distributed by the Corporation in connection with such annual meeting.

(b)To be timely, the Notice of Proxy Access Nomination must be delivered to the Secretary at the principal executive offices of the Corporation not less than one hundred twenty (120) days and not more than the one hundred fifty (150) days prior to the first anniversary of the date that the Corporation distributed its proxy statement to stockholders for the previous year’s annual meeting of stockholders.

(c)The maximum number of Stockholder Nominees nominated by all Eligible Stockholders that will be included in the Corporation’s proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (i) two (2) or (ii) twenty percent (20%) of the number of directors in office as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Section 8 (the “Final Proxy Access Nomination Date”) or, if such amount is not a whole number, the closest whole number below twenty percent (20%). In the event that one or more vacancies for any reason occurs on the Board of Directors after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the maximum number of Stockholder Nominees included in the Corporation’s proxy materials shall be calculated based on the number of directors in office as so reduced. For purposes of determining when the maximum number of Stockholder Nominees provided for in this Section 8 has been reached, each of the following persons shall be counted as one of the Stockholder Nominees: (i) any individual nominated by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 8 whose nomination is subsequently withdrawn, (ii) any individual nominated by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 8 whom the Board of Directors decides to nominate for election to the Board of Directors and (iii) any director in office as of the Final Proxy Access Nomination Date who was included in the Corporation’s proxy materials as a Stockholder Nominee for either of the two (2) preceding annual meetings of stockholders (including any individual counted as a Stockholder Nominee pursuant to the immediately preceding clause (ii)) and whom the Board of Directors decides to renominate for election to the Board of Directors. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy materials pursuant to this Section 8 shall rank such Stockholder Nominees based on the order in which the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 8 exceeds the maximum number of Stockholder Nominees provided for in this Section 8. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 8 exceeds the maximum number of Stockholder Nominees provided for in this Section 8, the highest ranking Stockholder Nominee who meets the requirements of this Section 8 from each Eligible Stockholder will be selected for inclusion in the Corporation’s proxy materials until the maximum number is reached, going in order of the amount (largest to smallest) of shares of common stock of the Corporation each Eligible Stockholder disclosed as owned in its Notice of Proxy Access Nomination. If the maximum number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 8 from each Eligible Stockholder has been selected, then the next highest ranking

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Stockholder Nominee who meets the requirements of this Section 8 from each Eligible Stockholder will be selected for inclusion in the Corporation’s proxy materials, and this process will continue as many times as necessary, following the same order each time, until the maximum number is reached.

(d) An “Eligible Stockholder” is a stockholder or group of no more than twenty-five (25) stockholders (counting as one stockholder, for this purpose, any two or more funds that are part of the same Qualifying Fund Group (as defined below)) that (i) has owned (as defined below) continuously for at least three (3) years (the “Minimum Holding Period”) a number of shares of common stock of the Corporation that represents at least three percent (3%) of the Corporation’s outstanding common stock as of the date the Notice of Proxy Access Nomination is delivered to the Secretary of the Corporation in accordance with this Section 8 (the “Required Shares”), (ii) continues to own the Required Shares through the annual meeting date and (iii) satisfies all other requirements of, and complies with all applicable procedures set forth in, this Section 8. A “Qualifying Fund Group” is a group of two or more funds that are (A) under common management and investment control, (B) under common management and funded primarily by the same employer or (C) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended. For purposes of this Section 8, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of common stock of the Corporation as to which the stockholder possesses both (i) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (x) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed, (y) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar instrument or agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Corporation, if, in any such case, such instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such stockholder’s or its affiliates’ full right to vote or direct the voting of any such shares and/or (2) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or affiliate. Without limiting the foregoing, to the extent not excluded by the immediately preceding sentence, an Eligible Stockholder’s “short position” as defined in Rule 14e-4 under the Exchange Act shall be deducted from the shares otherwise “owned.” A stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s ownership of shares shall be deemed to continue during any period in which (i) the stockholder has loaned such shares, provided that the stockholder has the power to recall such loaned shares on five (5) business days’ notice and includes with the Notice of Proxy Access Nomination an agreement that it (A) will promptly recall such loaned shares upon being notified that any of its Stockholder Nominees will be included in the Corporation’s proxy materials and (B) will continue to hold such shares through the date of the annual meeting or (ii) the stockholder has delegated any

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voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the common stock of the Corporation are “owned” for these purposes shall be determined by the Board of Directors or any committee thereof. For purposes of this Section 8, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the General Rules and Regulations under the Exchange Act.

(e)To be in proper form for purposes of this Section 8, the Notice of Proxy Access Nomination must include the following:

(1)a written statement by the Eligible Stockholder setting forth and certifying as to the number of shares it owns and has owned continuously during the Minimum Holding Period, and the Eligible Stockholder’s agreement to provide immediate notice if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the annual meeting;

(2)one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven (7) calendar days prior to the date the Notice of Proxy Access Nomination is delivered to the Secretary of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder’s agreement to provide, within five (5) business days after the later of the record date for the annual meeting and the date on which notice of the record date is first publicly disclosed, one or more written statements from the record holder and such intermediaries verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date;

(3)a copy of the Schedule 14N that has been filed with the United States Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act;

(4)the information required by clauses (i) and (iii) of paragraph (a)(2) of Section 7 of this Article II (including the consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected);

(5)a representation that the Eligible Stockholder (i) will continue to hold the Required Shares through the annual meeting date, (ii) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Corporation, and does not presently have such intent, (iii) has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Stockholder Nominee(s) it is nominating pursuant to this Section 8, (iv) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (v) has not distributed and will not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation, (vi) has complied and will comply with all laws and regulations applicable to solicitations and the use, if any, of soliciting material in connection with the annual meeting, and (vii) has provided and will provide facts, statements and

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other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make such information, in light of the circumstances under which it was or will be made or provided, not misleading;

(6)an undertaking that the Eligible Stockholder agrees to (i) assume all liability stemming from any legal or regulatory violation arising out communications with the stockholders of the Corporation by the Eligible Stockholder, its affiliates and associates or their respective agents and representatives, either before or after providing a Notice of Proxy Access Nomination pursuant to this Section 8, or out of the facts, statements or other information that the Eligible Stockholder or its Stockholder Nominee(s) provided to the Corporation pursuant to this Section 8 or otherwise in connection with the inclusion of such Stockholder Nominee(s) in the Corporation’s proxy materials pursuant to this Section 8, (ii) indemnify and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 8 and (iii) file with the Securities and Exchange Commission any solicitation or other communication with the stockholders of the Corporation relating to the meeting at which its Stockholder Nominee(s) will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Exchange Act; and

(7)in the case of a nomination by a group of stockholders together constituting an Eligible Stockholder in which two or more funds that are part of the same Qualifying Fund Group are counted as one stockholder for purposes of qualifying as an Eligible Stockholder, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are part of the same Qualifying Fund Group.

(f)In addition to the information required pursuant to Section 8(e) or any other provision of these Bylaws, the Corporation may require (i) each Stockholder Nominee to furnish any other information (A) that may reasonably be requested by the Corporation to determine whether the Stockholder Nominee would be independent under the rules and listing standards of the principal United States securities exchanges upon which the common stock of the Corporation is listed or traded, any applicable rules of the U.S. Securities and Exchange Commission or any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the Corporation’s directors (collectively, the “Independence Standards”), (B) that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such Stockholder Nominee or (C) that may reasonably be requested by the Corporation to determine the eligibility of such Stockholder Nominee to be included in the Corporation’s proxy materials pursuant to this Section 8 or to serve as a director of the Corporation and (ii) the Eligible Stockholder to furnish any other information that may reasonably be requested by the Corporation to verify the Eligible Stockholder’s continuous ownership of the Required Shares for the Minimum Holding Period and through the date of the annual meeting.

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(g)The Eligible Stockholder may, at its option, provide to the Secretary of the Corporation, at the time the Notice of Proxy Access Nomination is provided, a written statement, not to exceed 500 words, in support of the Stockholder Nominee(s)’ candidacy (a “Supporting Statement”). Only one Supporting Statement may be submitted by an Eligible Stockholder (including any group of stockholders together constituting an Eligible Stockholder) in support of its Stockholder Nominee(s). Notwithstanding anything to the contrary contained in this Section 8, the Corporation may omit from its proxy materials any information or Supporting Statement (or portion thereof) that it, in good faith, believes would violate any applicable law or regulation.

(h)In the event that any information or communications provided by an Eligible Stockholder or a Stockholder Nominee to the Corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make such information, in light of the circumstances under which it was made or provided, not misleading, such Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Corporation of any such defect in such previously provided information and of the information that is required to correct any such defect; it being understood that providing such notification shall not be deemed to cure any such defect or limit the remedies available to the Corporation relating to any such defect (including the right to omit a Stockholder Nominee from its proxy materials pursuant to this Section 8). In addition, any person providing any information pursuant to this Section 8 must deliver to the Secretary at the principal executive office of the Corporation, not later than five (5) business days after the later of the record date for the annual meeting and the date on which notice of the record date is first publicly disclosed (i) any such written updates and supplements necessary to ensure that the information previously provided or required to be provided shall be true and correct as of the record date for the annual meeting or (ii) a written certification that no such updates or supplements are necessary and that the information previously provided remains true and correct as of the record date for the annual meeting.

(i)Notwithstanding anything to the contrary contained in this Section 8, the Corporation shall not be required to include, pursuant to this Section 8, a Stockholder Nominee in its proxy materials (i) for any meeting of stockholders for which the Secretary of the Corporation receives notice that the Eligible Stockholder or any other stockholder intends to nominate one or more persons for election to the Board of Directors pursuant to the advance notice requirements for stockholder nominees set forth in Section 7 of this Article II, (ii) if such Stockholder Nominee would not be an independent director under the Independence Standards, as determined by the Board of Directors or one or more of its committees, (iii) if such Stockholder Nominee’s election as a member of the Board of Directors would cause the Corporation to be in violation of these Bylaws, the Charter, the rules and listing standards of the principal United States securities exchanges upon which the common stock of the Corporation is listed or traded, or any applicable state or federal law, rule or regulation, (iv) if such Stockholder Nominee is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, (v) if such Stockholder Nominee or the Eligible Stockholder who nominated such Stockholder Nominee provides any facts, statements or other information to the Corporation or its stockholders required or requested pursuant to this Section 8 that is not true and correct in all material respects or that omits a material fact necessary to make such information, in light of the circumstances in which it is made or provided, not misleading, or (vi) if such Stockholder Nominee or the Eligible

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Stockholder who nominated such Stockholder Nominee otherwise contravenes any of the agreements or representations made by such Stockholder Nominee or Eligible Stockholder or fails to comply with its obligations pursuant to this Section 8.

(j)Notwithstanding anything to the contrary set forth herein, if (i) the Stockholder Nominee and/or the applicable Eligible Stockholder shall have breached any of its or their obligations, agreements or representations under this Section 8, or (ii) the Stockholder Nominee shall have otherwise become ineligible for inclusion in the Corporation’s proxy materials pursuant to this Section 8 or dies, becomes disabled or otherwise becomes ineligible or unavailable for election at the annual meeting, in each case as determined by the Board of Directors, any committee thereof or the presiding officer at the annual meeting of stockholders, (x) the Corporation may omit or, to the extent feasible, remove the information concerning such Stockholder Nominee and the related Supporting Statement from its proxy materials and/or otherwise communicate to its stockholders that such Stockholder Nominee will not be eligible for election at the annual meeting, (y) the Corporation shall not be required to include in its proxy materials any successor or replacement nominee proposed by the applicable Eligible Stockholder or any other Eligible Stockholder and (z) the Board of Directors or the presiding officer at the annual meeting of stockholders shall declare such nomination to be invalid, such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Corporation and the named proxies will not vote any proxies received from stockholders with respect to such Stockholder Nominee. In addition, if the Eligible Stockholder (or a representative thereof) does not appear at the annual meeting to present any nomination pursuant to this Section 8, such nomination shall be declared invalid and disregarded as provided in clause (z) above.

(k)Whenever the Eligible Stockholder consists of a group of stockholders (including a group of funds that are part of the same Qualifying Fund Group), (i) each provision in this Section 8 that requires the Eligible Stockholder to provide any written statements, representations, undertakings, agreements or other instruments or to meet any other conditions shall be deemed to require each stockholder (including each individual fund) that is a member of such group to provide such statements, representations, undertakings, agreements or other instruments and to meet such other conditions (except that the members of such group may aggregate their shareholdings in order to meet the three percent (3%) ownership requirement of the “Required Shares” definition), (ii) the Notice of Proxy Access Nomination must designate one member of the group for purposes of receiving communications, notices and inquiries from the Corporation and otherwise authorize such member to act on behalf of each member of the group with respect to the nomination under this Section 8 and (iii) a breach of any obligation, agreement or representation under this Section 8 by any member of such group shall be deemed a breach by the Eligible Stockholder. Whenever the Eligible Stockholder consists of a group of stockholders aggregating their shareholdings in order to meet the three percent (3%) ownership requirement of the “Required Shares” definition, (x) such ownership shall be determined by aggregating the lowest number of shares continuously owned by each such stockholder during the Minimum Holding Period and (y) the Notice of Proxy Access Nomination must indicate, for each such stockholder, such lowest number of shares continuously owned by such stockholder during the Minimum Holding Period. No person may be a member of more than one group of persons constituting an Eligible Stockholder with respect to any annual meeting. For the avoidance of doubt, a stockholder may withdraw from

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a group of stockholders at any time prior to the annual meeting of stockholders and if, as a result of such withdrawal, the Eligible Stockholder no longer owns the Required Shares, the nomination shall be disregarded as provided in Section 8(i).

(l)Any Stockholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of stockholders but either (i) withdraws from or becomes ineligible or unavailable for election at the annual meeting, or (ii) does not receive at least ten percent (10%) of the votes cast in favor of such Stockholder Nominee’s election, will be ineligible to be a Stockholder Nominee pursuant to this Section 8 for the next two annual meetings of stockholders. For the avoidance of doubt, the immediately preceding sentence shall not prevent any stockholder from nominating any person to the Board of Directors pursuant to and in accordance with Section 7 of this Article II.

(m)For purposes of this Section 8, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(n)This Section 8 provides the exclusive method for a stockholder to include nominees for election to the Board of Directors in the Corporation’s proxy materials.

SECTION 9.INSPECTORS -- The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as inspector of an election of directors. Inspectors need not be stockholders.

SECTION 10.CONTROL SHARE ACQUISITION ACT -- Notwithstanding any other provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (the “MGCL”) (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

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ARTICLE III
DIRECTORS

SECTION 1.NUMBER AND TERM -- At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Directors may establish, increase or decrease the number of directors, provided, that the number thereof shall never be less than three (3), nor more than eleven (11), and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors. Notwithstanding the foregoing, upon the occurrence of a default in the payment of dividends of any class or series of preferred stock, or any other event, which will entitle the holders of any class or series of preferred stock to elect additional directors of the Corporation, the number of directors of the Corporation will thereupon be increased by the number of additional directors to be elected by the holders of such class or series of preferred stock, and such increase in the number of directors shall remain in effect for so long as the holders of such class of series of preferred stock are entitled to elect such additional directors. Directors need not be stockholders.

SECTION 2.QUORUM -- A majority of the directors shall constitute a quorum for the transaction of business. If, at any meeting of the Board, there shall be less than a quorum present, a majority of those directors present may adjourn the meeting, from time to time, until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned.

SECTION 3.FIRST MEETING -- The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after the annual meeting of stockholders or the time and place of such meeting may be fixed by written consent of the entire Board.

SECTION 4.ELECTION OF OFFICERS -- At the first meeting, or at any subsequent meeting called for that purpose, the directors shall elect the officers of the Corporation, as more specifically set forth in ARTICLE V of these Bylaws. Such officers shall hold office until the next annual election of officers, or until their successors are elected and shall have qualified.

SECTION 5.REGULAR MEETINGS -- Regular meetings of the Board of Directors shall be held at such places and times as shall be determined, from time to time, by resolution of the Board of Directors without other notice than such resolution.

SECTION 6.SPECIAL MEETINGS -- Special meetings of the Board of Directors may be called by the Chairman, the Chief Executive Officer, the President, the Secretary or by any three (3) directors on prior notice to each director. In case such notice is mailed, it shall be given at least four (4) days prior to the time of the holding of the meeting. In case such notice is given personally, or by telephone, electronic mail, facsimile correspondence or telegram, it shall be given at least twenty-four (24) hours prior to the time of the holding of the meeting.

SECTION 7.PLACE OF MEETINGS -- The directors may hold their meetings, and have one or more offices, and keep the books of the Corporation outside the State of Maryland at any

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office or offices of the Corporation, or at any other place as they from time to time by resolution may determine.

SECTION 8.DISPENSING WITH NOTICE -- The transactions of any meeting of the Board of Directors which is not properly called or noticed, regardless of how called and noticed or wherever held, shall be as valid as though such transactions had occurred at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting need not be given to any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director.

SECTION 9.ACTION WITHOUT MEETING -- Any action required or permitted to be taken at any meeting of the Board of Directors, or any committee thereof, may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board of Directors or committee.

SECTION 10.TELEPHONIC MEETINGS -- Unless otherwise restricted by the Charter or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

SECTION 11.GENERAL POWERS OF DIRECTORS -- The Board of Directors shall manage the business and affairs of the Corporation, and, subject to the restrictions imposed by law, exercise all the powers of the Corporation, except as conferred on or reserved to the stockholders by law or by the Charter or these Bylaws.

SECTION 12.SPECIFIC POWERS OF DIRECTORS -- Without prejudice to such general powers, it hereby is expressly declared that the directors shall have the following powers, to the extent permitted under the laws of the State of Maryland, subject to the provisions of the Charter and other provisions of these Bylaws:

(1)To make and change regulations, not inconsistent with these Bylaws, for the management of the business and affairs of the Corporation.

(2)To purchase or otherwise acquire for the Corporation any property, rights or privileges which the Corporation is authorized to acquire.

(3)To pay for any property purchased for the Corporation, either wholly or partly in money, stock, bonds, debentures or other securities of the Corporation.

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(4)To borrow money and make and issue notes, bonds and other negotiable and transferable instruments, mortgages, deeds of trust and trust agreements, and to do every act and thing necessary to effectuate the same.

(5)To lease and rent real property whether in the capacity of lessor or lessee.

(6)To dispose of or transfer property, both real and personal, in any fashion or by any lawful means, including, without limitation, by lease and as security for borrowings of the Corporation.

(7)To lend money and acquire loans made by others, and to accept, in connection therewith, notes, bonds and other transferable instruments, mortgages, deeds of trust and trust agreements of others, and to do every act and thing otherwise necessary in connection therewith.

(8)To make investments from time to time with funds of the Corporation and to dispose of such investments.

(9)To remove any officer when, in their judgment, the best interests of the Corporation shall be served thereby, and, in their discretion, from time to time to devolve the powers and duties of any officer upon any other officer or person for the time being.

(10)To appoint and remove or suspend subordinate officers, agents, or factors as they may deem necessary, and to determine their duties, and to fix and from time to time to change their salaries or remuneration, and to require security as and when they think fit.

(11)To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, agents and factors.

(12)To determine who shall be authorized, on behalf of the Corporation, to make and sign bills, notes, acceptances, endorsements, contracts and other instruments.

(13)To determine who shall be entitled, in the name and on behalf of the Corporation, to vote upon or to assign and transfer any shares of stock, bonds or other securities of other corporations held by this Corporation.

(14)To authorize the Corporation to enter into, and to execute and deliver, and to modify, amend or terminate, from time to time, agreements, notes, acceptances, bills of sale, documents of transfer or other documents or instruments of any kind or nature whatsoever, in furtherance of or in connection with lawful activities of the Corporation.

(15)To delegate any of the powers of the Board, in relation to the ordinary business of the Corporation, to any standing or special committee, or to any officer or agent (with power to sub-delegate), upon such terms as they deem fit.

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(16)To call special meetings of the stockholders for any purpose or purposes.

SECTION 13.COMPENSATION -- Directors shall receive no stated salary for their services as directors but, by resolution of the Board, may receive fixed fees per year and/or per meeting, and expenses of attendance for attendance at each meeting.

Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, or otherwise, and receiving compensation therefor.

ARTICLE IV
COMMITTEES

SECTION 1.APPOINTMENTS AND POWERS -- The Board of Directors may, by resolution or resolutions passed by a majority of the entire Board of Directors, designate one or more committees, including, without limitation an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation Committee, each consisting of one (1) or more directors, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members of a committee who may replace any absent or disqualified member at any meeting of the committee. Such alternate members shall not be counted for purposes of determining a quorum unless so appointed, in which case they shall be counted in the place of the absent or disqualified member. The committee, to the extent provided in said resolution or resolutions or in these Bylaws and permitted under the laws of the State of Maryland, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in these Bylaws or as may be determined from time to time by resolution adopted by the Board of Directors.

SECTION 2.MINUTES -- Committees shall keep regular minutes of their proceedings, and report the same to the Board of Directors when required.

ARTICLE V
OFFICERS

SECTION 1.OFFICERS -- The officers shall be elected at the first meeting of the Board of Directors after each annual meeting of stockholders. The Board of Directors shall elect a Chief Executive Officer, a President, a Secretary and a Treasurer, and may elect one or more Vice Presidents as they may deem proper. Any person may hold two or more offices, except that no one person shall concurrently hold the offices of President and Vice-President.

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The Board of Directors may elect such other officers and agents as it may deem advisable, who shall hold office for such terms and shall exercise such powers and perform such duties as shall from time to time be determined by the Board of Directors.

SECTION 2.CHIEF EXECUTIVE OFFICER -- The Chief Executive Officer shall have the general powers and duties of supervision and management usually vested in the office of Chief Executive Officer of a corporation. He shall have general supervision, direction and control of the business of the Corporation. He shall also exercise such further powers and perform such other duties as may be conferred upon him by the Bylaws or the Board of Directors from time to time. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall have the power to execute bonds, mortgages and other contracts on behalf of the Corporation, and he may cause the corporate seal to be affixed to any instrument or document executed on behalf of the Corporation. In the event that no other individual shall at that time have been appointed by the Board of Directors to, and hold, the office of President of the Corporation, the individual appointed by the Board to the position of Chief Executive Officer shall also, by virtue of holding such office, be deemed to hold the office of President, and any action taken by such individual in his capacity as Chief Executive Officer will also be deemed action of the President.

SECTION 3.PRESIDENT -- The President shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall have general supervision, direction and control of the business of the Corporation. He shall also exercise such further powers and perform such other duties as may be conferred upon him by the Bylaws or the Board of Directors from time to time. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall have the power to execute bonds, mortgages and other contracts on behalf of the Corporation, and he may cause the corporate seal to be affixed to any instrument or document executed on behalf of the Corporation. In the event that no other individual shall at that time have been appointed by the Board of Directors to, and hold, the office of President of the Corporation, the individual appointed by the Board of Directors to the office of Chief Executive Officer shall also, by virtue of holding such office, be deemed to hold the office of President, and any action taken by such individual in his capacity as Chief Executive Officer will also be deemed action of the President.

