A w e a l t h o f a c c o m p l i s h m e n t s .
2 0 1 2 A n n u a l R e p o r t
1
E v e n g r e a t e r p o t e n t i a l .
2 0 1 2 A n n u a l R e p o r t
2
C o n tE n t s
Successful Past. Bright Future.
2012 Highlights
Letter to Shareholders
The Portfolio
Next Level of Execution
Conclusion
A Focused Strategy, Executed Well
Strong Operating Fundamentals
Resilient Rate Growth
Affluent Markets
Investment Management Delivers Consistency
Strong Leadership
Best-In-Class Partners
Sunrise Senior Living
Senior Lifestyle Corporation
Legend Senior Living
Belmont Village Senior Living
Medical Office Building Portfolio
Portfolio Map
The Health Care Market: Strong Potential for Growth
Non-GAAP Reconciliations
Form 10-K
Shareholder Information
4
6
7
8
11
13
15
16
16
16
17
17
19
22
24
25
26
27
29
33
34
36
(Inside Back Cover)
3
s u C C Es s f u l P A s t. BR i g h t f u t u R E.
2012 was a breakthrough year for Health Care REIT fueled by the
exceptional performance of the company’s employees and an in-depth
knowledge of the health care and seniors housing sectors. Health Care
REIT is positioned as a top-tier organization with a portfolio designed to
deliver consistent, resilient results. The company’s proven, relationship-
based investing philosophy creates the opportunity to capture the most
desirable investments.
4
george l. Chapman – Chairman, Chief Executive Officer and President
5
2 0 1 2 h i g h l i g h t s
C o m P A n y P E R f o R m A n C E
Health Care REIT generated one-year, three-year and five-year
cumulative total returns of 18%, 64% and 85%, respectively.
i n v E s t m E n t s
The company completed and announced over $8 billion of gross
investments and expanded into Canada and the United Kingdom.
Including the company’s recently announced Sunrise acquisition,
82% of revenue is derived from private-pay sources.
P o R t f o l i o P E R f o R m A n C E
In 2012, the company’s portfolio generated 4% average same store NOI
growth. The seniors housing operating portfolio same store NOI grew an
average of 8%. The medical office portfolio finished the year at 94.4%
occupancy, with a full-year retention rate of 82%. The medical services
group ranked in the top 5% in the Kingsley Tenant Satisfaction Index.
C A P i t A l
Health Care REIT raised $3.7 billion of common equity at an average
gross price of $55.80, $287.5 million of preferred equity at 6.5%, and
$2.1 billion in senior debt at a blended rate of 3.6% and an average
maturity of 9.6 years. In January 2013, the company also increased its
credit facility to $2.75 billion at a reduced interest rate and extended
the term.
D i v i D E n D s
The fourth quarter 2012 dividend payment, paid in February 2013, was the
company’s 167th consecutive dividend. It was $0.765 per share, or $3.06
annually, representing a 3.4% increase over dividends paid in 2012.
For Non-GAAP reconciliations, see page 34
6
l E t t E R t o s h A R E h o l D E Rs
During the last several years we have emerged as a leader in the REIT and
health care sectors. Our disciplined investments have created a platform
that is producing strong, predictable internal and external growth and
consistent, sustainable results. Our portfolio is second to none, with
82% of our facilities private-pay and 80%
in the most affluent markets. Health Care
REIT has become a world-class organization
with a culture of excellence dedicated to the
continuous improvement of health care delivery.
We have enjoyed one of the most successful
cycles in the history of our company, and it is
with great pleasure that I share my belief that
the future is even brighter.
Our success is due to the prodigious efforts of
all our employees. We are systematizing every
process, institutionalizing our collaborative
culture and affirming our reputation as the
partner of choice in health care. We have
added highly qualified and experienced
personnel in key areas to help us effectively
manage the substantial increase in investment
volume. At the same time, we have maintained
our entrepreneurial spirit and drive.
Last year was one of substantial achievement in all areas of our business. But
the lead story of the year related to our purchase of Sunrise Senior Living, Inc.
