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 March 31, 2018

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 April 30, 2018, there were 469,755,917 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	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6.	Exhibits	47
Signatures

2

HCP, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	March 31, 2018			December 31, 2017
ASSETS
Real estate:
Buildings and improvements	$	11,532,338		$	11,239,732
Development costs and construction in progress	344,948			447,976
Land	1,808,210			1,785,865
Accumulated depreciation and amortization	(2,826,325		)	(2,741,695		)
Net real estate	10,859,171			10,731,878
Net investment in direct financing leases	713,463			714,352
Loans receivable, net	47,012			313,326
Investments in and advances to unconsolidated joint ventures	863,775			800,840
Accounts receivable, net of allowance of $4,516 and $4,425, respectively	51,468			40,733
Cash and cash equivalents	86,021			55,306
Restricted cash	31,947			26,897
Intangible assets, net	395,298			410,082
Assets held for sale, net	436,155			417,014
Other assets, net	583,261			578,033
Total assets	$	14,067,571		$	14,088,461
LIABILITIES AND EQUITY
Bank line of credit	$	1,092,357		$	1,017,076
Term loan	236,878			228,288
Senior unsecured notes	6,398,976			6,396,451
Mortgage debt	143,524			144,486
Other debt	93,856			94,165
Intangible liabilities, net	52,576			52,579
Liabilities of assets held for sale, net	8,564			14,031
Accounts payable and accrued liabilities	391,942			401,738
Deferred revenue	167,975			144,709
Total liabilities	8,586,648			8,493,523
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 469,725,220 and 469,435,678 shares issued and outstanding, respectively	469,725			469,436
Additional paid-in capital	8,183,166			8,226,113
Cumulative dividends in excess of earnings	(3,425,293		)	(3,370,520		)
Accumulated other comprehensive income (loss)	(21,307		)	(24,024		)
Total stockholders' equity	5,206,291			5,301,005
Joint venture partners	97,744			117,045
Non-managing member unitholders	176,888			176,888
Total noncontrolling interests	274,632			293,933
Total equity	5,480,923			5,594,938
Total liabilities and equity	$	14,067,571		$	14,088,461

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 March 31,
	2018			2017
Revenues:
Rental and related revenues	$	279,578		$	286,218
Tenant recoveries	37,174			33,675
Resident fees and services	142,814			140,232
Income from direct financing leases	13,266			13,712
Interest income	6,365			18,331
Total revenues	479,197			492,168
Costs and expenses:
Interest expense	75,102			86,718
Depreciation and amortization	143,250			136,554
Operating	172,552			159,081
General and administrative	29,175			22,478
Transaction costs	2,195			1,057
Total costs and expenses	422,274			405,888
Other income (expense):
Gain (loss) on sales of real estate, net	20,815			317,258
Other income (expense), net	(40,407		)	51,208
Total other income (expense), net	(19,592		)	368,466
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	37,331			454,746
Income tax benefit (expense)	5,336			6,162
Equity income (loss) from unconsolidated joint ventures	570			3,269
Net income (loss)	43,237			464,177
Noncontrolling interests' share in earnings	(3,005		)	(3,032		)
Net income (loss) attributable to HCP, Inc.	40,232			461,145
Participating securities' share in earnings	(391		)	(770		)
Net income (loss) applicable to common shares	$	39,841		$	460,375
Earnings per common share:
Basic	$	0.08		$	0.98
Diluted	$	0.08		$	0.97
Weighted average shares outstanding:
Basic	469,557			468,299
Diluted	469,695			475,173
Dividends declared per common share	$	0.37		$	0.37

See accompanying Notes to the Unaudited Consolidated Financial Statements.

4

HCP, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Net income (loss)	$	43,237		$	464,177
Other comprehensive income (loss):
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses)	(5,164		)	(302		)
Reclassification adjustment realized in net income (loss)	125			213
Change in Supplemental Executive Retirement Plan obligation and other	104			83
Foreign currency translation adjustment	7,652			990
Total other comprehensive income (loss)	2,717			984
Total comprehensive income (loss)	45,954			465,161
Total comprehensive income (loss) attributable to noncontrolling interests	(3,005		)	(3,032		)
Total comprehensive income (loss) attributable to HCP, Inc.	$	42,949		$	462,129

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
December 31, 2017	469,436		$	469,436		$	8,226,113		$	(3,370,520	)	$	(24,024	)	$	5,301,005		$	293,933		$	5,594,938
Impact of adoption of ASU No. 2017-05(1)	—		—			—			79,144			—			79,144			—			79,144
January 1, 2018	469,436		$	469,436		$	8,226,113		$	(3,291,376	)	$	(24,024	)	$	5,380,149		$	293,933		$	5,674,082
Net income (loss)	—		—			—			40,232			—			40,232			3,005			43,237
Other comprehensive income (loss)	—		—			—			—			2,717			2,717			—			2,717
Issuance of common stock, net	382		382			2,392			—			—			2,774			—			2,774
Repurchase of common stock	(93	)	(93		)	(2,051		)	—			—			(2,144		)	—			(2,144		)
Amortization of deferred compensation	—		—			5,919			—			—			5,919			—			5,919
Common dividends ($0.37 per share)	—		—			—			(174,149		)	—			(174,149		)	—			(174,149		)
Distributions to noncontrolling interest	—		—			—			—			—			—			(5,077		)	(5,077		)
Issuances of noncontrolling interest	—		—			—			—			—			—			995			995
Purchase of noncontrolling interest	—		—			(49,207		)	—			—			(49,207		)	(18,224		)	(67,431		)
March 31, 2018	469,725		$	469,725		$	8,183,166		$	(3,425,293	)	$	(21,307	)	$	5,206,291		$	274,632		$	5,480,923

	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)	—		—			—			461,145			—			461,145			3,032			464,177
Other comprehensive income (loss)	—		—			—			—			984			984			—			984
Issuance of common stock, net	427		427			3,045			—			—			3,472			—			3,472
Conversion of DownREIT units to common stock	54		54			1,494			—			—			1,548			(1,548		)	—
Repurchase of common stock	(116	)	(116		)	(3,416		)	—			—			(3,532		)	—			(3,532		)
Amortization of deferred compensation	—		—			3,765			—			—			3,765			—			3,765
Common dividends ($0.37 per share)	—		—			—			(173,629		)	—			(173,629		)	—			(173,629		)
Distributions to noncontrolling interest	—		—			—			—			—			—			(5,659		)	(5,659		)
Issuances of noncontrolling interest	—		—			—			—			—			—			650			650
Deconsolidation of noncontrolling interest	—		—			—			—			—			—			(58,061		)	(58,061		)
March 31, 2017	468,446		$	468,446		$	8,203,778		$	(2,802,218	)	$	(28,658	)	$	5,841,348		$	332,127		$	6,173,475

_______________________________________

(1) On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.

See accompanying Notes to the Unaudited Consolidated Financial Statements.

6

HCP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	43,237		$	464,177
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:	143,250			136,554
Amortization of deferred compensation	5,919			3,765
Amortization of deferred financing costs	3,336			3,858
Straight-line rents	(10,686		)	(5,007		)
Equity loss (income) from unconsolidated joint ventures	(570		)	(3,269		)
Distributions of earnings from unconsolidated joint ventures	5,336			7,842
Deferred income tax expense (benefit)	(2,394		)	(8,130		)
Impairments (recoveries), net	(3,298		)	—
Loss (gain) on sales of real estate, net	(20,815		)	(317,258		)
Loss (gain) on consolidation, net	41,017			—
Loss (gain) on sale of marketable securities	—			(50,895		)
Other non-cash items	(2,401		)	(660		)
Decrease (increase) in accounts receivable and other assets, net	(18,082		)	1,136
Increase (decrease) in accounts payable and accrued liabilities	12,315			(38,984		)
Net cash provided by (used in) operating activities	196,164			193,129
Cash flows from investing activities:
Acquisitions of real estate	(22,121		)	—
Development and redevelopment of real estate	(113,648		)	(75,166		)
Leasing costs, tenant improvements, and recurring capital expenditures	(19,246		)	(22,693		)
Proceeds from sales of real estate, net	30,392			1,206,256
Contributions to unconsolidated joint ventures	(3,688		)	(8,109		)
Distributions in excess of earnings from unconsolidated joint ventures	7,257			870
Proceeds from the RIDEA II transaction, net	—			462,241
Proceeds from sales/principal repayments on debt investments and direct financing leases	132,429			185,364
Investments in loans receivable, direct financing leases and other	(647		)	(15,000		)
Net cash provided by (used in) investing activities	10,728			1,733,763
Cash flows from financing activities:
Borrowings under bank line of credit, net	240,000			(375,812		)
Repayments under bank line of credit	(170,000		)	(37,032		)
Repayments and repurchase of debt, excluding bank line of credit	(1,172		)	(647,427		)
Issuance of common stock and exercise of options	2,774			3,472
Repurchase of common stock	(2,144		)	(3,532		)
Dividends paid on common stock	(174,149		)	(173,629		)
Issuance of noncontrolling interests	995			650
Distributions to and purchase of noncontrolling interests	(67,542		)	(5,659		)
Net cash provided by (used in) financing activities	(171,238		)	(1,238,969		)
Effect of foreign exchanges on cash, cash equivalents and restricted cash	111			7
Net increase (decrease) in cash, cash equivalents and restricted cash	35,765			687,930
Cash, cash equivalents and restricted cash, beginning of period	82,203			136,990
Cash, cash equivalents and restricted cash, end of period	$	117,968		$	824,920

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.

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. 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 months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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, 2017 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).

Recent Accounting Pronouncements

Revenue Recognition. Between May 2014 and February 2017, the Financial Accounting Standards Board (“FASB”) issued four 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”), (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), and (iv) ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). 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. ASU 2017-05 clarifies the scope of the FASB’s recently established guidance on nonfinancial asset derecognition and aligns the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets with the guidance in ASU 2014-09. The Company adopted the Revenue ASUs effective January 1, 2018 and utilized a modified retrospective adoption approach, resulting in a cumulative-effect adjustment to equity of $79 million as of January 1, 2018. Under the Revenue ASUs, the Company also elected to utilize a practical expedient which allows the Company to only reassess contracts that were not completed as of the adoption date, rather than all historical contracts.

8

As the primary source of revenue for the Company is generated through leasing arrangements, for which timing and recognition of revenue are excluded from the Revenue ASUs, the impact of the Revenue ASUs, upon and subsequent to adoption, is generally limited to the following:

• The Company, along with its JV partners and independent SHOP operators, provide certain ancillary services to SHOP residents that are not contemplated in the lease with each resident (i.e., guest meals, concierge services, pharmacy services, etc.). These services are provided and paid for in addition to the standard services included in each resident lease (i.e., room and board, standard meals, etc.). The Company bills residents for ancillary services one month in arrears and recognizes revenue as the services are provided, as the Company has no continuing performance obligation related to those services. The Company records ancillary service revenue within resident fees and services and, under the Revenue ASUs, is required to disclose, on an ongoing basis, ancillary service revenue generated from its RIDEA structures. Included within resident fees and services for the quarters ended March 31, 2018 and 2017 is $10 million of ancillary service revenue.

• Prior to the adoption of the Revenue ASUs, the Company recognized a gain on sale of real estate using the full accrual method when collectibility of the sales price was reasonably assured, the Company was not obligated to perform additional activities that may be considered significant, the initial investment from the buyer was sufficient and other profit recognition criteria had been satisfied. The Company deferred all or a portion of a gain on sale of real estate if the requirements for gain recognition were not met at the time of sale. Subsequent to adopting the Revenue ASUs on January 1, 2018, the Company began recognizing a gain on sale of real estate upon transferring control of the asset to the purchaser, which is generally satisfied at the time of sale. In conjunction with its adoption of the Revenue ASUs, the Company reassessed its historical partial sale of real estate transactions to determine which transactions, if any, were not completed contracts (i.e., the transaction did not qualify for sale treatment under previous guidance). The Company concluded that it had one such material transaction, its partial sale of RIDEA II in the first quarter of 2017 (which was not a completed sale under historical guidance as of the Company's adoption date due to a minor obligation related to the interest sold). In accordance with the Revenue ASUs, the Company recorded its retained 40% equity investment at fair value as of the sale date. As a result, the Company recorded an adjustment to equity as of January 1, 2018 (under the modified retrospective transition approach) representing a step-up in the fair value of its equity investment in RIDEA II of $107 million (to a carrying value of $121 million as of January 1, 2018) and a $30 million impairment charge to decrease the carrying value to the expected sales price of the investment (see Note 4).

• The Company generally expects that the new guidance will result in certain transactions qualifying as sales of real estate at an earlier date than under historical accounting guidance.

The following table illustrates changes in the Company’s consolidated balance sheet as reported and as it would have been reported prior to the adoption of the Revenue ASUs as of March 31, 2018 (in thousands):

	March 31, 2018
	As Reported	As Would Have Been Reported Prior to Adoption
Investments in and advances to unconsolidated joint ventures	863,775	792,291
Other assets, net	583,261	586,066
Deferred revenue	167,975	178,440
Total stockholders' equity	5,206,291	5,127,147

Additionally, effective January 1, 2018, the Company adopted the following ASUs, each of which did not have a material impact to its consolidated financial position, results of operations, cash flows or disclosures upon adoption:

• ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) and ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (“ASU 2018-03”). The core principle of the amendments in ASU 2016-01 and ASU 2018-03 involves the measurement of equity investments (except those accounted for under the equity method of accounting or those that result in consolidation) at fair value and the recognition of changes in fair value of those investments during each reporting period in net income (loss). As a result, ASU 2016-01 and ASU 2018-03 eliminate the cost method of accounting for equity securities that do not have readily determinable fair values. Pursuant to the new guidance, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

• ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). The amendments in ASU 2016-16 require an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory

9

at the time that the transfer occurs. Historical guidance does not require recognition of tax consequences until the asset is eventually sold to a third party.

During the fourth quarter of 2017, the Company adopted ASU No. 2016-18, Restricted Cash (“ASU 2016-18”) and ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) (collectively, the “Cash Flow ASUs”). ASU 2016-18 requires an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows and ASU 2016-15 provides guidance clarifying how certain cash receipts and cash payments should be classified. The full retrospective approach of adoption is required for the Cash Flow ASUs and, accordingly, certain line items in the Company’s consolidated statements of cash flows have been reclassified to conform to the current period presentation.

The following table illustrates changes in the Company’s cash flows as reported and as previously reported prior to the adoption of the Cash Flow ASUs during the fourth quarter of 2017 (in thousands):

	Three Months Ended March 31, 2017
	As Reported		As Previously Reported
Net cash provided by (used in) investing activities	$	1,733,763	$	1,715,217
Net increase (decrease) in balance(1)	687,930		669,384
Balance - beginning of period(1)	136,990		94,730
Balance - end of period(1)	824,920		764,114

_______________________________________

(1) Amounts in the As Reported column include cash and cash equivalents and restricted cash as required upon the adoption of the Cash Flow ASUs. Amounts in the As Previously Reported column reflect only cash and cash equivalents.

In addition to the changes in the consolidated statements of cash flows as a result of the adoption the Cash Flow ASUs, certain amounts within the consolidated statements of cash flows have been reclassified for prior periods to conform to the current period presentation. Such reclassifications primarily combined line items of similar classes of transactions and had no impact on the cash flows from operating, investing and financing activities.

Leases. 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: (i) will recognize all of its significant operating leases for which it is the lessee, including corporate office leases, equipment leases, and ground leases, on its consolidated balance sheets, (ii) will capitalize fewer legal costs related to the drafting and execution of its lease agreements, and (iii) may be required to increase its revenue and expense for the amount of real estate taxes and insurance paid by its tenants under triple-net leases.

ASU 2016-02 provides a practical expedient, which the Company plans to elect, 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. Although not yet finalized, the FASB has also proposed an option for lessors to elect a practical expedient allowing them to not separate lease and nonlease components in a contract for the purpose of revenue recognition and disclosure. This practical expedient is limited to circumstances in which (i) the timing and pattern of transfer are the same for the nonlease component and the related lease component and (ii) the lease component would be classified as an operating lease. If finalized, the Company plans to elect this practical expedient as well. 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.

Credit Losses. 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

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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 financing leases (“DFLs”) 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.

The following ASU has been issued, but not 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. The amendments in ASU 2017-12 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For cash flow and net investment 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.

NOTE 3.  Master Transactions and Cooperation Agreement with Brookdale

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 (the "Brookdale Transactions"). 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.

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, which account for primarily all of the assets subject to triple-net leases between the Company and the Lessee (before giving effect to the contemplated sale or transition of 34 assets discussed below). Under the Amended Master Lease, the Company has 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 a net worth test are not satisfied;

• Enhanced reporting requirements and related remedies; and

• The right to market for sale the CCRC portfolio (as defined below).

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 has 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 has provided an aggregate $5 million annual reduction in rent on three assets, effective January 1, 2018; and

• The Company will sell two triple-net assets to Brookdale or its affiliates for $35 million, both of which were sold in April 2018.

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

• The Company, which owned 90% of the interests in its RIDEA I and RIDEA III JVs with Brookdale at the time the MTCA was executed, agreed to purchase Brookdale’s 10% noncontrolling interest in each JV for an aggregate purchase price of $95 million. These JVs collectively own and operate 58 independent living, assisted living, memory care and/or skilled nursing facilities (the “RIDEA Facilities”). The Company completed its acquisitions of the RIDEA III noncontrolling interest for $32 million in December 2017 and the RIDEA I noncontrolling interest for $63 million in March 2018;

• The Company has 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. As of March 31, 2018, the Company had completed the transition of eight SHOP assets;

• The Company will sell four of the RIDEA Facilities to Brookdale or its affiliates for $239 million, one of which was sold in January 2018 for $32 million. The remaining three RIDEA Facilities were sold in April 2018 for $207 million;

• A Brookdale affiliate continues to manage the remaining 18 RIDEA Facilities pursuant to amended 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 has the right to sell, to certain permitted transferees, its 49% ownership interest in JVs that own and operate a portfolio of continuing care retirement communities (the “CCRC Portfolio”) 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.

NOTE 4.  Real Estate Transactions

Dispositions of Real Estate

Held for Sale

At March 31, 2018, seven SHOP facilities, two senior housing triple-net facilities and four life science facilities were classified as held for sale, with an aggregate carrying value of $436 million, primarily comprised of real estate assets of $410 million, net of accumulated depreciation of $98 million. At December 31, 2017, two senior housing triple-net facilities, four life science facilities and six SHOP facilities were classified as held for sale, with an aggregate carrying value of $417 million, primarily comprised of real estate assets of $393 million, net of accumulated depreciation of $93 million. Liabilities of assets held for sale is primarily comprised of intangible and other liabilities at both March 31, 2018 and December 31, 2017.

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”). Also in January 2017, 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. Refer to Note 2 for the impact of adopting the Revenue ASUs on January 1, 2018 to the Company’s partial sale of RIDEA II in the first quarter of 2017.

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 for $91 million. The Company expects the transaction to close in the second quarter of 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.

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U.K. Portfolio

On May 1, 2018, the Company entered into definitive agreements with an institutional investor to create a joint venture (the “U.K. JV”) through which the Company will sell a 51% interest in all United Kingdom (“U.K.”) assets owned by the Company (“the U.K. Portfolio”) based on a total value of £394 million. The Company will retain a 49% noncontrolling interest in the joint venture. Upon closing the U.K. JV, the Company expects to deconsolidate the U.K. Portfolio and recognize a gain on deconsolidation.

2018 Dispositions 

In January 2018, the Company sold two SHOP assets for $35 million, resulting in gain on sales of $21 million.

In April 2018, the Company sold four SHOP assets and two senior housing triple-net assets for $265 million.

2017 Dispositions (Three months ended March 31, 2017)

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.

Investments in Real Estate

During the three months ended March 31, 2018, the Company acquired development rights on a land parcel in the Boston suburb of Lexington, Massachusetts for $21 million. The Company will commence a life science development on the land in 2018.

There were no new real estate investments made during the three months ended March 31, 2017.

NOTE 5.  Net Investment in Direct Financing Leases

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

	March 31, 2018			December 31, 2017
Minimum lease payments receivable	$	1,049,400		$	1,062,452
Estimated residual value	504,457			504,457
Less unearned income	(840,394		)	(852,557		)
Net investment in direct financing leases	$	713,463		$	714,352
Properties subject to direct financing leases	29			29

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 March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment				Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing triple-net	$	628,859	88	$	274,264	$	354,595	$	—
Other non-reportable segments	84,604		12	84,604		—		—
	$	713,463	100	$	358,868	$	354,595	$	—

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 is being recognized on a cash basis. During the three months ended March 31, 2018 and 2017, the Company recognized income from DFLs of $3 million and received cash payments of $5 million and $4 million, respectively, from the DFL Watchlist Portfolio. The carrying value of the DFL Watchlist Portfolio was $355 million and $356 million at March 31, 2018 and December 31, 2017, respectively.

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NOTE 6.  Loans Receivable

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

	March 31, 2018								December 31, 2017
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine(1)	$	—	$	22,105		$	22,105		$	—	$	269,299		$	269,299
Other(2)	24,990		—			24,990			188,418		—			188,418
Unamortized discounts, fees and costs	—		(83		)	(83		)	—		(596		)	(596		)
Allowance for loan losses(3)	—		—			—			—		(143,795		)	(143,795		)
	$	24,990	$	22,022		$	47,012		$	188,418	$	124,908		$	313,326

_______________________________________

(1) In December 2017, the Company entered into a participating debt financing arrangement to fund a $115 million senior living development project, which remained unfunded at March 31, 2018.

(2) Represents loans denominated in British pound sterling (“GBP”). At December 31, 2017, includes the U.K. Bridge Loan discussed below.

(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 March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	24,990	53	$	24,990	$	—	$	—
Other secured	22,022		47	22,022		—		—
	$	47,012	100	$	47,012	$	—	$	—

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).

Additionally, 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 (expense), net, as the sales price was above the previously-impaired carrying value of £41 million ($50 million).

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

From July 2012 through May 2015, the Company funded, in aggregate, $257 million under a collateralized mezzanine loan facility (the “Mezzanine Loan”) to certain affiliates of Tandem Health Care (together with its affiliates, “Tandem”). During 2017, the Company recorded impairment charges totaling $144 million on the Mezzanine Loan. The decline in fair value driving each impairment charge was based primarily on declining operating results of the collateral underlying the Mezzanine Loan, as well as market and industry data, which reflected a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector. The resulting carrying value of the Mezzanine Loan as of December 31, 2017 was $105 million. In conjunction with the declining operating results and industry trends, beginning in the first quarter of 2017, the Company elected to recognize interest income on a cash basis. During the three months ended March 31, 2018 and 2017, the Company recognized interest income and received cash payments of zero and $7 million, respectively, from Tandem.

In March 2018, the Company sold the Mezzanine Loan to a third party for approximately $112 million, resulting in an impairment recovery, net of transaction costs and fees, of $3 million included in other income (expense), net. The Company holds no further economic interest in the operations of Tandem.

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U.K. Bridge Loan

In 2016, 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 seven care homes in the U.K. Under the bridge loan, the Company retained a three-year call option to acquire those seven care homes at a future date for £105 million, subject to certain conditions precedent being met. In March 2018, upon resolution of all conditions precedent, the Company began the process of exercising its call option to acquire the seven care homes and concluded that it should consolidate the real estate. As a result, the Company derecognized the outstanding loan receivable of £105 million and recognized a £29 million ($41 million) loss on consolidation. Refer to Note 15 for the complete impact of consolidating the seven care homes during the first quarter of 2018.

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
			March 31,		December 31,
Entity(1)	Ownership%		2018		2017
CCRC JV		49	$	395,005	$	400,241
RIDEA II(2)		40	328,873		259,651
Life Science JVs(3)		50 - 63	65,016		65,581
MBK JV		50	37,442		38,005
Development JVs(4)		50 - 90	23,733		23,365
Medical Office JVs(5)		20 - 67	12,395		12,488
K&Y JVs(6)		80	1,298		1,283
Advances to unconsolidated joint ventures, net			13		226
			$	863,775	$	800,840

_______________________________________

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

(2) Effective January 1, 2018, the Company increased its carrying value in RIDEA II as a net adjustment to retained earnings under its elected transition approach in accordance with the adoption of ASU 2017-05 (see Note 2). See Note 4 for further information on the deconsolidation and pending sale of RIDEA II.

(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 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%).

(5) 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%).

(6) Includes three unconsolidated JVs.

NOTE 8.  Intangibles

Intangible assets primarily consist of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles. Intangible liabilities primarily consist of below market lease intangibles and above market ground lease intangibles. The following tables summarize the Company’s intangible lease assets and liabilities (in thousands):

Intangible lease assets	March 31, 2018			December 31, 2017
Gross intangible lease assets	$	732,110		$	795,305
Accumulated depreciation and amortization	(336,812		)	(385,223		)
Intangible assets, net	$	395,298		$	410,082

Intangible lease liabilities	March 31, 2018			December 31, 2017
Gross intangible lease liabilities	$	124,609		$	126,212
Accumulated depreciation and amortization	(72,033		)	(73,633		)
Intangible liabilities, net	$	52,576		$	52,579

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NOTE 9.  Debt

Bank Line of Credit and Term Loan

The Company’s $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on October 19, 2021 and contains two, six-month extension options. 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 March 31, 2018, the margin on the Facility was 1.00% 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 $750 million, subject to securing additional commitments. At March 31, 2018, the Company had $1.1 billion, including £105 million ($147 million), outstanding under the Facility, with a weighted average effective interest rate of 2.99%.

On April 6, 2018, the Company paid down $290 million outstanding under the Facility primarily using proceeds from asset sales to Brookdale (see Note 3).

At March 31, 2018, the Company had £169 million ($237 million) outstanding on its term loan, which accrues interest at a rate of GBP LIBOR plus 1.15%, subject to adjustments based on the Company’s credit ratings. The term loan matures in January 2019 and contains a one-year committed extension option. The Company has a one-time right to repay the outstanding GBP balance and re-borrow in USD with all other key terms unchanged.