SECTION 4.VICE PRESIDENTS -- Each Vice President shall have such powers and shall perform such duties as are usually vested in the office of Vice President of a corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall have the power to execute bonds, mortgages and other contracts on behalf of the Corporation, and he may cause the corporate seal to be affixed to any instrument or document executed on behalf of the Corporation.

SECTION 5.SECRETARY -- The Secretary shall give, or cause to be given, notice of all meetings of stockholders and the Board of Directors, and all other notices required by law or by these Bylaws, and, in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chief Executive Officer, the President, the Board of Directors, or the stockholders upon whose request the meeting is called as provided in these Bylaws. He shall record all proceedings of meetings of the stockholders and of the Board of Directors in a

18

book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the Directors or the Chief Executive Officer or President. He shall have custody of the corporate seal, and shall have the power to affix said seal to all instruments or documents executed on behalf of the Corporation.

SECTION 6.TREASURER -- The Treasurer shall have the custody of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation. He shall deposit all monies and other valuables in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors.

The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors or the President or Chief Executive Officer, taking proper vouchers for such disbursements. He shall render to the President or Chief Executive Officer and the Board of Directors, at the regular meetings of the Board, or whenever they may request it, an accounting of all his transactions as Treasurer, and of the financial condition of the Corporation.

If required by the Board of Directors, he shall give the Corporation a bond for the faithful discharge of his duties, in such amount and with such surety as the Board shall prescribe.

SECTION 7.CHAIRMAN -- The Chairman, if one is elected, shall preside at all meetings of the Board of Directors and stockholders, and shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors.

SECTION 8.ASSISTANT SECRETARIES AND ASSISTANT TREASURERS -- Assistant Secretaries and Assistant Treasurers, if any, may be appointed by the Chief Executive Officer, the President or Vice President and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the Secretary and by the Treasurer.

ARTICLE VI
RESIGNATIONS; FILLING OF VACANCIES; REMOVAL FROM OFFICE

SECTION 1.RESIGNATIONS -- Any director or officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and, if no time be specified, at the time of its receipt by the Board of Directors, the Chief Executive Officer, the President or the Secretary. The acceptance of a resignation shall not be necessary to make it effective.

SECTION 2.FILLING OF VACANCIES -- If the office of any officer or director becomes vacant, other than vacancies on the Board of Directors created by an increase in the number of directors, the remaining directors in office, although less than a quorum, may appoint, by a majority vote, any qualified person to fill such vacancy, who shall hold office, in the case of an officer, for the unexpired term of his predecessor and until his successor is elected and shall have qualified, or, in the case of a director, until the next annual meeting of stockholders and until his successor is elected and shall have qualified.

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Any vacancy on the Board of Directors occurring by reason of an increase in the number of directors may be filled by action of a majority of the entire Board, for a term of office continuing only until the next annual meeting of stockholders and until his successor is elected and shall have qualified, or may be filled by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of directors.

SECTION 3.REMOVAL FROM OFFICE -- A director may be removed from office only by the stockholders or the Board of Directors of the Corporation in the manner and by the vote set forth in the Charter of the Corporation. The stockholders of the Corporation may elect a successor or successors to fill any vacancy or vacancies which result from the removal of a director or directors, and each such successor will serve for the unexpired term of the removed director.

Any officer or agent elected or appointed by the Board of Directors, may be removed by said Board whenever, in its judgment, the best interests of the Corporation shall be served thereby.

ARTICLE VII
CAPITAL STOCK

SECTION 1.STOCK CERTIFICATES AND UNCERTIFICATED SHARES -- The shares of stock in the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate theretofore issued until such certificate is surrendered to the Corporation. Every holder of shares of stock of the Corporation, other than uncertificated shares, shall be entitled to a certificate or certificates signed by the Chairman, the Chief Executive Officer, the President or a Vice President, and countersigned by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, representing and certifying to the number of shares of stock owned by such holder. The signatures on certificates of stock may be either manual or facsimile.

In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. Each certificate representing shares of the capital stock of the Corporation shall bear on its face or back such statements relating to the authority of the Corporation to issue more than one class of stock, the designations and other terms and conditions of each such class of stock and restrictions on transferability of capital stock imposed by the Corporation, or a statement that such information will be provided on request and without charge, all as and to the extent which may be required by the laws of the State of Maryland.

SECTION 2.LOST CERTIFICATES -- A new certificate of stock may be issued in place of any certificate theretofore issued by the Corporation and alleged to have been lost or destroyed, and the Board of Directors may, at its discretion, request the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond, in such sum as the Board of Directors

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may direct, but not exceeding double the value of the stock, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate.

SECTION 3.TRANSFER OF SHARES -- Subject to the restrictions that may be contained in the Charter, the shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized representatives.

SECTION 4.DIVIDENDS -- Subject to the provisions of the Charter and the laws of the State of Maryland, the Board of Directors may, at any regular or special meeting, declare dividends upon the capital stock of the Corporation, as and when the Board of Directors may deem expedient.

ARTICLE VIII
MISCELLANEOUS

SECTION 1.CORPORATE SEAL -- The Board of Directors shall adopt and may alter a common seal of the Corporation. Said seal shall be circular in form and shall contain the name of the Corporation, the year of its creation, and the words: “CORPORATE SEAL, MARYLAND.” It may be used by causing it or a facsimile thereof to be impressed, affixed, or otherwise reproduced.

SECTION 2.FISCAL YEAR -- The fiscal year of the Corporation shall end on the 31st day of December of each calendar year.

SECTION 3.CHECKS, DRAFTS, NOTES -- All checks, drafts, or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as from time to time shall be determined by resolution of the Board of Directors or, in the absence of any specific resolution of the Board of Directors, or if not otherwise provided by the Board of Directors, may be signed by the Chief Executive Officer, the President or any Vice President.

SECTION 4.CORPORATE RECORDS -- The Corporation shall keep correct and complete books of account and minutes of the proceedings of its stockholders and Board of Directors.

The Corporation shall keep and maintain at its principal office a certified copy of its Charter and all amendments thereto, a certified copy of its Bylaws and all amendments thereto, a stock ledger or duplicate stock ledger, revised annually, containing the names, alphabetically arranged, of all stockholders, their residence addresses, and the number of shares held by them, respectively. In lieu of the stock ledger or duplicate stock ledger, a statement may be filed in the principal office stating the name of the custodian of the stock ledger or duplicate stock ledger, and the present and complete post office address (including street and number, if any) where such stock ledger or duplicate stock ledger is kept.

The Board of Directors shall take all reasonable steps to assure that a full and correct annual statement of the affairs of the Corporation is prepared annually, including a balance sheet and a financial statement of operations for the preceding fiscal year which shall be certified by independent certified public accountants, and distributed to stockholders within one

21

hundred and twenty (120) days after the close of the Corporation’s fiscal year and a reasonable period of time prior to the annual meeting of stockholders. Such annual statement shall also be submitted at the annual meeting and shall be filed within twenty (20) days thereafter at the principal office of the Corporation in the State of Maryland. The Board of Directors shall also be responsible for scheduling the annual meeting of stockholders.

SECTION 5.NOTICE AND WAIVER OF NOTICE -- Whenever, pursuant to the laws of the State of Maryland or these Bylaws, any notice is required to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute.

Any notice required to be given may be waived, in writing, by the person or persons entitled thereto, whether before or after the time stated therein.

ARTICLE IX
AMENDMENTS

SECTION 1.AMENDMENTS OF BYLAWS -- The stockholders by the affirmative vote of a majority of all the votes entitled to be cast on the matter, or the directors, by the affirmative vote of a majority of the entire Board of Directors, may amend or alter any of these Bylaws. Notwithstanding the foregoing, any amendment to Section 1 of Article III of the Bylaws which increases the number of directors by more than one (1) in any twelve (12) month period or increases the total number of directors to more than ten (10), and any amendment to this Section 1 of Article IX of the Bylaws, shall require approval by the Board of Directors by unanimous vote or approval by the stockholders of the Corporation by the affirmative vote of 90% of all votes entitled to be cast.

ARTICLE X
INDEMNIFICATION OF OFFICERS AND DIRECTORS

SECTION 1.INDEMNIFICATION -- The Corporation shall indemnify and hold harmless, in the manner and to the fullest extent permitted by law, any person (or the estate of any person) who is or was a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or, as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, trustee, partner, member, agent or employee of another corporation, partnership, limited liability company, association, joint venture, trust, benefit plan or other enterprise (including without limitation service in the administration and management of any separate, segregated fund established for purposes of collecting and distributing voluntary employee political contributions to federal election campaigns pursuant to the Federal

22

Election Campaign Act of 1971, as amended from time to time). To the fullest extent permitted by law, the indemnification provided herein shall include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement and any such expenses may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding and without requiring a preliminary determination as to the ultimate entitlement to indemnification. The Corporation may, with the approval of the Board of Directors, provide such indemnification and advancement of expenses as set forth in the preceding sentences of this Section 1 of this Article X of the Bylaws to agents and employees of the Corporation, other than officers and directors. The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any officer or director or employee against any liability which may be asserted against such person.

SECTION 2.PROVISIONS NOT EXCLUSIVE -- This Article X shall not be construed as a limitation upon the power of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by law, or upon the power of the Corporation to enter into contracts or undertakings of indemnity with a director, officer, employee or agent of the Corporation, nor shall it be construed as a limitation upon any other rights to which a person seeking indemnification from the Corporation may be entitled under any agreement, the Charter of the Corporation, or vote of stockholders or disinterested directors, or otherwise, both as to any action in such person’s official capacity and as to any action in another capacity while holding any office of the Corporation.

SECTION 3.RESTRICTION ON REPEAL OR MODIFICATION -- Any repeal or modification of any section of this Article X of the Bylaws by the stockholders or directors of the Corporation shall be prospective only, and shall not adversely affect any right to indemnification or advancement of expenses hereunder existing at the time of such repeal or modification.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Thomas M. Herzog, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCP, Inc. for the period ended September 30, 2017;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

4
Date: November 2, 2017	/s/ THOMAS M. HERZOG
	Thomas M. Herzog
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Peter A. Scott, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCP, Inc. for the period ended September 30, 2017;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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Date: November 2, 2017	/s/ PETER A. SCOTT
	Peter A. Scott
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of HCP, Inc., a Maryland corporation (the “Company”), hereby certifies, to his knowledge, that:

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended September 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 2, 2017	/s/ THOMAS M. HERZOG
	Thomas M. Herzog
	President and Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of HCP, Inc., a Maryland corporation (the “Company”), hereby certifies, to his knowledge, that:

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended September 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 2, 2017	/s/ PETER A. SCOTT
	Peter A. Scott
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 27, 2017
Document and Entity Information
Entity Registrant Name	HCP, INC.
Entity Central Index Key	0000765880
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		469,108,449
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Real Estate:
Buildings and improvements	$ 11,052,578	$ 11,692,654
Development costs and construction in progress	429,459	400,619
Land	1,752,890	1,881,487
Accumulated depreciation and amortization	(2,699,174)	(2,648,930)
Net real estate	10,535,753	11,325,830
Net investment in direct financing leases	715,104	752,589
Loans receivable, net	402,152	807,954
Investments in and advances to unconsolidated joint ventures	822,369	571,491
Accounts receivable, net of allowance of $4,312 and $4,459, respectively	34,571	45,116
Cash and cash equivalents	133,887	94,730
Restricted cash	27,135	42,260
Intangible assets, net	400,867	479,805
Assets held for sale, net	216,074	927,866
Other assets, net	616,169	711,624
Total assets	13,904,081	15,759,265
LIABILITIES AND EQUITY
Bank line of credit	605,837	899,718
Term loans	226,205	440,062
Senior unsecured notes	6,393,926	7,133,538
Mortgage debt	145,417	623,792
Other debt	94,818	92,385
Intangible liabilities, net	53,427	58,145
Liabilities of assets held for sale, net	8,653	3,776
Accounts payable and accrued liabilities	381,189	417,360
Deferred revenue	140,378	149,181
Total liabilities	8,049,850	9,817,957
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 469,034,877 and 468,081,489 shares issued and outstanding, respectively	469,035	468,081
Additional paid-in capital	8,224,531	8,198,890
Cumulative dividends in excess of earnings	(3,137,642)	(3,089,734)
Accumulated other comprehensive income (loss)	(24,491)	(29,642)
Total stockholders' equity	5,531,433	5,547,595
Joint venture partners	145,496	214,377
Non-managing member unitholders	177,302	179,336
Total noncontrolling interests	322,798	393,713
Total equity	5,854,231	5,941,308
Total liabilities and equity	$ 13,904,081	$ 15,759,265

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Balance Sheet Parenthetical Disclosures
Accounts receivable, allowance (in dollars)	$ 4,312	$ 4,459
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	469,034,877	468,081,489
Common stock, shares outstanding	469,034,877	468,081,489

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues:
Rental and related revenues	$ 266,109	$ 290,280	$ 816,147	$ 872,828
Tenant recoveries	36,860	34,809	105,794	99,715
Resident fees and services	126,040	170,752	391,688	500,717
Income from direct financing leases	13,240	14,234	40,516	44,791
Interest income	11,774	20,482	50,974	71,298
Total revenues	454,023	530,557	1,405,119	1,589,349
Costs and expenses:
Interest expense	71,328	117,860	235,834	361,255
Depreciation and amortization	130,588	141,407	397,893	421,181
Operating	155,338	187,714	467,582	542,751
General and administrative	23,523	34,781	67,287	83,011
Acquisition and pursuit costs	580	2,763	2,504	6,061
Impairments (recoveries), net	25,328	0	82,010	0
Total costs and expenses	406,685	484,525	1,253,110	1,414,259
Other income (expense):
Gain (loss) on sales of real estate, net	5,182	(9)	322,852	119,605
Loss on debt extinguishments	(54,227)	0	(54,227)	0
Other income (expense), net	(10,556)	1,432	40,723	5,064
Total other income (expense), net	(59,601)	1,423	309,348	124,669
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	(12,263)	47,455	461,357	299,759
Income tax benefit (expense)	5,481	424	14,630	(1,101)
Equity income (loss) from unconsolidated joint ventures	1,062	(2,053)	4,571	(4,028)
Income (loss) from continuing operations	(5,720)	45,826	480,558	294,630
Discontinued operations:
Income (loss) before transaction costs and income taxes	0	121,229	0	360,226
Transaction costs	0	(14,805)	0	(28,509)
Income tax benefit (expense)	0	1,789	0	(47,721)
Total discontinued operations	0	108,213	0	283,996
Net income (loss)	(5,720)	154,039	480,558	578,626
Noncontrolling interests' share in earnings	(1,937)	(2,789)	(7,687)	(9,540)
Net income (loss) attributable to HCP, Inc.	(7,657)	151,250	472,871	569,086
Participating securities' share in earnings	(131)	(326)	(560)	(977)
Net income (loss) applicable to common shares	$ (7,788)	$ 150,924	$ 472,311	$ 568,109
Basic earnings per common share:
Continuing operations (in dollars per share)	$ (0.02)	$ 0.09	$ 1.01	$ 0.61
Discontinued operations (in dollars per share)	0.00	0.23	0.00	0.61
Net income (loss) applicable to common shares (in dollars per share)	(0.02)	0.32	1.01	1.22
Diluted earnings per common share:
Continuing operations (in dollars per share)	(0.02)	0.09	1.01	0.61
Discontinued operations (in dollars per share)	0.00	0.23	0.00	0.61
Net income (loss) applicable to common shares (in dollars per share)	$ (0.02)	$ 0.32	$ 1.01	$ 1.22
Weighted average shares used to calculate earnings per common share:
Basic (in shares)	468,975	467,628	468,642	466,931
Diluted (in shares)	468,975	467,835	468,828	467,132
Dividends declared per common share (in dollars per share)	$ 0.37	$ 0.575	$ 1.11	$ 1.725

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (5,720)	$ 154,039	$ 480,558	$ 578,626
Other comprehensive income (loss):
Change in net unrealized gains (losses) on securities	(8)	4	(2)	(1)
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses)	(3,672)	1,184	(10,105)	1,532
Reclassification adjustment realized in net income (loss)	654	154	674	494
Change in Supplemental Executive Retirement Plan obligation	74	70	222	211
Foreign currency translation adjustment	5,750	(838)	14,362	(1,930)
Total other comprehensive income (loss)	2,798	574	5,151	306
Total comprehensive income (loss)	(2,922)	154,613	485,709	578,932
Total comprehensive income (loss) attributable to noncontrolling interests	(1,937)	(2,789)	(7,687)	(9,540)
Total comprehensive income (loss) attributable to HCP, Inc.	$ (4,859)	$ 151,824	$ 478,022	$ 569,392

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Cumulative Dividends In Excess Of Earnings	Accumulated Other Comprehensive Income (Loss)	Total Stockholders’ Equity	Total Noncontrolling Interests
Balance at Dec. 31, 2015	$ 9,746,317	$ 465,488	$ 11,647,039	$ (2,738,414)	$ (30,470)	$ 9,343,643	$ 402,674
Balance (in shares) at Dec. 31, 2015		465,488
Increase (Decrease) in Stockholders' Equity
Net income (loss)	578,626			569,086		569,086	9,540
Other comprehensive income (loss)	306				306	306
Issuance of common stock, net	55,711	$ 2,290	53,421			55,711
Issuance of common stock, net (in shares)		2,290
Conversion of DownREIT units to common stock		$ 145	5,948			6,093	(6,093)
Conversion of DownREIT units (in shares)		145
Repurchase of common stock	(8,667)	$ (236)	(8,431)			(8,667)
Repurchase of common stock (in shares)		(236)
Exercise of stock options	3,473	$ 133	3,340			3,473
Exercise of stock options (in shares)		133
Amortization of deferred compensation	19,307		19,307			19,307
Common dividends	(806,243)			(806,243)		(806,243)
Distributions to noncontrolling interests	(18,687)		(36)			(36)	(18,651)
Issuances of noncontrolling interests	4,785						4,785
Deconsolidation of noncontrolling interests	506		(36)	475		439	67
Balance at Sep. 30, 2016	9,575,434	$ 467,820	11,720,552	(2,975,096)	(30,164)	9,183,112	392,322
Balance (in shares) at Sep. 30, 2016		467,820
Balance at Dec. 31, 2016	5,941,308	$ 468,081	8,198,890	(3,089,734)	(29,642)	5,547,595	393,713
Balance (in shares) at Dec. 31, 2016		468,081
Increase (Decrease) in Stockholders' Equity
Net income (loss)	480,558			472,871		472,871	7,687
Other comprehensive income (loss)	5,151				5,151	5,151
Issuance of common stock, net	17,350	$ 998	16,352			17,350
Issuance of common stock, net (in shares)		998
Conversion of DownREIT units to common stock		$ 68	2,003			2,071	(2,071)
Conversion of DownREIT units (in shares)		68
Repurchase of common stock	(4,459)	$ (144)	(4,315)			(4,459)
Repurchase of common stock (in shares)		(144)
Exercise of stock options	768	$ 32	736			768
Exercise of stock options (in shares)		32
Amortization of deferred compensation	10,865		10,865			10,865
Common dividends	(520,779)			(520,779)		(520,779)
Distributions to noncontrolling interests	(19,520)						(19,520)
Issuances of noncontrolling interests	1,050						1,050
Deconsolidation of noncontrolling interests	(58,061)						(58,061)
Balance at Sep. 30, 2017	$ 5,854,231	$ 469,035	$ 8,224,531	$ (3,137,642)	$ (24,491)	$ 5,531,433	$ 322,798
Balance (in shares) at Sep. 30, 2017		469,035

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CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Stockholders' Equity [Abstract]
Common dividends, per share (in dollars per share)	$ 0.37	$ 0.575	$ 1.11	$ 1.725

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net income (loss)	$ 480,558	$ 578,626
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of real estate, in-place lease and other intangibles: Continuing operations	397,893	421,181
Depreciation and amortization of real estate, in-place lease and other intangibles: Discontinued operations	0	4,401
Amortization of deferred compensation	10,865	19,307
Amortization of deferred financing costs	11,141	15,598
Straight-line rents	(12,236)	(14,412)
Equity loss (income) from unconsolidated joint ventures	(4,571)	4,028
Distributions of earnings from unconsolidated joint ventures	27,692	5,919
Loss (gain) on sales of real estate, net	(322,852)	(119,605)
Allowance for loan losses	59,420	0
Deferred income tax expense (benefit)	(17,786)	47,195
Impairments (recoveries), net	22,590	0
Loss on extinguishment of debt	54,227	0
Casualty-related loss (recoveries), net	9,912	0
Foreign exchange and other losses (gains), net	(986)	(127)
Gain (loss) on sale of marketable securities	(50,895)	0
Other non-cash items	(543)	(2,035)
Changes in:
Accounts receivable, net	396	7,558
Other assets, net	(2,617)	(9,674)
Accounts payable and accrued liabilities	(24,312)	40,672
Net cash provided by (used in) operating activities	637,896	998,632
Cash flows from investing activities:
Acquisitions of real estate	(135,816)	(257,242)
Development and redevelopment of real estate	(261,510)	(304,818)
Leasing costs, tenant improvements, and recurring capital expenditures	(75,211)	(64,501)
Proceeds from sales of real estate, net	1,249,993	211,810
Contributions to unconsolidated joint ventures	(25,776)	(10,169)
Distributions in excess of earnings from unconsolidated joint ventures	4,845	14,458
Net proceeds from the RIDEA II transaction	480,614	0
Proceeds from the sales of Four Seasons investments	135,538	0
Principal repayments on direct financing leases, loans receivable and other	414,732	221,179
Investments in loans receivable, direct financing leases and other	(28,339)	(129,335)
Decrease (increase) in restricted cash	(3,247)	4,459
Net cash provided by (used in) investing activities	1,755,823	(314,159)
Cash flows from financing activities:
Net borrowings (repayments) under bank line of credit	23,419	1,157,897
Repayments under bank line of credit	(339,826)	(135,000)
Repayment of term loans	(234,459)	0
Repayments of senior unsecured notes	(750,000)	(900,000)
Issuance of mortgage and other debt	5,395	0
Repayments of mortgage and other debt	(482,487)	(249,540)
Debt extinguishment costs	(51,415)	0
Deferred financing costs	0	(1,057)
Issuance of common stock and exercise of options	18,118	59,184
Repurchase of common stock	(4,459)	(8,667)
Dividends paid on common stock	(520,779)	(806,243)
Issuance of noncontrolling interests	1,050	4,785
Distributions to noncontrolling interests	(19,520)	(18,687)
Net cash provided by (used in) financing activities	(2,354,963)	(897,328)
Effect of foreign exchange on cash and cash equivalents	401	(754)
Net increase (decrease) in cash and cash equivalents	39,157	(213,609)
Cash and cash equivalents, beginning of period	94,730	346,500
Cash and cash equivalents, end of period	$ 133,887	$ 132,891

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Business

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business

Business

Overview

HCP, Inc., a Standard & Poor’s (“S&P”) 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) which, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). The Company acquires, develops, leases, manages and disposes of healthcare real estate and provides financing to healthcare providers. The Company’s diverse portfolio is comprised of investments in the following reportable healthcare segments: (i) senior housing triple-net; (ii) senior housing operating portfolio (“SHOP”); (iii) life science and (iv) medical office.

Master Transactions and Cooperation Agreement with Brookdale

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

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

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

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

• Enhanced reporting requirements and related remedies; and

• The right to market for sale the CCRC portfolio.