7
t hE Po R t f o l i o
s u n r i s e s e n i o r l i v i n g
Our partnership and the Sunrise team hit the
The Sunrise acquisition in many respects was
ground running when we closed the transaction in
the capstone of several years of exceptional
early 2013. By taking the management company
and carefully planned acquisitions in a period
private, Sunrise can improve every process,
of consolidation and change in health care and
become a model of “best practices,” and position
seniors housing. The Sunrise acquisition fits
itself for further growth and capital availability in
perfectly with our overall strategy. This exceptional
this dynamic and consolidating market.
portfolio offers an attractive initial yield, strong
NOI growth and a pipeline of unique development
As part of the transaction, we ensured that the
opportunities. Sunrise has a truly national
current Sunrise CEO, Mark Ordan, would lead
platform with a widely recognized brand, so it
the transition of the company to a top-flight
is well positioned as a vehicle for the inevitable
management team comprised of a successor
consolidation that is necessary in a highly
CEO, key personnel from Sunrise and new
fragmented and increasingly complex industry.
recruits capable of lifting the company to new
heights. Mark will remain on the Sunrise board
Due to a tremendous team effort, we accelerated
to smooth the transition.
the buyout of various Sunrise joint venture
partners, so that by early January 2013, we had
other 2012 and 2013 s eniors housing investments
invested $3.4 billion in 125 Sunrise communities.
Besides the Sunrise transaction, we made a
It is the largest transaction in Health Care REIT’s
number of other key acquisitions that deepened
history. By July 1, 2013, we expect to purchase
our strong presence in the seniors housing space.
the remainder of another large Sunrise joint
These included new partnerships with Legend
venture that will bring our total investment to
Senior Living, Senior Lifestyle and Kisco Senior
$4.3 billion. The overall cap rate of approximately
Living. We also significantly grew our relationship
6.5% makes the transaction strongly accretive.
with Belmont Village. These companies are widely
regarded as top operators in the industry. We
The Sunrise Senior Living management company
look forward to building on these partnerships
was sold to a group led by Kohlberg Kravis
going forward. A summary of these investments
Roberts and Beecken Petty O’Keefe & Company,
is included on pages 22 through 26.
with Health Care REIT retaining a 20% interest.
8
m e d i c a l f a c i l i t i e s
Let me turn to the medical facilities sector.
Our average MOB size is now approximately
We believe there are significant investment
65,000 square feet. Due to the superb work
opportunities in the
MOB arena. Today,
care providers perform
approximately 60% of
acute care services in
an outpatient setting.
Many of the MOBs are
strategically located
closer to the customer,
in suburban areas that
are experiencing the
greatest population
growth. To provide a
convenient, one-stop
venue, MOBs are
combining a variety
of complementary
services, including
surgical, diagnostic
and wellness services.
Today, we are
investing in MOBs that
range from 50,000 to
300,000 square feet.
of our property
management team,
our occupancy is a
sector-leading 94.4%
with an annual
retention rate of 82%.
The high quality
of our modern, on
campus and affiliated
portfolio allows us
to maintain these
kinds of performance
characteristics
and deliver
consistent returns.
During 2012, we
made several large
investments in the
medical facilities
space, including
investments with
Kelsey-Seybold,
Northside, Trinity,
These facilities, which some refer to as “hospitals
Virtua, Christus and Scott & White. A summary
without beds,” are becoming a focal point of
of these investments is included on pages 27
health care delivery.
and 28. We are building strong relationships
that we are confident will lead to future
investment opportunities.
9
10
n E x t l Ev E l o f E xE C u t i o n
Health Care REIT is considered to be the partner
savings of around 18% when costs were otherwise
of choice in seniors housing and a value-add
significantly rising. We are now working on a
partner in the medical facilities space. We own
joint purchasing program that should produce
premier assets and partner with operators in
substantial savings.
affluent, high-barrier-to-entry markets in the
United States, the United Kingdom and Canada.
