Segment Disclosures

6 Months Ended

Jun. 30, 2013

Segment Disclosures

Segment Disclosures

(13) Segment Disclosures

The Company evaluates its business and makes resource allocations based on its five business segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. Under the senior housing, post-acute/skilled nursing, life science and hospital segments, the Company invests or co-invests primarily in single operator or tenant properties, through the acquisition and development of real estate and by debt issued by operators in these sectors. Under the medical office segment, the Company invests or co-invests through the acquisition and development of medical office buildings (“MOBs”) that are leased under gross, modified gross or triple-net leases, generally to multiple tenants, and which generally require a greater level of property management. The accounting policies of the segments are the same as those described in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2012 in the Company’s Annual Report on Form 10-K filed with the SEC. There were no intersegment sales or transfers during the six months ended June 30, 2013 and 2012. The Company evaluates performance based upon property net operating income from continuing operations (“NOI”), adjusted NOI and interest income of the combined investments in each segment.

Non-segment assets consist primarily of corporate assets including cash, restricted cash, accounts receivable, net, marketable equity securities, deferred financing costs 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 determining the Company’s performance measure. See Note 11 for other information regarding concentrations of credit risk.

Summary information for the reportable segments follows (in thousands):

For the three months ended June 30, 2013:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)(Cash NOI)
Senior housing	$	150,261	$	37,590	$	2,806	$	—	$	190,657	$	163,714	$	148,400
Post-acute/skilled	137,520		—		11,029		—		148,549		136,867		120,128
Life science	75,227		—		—		1		75,228		61,388		58,265
Medical office	90,174		—		—		498		90,672		54,956		53,857
Hospital	10,866		—		312		—		11,178		9,899		21,609
Total	$	464,048	$	37,590	$	14,147	$	499	$	516,284	$	426,824	$	402,259

For the three months ended June 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		AdjustedNOI(2)(Cash NOI)
Senior housing	$	113,387	$	35,569	$	527	$	—	$	149,483	$	125,516	$	113,936
Post-acute/skilled	134,353		—		427		—		134,780		134,188		116,517
Life science	72,545		—		—		1		72,546		58,990		55,735
Medical office	80,905		—		—		469		81,374		48,926		47,682
Hospital	21,970		—		262		—		22,232		21,033		20,509
Total	$	423,160	$	35,569	$	1,216	$	470	$	460,415	$	388,653	$	354,379

For the six months ended June 30, 2013:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)(Cash NOI)
Senior housing	$	299,157	$	74,481	$	5,207	$	—	$	378,845	$	325,110	$	291,398
Post-acute/skilled	273,623		—		21,014		—		294,637		272,323		236,286
Life science	148,557		—		—		2		148,559		121,335		114,605
Medical office	177,429		—		—		940		178,369		107,915		105,528
Hospital	30,990		—		312		—		31,302		29,135		40,389
Total	$	929,756	$	74,481	$	26,533	$	942	$	1,031,712	$	855,818	$	788,206

For the six months ended June 30, 2012:

Segments	RentalRevenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		AdjustedNOI(2)(Cash NOI)
Senior housing	$	226,692	$	71,748	$	809	$	—	$	299,249	$	253,386	$	228,393
Post-acute/skilled	268,026		—		707		—		268,733		267,661		229,365
Life science	144,375		—		—		2		144,377		117,936		114,838
Medical office	160,861		—		—		961		161,822		97,178		94,604
Hospital	40,647		—		519		—		41,166		38,779		37,702
Total	$	840,601	$	71,748	$	2,035	$	963	$	915,347	$	774,940	$	704,902

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

(2) NOI is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate. The Company defines NOI as rental and related revenues, including tenant recoveries, resident fees and services, and income from direct financing leases, less property level operating expenses. NOI excludes interest income, investment management fee income, interest expense, depreciation and amortization, general and administrative expenses, litigation settlement, impairments, impairment recoveries, other income, net, income taxes, equity income from and impairments of investments in unconsolidated joint ventures, and discontinued operations. The Company 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 accretion, amortization of above and below market lease intangibles, and lease termination fees. Adjusted NOI is sometimes referred to as “cash NOI.” The Company uses NOI and adjusted NOI to make decisions about resource allocations and to assess and compare property level performance. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP because it does not reflect the aforementioned excluded items. Further, the Company’s definition of NOI may not be comparable to the definition used by other REITs or real estate companies, as those companies may use different methodologies for calculating NOI.

The following is a reconciliation of reported net income to NOI and adjusted NOI (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	216,725		$	204,975		$	450,509		$	401,539
Interest income	(14,147		)	(1,216		)	(26,533		)	(2,035		)
Investment management fee income	(499		)	(470		)	(942		)	(963		)
Interest expense	108,716			102,354			218,006			206,044
Depreciation and amortization	110,686			84,873			215,314			170,062
General and administrative	24,073			14,801			44,744			34,884
Other income, net	(3,240		)	(1,028		)	(15,303		)	(1,462		)
Income taxes	1,654			171			2,530			(541		)
Equity income from unconsolidated joint ventures	(15,585		)	(15,732		)	(30,386		)	(29,407		)
Total discontinued operations	(1,559		)	(75		)	(2,121		)	(3,181		)
NOI	426,824			388,653			855,818			774,940
Straight-line rents	2,838			(11,860		)	(15,955		)	(21,787		)
DFL accretion	(21,394		)	(22,017		)	(45,564		)	(47,639		)
Amortization of above and below market lease intangibles, net	(5,990		)	(625		)	(6,068		)	(1,322		)
Lease termination fees	(15		)	(251		)	(15		)	(399		)
NOI adjustments related to discontinued operations	(4		)	479			(10		)	1,109
Adjusted NOI	$	402,259		$	354,379		$	788,206		$	704,902

The Company’s total assets by segment were (in thousands):

	June 30,			December 31,
Segments	2013			2012
Senior housing	$	7,799,169		$	7,654,221
Post-acute/skilled nursing	6,389,017			6,080,826
Life science	3,955,373			3,932,397
Medical office	2,679,908			2,661,394
Hospital	733,338			711,836
Gross segment assets	21,556,805			21,040,674
Accumulated depreciation and amortization	(2,178,621		)	(1,970,621		)
Assets held-for-sale, net	6,936			9,578
Net segment assets	19,385,120			19,079,631
Other non-segment assets	666,673			835,924
Total assets	$	20,051,793		$	19,915,555

At June 30, 2013, goodwill of $50 million was allocated to segment assets as follows: (i) senior housing—$31 million, (ii) post-acute/skilled nursing—$3 million, (iii) medical office—$11 million, and (iv) hospital—$5 million.