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

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

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

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

• The Company will sell two triple-net assets to Brookdale or its affiliates for $35 million; and

• The Company will have the right to convert five assets to a cash flow lease by December 31, 2017. The Company has the right to terminate the cash flow lease without penalty to facilitate the sale or transition of these additional assets, at its option.

Joint Venture Transactions. Also pursuant to the MTCA, the Company and Brookdale agreed to the following:

• The Company, which currently owns 90% of the interests in its RIDEA I and RIDEA III joint ventures with Brookdale, will purchase Brookdale’s 10% noncontrolling interest in each joint venture. These joint ventures collectively own and operate 58 independent living, assisted living, memory care and/or skilled nursing facilities (the “RIDEA Facilities”);

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

• The Company will sell four of the RIDEA Facilities to Brookdale or its affiliates for $239 million;

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

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

RIDEA II Sale Transaction

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

On November 1, 2017, the Company entered into a definitive agreement with an investor group led by CPA to sell its remaining 40% ownership interest in RIDEA II. The Company expects the transaction to close in 2018. CPA has also agreed to cause refinancing of the Company’s $242 million loan receivables from RIDEA II within one year following the close of the transaction. Total expected proceeds to the Company from the transaction and refinancing of the loan receivables from RIDEA II are $332 million.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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 revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of HCP, 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. In the opinion of management, 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, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).

Real Estate

On January 1, 2017 the Company adopted Accounting Standards Update (“ASU”) No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the Financial Accounting Standards Board’s (“FASB”) definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset, or a group of assets, or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an acquired input and a substantive process that together significantly contribute to the ability to create outputs. In addition, ASU 2017-01 clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. This ASU is to be applied prospectively and the Company expects that a majority of its future real estate acquisitions and dispositions will be deemed asset transactions rather than business combinations. As a result, for asset acquisitions the Company will record identifiable assets acquired, liabilities assumed and any associated noncontrolling interests at cost on a relative fair value basis. In addition, for such asset acquisitions, no goodwill will be recognized, third party transaction costs will be capitalized and any associated contingent consideration will be recorded when the contingency is resolved. 

Reclassifications

Certain amounts in the Company’s consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Certain prior period amounts have been reclassified on consolidated statements of operations for discontinued operations (see Note 4).

Recent Accounting Pronouncements

In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). The amendments in ASU 2017-05 clarify the scope of the FASB’s recently established guidance on nonfinancial asset derecognition which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets. In addition, ASU 2017-05 clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard (see below). ASU 2017-05 is effective for annual periods beginning after December 15, 2017, including interim periods within, and must be adopted in conjunction with the Revenue ASUs (as defined below). ASU 2017-05 can be adopted using a full retrospective approach or a modified retrospective approach, resulting in a cumulative-effect adjustment to equity as of the beginning of the fiscal year in which the guidance is effective. The Company has not yet elected a transition method and is evaluating the complete impact of the adoption of the Revenue ASUs (see below) on January 1, 2018 to its consolidated financial position, results of operations and disclosures. The Company expects to complete its evaluation of the impacts of the Revenue ASUs during the fourth quarter of 2017.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amendments in ASU 2016-13 eliminate the “probable” initial threshold for recognition of credit losses in current accounting guidance and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument. Previously, when credit losses were measured under current accounting guidance, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. ASU 2016-13 is effective for fiscal years, and interim periods within, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within, beginning after December 15, 2018. A reporting entity is required to apply the amendments in ASU 2016-13 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Upon adoption of ASU 2016-13, the Company is required to reassess its financing receivables, including direct finance leases and loans receivable, and expects that application of ASU 2016-13 may result in the Company recognizing credit losses at an earlier date than would otherwise be recognized under current accounting guidance. The Company is evaluating the impact of the adoption of ASU 2016-13 on January 1, 2020 to its consolidated financial position and results of operations.

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

As the primary source of revenue for the Company is generated through leasing arrangements, which are excluded from the Revenue ASUs (as it relates to the timing and recognition of revenue), the Company expects that it may be impacted in its recognition of non-lease revenue, such as certain resident fees in its RIDEA structures (a portion of which are not generated through leasing arrangements), non-lease components of revenue from lease agreements and its recognition of real estate sale transactions. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under current guidance. As a result, the Company generally expects that the new guidance will result in more transactions qualifying as sales of real estate and revenue being recognized at an earlier date than under current accounting guidance. Additionally, upon adoption of the Revenue ASUs in 2018, the Company anticipates that it will be required to separately disclose the components of its total revenue between lease revenue accounted for under existing lease guidance and service revenue accounted for under the new Revenue ASUs, including non-lease components such as certain services embedded in base leasing fees. The Company has not yet elected a transition method and is evaluating the complete impact of the adoption of the Revenue ASUs on January 1, 2018 to its consolidated financial position, results of operations and disclosures. The Company expects to complete its evaluation of the impacts of the Revenue ASUs during the fourth quarter of 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the current accounting for leases to: (i) require lessees to put most leases on their balance sheets, but continue recognizing expenses on their income statements in a manner similar to requirements under current accounting guidance, (ii) eliminate current real estate specific lease provisions and (iii) modify the classification criteria and accounting for sales-type leases for lessors. ASU 2016-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2018. Early adoption is permitted. The transition method required by ASU 2016-02 varies based on the specific amendment being adopted. As a result of adopting ASU 2016-02, the Company will recognize all of its significant operating leases for which it is the lessee, including corporate office leases and ground leases, on its consolidated balance sheets and will capitalize fewer legal costs related to the drafting and execution of its lease agreements. From a lessor perspective, the Company expects that it will be required to further bifurcate lease agreements to separately recognize and disclose non-lease components that are executory in nature. Lease components will continue to be recognized on a straight-line basis over the lease term and certain non-lease components will be accounted for under the Revenue ASUs. The disaggregated disclosure of lease and executory non-lease components (e.g., maintenance) will be required upon the adoption of ASU 2016-02 . The Company anticipates that it will elect a practical expedient offered in ASU 2016-02 that allows an entity to not reassess the following upon adoption (must be elected as a group): (i) whether an expired or existing contract contains a lease arrangement, (ii) lease classification related to expired or existing lease arrangements, or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. The Company does not expect the bifurcation of non-lease components from a lease agreement to significantly impact the existing revenue recognition pattern. The Company is still evaluating the complete impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position, results of operations and disclosures.

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

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

• ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 is effective for fiscal years, including interim periods within, beginning after December 15, 2019 (upon the first goodwill impairment test performed during that fiscal year). Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. A reporting entity must apply the amendments in ASU 2017-04 using a prospective approach. The Company plans to adopt ASU 2017-04 during the fourth quarter of 2017.

• ASU No. 2016-18, Restricted Cash (“ASU 2016-18”). ASU 2016-18 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-18 using a full retrospective approach. The Company plans to adopt ASU 2016-18 during the fourth quarter of 2017.

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

• ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-15 using a full retrospective approach. The Company plans to adopt ASU 2016-15 during the fourth quarter of 2017.

• ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted only for updates to certain disclosure requirements. A reporting entity is required to apply the amendments in ASU 2016-01 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption.

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Real Estate Property Investments

9 Months Ended

Sep. 30, 2017

Real Estate [Abstract]

Real Estate Property Investments

Real Estate Property Investments

Investments in Real Estate

The following table summarizes the Company’s real estate acquisitions for the nine months ended September 30, 2017 (in thousands):

	Consideration				Assets Acquired
Segment	Cash Paid/ Debt Settled		Liabilities Assumed		Real Estate		Net Intangibles
Life science	$	87,467	$	2,841	$	91,208	$	(900	)
Medical office	48,349		837		44,401		4,785
	$	135,816	$	3,678	$	135,609	$	3,885

The following table summarizes the Company’s real estate acquisitions for the nine months ended September 30, 2016 (in thousands):

	Consideration				Assets Acquired
Segment	Cash Paid/ Debt Settled		Liabilities Assumed		Real Estate		Net Intangibles
Senior housing triple-net	$	76,362	$	1,200	$	71,875	$	5,687
SHOP	113,971		76,931		177,551		13,351
Life science	49,000		—		47,400		1,600
Other non-reportable segments	17,909		—		16,596		1,313
	$	257,242	$	78,131	$	313,422	$	21,951

In October 2017, the Company entered into definitive agreements to acquire a $228 million life science campus known as the Hayden Research Campus located in the Boston suburb of Lexington, Massachusetts. The Company will own an interest in this campus through a consolidated joint venture with King Street Properties. The campus includes two existing buildings totaling 400,000 square feet and is currently 66% leased.

Impairments of Real Estate

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

Casualty-Related Losses

As a result of Hurricane Harvey and Hurricane Irma during the third quarter of 2017, the Company recorded an estimated $11 million of casualty-related losses, net of a small insurance recovery. The losses are comprised of $6 million of property damage and (ii) $5 million of other associated costs, including storm preparation, clean up, relocation and other costs. Of the total $11 million casualty losses incurred, $10 million was recorded in Other income (expense), net, and $1 million was recorded in Equity income (loss) from unconsolidated joint ventures as it relates to casualty losses for properties owned by certain of our unconsolidated joint ventures. In addition, the Company recorded a $2 million deferred tax benefit associated with the casualty-related losses.

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Discontinued Operations and Dispositions of Real Estate

9 Months Ended

Sep. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Dispositions of Real Estate

 Discontinued Operations and Dispositions of Real Estate

Discontinued Operations - Quality Care Properties, Inc.

On October 31, 2016, the Company completed the spin-off (the “Spin-Off”) of its subsidiary, Quality Care Properties, Inc. (“QCP”). The Spin-Off included 338 properties, primarily comprised of the HCR ManorCare, Inc. (“HCRMC”) direct financing lease (“DFL”) investments and an equity investment in HCRMC. QCP is an independent, publicly-traded, self-managed and self-administrated REIT.

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

Summarized financial information for discontinued operations for the three and nine months ended September 30, 2016 is as follows (in thousands):

	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenues:
Rental and related revenues	$	6,898		$	20,620
Tenant recoveries	386			1,147
Income from direct financing leases	116,429			345,940
Total revenues	123,713			367,707
Costs and expenses:
Depreciation and amortization	(1,467		)	(4,401		)
Operating	(1,033		)	(3,076		)
General and administrative	(6		)	(68		)
Acquisition and pursuit costs	(14,805		)	(28,509		)
Other income (expense), net	22			64
Income (loss) before income taxes	106,424			331,717
Income tax benefit (expense)	1,789			(47,721		)
Total discontinued operations	$	108,213		$	283,996

HCR ManorCare, Inc.

Discontinued operations is primarily comprised of QCP’s HCRMC DFL investments. During the nine months ended September 30, 2016, the Company received cash payments of $346 million from the HCRMC DFL investments.

No accretion related to its HCRMC DFL investments was recognized in 2016 due to the Company utilizing a cash basis method of accounting beginning January 1, 2016.

The Company’s acquisition of the HCRMC DFL investments in 2011 was subject to federal and state built-in gain tax of up to $2 billion if all the assets were sold within 10 years of the acquisition date. At the time of acquisition, the Company intended to hold the assets for at least 10 years, at which time the assets would no longer be subject to the built-in gain tax. In December 2015, the U.S. Federal Government passed legislation which permanently reduced the holding period, for federal tax purposes, to 5 years, which the Company satisfied in April 2016. This legislation was not extended to certain states, which maintain a 10 year requirement. During the three months ended March 31, 2016, the Company determined that it may sell assets during the next five years and, therefore, recorded a deferred tax liability of $49 million representing its estimated exposure to state built-in gain tax.

Dispositions of Real Estate

Held for Sale

At September 30, 2017, three senior housing triple-net facilities and four life science facilities were classified as held for sale, with an aggregate carrying value of $216 million, primarily comprised of real estate assets of $199 million.

At December 31, 2016, 64 senior housing triple-net facilities, four life science facilities and a SHOP facility were classified as held for sale, with an aggregate carrying value of $928 million, primarily comprised of real estate assets of $809 million. All facilities held for sale at December 31, 2016 were sold during the first quarter of 2017.

2017 Dispositions 

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

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

In April 2017, the Company sold a land parcel in San Diego, California for $27 million and one life science building in San Diego, California for $5 million and recognized a total net gain on sales of $1 million.

In August 2017, the Company sold two senior housing triple-net facilities for $15 million and recognized a gain on sale of $5 million.

2016 Dispositions

During the nine months ended September 30, 2016, the Company sold five post-acute/skilled nursing facilities and two senior housing triple-net facilities for $130 million, a life science facility for $74 million, three medical office buildings for $20 million and a SHOP facility for $6 million and recognized total gain on sales of $120 million.

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Net Investment in Direct Financing Leases

9 Months Ended

Sep. 30, 2017

Leases, Capital [Abstract]

Net Investment in Direct Financing Leases

Net Investment in Direct Financing Leases

Net investment in DFLs consisted of the following (dollars in thousands):

	September 30, 2017			December 31, 2016
Minimum lease payments receivable	$	1,076,049		$	1,108,237
Estimated residual value	504,457			539,656
Less unearned income	(865,402		)	(895,304		)
Net investment in direct financing leases	$	715,104		$	752,589
Properties subject to direct financing leases	29			30

Certain DFLs contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms.

In February 2017, the Company sold a hospital within a DFL in Palm Beach Gardens, Florida for $43 million to the current tenant and recognized a gain on sale of $4 million.

Direct Financing Lease Internal Ratings

The following table summarizes the Company’s internal ratings for DFLs at September 30, 2017 (dollars in thousands):

	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment				Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing triple-net	$	630,500	88%	$	273,383	$	357,117	$	—
Other non-reportable segments	84,604		12	84,604		—		—
	$	715,104	100%	$	357,987	$	357,117	$	—

Beginning September 30, 2013, the Company placed a 14-property senior housing triple-net DFL (the “DFL Watchlist Portfolio”) on nonaccrual status and “Watch List” status. The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue for the DFL Watchlist Portfolio has been recognized on a cash basis. During the three months ended September 30, 2017 and 2016, the Company recognized income from DFLs of $4 million and $3 million, respectively, and received cash payments of $5 million from the DFL Watchlist Portfolio. During the nine months ended September 30, 2017 and 2016, the Company recognized income from DFLs of $10 million and received cash payments of $14 million and $15 million, respectively, from the DFL Watchlist Portfolio. The carrying value of the DFL Watchlist Portfolio was $357 million and $361 million at September 30, 2017 and December 31, 2016, respectively.

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Loans Receivable

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Loans Receivable

Loans Receivable

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

	September 30, 2017								December 31, 2016
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine(1)	$	—	$	277,299		$	277,299		$	—	$	615,188		$	615,188
Other(2)	184,880		—			184,880			195,946		—			195,946
Unamortized discounts, fees and costs(1)	—		(607		)	(607		)	413		(3,593		)	(3,180		)
Allowance for loan losses(3)	—		(59,420		)	(59,420		)	—		—			—
	$	184,880	$	217,272		$	402,152		$	196,359	$	611,595		$	807,954

_______________________________________

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

(2) At September 30, 2017 and December 31, 2016, included £122 million ($163 million) and £113 million ($140 million), respectively, outstanding primarily related to Maria Mallaband loans.

(3) Related to the Company’s mezzanine loan facility to Tandem Health Care discussed below.

Loans Receivable Internal Ratings

The following table summarizes the Company’s internal ratings for loans receivable at September 30, 2017 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	184,880	46%	$	184,880	$	—	$	—
Other secured	217,272		54	19,898		—		197,374
	$	402,152	100%	$	204,778	$	—	$	197,374

Real Estate Secured Loans

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

Other Secured Loans

HC-One Facility. On June 30, 2017, the Company received £283 million ($367 million) from the repayment of its HC-One mezzanine loan.

Tandem Health Care Loan. On July 31, 2012, the Company closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), as part of the recapitalization of a post-acute/skilled nursing portfolio (the “Tandem Portfolio”). The Company funded $100 million (the “First Tranche”) at closing and funded an additional $102 million (the “Second Tranche”) in June 2013. In May 2015, the Company increased and extended the mezzanine loan facility with Tandem to: (i) fund $50 million (the “Third Tranche”) and $5 million (the “Fourth Tranche”), which proceeds were used to repay a portion of Tandem’s existing senior and mortgage debt, respectively; (ii) extend its maturity to October 2018; and (iii) extend the prepayment penalty period through January 2017. The tranches (collectively, the “Tandem Mezzanine Loan”) bear interest at fixed annual rates of 12%, 14%,  6% and 6% per annum for the First, Second, Third and Fourth Tranches, respectively. The blended rate for the Tandem Mezzanine Loan is 11.5% per year.

Tandem leases the entire Tandem Portfolio to Consulate Health Care (“Consulate”) under a master lease (the “Tandem and Consulate Lease”). At September 30, 2017, as a result of the Tandem Portfolio’s operating performance, there are outstanding events of default under the Tandem and Consulate Lease (“Events of Default”) due to: (i) Consulate’s failure to meet certain financial covenants under the Tandem and Consulate Lease and (ii) events of default under Consulate’s working capital facility, which, through a cross-default provision, are Events of Default. Starting in April 2017, Consulate failed to pay the full amount of its rent under the Tandem and Consulate Lease which triggered another Event of Default. Through cross-default provisions, these Events of Default are also events of default under the Tandem Mezzanine Loan and Tandem’s senior mortgage debt (each, a “Loan Event of Default”). The Tandem Mezzanine Loan requires Tandem to pay default interest at a rate of 16.5% per year during periods in which there is an outstanding Loan Event of Default. Tandem did not pay the additional 5% default interest rate spread above the 11.5% and, therefore, created a monetary event of default under the Tandem Mezzanine Loan.

Although Tandem continues to remain current on its non-default interest payment obligations under the Tandem Mezzanine Loan, the Company believes that it is probable it will be unable to collect all interest and principal payments, including default interest payments, according to the contractual terms of the Tandem Mezzanine Loan. As the Tandem Mezzanine Loan is deemed collateral-dependent and the carrying amount of the Tandem Mezzanine Loan exceeded the fair value of the underlying collateral at June 30, 2017, as part of its quarterly review process, the Company recorded an impairment charge and related allowance of $57 million during the three months ended June 30, 2017, reducing the carrying value to $200 million, which approximated the fair value of the collateral as of June 30, 2017. The decline in fair value of the collateral was driven by a variety of factors, including recent operating results of the underlying real estate assets, as well as market and industry data, that reflect a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector. The calculation of the fair value of the collateral was primarily based on an income approach and relies on forecasted EBITDAR (defined as earnings before interest, taxes, depreciation and amortization, and rent) and market data, including, but not limited to, sales price per unit/bed, rent coverage ratios, and real estate capitalization rates. All valuation inputs are considered to be Level 2 measurements within the fair value hierarchy.

The Company entered into a forbearance agreement with Tandem on May 1, 2017, pursuant to which it agreed to forbear from exercising remedies, including waiving default interest, with respect to the above-described Loan Events of Default under the Tandem Mezzanine Loan until June 30, 2017, which was subsequently extended to July 31, 2017 with certain modifications.

On July 31, 2017, subsequent to its second quarter 2017 quarterly review process and the aforementioned impairment, the Company entered into a binding agreement (“Agreement”) with the borrowers to provide an option to repay the Tandem Mezzanine Loan at a discounted value of $197 million (the “Repayment Value”). Upon execution of the Agreement, the borrowers posted a $2 million non-refundable deposit and secured the right to repay the Tandem Mezzanine Loan by October 25, 2017 (at the Repayment Value). A second non-refundable deposit of $2 million was posted by the borrowers on August 31, 2017. The borrowers also retained the option to extend the term of the Agreement to December 31, 2017 upon satisfaction of one of the following requirements: (i) posting of an additional $4 million non-refundable deposit, (ii) providing evidence of a commitment letter(s) for financing to satisfy the full Repayment Value, which is subject to the Company’s approval and may be granted or withheld in the Company’s sole discretion, or (iii) paying down the principal balance of the Tandem Mezzanine Loan by at least $50 million. On October 25, 2017, the borrowers exercised their option to extend the term of the Agreement to December 31, 2017 by posting an additional $4 million non-refundable deposit. The borrowers are obligated to continue making interest payments based on the $257 million par value of the Tandem Mezzanine Loan through the repayment date, adjusted for any principal payments received from Tandem. As part of the Agreement, the Company agreed to forbear from exercising remedies, including waiving default interest, with respect to the above-described Loan Events of Default under the Tandem Mezzanine Loan, through December 31, 2017. If the option is not exercised, the entire $257 million par value of the Tandem Mezzanine Loan is due on October 31, 2018.

During the third quarter of 2017, the Company recorded an additional $3 million impairment charge to write down the carrying value of the Tandem Mezzanine Loan to the Repayment Value and assigned the Tandem Mezzanine Loan an internal rating of Workout. The repayment of the Tandem Mezzanine Loan is subject to customary closing conditions and may not occur within the anticipated timeframe or at all.

Beginning in the first quarter of 2017, the Company elected to recognize interest income on a cash basis. During both the three months ended September 30, 2017 and 2016, the Company recognized interest income and received cash payments of $8 million from Tandem. During both the nine months ended September 30, 2017 and 2016, the Company recognized interest income and received cash payments of $23 million from Tandem. The carrying value of the Tandem Mezzanine Loan was $197 million and $256 million at September 30, 2017 and December 31, 2016, respectively.

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Investments in and Advances to Unconsolidated Joint Ventures

9 Months Ended

Sep. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

Investments in and Advances to Unconsolidated Joint Ventures

Investments in and Advances to Unconsolidated Joint Ventures

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

				Carrying Amount
				September 30,		December 31,
Entity(1)	Segment	Ownership%		2017		2016
CCRC JV(2)	SHOP		49	$	427,159	$	439,449
RIDEA II	SHOP		40	257,766		—
Life Science JVs(3)	Life science		50 - 63	64,111		67,879
MBK JV(2)	SHOP		50	38,366		38,909
Development JVs(5)	SHOP		50 - 90	19,867		10,459
Medical Office JVs(4)	Medical office		20 - 67	13,620		13,438
K&Y JVs(6)	Other non-reportable segments		80	1,465		1,342
Advances to unconsolidated joint ventures, net				15		15
				$	822,369	$	571,491

_______________________________________

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

(2) Includes two unconsolidated JVs in a RIDEA structure (PropCo and OpCo).

(3) Includes the following unconsolidated partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

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

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

(6) Includes three unconsolidated joint ventures.

See Note 1 for further information on the deconsolidation of RIDEA II.