The Facility and 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 March 31, 2018, the Company was in compliance with each of these restrictions and requirements of the Facility and term loan.

Senior Unsecured Notes

At March 31, 2018, 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 March 31, 2018.

The following table summarizes the Company’s senior unsecured notes payoffs during the year ended December 31, 2017 (dollars in thousands):

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

There were no senior unsecured notes repayments during the three months ended March 31, 2018.

There were no senior unsecured notes issuances during the three months ended March 31, 2018 or year ended December 31, 2017.

Mortgage Debt

At March 31, 2018, the Company had $138 million in aggregate principal of mortgage debt outstanding, which is secured by 16 healthcare facilities (including redevelopment properties) with a carrying value of $296 million. In March 2017, the Company paid off $472 million of mortgage debt.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into or terminate material leases. Some of the mortgage debt may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

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Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2018 (in thousands):

Year	Bank Line of Credit(1)		Term Loan(2)			Senior Unsecured Notes(3)			Mortgage Debt(4)		Total(5)
2018 (nine months)	$	—	$	—		$	—		$	2,649	$	2,649
2019	—		237,175			450,000			3,700		690,875
2020	—		—			800,000			3,758		803,758
2021	1,092,357		—			700,000			11,117		1,803,474
2022	—		—			900,000			2,861		902,861
Thereafter	—		—			3,600,000			113,619		3,713,619
	1,092,357		237,175			6,450,000			137,704		7,917,236
(Discounts), premium and debt costs, net	—		(297		)	(51,024		)	5,820		(45,501		)
	$	1,092,357	$	236,878		$	6,398,976		$	143,524	$	7,871,735

_______________________________________

(1) Includes £105 million translated into U.S. dollars (“USD”).

(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 4.20% and a weighted average maturity of six years.

(4) Interest rates on the mortgage debt ranged from 1.95% to 5.91% with a weighted average effective interest rate of 4.18% and a weighted average maturity of 20 years.

(5) Excludes $94 million of other debt that have no scheduled maturities.

NOTE 10.  Commitments and Contingencies

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, HCR ManorCare, Inc. (“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. On November 28, 2017, the Court appointed Societe Generale Securities GmbH (SGSS Germany) and the City of Birmingham Retirement and Relief Systems (Birmingham) as Co-Lead Plaintiffs in the class action. Co-Lead Plaintiffs filed a consolidated Amended Complaint on February 28, 2018. Defendants filed their motion to dismiss the Amended Complaint on March 30, 2018. 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 recently adjourned the status conference scheduled for January 10, 2018 to June 11, 2018.

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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. 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. The Court granted Defendants’ motion to transfer on November 28, 2017, and Kelley is now pending in the Northern District of Ohio.

The Court in the Northern District of Ohio is considering a request to consolidate the Weldon and Kelley actions.

The Company’s Board of Directors received letters dated August 17, 2016, April 19, 2017, and April 20, 2017 from private law firms acting on behalf of clients who are purported stockholders of the Company, each asserting allegations similar to those made in the Subodh and Stearns matters discussed above. Each letter demands that the Board of Directors take action to assert the Company’s rights. The Board of Directors completed its evaluation and determined to reject the demand letters. Rejection notices were sent in December of 2017.

The Company believes that the plaintiffs lack standing or the lawsuits and demands are without merit, and the Company is unable to estimate the amount of loss or range of reasonably possible losses with respect to the matters discussed above as of March 31, 2018.

NOTE 11.  Equity

Accumulated Other Comprehensive Income (Loss)

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

	March 31, 2018			December 31, 2017
Cumulative foreign currency translation adjustment	$	697		$	(6,955	)
Unrealized gains (losses) on cash flow hedges, net	(18,989		)	(13,950		)
Supplemental Executive Retirement plan minimum liability and other	(3,015		)	(3,119		)
Total other comprehensive income (loss)	$	(21,307	)	$	(24,024	)

Noncontrolling Interests

See Note 4 for the deconsolidation of RIDEA II and Note 14 for the supplemental schedule of non-cash financing activities.

See Note 3 for the Company’s purchase of Brookdale’s noncontrolling interest in RIDEA III in March 2018.

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NOTE 12.  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. The Company has non-reportable segments that are comprised primarily of the Company’s debt investments, hospital properties, unconsolidated JVs (see below) and care homes in the 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 2017 Annual Report on Form 10-K filed with the SEC, as updated by Note 2 herein.

During the three months ended March 31, 2018, there were no transfers of assets between segments. During the three months ended March 31, 2017, one senior housing triple-net facility was transferred to the Company’s SHOP segment.

The Company evaluates performance based upon: (i) property NOI and (ii) Adjusted NOI. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses (which exclude transition costs); NOI excludes all other financial statement amounts included in net income (loss). Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, and the impact of deferred community fee income and expense.

During the fourth quarter of 2017, as a result of a change in how operating results are reported to the chief operating decision makers, for the purpose of evaluating performance and allocating resources, the Company began excluding unconsolidated JVs from its evaluation of its segments' operating results. Unconsolidated JVs are now reflected in other non-reportable segments.

The adjustments to NOI and resulting Adjusted NOI for SHOP have been recast for prior periods to conform to the current period presentation which excludes: (i) the impact of deferred community fee income and expense, resulting in recognition as cash is received and expenses are paid and (ii) adjustments related to unconsolidated JVs (see above).

Non-segment assets consist of assets in the Company's other non-reportable segments and corporate non-segment assets. Corporate 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 assets and liabilities held for sale. See Note 16 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, 2018:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	74,289		$	144,670		$	99,622		$	123,935		$	30,316		$	—		$	472,832
Operating expenses	(1,045		)	(101,746		)	(21,809		)	(46,696		)	(1,256		)	—			(172,552		)
NOI	73,244			42,924			77,813			77,239			29,060			—			300,280
Adjustments to NOI(2)	(1,865		)	(1,607		)	(3,751		)	(1,071		)	(1,392		)	—			(9,686		)
Adjusted NOI	71,379			41,317			74,062			76,168			27,668			—			290,594
Addback adjustments	1,865			1,607			3,751			1,071			1,392			—			9,686
Interest income	—			—			—			—			6,365			—			6,365
Interest expense	(600		)	(988		)	(83		)	(120		)	(728		)	(72,583		)	(75,102		)
Depreciation and amortization	(21,906		)	(27,628		)	(36,080		)	(45,519		)	(12,117		)	—			(143,250		)
General and administrative	—			—			—			—			—			(29,175		)	(29,175		)
Transaction costs	—			—			—			—			—			(2,195		)	(2,195		)
Gain (loss) on sales of real estate, net	—			20,815			—			—			—			—			20,815
Other income (expense), net	—			—			—			—			(40,567		)	160			(40,407		)
Income tax benefit (expense)	—			—			—			—			—			5,336			5,336
Equity income (loss) from unconsolidated JVs	—			—			—			—			570			—			570
Net income (loss)	$	50,738		$	35,123		$	41,650		$	31,600		$	(17,417	)	$	(98,457	)	$	43,237

_______________________________________

(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, deferral of community fees, net and termination fees.

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For the three months ended March 31, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	100,034		$	140,228		$	85,321		$	118,371		$	29,883		$	—		$	473,837
Operating expenses	(1,111		)	(94,539		)	(17,319		)	(44,864		)	(1,248		)	—			(159,081		)
NOI	98,923			45,689			68,002			73,507			28,635			—			314,756
Adjustments to NOI(2)	(1,839		)	(310		)	(305		)	(961		)	(1,012		)	—			(4,427		)
Adjusted NOI	97,084			45,379			67,697			72,546			27,623			—			310,329
Addback adjustments	1,839			310			305			961			1,012			—			4,427
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		)
Transaction costs	—			—			—			—			—			(1,057		)	(1,057		)
Gain (loss) on sales of real estate, net	268,464			366			44,633			—			3,795			—			317,258
Other income (expense), net	—			—			—			—			50,895			313			51,208
Income tax benefit (expense)	—			—			—			—			—			6,162			6,162
Equity income (loss) from unconsolidated JVs	—			—			—			—			3,269			—			3,269
Net income (loss)	$	340,349		$	15,101		$	78,740		$	30,649		$	95,663		$	(96,325	)	$	464,177

_______________________________________

(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, deferral of community fees, net and termination fees.

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

	Three Months Ended March 31,
Segment	2018		2017
Senior housing triple-net	$	74,289	$	100,034
SHOP	144,670		140,228
Life science	99,622		85,321
Medical office	123,935		118,371
Other non-reportable segments	36,681		48,214
Total revenues	$	479,197	$	492,168

See Notes 3, 4 and 6 for significant transactions impacting the Company’s segment assets during the periods presented.

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NOTE 13.  Earnings Per Common Share

The following table illustrates the computation of basic and diluted earnings per share (in thousands, except per share amounts):

	Three Months Ended March 31,
	2018			2017
Numerator
Net income (loss) from continuing operations	$	43,237		$	464,177
Noncontrolling interests' share in earnings	(3,005		)	(3,032		)
Net income (loss) attributable to HCP, Inc.	40,232			461,145
Less: Participating securities' share in earnings	(391		)	(770		)
Net income (loss) applicable to common shares	$	39,841		$	460,375
Numerator - Dilutive
Net income (loss) applicable to common shares	$	39,841		$	460,375
Add: distributions on dilutive convertible units and other	—			2,803
Dilutive net income (loss) available to common shares	$	39,841		$	463,178
Denominator
Basic weighted average shares outstanding	469,557			468,299
Dilutive potential common shares - equity awards	138			229
Dilutive potential common shares - DownREIT conversions	—			6,645
Diluted weighted average common shares	469,695			475,173
Earnings per common share:
Basic	$	0.08		$	0.98
Diluted	$	0.08		$	0.97

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 March 31, 2018, 7 million shares issuable upon conversion of 4 million DownREIT units were not included because they are anti-dilutive.

NOTE 14.  Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2018		2017
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	92,701	$	108,232
Income taxes paid	340		1,105
Capitalized interest	3,578		3,090
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	62,160		51,498
Derecognition of U.K. Bridge Loan receivable	147,474		—
Consolidation of net assets related to U.K. Bridge Loan	106,457		—
Deconsolidation of noncontrolling interest in connection with RIDEA II transaction	—		58,061
Vesting of restricted stock units and conversion of non-managing member units into common stock	258		1,841

See discussions related to the U.K. Bridge Loan in Notes 6 and 15.

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The following table summarizes cash, cash equivalents and restricted cash (in thousands):

	March 31,
	2018		2017
Cash and cash equivalents	$	86,021	$	764,114
Restricted cash	31,947		60,806
Cash, cash equivalents and restricted cash	$	117,968	$	824,920

NOTE 15.  Variable Interest Entities

Unconsolidated Variable Interest Entities

At March 31, 2018, 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) one loan to a VIE borrower. 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 JV 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 JV. 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 a JV (Vintage Park Development JV) (see Note 7), which has been identified as a VIE as power is shared with a member that does not have a substantive equity investment at risk. The assets of the JV primarily consist of a leased property (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt-service payments. Any assets generated by the JV may only be used to settle its respective contractual obligations (primarily debt service payments).

The Company holds an 85% ownership interest in a development JV (Waldwick JV) (see Note 7), which has been identified as a VIE as power is shared with a member that does not have a substantive equity investment at risk. The assets of the JV 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 the JV 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).

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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 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.

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 March 31, 2018 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	$	600,822
VIE tenants - operating leases(2)	Lease intangibles, net and straight-line rent receivables	5,983
CCRC OpCo	Investments in unconsolidated joint ventures	190,662
RIDEA II PropCo	Investments in unconsolidated joint ventures	309,882
Unconsolidated Development JVs	Investments in unconsolidated joint ventures	13,070
Loan - Seller Financing	Loans receivable, net	10,000
CMBS and LLC investment	Marketable debt and cost method investment	33,874

_______________________________________

(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 March 31, 2018, 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 5, 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 March 31, 2018 and December 31, 2017 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 and total liabilities include VIE assets and liabilities as follows (in thousands):

	March 31, 2018			December 31, 2017
Assets
Buildings and improvements	$	1,744,402		$	2,436,414
Development costs and construction in progress	16,226			32,285
Land	170,889			227,162
Accumulated depreciation and amortization	(345,331		)	(542,091		)
Net real estate	1,586,186			2,153,770
Investments in and advances to unconsolidated joint ventures	2,148			2,231
Accounts receivable, net	7,287			10,242
Cash and cash equivalents	12,077			15,861
Restricted cash	2,595			2,619
Intangible assets, net	111,149			125,475
Other assets, net	35,788			33,749
Total assets	$	1,757,230		$	2,343,947
Liabilities
Mortgage debt	44,882			45,016
Intangible liabilities, net	12,509			10,672
Accounts payable and accrued liabilities	223,708			269,280
Deferred revenue	15,275			14,432
Total liabilities	$	296,374		$	339,400

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 medical office buildings (“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 (“Vintage Park JV”) that owns an 85% interest in an unconsolidated development VIE. 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).

Watertown JV.  The Company holds a 95% ownership interest in JV entities formed in November 2017 that own and operate a senior housing property in a RIDEA structure (“Watertown JV”). Watertown PropCo is a VIE as the Company and the non-managing member share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. Watertown OpCo is a VIE as the non-managing member, through its equity interest, lacks substantive participation rights in the management of Watertown OpCo or kick-out rights over the managing member. The Company consolidates Watertown PropCo and Watertown 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 Watertown PropCo primarily consist of a leased property (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 Watertown OpCo primarily consist of leasehold interests in a senior housing facility (operating lease), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to

24

Watertown 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 Watertown 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).

Hayden JV.  The Company holds a 99% ownership interest in a JV entity formed in December 2017 that owns and leases a life science complex (“Hayden JV”). The Hayden JV is a VIE as the members share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. The Company consolidates the Hayden JV 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 Hayden JV primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by Hayden JV may only be used to settle its contractual obligations (primarily from capital expenditures).

Consolidated Lessees. The Company leases 21 senior housing properties to lessee entities under cash flow leases through which the Company receives monthly rent equal to the residual cash flows of the properties. The lessee entities are classified as VIEs as they are "thinly capitalized" entities. The Company consolidates the lessee entities as it has the ability to control the activities that most significantly impact the economic performance of the lessee entities. The lessee entities' assets 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 the Company and operating expenses of the senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

DownREITs. The Company holds a controlling ownership interest in and is the managing member of five limited liability companies (“DownREITs”). The Company classifies 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”). The Company classifies 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).

U.K. Bridge Loan. In 2016, the Company provided a £105 million ($131 million at closing) bridge loan to MMCG to fund the acquisition of a portfolio of seven 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. During the quarter ended March 31, 2018, the Company concluded that the conditions required to exercise the call option had been met and initiated the call option process to acquire the special purpose entity, which it expects to complete during the second quarter of 2018. In conjunction with initiating the process to legally exercise its call option and the satisfaction of required contingencies, the Company concluded that it is the primary beneficiary of the special purpose entity and therefore, should consolidate the entity. As such, the Company derecognized the previously outstanding loan receivable, recognized the special purpose entity’s assets and liabilities at their respective fair values, and recognized a £29 million ($41 million) loss on consolidation (within other income (expense), net and income tax benefit (expense)), net of a tax benefit of £2 million ($3 million), to account for the difference between the carrying value of the loan receivable and the fair value of net assets and liabilities assumed. The fair value of net assets and liabilities consolidated during the first quarter of 2018 consists of £81 million ($114 million) of net real estate, £4 million ($5 million) of intangible assets, and £9 million ($13 million) of net deferred tax liabilities.

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

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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.

Exchange Accommodation Titleholder.  During the year ended December 31, 2017, the Company acquired a portfolio of 11 MOBs (the "acquired properties") using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a "reverse 1031 exchange"). As of March 31, 2018, the Company had not completed the reverse 1031 exchange and as such, the acquired properties remained in the possession of an Exchange Accommodation Titleholder ("EAT"). The EAT is classified as a VIE as it is a “thinly capitalized” entity. The Company consolidates the EAT because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the EAT's economic performance. The properties held by the EAT are reflected as real estate with an aggregate carrying value of $153 million as of March 31, 2018. The assets of the EAT primarily consist of a leased property (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by the EAT may only be used to settle its contractual obligations (primarily from capital expenditures).

NOTE 16.  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 Total Assets
	Total Company		Senior Housing Triple-Net
	March 31,	December 31,	March 31,	December 31,
Tenant	2018	2017	2018	2017
Brookdale	10	10	39	39

	Percentage of Revenues
	Total Company		Senior Housing Triple-Net
	Three Months Ended March 31,		Three Months Ended March 31,
Tenant	2018	2017	2018	2017
Brookdale(1)	7	12	43	60

_______________________________________

(1) The Company's concentration with respect to Brookdale as a tenant is expected to decrease with the completion of the Brookdale Transactions (see Note 3). Includes revenues from 64 senior housing triple-net facilities that were sold in March 2017. 

At March 31, 2018 and December 31, 2017, Brookdale managed or operated, in the Company’s SHOP segment, approximately 12% and 13%, respectively, of the Company’s real estate investments based on total 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 March 31, 2018, Brookdale provided comprehensive facility management and accounting services with respect to 68 of the Company’s consolidated SHOP facilities and 62 SHOP facilities owned by its unconsolidated JVs, for which the Company or JV pay annual management fees pursuant to long-term management agreements. The Company's concentration with respect to Brookdale as an operator in its SHOP segment is expected to decrease with the completion of the Brookdale Transactions (see Note 3) and the sale of its remaining 40% ownership interest in RIDEA II (see Note 4). 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.

See Note 3 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

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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 17.  Fair Value Measurements

Financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets are immaterial at March 31, 2018.

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

	March 31, 2018(3)				December 31, 2017(3)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	47,012	$	47,075	$	313,326	$	313,242
Marketable debt securities(2)	18,814		18,814		18,690		18,690
Bank line of credit(2)	1,092,357		1,092,357		1,017,076		1,017,076
Term loan(2)	236,878		236,878		228,288		228,288
Senior unsecured notes(1)	6,398,976		6,577,155		6,396,451		6,737,825
Mortgage debt(2)	143,524		137,704		144,486		125,984
Other debt(2)	93,856		93,856		94,165		94,165
Interest-rate swap liabilities(2)	1,931		1,931		2,483		2,483
Cross currency swap liability(2)	16,684		16,684		10,968		10,968

_______________________________________

(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) 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 loan 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) During the three months ended March 31, 2018 and year ended December 31, 2017, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

NOTE 18.  Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and cross currency swap contracts at March 31, 2018 (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	$	43,000	3.82%	BMA Swap Index		$	(1,931	)
Cross currency swap:
April 2017(3)	February 2019	Net Investment	£105,000 / $131,000		2.58%	3.75	%	$	(16,684	)

______________________________________

(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 2.58% 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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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 March 31, 2018, £150 million of the Company’s GBP-denominated borrowings under the 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, (i) the remeasurement value of the designated £150 million GBP-denominated borrowings and (ii) the change in fair value of the £105 million cross currency swap due primarily 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 balance in accumulated other comprehensive income (loss) 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” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 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, 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 percentage of our revenues;

• 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 the acquisition and financing of suitable healthcare properties as well as 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 and medical office buildings, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries;

• our ability to identify replacement tenants and operators and the potential renovation costs and regulatory approvals associated therewith;

• the risks associated with property development and redevelopment, including costs above original estimates, project delays and lower occupancy rates and rents than expected;

• 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 acquisitions or other investments within expected time frames or at all, or within expected cost projections;

• 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;

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

• the effect on us and our tenants and operators of legislation, executive orders and other legal requirements, including compliance with the Americans with Disabilities Act, fire, safety and health regulations, environmental laws, the Affordable Care Act, licensure, certification and inspection requirements, and laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements or fines for noncompliance;

• 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;

• our ability to foreclose on collateral securing our real estate-related loans;

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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 and other conditions, including 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;

• the potential impact of uninsured or underinsured losses;

• our reliance on information technology systems and the potential impact of system failures, disruptions or breaches; 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

• 2018 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 March 31, 2018, our portfolio of investments, including properties in our unconsolidated joint ventures (“JVs”), consisted of interests in 833 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; and (iii) to maintain an investment grade balance sheet with adequate liquidity and 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.

We believe our real estate portfolio holds the potential for increased future cash flows as it is well-maintained and in desirable locations. 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

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be consistent with our investment strategies. We may co-invest alongside institutional or development investors through partnerships or limited liability companies.

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 don’t retain a significant amount of 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.

2018 Transaction Overview

Brookdale Transactions Update

• In January 2018, we sold the first of six agreed upon facilities to Brookdale Senior Living, Inc. (“Brookdale”) for $32 million. In April 2018, we sold the remaining five facilities to Brookdale for $243 million.

• In March 2018, we completed the acquisition of Brookdale’s noncontrolling interest in RIDEA I for $63 million.

• As of March 31, 2018, we had completed the transition of eight assets previously operated by Brookdale to other operators.

See Note 3 to the Consolidated Financial Statements for additional information.

U.K. Investment Update

• On May 1, 2018, we entered into definitive agreements with an institutional investor to create a joint venture (the “U.K. JV”) through which we will sell a 51% interest in all United Kingdom (“U.K.”) assets owned by us (the “U.K. Portfolio”) based on a total value of £394 million. We will retain a 49% noncontrolling interest in the joint venture. Upon closing the U.K. JV, we expect to deconsolidate the U.K. Portfolio and recognize a gain on deconsolidation.

Disposition and Loan Transactions

• In 2016, we provided a £105 million ($131 million at closing) bridge loan to Maria Mallaband Care Group Ltd. to fund the acquisition of a portfolio of seven care homes in the U.K. Under the bridge loan, we retained a call option to acquire those seven care homes at a future date for £105 million, subject to certain conditions being met. In March 2018, in conjunction with Maria Mallaband and HCP satisfying the conditions necessary to exercise our call option to acquire the seven care homes, we began consolidating the real estate. As a result, we derecognized the outstanding loan receivable and recognized a £29 million ($41 million) loss on consolidation for the difference between the carrying value of the loan receivable and the fair value of net assets and liabilities assumed, primarily real estate. See Notes 6 and 15 to the Consolidated Financial Statements for additional information.

• In March 2018, we sold our Tandem Health Care mezzanine loan (“Tandem Mezzanine Loan”) to a third party for approximately $112 million, resulting in an impairment recovery, net of transaction costs and fees, of $3 million.

• In April 2018, we sold a SHOP facility located in Texas for $23 million.

Financing Activities

• On April 6, 2018, we repaid $290 million outstanding under our revolving credit facility, primarily using proceeds from asset sales to Brookdale (see Brookdale Transactions Update above).

Development Activities

• In March 2018, we acquired the rights to develop a new 214,000 square foot life science facility on our existing Hayden Research Campus in Lexington, Massachusetts for $21 million. The planned development, 75 Hayden, will be a four-story, purpose-built Class A life science facility and parking garage.

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Dividends

The following table summarizes our common stock cash dividends declared in 2018:

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
February 1	February 15	$	0.37	March 2
April 26	May 7	0.37		May 22

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, unconsolidated JVs and hospitals. We evaluate performance based upon: (i) property net operating income from continuing operations (“NOI”) and (ii) adjusted NOI (cash NOI) 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, 2017 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. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses (which exclude transition costs); NOI excludes all other financial statement amounts included in net income (loss) as presented in Note 12 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, termination fees, and the impact of deferred community fee income and expense. The adjustments to NOI and resulting Adjusted NOI for SHOP have been recast for prior periods presented to conform to the current period presentation, which excludes 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.” During the fourth quarter of 2017, as a result of a change in how operating results are reported to our chief operating decision makers for the purpose of evaluating performance and allocating resources, we began excluding unconsolidated joint ventures from the evaluation of our segments' operating results. Unconsolidated joint ventures are now reflected in other non-reportable segments, and as a result, excluded from NOI and Adjusted NOI. Prior period NOI and Adjusted NOI have also been recast to conform to current period presentation, which excludes unconsolidated joint ventures. We use NOI and Adjusted NOI to make decisions about resource allocations, to assess and 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 12 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.

Same Property Portfolio

SPP NOI and Adjusted (Cash) NOI information allows us to evaluate the performance of our property portfolio under a consistent population by eliminating changes in the composition of our consolidated portfolio of properties. SPP NOI excludes certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis.

Properties are included in 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

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12 months in operations under a consistent reporting structure. A property is removed from 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 our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. For consolidated joint ventures in which we do not own 100%, we reflect our share 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 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.

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 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 on an adjusted basis before the impact of non-comparable items including, but not limited to, transaction-related items, impairments (recoveries) of non-depreciable assets, severance and related charges, prepayment costs (benefits) associated with early retirement or payment of debt, litigation costs (recoveries), casualty-related charges (recoveries), foreign currency remeasurement losses (gains) and changes in tax legislation (“FFO as adjusted”). Transaction-related items include transaction expenses and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. 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. 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 certain other adjustments to net income (loss), in addition to adjustments made to arrive at the NAREIT defined measure of FFO. 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

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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.