These operational improvements, together with
Our portfolio is well-diversified. Our platform is
the strong demographics and the resiliency
poised to deliver continued growth.
of occupancies and cash flows, will help us
make the case that the seniors housing sector
There are several key reasons for Health Care
is undervalued. Better data from the National
REIT’s success. First, we are immersed in health
Investment Center for the Seniors Housing and
care and seniors housing and understand how
Care Industry and other studies are also helping
it is evolving. Second, we take a partnership
to make that case. In 2013 and later years, we
approach to investing with operators and health
will strive to improve seniors housing valuations
systems. Finally, we hire the “best and the
through better data, information and research.
brightest” and develop talent effectively.
In the medical facilities sector, our teams have
i m m e r s i o n i n h e a l t h C a r e
a deep understanding of the evolution of acute
By immersing ourselves in, and committing to
and post-acute care. We understand each health
improve, health care, we have been able to attract
system’s needs and deliver solutions tailored
leading operators and systems.
to that system. Our medical office property
management team received a high honor this
In the seniors housing sector, the company is well
year, ranking in the top 5% for overall tenant
positioned to drive internal and external growth.
satisfaction in the Kingsley Associates’ 2012
We regularly coordinate “best practices” sessions
Medical Office Building Index, the largest and
among our key seniors housing operators. These
most comprehensive performance-benchmarking
sessions have helped promote improved care
database in the industry. Our development team
and services.
continues to successfully deliver state-of-the-
art facilities for health systems on time and on
We also drive results through joint programs, such
budget. Our development team has been rehired
as our group property and casualty insurance
by many different systems for numerous projects.
program. In 2012, this program generated average
We believe that no one in our sector is more
11
capable of profitably developing and managing
We believe our investment model is the most
medical office and acute-care facilities in a
sustainable in the sector. Our recurring investments
world-class manner.
with existing customers were approximately 76% of
Relationship-i nvesting
Approach
The success of our
relationship-investing
approach is clear from
the volume and quality
of our investments
during the last several
years and the added
value they create for
shareholders. For
the two years ended
December 31, 2012,
our gross investments
totaled nearly
$11 billion. Including
the Sunrise investments
that we have closed
or expect to close in
2013, that number
increases to over
$14 billion.
our total investments
in 2012. The addition
of significant new
operators, who are
attracted to our
partnership approach,
only increases the
opportunities for
attractive investments
from our relationships.
Our investments
during the last several
years have eliminated
any meaningful size
differential with our two
primary competitors,
while at the same time
putting us at the top in
terms of asset quality.
As we continue to
successfully integrate
Sunrise and the other
investments we have
made during the last
several years, we have driven our FFO and FAD
multiple to the top of our sector.
12
i n t e l l e c t u a l C a p i t a l
The dramatic growth in the company’s assets
C o nC l u s i o n
In May 2012, we were pleased to welcome Judy
and enterprise value is visible to the market.
Pelham to our Board of Directors. Judy has been
Equally significant, but perhaps not as visible,
actively involved in the health care industry for
is our investment in growing our intellectual
over 30 years. She has served in leadership roles
capital and creating a culture of excellence.
with leading hospital systems and health care
We are building a best-in-class organization,
institutions and on the board of other innovative
distinguished by a commitment to expanding the
public companies, including Amgen.
capabilities of our people, processes and systems.
We are developing leaders at all levels of the
We are dedicated to the continuous improvement
organization so that we can effectively manage
of the seniors housing and health care sectors.
the complexities of the business – today and in
Your ongoing support makes our success possible.
the future. We launched a structured learning
and development program that strengthens and
enhances the professional development of our
people. We created customer-focused teams
to maximize the performance of our portfolio.
We convene our major operators three times
each year to share best practices for enhancing
George L. Chapman
performance and reducing costs. We continue to
Chairman, Chief Executive Officer and President
upgrade our IT systems, including our powerful
February 25, 2013
proprietary asset management system, to ensure
access to real-time information to support
decision-making.
We have earned a leadership position in our
sector. Our culture of excellence drives us
to expand the capacity of our people and
our infrastructure to deliver consistent,
sustainable results.
13
14
A f oC u s E D s t R A t E g y, Ex E C u tE D W El l
Over the past several years, Health Care REIT’s relationship-investment
philosophy created the opportunity for remarkable growth. A sound
philosophy must be coupled with excellent execution. Through its strategic
investment approach, the company has continually improved its portfolio
quality and built an infrastructure focused on customer needs. The result: a
premier portfolio in the market, managed by the industry-leading internal and
external operating teams.