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Intangibles

9 Months Ended

Sep. 30, 2017

Intangibles

Intangibles

Intangibles

The following tables summarize the Company’s intangible lease assets and liabilities (in thousands):

Intangible lease assets	September 30, 2017			December 31, 2016
Gross intangible lease assets	$	775,848		$	911,697
Accumulated depreciation and amortization	(374,981		)	(431,892		)
Net intangible lease assets	$	400,867		$	479,805

Intangible lease liabilities	September 30, 2017			December 31, 2016
Gross intangible lease liabilities	$	124,454		$	163,924
Accumulated depreciation and amortization	(71,027		)	(105,779		)
Net intangible lease liabilities	$	53,427		$	58,145

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Other Assets

9 Months Ended

Sep. 30, 2017

Other Assets [Abstract]

Other Assets

Other Assets

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

	September 30, 2017		December 31, 2016
Straight-line rent receivables, net of allowance of $22,705 and $25,059, respectively	$	313,627	$	311,776
Leasing costs and inducements, net	102,557		156,820
Deferred tax assets	60,254		42,458
Goodwill	47,019		42,386
Marketable debt securities, net	18,567		68,630
Other	74,145		89,554
Total other assets, net	$	616,169	$	711,624

Four Seasons Health Care Senior Notes 

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

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Debt

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Debt

Debt

Bank Line of Credit and Term Loans

The Company’s $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on March 31, 2018 and contains a committed one-year extension option, at a cost of 30 basis points. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends on the Company’s credit ratings. The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings. Based on the Company’s credit ratings at September 30, 2017, the margin on the Facility was 1.05% and the facility fee was 0.20%. The Facility also includes a feature that allows the Company to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments. During the nine months ended September 30, 2017, the Company had net repayments of $316 million primarily using proceeds from the RIDEA II joint venture disposition, the sale of its Four Seasons Notes and the repayment of its HC-One Facility. At September 30, 2017, the Company had $606 million, including £105 million ($141 million), outstanding under the Facility, with a weighted average effective interest rate of 2.40%.

On October 19, 2017, the Company terminated the Facility and executed a new $2.0 billion unsecured revolving line of credit facility (the “New Facility”) maturing on October 19, 2021. Borrowings under the New Facility accrue interest at LIBOR plus a margin that depends on the Company’s credit ratings (1.00% initially). The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings (0.20% initially). The New Facility contains two, six-month extension options and 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.

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 million unsecured term loan (the “2012 Term Loan”). In March 2017, the Company repaid the 2012 Term Loan.

On June 30, 2017, the Company repaid £51 million of its four-year unsecured term loan entered into in January 2015 (the “2015 Term Loan”). Concurrently, the Company terminated its three-year interest rate swap which fixed the interest of the 2015 Term Loan, and therefore, beginning June 30, 2017, the 2015 Term Loan accrues interest at a rate of British pound sterling (“GBP”) LIBOR plus 1.15%, subject to adjustments based on the Company’s credit ratings. At September 30, 2017 the Company had £169 million ($226 million) outstanding on the 2015 Term Loan.

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

Senior Unsecured Notes

At September 30, 2017, the Company had senior unsecured notes outstanding with an aggregate principal balance of $6.5 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, 2017.

The following table summarizes the Company’s senior unsecured note payoffs for the nine months ended September 30, 2017 (dollars in thousands):

Date	Amount		Coupon Rate
May 1, 2017	$	250,000	5.625	%
July 27, 2017(1)	$	500,000	5.375	%

_______________________________________

(1) The Company recorded a $54 million loss on debt extinguishment related to the repurchase of senior notes.

The following table summarizes the Company’s senior unsecured notes payoffs for the year ended December 31, 2016 (dollars in thousands):

Date	Amount		Coupon Rate
February 1, 2016	$	500,000	3.750	%
September 15, 2016	$	400,000	6.300	%
November 30, 2016	$	500,000	6.000	%
November 30, 2016	$	600,000	6.700	%

There were no senior unsecured notes issuances for the nine months ended September 30, 2017 and the year ended December 31, 2016.

Mortgage Debt

At September 30, 2017, the Company had $139 million in aggregate principal of mortgage debt outstanding, which is secured by 16 healthcare facilities (including redevelopment properties) with a carrying value of $303 million. In March 2017, the Company paid off $472 million of mortgage debt.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at September 30, 2017 (in thousands):

Year	Bank Line of Credit(1)		2015 Term Loan(2)			Senior Unsecured Notes(3)			Mortgage Debt(4)		Total(5)
2017 (three months)	$	—	$	—		$	—		$	847	$	847
2018	605,837		—			—			3,512		609,349
2019	—		226,680			450,000			3,700		680,380
2020	—		—			800,000			3,758		803,758
2021	—		—			700,000			11,117		711,117
Thereafter	—		—			4,500,000			116,481		4,616,481
	605,837		226,680			6,450,000			139,415		7,421,932
(Discounts), premium and debt costs, net	—		(475		)	(56,074		)	6,002		(50,547		)
	$	605,837	$	226,205		$	6,393,926		$	145,417	$	7,371,385

_______________________________________

(1) Includes £105 million translated into U.S. dollars (“USD”). The Bank Line of Credit was terminated on October 19, 2017 and the Company executed a New Facility which matures in October 2021.

(2) Represents £169 million translated into USD.

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

(4) Interest rates on the mortgage debt ranged from 2.01% to 5.91% with a weighted average effective interest rate of 4.19% and a weighted average maturity of 20 years.

(5) Excludes $95 million of other debt that have no scheduled maturities.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Commitments

From October 31, 2016 through June 2017, HCP was the sole lender to QCP of an unsecured revolving credit facility (the “Unsecured Revolving Credit Facility”) which had a total commitment of $100 million at inception. The Unsecured Revolving Credit Facility was available to be drawn upon by QCP through October 31, 2017 with any drawn amounts due on October 31, 2018. Commitments under the Unsecured Revolving Credit Facility automatically and permanently decreased each calendar month by an amount equal to 50% of QCP’s and its restricted subsidiaries’ retained cash flow for the prior calendar month. All borrowings under the Unsecured Revolving Credit Facility were subject to the satisfaction of certain conditions, including (i) QCP’s senior secured revolving credit facility being unavailable, (ii) the failure of HCRMC to pay rent and (iii) other customary conditions, including the absence of a default and the accuracy of representations and warranties. QCP could only draw on the Unsecured Revolving Credit Facility prior to the one-year anniversary of the completion of the Spin-Off. Borrowings under the Unsecured Revolving Credit Facility would have born interest at a rate equal to LIBOR, subject to a 1.00% floor, plus an applicable margin of 6.25%. In addition to paying interest on outstanding principal under the Unsecured Revolving Credit Facility, QCP was required to pay a facility fee equal to 0.50% per annum of the unused capacity under the Unsecured Revolving Credit Facility to HCP, payable quarterly. No amounts were drawn on the Unsecured Revolving Credit Facility and the total commitment was reduced to zero at June 30, 2017.

Legal Proceedings

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

Class Action

On May 9, 2016, a purported stockholder of the Company filed a putative class action complaint, Boynton Beach Firefighters’ Pension Fund v. HCP, Inc., et al., Case No. 3:16-cv-01106-JJH, in the U.S. District Court for the Northern District of Ohio against the Company, certain of its officers, HCRMC, and certain of its officers, asserting violations of the federal securities laws. The suit asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and alleges that the Company made certain false or misleading statements relating to the value of and risks concerning its investment in HCRMC by allegedly failing to disclose that HCRMC had engaged in billing fraud, as alleged by the U.S. Department of Justice in a pending suit against HCRMC arising from the False Claims Act. The plaintiff in the suit demands compensatory damages (in an unspecified amount), costs and expenses (including attorneys’ fees and expert fees), and equitable, injunctive, or other relief as the Court deems just and proper. As the Boynton Beach action is in its early stages and a lead plaintiff has not yet been named, the defendants have not yet responded to the complaint. The Company believes the suit to be without merit and intends to vigorously defend against it.

Derivative Actions

On June 16, 2016 and July 5, 2016, purported stockholders of the Company filed two derivative actions, respectively Subodh v. HCR ManorCare Inc., et al., Case No. 30-2016-00858497-CU-PT-CXC and Stearns v. HCR ManorCare, Inc., et al., Case No. 30-2016-00861646-CU-MC-CJC, in the Superior Court of California, County of Orange, against certain of the Company’s current and former directors and officers and HCRMC. The Company is named as a nominal defendant. As both derivative actions contained substantially the same allegations, they have been consolidated into a single action. The consolidated action alleges that the defendants engaged in various acts of wrongdoing, including, among other things, breaching fiduciary duties by publicly making false or misleading statements of fact regarding HCRMC’s finances and prospects, and failing to maintain adequate internal controls. As the Subodh/Stearns action is in the early stages, defendants have not yet responded to the complaint. On April 18, 2017, the Court approved the parties’ stipulation staying the action pending further developments, including in the related securities class action litigation. The Court also adjourned the status conference scheduled for April 27, 2017 to January 10, 2018.

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

On July 21, 2017, a purported stockholder of the Company filed another derivative action, Kelley v. HCR Manorcare, Inc., et al., Case No. 8:17-cv-01259, in federal court in the Central District of California, against certain of the Company’s current and former directors and officers and HCRMC. The Company is named as a nominal defendant. The Kelley complaint asserts similar claims to those asserted in Weldon and in the California derivative actions. Like Weldon, the Kelley complaint also additionally alleges that the Company made false statements in its 2016 proxy statement, and asserts a claim for a violation of Section 14(a) of the Exchange Act. The case is currently before Judge James V. Selna. On September 25, 2017, Defendants moved to transfer the action to the Northern District of Ohio (i.e., the court where the class action and other federal derivative action are pending) or, in the alternative, to stay the action.  Oral argument is currently scheduled for December 4, 2017. Judge Selna granted the Company’s joint stipulation to stay the time to respond to the complaint until 60 days after the transfer or stay motion is decided.

Welltower v. Scott M. Brinker

On May 15, 2017, Welltower, Inc. filed a complaint in the Court of Common Pleas in Lucas County, Ohio, against Scott M. Brinker, alleging that he violated his non-competition obligations to Welltower prior to and upon acceptance of an offer of employment with the Company. In connection with Mr. Brinker’s hiring, the Company agreed to indemnify him for legal fees and any losses that result from the action. The matter is scheduled to be heard the week of November 6, 2017. The Company believes the suit to be without merit.

The Company is unable to estimate the amount of loss or range of reasonably possible losses with respect to the matters discussed above at September 30, 2017.

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Equity

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Equity

Equity

Accumulated Other Comprehensive Income (Loss)

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

	September 30, 2017			December 31, 2016
Cumulative foreign currency translation adjustment	$	(8,455	)	$	(22,817	)
Unrealized gains (losses) on cash flow hedges, net	(13,073		)	(3,642		)
Supplemental Executive Retirement plan minimum liability	(2,907		)	(3,129		)
Unrealized gains (losses) on available for sale securities	(56		)	(54		)
Total other comprehensive income (loss)	$	(24,491	)	$	(29,642	)

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Segment Disclosures

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Segment Disclosures

Segment Disclosures

The Company evaluates its business and allocates resources based on its reportable business segments: (i) senior housing triple-net, (ii) SHOP, (iii) life science and (iv) medical office. Under the medical office and life science segments, the Company invests through the acquisition and development of medical office buildings (“MOBs”) and life science facilities, which generally require a greater level of property management. The Company’s senior housing facilities are managed utilizing triple-net leases and RIDEA structures. The Company has non-reportable segments that are comprised primarily of the Company’s debt investments, hospital properties and care homes in the United Kingdom (“U.K.”). The accounting policies of the segments are the same as those in Note 2 to the Consolidated Financial Statements in the Company’s 2016 Annual Report on Form 10-K filed with the SEC, as updated by Note 2 herein. During the year ended December 31, 2016, 17 senior housing triple-net facilities were transitioned to a RIDEA structure (reported in the Company’s SHOP segment). During the nine months ended September 30, 2017, four senior housing triple-net facilities were transferred to the Company’s SHOP segment, of which one was transitioned to a RIDEA structure. The Company evaluates performance based upon: (i) property net operating income from continuing operations (“NOI”) and (ii) Adjusted NOI of the combined consolidated and unconsolidated investments in each segment. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, non-refundable entrance fees, net of entrance fee amortization and lease termination fees and the impact of deferred community fee income and expense. The adjustments to NOI and resulting Adjusted NOI for SHOP have been restated for prior periods presented to conform to the current period presentation for the adjustment to exclude the impact of deferred community fee income and expense, resulting in recognition as cash is received and expenses are paid.

Non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, marketable equity securities and, if any, real estate held for sale. Interest expense, depreciation and amortization, and non-property specific revenues and expenses are not allocated to individual segments in evaluating the Company’s segment-level performance. See Note 17 for other information regarding concentrations of credit risk.

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

For the three months ended September 30, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	77,220		$	126,040		$	90,174		$	119,847		$	28,968		$	—		$	442,249
HCP share of unconsolidated JV revenues	—			81,936			2,031			496			421			—			84,884
Operating expenses	(934		)	(86,821		)	(19,960		)	(46,486		)	(1,137		)	—			(155,338		)
HCP share of unconsolidated JV operating expenses	—			(65,035		)	(433		)	(143		)	(20		)	—			(65,631		)
NOI	76,286			56,120			71,812			73,714			28,232			—			306,164
Adjustments to NOI(2)	(600		)	4,551			(751		)	(582		)	(1,283		)	—			1,335
Adjusted NOI	75,686			60,671			71,061			73,132			26,949			—			307,499
Addback adjustments	600			(4,551		)	751			582			1,283			—			(1,335		)
Interest income	—			—			—			—			11,774			—			11,774
Interest expense	(640		)	(933		)	(87		)	(126		)	(618		)	(68,924		)	(71,328		)
Depreciation and amortization	(25,547		)	(24,884		)	(30,851		)	(42,047		)	(7,259		)	—			(130,588		)
General and administrative	—			—			—			—			—			(23,523		)	(23,523		)
Acquisition and pursuit costs	—			—			—			—			—			(580		)	(580		)
Recoveries (impairments), net	—			—			—			—			(25,328		)	—			(25,328		)
Gain (loss) on sales of real estate, net	(6		)	5,180			8			—			—			—			5,182
Loss on debt extinguishments	—			—			—			—			—			(54,227		)	(54,227		)
Other income (expense), net	—			—			—			—			—			(10,556		)	(10,556		)
Income tax benefit (expense)	—			—			—			—			—			5,481			5,481
Less: HCP share of unconsolidated JV NOI	—			(16,901		)	(1,598		)	(353		)	(401		)	—			(19,253		)
Equity income (loss) from unconsolidated JVs	—			(245		)	789			274			244			—			1,062
Net income (loss)	$	50,093		$	18,337		$	40,073		$	31,462		$	6,644		$	(152,329	)	$	(5,720	)

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

For the three months ended September 30, 2016:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	104,262		$	170,739		$	90,847		$	113,653		$	30,574		$	—		$	510,075
HCP share of unconsolidated JV revenues	—			50,973			1,929			502			410			—			53,814
Operating expenses	(1,794		)	(121,502		)	(18,487		)	(44,738		)	(1,193		)	—			(187,714		)
HCP share of unconsolidated JV operating expenses	—			(42,463		)	(406		)	(148		)	(20		)	—			(43,037		)
NOI	102,468			57,747			73,883			69,269			29,771			—			333,138
Adjustments to NOI(2)	(1,003		)	4,081			(314		)	(814		)	(1,140		)	—			810
Adjusted NOI	101,465			61,828			73,569			68,455			28,631			—			333,948
Addback adjustments	1,003			(4,081		)	314			814			1,140			—			(810		)
Interest income	—			—			—			—			20,482			—			20,482
Interest expense	(644		)	(8,130		)	(634		)	(1,608		)	(2,260		)	(104,584		)	(117,860		)
Depreciation and amortization	(34,030		)	(26,837		)	(31,967		)	(41,111		)	(7,462		)	—			(141,407		)
General and administrative	—			—			—			—			—			(34,781		)	(34,781		)
Acquisition and pursuit costs	—			—			—			—			—			(2,763		)	(2,763		)
Gain (loss) on sales of real estate, net	—			—			—			(9		)	—			—			(9		)
Other income (expense), net	—			—			—			—			—			1,432			1,432
Income tax benefit (expense)	—			—			—			—			—			424			424
Less: HCP share of unconsolidated JV NOI	—			(8,510		)	(1,523		)	(354		)	(390		)	—			(10,777		)
Equity income (loss) from unconsolidated JVs	—			(3,517		)	778			462			224			—			(2,053		)
Discontinued operations	—			—			—			—			—			108,213			108,213
Net income (loss)	$	67,794		$	10,753		$	40,537		$	26,649		$	40,365		$	(32,059	)	$	154,039

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

For the nine months ended September 30, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	255,332		$	391,684		$	262,224		$	357,381		$	87,524		$	—		$	1,354,145
HCP share of unconsolidated JV revenues	—			239,667			5,975			1,481			1,256			—			248,379
Operating expenses	(2,927		)	(267,226		)	(56,024		)	(137,930		)	(3,475		)	—			(467,582		)
HCP share of unconsolidated JV operating expenses	—			(190,049		)	(1,234		)	(431		)	(58		)	—			(191,772		)
NOI	252,405			174,076			210,941			220,501			85,247			—			943,170
Adjustments to NOI(2)	(2,844		)	12,229			(1,094		)	(2,321		)	(3,164		)	—			2,806
Adjusted NOI	249,561			186,305			209,847			218,180			82,083			—			945,976
Addback adjustments	2,844			(12,229		)	1,094			2,321			3,164			—			(2,806		)
Interest income	—			—			—			—			50,974			—			50,974
Interest expense	(1,898		)	(6,950		)	(288		)	(382		)	(3,541		)	(222,775		)	(235,834		)
Depreciation and amortization	(77,478		)	(75,657		)	(95,648		)	(127,261		)	(21,849		)	—			(397,893		)
General and administrative	—			—			—			—			—			(67,287		)	(67,287		)
Acquisition and pursuit costs	—			—			—			—			—			(2,504		)	(2,504		)
Recoveries (impairments), net	—			—			—			—			(82,010		)	—			(82,010		)
Gain (loss) on sales of real estate, net	268,227			5,313			45,922			(406		)	3,796			—			322,852
Loss on debt extinguishments	—			—			—			—			—			(54,227		)	(54,227		)
Other income (expense), net	—			—			—			—			—			40,723			40,723
Income tax benefit (expense)	—			—			—			—			—			14,630			14,630
Less: HCP share of unconsolidated JV NOI	—			(49,618		)	(4,741		)	(1,050		)	(1,198		)	—			(56,607		)
Equity income (loss) from unconsolidated JVs	—			683			2,322			846			720			—			4,571
Net income (loss)	$	441,256		$	47,847		$	158,508		$	92,248		$	32,139		$	(291,440	)	$	480,558

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

For the nine months ended September 30, 2016:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	319,989		$	500,704		$	269,994		$	331,881		$	95,483		$	—		$	1,518,051
HCP share of unconsolidated JV revenues	—			152,424			5,628			1,503			1,224			—			160,779
Operating expenses	(5,521		)	(350,949		)	(53,191		)	(129,715		)	(3,375		)	—			(542,751		)
HCP share of unconsolidated JV operating expenses	—			(125,244		)	(1,173		)	(452		)	(30		)	—			(126,899		)
NOI	314,468			176,935			221,258			203,217			93,302			—			1,009,180
Adjustments to NOI(2)	(8,464		)	14,648			(1,545		)	(2,361		)	(1,926		)	—			352
Adjusted NOI	306,004			191,583			219,713			200,856			91,376			—			1,009,532
Addback adjustments	8,464			(14,648		)	1,545			2,361			1,926			—			(352		)
Interest income	—			—			—			—			71,298			—			71,298
Interest expense	(8,859		)	(23,818		)	(1,904		)	(4,899		)	(7,067		)	(314,708		)	(361,255		)
Depreciation and amortization	(101,737		)	(78,124		)	(97,640		)	(120,432		)	(23,248		)	—			(421,181		)
General and administrative	—			—			—			—			—			(83,011		)	(83,011		)
Acquisition and pursuit costs	—			—			—			—			—			(6,061		)	(6,061		)
Gain (loss) on sales of real estate, net	23,940			—			29,428			8,333			57,904			—			119,605
Other income (expense), net	—			—			—			—			—			5,064			5,064
Income tax benefit (expense)	—			—			—			—			—			(1,101		)	(1,101		)
Less: HCP share of unconsolidated JV NOI	—			(27,180		)	(4,455		)	(1,051		)	(1,194		)	—			(33,880		)
Equity income (loss) from unconsolidated JVs	—			(8,477		)	2,263			1,541			645			—			(4,028		)
Discontinued operations	—			—			—			—			—			283,996			283,996
Net income (loss)	$	227,812		$	39,336		$	148,950		$	86,709		$	191,640		$	(115,821	)	$	578,626

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
Segment	2017		2016		2017		2016
Senior housing triple-net	$	77,220	$	104,262	$	255,332	$	319,989
SHOP	126,040		170,739		391,684		500,704
Life science	90,174		90,847		262,224		269,994
Medical office	119,847		113,653		357,381		331,881
Other non-reportable segments	40,742		51,056		138,498		166,781
Total revenues	$	454,023	$	530,557	$	1,405,119	$	1,589,349

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

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

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

For the three months ended September 30, 2017, diluted loss per share from continuing operations is calculated using the weighted-average common shares outstanding during the period, as the effect of shares issuable under employee compensation plans and upon DownREIT unit conversions would have been anti-dilutive. All DownREIT units and approximately 1 million stock options were anti-dilutive for all periods presented.

Additionally, during the three months ended September 30, 2016, 6 million shares, issuable upon conversion of 4 million DownREIT units, were not included because they are anti-dilutive. For the nine months ended September 30, 2017 and 2016, 7 million and 6 million shares, respectively, issuable upon conversion of 4 million and 4 million DownREIT units, were not included because they are anti-dilutive.

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,
	2017			2016			2017			2016
Numerator
Net income (loss) from continuing operations	$	(5,720	)	$	45,826		$	480,558		$	294,630
Noncontrolling interests' share in earnings	(1,937		)	(2,789		)	(7,687		)	(9,540		)
Net income (loss) attributable to HCP, Inc.	(7,657		)	43,037			472,871			285,090
Less: Participating securities' share in earnings	(131		)	(326		)	(560		)	(977		)
Income (loss) from continuing operations applicable to common shares	(7,788		)	42,711			472,311			284,113
Discontinued operations	—			108,213			—			283,996
Net income (loss) applicable to common shares	$	(7,788	)	$	150,924		$	472,311		$	568,109
Denominator
Basic weighted average shares outstanding	468,975			467,628			468,642			466,931
Dilutive potential common shares - equity awards	—			207			186			201
Diluted weighted average common shares	468,975			467,835			468,828			467,132
Basic earnings per common share
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22
Diluted earnings per common share
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2017

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

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

	Nine Months Ended September 30,
	2017			2016
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	261,799		$	401,628
Income taxes paid	9,897			5,734
Capitalized interest	12,607			8,490
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	63,515			60,897
Non-cash acquisitions and dispositions settled with receivables and restricted cash held in connection with Section 1031 transactions	—			15,570
Vesting of restricted stock units and conversion of non-managing member units into common stock	2,464			6,620
Mortgages and other liabilities assumed with real estate acquisitions	3,678			78,131
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	(56		)	1,531

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Variable Interest Entities

9 Months Ended

Sep. 30, 2017

Variable Interest Entities [Abstract]

Variable Interest Entities

Variable Interest Entities

Unconsolidated Variable Interest Entities

At September 30, 2017, the Company had investments in: (i) five unconsolidated VIE JVs, (ii) 48 properties leased to VIE tenants, (iii) marketable debt securities of one VIE and (iv) three loans to VIE borrowers. The Company has determined that it is not the primary beneficiary of and therefore does not consolidate these VIEs because it does not have the ability to control the activities that most significantly impact their economic performance. Except for the Company’s equity interest in the unconsolidated JVs (CCRC OpCo, RIDEA II PropCo, Vintage Park Development JV, Waldwick JV and the LLC investment discussed below), it has no formal involvement in these VIEs beyond its investments.