Funds Available for Distribution (“FAD”)

FAD is defined as FFO as adjusted after excluding the impact of the following: (i) amortization of deferred compensation expense, (ii) amortization of deferred financing costs, net, (iii) straight-line rents, (iv) amortization of acquired market lease intangibles, net, (v) non-cash interest 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 prior period amounts in the “Non-GAAP Financial Measures Reconciliation” below for FAD have been reclassified to conform to the current period presentation. More specifically, recurring capital expenditures, including leasing costs and second generation tenant and capital improvements ("FAD capital expenditures") excludes our share from unconsolidated joint ventures (currently reported in “other FAD adjustments”). 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 Months Ended March 31, 2018 to the Three Months Ended March 31, 2017

Overview

Three Months Ended March 31, 2018 and 2017

The following table summarizes results for the three months ended March 31, 2018 and 2017 (dollars in thousands, except per share data):

	Three Months Ended March 31,
	2018		2017		Change
Net income (loss) applicable to common shares	$	39,841	$	460,375	$	(420,534	)
FFO	219,434		288,249		(68,815		)
FFO as adjusted	227,352		240,172		(12,820		)
FAD	201,736		218,555		(16,819		)

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

• a reduction in net gain on sales of real estate during the first quarter of 2018 compared to the first quarter of 2017;

• a loss on consolidation of seven care homes in the U.K. during the first quarter of 2018;

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• a gain on sale of our Four Seasons senior notes (“Four Seasons Notes”) during the first quarter of 2017, which was not replicated during the first quarter of 2018;

• a reduction in NOI, primarily as a result of the sale of 64 senior housing triple-net assets during the first quarter of 2017;

• 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;

• an increase in severance and related charges during the first quarter of 2018 related to the departure of our former Executive Chairman; and

• a reduction in interest income due to the: (i) sale of our Tandem Mezzanine Loan in March 2018 and (ii) payoff of our HC-One Facility in June 2017.

The decrease in EPS was partially offset by:

• increased NOI from our 2017 acquisitions, annual rent escalations and developments placed in service, primarily in our life science and medical office segments; and

• a reduction in interest expense as a result of debt repayments primarily in the third quarter of 2017.

FFO decreased primarily as a result of the aforementioned events impacting EPS, except for gain on sales of real estate and the loss on consolidation 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:

• an increase in severance and related charges; and

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

FAD decreased primarily as a result of the aforementioned events impacting FFO as adjusted, except for the impact of straight-line rents, which are excluded from FAD.

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 March 31, 2018 consists of 657 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 2017 and that remained in operation under a consistent reporting structure through March 31, 2018. Our total property portfolio consists of 749 and 732 properties at March 31, 2018 and 2017, respectively.

Senior Housing Triple-Net

The following table summarizes results at and for the three months ended March 31, 2018 and 2017 (dollars in thousands, except per unit data):

	SPP									Total Portfolio
	Three Months Ended March 31,									Three Months Ended March 31,
	2018			2017			Change			2018			2017			Change
Rental revenues(1)	$	73,217		$	70,222		$	2,995		$	74,289		$	100,034		$	(25,745	)
Operating expenses	(146		)	(128		)	(18		)	(1,045		)	(1,111		)	66
NOI	73,071			70,094			2,977			73,244			98,923			(25,679		)
Adjustments to NOI	(1,849		)	794			(2,643		)	(1,865		)	(1,839		)	(26		)
Adjusted NOI	$	71,222		$	70,888		$	334		71,379			97,084			(25,705		)
Non-SPP adjusted NOI										(157		)	(26,196		)	26,039
SPP adjusted NOI										$	71,222		$	70,888		$	334
Adjusted NOI % change							0.5		%
Property count(2)	179			179						181			209
Average capacity (units)(3)	18,123			18,136						18,331			26,435
Average annual rent per unit	$	15,752		$	15,663					$	15,803		$	14,858

_______________________________________

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

(2) From our 2017 presentation of SPP, we removed four senior housing properties from SPP that were classified as held for sale and 24 senior housing properties that we transitioned to SHOP.

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(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 annual rent escalations. The increase in Adjusted NOI was partially offset by rent reductions under the Brookdale Transactions.

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

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

• the transfer of 24 senior housing triple-net facilities to our SHOP segment during 2017.

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

Senior Housing Operating Portfolio

The following table summarizes results at and for the three months ended March 31, 2018 and 2017 (dollars in thousands, except per unit data):

	SPP									Total Portfolio
	Three Months Ended March 31,									Three Months Ended March 31,
	2018			2017			Change			2018			2017			Change
Rental revenues(1)	$	108,944		$	108,782		$	162		$	144,670		$	140,228		$	4,442
Operating expenses	(74,291		)	(71,067		)	(3,224		)	(101,746		)	(94,539		)	(7,207		)
NOI	34,653			37,715			(3,062		)	42,924			45,689			(2,765		)
Adjustments to NOI	393			(291		)	684			(1,607		)	(310		)	(1,297		)
Adjusted NOI	$	35,046		$	37,424		$	(2,378	)	41,317			45,379			(4,062		)
Non-SPP adjusted NOI										(6,271		)	(7,955		)	1,684
SPP adjusted NOI										$	35,046		$	37,424		$	(2,378	)
Adjusted NOI % change							(6.4		)%
Property count(2)	69			69						100			81
Average capacity (units)(3)	10,317			10,333						13,597			13,091
Average annual rent per unit	$	48,559		$	47,003					$	49,103		$	48,576

_______________________________________

(1) Represents resident fees and services.

(2) From our 2017 presentation of SPP, we removed two SHOP properties from SPP that were sold and three SHOP properties were classified as held for sale.

(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 decreased primarily as a result of the following:

• occupancy declines and higher labor costs; partially offset by

• increased rates for resident fees.

Total Portfolio NOI and Adjusted NOI decreased primarily as a result of the aforementioned decreases to SPP and the following:

• decreased non-SPP income from our partial sale of RIDEA II in the first quarter of 2017; partially offset by

• non-SPP income for 24 senior housing triple-net assets transferred to SHOP during 2017.

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Life Science

The following table summarizes results at and for the three months ended March 31, 2018 and 2017 (dollars and square feet in thousands, except per square foot data):

	SPP									Total Portfolio
	Three Months Ended March 31,									Three Months Ended March 31,
	2018			2017			Change			2018			2017			Change
Rental revenues(1)	$	75,584		$	73,894		$	1,690		$	99,622		$	85,321		$	14,301
Operating expenses	(15,428		)	(14,424		)	(1,004		)	(21,809		)	(17,319		)	(4,490		)
NOI	60,156			59,470			686			77,813			68,002			9,811
Adjustments to NOI	(64		)	379			(443		)	(3,751		)	(305		)	(3,446		)
Adjusted NOI	$	60,092		$	59,849		$	243		74,062			67,697			6,365
Non-SPP adjusted NOI										(13,970		)	(7,848		)	(6,122		)
SPP adjusted NOI										$	60,092		$	59,849		$	243
Adjusted NOI % change							0.4		%
Property count(2)	108			108						131			124
Average occupancy	94.6		%	95.9		%				93.7		%	96.2		%
Average occupied square feet	6,010			6,091						7,289			6,682
Average annual total revenues per occupied square foot	$	50		$	49					$	53		$	51
Average annual base rent per occupied square foot	$	41		$	40					$	43		$	42

_______________________________________

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

(2) From our 2017 presentation of SPP, we removed a life science facility that was sold and a life science facility that was placed in redevelopment. Our 2017 total portfolio property count has been adjusted to include eight properties in development as of March 31, 2017.

SPP NOI and Adjusted NOI increased primarily as a result of annual rent escalations, partially offset by a mark-to-market rent decrease on a 147,000 square foot lease in South San Francisco.

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: (i) increased occupancy in portions of a development placed into operations in 2017 and 2018 and (ii) acquisitions in 2017; partially offset by

• decreased income from the placement of life science facilities into redevelopment in 2017 and 2018 and the sale of life science facilities in 2017.

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Medical Office

The following table summarizes results at and for the three months ended March 31, 2018 and 2017 (dollars and square feet in thousands, except per square foot data):

	SPP									Total Portfolio
	Three Months Ended March 31,									Three Months Ended March 31,
	2018			2017			Change			2018			2017			Change
Rental revenues(1)	$	104,626		$	103,240		$	1,386		$	123,935		$	118,371		$	5,564
Operating expenses	(37,845		)	(37,202		)	(643		)	(46,696		)	(44,864		)	(1,832		)
NOI	66,781			66,038			743			77,239			73,507			3,732
Adjustments to NOI	(393		)	(678		)	285			(1,071		)	(961		)	(110		)
Adjusted NOI	$	66,388		$	65,360		$	1,028		76,168			72,546			3,622
Non-SPP adjusted NOI										(9,780		)	(7,186		)	(2,594		)
SPP adjusted NOI										$	66,388		$	65,360		$	1,028
Adjusted NOI % change							1.6		%
Property count(2)	225			225						254			242
Average occupancy	92.1		%	92.5		%				91.9		%	91.9		%
Average occupied square feet	15,007			15,174						16,969			16,658
Average annual total revenues per occupied square foot	$	28		$	27					$	29		$	28
Average annual base rent per occupied square foot	$	23		$	23					$	24		$	24

_______________________________________

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

(2) From our 2017 presentation of SPP, we removed four MOBs that were sold and four MOBs that were placed into redevelopment. Our 2017 property count has been adjusted to include four properties in development as of March 31, 2017.

SPP NOI and Adjusted NOI increased primarily as a result of mark-to-market lease renewals. 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 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 2017.

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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 months ended March 31, 2018 and 2017 (in thousands):

	Three Months Ended March 31,
	2018			2017			Change
Interest income	$	6,365		$	18,331		$	(11,966	)
Interest expense	75,102			86,718			(11,616		)
Depreciation and amortization	143,250			136,554			6,696
General and administrative	29,175			22,478			6,697
Transaction costs	2,195			1,057			1,138
Gain (loss) on sales of real estate, net	20,815			317,258			(296,443		)
Other income (expense), net	(40,407		)	51,208			(91,615		)
Income tax benefit (expense)	5,336			6,162			(826		)
Equity income (loss) from unconsolidated joint ventures	570			3,269			(2,699		)
Noncontrolling interests’ share in earnings	(3,005		)	(3,032		)	27

Interest income

Interest income decreased for the three months ended March 31, 2018 as a result of: (i) decreased interest received from our Tandem Mezzanine Loan during the first quarter of 2018, and (ii) the payoff of our HC-One Facility in June 2017.

Interest expense

Interest expense decreased for the three months ended March 31, 2018 as a result of senior unsecured notes, term loan and mortgage debt repayments, which occurred primarily in the third quarter of 2017, partially offset by an increased line of credit balance during the first quarter of 2018.

Approximately 83% and 94% of our total debt, inclusive of $43 million and $321 million of variable rate debt swapped to fixed through interest rate swaps, was fixed rate debt as of March 31, 2018 and 2017, respectively. At March 31, 2018, our fixed rate debt and variable rate debt had weighted average interest rates of 4.20% and 2.78%, respectively. At March 31, 2017, our fixed rate debt and variable rate debt had weighted average interest rates of 4.26% and 1.65%, 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 increased for the three months ended March 31, 2018 primarily as a result of: (i) assets acquired during 2017 and (ii) development and redevelopment projects placed into operations during 2017 and 2018, partially offset by: (i) the deconsolidation of RIDEA II during the first quarter of 2017 and (ii) dispositions of real estate throughout 2017.

General and administrative expenses

General and administrative expenses increased for the three months ended March 31, 2018 primarily as a result of severance and related charges resulting from the departure of our former Executive Chairman in March 2018.

Gain (loss) on sales of real estate, net

During the three months ended March 31, 2018, we sold two SHOP facilities and recognized total net gain on sales of real estate of $21 million. During the three months ended March 31, 2017, we sold 64 senior housing triple-net assets, four life science facilities, and a 40% interest in RIDEA II and recognized total net gain on sales of real estate of $317 million.

Other income (expense), net

Other income (expense), net, decreased for the three months ended March 31, 2018 primarily as a result of: (i) a loss on consolidation of seven U.K. care homes in March 2018 (see Note 15 to the Consolidated Financial Statements for additional information) and (ii) a gain on sale of our Four Seasons Notes in March 2017. The decrease in other income (expense), net was partially offset by the impairment recovery upon sale of our Tandem Mezzanine Loan during the first quarter of 2018.

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Equity income (loss) from unconsolidated joint ventures

The decrease in equity income from unconsolidated joint ventures for the three months ended March 31, 2018 was the result of decreased income primarily from our investments in RIDEA II and the CCRC JV.

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; 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:

• sale or exchange of ownership interests in properties;

• draws on our credit facilities;

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

• issuance of common or preferred stock.

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 April 30, 2018, 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.

The following table sets forth changes in cash flows (in thousands):

	Three Months Ended March 31,
	2018			2017			Change
Net cash provided by (used in) operating activities	$	196,164		$	193,129		$	3,035
Net cash provided by (used in) investing activities	10,728			1,733,763			(1,723,035		)
Net cash provided by (used in) financing activities	(171,238		)	(1,238,969		)	1,067,731

Operating Cash Flows

The decrease in operating cash flow is primarily the result of: (i) decreased NOI related to dispositions during 2017, including the sale of 64 senior housing triple-net assets during the first quarter of 2017 and (ii) 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. The decline in operating cash flow is partially offset by (i) 2017 acquisitions, (ii) annual rent increases, (iii) developments and redevelopments placed in service during 2017 and the first quarter of 2018, and (iv) decreased interest paid as a result of debt repayments during 2017.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.

Investing Cash Flows

The following are significant investing activities for the three months ended March 31, 2018:

• received net proceeds of $163 million primarily from the sale of our Tandem Mezzanine Loan and real estate; and

• made investments of $159 million primarily for the development of real estate.

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The following are significant investing activities for the three months ended March 31, 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 $185 million primarily from the sale of our Four Seasons investments and DFL repayment; and

• made investments of $121 million primarily for the development of real estate.

Financing Cash Flows

The following are significant financing activities for the three months ended March 31, 2018:

• made net borrowings of $70 million under our bank line of credit;

• paid $63 million to purchase Brookdale’s noncontrolling interest in RIDEA I; and

• paid cash dividends on common stock of $174 million.

The following are significant financing activities for the three months ended March 31, 2017:

• made net repayments of $1.1 billion under our bank line of credit, term loans and mortgage debt; and

• paid dividends on common stock of $174 million.

Debt

See Note 9 in the Consolidated Financial Statements for information about our outstanding debt.

See “2018 Transaction Overview” for further information regarding our significant financing activities through May 3, 2018.

Equity

At March 31, 2018, we had 470 million shares of common stock outstanding, equity totaled $5.5 billion, and our equity securities had a market value of $11.1 billion.

At March 31, 2018, 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 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 March 31, 2018, 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 three months ended March 31, 2018 and, at March 31, 2018, $676 million of our common stock remained 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.

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Off-Balance Sheet Arrangements

We own interests in certain unconsolidated JVs 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 JV 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, 2017 in “Contractual Obligations” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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 March 31,
	2018			2017
Net income (loss) applicable to common shares	$	39,841		$	460,375
Real estate related depreciation and amortization	143,250			136,554
Real estate related depreciation and amortization on unconsolidated joint ventures	17,388			15,039
Real estate related depreciation and amortization on noncontrolling interests and other	(2,543		)	(3,972		)
Other depreciation and amortization	1,296			3,010
Loss (gain) on sales of real estate, net	(20,815		)	(317,258		)
Loss (gain) upon consolidation of real estate, net(1)	41,017			—
Taxes associated with real estate dispositions(2)	—			(5,499		)
FFO applicable to common shares	219,434			288,249
Distributions on dilutive convertible units	—			2,803
Diluted FFO applicable to common shares	$	219,434		$	291,052
Weighted average shares outstanding - diluted FFO	469,695			475,173
Impact of adjustments to FFO:
Transaction-related items	$	1,942		$	1,057
Other impairments (recoveries), net(3)	(3,298		)	(50,895		)
Severance and related charges(4)	8,738			—
Litigation costs	406			1,838
Foreign currency remeasurement losses (gains)	130			(77		)
Total adjustments	$	7,918		$	(48,077	)
FFO as adjusted applicable to common shares	$	227,352		$	240,172
Distributions on dilutive convertible units and other	1,711			2,877
Diluted FFO as adjusted applicable to common shares	$	229,063		$	243,049
Weighted average shares outstanding - diluted FFO as adjusted	474,363			475,173

42

	Three Months Ended March 31,
	2018			2017
FFO as adjusted applicable to common shares	$	227,352		$	240,172
Amortization of deferred compensation(5)	3,420			3,765
Amortization of deferred financing costs	3,336			3,858
Straight-line rents	(10,686		)	(7,396		)
FAD capital expenditures(6)	(19,118		)	(22,077		)
Lease restructure payments	299			540
CCRC entrance fees(7)	3,027			3,649
Deferred income taxes	(2,140		)	(2,374		)
Other FAD adjustments	(3,754		)	(1,582		)
FAD applicable to common shares	201,736			218,555
Distributions on dilutive convertible units	—			2,803
Diluted FAD applicable to common shares	$	201,736		$	221,358

	Three Months Ended March 31,
	2018			2017
Diluted earnings per common share	$	0.08		$	0.97
Depreciation and amortization	0.34			0.32
Loss (gain) on sales of real estate, net	(0.04		)	(0.67		)
Loss (gain) upon consolidation of real estate, net(1)	0.09			—
Taxes associated with real estate dispositions(2)	—			(0.01		)
Diluted FFO per common share	$	0.47		$	0.61
Other impairments (recoveries), net(3)	(0.01		)	(0.10		)
Severance and related charges(4)	0.02			—
Diluted FFO as adjusted per common share	$	0.48		$	0.51

_______________________________________

(1) For the three months ended March 31, 2018, represents the loss on consolidation of seven U.K. care homes.

(2) For the three months ended March 31, 2017, represents income tax benefit associated with the disposition of real estate assets in our RIDEA II transaction.

(3) For the three months ended March 31, 2018, represents the impairment recovery upon sale of our Tandem Health Care mezzanine loan ("Tandem Mezzanine Loan") in March 2018. For the three months ended March 31, 2017, represents the impairment recovery upon the sale of our Four Seasons Health Care senior notes in the first quarter of 2017.

(4) For the three months ended March 31, 2018, relates to the departure of our former Executive Chairman, including $6 million of cash severance and $3 million of equity award vestings.

(5) Excludes $3 million related to the acceleration of deferred compensation for restricted stock units that vested upon the departure of our former Executive Chairman, which is included in severance and related charges for the three months ended March 31, 2018.

(6) Excludes our share of recurring capital expenditures, leasing costs, and tenant and capital improvements from unconsolidated joint ventures (reported in "Other FAD adjustments").

(7) 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.

For a reconciliation of NOI and Adjusted NOI to net income (loss), refer to Note 12 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, 2017

43

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 2018.

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 British pound sterling (“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 18 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 March 31, 2018, our exposure to interest rate risk is primarily on our variable rate debt. At March 31, 2018, $43 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 or decrease in interest rates would change the fair value of our fixed rate debt by approximately $278 million and $340 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 March 31, 2018, our annual interest expense and interest income would increase by approximately $13 million and $1 million, respectively.

Foreign Currency Risk.  At March 31, 2018, 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 months ended March 31, 2018, 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 March 31, 2018, 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 March 31, 2018, both the fair value and carrying value of marketable debt securities was $19 million.

44

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 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 March 31, 2018. 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 March 31, 2018.

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.

45

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See the “Legal Proceedings” section of Note 10 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, 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 during the three months ended March 31, 2018.

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
January 1-31, 2018	44	$	23.33	—	—
February 1-28, 2018	83,997	23.30		—	—
March 1-31, 2018	8,572	21.64		—	—
Total	92,613	25.41		—	—

_______________________________________

(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. 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.

46

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 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 (incorporated herein by reference to Exhibit 3.1 to HCP’s Quarterly Report on Form 10-Q filed November 2, 2017).
3.2	Fifth Amended and Restated Bylaws of HCP, as amended through July 27, 2017 (incorporated herein by reference to Exhibit 3.2 to HCP’s Quarterly Report on Form 10-Q filed November 2, 2017).
10.1	Amendment No. 1 to HCP, Inc. 2014 Performance Incentive Plan.*
10.2	Form of 2014 Performance Incentive Plan 3-Year LTIP RSU Agreement (adopted 2018).*
10.3	Form of 2014 Performance Incentive Plan Retentive LTIP RSU Agreement (adopted 2018).*
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. 

47

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: May 3, 2018	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)

48

EX-10.1

Exhibit 10.1

AMENDMENT NO. 1

HCP, INC.
AMENDED AND RESTATED

2014 PERFORMANCE INCENTIVE PLAN

Dated as of February 8, 2018

WHEREAS, HCP, Inc., a Maryland corporation (the “Corporation”) maintains the HCP, Inc. 2014 Performance Incentive Plan (the “Plan”) to promote the success of the Corporation and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons; and

WHEREAS, the Compensation Committee (the “Committee”) of the Board of Directors of the Corporation desires to amend the Plan in accordance with the terms of this Amendment No. 1 (this “Amendment”).

NOW THEREFORE, the Plan is henceforth amended as follows:

1. Section 5 of the Plan is hereby amended to add a Section 5.9 to read in its entirety as follows:

5.9    Minimum Vesting Conditions. 

5.9.1 Any award granted hereunder shall provide for a time-based or performance-based vesting schedule, as applicable, of at least one (1) year following the date of grant. 

5.9.2 Notwithstanding anything set forth in Section 5.9.1 to the contrary, awards representing a maximum of five percent (5%) of the Share Limit may be granted hereunder without any minimum vesting condition.

2. The first sentence of Section 5.2 of the Plan is hereby deleted in its entirety and replaced with the following:

“Any award granted under the Plan that is intended to satisfy the requirements for "performance-based compensation" within the meaning of Section 162(m) of the Code is referred to as a "Performance-Based Award" and any options and SARs that are intended to qualify as Performance-Based Awards are referred to as "Qualifying Options" and "Qualifying SARs," respectively.”

3. Section 8.8.3(b) of the Plan is hereby deleted in its entirety.

4. Except as amended by this Amendment, the Plan shall remain in full force and effect in accordance with its terms.

5. This Amendment shall be governed by, and construed in accordance with the laws of the State of Maryland.

*    *    *

[The remainder of this page is left blank intentionally.]

2

EX-10.2

EXHIBIT 10.2

HCP, INC.

3-YEAR LTIP RSU AGREEMENT

THIS 3-YEAR LTIP RSU AGREEMENT (this “Agreement”) is effective as of [__________], 20[__] (the “Award Date”) by and between HCP, Inc., a Maryland corporation (the “Corporation”), and [__________] (the “Participant”).

W I T N E S S E T H

WHEREAS, the Compensation Committee of the Board of Directors of the Corporation (the “Committee”) has determined that the Participant is eligible to receive an award of restricted stock units, as described below; and

WHEREAS, pursuant to the HCP, Inc. 2014 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), the Corporation hereby grants to the Participant, effective as of the date hereof, an award of restricted stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1.Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Plan.

2.Grant. Subject to the terms of this Agreement, the Corporation hereby grants to the Participant a target award (the “Award”) of [__________] stock units (the “Performance Units”) with respect to the performance period beginning on January 1, [__________] and ending on December 31, [__________] (the “Performance Period”). As used herein, the term “stock unit” means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock solely for purposes of the Plan and this Agreement. The Performance Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Performance Units vest pursuant to Section 3. The Performance Units shall not be treated as property or as a trust fund of any kind. The Committee is the Administrator of the Plan for purposes of the Performance Units. The Award is subject to all of the terms and conditions set forth in this Agreement, and is further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Committee, as such rules are in effect from time to time.

3.Vesting. Subject to this Section 3 and Section 8, the number of Performance Units ultimately earned and vested under the Award shall be determined in accordance with Exhibit A attached hereto based on whether the Corporation has attained certain pre-established performance goals with respect to the Performance Period. The determination as to whether the Corporation has attained the performance goals set forth in Exhibit A

1

with respect to the Performance Period shall be made by the Committee (the “Committee Determination”). The Committee Determination shall be made no later than March 15 following the end of the Performance Period (or such earlier time as provided in Section 9(b)). The Performance Units shall not be deemed vested pursuant to any other provision of this Agreement earlier than the date that the Committee makes such determination.

4.Continuance of Employment. Except as otherwise expressly provided in Section 8, the vesting schedule requires continued employment through the date of the Committee Determination (the “Vesting Period”), as provided in Section 3, as a condition to the vesting of the Award and the rights and benefits under this Agreement. Employment for only a portion of the Vesting Period, even if a substantial portion, will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment as provided in Section 8 below or under the Plan.

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation or any of its Subsidiaries, affects the Participant’s status as an employee at will who is subject to termination without Cause (as defined herein), confers upon the Participant any right to remain employed by or in service to the Corporation or any of its Subsidiaries, interferes in any way with the right of the Corporation or any of its Subsidiaries at any time to terminate such employment or services, or affects the right of the Corporation or any of its Subsidiaries to increase or decrease the Participant’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Participant without his or her consent thereto.

5.Dividend and Voting Rights.

(a)Limitations on Rights Associated with Units. The Participant shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 5(b) with respect to Dividend Equivalent Rights) and no voting rights with respect to the Performance Units and any shares of Common Stock underlying or issuable in respect of such Performance Units until such shares of Common Stock are actually issued to and held of record by the Participant.

(b)Dividend Equivalent Rights. Subject to vesting as provided below, the Participant will have the right to receive, with respect to each Performance Unit, an amount equal to the amount of any ordinary cash dividend paid by the Corporation on a share of Common Stock as to which the related dividend record date occurs on or after the first day of the Performance Period and before the date on which the Performance Unit is settled pursuant to Section 7 (a “Dividend Equivalent Right”). Any Dividend Equivalent Right credited with respect to an outstanding Performance Unit that does not vest pursuant to Section 3 shall immediately terminate upon the forfeiture of such Performance Unit, and the Participant shall not be entitled to any payment with respect thereto. In the case of Dividend Equivalent Rights credited with respect to an outstanding Performance Unit that vests pursuant to Section 3, the Dividend Equivalent Rights will be paid to the Participant

2

in cash (without interest) as soon as practicable after the Committee Determination and in all events not later than March 15 of the year that follows the end of the Performance Period. Dividend Equivalent Rights will not be paid to the Participant with respect to any Performance Units that are forfeited or terminated pursuant to Section 3 or 8.