Growth with its partners has become a key driver of Health Care REIT’s ability
to deliver consistent, resilient returns. The company’s portfolio concentration
in affluent, high-barrier-to-entry markets and affiliation with market-dominant
operators and health systems is designed to offer higher same store growth
and better investment opportunities. It also provides significant protection
against adverse movements in the overall real estate markets.
Simply put, portfolio quality drives consistent, resilient returns.
15
s tR o n g o P E R At i n g f u n D Am E n tA l s
h e a l t h C a r e R Ei t 1
$5,558
i n d u s t r y m e d i a n 2
$3,953
Revenue Per occupied Room (REvPoR)/month
R E s i l iE n t RAt E g Ro W t h 3
5.0%
5%
4%
3%
2%
1%
0%
3.5%
2.9%
2.6%
2.4%
3.0%
3.6%
1.3%
1.5%
1.9%
Q208
Q209
Q210
Q211
Q212
health Care REit s eniors housing
toP 31 msAs seniors housing
Core inflation
A f f l uE n t m A R K E t s
h e a l t h C a r e R Ei t 4
t h e u n i t e d s t a t e s 5
Average housing value
Average household income
$373,878
$90,276
$233,655
$69,637
1 U.S. seniors housing operating portfolio only, data as of 12/31/12; including total announced Sunrise acquisitions of $4.3 billion; see page 34 for
Non-GAAP reconciliations
2 Industry median is American Seniors Housing Association State of Seniors Housing 2012 data weighted by Health Care REIT seniors housing
operating portfolio care type including pro forma Sunrise acquisition
3 Health Care REIT Rate Growth is Same Store REVPOR Year-over-Year; Sources: Health Care REIT internal documents, NIC, BLS, Federal Reserve
Economic Database (FRED); see page 34 for Non-GAAP reconciliations
4 Demographic analysis of seniors housing operating portfolio based on a 5-mile radius of communities within the top 100 CBSAs (Core Based
Statistical Areas) versus the same characteristics of the United States
5 CBSA data from Nielsen & Co.; 2013 demographics database powered by PCensus
16
Working in collaboration with the industry’s
The company also has taken a proactive
top providers, Health Care REIT’s portfolio is
approach to disposing properties from the
positioned to deliver strong internal growth. Of the
portfolio that are no longer aligned with its
company’s seniors housing operating portfolio,
strategy. In 2012, Health Care REIT disposed of
93% is located in East and West Coast markets
$534 million of non-core assets. During the five
and Top 31 MSAs. Overall, the company’s US
years ended December 31, 2012, the company
portfolio features high-end, high-barrier-to-entry
averaged over $300 million of dispositions.
markets, with 80% located in East and West
The majority of these dispositions were small,
Coast markets and Top 31 MSAs.
unaffiliated MOBs; older, Medicaid-funded skilled
nursing facilities; and smaller portfolios.
With respect to the medical facilities sector,
the average size of Health Care REIT’s medical
office buildings is 65,000 square feet, with an
s t R o n g l E A D E R s h iP
Great strategy and execution requires great people.
occupancy rate of 94.4%. Among the company’s
Health Care REIT has put together an exceptional
facilities, 92% are affiliated with health systems.
staff of experienced and talented specialists working
i n vE s t mE n t m An A g E m E n t
D E l i v E Rs C o n s i s tE n C y
Maintaining one of the highest quality portfolios
within an investment team structure. This includes
a tenured management team with an average of
18 years of industry experience, and eight customer-
focused portfolio management teams providing a
in the United States, the United Kingdom and
full range of management services.
Canada requires considerable focus on investment
management, which Health Care REIT views
By creating a comprehensive, best-in-class growth
as an important tool for growth. The company
platform and retaining teams of the best and
continuously works to maximize total returns
brightest people to support its expanding investment
by finding value-add opportunities for partners,
platform, Health Care REIT is well positioned
performing active portfolio management and
to deliver on its mission of maximizing total
maintaining relationships with strategic partners.
shareholder returns.