The Company holds a 49% ownership interest in CCRC OpCo, a joint venture entity formed in August 2014 that operates senior housing properties in a RIDEA structure and has been identified as a VIE (see Note 7). The equity members of CCRC OpCo “lack power” because they share certain operating rights with Brookdale, as manager of the CCRCs. The assets of CCRC OpCo primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable, and cash and cash equivalents; its obligations primarily consist of operating lease obligations to CCRC PropCo, debt service payments and capital expenditures for the properties, and accounts payable and expense accruals associated with the cost of its CCRCs’ operations. Assets generated by the CCRC operations (primarily rents from CCRC residents) of CCRC OpCo may only be used to settle its contractual obligations (primarily from debt service payments, capital expenditures, and rental costs and operating expenses incurred to manage such facilities).

In January 2017, as a result of the partial sale of its interest in RIDEA II, the Company concluded that it should deconsolidate RIDEA II as it is no longer the primary beneficiary of the joint venture. The HCP/CPA JV is the primary beneficiary of both RIDEA II PropCo and RIDEA II OpCo as it controls the significant activities of RIDEA II PropCo and, of the group that controls the significant activities of RIDEA II OpCo, is most closely associated to the entity. Furthermore, control over the HCP/CPA JV is shared between HCP and CPA, and as such, the Company does not consolidate the HCP/CPA JV. Subsequent to the partial sale of its interest in RIDEA II, the Company continues to hold a direct investment in RIDEA II PropCo, which has been identified as a VIE as Brookdale, the non-managing member, does not have any substantive participating rights or kick-out rights over the managing member, HCP/CPA PropCo (see Notes 4 and 7). The assets of RIDEA II PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a combination of third-party and HCP debt (see Note 4). Assets generated by RIDEA II PropCo (primarily from RIDEA II OpCo lease payments) may only be used to settle its contractual obligations (primarily debt service payments on the third-party and HCP debt).

The Company holds an 85% ownership interest in two development joint ventures (Vintage Park Development JV and Waldwick JV) (see Note 7), which have been identified as VIEs as power is shared with a member that does not have a substantive equity investment at risk. The assets of each joint venture primarily consist of an in-progress senior housing facility development project that it owns and cash and cash equivalents; its obligations primarily consist of accounts payable and expense accruals associated with the cost of its development obligations. Any assets generated by each joint venture may only be used to settle its respective contractual obligations (primarily development expenses and debt service payments).

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

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

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

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

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

Between 2012 and 2015, the Company funded a $257 million mezzanine loan facility to Tandem as part of a recapitalization of the Tandem Portfolio (see Note 6). Due to a decline in the fair value of the Tandem Portfolio over time, there is no longer sufficient equity at risk in Tandem and it has become a “thinly capitalized” borrower.

The classification of the related assets and liabilities and the maximum loss exposure as a result of the Company’s involvement with these VIEs at September 30, 2017 was as follows (in thousands):

VIE Type	Asset/Liability Type	Maximum Loss Exposure and Carrying Amount(1)
VIE tenants - DFLs(2)	Net investment in DFLs	$	602,501
VIE tenants - operating leases(2)	Lease intangibles, net and straight-line rent receivables	5,183
CCRC OpCo	Investments in unconsolidated joint ventures	214,140
RIDEA II PropCo	Investments in unconsolidated joint ventures	251,419
Development JVs	Investments in unconsolidated joint ventures	11,202
Tandem Health Care	Loans Receivable, net	197,374
Loan - Senior Secured	Loans Receivable, net	141,574
Loan - Seller Financing	Loans Receivable, net	10,000
CMBS and LLC investment	Marketable debt and cost method investment	33,630

_______________________________________

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

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

At September 30, 2017, the Company had not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash shortfalls).

See Notes 4, 6, 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

HCP, Inc.’s consolidated total assets and total liabilities at September 30, 2017 and December 31, 2016 include certain assets of VIEs that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at September 30, 2017 and December 31, 2016 include VIE assets as follows (in thousands):

	September 30, 2017			December 31, 2016
Assets
Building and improvements	$	2,833,834		$	3,522,310
Developments in process	22,860			31,953
Land	227,682			327,241
Accumulated depreciation	(584,621		)	(676,276		)
Net real estate	2,499,755			3,205,228
Investments in and advances to unconsolidated joint ventures	2,119			3,641
Accounts receivable, net	9,964			19,996
Cash and cash equivalents	36,262			35,844
Restricted cash	2,137			22,624
Intangible assets, net	132,905			169,027
Other assets, net	56,854			69,562
Total assets	$	2,739,996		$	3,525,922
Liabilities
Mortgage debt	45,067			520,870
Intangible liabilities, net	9,170			8,994
Accounts payable and accrued expenses	102,780			120,719
Deferred revenue	18,162			23,456
Total liabilities	$	175,179		$	674,039

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

RIDEA III.  The Company holds a 90% ownership interest in JV entities formed in June 2015 that own and operate senior housing properties in a RIDEA structure. The Company has historically classified RIDEA III OpCo as a VIE and, as a result of the adoption of ASU 2015-02, also classifies RIDEA III PropCo as a VIE due to the non-managing member lacking substantive participation rights in the management of RIDEA III PropCo or kick-out rights over the managing member. The Company consolidates RIDEA III PropCo and RIDEA III OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of RIDEA III PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a note payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA III OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA III PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA III structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

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

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

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

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

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

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Concentration of Credit Risk

9 Months Ended

Sep. 30, 2017

Risks and Uncertainties [Abstract]

Concentration of Credit Risk

Concentration of Credit Risk

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

The following tables provide information regarding the Company’s concentrations of credit risk with respect to certain tenants:

	Percentage of Gross Assets
	Total Company		Senior Housing Triple-Net
	September 30,	December 31,	September 30,	December 31,
Tenant	2017	2016	2017	2016
Brookdale(1)	11%	17%	42%	69%

	Percentage of Revenues
	Total Company Revenues				Senior Housing Triple-Net Revenues
	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
Tenant	2017	2016	2017	2016	2017	2016	2017	2016
Brookdale(1)	8%	12%	10%	12%	48%	60%	53%	59%

_______________________________________

(1) Includes assets and revenues from 64 senior housing triple-net facilities that were classified as held for sale at December 31, 2016 and sold in March 2017. 

At September 30, 2017 and December 31, 2016, Brookdale managed or operated, in the Company’s SHOP segment, approximately 13% and 18%, respectively, of the Company’s real estate investments based on gross assets. Because an operator manages the Company’s facilities in exchange for the receipt of a management fee, the Company is not directly exposed to the credit risk of its operators in the same manner or to the same extent as its triple-net tenants. At September 30, 2017, Brookdale provided comprehensive facility management and accounting services with respect to 59 of the Company’s SHOP facilities and 62 SHOP facilities owned by its unconsolidated joint ventures, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. Most of the management agreements have terms ranging from 10 to 15 years, with three to four5-year renewal periods. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.

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

See Note 1 for further information on the reduction of concentration related to Brookdale.

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

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Financial Instruments, Owned, at Fair Value [Abstract]

Fair Value Measurements

Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis at September 30, 2017 in the consolidated balance sheets are immaterial.

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

	September 30, 2017(4)				December 31, 2016(4)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	402,152	$	402,267	$	807,954	$	807,505
Marketable debt securities(2)	18,567		18,567		68,630		68,630
Marketable equity securities(1)	74		74		76		76
Warrants(3)	58		58		19		19
Bank line of credit(2)	605,837		605,837		899,718		899,718
Term loans(2)	226,205		226,205		440,062		440,062
Senior unsecured notes(1)	6,393,926		6,769,010		7,133,538		7,386,149
Mortgage debt(2)	145,417		131,419		623,792		609,374
Other debt(2)	94,818		94,818		92,385		92,385
Interest-rate swap liabilities(2)	2,980		2,980		4,857		4,857
Currency swap asset(2)	—		—		2,920		2,920
Cross currency swap liability(2)	9,469		9,469		—		—

_______________________________________

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

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

(3) Level 3: Fair value determined based on significant unobservable market inputs using standardized derivative pricing models.

(4) During the nine months ended September 30, 2017 and year ended December 31, 2016, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and cross currency swap contracts at September 30, 2017 (dollars and GBP in thousands):

Date Entered	Maturity Date	Hedge Designation	Notional		Pay Rate	Receive Rate		Fair Value(1)
Interest rate:
July 2005(2)	July 2020	Cash Flow	$	44,000	3.82%	BMA Swap Index		$	(2,980	)
Cross currency swap:
April 2017(3)	February 2019	Net Investment	£105,000 / $131,400		2.58%	3.75	%	$	(9,469	)

_______________________________________

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

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

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

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

At September 30, 2017, £150 million of the Company’s GBP-denominated borrowings under the 2015 Term Loan and a £105 million cross currency swap are designated as a hedge of a portion of the Company’s net investments in GBP-functional subsidiaries to mitigate its exposure to fluctuations in the GBP to USD exchange rate. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to USD exchange rate of the instrument is recorded as part of the cumulative translation adjustment component of accumulated other comprehensive income (loss). Accordingly, the remeasurement value of the designated £150 million GBP-denominated borrowings and £105 million cross currency swap due to fluctuations in the GBP to USD exchange rate are reported in accumulated other comprehensive income (loss) as the hedging relationship is considered to be effective. The cumulative balance of the remeasurement value will be reclassified to earnings when the hedged investment is sold or substantially liquidated.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

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 revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of HCP, 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. In the opinion of management, 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, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).

Real Estate

Real Estate

On January 1, 2017 the Company adopted Accounting Standards Update (“ASU”) No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the Financial Accounting Standards Board’s (“FASB”) definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset, or a group of assets, or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an acquired input and a substantive process that together significantly contribute to the ability to create outputs. In addition, ASU 2017-01 clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. This ASU is to be applied prospectively and the Company expects that a majority of its future real estate acquisitions and dispositions will be deemed asset transactions rather than business combinations. As a result, for asset acquisitions the Company will record identifiable assets acquired, liabilities assumed and any associated noncontrolling interests at cost on a relative fair value basis. In addition, for such asset acquisitions, no goodwill will be recognized, third party transaction costs will be capitalized and any associated contingent consideration will be recorded when the contingency is resolved. 

Reclassifications

Reclassifications

Certain amounts in the Company’s consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Certain prior period amounts have been reclassified on consolidated statements of operations for discontinued operations (see Note 4).

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). The amendments in ASU 2017-05 clarify the scope of the FASB’s recently established guidance on nonfinancial asset derecognition which applies to the derecognition of all nonfinancial assets and in-substance nonfinancial assets. In addition, ASU 2017-05 clarifies the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets to align with the new revenue recognition standard (see below). ASU 2017-05 is effective for annual periods beginning after December 15, 2017, including interim periods within, and must be adopted in conjunction with the Revenue ASUs (as defined below). ASU 2017-05 can be adopted using a full retrospective approach or a modified retrospective approach, resulting in a cumulative-effect adjustment to equity as of the beginning of the fiscal year in which the guidance is effective. The Company has not yet elected a transition method and is evaluating the complete impact of the adoption of the Revenue ASUs (see below) on January 1, 2018 to its consolidated financial position, results of operations and disclosures. The Company expects to complete its evaluation of the impacts of the Revenue ASUs during the fourth quarter of 2017.

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amendments in ASU 2016-13 eliminate the “probable” initial threshold for recognition of credit losses in current accounting guidance and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument. Previously, when credit losses were measured under current accounting guidance, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. ASU 2016-13 is effective for fiscal years, and interim periods within, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within, beginning after December 15, 2018. A reporting entity is required to apply the amendments in ASU 2016-13 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Upon adoption of ASU 2016-13, the Company is required to reassess its financing receivables, including direct finance leases and loans receivable, and expects that application of ASU 2016-13 may result in the Company recognizing credit losses at an earlier date than would otherwise be recognized under current accounting guidance. The Company is evaluating the impact of the adoption of ASU 2016-13 on January 1, 2020 to its consolidated financial position and results of operations.

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

As the primary source of revenue for the Company is generated through leasing arrangements, which are excluded from the Revenue ASUs (as it relates to the timing and recognition of revenue), the Company expects that it may be impacted in its recognition of non-lease revenue, such as certain resident fees in its RIDEA structures (a portion of which are not generated through leasing arrangements), non-lease components of revenue from lease agreements and its recognition of real estate sale transactions. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under current guidance. As a result, the Company generally expects that the new guidance will result in more transactions qualifying as sales of real estate and revenue being recognized at an earlier date than under current accounting guidance. Additionally, upon adoption of the Revenue ASUs in 2018, the Company anticipates that it will be required to separately disclose the components of its total revenue between lease revenue accounted for under existing lease guidance and service revenue accounted for under the new Revenue ASUs, including non-lease components such as certain services embedded in base leasing fees. The Company has not yet elected a transition method and is evaluating the complete impact of the adoption of the Revenue ASUs on January 1, 2018 to its consolidated financial position, results of operations and disclosures. The Company expects to complete its evaluation of the impacts of the Revenue ASUs during the fourth quarter of 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the current accounting for leases to: (i) require lessees to put most leases on their balance sheets, but continue recognizing expenses on their income statements in a manner similar to requirements under current accounting guidance, (ii) eliminate current real estate specific lease provisions and (iii) modify the classification criteria and accounting for sales-type leases for lessors. ASU 2016-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2018. Early adoption is permitted. The transition method required by ASU 2016-02 varies based on the specific amendment being adopted. As a result of adopting ASU 2016-02, the Company will recognize all of its significant operating leases for which it is the lessee, including corporate office leases and ground leases, on its consolidated balance sheets and will capitalize fewer legal costs related to the drafting and execution of its lease agreements. From a lessor perspective, the Company expects that it will be required to further bifurcate lease agreements to separately recognize and disclose non-lease components that are executory in nature. Lease components will continue to be recognized on a straight-line basis over the lease term and certain non-lease components will be accounted for under the Revenue ASUs. The disaggregated disclosure of lease and executory non-lease components (e.g., maintenance) will be required upon the adoption of ASU 2016-02 . The Company anticipates that it will elect a practical expedient offered in ASU 2016-02 that allows an entity to not reassess the following upon adoption (must be elected as a group): (i) whether an expired or existing contract contains a lease arrangement, (ii) lease classification related to expired or existing lease arrangements, or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. The Company does not expect the bifurcation of non-lease components from a lease agreement to significantly impact the existing revenue recognition pattern. The Company is still evaluating the complete impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position, results of operations and disclosures.

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

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

• ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 is effective for fiscal years, including interim periods within, beginning after December 15, 2019 (upon the first goodwill impairment test performed during that fiscal year). Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. A reporting entity must apply the amendments in ASU 2017-04 using a prospective approach. The Company plans to adopt ASU 2017-04 during the fourth quarter of 2017.

• ASU No. 2016-18, Restricted Cash (“ASU 2016-18”). ASU 2016-18 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-18 using a full retrospective approach. The Company plans to adopt ASU 2016-18 during the fourth quarter of 2017.

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

• ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-15 using a full retrospective approach. The Company plans to adopt ASU 2016-15 during the fourth quarter of 2017.

• ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted only for updates to certain disclosure requirements. A reporting entity is required to apply the amendments in ASU 2016-01 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption.

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Real Estate Property Investments (Tables)

9 Months Ended

Sep. 30, 2017

Real Estate [Abstract]

Schedule of Real Estate Acquisitions

The following table summarizes the Company’s real estate acquisitions for the nine months ended September 30, 2017 (in thousands):

	Consideration				Assets Acquired
Segment	Cash Paid/ Debt Settled		Liabilities Assumed		Real Estate		Net Intangibles
Life science	$	87,467	$	2,841	$	91,208	$	(900	)
Medical office	48,349		837		44,401		4,785
	$	135,816	$	3,678	$	135,609	$	3,885

The following table summarizes the Company’s real estate acquisitions for the nine months ended September 30, 2016 (in thousands):

	Consideration				Assets Acquired
Segment	Cash Paid/ Debt Settled		Liabilities Assumed		Real Estate		Net Intangibles
Senior housing triple-net	$	76,362	$	1,200	$	71,875	$	5,687
SHOP	113,971		76,931		177,551		13,351
Life science	49,000		—		47,400		1,600
Other non-reportable segments	17,909		—		16,596		1,313
	$	257,242	$	78,131	$	313,422	$	21,951

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Discontinued Operations and Dispositions of Real Estate (Tables)

9 Months Ended

Sep. 30, 2017

Spinoff

Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]

Summary of Financial Information for Discontinued Operations

Summarized financial information for discontinued operations for the three and nine months ended September 30, 2016 is as follows (in thousands):

	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
Revenues:
Rental and related revenues	$	6,898		$	20,620
Tenant recoveries	386			1,147
Income from direct financing leases	116,429			345,940
Total revenues	123,713			367,707
Costs and expenses:
Depreciation and amortization	(1,467		)	(4,401		)
Operating	(1,033		)	(3,076		)
General and administrative	(6		)	(68		)
Acquisition and pursuit costs	(14,805		)	(28,509		)
Other income (expense), net	22			64
Income (loss) before income taxes	106,424			331,717
Income tax benefit (expense)	1,789			(47,721		)
Total discontinued operations	$	108,213		$	283,996

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Net Investment in Direct Financing Leases (Tables)

9 Months Ended

Sep. 30, 2017

Loans Receivable:

Schedule of Components of Net Investment in DFLs

Net investment in DFLs consisted of the following (dollars in thousands):

	September 30, 2017			December 31, 2016
Minimum lease payments receivable	$	1,076,049		$	1,108,237
Estimated residual value	504,457			539,656
Less unearned income	(865,402		)	(895,304		)
Net investment in direct financing leases	$	715,104		$	752,589
Properties subject to direct financing leases	29			30

DFL Watchlist Portfolio

Loans Receivable:

Summary of the Company's Internal Ratings for DFLs

The following table summarizes the Company’s internal ratings for DFLs at September 30, 2017 (dollars in thousands):

	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment				Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing triple-net	$	630,500	88%	$	273,383	$	357,117	$	—
Other non-reportable segments	84,604		12	84,604		—		—
	$	715,104	100%	$	357,987	$	357,117	$	—

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Loans Receivable (Tables) - Loans receivable

9 Months Ended

Sep. 30, 2017

Loans Receivable:

Schedule of Loans Receivable

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

	September 30, 2017								December 31, 2016
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine(1)	$	—	$	277,299		$	277,299		$	—	$	615,188		$	615,188
Other(2)	184,880		—			184,880			195,946		—			195,946
Unamortized discounts, fees and costs(1)	—		(607		)	(607		)	413		(3,593		)	(3,180		)
Allowance for loan losses(3)	—		(59,420		)	(59,420		)	—		—			—
	$	184,880	$	217,272		$	402,152		$	196,359	$	611,595		$	807,954

_______________________________________

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

(2) At September 30, 2017 and December 31, 2016, included £122 million ($163 million) and £113 million ($140 million), respectively, outstanding primarily related to Maria Mallaband loans.

(3) Related to the Company’s mezzanine loan facility to Tandem Health Care discussed below.

Summary of the Company's Internal Ratings for Loans Receivable

The following table summarizes the Company’s internal ratings for loans receivable at September 30, 2017 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	184,880	46%	$	184,880	$	—	$	—
Other secured	217,272		54	19,898		—		197,374
	$	402,152	100%	$	204,778	$	—	$	197,374

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Investments in and Advances to Unconsolidated Joint Ventures (Tables)

9 Months Ended

Sep. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Equity Method Investments

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

				Carrying Amount
				September 30,		December 31,
Entity(1)	Segment	Ownership%		2017		2016
CCRC JV(2)	SHOP		49	$	427,159	$	439,449
RIDEA II	SHOP		40	257,766		—
Life Science JVs(3)	Life science		50 - 63	64,111		67,879
MBK JV(2)	SHOP		50	38,366		38,909
Development JVs(5)	SHOP		50 - 90	19,867		10,459
Medical Office JVs(4)	Medical office		20 - 67	13,620		13,438
K&Y JVs(6)	Other non-reportable segments		80	1,465		1,342
Advances to unconsolidated joint ventures, net				15		15
				$	822,369	$	571,491

_______________________________________

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

(2) Includes two unconsolidated JVs in a RIDEA structure (PropCo and OpCo).

(3) Includes the following unconsolidated partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

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

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

(6) Includes three unconsolidated joint ventures.

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Intangibles (Tables)

9 Months Ended

Sep. 30, 2017

Intangibles

Schedule of Intangible Lease Assets

The following tables summarize the Company’s intangible lease assets and liabilities (in thousands):

Intangible lease assets	September 30, 2017			December 31, 2016
Gross intangible lease assets	$	775,848		$	911,697
Accumulated depreciation and amortization	(374,981		)	(431,892		)
Net intangible lease assets	$	400,867		$	479,805

Schedule of Intangible Lease Liabilities

Intangible lease liabilities	September 30, 2017			December 31, 2016
Gross intangible lease liabilities	$	124,454		$	163,924
Accumulated depreciation and amortization	(71,027		)	(105,779		)
Net intangible lease liabilities	$	53,427		$	58,145

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Other Assets (Tables)

9 Months Ended

Sep. 30, 2017

Other Assets [Abstract]

Schedule of Other Assets

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

	September 30, 2017		December 31, 2016
Straight-line rent receivables, net of allowance of $22,705 and $25,059, respectively	$	313,627	$	311,776
Leasing costs and inducements, net	102,557		156,820
Deferred tax assets	60,254		42,458
Goodwill	47,019		42,386
Marketable debt securities, net	18,567		68,630
Other	74,145		89,554
Total other assets, net	$	616,169	$	711,624

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Debt (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Summary of Senior Notes Issuances

The following table summarizes the Company’s senior unsecured note payoffs for the nine months ended September 30, 2017 (dollars in thousands):

Date	Amount		Coupon Rate
May 1, 2017	$	250,000	5.625	%
July 27, 2017(1)	$	500,000	5.375	%

_______________________________________

(1) The Company recorded a $54 million loss on debt extinguishment related to the repurchase of senior notes.

The following table summarizes the Company’s senior unsecured notes payoffs for the year ended December 31, 2016 (dollars in thousands):

Date	Amount		Coupon Rate
February 1, 2016	$	500,000	3.750	%
September 15, 2016	$	400,000	6.300	%
November 30, 2016	$	500,000	6.000	%
November 30, 2016	$	600,000	6.700	%

Summary of Debt Maturities and Schedule Principal Repayments

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at September 30, 2017 (in thousands):

Year	Bank Line of Credit(1)		2015 Term Loan(2)			Senior Unsecured Notes(3)			Mortgage Debt(4)		Total(5)
2017 (three months)	$	—	$	—		$	—		$	847	$	847
2018	605,837		—			—			3,512		609,349
2019	—		226,680			450,000			3,700		680,380
2020	—		—			800,000			3,758		803,758
2021	—		—			700,000			11,117		711,117
Thereafter	—		—			4,500,000			116,481		4,616,481
	605,837		226,680			6,450,000			139,415		7,421,932
(Discounts), premium and debt costs, net	—		(475		)	(56,074		)	6,002		(50,547		)
	$	605,837	$	226,205		$	6,393,926		$	145,417	$	7,371,385

_______________________________________

(1) Includes £105 million translated into U.S. dollars (“USD”). The Bank Line of Credit was terminated on October 19, 2017 and the Company executed a New Facility which matures in October 2021.

