XML 50 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Real Property Acquisitions and Development
 12 Months Ended
Dec. 31, 2013
Real Property Acquisitions and Development [Abstract]  
Real Property Acquisitions and Development

3. Real Property Acquisitions and Development

The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their respective fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with property acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs. During the year ended December 31, 2013, we finalized our purchase price allocation of certain previously reported acquisitions and there were no material changes from those previously disclosed.

Seniors Housing Triple-net Activity

The following provides our purchase price allocations and other seniors housing triple-net real property investment activity for the periods presented (in thousands):

Year Ended December 31,
2013(1)20122011
Land and land improvements $ 54,596 $ 87,242$ 212,156
Buildings and improvements 265,390 984,077 3,108,508
Restricted cash 189 0 0
Receivables and other assets 1,020 119 9,101
Total assets acquired(2) 321,195 1,071,438 3,329,765
Secured debt (9,810) (89,881) (93,431)
Accrued expenses and other liabilities (540) (3,542) (91,290)
Total liabilities assumed (10,350) (93,423) (184,721)
Capital in excess of par 0 921 0
Noncontrolling interests 0 (17,215) 0
Non-cash acquisition related activity (151) (616) (2,532)
Cash disbursed for acquisitions 310,694 961,105 3,142,512
Construction in progress additions 141,129 179,684 182,626
Less: Capitalized interest (4,698) (6,041) (5,752)
Cash disbursed for construction in progress 136,431 173,643 176,874
Capital improvements to existing properties 34,926 67,026 49,336
Total cash invested in real property, net of cash acquired $ 482,051 $ 1,201,774$ 3,368,722
(1)Includes acquisitions with an aggregate purchase price of $212,043,000 for which the allocation of the purchase price consideration is preliminary and subject to change.
(2)Excludes $2,031,000 of cash acquired during the year ended December 31, 2012.

Seniors Housing Operating Activity

Acquisitions of seniors housing operating properties are structured under RIDEA, which is described in Note 18. This structure results in the inclusion of all resident revenues and related property operating expenses from the operation of these qualified health care properties in our consolidated statements of comprehensive income. Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. See Note 2 for information regarding our foreign currency policies.

The following is a summary of our seniors housing operating real property investment activity for the periods presented (in thousands):

Year Ended December 31,
2013(1)20122011
Land and land improvements $ 445,152 $ 146,332$ 112,350
Buildings and improvements 4,275,046 1,341,560 1,512,764
Acquired lease intangibles 396,444 118,077 122,371
Restricted cash 44,427 1,296 20,699
Receivables and other assets 79,564 10,125 901
Total assets acquired(2) 5,240,633 1,617,390 1,769,085
Secured debt (1,275,245) (124,190) (796,272)
Accrued expenses and other liabilities (96,709) (17,347) (44,483)
Total liabilities assumed (1,371,954) (141,537) (840,755)
Capital in excess of par - 0 (6,017)
Noncontrolling interests (232,575) (56,884) (69,984)
Non-cash acquisition related activity(3) (555,563) - -
Cash disbursed for acquisitions 3,080,541 1,418,969 852,329
Construction in progress additions 3,894 - -
Less: Capitalized interest (57) - -
Cash disbursed for construction in progress 3,837 - -
Capital improvements to existing properties 72,258 21,751 15,880
Total cash invested in real property, net of cash acquired $ 3,156,636 $ 1,440,720$ 868,209
(1)Includes an aggregate purchase price of $1,318,168,000 relating to the Revera Partnership for which the allocation of the purchase price consideration is preliminary and subject to change.
(2)Excludes $92,148,000, $20,691,000 and $38,952,000 of cash acquired during the years ended December 31, 2013, 2012 and 2011, respectively.
(3)Represents Sunrise loan and noncontrolling interest acquisitions during the first quarter of 2013.

Revera Acquisition

On May 28, 2013, we completed the formation of our partnership (the “Revera Partnership”) with Revera Inc. to own and operate a portfolio of 47 seniors housing properties in Canada. We own a 75% partnership interest and Revera Inc. owns the remaining 25% interest and manages the facilities. The results of operations for the Revera Partnership have been included in our consolidated results of operations beginning on May 28, 2013 and are a component of our seniors housing operating segment. Consolidation is based on a combination of ownership interest and control of operational decision-making authority. The total purchase price of $1,318,168,000 for the 47 properties acquired has been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values in accordance with the Company’s accounting policies. Such allocations have not been finalized as we are reviewing final asset valuations with our partner, and, as such, the allocation of the purchase consideration included in the accompanying Consolidated Balance Sheet as of December 31, 2013 is preliminary and subject to adjustment.