6.Restrictions on Transfer. Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7.Timing and Manner of Payment. As soon as administratively practical following the Committee Determination (and in all events no later than March 15 of the year that follows the end of the Performance Period or such time as provided in Section 9(b)), the Corporation shall deliver to the Participant a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Performance Units subject to the Award that vest in accordance with Section 3; provided, however, that in the event that the vesting and payment of the Performance Units is triggered by the Participant’s “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) and the Participant is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of such separation from service, the Participant shall not be entitled to any payment of the Performance Units until the earlier of (a) the date which is six months after the Participant’s separation from service with the Corporation for any reason other than death, or (b) the date of the Participant’s death, if and to the extent such delay in payment is required to comply with Section 409A of the Code. The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Performance Units is subject to the condition precedent that the Participant or other person entitled under the Plan to receive any shares with respect to the vested Performance Units deliver to the Corporation any representations or other documents or assurances that the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements. The Participant shall have no further rights with respect to any Performance Units that are paid or that terminate pursuant to this Agreement.

8.Termination of Employment or Services. Notwithstanding any provisions to the contrary in any employment agreement, the HCP, Inc. Executive Severance Plan (as it may be amended from time to time, the “Severance Plan”), the HCP, Inc. Executive Change in Control Severance Plan or successor plan (as it may be amended from time to time, the “CIC Severance Plan”), or any other severance plan adopted by the Corporation, the provisions set forth in this Section 8 are applicable in the event of a termination of the Participant’s employment with the Corporation and its Subsidiaries.

(a)Qualifying Termination. If, at any time during the Vesting Period, the Participant ceases to be employed by the Corporation or one of its Subsidiaries (the date of such termination of employment is referred to as the Participant’s “Severance

3

Date”) as a result of (i) the Participant’s death or Disability, or (ii) a termination of employment by the Corporation or one of its Subsidiaries without Cause (as defined herein), then, subject to the release requirement set forth in the following paragraph, the Performance Units will remain outstanding during the remainder of the Vesting Period and will remain subject to Section 3. The Participant will be entitled to the number of Performance Units the Participant would have received in accordance with Section 3, if any, had the Participant remained employed until the end of the Vesting Period.

Any benefit to the Participant pursuant to the preceding paragraph (other than in connection with the Participant’s death) is subject to the condition precedent that (x) the Participant has fully executed a valid and effective release (in the form attached to the Severance Plan or, if such release is executed on or after a Change in Control Event, in the form attached to the CIC Severance Plan, or in either case such other form as the Committee may reasonably require in the circumstances, which other form shall be substantially similar to the form attached to the Severance Plan or the CIC Severance Plan, as the case may be, that would otherwise apply in the circumstances but with such changes as the Committee may determine to be required or reasonably advisable in order to make the release enforceable and otherwise compliant with applicable laws), (y) such executed release is delivered by the Participant to the Corporation so that it is received by the Corporation in the time period specified below, and (z) such release is not revoked by the Participant (pursuant to any revocation rights afforded by applicable law). In order to satisfy the requirements of this paragraph, the Participant’s release referred to in the preceding sentence must be delivered by the Participant to the Corporation so that it is received by the Corporation no later than twenty-five (25) calendar days after the Participant’s Severance Date (or such later date as may be required for an enforceable release of the Participant’s claims under the United States Age Discrimination in Employment Act of 1967, as amended (“ADEA”), to the extent the ADEA is applicable in the circumstances, in which case the Participant will be provided with either twenty-one (21) or forty-five (45) days, depending on the circumstances of the termination, to consider the release). In addition, the Corporation may require that the Participant’s release be executed no earlier than the Participant’s Severance Date. If the period during which the Participant is permitted to consider the release in accordance with this paragraph begins in one calendar year and ends in a second calendar year, the payment of any Stock Units that remain eligible to vest pursuant to the preceding paragraph shall not be made earlier than the second calendar year.

(b)Forfeiture of Performance Units upon Certain Terminations of Employment. If, at any time during the Vesting Period, the Participant ceases to be employed by the Corporation or one of its Subsidiaries as a result of (i) a termination of employment by the Corporation or one of its Subsidiaries for Cause, or (ii) a termination of employment by the Participant, excluding any termination contemplated by Section 8(a) (other than a termination contemplated by Section 8(a) but as to which the Participant did not timely satisfy any applicable release requirement pursuant to Section 8(a)) and subject to the next paragraph, all of the Performance Units shall be automatically terminated and cancelled in full, effective as of the Severance Date, and this Agreement shall be null and void and of no further force and effect.

4

If, however, the Participant ceases to be employed by the Corporation or one of its Subsidiaries and such termination of employment is a result of a retirement or resignation by the Participant (other than (x) any termination contemplated by Section 8(a) and (y) a termination of employment by the Corporation or one of its Subsidiaries for Cause) and, immediately after such termination of employment, the Participant is a member of the Board or provides consulting services to the Corporation or one of its Subsidiaries under a written consulting agreement entered into by and between the Participant and the Corporation or one of its Subsidiaries, then the termination of employment rules of the preceding paragraph shall not apply when the Participant ceases to be employed by the Corporation or one of its Subsidiaries but shall apply if and when, and effective as of the time that, the Participant ceases to be a member of the Board or ceases to provide consulting services to the Corporation or one of its Subsidiaries under such a written consulting agreement. For clarity, the Participant’s obligations under a confidentiality, noncompetition, non-solicitation, cooperation or similar clause or agreement shall not constitute “consulting services” for purposes of the preceding sentence.

(c)Termination of Performance Units. Any Performance Units that are not vested on the date of the Committee Determination (after giving effect to such Committee Determination) shall terminate. If any unvested Performance Units are terminated pursuant to Section 8(b) or this Section 8(c), such Performance Units shall automatically terminate and be cancelled as of the Severance Date or as of the date of the Committee Determination, as the case may be, without payment of any consideration by the Corporation and without any other action by the Participant, or the Participant’s beneficiary or personal representative, as the case may be.

(d)Definitions. As used in this Agreement:

(i)    “Cause” shall have the meaning set forth in the Severance Plan.

(ii)    “Disability” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator).

9.Adjustments upon Specified Events; Change in Control Event.

(a)Adjustments. Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Performance Units then outstanding and the number and kind of securities that may be issued in respect of the Award. No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are paid pursuant to Section 5(b).

(b)Change in Control Event. Upon the occurrence, at any time during the Vesting Period, of a Change in Control Event with respect to the Corporation and notwithstanding any provision of Section 7.2 or 7.3 of the Plan, any employment agreement, the Severance Plan, the CIC Severance Plan (or successor plan) or any other

5

severance plan adopted by the Corporation, the Performance Period for all outstanding Awards will be shortened, if such Performance Period has not already ended, so that the Performance Period will be deemed to have ended on the day of the Change in Control Event and the Committee Determination pursuant to Section 3 shall be made not later than 20 days following the Change in Control Event. The Vesting Period will be deemed to end on the date of the Change in Control Event even though the Committee Determination may not occur until after such date, such that a Participant employed by the Corporation or a Subsidiary on the date of the Change in Control Event shall be fully vested in any Performance Units that vest as a result of the Committee Determination even if the Participant does not remain employed by the Corporation or a Subsidiary through the date of the Committee Determination. A Participant shall become vested in a number of Performance Units, if any, determined in accordance with Section 3 based on such shortened Performance Period. On or as soon as administratively practical following the Change in Control Event (and in all events no later than thirty (30) days following such Change in Control Event), the Corporation shall deliver to the Participant a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Performance Units that vest in accordance with this Section 9(b).

10.Tax Withholding. Upon vesting of any Performance Units or any distribution of shares of Common Stock in respect of the Performance Units, the Corporation shall reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value, to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates; provided, however, that in the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Performance Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other compensation payable to the Participant any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

11.Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s payroll records. Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government. Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 11.

12.Plan. The Award and all rights of the Participant under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by

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reference. The Participant agrees to be bound by the terms of the Plan and this Agreement. The Participant acknowledges having read and understanding the Plan, the Prospectus for the Plan and this Agreement. Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

13.Entire Agreement. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan. Any such amendment must be in writing and signed by the Corporation. Any such amendment that materially and adversely affects the Participant’s rights under this Agreement requires the consent of the Participant in order to be effective with respect to the Award. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof. The Participant acknowledges receipt of a copy of this Agreement, the Plan and the Prospectus for the Plan.

14.Limitation on Participant’s Rights. Participation in the Planconfers norights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Performance Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to the Performance Units, as and when payable hereunder. The Award has been granted to the Participant in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant.

15.Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

16.Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

17.Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

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18.Construction. It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code. This Agreement shall be construed and interpreted consistent with that intent.

19.Clawback Policy. The Performance Units are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Performance Units or any shares of Common Stock or other cash or property received with respect to the Performance Units (including any value received from a disposition of the shares acquired upon payment of the Performance Units).

THE PARTICIPANT’S ACCEPTANCE OF THE AWARD THROUGH THE ELECTRONIC STOCK PLAN AWARD RECORDKEEPING SYSTEM MAINTAINED BY THE CORPORATION OR ITS DESIGNEE CONSTITUTES THE PARTICIPANT’S AGREEMENT TO THE TERMS AND CONDITIONS HEREOF, AND THAT THE AWARD IS GRANTED UNDER AND GOVERNED BY THE TERMS AND CONDITIONS OF THE PLAN AND THIS AGREEMENT.

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EXHIBIT A

Award Subject to Relative TSR Performance. The Award shall be eligible to vest in accordance with this Exhibit A. The Award will be subject to forfeiture and cancellation by the Corporation if the Corporation’s performance during the Performance Period does not meet or exceed the Threshold goal for the Performance Period. Performance at or above the Threshold level will result in the Award becoming vested in the amount set forth below. The vesting for performance between the Threshold and Target levels and Target and High levels, respectively, shall be based on linear interpolation. In no event will the Award vest as to more than 200% of the target number of Performance Units subject to the Award.

Performance	Threshold	Target	High
Relative Three-Year Total Stockholder Return of the Corporation	25th   percentile ranking	50th   percentile ranking	80th   percentile ranking or above
Percentage of Award Vesting	50%	100%	200%

“Total Stockholder Return” or “TSR” means total stockholder return, meaning stock price appreciation from the beginning to the end of the Performance Period, plus dividends and distributions (other than stock dividends as to which an adjustment is made as provided below) made or declared (assuming such dividends or distributions are reinvested in the applicable company’s common stock on the date of distribution, with non-cash dividends or distributions valued at their fair market value at the time of distribution) during the Performance Period. For purposes of computing TSR, the stock price at the beginning of the Performance Period will be the closing price of a share of common stock on the first trading day of the Performance Period, and the stock price at the end of the Performance Period will be the average closing price of a share of common stock over the 10 trading days ending on the last trading day of the Performance Period, adjusted for stock splits, reverse stock splits, and stock dividends. As to a stock which goes ex-dividend during such 10-trading day period, the closing prices as to such stock for the portion of such period preceding the ex-dividend date shall be equitably and proportionately adjusted to exclude the amount of the related dividend as the dividend will be treated as reinvested as provided above.

“Relative Three-Year Total Stockholder Return” shall be based on the Corporation's three-year TSR for the Performance Period compared to the three-year TSRs of the companies that constitute the [__________] Index at the beginning of the Performance Period and that, throughout the Performance Period, remain traded on a national securities exchange, as such term is defined by the SEC, excluding the following:

• The following constituents:

o [__________]; and

• Any other constituent that is subject during the Performance Period to a merger, sale or spin-off of all or substantially all of its assets, or other business combination that would artificially distort its TSR, provided that if the constituent is the acquirer

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or survivor in any such merger or other business combination and its stock remains traded on a national securities exchange following such merger or other business combination, the constituent shall not be excluded for these purposes.

In determining Relative Three-Year Total Stockholder Return, in the event that the Corporation’s TSR for the Performance Period is equal to the TSR(s) for the Performance Period of one or more other companies in the comparison group (as provided above), the Corporation’s TSR will be deemed to be greater than the TSR of such other comparison group member(s) for that period.

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EX-10.3

EXHIBIT 10.3

HCP, INC.

RETENTIVE LTIP RSU AGREEMENT

THIS RETENTIVE LTIP RSU AGREEMENT (this “Agreement”) is effective as of [__________], 20[__] (the “Award Date”) by and between HCP, Inc., a Maryland corporation (the “Corporation”), and [__________] (the “Participant”).

W I T N E S S E T H

WHEREAS, the Compensation Committee of the Board of Directors of the Corporation (the “Committee”) has determined that the Participant is eligible to receive an award of restricted stock units, as described below; and

WHEREAS, pursuant to the HCP, Inc. 2014 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), the Corporation hereby grants to the Participant, effective as of the date hereof, an award of restricted stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1.    Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Plan.

2.Grant. Subject to the terms of this Agreement, the Corporation hereby grants to the Participant an award (the “Award”) of [__________] stock units (the “Stock Units”). As used herein, the term “stock unit” means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock solely for purposes of the Plan and this Agreement. The Stock Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Stock Units vest pursuant to Section 3. The Stock Units shall not be treated as property or as a trust fund of any kind. The Committee is the Administrator of the Plan for purposes of the Stock Units. The Award is subject to all of the terms and conditions set forth in this Agreement, and is further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Committee, as such rules are in effect from time to time.

3.Vesting. Subject to Section 8, the Award shall vest and become nonforfeitable with respect to one-third of the total number of the Stock Units on each of the first, second and third anniversaries of the Award Date. Notwithstanding the foregoing, no portion of the Award will vest unless the Corporation’s Normalized FFO Per Share, as defined in the Corporation’s [__________] Cash Incentive Plan, with respect to the [__________] calendar year equals or exceeds $[__________].

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4.Continuance of Employment. Except as otherwise expressly provided in Section 8, the vesting schedule requires continued employment through each applicable vesting date, as provided in Section 3, as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement. Employment for only a portion of the vesting period, even if a substantial portion, will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment as provided in Section 8 below or under the Plan.

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation or any of its Subsidiaries, affects the Participant’s status as an employee at will who is subject to termination without Cause (as defined herein), confers upon the Participant any right to remain employed by or in service to the Corporation or any of its Subsidiaries, interferes in any way with the right of the Corporation or any of its Subsidiaries at any time to terminate such employment or services, or affects the right of the Corporation or any of its Subsidiaries to increase or decrease the Participant’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Participant without his or her consent thereto.

5.Dividend and Voting Rights.

(a)Limitations on Rights Associated with Units. The Participant shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 5(b) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Participant.

(b)Dividend Equivalent Rights. As of any date that the Corporation pays an ordinary cash dividend on its Common Stock, the Corporation shall pay the Participant an amount equal to the per share cash dividend paid by the Corporation on its Common Stock on such date multiplied by the number of Stock Units remaining subject to the Award as of the related dividend payment record date. No such payment shall be made with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Section 8.

6.Restrictions on Transfer. Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7.Timing and Manner of Payment. As soon as administratively practical following each vesting of the applicable portion of the total Award pursuant to the terms hereof (and in all events within sixty (60) days after such vesting event), the Corporation shall deliver to the Participant a number of shares of Common Stock (either by delivering

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one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Stock Units subject to the Award that vest on such vesting event; provided, however, that in the event that the vesting and payment of the Stock Units is triggered by the Participant’s “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) and the Participant is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of such separation from service, the Participant shall not be entitled to any payment of the Stock Units until the earlier of (a) the date which is six months after the Participant’s separation from service with the Corporation for any reason other than death, or (b) the date of the Participant’s death, if and to the extent such delay in payment is required to comply with Section 409A of the Code. The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Stock Units is subject to the condition precedent that the Participant or other person entitled under the Plan to receive any shares with respect to the vested Stock Units deliver to the Corporation any representations or other documents or assurances that the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements. The Participant shall have no further rights with respect to any Stock Units that are paid or that terminate pursuant to this Agreement.

8.Termination of Employment or Services. Notwithstanding any provisions to the contrary in any employment agreement, the HCP, Inc. Executive Severance Plan (as it may be amended from time to time, the “Severance Plan”), the HCP, Inc. Change in Control Severance Plan (or successor plan) (as it may be amended from time to time, the “CIC Severance Plan”), or any other severance plan adopted by the Corporation, the provisions set forth in this Section 8 are applicable in the event of a termination of the Participant’s employment with the Corporation and its Subsidiaries.

(a)Qualifying Termination. If the Participant ceases to be employed by the Corporation or one of its Subsidiaries (the date of such termination of employment is referred to as the Participant’s “Severance Date”) as a result of (i) the Participant’s death or Disability, (ii) a termination of employment by the Corporation or one of its Subsidiaries without Cause (as defined herein, and whether before or after a Change in Control Event), or (iii) a termination of employment by the Participant for Good Reason (as defined herein) upon or following a Change in Control Event with respect to the Corporation, then, subject to the release requirement set forth in the following paragraph, the Participant’s Stock Units, to the extent such units are not then vested and without regard to the last sentence of Section 3, shall become fully vested as of the Severance Date and shall be paid in accordance with Section 7.

Any acceleration of vesting pursuant to the preceding paragraph (other than in connection with the Participant’s death) is subject to the condition precedent that (x) the Participant has fully executed a valid and effective release (in the form attached to the Severance Plan or, if such release is executed on or after a Change in Control Event, in the form attached to the CIC Severance Plan, or in either case such other form as the Committee may reasonably require in the circumstances, which other form shall be substantially similar to the form attached to the Severance Plan or the CIC Severance Plan, as the case may be, that would otherwise apply in the circumstances but with such changes as the Committee may

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determine to be required or reasonably advisable in order to make the release enforceable and otherwise compliant with applicable laws), (y) such executed release is delivered by the Participant to the Corporation so that it is received by the Corporation in the time period specified below, and (z) such release is not revoked by the Participant (pursuant to any revocation rights afforded by applicable law). In order to satisfy the requirements of this paragraph, the Participant’s release referred to in the preceding sentence must be delivered by the Participant to the Corporation so that it is received by the Corporation no later than twenty-five (25) calendar days after the Participant’s Severance Date (or such later date as may be required for an enforceable release of the Participant’s claims under the United States Age Discrimination in Employment Act of 1967, as amended (“ADEA”), to the extent the ADEA is applicable in the circumstances, in which case the Participant will be provided with either twenty-one (21) or forty-five (45) days, depending on the circumstances of the termination, to consider the release). In addition, the Corporation may require that the Participant’s release be executed no earlier than the Participant’s Severance Date. If the period during which the Participant is permitted to consider the release in accordance with this paragraph begins in one calendar year and ends in a second calendar year, the payment of any Stock Units that accelerate pursuant to the preceding paragraph shall be made in accordance with Section 7 but in all events in the second calendar year.

(b)Forfeiture of Stock Units upon Certain Terminations of Employment. If the Participant ceases to be employed by the Corporation or one of its Subsidiaries as a result of (i) a termination of employment by the Corporation or one of its Subsidiaries for Cause, or (ii) a termination of employment by the Participant, excluding any termination contemplated by Section 8(a) (other than a termination contemplated by Section 8(a) but as to which the Participant did not timely satisfy any applicable release requirement pursuant to Section 8(a)) and subject to the next paragraph, the Participant’s Stock Units shall be automatically terminated to the extent such units have not become vested pursuant to Section 3 hereof upon the Severance Date.

If, however, the Participant ceases to be employed by the Corporation or one of its Subsidiaries and such termination of employment is a result of a retirement or resignation by the Participant (other than (x) any termination contemplated by Section 8(a) and (y) a termination of employment by the Corporation or one of its Subsidiaries for Cause) and, immediately after such termination of employment, the Participant is a member of the Board or provides consulting services to the Corporation or one of its Subsidiaries under a written consulting agreement entered into by and between the Participant and the Corporation or one of its Subsidiaries, then the termination of employment rules of the preceding paragraph shall not apply when the Participant ceases to be employed by the Corporation or one of its Subsidiaries but shall apply if and when, and effective as of the time that, the Participant ceases to be a member of the Board or ceases to provide consulting services to the Corporation or one of its Subsidiaries under such a written consulting agreement. For clarity, the Participant’s obligations under a confidentiality, noncompetition, non-solicitation, cooperation or similar clause or agreement shall not constitute “consulting services” for purposes of the preceding sentence.

(c)Termination of Stock Units. If any unvested Stock Units are terminated pursuant to Section 8(b), such Stock Units shall automatically terminate and be

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cancelled as of the Severance Date without payment of any consideration by the Corporation and without any other action by the Participant, or the Participant’s beneficiary or personal representative, as the case may be.

(d)Definitions. As used in this Agreement:

(i)    “Cause” shall have the meaning set forth in the Severance Plan; provided, however, that upon and after a Change in Control Event “Cause” shall have the meaning set forth in the CIC Severance Plan.

(ii)    “Disability” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator).

(iii)    “Good Reason” shall have the meaning set forth in the CIC Severance Plan.

9.Adjustments Upon Specified Events; Change in Control Event.

(a)Adjustments. Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Award. No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are paid pursuant to Section 5(b).

(b)Change in Control Event. Upon the occurrence of an event contemplated by Section 7.2 or 7.3 of the Plan and notwithstanding any provision of Section 7.2 or 7.3 of the Plan, any employment agreement, the CIC Severance Plan (or successor plan)or any other severance plan adopted by the Corporation, the Award (to the extent outstanding at the time of such event) shall continue in effect in accordance with its terms following such event (subject to adjustment in connection with such event pursuant to Section 7.1 of the Plan); provided, however, that the Administrator shall determine, in its sole discretion, whether the vesting of the Stock Units will accelerate in connection with such event and the extent of any such accelerated vesting; provided, further, that any Stock Units that are so accelerated will be paid on or as soon as administratively practical following (and in all events no later than thirty (30) days following) such event.

10.Tax Withholding. Upon vesting of any Stock Units or any distribution of shares of Common Stock in respect of the Stock Units, the Corporation shall reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value, to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates; provided, however, that in the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Stock Units,

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the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other compensation payable to the Participant any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

11.Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s payroll records. Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government. Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 11.

12.Plan. The Award and all rights of the Participant under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The Participant agrees to be bound by the terms of the Plan and this Agreement. The Participant acknowledges having read and understanding the Plan, the Prospectus for the Plan and this Agreement. Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

13.Entire Agreement. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan. Any such amendment must be in writing and signed by the Corporation. Any such amendment that materially and adversely affects the Participant’s rights under this Agreement requires the consent of the Participant in order to be effective with respect to the Award. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof. The Participant acknowledges receipt of a copy of this Agreement, the Plan and the Prospectus for the Plan.

14.Limitation on Participant’s Rights. Participation in the Planconfers norights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general

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unsecured creditor with respect to the Stock Units, as and when payable hereunder. The Award has been granted to the Participant in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant.

15.Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

16.Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

17.Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

18.Construction. It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code. This Agreement shall be construed and interpreted consistent with that intent.

19.Clawback Policy. The Stock Units are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Stock Units or any shares of Common Stock or other cash or property received with respect to the Stock Units (including any value received from a disposition of the shares acquired upon payment of the Stock Units).