(2) Represents £169 million translated into USD.

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

(4) Interest rates on the mortgage debt ranged from 2.01% to 5.91% with a weighted average effective interest rate of 4.19% and a weighted average maturity of 20 years.

(5) Excludes $95 million of other debt that have no scheduled maturities.

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Equity (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Schedule of Accumulated Other comprehensive Loss

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

	September 30, 2017			December 31, 2016
Cumulative foreign currency translation adjustment	$	(8,455	)	$	(22,817	)
Unrealized gains (losses) on cash flow hedges, net	(13,073		)	(3,642		)
Supplemental Executive Retirement plan minimum liability	(2,907		)	(3,129		)
Unrealized gains (losses) on available for sale securities	(56		)	(54		)
Total other comprehensive income (loss)	$	(24,491	)	$	(29,642	)

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Segment Disclosures (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Summary of Financial Information of Reportable Segments

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

For the three months ended September 30, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	77,220		$	126,040		$	90,174		$	119,847		$	28,968		$	—		$	442,249
HCP share of unconsolidated JV revenues	—			81,936			2,031			496			421			—			84,884
Operating expenses	(934		)	(86,821		)	(19,960		)	(46,486		)	(1,137		)	—			(155,338		)
HCP share of unconsolidated JV operating expenses	—			(65,035		)	(433		)	(143		)	(20		)	—			(65,631		)
NOI	76,286			56,120			71,812			73,714			28,232			—			306,164
Adjustments to NOI(2)	(600		)	4,551			(751		)	(582		)	(1,283		)	—			1,335
Adjusted NOI	75,686			60,671			71,061			73,132			26,949			—			307,499
Addback adjustments	600			(4,551		)	751			582			1,283			—			(1,335		)
Interest income	—			—			—			—			11,774			—			11,774
Interest expense	(640		)	(933		)	(87		)	(126		)	(618		)	(68,924		)	(71,328		)
Depreciation and amortization	(25,547		)	(24,884		)	(30,851		)	(42,047		)	(7,259		)	—			(130,588		)
General and administrative	—			—			—			—			—			(23,523		)	(23,523		)
Acquisition and pursuit costs	—			—			—			—			—			(580		)	(580		)
Recoveries (impairments), net	—			—			—			—			(25,328		)	—			(25,328		)
Gain (loss) on sales of real estate, net	(6		)	5,180			8			—			—			—			5,182
Loss on debt extinguishments	—			—			—			—			—			(54,227		)	(54,227		)
Other income (expense), net	—			—			—			—			—			(10,556		)	(10,556		)
Income tax benefit (expense)	—			—			—			—			—			5,481			5,481
Less: HCP share of unconsolidated JV NOI	—			(16,901		)	(1,598		)	(353		)	(401		)	—			(19,253		)
Equity income (loss) from unconsolidated JVs	—			(245		)	789			274			244			—			1,062
Net income (loss)	$	50,093		$	18,337		$	40,073		$	31,462		$	6,644		$	(152,329	)	$	(5,720	)

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

For the three months ended September 30, 2016:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	104,262		$	170,739		$	90,847		$	113,653		$	30,574		$	—		$	510,075
HCP share of unconsolidated JV revenues	—			50,973			1,929			502			410			—			53,814
Operating expenses	(1,794		)	(121,502		)	(18,487		)	(44,738		)	(1,193		)	—			(187,714		)
HCP share of unconsolidated JV operating expenses	—			(42,463		)	(406		)	(148		)	(20		)	—			(43,037		)
NOI	102,468			57,747			73,883			69,269			29,771			—			333,138
Adjustments to NOI(2)	(1,003		)	4,081			(314		)	(814		)	(1,140		)	—			810
Adjusted NOI	101,465			61,828			73,569			68,455			28,631			—			333,948
Addback adjustments	1,003			(4,081		)	314			814			1,140			—			(810		)
Interest income	—			—			—			—			20,482			—			20,482
Interest expense	(644		)	(8,130		)	(634		)	(1,608		)	(2,260		)	(104,584		)	(117,860		)
Depreciation and amortization	(34,030		)	(26,837		)	(31,967		)	(41,111		)	(7,462		)	—			(141,407		)
General and administrative	—			—			—			—			—			(34,781		)	(34,781		)
Acquisition and pursuit costs	—			—			—			—			—			(2,763		)	(2,763		)
Gain (loss) on sales of real estate, net	—			—			—			(9		)	—			—			(9		)
Other income (expense), net	—			—			—			—			—			1,432			1,432
Income tax benefit (expense)	—			—			—			—			—			424			424
Less: HCP share of unconsolidated JV NOI	—			(8,510		)	(1,523		)	(354		)	(390		)	—			(10,777		)
Equity income (loss) from unconsolidated JVs	—			(3,517		)	778			462			224			—			(2,053		)
Discontinued operations	—			—			—			—			—			108,213			108,213
Net income (loss)	$	67,794		$	10,753		$	40,537		$	26,649		$	40,365		$	(32,059	)	$	154,039

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

For the nine months ended September 30, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	255,332		$	391,684		$	262,224		$	357,381		$	87,524		$	—		$	1,354,145
HCP share of unconsolidated JV revenues	—			239,667			5,975			1,481			1,256			—			248,379
Operating expenses	(2,927		)	(267,226		)	(56,024		)	(137,930		)	(3,475		)	—			(467,582		)
HCP share of unconsolidated JV operating expenses	—			(190,049		)	(1,234		)	(431		)	(58		)	—			(191,772		)
NOI	252,405			174,076			210,941			220,501			85,247			—			943,170
Adjustments to NOI(2)	(2,844		)	12,229			(1,094		)	(2,321		)	(3,164		)	—			2,806
Adjusted NOI	249,561			186,305			209,847			218,180			82,083			—			945,976
Addback adjustments	2,844			(12,229		)	1,094			2,321			3,164			—			(2,806		)
Interest income	—			—			—			—			50,974			—			50,974
Interest expense	(1,898		)	(6,950		)	(288		)	(382		)	(3,541		)	(222,775		)	(235,834		)
Depreciation and amortization	(77,478		)	(75,657		)	(95,648		)	(127,261		)	(21,849		)	—			(397,893		)
General and administrative	—			—			—			—			—			(67,287		)	(67,287		)
Acquisition and pursuit costs	—			—			—			—			—			(2,504		)	(2,504		)
Recoveries (impairments), net	—			—			—			—			(82,010		)	—			(82,010		)
Gain (loss) on sales of real estate, net	268,227			5,313			45,922			(406		)	3,796			—			322,852
Loss on debt extinguishments	—			—			—			—			—			(54,227		)	(54,227		)
Other income (expense), net	—			—			—			—			—			40,723			40,723
Income tax benefit (expense)	—			—			—			—			—			14,630			14,630
Less: HCP share of unconsolidated JV NOI	—			(49,618		)	(4,741		)	(1,050		)	(1,198		)	—			(56,607		)
Equity income (loss) from unconsolidated JVs	—			683			2,322			846			720			—			4,571
Net income (loss)	$	441,256		$	47,847		$	158,508		$	92,248		$	32,139		$	(291,440	)	$	480,558

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

For the nine months ended September 30, 2016:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	319,989		$	500,704		$	269,994		$	331,881		$	95,483		$	—		$	1,518,051
HCP share of unconsolidated JV revenues	—			152,424			5,628			1,503			1,224			—			160,779
Operating expenses	(5,521		)	(350,949		)	(53,191		)	(129,715		)	(3,375		)	—			(542,751		)
HCP share of unconsolidated JV operating expenses	—			(125,244		)	(1,173		)	(452		)	(30		)	—			(126,899		)
NOI	314,468			176,935			221,258			203,217			93,302			—			1,009,180
Adjustments to NOI(2)	(8,464		)	14,648			(1,545		)	(2,361		)	(1,926		)	—			352
Adjusted NOI	306,004			191,583			219,713			200,856			91,376			—			1,009,532
Addback adjustments	8,464			(14,648		)	1,545			2,361			1,926			—			(352		)
Interest income	—			—			—			—			71,298			—			71,298
Interest expense	(8,859		)	(23,818		)	(1,904		)	(4,899		)	(7,067		)	(314,708		)	(361,255		)
Depreciation and amortization	(101,737		)	(78,124		)	(97,640		)	(120,432		)	(23,248		)	—			(421,181		)
General and administrative	—			—			—			—			—			(83,011		)	(83,011		)
Acquisition and pursuit costs	—			—			—			—			—			(6,061		)	(6,061		)
Gain (loss) on sales of real estate, net	23,940			—			29,428			8,333			57,904			—			119,605
Other income (expense), net	—			—			—			—			—			5,064			5,064
Income tax benefit (expense)	—			—			—			—			—			(1,101		)	(1,101		)
Less: HCP share of unconsolidated JV NOI	—			(27,180		)	(4,455		)	(1,051		)	(1,194		)	—			(33,880		)
Equity income (loss) from unconsolidated JVs	—			(8,477		)	2,263			1,541			645			—			(4,028		)
Discontinued operations	—			—			—			—			—			283,996			283,996
Net income (loss)	$	227,812		$	39,336		$	148,950		$	86,709		$	191,640		$	(115,821	)	$	578,626

_______________________________________

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, the deferral of community fees, net of amortization, lease termination fees and non-refundable entrance fees as the fees are collected by the Company’s CCRC JV, net of CCRC JV entrance fee amortization.

Reconciliation of Company's Revenues by Segment

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

	Three Months Ended September 30,				Nine Months Ended September 30,
Segment	2017		2016		2017		2016
Senior housing triple-net	$	77,220	$	104,262	$	255,332	$	319,989
SHOP	126,040		170,739		391,684		500,704
Life science	90,174		90,847		262,224		269,994
Medical office	119,847		113,653		357,381		331,881
Other non-reportable segments	40,742		51,056		138,498		166,781
Total revenues	$	454,023	$	530,557	$	1,405,119	$	1,589,349

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings per Share

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,
	2017			2016			2017			2016
Numerator
Net income (loss) from continuing operations	$	(5,720	)	$	45,826		$	480,558		$	294,630
Noncontrolling interests' share in earnings	(1,937		)	(2,789		)	(7,687		)	(9,540		)
Net income (loss) attributable to HCP, Inc.	(7,657		)	43,037			472,871			285,090
Less: Participating securities' share in earnings	(131		)	(326		)	(560		)	(977		)
Income (loss) from continuing operations applicable to common shares	(7,788		)	42,711			472,311			284,113
Discontinued operations	—			108,213			—			283,996
Net income (loss) applicable to common shares	$	(7,788	)	$	150,924		$	472,311		$	568,109
Denominator
Basic weighted average shares outstanding	468,975			467,628			468,642			466,931
Dilutive potential common shares - equity awards	—			207			186			201
Diluted weighted average common shares	468,975			467,835			468,828			467,132
Basic earnings per common share
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22
Diluted earnings per common share
Continuing operations	$	(0.02	)	$	0.09		$	1.01		$	0.61
Discontinued operations	—			0.23			—			0.61
Net income (loss) applicable to common shares	$	(0.02	)	$	0.32		$	1.01		$	1.22

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2017

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

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

	Nine Months Ended September 30,
	2017			2016
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	261,799		$	401,628
Income taxes paid	9,897			5,734
Capitalized interest	12,607			8,490
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	63,515			60,897
Non-cash acquisitions and dispositions settled with receivables and restricted cash held in connection with Section 1031 transactions	—			15,570
Vesting of restricted stock units and conversion of non-managing member units into common stock	2,464			6,620
Mortgages and other liabilities assumed with real estate acquisitions	3,678			78,131
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	(56		)	1,531

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Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2017

Variable Interest Entities [Abstract]

Schedule of Variable Interest Entities

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, 2017 was as follows (in thousands):

VIE Type	Asset/Liability Type	Maximum Loss Exposure and Carrying Amount(1)
VIE tenants - DFLs(2)	Net investment in DFLs	$	602,501
VIE tenants - operating leases(2)	Lease intangibles, net and straight-line rent receivables	5,183
CCRC OpCo	Investments in unconsolidated joint ventures	214,140
RIDEA II PropCo	Investments in unconsolidated joint ventures	251,419
Development JVs	Investments in unconsolidated joint ventures	11,202
Tandem Health Care	Loans Receivable, net	197,374
Loan - Senior Secured	Loans Receivable, net	141,574
Loan - Seller Financing	Loans Receivable, net	10,000
CMBS and LLC investment	Marketable debt and cost method investment	33,630

_______________________________________

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

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

Consolidated Assets and Liabilities of Variable Interest Entities

Total assets at September 30, 2017 and December 31, 2016 include VIE assets as follows (in thousands):

	September 30, 2017			December 31, 2016
Assets
Building and improvements	$	2,833,834		$	3,522,310
Developments in process	22,860			31,953
Land	227,682			327,241
Accumulated depreciation	(584,621		)	(676,276		)
Net real estate	2,499,755			3,205,228
Investments in and advances to unconsolidated joint ventures	2,119			3,641
Accounts receivable, net	9,964			19,996
Cash and cash equivalents	36,262			35,844
Restricted cash	2,137			22,624
Intangible assets, net	132,905			169,027
Other assets, net	56,854			69,562
Total assets	$	2,739,996		$	3,525,922
Liabilities
Mortgage debt	45,067			520,870
Intangible liabilities, net	9,170			8,994
Accounts payable and accrued expenses	102,780			120,719
Deferred revenue	18,162			23,456
Total liabilities	$	175,179		$	674,039

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Concentration of Credit Risk (Tables)

9 Months Ended

Sep. 30, 2017

Risks and Uncertainties [Abstract]

Schedule of Concentration of Credit Risk

The following tables provide information regarding the Company’s concentrations of credit risk with respect to certain tenants:

	Percentage of Gross Assets
	Total Company		Senior Housing Triple-Net
	September 30,	December 31,	September 30,	December 31,
Tenant	2017	2016	2017	2016
Brookdale(1)	11%	17%	42%	69%

	Percentage of Revenues
	Total Company Revenues				Senior Housing Triple-Net Revenues
	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
Tenant	2017	2016	2017	2016	2017	2016	2017	2016
Brookdale(1)	8%	12%	10%	12%	48%	60%	53%	59%

_______________________________________

(1) Includes assets and revenues from 64 senior housing triple-net facilities that were classified as held for sale at December 31, 2016 and sold in March 2017. 

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Financial Instruments, Owned, at Fair Value [Abstract]

Summary of Carry Amounts and Fair Value of Financial Instruments

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

	September 30, 2017(4)				December 31, 2016(4)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	402,152	$	402,267	$	807,954	$	807,505
Marketable debt securities(2)	18,567		18,567		68,630		68,630
Marketable equity securities(1)	74		74		76		76
Warrants(3)	58		58		19		19
Bank line of credit(2)	605,837		605,837		899,718		899,718
Term loans(2)	226,205		226,205		440,062		440,062
Senior unsecured notes(1)	6,393,926		6,769,010		7,133,538		7,386,149
Mortgage debt(2)	145,417		131,419		623,792		609,374
Other debt(2)	94,818		94,818		92,385		92,385
Interest-rate swap liabilities(2)	2,980		2,980		4,857		4,857
Currency swap asset(2)	—		—		2,920		2,920
Cross currency swap liability(2)	9,469		9,469		—		—

_______________________________________

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

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

(3) Level 3: Fair value determined based on significant unobservable market inputs using standardized derivative pricing models.

(4) During the nine months ended September 30, 2017 and year ended December 31, 2016, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The following table summarizes the Company’s outstanding interest-rate and cross currency swap contracts at September 30, 2017 (dollars and GBP in thousands):

Date Entered	Maturity Date	Hedge Designation	Notional		Pay Rate	Receive Rate		Fair Value(1)
Interest rate:
July 2005(2)	July 2020	Cash Flow	$	44,000	3.82%	BMA Swap Index		$	(2,980	)
Cross currency swap:
April 2017(3)	February 2019	Net Investment	£105,000 / $131,400		2.58%	3.75	%	$	(9,469	)

_______________________________________

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

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

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

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Business - Master Lease Transactions (Details) $ in Millions		2 Months Ended	9 Months Ended	12 Months Ended
	Nov. 01, 2017 USD ($) property	Dec. 31, 2017 property	Sep. 30, 2017 facility	Dec. 31, 2016 facility	Jan. 01, 2018 USD ($) property
Senior housing triple-net
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of SH NNN facilities transitioned to RIDEA structure | facility			4	17
Affiliated Entity | Master Lease Transactions | Forecast | Assets Leased to Others | Senior housing triple-net
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Amount of annual rent cut | $					$ 5
Number of assets with annual rent cut					3
Number of SH NNN facilities transitioned to RIDEA structure		5
Affiliated Entity | Master Lease Transactions | Subsequent Event | Assets Leased to Others | Senior housing triple-net
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties	34
Properties with right to sell or transition to other operator	32
Right to sell and transfer period for operating leases	1 year
Properties transitioned to cash flow leases expiration period	2 years
Number of assets to be sold	2
Total consideration for disposition of real estate | $	$ 35
Brookdale | Affiliated Entity | Master Lease Transactions | Subsequent Event | Assets Leased to Others
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties	78

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Business - Joint Venture Transactions (Details) $ in Millions		9 Months Ended
	Nov. 01, 2017 USD ($) property agreement	Sep. 30, 2017
RIDEA I
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		90.00%
RIDEA III
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		90.00%
CCRC JV | SHOP
Variable Interest Entity [Line Items]
Investment ownership percentage		49.00%
Master Lease Transactions | Affiliated Entity | Subsequent Event | RIDEA I
Variable Interest Entity [Line Items]
Percentage of interest acquired	10.00%
Master Lease Transactions | Affiliated Entity | Subsequent Event | RIDEA III
Variable Interest Entity [Line Items]
Percentage of interest acquired	10.00%
Master Lease Transactions | Affiliated Entity | Assets Leased to Others | RIDEA Facilities | Subsequent Event
Variable Interest Entity [Line Items]
Number of properties	58
Number of assets under management agreement	2
Master Lease Transactions | Affiliated Entity | SHOP | Assets Leased to Others | RIDEA Facilities | Subsequent Event
Variable Interest Entity [Line Items]
Number of properties	36
Base management fee, percentage of gross revenue	5.00%
Percentage of annual increase in management fee	1.00%
Management fee annual rent increase period	2 years
Number of assets to be sold	4
Total consideration for disposition of real estate | $	$ 239
Number of assets under management agreement	18
Number of management agreement with termination rights | agreement	7
Management agreements with termination rights period	10 years
Master Lease Transactions | Affiliated Entity | Maximum | SHOP | Assets Leased to Others | RIDEA Facilities | Subsequent Event
Variable Interest Entity [Line Items]
Base management fee, percentage of gross revenue	7.00%
Master Lease Transactions | Affiliated Entity | CCRC JV | SHOP
Variable Interest Entity [Line Items]
Investment ownership percentage		49.00%
Ownership interest held by Parent		51.00%

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Business - RIDEA II Sale Transaction (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
	Nov. 01, 2017	Jan. 31, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sales of real estate, net			$ 5,182	$ (9)	$ 322,852	$ 119,605
HCP/CPA/Brookdale JV
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Debt provided		$ 602,000
Debt provided by third-party		360,000
Debt provided by entity		242,000
Net proceeds from the RIDEA II transaction		480,000
Proceeds from note receivable		$ 242,000
RIDEA II | HCP/CPA/Brookdale JV
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Investment ownership percentage		40.00%
Gain (loss) on sales of real estate, net		$ 99,000
RIDEA II | HCP/CPA/Brookdale JV
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Debt provided by entity		$ 242,000
RIDEA II | Subsequent Event | HCP/CPA/Brookdale JV
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Equity method investment ownership interest disposed	40.00%
Note receivable payment period	1 year
Consideration for disposal of equity method investment	$ 332,000

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Real Estate Property Investments - Schedule of Real Estate Acquisitions (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Real estate acquisitions
Consideration, Cash Paid/Debt Settled	$ 135,816	$ 257,242
Consideration, Liabilities assumed	3,678	78,131
Assets Acquired, Real Estate	135,609	313,422
Assets Acquired, Net Intangibles	3,885	21,951
Senior housing triple-net
Real estate acquisitions
Consideration, Cash Paid/Debt Settled		76,362
Consideration, Liabilities assumed		1,200
Assets Acquired, Real Estate		71,875
Assets Acquired, Net Intangibles		5,687
SHOP
Real estate acquisitions
Consideration, Cash Paid/Debt Settled		113,971
Consideration, Liabilities assumed		76,931
Assets Acquired, Real Estate		177,551
Assets Acquired, Net Intangibles		13,351
Life science
Real estate acquisitions
Consideration, Cash Paid/Debt Settled	87,467	49,000
Consideration, Liabilities assumed	2,841	0
Assets Acquired, Real Estate	91,208	47,400
Assets Acquired, Net Intangibles	(900)	1,600
Medical office
Real estate acquisitions
Consideration, Cash Paid/Debt Settled	48,349
Consideration, Liabilities assumed	837
Assets Acquired, Real Estate	44,401
Assets Acquired, Net Intangibles	$ 4,785
Other non-reportable segments
Real estate acquisitions
Consideration, Cash Paid/Debt Settled		17,909
Consideration, Liabilities assumed		0
Assets Acquired, Real Estate		16,596
Assets Acquired, Net Intangibles		$ 1,313

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Real Estate Property Investments - Narrative (Details) ft² in Thousands, $ in Thousands	1 Months Ended	3 Months Ended	9 Months Ended
	Oct. 31, 2017 USD ($) ft² property	Sep. 30, 2017 USD ($) property	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Real Estate [Line Items]
Impairments (recoveries), net			$ 22,590	$ 0
Casualty-related loss, net insurance proceeds		$ 11,000	$ 9,912	$ 0
Property damage related to casualty loss		6,000
Other associated costs related to casualty loss		5,000
Deferred tax benefit associated with casualty related losses		$ 2,000
Senior housing triple-net
Real Estate [Line Items]
Number of real estate properties impaired | property		11
Impairments (recoveries), net		$ 23,000
Hayden Research Campus | Subsequent Event | Life science
Real Estate [Line Items]
Amount of consideration transferred to acquire property	$ 228,000
Hayden Research Campus | Building | Subsequent Event | Life science
Real Estate [Line Items]
Number of properties | property	2
Area of real estate property | ft²	400
Percentage of rentable area leased	66.00%
Other income (expense), net
Real Estate [Line Items]
Casualty-related loss, net insurance proceeds		10,000
Equity income (loss) from unconsolidated joint ventures
Real Estate [Line Items]
Casualty-related loss, net insurance proceeds		$ 1,000