Sunrise Merger

In August 2012, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Sunrise Senior Living, Inc. (“Sunrise”), pursuant to which we agreed to acquire Sunrise in an all-cash merger (the “Merger”) in which Sunrise stockholders would receive $14.50 in cash for each share of Sunrise common stock. On January 9, 2013, we completed our acquisition of the Sunrise property portfolio. The Sunrise Merger advances our strategic vision to own higher-end, private pay properties located in major metropolitan markets. On July 1, 2013, we acquired the remaining interests in 49 previously unconsolidated properties. As of December 31, 2013, 120 properties are wholly owned and five properties are held in unconsolidated entities (see Note 7 for additional information). The total purchase price of approximately $4,155,052,000, including approximately $2,456,011,000 of cash consideration, has been allocated to the tangible and identifiable intangible assets and liabilities in the table above based on respective fair values in accordance with our accounting policies.

We recognized $654,717,000, $22,930,000 and $0 of revenues and $216,827,000, $11,698,000 and $0 of net operating income from continuing operations related to the consolidated Sunrise portfolio during the twelve month periods ended December 31, 2013, 2012 and 2011, respectively. In addition, we incurred $77,187,000 of transaction costs, which include advisory fees, due diligence costs, severances, and fees for legal and valuation services during the twelve month period ended December 31, 2013. These amounts are included in the seniors housing operating results reflected in Note 17.

The following unaudited pro forma consolidated results of operations have been prepared as if the Sunrise Merger had occurred as of January 1, 2012 based on the purchase price allocations discussed above. Amounts are in thousands, except per share data:

Year Ended December 31,
20132012
Revenues$ 3,047,072$ 2,487,332
Income (loss) from continuing operations attributable to common stockholders$ 17,091$ (50,424)
Income (loss) from continuing operations attributable to common stockholders per share:
Basic$ 0.06$ (0.23)
Diluted$ 0.06$ (0.23)

Medical Facilities Activity

Accrued contingent consideration related to certain medical facility acquisitions was $26,187,000 and $34,692,000 as of December 31, 2013 and 2012, respectively. Of the amount recognized, $12,500,000 is required to be settled in the Company’s common stock upon the achievement of certain performance thresholds. The following is a summary of our medical facilities real property investment activity for the periods presented (in thousands):

Year Ended December 31,
2013(1)20122011
Land and land improvements $ 14,515 $ 68,619$ 48,342
Buildings and improvements 251,291 648,409 520,976
Acquired lease intangibles 9,432 115,233 60,609
Restricted cash 505 975 100
Receivables and other assets 344 4,469 3,053
Total assets acquired(2) 276,087 837,705 633,080
Secured debt (55,884) (267,527) (72,225)
Accrued expenses and other liabilities (1,041) (25,928) (34,214)
Total liabilities assumed (56,925) (293,455) (106,439)
Noncontrolling interests (386) (193) (7,211)
Non-cash acquisition related activity(3) (12,056) (880) 0
Cash disbursed for acquisitions 206,720 543,177 519,430
Construction in progress additions 127,989 134,830 165,593
Less: Capitalized interest (1,945) (3,736) (7,412)
Accruals (18,752) (18,327) (33,451)
Cash disbursed for construction in progress 107,292 112,767 124,730
Capital improvements to existing properties 28,648 46,673 24,031
Total cash invested in real property, net of cash acquired $ 342,660 $ 702,617$ 668,191
(1)Includes acquisitions with an aggregate purchase price of $222,147,000 for which the allocation of the purchase price consideration is preliminary and subject to change.
(2)Excludes $2,154,000 of cash acquired during the year ended December 31, 2011.
(3)Represents non-cash consideration exchanged in an asset swap transaction during the year ended December 31, 2013.

Construction Activity

     The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented:

Year Ended
December 31, 2013December 31, 2012December 31, 2011
Development projects:
Seniors housing triple-net$ 133,181$ 146,913$ 114,161
Medical facilities 127,363 189,135 355,935
Total development projects 260,544 336,048 470,096
Expansion projects 26,395 4,983 45,414
Total construction in progress conversions$ 286,939$ 341,031$ 515,510

At December 31, 2013, future minimum lease payments receivable under operating leases (excluding properties in our seniors housing operating partnerships and excluding any operating expense reimbursements) are as follows (in thousands):

2014$ 293,766
2015 286,361
2016 273,716
2017 256,029
2018 235,245
Thereafter 1,330,688
Totals$ 2,675,805