THE PARTICIPANT’S ACCEPTANCE OF THE AWARD THROUGH THE ELECTRONIC STOCK PLAN AWARD RECORDKEEPING SYSTEM MAINTAINED BY THE CORPORATION OR ITS DESIGNEE CONSTITUTES THE PARTICIPANT’S AGREEMENT TO THE TERMS AND CONDITIONS HEREOF, AND THAT THE AWARD IS GRANTED UNDER AND GOVERNED BY THE TERMS AND CONDITIONS OF THE PLAN AND THIS AGREEMENT.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL 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 March 31, 2018;

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: May 3, 2018	/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 March 31, 2018;

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: May 3, 2018	/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 PRINCIPAL 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 March 31, 2018 (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: May 3, 2018	/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 March 31, 2018 (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: May 3, 2018	/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	3 Months Ended
	Mar. 31, 2018	Apr. 30, 2018
Document and Entity Information
Entity Registrant Name	HCP, INC.
Entity Central Index Key	0000765880
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
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		469,755,917
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Real estate:
Buildings and improvements	$ 11,532,338	$ 11,239,732
Development costs and construction in progress	344,948	447,976
Land	1,808,210	1,785,865
Accumulated depreciation and amortization	(2,826,325)	(2,741,695)
Net real estate	10,859,171	10,731,878
Net investment in direct financing leases	713,463	714,352
Loans receivable, net	47,012	313,326
Investments in and advances to unconsolidated joint ventures	863,775	800,840
Accounts receivable, net of allowance of $4,516 and $4,425, respectively	51,468	40,733
Cash and cash equivalents	86,021	55,306
Restricted cash	31,947	26,897
Intangible assets, net	395,298	410,082
Assets held for sale, net	436,155	417,014
Other assets, net	583,261	578,033
Total assets	14,067,571	14,088,461
LIABILITIES AND EQUITY
Bank line of credit	1,092,357	1,017,076
Term loan	236,878	228,288
Senior unsecured notes	6,398,976	6,396,451
Mortgage debt	143,524	144,486
Other debt	93,856	94,165
Intangible liabilities, net	52,576	52,579
Liabilities of assets held for sale, net	8,564	14,031
Accounts payable and accrued liabilities	391,942	401,738
Deferred revenue	167,975	144,709
Total liabilities	8,586,648	8,493,523
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 469,725,220 and 469,435,678 shares issued and outstanding, respectively	469,725	469,436
Additional paid-in capital	8,183,166	8,226,113
Cumulative dividends in excess of earnings	(3,425,293)	(3,370,520)
Accumulated other comprehensive income (loss)	(21,307)	(24,024)
Total stockholders' equity	5,206,291	5,301,005
Joint venture partners	97,744	117,045
Non-managing member unitholders	176,888	176,888
Total noncontrolling interests	274,632	293,933
Total equity	5,480,923	5,594,938
Total liabilities and equity	$ 14,067,571	$ 14,088,461

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Balance Sheet Parenthetical Disclosures
Accounts receivable, allowance (in dollars)	$ 4,516	$ 4,425
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	469,725,220	469,435,678
Common stock, shares outstanding	469,725,220	469,435,678

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues:
Rental and related revenues	$ 279,578	$ 286,218
Tenant recoveries	37,174	33,675
Resident fees and services	142,814	140,232
Income from direct financing leases	13,266	13,712
Interest income	6,365	18,331
Total revenues	479,197	492,168
Costs and expenses:
Interest expense	75,102	86,718
Depreciation and amortization	143,250	136,554
Operating	172,552	159,081
General and administrative	29,175	22,478
Transaction costs	2,195	1,057
Total costs and expenses	422,274	405,888
Other income (expense):
Gain (loss) on sales of real estate, net	20,815	317,258
Other income (expense), net	(40,407)	51,208
Total other income (expense), net	(19,592)	368,466
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	37,331	454,746
Income tax benefit (expense)	5,336	6,162
Equity income (loss) from unconsolidated joint ventures	570	3,269
Net income (loss)	43,237	464,177
Noncontrolling interests' share in earnings	(3,005)	(3,032)
Net income (loss) attributable to HCP, Inc.	40,232	461,145
Participating securities' share in earnings	(391)	(770)
Net income (loss) applicable to common shares	$ 39,841	$ 460,375
Earnings per common share:
Earnings per common share, basic (in dollars per share)	$ 0.08	$ 0.98
Earnings per common share, diluted (in dollars per share)	$ 0.08	$ 0.97
Weighted average shares outstanding:
Basic (in shares)	469,557	468,299
Diluted (in shares)	469,695	475,173
Dividends declared per common share (in dollars per share)	$ 0.37	$ 0.37

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 43,237	$ 464,177
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses)	(5,164)	(302)
Reclassification adjustment realized in net income (loss)	125	213
Change in Supplemental Executive Retirement Plan obligation and other	104	83
Foreign currency translation adjustment	7,652	990
Total other comprehensive income (loss)	2,717	984
Total comprehensive income (loss)	45,954	465,161
Total comprehensive income (loss) attributable to noncontrolling interests	(3,005)	(3,032)
Total comprehensive income (loss) attributable to HCP, Inc.	$ 42,949	$ 462,129

XML

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, 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)		464,177			461,145		461,145	3,032
Other comprehensive income (loss)		984				984	984
Issuance of common stock, net		3,472	$ 427	3,045			3,472
Issuance of common stock, net (in shares)			427
Conversion of DownREIT units to common stock		0	$ 54	1,494			1,548	(1,548)
Conversion of DownREIT units (in shares)			54
Repurchase of common stock		(3,532)	$ (116)	(3,416)			(3,532)
Repurchase of common stock (in shares)			(116)
Amortization of deferred compensation		3,765		3,765			3,765
Common dividends		(173,629)			(173,629)		(173,629)
Distributions to noncontrolling interest		(5,659)						(5,659)
Issuances of noncontrolling interest		650						650
Deconsolidation of noncontrolling interest		(58,061)						(58,061)
Balance at Mar. 31, 2017		6,173,475	$ 468,446	8,203,778	(2,802,218)	(28,658)	5,841,348	332,127
Balance (in shares) at Mar. 31, 2017			468,446
Increase (Decrease) in Stockholders' Equity
Cumulative effect of new accounting principle	[1]	79,144			79,144		79,144
Adjusted balance		5,674,082	$ 469,436	8,226,113	(3,291,376)	(24,024)	5,380,149	293,933
Balance at Dec. 31, 2017		5,594,938	$ 469,436	8,226,113	(3,370,520)	(24,024)	5,301,005	293,933
Balance (in shares) at Dec. 31, 2017			469,436
Increase (Decrease) in Stockholders' Equity
Net income (loss)		43,237			40,232		40,232	3,005
Other comprehensive income (loss)		2,717				2,717	2,717
Issuance of common stock, net		2,774	$ 382	2,392			2,774
Issuance of common stock, net (in shares)			382
Repurchase of common stock		(2,144)	$ (93)	(2,051)			(2,144)
Repurchase of common stock (in shares)			(93)
Amortization of deferred compensation		5,919		5,919			5,919
Common dividends		(174,149)			(174,149)		(174,149)
Distributions to noncontrolling interest		(5,077)						(5,077)
Issuances of noncontrolling interest		995						995
Purchase of noncontrolling interest		(67,431)		(49,207)			(49,207)	(18,224)
Balance at Mar. 31, 2018		$ 5,480,923	$ 469,725	$ 8,183,166	$ (3,425,293)	$ (21,307)	$ 5,206,291	$ 274,632
Balance (in shares) at Mar. 31, 2018			469,725

[1] On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.

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CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Stockholders' Equity [Abstract]
Common dividends, per share (in dollars per share)	$ 0.37	$ 0.37

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net income (loss)	$ 43,237	$ 464,177
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:	143,250	136,554
Amortization of deferred compensation	5,919	3,765
Amortization of deferred financing costs	3,336	3,858
Straight-line rents	(10,686)	(5,007)
Equity loss (income) from unconsolidated joint ventures	(570)	(3,269)
Distributions of earnings from unconsolidated joint ventures	5,336	7,842
Deferred income tax expense (benefit)	(2,394)	(8,130)
Impairments (recoveries), net	(3,298)	0
Loss (gain) on sales of real estate, net	(20,815)	(317,258)
Loss (gain) on consolidation, net	41,017	0
Loss (gain) on sale of marketable securities	0	(50,895)
Other non-cash items	(2,401)	(660)
Decrease (increase) in accounts receivable and other assets, net	(18,082)	1,136
Increase (decrease) in accounts payable and accrued liabilities	12,315	(38,984)
Net cash provided by (used in) operating activities	196,164	193,129
Cash flows from investing activities:
Acquisitions of real estate	(22,121)	0
Development and redevelopment of real estate	(113,648)	(75,166)
Leasing costs, tenant improvements, and recurring capital expenditures	(19,246)	(22,693)
Proceeds from sales of real estate, net	30,392	1,206,256
Contributions to unconsolidated joint ventures	(3,688)	(8,109)
Distributions in excess of earnings from unconsolidated joint ventures	7,257	870
Proceeds from the RIDEA II transaction, net	0	462,241
Proceeds from sales/principal repayments on debt investments and direct financing leases	132,429	185,364
Investments in loans receivable, direct financing leases and other	(647)	(15,000)
Net cash provided by (used in) investing activities	10,728	1,733,763
Cash flows from financing activities:
Borrowings under bank line of credit, net	240,000	(375,812)
Repayments under bank line of credit	(170,000)	(37,032)
Repayments and repurchase of debt, excluding bank line of credit	(1,172)	(647,427)
Issuance of common stock and exercise of options	2,774	3,472
Repurchase of common stock	(2,144)	(3,532)
Dividends paid on common stock	(174,149)	(173,629)
Issuance of noncontrolling interests	995	650
Distributions to and purchase of noncontrolling interests	(67,542)	(5,659)
Net cash provided by (used in) financing activities	(171,238)	(1,238,969)
Effect of foreign exchanges on cash, cash equivalents and restricted cash	111	7
Net increase (decrease) in cash, cash equivalents and restricted cash	35,765	687,930
Cash, cash equivalents and restricted cash, beginning of period	82,203	136,990
Cash, cash equivalents and restricted cash, end of period	$ 117,968	$ 824,920

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Business

3 Months Ended

Mar. 31, 2018

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.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

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. 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 months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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, 2017 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).

Recent Accounting Pronouncements

Revenue Recognition. Between May 2014 and February 2017, the Financial Accounting Standards Board (“FASB”) issued four 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”), (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), and (iv) ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). 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. ASU 2017-05 clarifies the scope of the FASB’s recently established guidance on nonfinancial asset derecognition and aligns the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets with the guidance in ASU 2014-09. The Company adopted the Revenue ASUs effective January 1, 2018 and utilized a modified retrospective adoption approach, resulting in a cumulative-effect adjustment to equity of $79 million as of January 1, 2018. Under the Revenue ASUs, the Company also elected to utilize a practical expedient which allows the Company to only reassess contracts that were not completed as of the adoption date, rather than all historical contracts.

As the primary source of revenue for the Company is generated through leasing arrangements, for which timing and recognition of revenue are excluded from the Revenue ASUs, the impact of the Revenue ASUs, upon and subsequent to adoption, is generally limited to the following:

• The Company, along with its JV partners and independent SHOP operators, provide certain ancillary services to SHOP residents that are not contemplated in the lease with each resident (i.e., guest meals, concierge services, pharmacy services, etc.). These services are provided and paid for in addition to the standard services included in each resident lease (i.e., room and board, standard meals, etc.). The Company bills residents for ancillary services one month in arrears and recognizes revenue as the services are provided, as the Company has no continuing performance obligation related to those services. The Company records ancillary service revenue within resident fees and services and, under the Revenue ASUs, is required to disclose, on an ongoing basis, ancillary service revenue generated from its RIDEA structures. Included within resident fees and services for the quarters ended March 31, 2018 and 2017 is $10 million of ancillary service revenue.

• Prior to the adoption of the Revenue ASUs, the Company recognized a gain on sale of real estate using the full accrual method when collectibility of the sales price was reasonably assured, the Company was not obligated to perform additional activities that may be considered significant, the initial investment from the buyer was sufficient and other profit recognition criteria had been satisfied. The Company deferred all or a portion of a gain on sale of real estate if the requirements for gain recognition were not met at the time of sale. Subsequent to adopting the Revenue ASUs on January 1, 2018, the Company began recognizing a gain on sale of real estate upon transferring control of the asset to the purchaser, which is generally satisfied at the time of sale. In conjunction with its adoption of the Revenue ASUs, the Company reassessed its historical partial sale of real estate transactions to determine which transactions, if any, were not completed contracts (i.e., the transaction did not qualify for sale treatment under previous guidance). The Company concluded that it had one such material transaction, its partial sale of RIDEA II in the first quarter of 2017 (which was not a completed sale under historical guidance as of the Company's adoption date due to a minor obligation related to the interest sold). In accordance with the Revenue ASUs, the Company recorded its retained 40% equity investment at fair value as of the sale date. As a result, the Company recorded an adjustment to equity as of January 1, 2018 (under the modified retrospective transition approach) representing a step-up in the fair value of its equity investment in RIDEA II of $107 million (to a carrying value of $121 million as of January 1, 2018) and a $30 million impairment charge to decrease the carrying value to the expected sales price of the investment (see Note 4).

• The Company generally expects that the new guidance will result in certain transactions qualifying as sales of real estate at an earlier date than under historical accounting guidance.

The following table illustrates changes in the Company’s consolidated balance sheet as reported and as it would have been reported prior to the adoption of the Revenue ASUs as of March 31, 2018 (in thousands):

	March 31, 2018
	As Reported	As Would Have Been Reported Prior to Adoption
Investments in and advances to unconsolidated joint ventures	863,775	792,291
Other assets, net	583,261	586,066
Deferred revenue	167,975	178,440
Total stockholders' equity	5,206,291	5,127,147

Additionally, effective January 1, 2018, the Company adopted the following ASUs, each of which did not have a material impact to its consolidated financial position, results of operations, cash flows or disclosures upon adoption:

• ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) and ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (“ASU 2018-03”). The core principle of the amendments in ASU 2016-01 and ASU 2018-03 involves the measurement of equity investments (except those accounted for under the equity method of accounting or those that result in consolidation) at fair value and the recognition of changes in fair value of those investments during each reporting period in net income (loss). As a result, ASU 2016-01 and ASU 2018-03 eliminate the cost method of accounting for equity securities that do not have readily determinable fair values. Pursuant to the new guidance, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

• ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). The amendments in ASU 2016-16 require an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time that the transfer occurs. Historical guidance does not require recognition of tax consequences until the asset is eventually sold to a third party.

During the fourth quarter of 2017, the Company adopted ASU No. 2016-18, Restricted Cash (“ASU 2016-18”) and ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) (collectively, the “Cash Flow ASUs”). ASU 2016-18 requires an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows and ASU 2016-15 provides guidance clarifying how certain cash receipts and cash payments should be classified. The full retrospective approach of adoption is required for the Cash Flow ASUs and, accordingly, certain line items in the Company’s consolidated statements of cash flows have been reclassified to conform to the current period presentation.

The following table illustrates changes in the Company’s cash flows as reported and as previously reported prior to the adoption of the Cash Flow ASUs during the fourth quarter of 2017 (in thousands):

	Three Months Ended March 31, 2017
	As Reported		As Previously Reported
Net cash provided by (used in) investing activities	$	1,733,763	$	1,715,217
Net increase (decrease) in balance(1)	687,930		669,384
Balance - beginning of period(1)	136,990		94,730
Balance - end of period(1)	824,920		764,114

_______________________________________

(1) Amounts in the As Reported column include cash and cash equivalents and restricted cash as required upon the adoption of the Cash Flow ASUs. Amounts in the As Previously Reported column reflect only cash and cash equivalents.

In addition to the changes in the consolidated statements of cash flows as a result of the adoption the Cash Flow ASUs, certain amounts within the consolidated statements of cash flows have been reclassified for prior periods to conform to the current period presentation. Such reclassifications primarily combined line items of similar classes of transactions and had no impact on the cash flows from operating, investing and financing activities.

Leases. 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: (i) will recognize all of its significant operating leases for which it is the lessee, including corporate office leases, equipment leases, and ground leases, on its consolidated balance sheets, (ii) will capitalize fewer legal costs related to the drafting and execution of its lease agreements, and (iii) may be required to increase its revenue and expense for the amount of real estate taxes and insurance paid by its tenants under triple-net leases.

ASU 2016-02 provides a practical expedient, which the Company plans to elect, 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. Although not yet finalized, the FASB has also proposed an option for lessors to elect a practical expedient allowing them to not separate lease and nonlease components in a contract for the purpose of revenue recognition and disclosure. This practical expedient is limited to circumstances in which (i) the timing and pattern of transfer are the same for the nonlease component and the related lease component and (ii) the lease component would be classified as an operating lease. If finalized, the Company plans to elect this practical expedient as well. 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.

Credit Losses. 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 financing leases (“DFLs”) 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.

The following ASU has been issued, but not 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. The amendments in ASU 2017-12 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For cash flow and net investment 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.

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Master Transactions and Cooperation Agreement with Brookdale

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Master Transactions and Cooperation Agreement with Brookdale

Master Transactions and Cooperation Agreement with Brookdale

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 (the "Brookdale Transactions"). 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.

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, which account for primarily all of the assets subject to triple-net leases between the Company and the Lessee (before giving effect to the contemplated sale or transition of 34 assets discussed below). Under the Amended Master Lease, the Company has 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 a net worth test are not satisfied;

• Enhanced reporting requirements and related remedies; and

• The right to market for sale the CCRC portfolio (as defined below).

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 has 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 has provided an aggregate $5 million annual reduction in rent on three assets, effective January 1, 2018; and

• The Company will sell two triple-net assets to Brookdale or its affiliates for $35 million, both of which were sold in April 2018.

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

• The Company, which owned 90% of the interests in its RIDEA I and RIDEA III JVs with Brookdale at the time the MTCA was executed, agreed to purchase Brookdale’s 10% noncontrolling interest in each JV for an aggregate purchase price of $95 million. These JVs collectively own and operate 58 independent living, assisted living, memory care and/or skilled nursing facilities (the “RIDEA Facilities”). The Company completed its acquisitions of the RIDEA III noncontrolling interest for $32 million in December 2017 and the RIDEA I noncontrolling interest for $63 million in March 2018;

• The Company has 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. As of March 31, 2018, the Company had completed the transition of eight SHOP assets;

• The Company will sell four of the RIDEA Facilities to Brookdale or its affiliates for $239 million, one of which was sold in January 2018 for $32 million. The remaining three RIDEA Facilities were sold in April 2018 for $207 million;

• A Brookdale affiliate continues to manage the remaining 18 RIDEA Facilities pursuant to amended 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 has the right to sell, to certain permitted transferees, its 49% ownership interest in JVs that own and operate a portfolio of continuing care retirement communities (the “CCRC Portfolio”) 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.

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Real Estate Transactions

3 Months Ended

Mar. 31, 2018

Real Estate [Abstract]

Real Estate Transactions

 Real Estate Transactions

Dispositions of Real Estate

Held for Sale

At March 31, 2018, seven SHOP facilities, two senior housing triple-net facilities and four life science facilities were classified as held for sale, with an aggregate carrying value of $436 million, primarily comprised of real estate assets of $410 million, net of accumulated depreciation of $98 million. At December 31, 2017, two senior housing triple-net facilities, four life science facilities and six SHOP facilities were classified as held for sale, with an aggregate carrying value of $417 million, primarily comprised of real estate assets of $393 million, net of accumulated depreciation of $93 million. Liabilities of assets held for sale is primarily comprised of intangible and other liabilities at both March 31, 2018 and December 31, 2017.

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”). Also in January 2017, 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. Refer to Note 2 for the impact of adopting the Revenue ASUs on January 1, 2018 to the Company’s partial sale of RIDEA II in the first quarter of 2017.

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 for $91 million. The Company expects the transaction to close in the second quarter of 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.

U.K. Portfolio

On May 1, 2018, the Company entered into definitive agreements with an institutional investor to create a joint venture (the “U.K. JV”) through which the Company will sell a 51% interest in all United Kingdom (“U.K.”) assets owned by the Company (“the U.K. Portfolio”) based on a total value of £394 million. The Company will retain a 49% noncontrolling interest in the joint venture. Upon closing the U.K. JV, the Company expects to deconsolidate the U.K. Portfolio and recognize a gain on deconsolidation.

2018 Dispositions 

In January 2018, the Company sold two SHOP assets for $35 million, resulting in gain on sales of $21 million.

In April 2018, the Company sold four SHOP assets and two senior housing triple-net assets for $265 million.

2017 Dispositions (Three months ended March 31, 2017)

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.

Investments in Real Estate

During the three months ended March 31, 2018, the Company acquired development rights on a land parcel in the Boston suburb of Lexington, Massachusetts for $21 million. The Company will commence a life science development on the land in 2018.

There were no new real estate investments made during the three months ended March 31, 2017.

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Net Investment in Direct Financing Leases

3 Months Ended

Mar. 31, 2018

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):

	March 31, 2018			December 31, 2017
Minimum lease payments receivable	$	1,049,400		$	1,062,452
Estimated residual value	504,457			504,457
Less unearned income	(840,394		)	(852,557		)
Net investment in direct financing leases	$	713,463		$	714,352
Properties subject to direct financing leases	29			29

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 March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment				Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing triple-net	$	628,859	88	$	274,264	$	354,595	$	—
Other non-reportable segments	84,604		12	84,604		—		—
	$	713,463	100	$	358,868	$	354,595	$	—

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 is being recognized on a cash basis. During the three months ended March 31, 2018 and 2017, the Company recognized income from DFLs of $3 million and received cash payments of $5 million and $4 million, respectively, from the DFL Watchlist Portfolio. The carrying value of the DFL Watchlist Portfolio was $355 million and $356 million at March 31, 2018 and December 31, 2017, respectively.

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Loans Receivable

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

Loans Receivable

Loans Receivable

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

	March 31, 2018								December 31, 2017
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine(1)	$	—	$	22,105		$	22,105		$	—	$	269,299		$	269,299
Other(2)	24,990		—			24,990			188,418		—			188,418
Unamortized discounts, fees and costs	—		(83		)	(83		)	—		(596		)	(596		)
Allowance for loan losses(3)	—		—			—			—		(143,795		)	(143,795		)
	$	24,990	$	22,022		$	47,012		$	188,418	$	124,908		$	313,326

_______________________________________

(1) In December 2017, the Company entered into a participating debt financing arrangement to fund a $115 million senior living development project, which remained unfunded at March 31, 2018.

(2) Represents loans denominated in British pound sterling (“GBP”). At December 31, 2017, includes the U.K. Bridge Loan discussed below.

(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 March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	24,990	53	$	24,990	$	—	$	—
Other secured	22,022		47	22,022		—		—
	$	47,012	100	$	47,012	$	—	$	—

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).

Additionally, 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 (expense), net, as the sales price was above the previously-impaired carrying value of £41 million ($50 million).

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

From July 2012 through May 2015, the Company funded, in aggregate, $257 million under a collateralized mezzanine loan facility (the “Mezzanine Loan”) to certain affiliates of Tandem Health Care (together with its affiliates, “Tandem”). During 2017, the Company recorded impairment charges totaling $144 million on the Mezzanine Loan. The decline in fair value driving each impairment charge was based primarily on declining operating results of the collateral underlying the Mezzanine Loan, as well as market and industry data, which reflected a declining trend in admissions and a continuing shift away from higher-rate Medicare plans in the post-acute/skilled nursing sector. The resulting carrying value of the Mezzanine Loan as of December 31, 2017 was $105 million. In conjunction with the declining operating results and industry trends, beginning in the first quarter of 2017, the Company elected to recognize interest income on a cash basis. During the three months ended March 31, 2018 and 2017, the Company recognized interest income and received cash payments of zero and $7 million, respectively, from Tandem.

In March 2018, the Company sold the Mezzanine Loan to a third party for approximately $112 million, resulting in an impairment recovery, net of transaction costs and fees, of $3 million included in other income (expense), net. The Company holds no further economic interest in the operations of Tandem.

U.K. Bridge Loan

In 2016, 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 seven care homes in the U.K. Under the bridge loan, the Company retained a three-year call option to acquire those seven care homes at a future date for £105 million, subject to certain conditions precedent being met. In March 2018, upon resolution of all conditions precedent, the Company began the process of exercising its call option to acquire the seven care homes and concluded that it should consolidate the real estate. As a result, the Company derecognized the outstanding loan receivable of £105 million and recognized a £29 million ($41 million) loss on consolidation. Refer to Note 15 for the complete impact of consolidating the seven care homes during the first quarter of 2018.

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Investments in and Advances to Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2018

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
			March 31,		December 31,
Entity(1)	Ownership%		2018		2017
CCRC JV		49	$	395,005	$	400,241
RIDEA II(2)		40	328,873		259,651
Life Science JVs(3)		50 - 63	65,016		65,581
MBK JV		50	37,442		38,005
Development JVs(4)		50 - 90	23,733		23,365
Medical Office JVs(5)		20 - 67	12,395		12,488
K&Y JVs(6)		80	1,298		1,283
Advances to unconsolidated joint ventures, net			13		226
			$	863,775	$	800,840

_______________________________________

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

(2) Effective January 1, 2018, the Company increased its carrying value in RIDEA II as a net adjustment to retained earnings under its elected transition approach in accordance with the adoption of ASU 2017-05 (see Note 2). See Note 4 for further information on the deconsolidation and pending sale of RIDEA II.

(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 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%).

(5) 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%).

(6) Includes three unconsolidated JVs.

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Intangibles

3 Months Ended

Mar. 31, 2018

Intangibles

Intangibles

Intangibles

Intangible assets primarily consist of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles. Intangible liabilities primarily consist of below market lease intangibles and above market ground lease intangibles. The following tables summarize the Company’s intangible lease assets and liabilities (in thousands):

Intangible lease assets	March 31, 2018			December 31, 2017
Gross intangible lease assets	$	732,110		$	795,305
Accumulated depreciation and amortization	(336,812		)	(385,223		)
Intangible assets, net	$	395,298		$	410,082

Intangible lease liabilities	March 31, 2018			December 31, 2017
Gross intangible lease liabilities	$	124,609		$	126,212
Accumulated depreciation and amortization	(72,033		)	(73,633		)
Intangible liabilities, net	$	52,576		$	52,579

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Debt

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Debt

Debt

Bank Line of Credit and Term Loan

The Company’s $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on October 19, 2021 and contains two, six-month extension options. 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 March 31, 2018, the margin on the Facility was 1.00% 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 $750 million, subject to securing additional commitments. At March 31, 2018, the Company had $1.1 billion, including £105 million ($147 million), outstanding under the Facility, with a weighted average effective interest rate of 2.99%.

On April 6, 2018, the Company paid down $290 million outstanding under the Facility primarily using proceeds from asset sales to Brookdale (see Note 3).

At March 31, 2018, the Company had £169 million ($237 million) outstanding on its term loan, which accrues interest at a rate of GBP LIBOR plus 1.15%, subject to adjustments based on the Company’s credit ratings. The term loan matures in January 2019 and contains a one-year committed extension option. The Company has a one-time right to repay the outstanding GBP balance and re-borrow in USD with all other key terms unchanged.

The Facility and 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 March 31, 2018, the Company was in compliance with each of these restrictions and requirements of the Facility and term loan.

Senior Unsecured Notes

At March 31, 2018, 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 March 31, 2018.

The following table summarizes the Company’s senior unsecured notes payoffs during the year ended December 31, 2017 (dollars in thousands):

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

There were no senior unsecured notes repayments during the three months ended March 31, 2018.

There were no senior unsecured notes issuances during the three months ended March 31, 2018 or year ended December 31, 2017.

Mortgage Debt

At March 31, 2018, the Company had $138 million in aggregate principal of mortgage debt outstanding, which is secured by 16 healthcare facilities (including redevelopment properties) with a carrying value of $296 million. In March 2017, the Company paid off $472 million of mortgage debt.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into or terminate material leases. Some of the mortgage debt may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2018 (in thousands):

Year	Bank Line of Credit(1)		Term Loan(2)			Senior Unsecured Notes(3)			Mortgage Debt(4)		Total(5)
2018 (nine months)	$	—	$	—		$	—		$	2,649	$	2,649
2019	—		237,175			450,000			3,700		690,875
2020	—		—			800,000			3,758		803,758
2021	1,092,357		—			700,000			11,117		1,803,474
2022	—		—			900,000			2,861		902,861
Thereafter	—		—			3,600,000			113,619		3,713,619
	1,092,357		237,175			6,450,000			137,704		7,917,236
(Discounts), premium and debt costs, net	—		(297		)	(51,024		)	5,820		(45,501		)
	$	1,092,357	$	236,878		$	6,398,976		$	143,524	$	7,871,735

_______________________________________

(1) Includes £105 million translated into U.S. dollars (“USD”).

(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 4.20% and a weighted average maturity of six years.

(4) Interest rates on the mortgage debt ranged from 1.95% to 5.91% with a weighted average effective interest rate of 4.18% and a weighted average maturity of 20 years.