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Discontinued Operations and Dispositions of Real Estate - QCP (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Oct. 31, 2016 property
Costs and expenses:
Depreciation and amortization			$ 0	$ (4,401)
Income tax benefit (expense)	$ 0	$ 1,789	$ 0	(47,721)
QCP | Discontinued Operations, Held-for-sale
Revenues:
Rental and related revenues		6,898		20,620
Tenant recoveries		386		1,147
Income from direct financing leases		116,429		345,940
Total revenues		123,713		367,707
Costs and expenses:
Depreciation and amortization		(1,467)		(4,401)
Operating		(1,033)		(3,076)
General and administrative		(6)		(68)
Acquisition and pursuit costs		(14,805)		(28,509)
Other income (expense), net		22		64
Income (loss) before income taxes		106,424		331,717
Income tax benefit (expense)		1,789		(47,721)
Total discontinued operations		$ 108,213		$ 283,996
QCP | Spinoff
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties | property					338

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Discontinued Operations and Dispositions of Real Estate - HCR ManorCare, Inc. (Details) - USD ($)	1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
	Dec. 31, 2015	Sep. 30, 2017	Sep. 30, 2016	Mar. 31, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2011
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
DFL income		$ 13,240,000	$ 14,234,000		$ 40,516,000	$ 44,791,000
Maximum
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Federal and state built-in gain tax from assets sold								$ 2,000,000,000
HCRMC
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
DFL income						$ 346,000,000
DFL accretion							$ 0
Federal and state built-in gain tax from assets sold, term								10 years
Federal built-in gain tax from assets sold, federal term	5 years
State built-in gain from assets sold				$ 49,000,000

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Discontinued Operations and Dispositions of Real Estate - Disposition of Real Estate (Details) $ in Thousands	1 Months Ended				3 Months Ended		9 Months Ended
	Aug. 31, 2017 USD ($) property	Apr. 30, 2017 USD ($) property	Mar. 31, 2017 USD ($) property	Jan. 31, 2017 USD ($) facility	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($) property	Dec. 31, 2016 USD ($) property
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net					$ 216,074		$ 216,074		$ 927,866
Real estate and other related assets, net									$ 809,000
Gain (loss) on sales of real estate, net					$ 5,182	$ (9)	322,852	$ 119,605
Proceeds from sales of real estate, net							$ 1,249,993	211,810
Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sales of real estate, net								$ 120,000
California
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total consideration for disposition of real estate		$ 27,000
Senior housing triple-net
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties classified as held for sale | property					3		3		64
Senior housing triple-net | Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | property	2							2
Gain (loss) on sales of real estate, net	$ 5,000
Proceeds from sales of real estate, net	$ 15,000
Senior housing triple-net | Brookdale Senior Living
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties classified as held for sale | property			64
Total consideration for disposition of real estate			$ 1,125,000
Gain (loss) on sales of real estate, net			$ 170,000
Life science
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties classified as held for sale | property					4		4		4
Number of properties disposed | facility				4
Total consideration for disposition of real estate				$ 76,000
Gain (loss) on sales of real estate, net				$ 45,000
Life science | Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | property								1
Proceeds from sales of real estate, net								$ 74,000
Life science | California | Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | property		1
Gain (loss) on sales of real estate, net		$ 1,000
Proceeds from sales of real estate, net		$ 5,000
SHOP
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties classified as held for sale | property									1
SHOP | Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | property								1
Proceeds from sales of real estate, net								$ 6,000
Post-acute/skilled nursing | Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | property								5
Post-acute/skill nursing and senior housing triplet-net | Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sales of real estate, net								$ 130,000
Medical office | Building
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | property								3
Proceeds from sales of real estate, net								$ 20,000
Real Estate
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net					$ 199,000		$ 199,000

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Net Investment in Direct Financing Leases - Direct Financing Leases (Details) $ in Thousands	1 Months Ended
	Feb. 28, 2017 USD ($)	Sep. 30, 2017 USD ($) property	Dec. 31, 2016 USD ($) property
Capital Leased Assets [Line Items]
Minimum lease payments receivable		$ 1,076,049	$ 1,108,237
Estimated residual value		504,457	539,656
Less unearned income		(865,402)	(895,304)
Net investment in direct financing leases		$ 715,104	$ 752,589
Properties subject to direct financing leases | property		29	30
Florida
Capital Leased Assets [Line Items]
Proceeds from sale of leased assets	$ 43,000
Gain on sale of a property within a direct financing lease	$ 4,000

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Net Investment in Direct Financing Leases - Direct Financing Lease Internal Ratings (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($) property
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 715,104		$ 715,104		$ 752,589
Percentage of DFL Portfolio	100.00%		100.00%
Properties subject to direct financing leases | property	29		29		30
DFL income	$ 13,240	$ 14,234	$ 40,516	$ 44,791
DFL Watchlist Portfolio
Net Investment in Direct Financing Leases
DFL income	4,000	3,000	10,000	10,000
Cash payments received	5,000	$ 5,000	14,000	$ 15,000
Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases	357,987		357,987
Watch List DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	357,117		357,117
Workout DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	0		0
Senior housing triple-net
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 630,500		$ 630,500
Percentage of DFL Portfolio	88.00%		88.00%
Senior housing triple-net | DFL Watchlist Portfolio
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 357,000		$ 357,000		$ 361,000
Properties subject to direct financing leases | property	14		14
Senior housing triple-net | Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 273,383		$ 273,383
Senior housing triple-net | Watch List DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	357,117		357,117
Senior housing triple-net | Workout DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	0		0
Other non-reportable segments
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 84,604		$ 84,604
Percentage of DFL Portfolio	12.00%		12.00%
Other non-reportable segments | Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 84,604		$ 84,604
Other non-reportable segments | Watch List DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	0		0
Other non-reportable segments | Workout DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 0		$ 0

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Loans Receivable - Schedule of Loans Receivable (Details) $ in Thousands, £ in Millions	Sep. 30, 2017 USD ($)	Sep. 30, 2017 GBP (£)	Dec. 31, 2016 USD ($)	Dec. 31, 2016 GBP (£)
Loans Receivable:
Mezzanine	$ 277,299		$ 615,188
Loans receivable, other	184,880		195,946
Unamortized discounts, fees and costs	(607)		(3,180)
Allowance for loan losses	(59,420)		0
Loans receivable, net	402,152		807,954
Real Estate Secured
Loans Receivable:
Mezzanine	0		0
Loans receivable, other	184,880		195,946
Unamortized discounts, fees and costs	0		413
Allowance for loan losses	0		0
Loans receivable, net	184,880		196,359
Other Secured
Loans Receivable:
Mezzanine	277,299		615,188
Loans receivable, other	0		0
Unamortized discounts, fees and costs	(607)		(3,593)
Allowance for loan losses	(59,420)		0
Loans receivable, net	217,272		611,595
HC-One Facility
Loans Receivable:
Mezzanine			348,000	£ 282
Unamortized discounts, fees and costs			3,000	2
Maria Mallaband Loans
Loans Receivable:
Loans receivable, other	$ 163,000	£ 122	$ 140,000	£ 113

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Loans Receivable - Schedule of Loans Receivable Internal Ratings (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Percentage of Loan Portfolio	100.00%
Loans receivable, net	$ 402,152	$ 807,954
Performing Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	204,778
Watch List Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	0
Workout Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	$ 197,374
Real Estate Secured
Financing Receivable, Recorded Investment [Line Items]
Percentage of Loan Portfolio	46.00%
Loans receivable, net	$ 184,880	196,359
Real Estate Secured | Performing Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	184,880
Real Estate Secured | Watch List Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	0
Real Estate Secured | Workout Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	$ 0
Other Secured
Financing Receivable, Recorded Investment [Line Items]
Percentage of Loan Portfolio	54.00%
Loans receivable, net	$ 217,272	$ 611,595
Other Secured | Performing Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	19,898
Other Secured | Watch List Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	0
Other Secured | Workout Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	$ 197,374

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Loans Receivable - Narrative (Details) $ in Thousands, £ in Millions						1 Months Ended		3 Months Ended			9 Months Ended
	Oct. 25, 2017 USD ($)	Aug. 31, 2017 USD ($)	Jul. 31, 2017 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2017 GBP (£)	Mar. 31, 2017 USD ($)	Mar. 31, 2017 GBP (£)	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	May 31, 2015 USD ($)	Jun. 30, 2013 USD ($)	Jul. 31, 2012 USD ($)
Loans Receivable:
Loans receivable, other								$ 184,880			$ 184,880		$ 195,946
Loans receivable, net								402,152			402,152		807,954
Allowance for loan losses											59,420	$ 0
HC-One Facility
Loans Receivable:
Cash payments received from borrower				$ 367,000	£ 283
Other Secured
Loans Receivable:
Loans receivable, other								0			0		0
Loans receivable, net								217,272			217,272		611,595
Tandem Mezzanine Loan
Loans Receivable:
Cash payments received from borrower								$ 8,000		$ 8,000	$ 23,000	$ 23,000
Loans receivable, other			$ 257,000
Loan receivable, blended annual rate (as a percent)								11.50%			11.50%
Default interest per year (as a percent)								16.50%			16.50%
Loans receivable, additional interest upaid											5.00%
Loans receivable, net				$ 200,000				$ 197,000	$ 200,000		$ 197,000		$ 256,000
Letter of intend, discounted repayment value			197,000
Non-refundable deposit to secure the right to repay by October 25, 2017		$ 2,000	2,000
Non-refundable deposit to extend repayment to December 31, 2017			4,000
Principal payment amount to extend repayment date to December 31, 2017			$ 50,000
Allowance for loan losses								$ 3,000	$ 57,000
Tandem Mezzanine Loan | Maximum
Loans Receivable:
Loans receivable, other																$ 205,000
Tandem Health Care Loan - First Tranche
Loans Receivable:
Loans receivable, other															$ 100,000
Loan receivable, interest rate payable (as a percent)															12.00%
Tandem Health Care Loan - Second Tranche
Loans Receivable:
Loans receivable, other															$ 102,000
Loan receivable, interest rate payable (as a percent)															14.00%
Tandem Health Care Loan Third Tranche
Loans Receivable:
Loans receivable, other														$ 50,000
Loan receivable, interest rate payable (as a percent)														6.00%
Tandem Health Care Loan Fourth Tranche
Loans Receivable:
Loans receivable, other														$ 5,000
Loan receivable, interest rate payable (as a percent)														6.00%
Four Seasons
Loans Receivable:
Payment to purchase senior secured term loan						$ 35,000	£ 29
Subsequent Event | Tandem Mezzanine Loan
Loans Receivable:
Non-refundable deposit to secure the right to repay by October 25, 2017	$ 4,000

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Investments in and Advances to Unconsolidated Joint Ventures - Schedule of Equity Method Investments (Details) $ in Thousands	Sep. 30, 2017 USD ($) joint_venture	Dec. 31, 2016 USD ($)
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures	$ 822,369	$ 571,491
CCRC JV | SHOP
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	49.00%
Investments in and advances to unconsolidated joint ventures	$ 427,159	439,449
Number of unconsolidated joint ventures | joint_venture	2
RIDEA II | SHOP
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	40.00%
Investments in and advances to unconsolidated joint ventures	$ 257,766	0
Life Science JVs | Life science
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures	$ 64,111	67,879
Life Science JVs | Life science | Minimum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	50.00%
Life Science JVs | Life science | Maximum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	63.00%
Torrey Pines Science Center, LP | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	50.00%
Britannia Biotech Gateway, LP | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	55.00%
LASDK, LP | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	63.00%
MBK JV | SHOP
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	50.00%
Investments in and advances to unconsolidated joint ventures	$ 38,366	38,909
Development JVs | SHOP
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures	$ 19,867	10,459
Number of unconsolidated joint ventures | joint_venture	4
Development JVs | SHOP | Minimum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	50.00%
Development JVs | SHOP | Maximum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	90.00%
Vintage Park Development JV | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	85.00%
Waldwick | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	85.00%
Otay Ranch | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	90.00%
MBK Development JV | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	50.00%
Medical Office JVs | Medical office
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures	$ 13,620	13,438
Number of unconsolidated joint ventures | joint_venture	3
Medical Office JVs | Medical office | Minimum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	20.00%
Medical Office JVs | Medical office | Maximum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	67.00%
HCP Ventures VI, LLC | Medical office
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	20.00%
H C P Ventures III, LLC | Medical office
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	30.00%
Suburban Properties, LLC | Medical office
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	67.00%
K&Y JVs | Other non-reportable segments
Company owned interests in entities, accounted under equity method:
Investment ownership percentage	80.00%
Investments in and advances to unconsolidated joint ventures	$ 1,465	1,342
Advances to unconsolidated joint ventures, net
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures	$ 15	$ 15

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Intangibles - Intangibles Lease Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Intangibles
Gross intangible lease assets	$ 775,848	$ 911,697
Accumulated depreciation and amortization	(374,981)	(431,892)
Net intangible lease assets	$ 400,867	$ 479,805

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Intangibles - Intangibles Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Intangibles
Gross intangible lease liabilities	$ 124,454	$ 163,924
Accumulated depreciation and amortization	(71,027)	(105,779)
Net intangible lease liabilities	$ 53,427	$ 58,145

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Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Other Assets [Abstract]
Straight-line rent receivables, net of allowance of $22,705 and $25,059, respectively	$ 313,627	$ 311,776
Leasing costs and inducements, net	102,557	156,820
Deferred tax assets	60,254	42,458
Goodwill	47,019	42,386
Marketable debt securities, net	18,567	68,630
Other	74,145	89,554
Total other assets, net	616,169	711,624
Allowance on straight-line rent receivables	$ 22,705	$ 25,059

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Other Assets - Narrative (Details) - 1 months ended Mar. 31, 2017 - Four Seasons £ in Millions, $ in Millions	USD ($)	GBP (£)	GBP (£)
Other assets
Marketable debt security, par value			£ 138.5
Marketable debt security, par value, discounted	$ 101		83.0
Market debt security, carrying value	50		£ 41.0
Other income, net
Other assets
Gain on sale	$ 51	£ 42.0

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Debt - Bank Line of Credit and Term Loans (Details) £ in Millions			1 Months Ended	9 Months Ended
	Oct. 19, 2017 USD ($) renewal_option	Jun. 30, 2017 GBP (£)	Jan. 31, 2015	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 GBP (£)	Dec. 31, 2016 USD ($)	Jul. 30, 2012 GBP (£)
Debt Instrument
Net repayment under bank line of credit				$ 339,826,000	$ 135,000,000
Bank line of credit				605,837,000			$ 899,718,000
Debt				7,371,385,000
Outstanding balance on term loan				$ 226,205,000			$ 440,062,000
Line of Credit and Term Loan
Debt Instrument
Debt instrument, covenant debt to assets (as a percent)				60.00%		60.00%
Debt instrument, covenant secured debt to assets (as a percent)				30.00%		30.00%
Debt instrument, covenant unsecured debt to unencumbered assets (as a percent)				60.00%		60.00%
Debt instrument, covenant minimum fixed charge coverage ratio				1.5		1.5
Debt instrument, covenant net worth				$ 6,500,000,000.0
Bank Line of Credit
Debt Instrument
Line of credit facility, maximum borrowing capacity				$ 2,000,000,000.0
Length of debt instrument extension period				1 year
Cost of debt extension				0.30%
Debt instrument, facility fee (as a percent)				0.20%
Line of credit facility additional aggregate amount, maximum				$ 500,000,000
Net repayment under bank line of credit				316,000,000
Bank line of credit				$ 141,000,000
Line of credit, portion denominated in GBP | £						£ 105
Weighted-average interest rate (as a percent)				2.40%		2.40%
Debt				$ 605,837,000
2012 Term Loan
Debt Instrument
Debt | £								£ 137
2015 Term Loan
Debt Instrument
Repayments of debt | £		£ 51
Term of facility			4 years
Term of the interest rate swap agreement			3 years
Term loans, portion denominated in GBP | £						£ 169
Outstanding balance on term loan				$ 226,000,000
LIBOR | Bank Line of Credit
Debt Instrument
Debt instrument, basis spread on variable rate (as a percent)				1.05%
GBP LIBOR | 2015 Term Loan
Debt Instrument
Debt instrument, basis spread on variable rate (as a percent)		1.15%
Subsequent Event | Bank Line of Credit | Revolving Credit Facility | New Facility
Debt Instrument
Line of credit facility, maximum borrowing capacity	$ 2,000,000,000.0
Length of debt instrument extension period	6 months
Debt instrument, facility fee (as a percent)	0.20%
Line of credit facility additional aggregate amount, maximum	$ 750,000,000
Number of extensions | renewal_option	2
Subsequent Event | Bank Line of Credit | Revolving Credit Facility | LIBOR | New Facility
Debt Instrument
Debt instrument, basis spread on variable rate (as a percent)	1.00%

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Debt - Senior Unsecured Notes (Details) - USD ($)						3 Months Ended		9 Months Ended
	Jul. 27, 2017	May 01, 2017	Nov. 30, 2016	Sep. 15, 2016	Feb. 01, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument
Total debt before discount, net						$ 7,421,932,000		$ 7,421,932,000
Loss on extinguishment of debt						54,227,000	$ 0	54,227,000	$ 0
Senior unsecured notes						6,393,926,000		6,393,926,000		$ 7,133,538,000
Unsecured Debt
Debt Instrument
Total debt before discount, net						6,450,000,000		6,450,000,000
Senior unsecured notes						$ 0		$ 0		$ 0
Unsecured Note 5.625%
Debt Instrument
Repayment of senior unsecured notes	$ 500,000,000	$ 250,000,000
Percentage of stated interest rate	5.375%	5.625%
Loss on extinguishment of debt	$ 54,000,000
Unsecured Note 3.75%
Debt Instrument
Repayment of senior unsecured notes					$ 500,000,000
Percentage of stated interest rate					3.75%
Unsecured Note 6.3%
Debt Instrument
Repayment of senior unsecured notes				$ 400,000,000
Percentage of stated interest rate				6.30%
Unsecured Note 6.0%
Debt Instrument
Repayment of senior unsecured notes			$ 500,000,000
Percentage of stated interest rate			6.00%
Unsecured Note 6.7%
Debt Instrument
Repayment of senior unsecured notes			$ 600,000,000
Percentage of stated interest rate			6.70%

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Debt - Mortgage Debt (Details) $ in Thousands, £ in Millions		1 Months Ended	9 Months Ended
	Jun. 30, 2017 GBP (£)	Mar. 31, 2017 USD ($)	Sep. 30, 2017 USD ($) facility	Sep. 30, 2017 GBP (£) facility	Dec. 31, 2016 USD ($)
Debt Instrument
Total debt before discount, net			$ 7,421,932
(Discounts), premiums and debt costs, net			(50,547)
Debt instruments, carrying amount			7,371,385
Other debt			94,818		$ 92,385
Debt maturing in 2017
Debt Instrument
2017			847
Debt maturing in 2018
Debt Instrument
2018			609,349
Debt maturing in 2019
Debt Instrument
2019			680,380
Debt maturing in 2020
Debt Instrument
2020			803,758
Debt maturing in 2021
Debt Instrument
2021			711,117
Thereafter
Debt Instrument
Thereafter			4,616,481
2015 Term Loan
Debt Instrument
Repayments of debt | £	£ 51
Term loans, portion denominated in GBP | £				£ 169
Bank Line of Credit
Debt Instrument
Total debt before discount, net			605,837
(Discounts), premiums and debt costs, net			0
Debt instruments, carrying amount			$ 605,837
Line of credit, portion denominated in GBP | £				£ 105
Weighted-average interest rate (as a percent)			2.40%	2.40%
Bank Line of Credit | Debt maturing in 2017
Debt Instrument
2017			$ 0
Bank Line of Credit | Debt maturing in 2018
Debt Instrument
2018			605,837
Bank Line of Credit | Debt maturing in 2019
Debt Instrument
2019			0
Bank Line of Credit | Debt maturing in 2020
Debt Instrument
2020			0
Bank Line of Credit | Debt maturing in 2021
Debt Instrument
2021			0
Bank Line of Credit | Thereafter
Debt Instrument
Thereafter			0
Term loans
Debt Instrument
Total debt before discount, net			226,680
(Discounts), premiums and debt costs, net			(475)
Debt instruments, carrying amount			226,205
Term loans | Debt maturing in 2017
Debt Instrument
2017			0
Term loans | Debt maturing in 2018
Debt Instrument
2018			0
Term loans | Debt maturing in 2019
Debt Instrument
2019			226,680
Term loans | Debt maturing in 2020
Debt Instrument
2020			0
Term loans | Debt maturing in 2021
Debt Instrument
2021			0
Term loans | Thereafter
Debt Instrument
Thereafter			0
Unsecured Debt
Debt Instrument
Total debt before discount, net			6,450,000
(Discounts), premiums and debt costs, net			(56,074)
Debt instruments, carrying amount			$ 6,393,926
Weighted-average interest rate (as a percent)			4.19%	4.19%
Weighted-average maturity			6 years
Unsecured Debt | Minimum
Debt Instrument
Percentage of stated interest rate			2.79%	2.79%
Unsecured Debt | Maximum
Debt Instrument
Percentage of stated interest rate			6.88%	6.88%
Unsecured Debt | Debt maturing in 2017
Debt Instrument
2017			$ 0
Unsecured Debt | Debt maturing in 2018
Debt Instrument
2018			0
Unsecured Debt | Debt maturing in 2019
Debt Instrument
2019			450,000
Unsecured Debt | Debt maturing in 2020
Debt Instrument
2020			800,000
Unsecured Debt | Debt maturing in 2021
Debt Instrument
2021			700,000
Unsecured Debt | Thereafter
Debt Instrument
Thereafter			$ 4,500,000
Mortgage Debt
Debt Instrument
Number of healthcare facilities used to secure debt | facility			16	16
Debt instrument, collateral, healthcare facilities carrying value			$ 303,000
Repayments of debt		$ 472,000
Total debt before discount, net			139,415
(Discounts), premiums and debt costs, net			6,002
Debt instruments, carrying amount			$ 145,417
Weighted-average interest rate (as a percent)			4.19%	4.19%
Weighted-average maturity			20 years
Mortgage Debt | Minimum
Debt Instrument
Percentage of stated interest rate			2.01%	2.01%
Mortgage Debt | Maximum
Debt Instrument
Percentage of stated interest rate			5.91%	5.91%
Mortgage Debt | Debt maturing in 2017
Debt Instrument
2017			$ 847
Mortgage Debt | Debt maturing in 2018
Debt Instrument
2018			3,512
Mortgage Debt | Debt maturing in 2019
Debt Instrument
2019			3,700
Mortgage Debt | Debt maturing in 2020
Debt Instrument
2020			3,758
Mortgage Debt | Debt maturing in 2021
Debt Instrument
2021			11,117
Mortgage Debt | Thereafter
Debt Instrument
Thereafter			116,481
Life Care Bonds and Demand Notes
Debt Instrument
Other debt			$ 95,000

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Commitments and Contingencies (Details)	Oct. 31, 2016 USD ($)	Sep. 30, 2017 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)	Jul. 05, 2016 lawsuit
Commitments and Contingencies
Loan amount outstanding		$ 605,837,000		$ 899,718,000
QCP | Unsecured Revolving Credit Facility
Commitments and Contingencies
Loan amount outstanding	$ 100,000,000		$ 0
Permanent decrease in commitments for each month equal to retained cash flow (as a percent)	50.00%
Term of facility	1 year
Debt instrument, facility fee (as a percent)	0.50%
QCP | LIBOR | Unsecured Revolving Credit Facility
Commitments and Contingencies
Debt instrument , floor rate (as a percent)	1.00%
Debt instrument, basis spread on variable rate (as a percent)	6.25%
Pending Litigation | Subodh V. HCR ManorCare Inc and Stearns V. HCR ManorCare, Inc
Commitments and Contingencies
Number of pending claims | lawsuit					2