17
18
B E s t - i n - C lA s s P A R t n E Rs
Through a highly successful relationship-investing strategy, the company
has secured numerous long-term partnerships with seniors housing
operators and health care systems with proven operating models and
expanding businesses. In fact, the company has relationships with more
than half of the seniors housing industry’s top 30 operators by size.
Sixty-eight percent of the ALFA Best of the Best 2012 award winners
are Health Care REIT operators.
These partners possess the scale, scope and skill to fuel great
performance and external growth opportunities. Case in point: Health Care
REIT averaged more than $1 billion invested per quarter over the last 12
quarters, with 76% of investments in the last four quarters representing
business with existing relationships.
19
5 Brookdale Senior Living
9
9
1
Life Care Centers of America
Merrill Gardens
8
9
9
1
1
0
0
2
Silverado Senior Living
Signature Health Care
2 Emeritus
Trilogy
0
0
2
5
0
0
2
6
0
0
2
8
0
0
2
9
0
0
2
Signature Senior Living
Windrose
Aurora Health Care
Bellevue Medical Center
Loma Linda University Medical Center – Murrieta
Virtua Health
Senior Star
0 Brandywine Senior Living
1
Capital Senior Living
0
2
Forest City
1
1
0
2
2
1
0
2
Belmont Village
Benchmark Senior Living
Cambridge Healthcare Properties
Chelsea Senior Living
Genesis HealthCare
Richmond Honan
Chartwell Retirement Residences
Kelsey-Seybold Clinics
Legend Senior Living
Senior Lifestyle Corporation
Sunrise Senior Living
20
21
s u nR i sE s E n i oR l i v i n g
Sunrise Senior Living operates a collection of best-in-class senior living
communities. The company has served seniors since 1981. Employing
approximately 31,600 people, Sunrise offers a full range of personalized
senior living services including independent living, assisted living and
memory care.
Since the first Sunrise community opened over 30 years ago, the company’s
mission has been to champion quality of life for seniors. Sunrise’s founders
developed a resident-centered philosophy of care based on deep convictions
about how to achieve the best quality of life for each individual.
Sunrise team members provide care to residents following the company’s
Principles of Service: encouraging independence, enabling freedom of
choice, preserving dignity, celebrating individuality, nurturing the spirit
and involving family and friends. By universally embracing this philosophy,
Sunrise has become one of the most widely recognized brands in the
industry and has earned a reputation as a premier provider of innovative
and nurturing senior living.
t h E s u nR i sE
A C Q u i s i t i o n
A D v A n C E s h E Al t h
C A R E R Ei t’ s
s t R A t E g iC v i s i o n
Class-A Private-Pay
Properties in High-Barrier-
to-Entry Markets
Strong NOI Growth and
Value-Creation Opportunity
Complementary to
Existing Portfolio
22
As of January 2013, Health Care REIT’s investment in 125 Sunrise
communities is $3.4 billion. By July 2013, the total investment is expected
to be $4.3 billion through additional joint venture buyouts.
The purchase of Sunrise Senior Living brings together two seniors housing
innovators and advances Health Care REIT’s strategy: own the highest
quality, private-pay seniors housing communities in affluent, high-barrier-to-
entry markets operated by experienced, dynamic management companies.
The 125-property portfolio includes approximately 10,000 units and is
located in high-end, high-barrier-to-entry markets such as New York, Los
Angeles, Washington DC, Boston, Chicago, San Francisco and London.
The portfolio is among the highest quality seniors housing properties in the
marketplace, with 96% of the U.S. portfolio located in East and West Coast
markets and Top 31 MSAs.
23
s E n i oR l i fE s t y lE C oR Po R A t i o n
Senior Lifestyle is recognized for its innovative, nationally award-winning
programming and high-quality assets across the United States. The company
also is noted as a pioneer in the seniors housing industry. In the early 1980s,
Bill Kaplan, Senior Lifestyle Co-Founder and Chairman, was a partner in
a real estate firm that converted apartments into condominiums. After
listening to residents and conducting research, it became clear there was
a need for a housing solution where seniors could get appropriate services
and advanced care. Bill Kaplan explains, “Here I was in the business of
developing independent living, which really was the start of the seniors
housing industry.”