(5) Excludes $94 million of other debt that have no scheduled maturities.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

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, HCR ManorCare, Inc. (“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. On November 28, 2017, the Court appointed Societe Generale Securities GmbH (SGSS Germany) and the City of Birmingham Retirement and Relief Systems (Birmingham) as Co-Lead Plaintiffs in the class action. Co-Lead Plaintiffs filed a consolidated Amended Complaint on February 28, 2018. Defendants filed their motion to dismiss the Amended Complaint on March 30, 2018. 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 recently adjourned the status conference scheduled for January 10, 2018 to June 11, 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. 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. The Court granted Defendants’ motion to transfer on November 28, 2017, and Kelley is now pending in the Northern District of Ohio.

The Court in the Northern District of Ohio is considering a request to consolidate the Weldon and Kelley actions.

The Company’s Board of Directors received letters dated August 17, 2016, April 19, 2017, and April 20, 2017 from private law firms acting on behalf of clients who are purported stockholders of the Company, each asserting allegations similar to those made in the Subodh and Stearns matters discussed above. Each letter demands that the Board of Directors take action to assert the Company’s rights. The Board of Directors completed its evaluation and determined to reject the demand letters. Rejection notices were sent in December of 2017.

The Company believes that the plaintiffs lack standing or the lawsuits and demands are without merit, and the Company is unable to estimate the amount of loss or range of reasonably possible losses with respect to the matters discussed above as of March 31, 2018.

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Equity

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Equity

Equity

Accumulated Other Comprehensive Income (Loss)

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

	March 31, 2018			December 31, 2017
Cumulative foreign currency translation adjustment	$	697		$	(6,955	)
Unrealized gains (losses) on cash flow hedges, net	(18,989		)	(13,950		)
Supplemental Executive Retirement plan minimum liability and other	(3,015		)	(3,119		)
Total other comprehensive income (loss)	$	(21,307	)	$	(24,024	)

Noncontrolling Interests

See Note 4 for the deconsolidation of RIDEA II and Note 14 for the supplemental schedule of non-cash financing activities.

See Note 3 for the Company’s purchase of Brookdale’s noncontrolling interest in RIDEA III in March 2018.

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Segment Disclosures

3 Months Ended

Mar. 31, 2018

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. The Company has non-reportable segments that are comprised primarily of the Company’s debt investments, hospital properties, unconsolidated JVs (see below) and care homes in the 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 2017 Annual Report on Form 10-K filed with the SEC, as updated by Note 2 herein.

During the three months ended March 31, 2018, there were no transfers of assets between segments. During the three months ended March 31, 2017, one senior housing triple-net facility was transferred to the Company’s SHOP segment.

The Company evaluates performance based upon: (i) property NOI and (ii) Adjusted NOI. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses (which exclude transition costs); NOI excludes all other financial statement amounts included in net income (loss). Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, and the impact of deferred community fee income and expense.

During the fourth quarter of 2017, as a result of a change in how operating results are reported to the chief operating decision makers, for the purpose of evaluating performance and allocating resources, the Company began excluding unconsolidated JVs from its evaluation of its segments' operating results. Unconsolidated JVs are now reflected in other non-reportable segments.

The adjustments to NOI and resulting Adjusted NOI for SHOP have been recast for prior periods to conform to the current period presentation which excludes: (i) the impact of deferred community fee income and expense, resulting in recognition as cash is received and expenses are paid and (ii) adjustments related to unconsolidated JVs (see above).

Non-segment assets consist of assets in the Company's other non-reportable segments and corporate non-segment assets. Corporate 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 assets and liabilities held for sale. See Note 16 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, 2018:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	74,289		$	144,670		$	99,622		$	123,935		$	30,316		$	—		$	472,832
Operating expenses	(1,045		)	(101,746		)	(21,809		)	(46,696		)	(1,256		)	—			(172,552		)
NOI	73,244			42,924			77,813			77,239			29,060			—			300,280
Adjustments to NOI(2)	(1,865		)	(1,607		)	(3,751		)	(1,071		)	(1,392		)	—			(9,686		)
Adjusted NOI	71,379			41,317			74,062			76,168			27,668			—			290,594
Addback adjustments	1,865			1,607			3,751			1,071			1,392			—			9,686
Interest income	—			—			—			—			6,365			—			6,365
Interest expense	(600		)	(988		)	(83		)	(120		)	(728		)	(72,583		)	(75,102		)
Depreciation and amortization	(21,906		)	(27,628		)	(36,080		)	(45,519		)	(12,117		)	—			(143,250		)
General and administrative	—			—			—			—			—			(29,175		)	(29,175		)
Transaction costs	—			—			—			—			—			(2,195		)	(2,195		)
Gain (loss) on sales of real estate, net	—			20,815			—			—			—			—			20,815
Other income (expense), net	—			—			—			—			(40,567		)	160			(40,407		)
Income tax benefit (expense)	—			—			—			—			—			5,336			5,336
Equity income (loss) from unconsolidated JVs	—			—			—			—			570			—			570
Net income (loss)	$	50,738		$	35,123		$	41,650		$	31,600		$	(17,417	)	$	(98,457	)	$	43,237

_______________________________________

(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, deferral of community fees, net and termination fees.

For the three months ended March 31, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	100,034		$	140,228		$	85,321		$	118,371		$	29,883		$	—		$	473,837
Operating expenses	(1,111		)	(94,539		)	(17,319		)	(44,864		)	(1,248		)	—			(159,081		)
NOI	98,923			45,689			68,002			73,507			28,635			—			314,756
Adjustments to NOI(2)	(1,839		)	(310		)	(305		)	(961		)	(1,012		)	—			(4,427		)
Adjusted NOI	97,084			45,379			67,697			72,546			27,623			—			310,329
Addback adjustments	1,839			310			305			961			1,012			—			4,427
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		)
Transaction costs	—			—			—			—			—			(1,057		)	(1,057		)
Gain (loss) on sales of real estate, net	268,464			366			44,633			—			3,795			—			317,258
Other income (expense), net	—			—			—			—			50,895			313			51,208
Income tax benefit (expense)	—			—			—			—			—			6,162			6,162
Equity income (loss) from unconsolidated JVs	—			—			—			—			3,269			—			3,269
Net income (loss)	$	340,349		$	15,101		$	78,740		$	30,649		$	95,663		$	(96,325	)	$	464,177

_______________________________________

(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, deferral of community fees, net and termination fees.

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

	Three Months Ended March 31,
Segment	2018		2017
Senior housing triple-net	$	74,289	$	100,034
SHOP	144,670		140,228
Life science	99,622		85,321
Medical office	123,935		118,371
Other non-reportable segments	36,681		48,214
Total revenues	$	479,197	$	492,168

See Notes 3, 4 and 6 for significant transactions impacting the Company’s segment assets during the periods presented.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

The following table illustrates the computation of basic and diluted earnings per share (in thousands, except per share amounts):

	Three Months Ended March 31,
	2018			2017
Numerator
Net income (loss) from continuing operations	$	43,237		$	464,177
Noncontrolling interests' share in earnings	(3,005		)	(3,032		)
Net income (loss) attributable to HCP, Inc.	40,232			461,145
Less: Participating securities' share in earnings	(391		)	(770		)
Net income (loss) applicable to common shares	$	39,841		$	460,375
Numerator - Dilutive
Net income (loss) applicable to common shares	$	39,841		$	460,375
Add: distributions on dilutive convertible units and other	—			2,803
Dilutive net income (loss) available to common shares	$	39,841		$	463,178
Denominator
Basic weighted average shares outstanding	469,557			468,299
Dilutive potential common shares - equity awards	138			229
Dilutive potential common shares - DownREIT conversions	—			6,645
Diluted weighted average common shares	469,695			475,173
Earnings per common share:
Basic	$	0.08		$	0.98
Diluted	$	0.08		$	0.97

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 March 31, 2018, 7 million shares issuable upon conversion of 4 million DownREIT units were not included because they are anti-dilutive.

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2018

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2018		2017
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	92,701	$	108,232
Income taxes paid	340		1,105
Capitalized interest	3,578		3,090
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	62,160		51,498
Derecognition of U.K. Bridge Loan receivable	147,474		—
Consolidation of net assets related to U.K. Bridge Loan	106,457		—
Deconsolidation of noncontrolling interest in connection with RIDEA II transaction	—		58,061
Vesting of restricted stock units and conversion of non-managing member units into common stock	258		1,841

See discussions related to the U.K. Bridge Loan in Notes 6 and 15.

The following table summarizes cash, cash equivalents and restricted cash (in thousands):

	March 31,
	2018		2017
Cash and cash equivalents	$	86,021	$	764,114
Restricted cash	31,947		60,806
Cash, cash equivalents and restricted cash	$	117,968	$	824,920

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Variable Interest Entities

3 Months Ended

Mar. 31, 2018

Variable Interest Entities [Abstract]

Variable Interest Entities

Variable Interest Entities

Unconsolidated Variable Interest Entities

At March 31, 2018, 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) one loan to a VIE borrower. 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 JV 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 JV. 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 a JV (Vintage Park Development JV) (see Note 7), which has been identified as a VIE as power is shared with a member that does not have a substantive equity investment at risk. The assets of the JV primarily consist of a leased property (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt-service payments. Any assets generated by the JV may only be used to settle its respective contractual obligations (primarily debt service payments).

The Company holds an 85% ownership interest in a development JV (Waldwick JV) (see Note 7), which has been identified as a VIE as power is shared with a member that does not have a substantive equity investment at risk. The assets of the JV 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 the JV 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 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.

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 March 31, 2018 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	$	600,822
VIE tenants - operating leases(2)	Lease intangibles, net and straight-line rent receivables	5,983
CCRC OpCo	Investments in unconsolidated joint ventures	190,662
RIDEA II PropCo	Investments in unconsolidated joint ventures	309,882
Unconsolidated Development JVs	Investments in unconsolidated joint ventures	13,070
Loan - Seller Financing	Loans receivable, net	10,000
CMBS and LLC investment	Marketable debt and cost method investment	33,874

_______________________________________

(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 March 31, 2018, 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 5, 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 March 31, 2018 and December 31, 2017 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 and total liabilities include VIE assets and liabilities as follows (in thousands):

	March 31, 2018			December 31, 2017
Assets
Buildings and improvements	$	1,744,402		$	2,436,414
Development costs and construction in progress	16,226			32,285
Land	170,889			227,162
Accumulated depreciation and amortization	(345,331		)	(542,091		)
Net real estate	1,586,186			2,153,770
Investments in and advances to unconsolidated joint ventures	2,148			2,231
Accounts receivable, net	7,287			10,242
Cash and cash equivalents	12,077			15,861
Restricted cash	2,595			2,619
Intangible assets, net	111,149			125,475
Other assets, net	35,788			33,749
Total assets	$	1,757,230		$	2,343,947
Liabilities
Mortgage debt	44,882			45,016
Intangible liabilities, net	12,509			10,672
Accounts payable and accrued liabilities	223,708			269,280
Deferred revenue	15,275			14,432
Total liabilities	$	296,374		$	339,400

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 medical office buildings (“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 (“Vintage Park JV”) that owns an 85% interest in an unconsolidated development VIE. 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).

Watertown JV.  The Company holds a 95% ownership interest in JV entities formed in November 2017 that own and operate a senior housing property in a RIDEA structure (“Watertown JV”). Watertown PropCo is a VIE as the Company and the non-managing member share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. Watertown OpCo is a VIE as the non-managing member, through its equity interest, lacks substantive participation rights in the management of Watertown OpCo or kick-out rights over the managing member. The Company consolidates Watertown PropCo and Watertown 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 Watertown PropCo primarily consist of a leased property (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 Watertown OpCo primarily consist of leasehold interests in a senior housing facility (operating lease), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to Watertown 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 Watertown 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).

Hayden JV.  The Company holds a 99% ownership interest in a JV entity formed in December 2017 that owns and leases a life science complex (“Hayden JV”). The Hayden JV is a VIE as the members share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. The Company consolidates the Hayden JV 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 Hayden JV primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by Hayden JV may only be used to settle its contractual obligations (primarily from capital expenditures).

Consolidated Lessees. The Company leases 21 senior housing properties to lessee entities under cash flow leases through which the Company receives monthly rent equal to the residual cash flows of the properties. The lessee entities are classified as VIEs as they are "thinly capitalized" entities. The Company consolidates the lessee entities as it has the ability to control the activities that most significantly impact the economic performance of the lessee entities. The lessee entities' assets 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 the Company and operating expenses of the senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

DownREITs. The Company holds a controlling ownership interest in and is the managing member of five limited liability companies (“DownREITs”). The Company classifies 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”). The Company classifies 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).

U.K. Bridge Loan. In 2016, the Company provided a £105 million ($131 million at closing) bridge loan to MMCG to fund the acquisition of a portfolio of seven 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. During the quarter ended March 31, 2018, the Company concluded that the conditions required to exercise the call option had been met and initiated the call option process to acquire the special purpose entity, which it expects to complete during the second quarter of 2018. In conjunction with initiating the process to legally exercise its call option and the satisfaction of required contingencies, the Company concluded that it is the primary beneficiary of the special purpose entity and therefore, should consolidate the entity. As such, the Company derecognized the previously outstanding loan receivable, recognized the special purpose entity’s assets and liabilities at their respective fair values, and recognized a £29 million ($41 million) loss on consolidation (within other income (expense), net and income tax benefit (expense)), net of a tax benefit of £2 million ($3 million), to account for the difference between the carrying value of the loan receivable and the fair value of net assets and liabilities assumed. The fair value of net assets and liabilities consolidated during the first quarter of 2018 consists of £81 million ($114 million) of net real estate, £4 million ($5 million) of intangible assets, and £9 million ($13 million) of net deferred tax liabilities.

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.

Exchange Accommodation Titleholder.  During the year ended December 31, 2017, the Company acquired a portfolio of 11 MOBs (the "acquired properties") using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a "reverse 1031 exchange"). As of March 31, 2018, the Company had not completed the reverse 1031 exchange and as such, the acquired properties remained in the possession of an Exchange Accommodation Titleholder ("EAT"). The EAT is classified as a VIE as it is a “thinly capitalized” entity. The Company consolidates the EAT because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the EAT's economic performance. The properties held by the EAT are reflected as real estate with an aggregate carrying value of $153 million as of March 31, 2018. The assets of the EAT primarily consist of a leased property (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by the EAT may only be used to settle its contractual obligations (primarily from capital expenditures).

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Concentration of Credit Risk

3 Months Ended

Mar. 31, 2018

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 Total Assets
	Total Company		Senior Housing Triple-Net
	March 31,	December 31,	March 31,	December 31,
Tenant	2018	2017	2018	2017
Brookdale	10	10	39	39

	Percentage of Revenues
	Total Company		Senior Housing Triple-Net
	Three Months Ended March 31,		Three Months Ended March 31,
Tenant	2018	2017	2018	2017
Brookdale(1)	7	12	43	60

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(1) The Company's concentration with respect to Brookdale as a tenant is expected to decrease with the completion of the Brookdale Transactions (see Note 3). Includes revenues from 64 senior housing triple-net facilities that were sold in March 2017. 

At March 31, 2018 and December 31, 2017, Brookdale managed or operated, in the Company’s SHOP segment, approximately 12% and 13%, respectively, of the Company’s real estate investments based on total 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 March 31, 2018, Brookdale provided comprehensive facility management and accounting services with respect to 68 of the Company’s consolidated SHOP facilities and 62 SHOP facilities owned by its unconsolidated JVs, for which the Company or JV pay annual management fees pursuant to long-term management agreements. The Company's concentration with respect to Brookdale as an operator in its SHOP segment is expected to decrease with the completion of the Brookdale Transactions (see Note 3) and the sale of its remaining 40% ownership interest in RIDEA II (see Note 4). 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.

See Note 3 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

3 Months Ended

Mar. 31, 2018

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 in the consolidated balance sheets are immaterial at March 31, 2018.

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

	March 31, 2018(3)				December 31, 2017(3)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	47,012	$	47,075	$	313,326	$	313,242
Marketable debt securities(2)	18,814		18,814		18,690		18,690
Bank line of credit(2)	1,092,357		1,092,357		1,017,076		1,017,076
Term loan(2)	236,878		236,878		228,288		228,288
Senior unsecured notes(1)	6,398,976		6,577,155		6,396,451		6,737,825
Mortgage debt(2)	143,524		137,704		144,486		125,984
Other debt(2)	93,856		93,856		94,165		94,165
Interest-rate swap liabilities(2)	1,931		1,931		2,483		2,483
Cross currency swap liability(2)	16,684		16,684		10,968		10,968

_______________________________________

(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) 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 loan 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) During the three months ended March 31, 2018 and year ended December 31, 2017, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 (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	$	43,000	3.82%	BMA Swap Index		$	(1,931	)
Cross currency swap:
April 2017(3)	February 2019	Net Investment	£105,000 / $131,000		2.58%	3.75	%	$	(16,684	)

______________________________________

(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 2.58% 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 March 31, 2018, £150 million of the Company’s GBP-denominated borrowings under the 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, (i) the remeasurement value of the designated £150 million GBP-denominated borrowings and (ii) the change in fair value of the £105 million cross currency swap due primarily 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 balance in accumulated other comprehensive income (loss) will be reclassified to earnings when the hedged investment is sold or substantially liquidated.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

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. 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 months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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, 2017 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Revenue Recognition. Between May 2014 and February 2017, the Financial Accounting Standards Board (“FASB”) issued four 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”), (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), and (iv) ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). 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. ASU 2017-05 clarifies the scope of the FASB’s recently established guidance on nonfinancial asset derecognition and aligns the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets with the guidance in ASU 2014-09. The Company adopted the Revenue ASUs effective January 1, 2018 and utilized a modified retrospective adoption approach, resulting in a cumulative-effect adjustment to equity of $79 million as of January 1, 2018. Under the Revenue ASUs, the Company also elected to utilize a practical expedient which allows the Company to only reassess contracts that were not completed as of the adoption date, rather than all historical contracts.

As the primary source of revenue for the Company is generated through leasing arrangements, for which timing and recognition of revenue are excluded from the Revenue ASUs, the impact of the Revenue ASUs, upon and subsequent to adoption, is generally limited to the following:

• The Company, along with its JV partners and independent SHOP operators, provide certain ancillary services to SHOP residents that are not contemplated in the lease with each resident (i.e., guest meals, concierge services, pharmacy services, etc.). These services are provided and paid for in addition to the standard services included in each resident lease (i.e., room and board, standard meals, etc.). The Company bills residents for ancillary services one month in arrears and recognizes revenue as the services are provided, as the Company has no continuing performance obligation related to those services. The Company records ancillary service revenue within resident fees and services and, under the Revenue ASUs, is required to disclose, on an ongoing basis, ancillary service revenue generated from its RIDEA structures. Included within resident fees and services for the quarters ended March 31, 2018 and 2017 is $10 million of ancillary service revenue.

• Prior to the adoption of the Revenue ASUs, the Company recognized a gain on sale of real estate using the full accrual method when collectibility of the sales price was reasonably assured, the Company was not obligated to perform additional activities that may be considered significant, the initial investment from the buyer was sufficient and other profit recognition criteria had been satisfied. The Company deferred all or a portion of a gain on sale of real estate if the requirements for gain recognition were not met at the time of sale. Subsequent to adopting the Revenue ASUs on January 1, 2018, the Company began recognizing a gain on sale of real estate upon transferring control of the asset to the purchaser, which is generally satisfied at the time of sale. In conjunction with its adoption of the Revenue ASUs, the Company reassessed its historical partial sale of real estate transactions to determine which transactions, if any, were not completed contracts (i.e., the transaction did not qualify for sale treatment under previous guidance). The Company concluded that it had one such material transaction, its partial sale of RIDEA II in the first quarter of 2017 (which was not a completed sale under historical guidance as of the Company's adoption date due to a minor obligation related to the interest sold). In accordance with the Revenue ASUs, the Company recorded its retained 40% equity investment at fair value as of the sale date. As a result, the Company recorded an adjustment to equity as of January 1, 2018 (under the modified retrospective transition approach) representing a step-up in the fair value of its equity investment in RIDEA II of $107 million (to a carrying value of $121 million as of January 1, 2018) and a $30 million impairment charge to decrease the carrying value to the expected sales price of the investment (see Note 4).

• The Company generally expects that the new guidance will result in certain transactions qualifying as sales of real estate at an earlier date than under historical accounting guidance.

The following table illustrates changes in the Company’s consolidated balance sheet as reported and as it would have been reported prior to the adoption of the Revenue ASUs as of March 31, 2018 (in thousands):

	March 31, 2018
	As Reported	As Would Have Been Reported Prior to Adoption
Investments in and advances to unconsolidated joint ventures	863,775	792,291
Other assets, net	583,261	586,066
Deferred revenue	167,975	178,440
Total stockholders' equity	5,206,291	5,127,147

Additionally, effective January 1, 2018, the Company adopted the following ASUs, each of which did not have a material impact to its consolidated financial position, results of operations, cash flows or disclosures upon adoption:

• ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) and ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (“ASU 2018-03”). The core principle of the amendments in ASU 2016-01 and ASU 2018-03 involves the measurement of equity investments (except those accounted for under the equity method of accounting or those that result in consolidation) at fair value and the recognition of changes in fair value of those investments during each reporting period in net income (loss). As a result, ASU 2016-01 and ASU 2018-03 eliminate the cost method of accounting for equity securities that do not have readily determinable fair values. Pursuant to the new guidance, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

• ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). The amendments in ASU 2016-16 require an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time that the transfer occurs. Historical guidance does not require recognition of tax consequences until the asset is eventually sold to a third party.

During the fourth quarter of 2017, the Company adopted ASU No. 2016-18, Restricted Cash (“ASU 2016-18”) and ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) (collectively, the “Cash Flow ASUs”). ASU 2016-18 requires an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows and ASU 2016-15 provides guidance clarifying how certain cash receipts and cash payments should be classified. The full retrospective approach of adoption is required for the Cash Flow ASUs and, accordingly, certain line items in the Company’s consolidated statements of cash flows have been reclassified to conform to the current period presentation.

The following table illustrates changes in the Company’s cash flows as reported and as previously reported prior to the adoption of the Cash Flow ASUs during the fourth quarter of 2017 (in thousands):

	Three Months Ended March 31, 2017
	As Reported		As Previously Reported
Net cash provided by (used in) investing activities	$	1,733,763	$	1,715,217
Net increase (decrease) in balance(1)	687,930		669,384
Balance - beginning of period(1)	136,990		94,730
Balance - end of period(1)	824,920		764,114

_______________________________________

(1) Amounts in the As Reported column include cash and cash equivalents and restricted cash as required upon the adoption of the Cash Flow ASUs. Amounts in the As Previously Reported column reflect only cash and cash equivalents.

In addition to the changes in the consolidated statements of cash flows as a result of the adoption the Cash Flow ASUs, certain amounts within the consolidated statements of cash flows have been reclassified for prior periods to conform to the current period presentation. Such reclassifications primarily combined line items of similar classes of transactions and had no impact on the cash flows from operating, investing and financing activities.

Leases. 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: (i) will recognize all of its significant operating leases for which it is the lessee, including corporate office leases, equipment leases, and ground leases, on its consolidated balance sheets, (ii) will capitalize fewer legal costs related to the drafting and execution of its lease agreements, and (iii) may be required to increase its revenue and expense for the amount of real estate taxes and insurance paid by its tenants under triple-net leases.

ASU 2016-02 provides a practical expedient, which the Company plans to elect, 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. Although not yet finalized, the FASB has also proposed an option for lessors to elect a practical expedient allowing them to not separate lease and nonlease components in a contract for the purpose of revenue recognition and disclosure. This practical expedient is limited to circumstances in which (i) the timing and pattern of transfer are the same for the nonlease component and the related lease component and (ii) the lease component would be classified as an operating lease. If finalized, the Company plans to elect this practical expedient as well. 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.

Credit Losses. 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 financing leases (“DFLs”) 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.

The following ASU has been issued, but not 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. The amendments in ASU 2017-12 expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For cash flow and net investment 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.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Schedule of Impact on Financial Statements from Adopting New Accounting Guidance

The following table illustrates changes in the Company’s cash flows as reported and as previously reported prior to the adoption of the Cash Flow ASUs during the fourth quarter of 2017 (in thousands):

	Three Months Ended March 31, 2017
	As Reported		As Previously Reported
Net cash provided by (used in) investing activities	$	1,733,763	$	1,715,217
Net increase (decrease) in balance(1)	687,930		669,384
Balance - beginning of period(1)	136,990		94,730
Balance - end of period(1)	824,920		764,114

_______________________________________

(1) Amounts in the As Reported column include cash and cash equivalents and restricted cash as required upon the adoption of the Cash Flow ASUs. Amounts in the As Previously Reported column reflect only cash and cash equivalents.

The following table illustrates changes in the Company’s consolidated balance sheet as reported and as it would have been reported prior to the adoption of the Revenue ASUs as of March 31, 2018 (in thousands):

	March 31, 2018
	As Reported	As Would Have Been Reported Prior to Adoption
Investments in and advances to unconsolidated joint ventures	863,775	792,291
Other assets, net	583,261	586,066
Deferred revenue	167,975	178,440
Total stockholders' equity	5,206,291	5,127,147

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Net Investment in Direct Financing Leases (Tables)

3 Months Ended

Mar. 31, 2018

Leases, Capital [Abstract]

Schedule of Components of Net Investment in DFLs

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

	March 31, 2018			December 31, 2017
Minimum lease payments receivable	$	1,049,400		$	1,062,452
Estimated residual value	504,457			504,457
Less unearned income	(840,394		)	(852,557		)
Net investment in direct financing leases	$	713,463		$	714,352
Properties subject to direct financing leases	29			29

Summary of the Company's Internal Ratings for DFLs

The following table summarizes the Company’s internal ratings for DFLs at March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment				Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing triple-net	$	628,859	88	$	274,264	$	354,595	$	—
Other non-reportable segments	84,604		12	84,604		—		—
	$	713,463	100	$	358,868	$	354,595	$	—

The following table summarizes the Company’s internal ratings for loans receivable at March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	24,990	53	$	24,990	$	—	$	—
Other secured	22,022		47	22,022		—		—
	$	47,012	100	$	47,012	$	—	$	—

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Loans Receivable (Tables)

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

Schedule of Loans Receivable

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

	March 31, 2018								December 31, 2017
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine(1)	$	—	$	22,105		$	22,105		$	—	$	269,299		$	269,299
Other(2)	24,990		—			24,990			188,418		—			188,418
Unamortized discounts, fees and costs	—		(83		)	(83		)	—		(596		)	(596		)
Allowance for loan losses(3)	—		—			—			—		(143,795		)	(143,795		)
	$	24,990	$	22,022		$	47,012		$	188,418	$	124,908		$	313,326

_______________________________________

(1) In December 2017, the Company entered into a participating debt financing arrangement to fund a $115 million senior living development project, which remained unfunded at March 31, 2018.