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Equity (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Loss
Cumulative foreign currency translation adjustment	$ (8,455)	$ (22,817)
Unrealized gains (losses) on cash flow hedges, net	(13,073)	(3,642)
Supplemental Executive Retirement plan minimum liability	(2,907)	(3,129)
Unrealized gains (losses) on available for sale securities	(56)	(54)
Total other comprehensive income (loss)	$ (24,491)	$ (29,642)

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Segment Disclosures - Summary Information for the Reportable Segments (Details) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 31, 2017 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) facility	Sep. 30, 2016 USD ($)	Dec. 31, 2016 facility
Segment reporting information, revenues
Rental revenues		$ 442,249	$ 510,075	$ 1,354,145	$ 1,518,051
HCP share of unconsolidated JV revenues		84,884	53,814	248,379	160,779
Operating expenses		(155,338)	(187,714)	(467,582)	(542,751)
HCP share of unconsolidated JV operating expenses		(65,631)	(43,037)	(191,772)	(126,899)
Segment NOI		306,164	333,138	943,170	1,009,180
Adjustments to NOI		1,335	810	2,806	352
Adjusted NOI		307,499	333,948	945,976	1,009,532
Addback adjustments		(1,335)	(810)	(2,806)	(352)
Interest income		11,774	20,482	50,974	71,298
Interest expense		(71,328)	(117,860)	(235,834)	(361,255)
Depreciation and amortization		(130,588)	(141,407)	(397,893)	(421,181)
General and administrative		(23,523)	(34,781)	(67,287)	(83,011)
Acquisition and pursuit costs		(580)	(2,763)	(2,504)	(6,061)
Recoveries (impairments), net		(25,328)	0	(82,010)	0
Gain (loss) on sales of real estate, net		5,182	(9)	322,852	119,605
Loss on debt extinguishments		(54,227)	0	(54,227)	0
Other income (expense), net		(10,556)	1,432	40,723	5,064
Income tax benefit (expense)		5,481	424	14,630	(1,101)
Less: HCP share of unconsolidated JV NOI		(19,253)	(10,777)	(56,607)	(33,880)
Equity income (loss) from unconsolidated JVs		1,062	(2,053)	4,571	(4,028)
Discontinued operations		0	108,213	0	283,996
Net income (loss)		(5,720)	154,039	480,558	578,626
Corporate and other assets
Segment reporting information, revenues
Rental revenues		0	0	0	0
HCP share of unconsolidated JV revenues		0	0	0	0
Operating expenses		0	0	0	0
HCP share of unconsolidated JV operating expenses		0	0	0	0
Segment NOI		0	0	0	0
Adjustments to NOI		0	0	0	0
Adjusted NOI		0	0	0	0
Addback adjustments		0	0	0	0
Interest income		0	0	0	0
Interest expense		(68,924)	(104,584)	(222,775)	(314,708)
Depreciation and amortization		0	0	0	0
General and administrative		(23,523)	(34,781)	(67,287)	(83,011)
Acquisition and pursuit costs		(580)	(2,763)	(2,504)	(6,061)
Recoveries (impairments), net		0		0
Gain (loss) on sales of real estate, net		0	0	0	0
Loss on debt extinguishments		(54,227)		(54,227)
Other income (expense), net		(10,556)	1,432	40,723	5,064
Income tax benefit (expense)		5,481	424	14,630	(1,101)
Less: HCP share of unconsolidated JV NOI		0	0	0	0
Equity income (loss) from unconsolidated JVs		0	0	0	0
Discontinued operations			108,213		283,996
Net income (loss)		(152,329)	(32,059)	$ (291,440)	(115,821)
Senior housing triple-net
Segment Disclosure
Number of SH NNN facilities transitioned to RIDEA structure | facility				4		17
Senior housing triple-net | Operating segment
Segment reporting information, revenues
Rental revenues		77,220	104,262	$ 255,332	319,989
HCP share of unconsolidated JV revenues		0	0	0	0
Operating expenses		(934)	(1,794)	(2,927)	(5,521)
HCP share of unconsolidated JV operating expenses		0	0	0	0
Segment NOI		76,286	102,468	252,405	314,468
Adjustments to NOI		(600)	(1,003)	(2,844)	(8,464)
Adjusted NOI		75,686	101,465	249,561	306,004
Addback adjustments		600	1,003	2,844	8,464
Interest income		0	0	0	0
Interest expense		(640)	(644)	(1,898)	(8,859)
Depreciation and amortization		(25,547)	(34,030)	(77,478)	(101,737)
General and administrative		0	0	0	0
Acquisition and pursuit costs		0	0	0	0
Recoveries (impairments), net		0		0
Gain (loss) on sales of real estate, net		(6)	0	268,227	23,940
Loss on debt extinguishments		0		0
Other income (expense), net		0	0	0	0
Income tax benefit (expense)		0	0	0	0
Less: HCP share of unconsolidated JV NOI		0	0	0	0
Equity income (loss) from unconsolidated JVs		0	0	0	0
Discontinued operations			0		0
Net income (loss)		50,093	67,794	441,256	227,812
SHOP | Operating segment
Segment reporting information, revenues
Rental revenues		126,040	170,739	391,684	500,704
HCP share of unconsolidated JV revenues		81,936	50,973	239,667	152,424
Operating expenses		(86,821)	(121,502)	(267,226)	(350,949)
HCP share of unconsolidated JV operating expenses		(65,035)	(42,463)	(190,049)	(125,244)
Segment NOI		56,120	57,747	174,076	176,935
Adjustments to NOI		4,551	4,081	12,229	14,648
Adjusted NOI		60,671	61,828	186,305	191,583
Addback adjustments		(4,551)	(4,081)	(12,229)	(14,648)
Interest income		0	0	0	0
Interest expense		(933)	(8,130)	(6,950)	(23,818)
Depreciation and amortization		(24,884)	(26,837)	(75,657)	(78,124)
General and administrative		0	0	0	0
Acquisition and pursuit costs		0	0	0	0
Recoveries (impairments), net		0		0
Gain (loss) on sales of real estate, net		5,180	0	5,313	0
Loss on debt extinguishments		0		0
Other income (expense), net		0	0	0	0
Income tax benefit (expense)		0	0	0	0
Less: HCP share of unconsolidated JV NOI		(16,901)	(8,510)	(49,618)	(27,180)
Equity income (loss) from unconsolidated JVs		(245)	(3,517)	683	(8,477)
Discontinued operations			0		0
Net income (loss)		18,337	10,753	47,847	39,336
Life science
Segment reporting information, revenues
Gain (loss) on sales of real estate, net	$ 45,000
Life science | Operating segment
Segment reporting information, revenues
Rental revenues		90,174	90,847	262,224	269,994
HCP share of unconsolidated JV revenues		2,031	1,929	5,975	5,628
Operating expenses		(19,960)	(18,487)	(56,024)	(53,191)
HCP share of unconsolidated JV operating expenses		(433)	(406)	(1,234)	(1,173)
Segment NOI		71,812	73,883	210,941	221,258
Adjustments to NOI		(751)	(314)	(1,094)	(1,545)
Adjusted NOI		71,061	73,569	209,847	219,713
Addback adjustments		751	314	1,094	1,545
Interest income		0	0	0	0
Interest expense		(87)	(634)	(288)	(1,904)
Depreciation and amortization		(30,851)	(31,967)	(95,648)	(97,640)
General and administrative		0	0	0	0
Acquisition and pursuit costs		0	0	0	0
Recoveries (impairments), net		0		0
Gain (loss) on sales of real estate, net		8	0	45,922	29,428
Loss on debt extinguishments		0		0
Other income (expense), net		0	0	0	0
Income tax benefit (expense)		0	0	0	0
Less: HCP share of unconsolidated JV NOI		(1,598)	(1,523)	(4,741)	(4,455)
Equity income (loss) from unconsolidated JVs		789	778	2,322	2,263
Discontinued operations			0		0
Net income (loss)		40,073	40,537	158,508	148,950
Medical office | Operating segment
Segment reporting information, revenues
Rental revenues		119,847	113,653	357,381	331,881
HCP share of unconsolidated JV revenues		496	502	1,481	1,503
Operating expenses		(46,486)	(44,738)	(137,930)	(129,715)
HCP share of unconsolidated JV operating expenses		(143)	(148)	(431)	(452)
Segment NOI		73,714	69,269	220,501	203,217
Adjustments to NOI		(582)	(814)	(2,321)	(2,361)
Adjusted NOI		73,132	68,455	218,180	200,856
Addback adjustments		582	814	2,321	2,361
Interest income		0	0	0	0
Interest expense		(126)	(1,608)	(382)	(4,899)
Depreciation and amortization		(42,047)	(41,111)	(127,261)	(120,432)
General and administrative		0	0	0	0
Acquisition and pursuit costs		0	0	0	0
Recoveries (impairments), net		0		0
Gain (loss) on sales of real estate, net		0	(9)	(406)	8,333
Loss on debt extinguishments		0		0
Other income (expense), net		0	0	0	0
Income tax benefit (expense)		0	0	0	0
Less: HCP share of unconsolidated JV NOI		(353)	(354)	(1,050)	(1,051)
Equity income (loss) from unconsolidated JVs		274	462	846	1,541
Discontinued operations			0		0
Net income (loss)		31,462	26,649	92,248	86,709
Other non-reportable segments | Operating segment
Segment reporting information, revenues
Rental revenues		28,968	30,574	87,524	95,483
HCP share of unconsolidated JV revenues		421	410	1,256	1,224
Operating expenses		(1,137)	(1,193)	(3,475)	(3,375)
HCP share of unconsolidated JV operating expenses		(20)	(20)	(58)	(30)
Segment NOI		28,232	29,771	85,247	93,302
Adjustments to NOI		(1,283)	(1,140)	(3,164)	(1,926)
Adjusted NOI		26,949	28,631	82,083	91,376
Addback adjustments		1,283	1,140	3,164	1,926
Interest income		11,774	20,482	50,974	71,298
Interest expense		(618)	(2,260)	(3,541)	(7,067)
Depreciation and amortization		(7,259)	(7,462)	(21,849)	(23,248)
General and administrative		0	0	0	0
Acquisition and pursuit costs		0	0	0	0
Recoveries (impairments), net		(25,328)		(82,010)
Gain (loss) on sales of real estate, net		0	0	3,796	57,904
Loss on debt extinguishments		0		0
Other income (expense), net		0	0	0	0
Income tax benefit (expense)		0	0	0	0
Less: HCP share of unconsolidated JV NOI		(401)	(390)	(1,198)	(1,194)
Equity income (loss) from unconsolidated JVs		244	224	720	645
Discontinued operations			0		0
Net income (loss)		$ 6,644	$ 40,365	$ 32,139	$ 191,640

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Segment Disclosures - Revenues and Assets by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Segment Disclosure
Total revenues	$ 454,023	$ 530,557	$ 1,405,119	$ 1,589,349
Operating segment
Segment Disclosure
Total revenues	454,023	530,557	1,405,119	1,589,349
Operating segment | Senior housing triple-net
Segment Disclosure
Total revenues	77,220	104,262	255,332	319,989
Operating segment | SHOP
Segment Disclosure
Total revenues	126,040	170,739	391,684	500,704
Operating segment | Life science
Segment Disclosure
Total revenues	90,174	90,847	262,224	269,994
Operating segment | Medical office
Segment Disclosure
Total revenues	119,847	113,653	357,381	331,881
Operating segment | Other non-reportable segments
Segment Disclosure
Total revenues	$ 40,742	$ 51,056	$ 138,498	$ 166,781

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Numerator
Net income (loss) from continuing operations	$ (5,720)	$ 45,826	$ 480,558	$ 294,630
Noncontrolling interests' share in earnings	(1,937)	(2,789)	(7,687)	(9,540)
Net income (loss) attributable to HCP, Inc.	(7,657)	43,037	472,871	285,090
Participating securities' share in earnings	(131)	(326)	(560)	(977)
Income (loss) from continuing operations applicable to common shares	(7,788)	42,711	472,311	284,113
Discontinued operations	0	108,213	0	283,996
Net income (loss) applicable to common shares	$ (7,788)	$ 150,924	$ 472,311	$ 568,109
Denominator
Basic weighted average common shares	468,975	467,628	468,642	466,931
Diluted weighted average common shares	468,975	467,835	468,828	467,132
Basic earnings per common share:
Continuing operations (in dollars per share)	$ (0.02)	$ 0.09	$ 1.01	$ 0.61
Discontinued operations (in dollars per share)	0.00	0.23	0.00	0.61
Net income (loss) applicable to common shares (in dollars per share)	(0.02)	0.32	1.01	1.22
Diluted earnings per common share
Continuing operations (in dollars per share)	(0.02)	0.09	1.01	0.61
Discontinued operations (in dollars per share)	0.00	0.23	0.00	0.61
Net income (loss) applicable to common shares (in dollars per share)	$ (0.02)	$ 0.32	$ 1.01	$ 1.22
Common Stock Options
Earnings per common share:
Shares of anti-dilutive securities excluded from earnings per share calculation	1,000	1,000	1,000	1,000
Down REIT
Earnings per common share:
Shares of anti-dilutive securities excluded from earnings per share calculation		6,000	7,000	6,000
DownREIT LLCs, non-managing member units outstanding		4,000	4,000	4,000
Equity awards
Denominator
Dilutive potential common shares	0	207	186	201

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Supplemental cash flow information:
Interest paid, net of capitalized interest	$ 261,799	$ 401,628
Income taxes paid	9,897	5,734
Capitalized interest	12,607	8,490
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	63,515	60,897
Non-cash acquisitions and dispositions settled with receivables and restricted cash held in connection with Section 1031 transactions	0	15,570
Vesting of restricted stock units and conversion of non-managing member units into common stock	2,464	6,620
Mortgages and other liabilities assumed with real estate acquisitions	3,678	78,131
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	$ (56)	$ 1,531

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Variable Interest Entities - Narrative (Details) $ in Thousands, £ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($) property facility joint_venture loan	Sep. 30, 2017 GBP (£) property joint_venture loan	Jul. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Variable Interest Entity [Line Items]
Mezzanine | $	$ 277,299			$ 615,188
Loans receivable, other | $	$ 184,880			$ 195,946
Unconsolidated Variable Interest Entities
Variable Interest Entity [Line Items]
Number of unconsolidated joint ventures	5	5
Number of VIE borrowers with marketable debt securities	1	1
Number of loans to VIE borrowers | loan	3	3
CCRC OpCo
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)	49.00%
Vintage Park Development JV and Waldwick JV
Variable Interest Entity [Line Items]
Number of unconsolidated joint ventures	2	2
Vintage Park Development JV
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)	85.00%
Waldwick
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)	85.00%
VIE tenants-operating leases
Variable Interest Entity [Line Items]
Number of properties leased | property	48	48
Number of VIE tenants	7	7
Loan-seller financing | Senior housing triple-net
Variable Interest Entity [Line Items]
Mezzanine | $	$ 10,000
Number of properties sold | facility	7
Term of facility	5 years
RIDEA I
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)	90.00%
RIDEA III
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)	90.00%
HCP Ventures V
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)	51.00%
Vintage Park Development JV
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)	90.00%
DownREIT Partnerships
Variable Interest Entity [Line Items]
Number of controlling ownership interest entities as a managing member	5
Bridge Loan | MMCG
Variable Interest Entity [Line Items]
Loan amount	$ 131,000	£ 105
Period of call-option retained	3 years
Tandem Mezzanine Loan
Variable Interest Entity [Line Items]
Loans receivable, other | $			$ 257,000

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Variable Interest Entities - Schedule of Variable Interest Entities (Details) $ in Thousands	Sep. 30, 2017 USD ($)
VIE tenants-DFLs
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	$ 602,501
VIE tenants-operating leases
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	5,183
CCRC OpCo
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	214,140
RIDEA II
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	251,419
Development JVs
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	11,202
Tandem Health Care
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	197,374
Loan-senior secured
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	141,574
Loan-seller financing
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	10,000
CMBS and LLC Investment
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	$ 33,630

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Variable Interest Entities - Consolidated Assets and Liabilities of VIEs (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
ASSETS
Buildings and improvements	$ 11,052,578	$ 11,692,654
Developments in process	429,459	400,619
Land	1,752,890	1,881,487
Accumulated depreciation	(2,699,174)	(2,648,930)
Net real estate	10,535,753	11,325,830
Investments in and advances to unconsolidated joint ventures	822,369	571,491
Accounts receivable, net	34,571	45,116
Cash and cash equivalents	133,887	94,730	$ 132,891	$ 346,500
Restricted cash	27,135	42,260
Intangible assets, net	400,867	479,805
Other assets, net	616,169	711,624
Total assets	13,904,081	15,759,265
LIABILITIES AND EQUITY
Mortgage debt	145,417	623,792
Intangible liabilities, net	53,427	58,145
Accounts payable and accrued expenses	8,653	3,776
Deferred revenue	140,378	149,181
Total liabilities	8,049,850	9,817,957
VIEs
ASSETS
Buildings and improvements	2,833,834	3,522,310
Developments in process	22,860	31,953
Land	227,682	327,241
Accumulated depreciation	(584,621)	(676,276)
Net real estate	2,499,755	3,205,228
Investments in and advances to unconsolidated joint ventures	2,119	3,641
Accounts receivable, net	9,964	19,996
Cash and cash equivalents	36,262	35,844
Restricted cash	2,137	22,624
Intangible assets, net	132,905	169,027
Other assets, net	56,854	69,562
Total assets	2,739,996	3,525,922
LIABILITIES AND EQUITY
Mortgage debt	45,067	520,870
Intangible liabilities, net	9,170	8,994
Accounts payable and accrued expenses	102,780	120,719
Deferred revenue	18,162	23,456
Total liabilities	$ 175,179	$ 674,039

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Concentration of Credit Risk - Schedule of Concentration Risk (Details) - property	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Total Assets | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)			11.00%		17.00%
Revenue | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)	8.00%	12.00%	10.00%	12.00%
Senior housing triple-net
Concentration Risk [Line Items]
Number of properties classified as held for sale	3		3		64
Senior housing triple-net | Total Assets | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)			42.00%		69.00%
Senior housing triple-net | Revenue | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)	48.00%	60.00%	53.00%	59.00%

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Concentration of Credit Risk - Narrative (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2017 facility renewal	Dec. 31, 2016
Brookdale | Minimum
Concentration Risk [Line Items]
Percentage of EDITDAR payable as base management fee	4.50%
Brookdale | Maximum
Concentration Risk [Line Items]
Percentage of EDITDAR payable as base management fee	5.00%
SHOP | Management and Accounting Services | Brookdale
Concentration Risk [Line Items]
Number of facilities | facility	59
Number of facilities owned by unconsolidated joint venture | facility	62
Management and Accounting Services | SHOP | Brookdale
Concentration Risk [Line Items]
Management agreement renewal term (in years)	5 years
Management and Accounting Services | SHOP | Brookdale | Minimum
Concentration Risk [Line Items]
Management agreement term (in years)	10 years
Number of renewals on management agreement | renewal	3
Management and Accounting Services | SHOP | Brookdale | Maximum
Concentration Risk [Line Items]
Management agreement term (in years)	15 years
Number of renewals on management agreement | renewal	4
Total Assets | SHOP | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)	13.00%	18.00%
Brookdale | Total Assets
Concentration Risk [Line Items]
Concentration risk (as a percent)	11.00%	17.00%

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Fair Value Measurements - Summary of the Carrying Amounts and Fair Values of the Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Summary of financial instruments
Bank line of credit	$ 605,837	$ 899,718
Senior unsecured notes	6,393,926	7,133,538
Mortgage debt	145,417	623,792
Other debt	94,818	92,385
Carrying Value
Summary of financial instruments
Loans receivable, net	402,152	807,954
Marketable debt securities	18,567	68,630
Marketable equity securities	74	76
Bank line of credit	605,837	899,718
Term loans	226,205	440,062
Senior unsecured notes	6,393,926	7,133,538
Mortgage debt	145,417	623,792
Other debt	94,818	92,385
Carrying Value | Warrants
Summary of financial instruments
Derivative assets	58	19
Carrying Value | Interest-rate swap contracts
Summary of financial instruments
Derivative liabilities	2,980	4,857
Carrying Value | Currency swap
Summary of financial instruments
Derivative assets	0	2,920
Derivative liabilities	9,469	0
Fair Value | Level 1
Summary of financial instruments
Marketable equity securities	74	76
Senior unsecured notes	6,769,010	7,386,149
Fair Value | Level 2
Summary of financial instruments
Loans receivable, net	402,267	807,505
Marketable debt securities	18,567	68,630
Bank line of credit	605,837	899,718
Term loans	226,205	440,062
Mortgage debt	131,419	609,374
Other debt	94,818	92,385
Fair Value | Warrants | Level 3
Summary of financial instruments
Derivative assets	58	19
Fair Value | Interest-rate swap contracts | Level 2
Summary of financial instruments
Derivative liabilities	2,980	4,857
Fair Value | Currency swap | Level 2
Summary of financial instruments
Derivative assets	0	2,920
Derivative liabilities	$ 9,469	$ 0

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Derivative Financial Instruments - Schedule of Derivative Instruments (Details) - Sep. 30, 2017	USD ($) derivative $ / £	GBP (£) derivative $ / £
Cash Flow | Interest-rate swap contracts
Derivative [Line Items]
Notional	$ 44,000,000
Fixed Rate/Buy Amount (as a percent)	3.82%	3.82%
Fair value of interest rate hedge, liabilities	$ (2,980,000)
Number of interest-rate contracts held | derivative	3	3
Net Investment | Cross currency swap
Derivative [Line Items]
Notional | £		£ 105,000,000
Fair value of interest rate hedge, liabilities	$ (9,469,000)
Foreign currency exchange rate | $ / £	1.251	1.251
Long | Net Investment | Cross currency swap
Derivative [Line Items]
Notional | £		£ 105,000,000
Fixed Rate/Buy Amount (as a percent)	2.584%	2.584%
Short | Net Investment | Cross currency swap
Derivative [Line Items]
Notional	$ 131,400,000
Fixed Rate/Buy Amount (as a percent)	3.75%	3.75%

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Derivative Financial Instruments - Narrative (Details) - 9 months ended Sep. 30, 2017 $ in Millions	USD ($)	GBP (£)
Net Investment | Facility and 2015 Term Loan
Derivative [Line Items]
Borrowings designated as hedge of net investment | £		£ 150,000,000
Interest-rate swap contracts | Maximum
Derivative [Line Items]
Estimate change in fair value of derivative for assumption of one percentage point change in the interest rate | $	$ 2
Cross currency swap | Maximum
Derivative [Line Items]
Estimate change in fair value of derivative for assumption of one percentage point change in the interest rate | $	$ 2
Cross currency swap | Net Investment
Derivative [Line Items]
Notional | £		£ 105,000,000