Segment Disclosures

3 Months Ended

Mar. 31, 2017

Segment Disclosures

Segment Disclosures

NOTE 13.  Segment Disclosures

The Company evaluates its business and allocates resources based on its reportable business segments: (i) SH NNN, (ii) SHOP, (iii) life science and (iv) medical office. Under the medical office segment, the Company invests through the acquisition and development of MOBs, which generally require a greater level of property management. Otherwise, the Company primarily invests, through the acquisition and development of real estate, in single tenant and operator properties. The Company has non-reportable segments that are comprised primarily of the Company’s debt investments, hospital properties and U.K. care homes. 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 amended by Note 2 herein. During the year ended December 31, 2016, 17 SH NNN facilities were transitioned to a RIDEA structure (reported in the Company’s SHOP segment). During the three months ended March 31, 2017, one SH NNN facility 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.

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 March 31, 2017:

					Life		Medical		Other		Corporate
	SH NNN		SHOP		Science		Office		Non-reportable		Non-segment		Total
Rental revenues(1)	$	100,034	$	140,228	$	85,321	$	118,371	$	29,883	$	—	$	473,837
HCP share of unconsolidated JV revenues		—		76,364		1,940		489		418		—		79,211
Operating expenses		(1,111)		(94,539)		(17,319)		(44,864)		(1,248)		—		(159,081)
HCP share of unconsolidated JV operating expenses		—		(59,527)		(371)		(142)		(19)		—		(60,059)
NOI		98,923		62,526		69,571		73,854		29,034		—		333,908
Adjustments to NOI(2)		(1,839)		3,508		(256)		(969)		(1,012)		—		(568)
Adjusted NOI		97,084		66,034		69,315		72,885		28,022		—		333,340
Addback adjustments		1,839		(3,508)		256		969		1,012		—		568
Interest income		—		—		—		—		18,331		—		18,331
Interest expense		(627)		(4,596)		(104)		(129)		(1,997)		(79,265)		(86,718)
Depreciation and amortization		(26,411)		(26,358)		(33,791)		(42,729)		(7,265)		—		(136,554)
General and administrative		—		—		—		—		—		(22,478)		(22,478)
Acquisition and pursuit costs		—		—		—		—		—		(1,057)		(1,057)
Gain on sales of real estate, net		268,464		366		44,633		—		3,795		—		317,258
Other income, net		—		—		—		—		—		51,208		51,208
Income tax benefit		—		—		—		—		—		6,162		6,162
Less: HCP share of unconsolidated JV NOI		—		(16,837)		(1,569)		(347)		(399)		—		(19,152)
Equity income in unconsolidated JVs		—		1,993		770		269		237		—		3,269
Net income (loss)	$	340,349	$	17,094	$	79,510	$	30,918	$	41,736	$	(45,430)	$	464,177

For the three months ended March 31, 2016:

					Life		Medical		Other		Corporate
	SH NNN		SHOP		Science		Office		Non-reportable		Non-segment		Total
Rental revenues(1)	$	106,889	$	165,763	$	88,948	$	108,023	$	32,805	$	—	$	502,428
HCP share of unconsolidated JV revenues		—		52,277		1,810		479		407		—		54,973
Operating expenses		(2,074)		(114,003)		(16,743)		(41,949)		(1,188)		—		(175,957)
HCP share of unconsolidated JV operating expenses		—		(42,088)		(374)		(149)		(3)		—		(42,614)
NOI		104,815		61,949		73,641		66,404		32,021		—		338,830
Adjustments to NOI(2)		(5,443)		5,032		(673)		(795)		(571)		—		(2,450)
Adjusted NOI		99,372		66,981		72,968		65,609		31,450		—		336,380
Addback adjustments		5,443		(5,032)		673		795		571		—		2,450
Interest income		—		—		—		—		18,029		—		18,029
Interest expense		(4,166)		(7,855)		(638)		(1,665)		(2,327)		(105,411)		(122,062)
Depreciation and amortization		(33,506)		(26,297)		(33,596)		(38,719)		(7,737)		—		(139,855)
General and administrative		—		—		—		—		—		(25,451)		(25,451)
Acquisition and pursuit costs		—		—		—		—		—		(2,475)		(2,475)
Other income, net		—		—		—		—		—		1,292		1,292
Income tax expense		—		—		—		—		—		(3,704)		(3,704)
Less: HCP share of unconsolidated JV NOI		—		(10,189)		(1,436)		(330)		(404)		—		(12,359)
Equity (loss) income in unconsolidated JVs		—		(2,478)		709		658		203		—		(908)
Discontinued operations		—		—		—		—		—		68,408		68,408
Net income (loss)	$	67,143	$	15,130	$	38,680	$	26,348	$	39,785	$	(67,341)	$	119,745

(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, 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 March 31,
Segment	2017		2016
SH NNN	$	100,034	$	106,889
SHOP		140,228		165,763
Life science		85,321		88,948
Medical office		118,371		108,023
Other non-reportable segments		48,214		50,834
Total revenues	$	492,168	$	520,457

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