(2) Represents loans denominated in British pound sterling (“GBP”). At December 31, 2017, includes the U.K. Bridge Loan discussed below.

(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 DFLs at March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of DFL Portfolio	Internal Ratings
Segment				Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing triple-net	$	628,859	88	$	274,264	$	354,595	$	—
Other non-reportable segments	84,604		12	84,604		—		—
	$	713,463	100	$	358,868	$	354,595	$	—

The following table summarizes the Company’s internal ratings for loans receivable at March 31, 2018 (dollars in thousands):

	Carrying Amount		Percentage of Loan Portfolio	Internal Ratings
Investment Type				Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	24,990	53	$	24,990	$	—	$	—
Other secured	22,022		47	22,022		—		—
	$	47,012	100	$	47,012	$	—	$	—

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Investments in and Advances to Unconsolidated Joint Ventures (Tables)

3 Months Ended

Mar. 31, 2018

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
			March 31,		December 31,
Entity(1)	Ownership%		2018		2017
CCRC JV		49	$	395,005	$	400,241
RIDEA II(2)		40	328,873		259,651
Life Science JVs(3)		50 - 63	65,016		65,581
MBK JV		50	37,442		38,005
Development JVs(4)		50 - 90	23,733		23,365
Medical Office JVs(5)		20 - 67	12,395		12,488
K&Y JVs(6)		80	1,298		1,283
Advances to unconsolidated joint ventures, net			13		226
			$	863,775	$	800,840

_______________________________________

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

(2) Effective January 1, 2018, the Company increased its carrying value in RIDEA II as a net adjustment to retained earnings under its elected transition approach in accordance with the adoption of ASU 2017-05 (see Note 2). See Note 4 for further information on the deconsolidation and pending sale of RIDEA II.

(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 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%).

(5) 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%).

(6) Includes three unconsolidated JVs.

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Intangibles (Tables)

3 Months Ended

Mar. 31, 2018

Intangibles

Schedule of Intangible Lease Assets

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

Intangible lease assets	March 31, 2018			December 31, 2017
Gross intangible lease assets	$	732,110		$	795,305
Accumulated depreciation and amortization	(336,812		)	(385,223		)
Intangible assets, net	$	395,298		$	410,082

Schedule of Intangible Lease Liabilities

Intangible lease liabilities	March 31, 2018			December 31, 2017
Gross intangible lease liabilities	$	124,609		$	126,212
Accumulated depreciation and amortization	(72,033		)	(73,633		)
Intangible liabilities, net	$	52,576		$	52,579

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Debt (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Summary of Senior Notes Issuances

The following table summarizes the Company’s senior unsecured notes payoffs during the year ended December 31, 2017 (dollars in thousands):

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

Summary of Debt Maturities and Schedule Principal Repayments

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2018 (in thousands):

Year	Bank Line of Credit(1)		Term Loan(2)			Senior Unsecured Notes(3)			Mortgage Debt(4)		Total(5)
2018 (nine months)	$	—	$	—		$	—		$	2,649	$	2,649
2019	—		237,175			450,000			3,700		690,875
2020	—		—			800,000			3,758		803,758
2021	1,092,357		—			700,000			11,117		1,803,474
2022	—		—			900,000			2,861		902,861
Thereafter	—		—			3,600,000			113,619		3,713,619
	1,092,357		237,175			6,450,000			137,704		7,917,236
(Discounts), premium and debt costs, net	—		(297		)	(51,024		)	5,820		(45,501		)
	$	1,092,357	$	236,878		$	6,398,976		$	143,524	$	7,871,735

_______________________________________

(1) Includes £105 million translated into U.S. dollars (“USD”).

(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 4.20% and a weighted average maturity of six years.

(4) Interest rates on the mortgage debt ranged from 1.95% to 5.91% with a weighted average effective interest rate of 4.18% and a weighted average maturity of 20 years.

(5) Excludes $94 million of other debt that have no scheduled maturities.

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Equity (Tables)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Schedule of Accumulated Other comprehensive Loss

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

	March 31, 2018			December 31, 2017
Cumulative foreign currency translation adjustment	$	697		$	(6,955	)
Unrealized gains (losses) on cash flow hedges, net	(18,989		)	(13,950		)
Supplemental Executive Retirement plan minimum liability and other	(3,015		)	(3,119		)
Total other comprehensive income (loss)	$	(21,307	)	$	(24,024	)

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Segment Disclosures (Tables)

3 Months Ended

Mar. 31, 2018

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 March 31, 2018:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	74,289		$	144,670		$	99,622		$	123,935		$	30,316		$	—		$	472,832
Operating expenses	(1,045		)	(101,746		)	(21,809		)	(46,696		)	(1,256		)	—			(172,552		)
NOI	73,244			42,924			77,813			77,239			29,060			—			300,280
Adjustments to NOI(2)	(1,865		)	(1,607		)	(3,751		)	(1,071		)	(1,392		)	—			(9,686		)
Adjusted NOI	71,379			41,317			74,062			76,168			27,668			—			290,594
Addback adjustments	1,865			1,607			3,751			1,071			1,392			—			9,686
Interest income	—			—			—			—			6,365			—			6,365
Interest expense	(600		)	(988		)	(83		)	(120		)	(728		)	(72,583		)	(75,102		)
Depreciation and amortization	(21,906		)	(27,628		)	(36,080		)	(45,519		)	(12,117		)	—			(143,250		)
General and administrative	—			—			—			—			—			(29,175		)	(29,175		)
Transaction costs	—			—			—			—			—			(2,195		)	(2,195		)
Gain (loss) on sales of real estate, net	—			20,815			—			—			—			—			20,815
Other income (expense), net	—			—			—			—			(40,567		)	160			(40,407		)
Income tax benefit (expense)	—			—			—			—			—			5,336			5,336
Equity income (loss) from unconsolidated JVs	—			—			—			—			570			—			570
Net income (loss)	$	50,738		$	35,123		$	41,650		$	31,600		$	(17,417	)	$	(98,457	)	$	43,237

_______________________________________

(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, deferral of community fees, net and termination fees.

For the three months ended March 31, 2017:

	Senior Housing Triple-Net			SHOP			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Rental revenues(1)	$	100,034		$	140,228		$	85,321		$	118,371		$	29,883		$	—		$	473,837
Operating expenses	(1,111		)	(94,539		)	(17,319		)	(44,864		)	(1,248		)	—			(159,081		)
NOI	98,923			45,689			68,002			73,507			28,635			—			314,756
Adjustments to NOI(2)	(1,839		)	(310		)	(305		)	(961		)	(1,012		)	—			(4,427		)
Adjusted NOI	97,084			45,379			67,697			72,546			27,623			—			310,329
Addback adjustments	1,839			310			305			961			1,012			—			4,427
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		)
Transaction costs	—			—			—			—			—			(1,057		)	(1,057		)
Gain (loss) on sales of real estate, net	268,464			366			44,633			—			3,795			—			317,258
Other income (expense), net	—			—			—			—			50,895			313			51,208
Income tax benefit (expense)	—			—			—			—			—			6,162			6,162
Equity income (loss) from unconsolidated JVs	—			—			—			—			3,269			—			3,269
Net income (loss)	$	340,349		$	15,101		$	78,740		$	30,649		$	95,663		$	(96,325	)	$	464,177

_______________________________________

(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, deferral of community fees, net and termination fees.

Reconciliation of Company's Revenues by Segment

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

	Three Months Ended March 31,
Segment	2018		2017
Senior housing triple-net	$	74,289	$	100,034
SHOP	144,670		140,228
Life science	99,622		85,321
Medical office	123,935		118,371
Other non-reportable segments	36,681		48,214
Total revenues	$	479,197	$	492,168

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2018

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 March 31,
	2018			2017
Numerator
Net income (loss) from continuing operations	$	43,237		$	464,177
Noncontrolling interests' share in earnings	(3,005		)	(3,032		)
Net income (loss) attributable to HCP, Inc.	40,232			461,145
Less: Participating securities' share in earnings	(391		)	(770		)
Net income (loss) applicable to common shares	$	39,841		$	460,375
Numerator - Dilutive
Net income (loss) applicable to common shares	$	39,841		$	460,375
Add: distributions on dilutive convertible units and other	—			2,803
Dilutive net income (loss) available to common shares	$	39,841		$	463,178
Denominator
Basic weighted average shares outstanding	469,557			468,299
Dilutive potential common shares - equity awards	138			229
Dilutive potential common shares - DownREIT conversions	—			6,645
Diluted weighted average common shares	469,695			475,173
Earnings per common share:
Basic	$	0.08		$	0.98
Diluted	$	0.08		$	0.97

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2018

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2018		2017
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	92,701	$	108,232
Income taxes paid	340		1,105
Capitalized interest	3,578		3,090
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	62,160		51,498
Derecognition of U.K. Bridge Loan receivable	147,474		—
Consolidation of net assets related to U.K. Bridge Loan	106,457		—
Deconsolidation of noncontrolling interest in connection with RIDEA II transaction	—		58,061
Vesting of restricted stock units and conversion of non-managing member units into common stock	258		1,841

Schedule of Cash, Cash Equivalents and Restricted Cash

The following table summarizes cash, cash equivalents and restricted cash (in thousands):

	March 31,
	2018		2017
Cash and cash equivalents	$	86,021	$	764,114
Restricted cash	31,947		60,806
Cash, cash equivalents and restricted cash	$	117,968	$	824,920

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Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 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	$	600,822
VIE tenants - operating leases(2)	Lease intangibles, net and straight-line rent receivables	5,983
CCRC OpCo	Investments in unconsolidated joint ventures	190,662
RIDEA II PropCo	Investments in unconsolidated joint ventures	309,882
Unconsolidated Development JVs	Investments in unconsolidated joint ventures	13,070
Loan - Seller Financing	Loans receivable, net	10,000
CMBS and LLC investment	Marketable debt and cost method investment	33,874

_______________________________________

(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 and total liabilities include VIE assets and liabilities as follows (in thousands):

	March 31, 2018			December 31, 2017
Assets
Buildings and improvements	$	1,744,402		$	2,436,414
Development costs and construction in progress	16,226			32,285
Land	170,889			227,162
Accumulated depreciation and amortization	(345,331		)	(542,091		)
Net real estate	1,586,186			2,153,770
Investments in and advances to unconsolidated joint ventures	2,148			2,231
Accounts receivable, net	7,287			10,242
Cash and cash equivalents	12,077			15,861
Restricted cash	2,595			2,619
Intangible assets, net	111,149			125,475
Other assets, net	35,788			33,749
Total assets	$	1,757,230		$	2,343,947
Liabilities
Mortgage debt	44,882			45,016
Intangible liabilities, net	12,509			10,672
Accounts payable and accrued liabilities	223,708			269,280
Deferred revenue	15,275			14,432
Total liabilities	$	296,374		$	339,400

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Concentration of Credit Risk (Tables)

3 Months Ended

Mar. 31, 2018

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 Total Assets
	Total Company		Senior Housing Triple-Net
	March 31,	December 31,	March 31,	December 31,
Tenant	2018	2017	2018	2017
Brookdale	10	10	39	39

	Percentage of Revenues
	Total Company		Senior Housing Triple-Net
	Three Months Ended March 31,		Three Months Ended March 31,
Tenant	2018	2017	2018	2017
Brookdale(1)	7	12	43	60

_______________________________________

(1) The Company's concentration with respect to Brookdale as a tenant is expected to decrease with the completion of the Brookdale Transactions (see Note 3). Includes revenues from 64 senior housing triple-net facilities that were sold in March 2017. 

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

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):

	March 31, 2018(3)				December 31, 2017(3)
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	47,012	$	47,075	$	313,326	$	313,242
Marketable debt securities(2)	18,814		18,814		18,690		18,690
Bank line of credit(2)	1,092,357		1,092,357		1,017,076		1,017,076
Term loan(2)	236,878		236,878		228,288		228,288
Senior unsecured notes(1)	6,398,976		6,577,155		6,396,451		6,737,825
Mortgage debt(2)	143,524		137,704		144,486		125,984
Other debt(2)	93,856		93,856		94,165		94,165
Interest-rate swap liabilities(2)	1,931		1,931		2,483		2,483
Cross currency swap liability(2)	16,684		16,684		10,968		10,968

_______________________________________

(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) 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 loan 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) During the three months ended March 31, 2018 and year ended December 31, 2017, there were no material transfers of financial assets or liabilities within the fair value hierarchy.

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 (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	$	43,000	3.82%	BMA Swap Index		$	(1,931	)
Cross currency swap:
April 2017(3)	February 2019	Net Investment	£105,000 / $131,000		2.58%	3.75	%	$	(16,684	)

______________________________________

(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 2.58% 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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Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended
	Jan. 01, 2018	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Schedule of Equity Method Investments [Line Items]
Cumulative effect adjustment to equity		$ 5,206,291		$ 5,301,005
Resident fees and services		$ 142,814	$ 140,232
RIDEA II
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage		40.00%	40.00%
Equity method investments	$ 121,000
Difference between Revenue Guidance in Effect before and after Topic 606 | ASU 2014-09
Schedule of Equity Method Investments [Line Items]
Cumulative effect adjustment to equity	79,000
Impairment charge	30,000
Difference between Revenue Guidance in Effect before and after Topic 606 | ASU 2014-09 | RIDEA II
Schedule of Equity Method Investments [Line Items]
Fair value of equity method investments	$ 107,000
Ancillary service revenue | ASU 2014-09
Schedule of Equity Method Investments [Line Items]
Resident fees and services		$ 10,000	$ 10,000

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Summary of Significant Accounting Policies - Schedule of Balance Sheets Impact from ASUs Adoption (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Investments in and advances to unconsolidated joint ventures	$ 863,775	$ 800,840
Other assets, net	583,261	578,033
Deferred revenue	167,975	144,709
Total stockholders' equity	5,206,291	$ 5,301,005
As Would Have Been Reported Prior to Adoption
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Investments in and advances to unconsolidated joint ventures	792,291
Other assets, net	586,066
Deferred revenue	178,440
Total stockholders' equity	$ 5,127,147

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Summary of Significant Accounting Policies - Schedule of Cash Flows Impact from ASUs Adoption (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net cash provided by (used in) investing activities	$ 10,728	$ 1,733,763
Net increase (decrease) in balance	35,765	687,930
Cash, cash equivalents and restricted cash, beginning of period	82,203	136,990
Cash, cash equivalents and restricted cash, end of period	117,968	824,920
Balance - of continuing operations end of year	$ 117,968	824,920
As Previously Reported
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net cash provided by (used in) investing activities		1,715,217
Net increase (decrease) in balance		669,384
Cash, cash equivalents and restricted cash, beginning of period		94,730
Cash, cash equivalents and restricted cash, end of period		764,114
Balance - of continuing operations end of year		$ 764,114

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Master Transactions and Cooperation Agreement with Brookdale (Details) $ in Millions		1 Months Ended					3 Months Ended
	Nov. 01, 2017 USD ($) property agreement	Apr. 30, 2018 USD ($) property facility	Mar. 31, 2018 USD ($)	Jan. 31, 2018 USD ($) property facility	Dec. 31, 2017 USD ($)	Mar. 31, 2017 USD ($) property	Mar. 31, 2018 property	Jan. 01, 2018 USD ($) property
Lease Amendments And Terminations And Joint Venture Formations.
Percentage of interest acquired	10.00%
Consideration transferred | $	$ 95
Payment to acquired noncontrolling interest | $			$ 63		$ 32
CCRC JV
Lease Amendments And Terminations And Joint Venture Formations.
Investment ownership percentage			49.00%				49.00%
RIDEA Facilities
Lease Amendments And Terminations And Joint Venture Formations.
Ownership percentage (as a percent)	90.00%
Assets Leased to Others | RIDEA Facilities
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties	58
Assets Leased to Others | Brookdale
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties	78
Senior housing triple-net
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties sold						64
Total consideration for disposal of real estate | $						$ 1,125
Senior housing triple-net | Subsequent Event
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties sold | facility		2
Senior housing triple-net | Assets Leased to Others
Lease Amendments And Terminations And Joint Venture Formations.
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
Amount of annual rent cut | $								$ 5
Number of assets with annual rent cut								3
Senior housing triple-net | Assets Leased to Others | Subsequent Event
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties sold		2
Total consideration for disposal of real estate | $		$ 35
SHOP
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties sold | facility				2
Total consideration for disposal of real estate | $				$ 35
SHOP | CCRC JV
Lease Amendments And Terminations And Joint Venture Formations.
Investment ownership percentage			49.00%				49.00%
Ownership interest held by Parent			51.00%				51.00%
SHOP | Subsequent Event
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties sold | facility		4
SHOP | Assets Leased to Others
Lease Amendments And Terminations And Joint Venture Formations.
Number of assets transitioned out							8
SHOP | Assets Leased to Others | RIDEA Facilities
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties	36
Management termination period	1 year
Number of properties sold				1
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
Proceeds from sale of productive assets | $				$ 32
Number of assets under management agreement	18
Number of management agreement with termination rights | agreement	7
Management agreements with termination rights period	10 years
SHOP | Assets Leased to Others | RIDEA Facilities | Subsequent Event
Lease Amendments And Terminations And Joint Venture Formations.
Number of properties sold		3
Proceeds from sale of productive assets | $		$ 207
SHOP | Assets Leased to Others | RIDEA Facilities | Maximum
Lease Amendments And Terminations And Joint Venture Formations.
Base management fee, percentage of gross revenue	7.00%
SHOP | Assets Leased to Others | Separate RIDEA structure
Lease Amendments And Terminations And Joint Venture Formations.
Number of assets under management agreement	2

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Real Estate Transactions - Held for Sale (Details) $ in Thousands	Mar. 31, 2018 USD ($) property	Dec. 31, 2017 USD ($) property
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	$ 436,155	$ 417,014
Accumulated depreciation	2,826,325	2,741,695
Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	$ 436,000	$ 417,000
Held-for-sale | 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	7	6
Held-for-sale | 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	2	2
Held-for-sale | 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
Held-for-sale | Real Estate
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	$ 410,000	$ 393,000
Accumulated depreciation	$ 98,000	$ 93,000

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Real Estate Transactions - RIDEA II Sale Transaction (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended
	Nov. 01, 2017	Jan. 31, 2017	Jun. 30, 2018	Mar. 31, 2018	Mar. 31, 2017
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sales of real estate				$ 20,815	$ 317,258
HCP/CPA/Brookdale JV
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Debt Instrument 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
RIDEA II
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Investment ownership percentage				40.00%	40.00%
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%
Disposed of by Sale | RIDEA II
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sales of real estate		$ 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
Note receivable payment period	1 year
RIDEA II | HCP/CPA/Brookdale JV | Forecast
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Equity method investment ownership interest disposed			40.00%
Consideration of disposal of equity method investment			$ 91,000

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Real Estate Transactions - U.K. Portfolio (Details) $ in Thousands, £ in Millions	3 Months Ended
	Jun. 30, 2018 GBP (£)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Value of U.K. Portfolio | $		$ 14,067,571	$ 14,088,461
Forecast | Disposed of by Sale | U.K. Portfolio
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Ownership interest percentage selling	51.00%
Value of U.K. Portfolio | £	£ 394
U.K. Portfolio | Forecast
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Percentage of noncontrolling interest in the joint venture	49.00%

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Real Estate Transactions - Disposition of Real Estate (Details) $ in Thousands	1 Months Ended				3 Months Ended
	Apr. 30, 2018 USD ($) facility	Jan. 31, 2018 USD ($) facility	Mar. 31, 2017 USD ($) property	Jan. 31, 2017 USD ($) facility	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sales of real estate, net					$ 20,815	$ 317,258
SHOP
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | facility		2
Total consideration for disposal of real estate		$ 35,000
Gain (loss) on sales of real estate, net		$ 21,000
SHOP | Subsequent Event
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | facility	4
Senior housing triple-net
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | property			64
Total consideration for disposal of real estate			$ 1,125,000
Gain (loss) on sales of real estate, net			$ 170,000
Senior housing triple-net | Subsequent Event
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | facility	2
Triple-net and SHOP | Subsequent Event
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total consideration for disposal of real estate	$ 265,000
Life science
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties disposed | facility				4
Total consideration for disposal of real estate				$ 76,000
Gain (loss) on sales of real estate, net				$ 45,000

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Real Estate Transactions - Investments in Real Estate (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Real Estate [Abstract]
Payments to acquire real estate	$ 21,000,000	$ 0

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Net Investment in Direct Financing Leases - Direct Financing Leases (Details) $ in Thousands	1 Months Ended
	Feb. 28, 2017 USD ($) property	Mar. 31, 2018 USD ($) property	Dec. 31, 2017 USD ($) property
Capital Leased Assets [Line Items]
Minimum lease payments receivable		$ 1,049,400	$ 1,062,452
Estimated residual value		504,457	504,457
Less unearned income		(840,394)	(852,557)
Net investment in direct financing leases		$ 713,463	$ 714,352
Properties subject to direct financing leases | property		29	29
Florida
Capital Leased Assets [Line Items]
Number of properties sold | property	1
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
	Mar. 31, 2018 USD ($) property	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($) property
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 713,463		$ 714,352
Percentage of DFL Portfolio	100.00%
Properties subject to direct financing leases | property	29		29
DFL income	$ 13,266	$ 13,712
Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases	358,868
Watch List DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	354,595
Watch List DFLs | DFL Portfolio
Net Investment in Direct Financing Leases
DFL income	3,000	3,000
Cash payments received	5,000	$ 4,000
Workout DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	0
Senior housing triple-net
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 628,859
Percentage of DFL Portfolio	88.00%
Senior housing triple-net | Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 274,264
Senior housing triple-net | Watch List DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	354,595
Senior housing triple-net | Watch List DFLs | DFL Portfolio
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 355,000		$ 356,000
Properties subject to direct financing leases | property	14
Senior housing triple-net | Workout DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 0
Other non-reportable segments
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 84,604
Percentage of DFL Portfolio	12.00%
Other non-reportable segments | Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 84,604
Other non-reportable segments | Watch List DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	0
Other non-reportable segments | Workout DFLs
Net Investment in Direct Financing Leases
Net investment in direct financing leases	$ 0

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Loans Receivable - Schedule of Loans Receivable (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Mar. 31, 2018
Loans Receivable:
Mezzanine	$ 269,299	$ 22,105
Loans receivable, other	188,418	24,990
Unamortized discounts, fees and costs	(596)	(83)
Allowance for loan losses	(143,795)	0
Loans receivable, net	313,326	47,012
Loans receivable commitments	115,000
Real Estate Secured
Loans Receivable:
Mezzanine	0	0
Loans receivable, other	188,418	24,990
Unamortized discounts, fees and costs	0	0
Allowance for loan losses	0	0
Loans receivable, net	188,418	24,990
Other Secured
Loans Receivable:
Mezzanine	269,299	22,105
Loans receivable, other	0	0
Unamortized discounts, fees and costs	(596)	(83)
Allowance for loan losses	(143,795)	0
Loans receivable, net	$ 124,908	$ 22,022

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Loans Receivable - Schedule of Loans Receivable Internal Ratings (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment [Line Items]
Percentage of Loan Portfolio	100.00%
Loans receivable, net	$ 47,012	$ 313,326
Performing Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	47,012
Watch List Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	0
Workout Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	$ 0
Real Estate Secured
Financing Receivable, Recorded Investment [Line Items]
Percentage of Loan Portfolio	53.00%
Loans receivable, net	$ 24,990	188,418
Real Estate Secured | Performing Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	24,990
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	47.00%
Loans receivable, net	$ 22,022	$ 124,908
Other Secured | Performing Loans
Financing Receivable, Recorded Investment [Line Items]
Loans receivable, net	22,022
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	$ 0

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Loans Receivable - Narrative (Details) £ in Millions			1 Months Ended			3 Months Ended			12 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2017 GBP (£)	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Mar. 31, 2017 GBP (£)	Mar. 31, 2018 USD ($) property	Mar. 31, 2018 GBP (£) property	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($) property	Feb. 28, 2017 USD ($)	Feb. 28, 2017 GBP (£)	Dec. 31, 2016 GBP (£) property	May 31, 2015 USD ($)
Loans Receivable:
Loans receivable, other			$ 24,990,000			$ 24,990,000			$ 188,418,000
Loans receivable, net			47,012,000			47,012,000			313,326,000
Notes reduction due to call option exercised						147,474,000		$ 0
Loss from initial consolidation of VIE						41,017,000		0
MMCG
Loans Receivable:
Loss from initial consolidation of VIE						41,000,000	£ 29.0
HC-One Facility
Loans Receivable:
Cash payments received from borrower	$ 367,000,000	£ 283.0
Tandem Mezzanine Loan
Loans Receivable:
Proceeds from sale of loans receivable			112,000,000
Cash payments received from borrower						$ 0		$ 7,000,000
Loans receivable, other									105,000,000
Impairment charges on receivable									$ 144,000,000
Impairment recovery on receivable			$ 3,000,000
Tandem Mezzanine Loan | Maximum
Loans Receivable:
Loans receivable, other														$ 257,000,000
Bridge Loan | MMCG
Loans Receivable:
Loans receivable, net										$ 131,000,000			£ 105.0
Period of call-option retained										3 years
Number of properties in a purchase option | property										7			7
Number of properties acquired in a purchase option | property						7	7
Notes reduction due to call option exercised | £							£ 105.0
Loss from initial consolidation of VIE						$ 41,000,000	£ 29.0
Four Seasons
Loans Receivable:
Proceeds from sale of loans receivable				$ 35,000,000	£ 29.0
Investment in held to maturity at amortized cost | £					138.5
Proceeds from sale of held to maturity securities				101,000,000	83.0
Gain on sale of securities				$ 51,000,000	£ 42.0
Marketable debt securities, net											$ 50,000,000	£ 41.0

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Investments in and Advances to Unconsolidated Joint Ventures - Schedule of Equity Method Investments (Details) $ in Thousands	Mar. 31, 2018 USD ($) joint_venture	Dec. 31, 2017 USD ($)	Mar. 31, 2017
Schedule of Equity Method Investments [Line Items]
Investments in and advances to unconsolidated joint ventures	$ 863,775	$ 800,840
CCRC JV
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	49.00%
Investments in and advances to unconsolidated joint ventures	$ 395,005	400,241
RIDEA II
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	40.00%		40.00%
Investments in and advances to unconsolidated joint ventures	$ 328,873	259,651
Life Science JVs
Schedule of Equity Method Investments [Line Items]
Investments in and advances to unconsolidated joint ventures	$ 65,016	65,581
Life Science JVs | Minimum
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	50.00%
Life Science JVs | Maximum
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	63.00%
Torrey Pines Science Center, LP
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	50.00%
Britannia Biotech Gateway, LP
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	55.00%
LASDK, LP
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	63.00%
MBK JV
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	50.00%
Investments in and advances to unconsolidated joint ventures	$ 37,442	38,005
Development JVs
Schedule of Equity Method Investments [Line Items]
Investments in and advances to unconsolidated joint ventures	$ 23,733	23,365
Number of unconsolidated joint ventures | joint_venture	4
Development JVs | Minimum
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	50.00%
Development JVs | Maximum
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	90.00%
Vintage Park Development JV
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	85.00%
Waldwick
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	85.00%
Otay Ranch
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	90.00%
MBK Development JV
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	50.00%
Medical Office JVs
Schedule of Equity Method Investments [Line Items]
Investments in and advances to unconsolidated joint ventures	$ 12,395	12,488
Number of unconsolidated joint ventures | joint_venture	3
Medical Office JVs | Minimum
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	20.00%
Medical Office JVs | Maximum
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	67.00%
HCP Ventures VI, LLC
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	20.00%
HCP Ventures III, LLC
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	30.00%
Suburban Properties, LLC
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	67.00%
K&Y JVs
Schedule of Equity Method Investments [Line Items]
Investment ownership percentage	80.00%
Investments in and advances to unconsolidated joint ventures	$ 1,298	1,283
Advances to unconsolidated joint ventures, net
Schedule of Equity Method Investments [Line Items]
Investments in and advances to unconsolidated joint ventures	$ 13	$ 226

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Intangibles - Intangibles Lease Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Intangibles
Gross intangible lease assets	$ 732,110	$ 795,305
Accumulated depreciation and amortization	(336,812)	(385,223)
Intangible assets, net	$ 395,298	$ 410,082

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Intangibles - Intangibles Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Intangibles
Gross intangible lease liabilities	$ 124,609	$ 126,212
Accumulated depreciation and amortization	(72,033)	(73,633)
Intangible liabilities, net	$ 52,576	$ 52,579

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Debt - Bank Line of Credit and Term Loan (Details) £ in Millions		3 Months Ended
	Apr. 06, 2018 USD ($)	Mar. 31, 2018 USD ($) renewal_option	Mar. 31, 2017 USD ($)	Mar. 31, 2018 GBP (£) renewal_option	Dec. 31, 2017 USD ($)
Debt Instrument
Bank line of credit		$ 1,092,357,000			$ 1,017,076,000
Repayment under bank line of credit		170,000,000	$ 37,032,000
Debt		7,871,735,000
Outstanding balance on term loan		$ 236,878,000			$ 228,288,000
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
2015 Term Loan
Debt Instrument
Length of debt instrument extension period		1 year
Outstanding balance on term loan		$ 237,000,000		£ 169
GBP LIBOR | 2015 Term Loan
Debt Instrument
Debt instrument, basis spread on variable rate (as a percent)		1.15%
Bank Line of Credit | Revolving Credit Facility
Debt Instrument
Line of credit facility, maximum borrowing capacity		$ 2,000,000,000.0
Number of extensions | renewal_option		2		2
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
Bank line of credit		1,100,000,000
Debt denominated in foreign currency outstanding		$ 147,000,000		£ 105
Weighted-average interest rate (as a percent)		2.99%		2.99%
Bank Line of Credit | Revolving Credit Facility | Subsequent Event
Debt Instrument
Repayment under bank line of credit	$ 290,000,000
Bank Line of Credit | Revolving Credit Facility | LIBOR
Debt Instrument
Debt instrument, basis spread on variable rate (as a percent)		1.00%

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Debt - Senior Unsecured Notes (Details) - USD ($)	Jul. 27, 2017	May 01, 2017	Mar. 31, 2018	Dec. 31, 2017
Debt Instrument
Principal balance on debt			$ 7,917,236,000
Senior unsecured notes			6,398,976,000	$ 6,396,451,000
Unsecured Debt
Debt Instrument
Principal balance on debt			6,450,000,000
Senior unsecured notes			$ 0	$ 0
Unsecured Note 5.625%
Debt Instrument
Repayment of senior unsecured notes		$ 250,000,000
Percentage of stated interest rate		5.625%
Unsecured Note 5.375%
Debt Instrument
Repayment of senior unsecured notes	$ 500,000,000
Percentage of stated interest rate	5.375%

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Debt - Mortgage Debt (Details) $ in Thousands, £ in Millions	1 Months Ended	3 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2018 USD ($) facility	Mar. 31, 2018 GBP (£) facility	Dec. 31, 2017 USD ($)
Debt Instrument
Term loan		$ 236,878		$ 228,288
Total debt before discount, net		7,917,236
(Discounts), premiums and debt costs, net		(45,501)
Debt instruments, carrying amount		7,871,735
Other debt		93,856		$ 94,165
Debt maturing in 2018
Debt Instrument
2018 (nine months)		2,649
Debt maturing in 2019
Debt Instrument
2019		690,875
Debt maturing in 2020
Debt Instrument
2020		803,758
Debt maturing in 2021
Debt Instrument
2021		1,803,474
Debt maturing in 2022
Debt Instrument
2022		902,861
Thereafter
Debt Instrument
Thereafter		3,713,619
2015 Term Loan
Debt Instrument
Term loan		237,000	£ 169
Bank Line of Credit
Debt Instrument
Total debt before discount, net		1,092,357
(Discounts), premiums and debt costs, net		0
Debt instruments, carrying amount		1,092,357
Bank Line of Credit | Debt maturing in 2018
Debt Instrument
2018 (nine months)		0
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		1,092,357
Bank Line of Credit | Debt maturing in 2022
Debt Instrument
2022		0
Bank Line of Credit | Thereafter
Debt Instrument
Thereafter		0
Term loans
Debt Instrument
Total debt before discount, net		237,175
(Discounts), premiums and debt costs, net		(297)
Debt instruments, carrying amount		236,878
Term loans | Debt maturing in 2018
Debt Instrument
2018 (nine months)		0
Term loans | Debt maturing in 2019
Debt Instrument
2019		237,175
Term loans | Debt maturing in 2020
Debt Instrument
2020		0
Term loans | Debt maturing in 2021
Debt Instrument
2021		0
Term loans | Debt maturing in 2022
Debt Instrument
2022		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		(51,024)
Debt instruments, carrying amount		$ 6,398,976
Weighted-average interest rate (as a percent)		4.20%	4.20%
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 2018
Debt Instrument
2018 (nine months)		$ 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 | Debt maturing in 2022
Debt Instrument
2022		900,000
Unsecured Debt | Thereafter
Debt Instrument
Thereafter		$ 3,600,000
Mortgage Debt
Debt Instrument
Number of healthcare facilities used to secure debt | facility		16	16
Debt instrument, collateral, healthcare facilities carrying value		$ 296,000
Repayments of debt	$ 472,000
Total debt before discount, net		137,704
(Discounts), premiums and debt costs, net		5,820
Debt instruments, carrying amount		$ 143,524
Weighted-average interest rate (as a percent)		4.18%	4.18%
Weighted-average maturity		20 years
Mortgage Debt | Minimum
Debt Instrument
Percentage of stated interest rate		1.95%	1.95%
Mortgage Debt | Maximum
Debt Instrument
Percentage of stated interest rate		5.91%	5.91%
Mortgage Debt | Debt maturing in 2018
Debt Instrument
2018 (nine months)		$ 2,649
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 | Debt maturing in 2022
Debt Instrument
2022		2,861
Mortgage Debt | Thereafter
Debt Instrument
Thereafter		$ 113,619

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Equity (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Accumulated Other Comprehensive Loss
Cumulative foreign currency translation adjustment	$ 697	$ (6,955)
Unrealized gains (losses) on cash flow hedges, net	(18,989)	(13,950)
Supplemental Executive Retirement plan minimum liability and other	(3,015)	(3,119)
Total other comprehensive income (loss)	$ (21,307)	$ (24,024)

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Segment Disclosures - Summary Information for the Reportable Segments (Details) $ in Thousands	1 Months Ended			3 Months Ended
	Jan. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Jan. 31, 2017 USD ($)	Mar. 31, 2018 USD ($) facility	Mar. 31, 2017 USD ($) facility
Segment Disclosure
Number of SH NNN facilities transitioned to RIDEA structure | facility				0
Segment reporting information, revenues
Rental revenues				$ 472,832	$ 473,837
Operating expenses				(172,552)	(159,081)
Segment NOI				300,280	314,756
Adjustments to NOI				(9,686)	(4,427)
Adjusted NOI				290,594	310,329
Addback adjustments				9,686	4,427
Interest income				6,365	18,331
Interest expense				(75,102)	(86,718)
Depreciation and amortization				(143,250)	(136,554)
General and administrative				(29,175)	(22,478)
Transaction costs				(2,195)	(1,057)
Gain (loss) on sales of real estate, net				20,815	317,258
Other income (expense), net				(40,407)	51,208
Income tax benefit (expense)				5,336	6,162
Equity income (loss) from unconsolidated JVs				570	3,269
Net income (loss)				43,237	464,177
Corporate and other assets
Segment reporting information, revenues
Rental revenues				0	0
Operating expenses				0	0
Segment NOI				0	0
Adjustments to NOI				0	0
Adjusted NOI				0	0
Addback adjustments				0	0
Interest income				0	0
Interest expense				(72,583)	(79,265)
Depreciation and amortization				0	0
General and administrative				(29,175)	(22,478)
Transaction costs				(2,195)	(1,057)
Gain (loss) on sales of real estate, net				0	0
Other income (expense), net				160	313
Income tax benefit (expense)				5,336	6,162
Equity income (loss) from unconsolidated JVs				0	0
Net income (loss)				(98,457)	$ (96,325)
Senior housing triple-net
Segment Disclosure
Number of SH NNN facilities transitioned to RIDEA structure | facility					1
Segment reporting information, revenues
Gain (loss) on sales of real estate, net		$ 170,000
Senior housing triple-net | Operating segment
Segment reporting information, revenues
Rental revenues				74,289	$ 100,034
Operating expenses				(1,045)	(1,111)
Segment NOI				73,244	98,923
Adjustments to NOI				(1,865)	(1,839)
Adjusted NOI				71,379	97,084
Addback adjustments				1,865	1,839
Interest income				0	0
Interest expense				(600)	(627)
Depreciation and amortization				(21,906)	(26,411)
General and administrative				0	0
Transaction costs				0	0
Gain (loss) on sales of real estate, net				0	268,464
Other income (expense), net				0	0
Income tax benefit (expense)				0	0
Equity income (loss) from unconsolidated JVs				0	0
Net income (loss)				50,738	340,349
SHOP
Segment reporting information, revenues
Gain (loss) on sales of real estate, net	$ 21,000
SHOP | Operating segment
Segment reporting information, revenues
Rental revenues				144,670	140,228
Operating expenses				(101,746)	(94,539)
Segment NOI				42,924	45,689
Adjustments to NOI				(1,607)	(310)
Adjusted NOI				41,317	45,379
Addback adjustments				1,607	310
Interest income				0	0
Interest expense				(988)	(4,596)
Depreciation and amortization				(27,628)	(26,358)
General and administrative				0	0
Transaction costs				0	0
Gain (loss) on sales of real estate, net				20,815	366
Other income (expense), net				0	0
Income tax benefit (expense)				0	0
Equity income (loss) from unconsolidated JVs				0	0
Net income (loss)				35,123	15,101
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				99,622	85,321
Operating expenses				(21,809)	(17,319)
Segment NOI				77,813	68,002
Adjustments to NOI				(3,751)	(305)
Adjusted NOI				74,062	67,697
Addback adjustments				3,751	305
Interest income				0	0
Interest expense				(83)	(104)
Depreciation and amortization				(36,080)	(33,791)
General and administrative				0	0
Transaction costs				0	0
Gain (loss) on sales of real estate, net				0	44,633
Other income (expense), net				0	0
Income tax benefit (expense)				0	0
Equity income (loss) from unconsolidated JVs				0	0
Net income (loss)				41,650	78,740
Medical office | Operating segment
Segment reporting information, revenues
Rental revenues				123,935	118,371
Operating expenses				(46,696)	(44,864)
Segment NOI				77,239	73,507
Adjustments to NOI				(1,071)	(961)
Adjusted NOI				76,168	72,546
Addback adjustments				1,071	961
Interest income				0	0
Interest expense				(120)	(129)
Depreciation and amortization				(45,519)	(42,729)
General and administrative				0	0
Transaction costs				0	0
Gain (loss) on sales of real estate, net				0	0
Other income (expense), net				0	0
Income tax benefit (expense)				0	0
Equity income (loss) from unconsolidated JVs				0	0
Net income (loss)				31,600	30,649
Other non-reportable segments | Operating segment
Segment reporting information, revenues
Rental revenues				30,316	29,883
Operating expenses				(1,256)	(1,248)
Segment NOI				29,060	28,635
Adjustments to NOI				(1,392)	(1,012)
Adjusted NOI				27,668	27,623
Addback adjustments				1,392	1,012
Interest income				6,365	18,331
Interest expense				(728)	(1,997)
Depreciation and amortization				(12,117)	(7,265)
General and administrative				0	0
Transaction costs				0	0
Gain (loss) on sales of real estate, net				0	3,795
Other income (expense), net				(40,567)	50,895
Income tax benefit (expense)				0	0
Equity income (loss) from unconsolidated JVs				570	3,269
Net income (loss)				$ (17,417)	$ 95,663

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Segment Disclosures - Revenues and Assets by Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Segment Disclosure
Total revenues	$ 479,197	$ 492,168
Operating segment
Segment Disclosure
Total revenues	479,197	492,168
Operating segment | Senior housing triple-net
Segment Disclosure
Total revenues	74,289	100,034
Operating segment | SHOP
Segment Disclosure
Total revenues	144,670	140,228
Operating segment | Life science
Segment Disclosure
Total revenues	99,622	85,321
Operating segment | Medical office
Segment Disclosure
Total revenues	123,935	118,371
Operating segment | Other non-reportable segments
Segment Disclosure
Total revenues	$ 36,681	$ 48,214

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Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator
Net income (loss) from continuing operations	$ 43,237	$ 464,177
Noncontrolling interests' share in earnings	(3,005)	(3,032)
Net income (loss) attributable to HCP, Inc.	40,232	461,145
Less: Participating securities' share in earnings	(391)	(770)
Net income (loss) applicable to common shares	39,841	460,375
Numerator - Dilutive
Net income (loss) applicable to common shares	39,841	460,375
Add: distributions on dilutive convertible units and other	0	2,803
Dilutive net income (loss) available to common shares	$ 39,841	$ 463,178
Denominator
Basic weighted average common shares	469,557	468,299
Diluted weighted average common shares	469,695	475,173
Earnings per common share:
Earnings per common share, basic (in dollars per share)	$ 0.08	$ 0.98
Earnings per common share, diluted (in dollars per share)	$ 0.08	$ 0.97
Equity awards
Denominator
Dilutive potential common shares	138	229
Down REIT
Denominator
Dilutive potential common shares	0	6,645
Earnings per common share:
Shares of anti-dilutive securities excluded from earnings per share calculation	7,000
DownREIT LLCs, non-managing member units outstanding	4,000

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Supplemental cash flow information:
Interest paid, net of capitalized interest	$ 92,701	$ 108,232
Income taxes paid	340	1,105
Capitalized interest	3,578	3,090
Supplemental schedule of non-cash investing and financing activities:
Accrued construction costs	62,160	51,498
Derecognition of U.K. Bridge Loan receivable	147,474	0
Consolidation of net assets related to U.K. Bridge Loan	106,457	0
Deconsolidation of noncontrolling interest in connection with RIDEA II transaction	0	58,061
Vesting of restricted stock units and conversion of non-managing member units into common stock	$ 258	$ 1,841

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Supplemental Cash Flow Information - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017
Supplementary Insurance Information [Abstract]
Cash and cash equivalents	$ 86,021	$ 55,306	$ 764,114
Restricted cash	31,947	$ 26,897	60,806
Cash, cash equivalents and restricted cash	$ 117,968		$ 824,920

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Variable Interest Entities - Narrative (Details) $ in Thousands, £ in Millions	1 Months Ended	3 Months Ended			12 Months Ended
	Mar. 31, 2017 property	Mar. 31, 2018 USD ($) property facility joint_venture tenant loan	Mar. 31, 2018 GBP (£) facility joint_venture	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($) property	Dec. 31, 2016 USD ($) property	Mar. 31, 2018 GBP (£) property joint_venture tenant loan	Dec. 31, 2016 GBP (£) property
Variable Interest Entity [Line Items]
Mezzanine | $		$ 22,105			$ 269,299
Loans receivable, net | $		47,012			$ 313,326
Loss from initial consolidation of VIE | $		$ 41,017		$ 0
Senior housing triple-net
Variable Interest Entity [Line Items]
Number of properties sold | property	64
Unconsolidated Variable Interest Entities
Variable Interest Entity [Line Items]
Number of unconsolidated joint ventures | joint_venture		5					5
Number of VIE borrowers with marketable debt securities | joint_venture		1					1
Number of loans to VIE borrowers | loan		1					1
CCRC OpCo
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		49.00%	49.00%
Vintage Park Development JV
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		85.00%	85.00%
Waldwick
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		85.00%	85.00%
VIE tenants-operating leases
Variable Interest Entity [Line Items]
Number of properties leased | property		48					48
Number of VIE tenants | tenant		7					7
Loan - Seller Financing | Senior housing triple-net
Variable Interest Entity [Line Items]
Mezzanine | $		$ 10,000
Number of properties sold | facility		7	7
Term of facility		5 years	5 years
HCP Ventures V
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		51.00%	51.00%
Vintage Park JV
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		90.00%	90.00%
Watertown JV
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		95.00%	95.00%
Hayden JV
Variable Interest Entity [Line Items]
Ownership percentage (as a percent)		99.00%	99.00%
Consolidated lessees VIE
Variable Interest Entity [Line Items]
Number of properties leased | property		21					21
DownREIT Partnerships
Variable Interest Entity [Line Items]
Number of controlling ownership interest entities as a managing member | joint_venture		5	5
MMCG
Variable Interest Entity [Line Items]
Loss from initial consolidation of VIE		$ 41,000	£ 29
Tax benefit of initial consolidation of variable interest entity		3,000	2
Carrying amount of liabilities in VIE		13,000					£ 9
MMCG | Property, plant and equipment
Variable Interest Entity [Line Items]
Carrying amount of assets in VIE		114,000					81
MMCG | Intangible assets
Variable Interest Entity [Line Items]
Carrying amount of assets in VIE		5,000					£ 4
MMCG | Bridge Loan
Variable Interest Entity [Line Items]
Loans receivable, net						$ 131,000		£ 105
Number of properties in a purchase option | property						7		7
Period of call-option retained						3 years
Loss from initial consolidation of VIE		41,000	£ 29
Exchange Accommodation Titleholder
Variable Interest Entity [Line Items]
Carrying amount of assets in VIE | $		$ 153,000
Number of properties acquired | property					11

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Variable Interest Entities - Schedule of Variable Interest Entities (Details) $ in Thousands	Mar. 31, 2018 USD ($)
VIE tenants-DFLs
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	$ 600,822
VIE tenants-operating leases
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	5,983
CCRC OpCo
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	190,662
RIDEA II
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	309,882
Unconsolidated Development JVs
Variable Interest Entity [Line Items]
Maximum Loss Exposure and Carrying Amount	13,070
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	$ 33,874

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Variable Interest Entities - Consolidated Assets and Liabilities of VIEs (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017
ASSETS
Buildings and improvements	$ 11,532,338	$ 11,239,732
Development costs and construction in progress	344,948	447,976
Land	1,808,210	1,785,865
Accumulated depreciation and amortization	(2,826,325)	(2,741,695)
Net real estate	10,859,171	10,731,878
Investments in and advances to unconsolidated joint ventures	863,775	800,840
Accounts receivable, net	51,468	40,733
Cash and cash equivalents	86,021	55,306	$ 764,114
Restricted cash	31,947	26,897	$ 60,806
Intangible assets, net	395,298	410,082
Other assets, net	583,261	578,033
Total assets	14,067,571	14,088,461
LIABILITIES AND EQUITY
Mortgage debt	143,524	144,486
Intangible liabilities, net	52,576	52,579
Accounts payable and accrued liabilities	8,564	14,031
Deferred revenue	167,975	144,709
Total liabilities	8,586,648	8,493,523
VIEs
ASSETS
Buildings and improvements	1,744,402	2,436,414
Development costs and construction in progress	16,226	32,285
Land	170,889	227,162
Accumulated depreciation and amortization	(345,331)	(542,091)
Net real estate	1,586,186	2,153,770
Investments in and advances to unconsolidated joint ventures	2,148	2,231
Accounts receivable, net	7,287	10,242
Cash and cash equivalents	12,077	15,861
Restricted cash	2,595	2,619
Intangible assets, net	111,149	125,475
Other assets, net	35,788	33,749
Total assets	1,757,230	2,343,947
LIABILITIES AND EQUITY
Mortgage debt	44,882	45,016
Intangible liabilities, net	12,509	10,672
Accounts payable and accrued liabilities	223,708	269,280
Deferred revenue	15,275	14,432
Total liabilities	$ 296,374	$ 339,400

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Concentration of Credit Risk - Schedule of Concentration Risk (Details) - property	1 Months Ended	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Total Assets | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)		10.00%		10.00%
Revenue | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)		7.00%	12.00%
Senior housing triple-net
Concentration Risk [Line Items]
Number of properties disposed	64
Senior housing triple-net | Total Assets | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)		39.00%		39.00%
Senior housing triple-net | Revenue | Brookdale
Concentration Risk [Line Items]
Concentration risk (as a percent)		43.00%	60.00%

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Concentration of Credit Risk - Narrative (Details)	3 Months Ended		12 Months Ended
	Jun. 30, 2018	Mar. 31, 2018 facility renewal	Dec. 31, 2017
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		68
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)		12.00%	13.00%
Brookdale | Total Assets
Concentration Risk [Line Items]
Concentration risk (as a percent)		10.00%	10.00%
RIDEA II | Forecast | HCP/CPA/Brookdale JV
Concentration Risk [Line Items]
Investment ownership percentage	40.00%

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Fair Value Measurements - Summary of the Carrying Amounts and Fair Values of the Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Summary of financial instruments
Bank line of credit	$ 1,092,357	$ 1,017,076
Senior unsecured notes	6,398,976	6,396,451
Mortgage debt	143,524	144,486
Other debt	93,856	94,165
Carrying Value
Summary of financial instruments
Loans receivable, net	47,012	313,326
Marketable debt securities	18,814	18,690
Bank line of credit	1,092,357	1,017,076
Term loan	236,878	228,288
Senior unsecured notes	6,398,976	6,396,451
Mortgage debt	143,524	144,486
Other debt	93,856	94,165
Carrying Value | Interest-rate swap contracts
Summary of financial instruments
Derivative liabilities	1,931	2,483
Carrying Value | Currency swap
Summary of financial instruments
Derivative liabilities	16,684	10,968
Fair Value | Level 1
Summary of financial instruments
Senior unsecured notes	6,577,155	6,737,825
Fair Value | Level 2
Summary of financial instruments
Loans receivable, net	47,075	313,242
Marketable debt securities	18,814	18,690
Bank line of credit	1,092,357	1,017,076
Term loan	236,878	228,288
Mortgage debt	137,704	125,984
Other debt	93,856	94,165
Fair Value | Interest-rate swap contracts | Level 2
Summary of financial instruments
Derivative liabilities	1,931	2,483
Fair Value | Currency swap | Level 2
Summary of financial instruments
Derivative liabilities	$ 16,684	$ 10,968

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Derivative Financial Instruments - Schedule of Derivative Instruments (Details) - Mar. 31, 2018	USD ($) derivative $ / £	GBP (£) derivative $ / £
Cash Flow | Interest-rate swap contracts
Derivative [Line Items]
Notional	$ 43,000,000
Fixed Rate/Buy Amount (as a percent)	3.82%	3.82%
Fair value of interest rate hedge, liabilities	$ (1,931,000)
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	$ (16,684,000)
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)	2.58%	2.58%
Short | Net Investment | Cross currency swap
Derivative [Line Items]
Notional	$ 131,000,000
Fixed Rate/Buy Amount (as a percent)	3.75%	3.75%

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Derivative Financial Instruments - Narrative (Details) - 3 months ended Mar. 31, 2018 $ 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