Within a few years, Senior Lifestyle broke ground in Chicago on its first
senior living community, focusing on first-class services and amenities.
In 1993, the company embarked on a first-of-its-kind relationship with the
city to develop 20 facilities in the Chicago area. Today, Senior Lifestyle is
one of the largest private seniors housing companies in America, with over
13,000 units under management.
A crucial component of Senior Lifestyle’s growth is its corporate culture.
“We focus a great deal on educating our employees on various aspects of our
business and promoting from within,” says Jon DeLuca, President and Chief
QR code generated on http://qrcode.littleidiot.be
Executive Officer. “When people come up through the ranks, they’re invested
in our residents and our communities in a very special way. They ensure the
right people are in place, not only in leadership roles, but in our communities
as well. And that builds long-term relationships with residents and families.”
Health Care REIT acquired 24 communities from Senior Lifestyle for $600 million
in several transactions throughout 2012. The alignment between the company’s
focus on long-term relationships with the right people and Health Care REIT’s
core values is a foundational element of the relationship’s success.
Scan this QR code to
view a video about Senior
Lifestyle Corporation
24
l Eg E n D s E n i oR l i v i n g
Throughout his career, seniors housing operator Tim Buchanan has served
on mission trips in third-world countries building schools and churches.
However, he was looking to find a stronger sense of mission in his day job.
In 1989, a fledgling concept called assisted living caught the interest of Tim
and his partner. The company they co-founded in 1991 eventually developed
several hundred facilities across the country. Health Care REIT was its first
multi-facility financing partner.
In 2002, Tim Buchanan founded Legend Senior Living, which has grown to
become one of the country’s most successful and innovative assisted living
providers, with facilities across the Midwest and Florida. Today, Legend Senior
Living continues to be a leading innovator by purchasing and developing
technologies that promote operational efficiency and improve care.
With a strong business model, outstanding care and financial results, Legend
Senior Living began searching for a strategic financial partner to help grow
the company. “Taking the company to the next level would require a larger
pool of capital and a different type of strategic partner,” says Tim Buchanan,
Founder and Chief Executive Officer of Legend Senior Living. “During the
search, Health Care REIT kept rising to the top of the list.”
In June 2012, Health Care REIT and Legend entered into a joint venture
partnership with 15 facilities. The partnership has enabled Legend to focus
on expanding its operating platform in certain strategic markets with the
confidence that it has a stable, well-aligned financial partner. Tim Buchanan
notes, “The benefit for us is having a partner who is really interested in how
we want to grow, the pace at which we want to grow, and the strengths that
we offer as a company.”
Scan this QR code
to view a video about
Legend Senior Living
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25
B E l m o n t v i l lA g E s E n i oR l i v i n g
Renowned for its distinctive architecture, high safety standards and innovative
programs and support services, Belmont Village is a fully integrated owner,
operator and developer of high-quality seniors housing communities.
With 19 communities in the joint venture, located in major metropolitan
high-barrier-to-entry markets including Los Angeles, San Diego, the
San Francisco Bay area, Chicago, Houston and Atlanta, Belmont Village is
focused on providing a balance of opportunities and support for residents,
distinguishing itself with a reputation for quality. Maintaining this reputation
was a top priority during the company’s search for a capital partner.
“One of the things that struck us was the fact Health Care REIT was a
great listener with respect to the particular needs and uniqueness of our
organization,” says Co-Founder, Patricia Will, Chief Executive Officer of
Belmont Village Senior Living. “We were very happy that they were able
to recognize the value in our real estate, but also to create a go-forward
ownership structure that makes a lot of sense for the principals at Belmont
Village and our employees long term.”
While Health Care REIT’s approach to investing is characterized by trust and
performance, Belmont Village has a methodical and selective growth strategy
that emphasizes planning and thought. The result is a partnership noted
for substantial organic growth – one that validates the Health Care REIT
relationship-based strategy.
In 2012, Health Care REIT significantly expanded its relationship with
Belmont Village by acquiring 17 properties for $740 million.
26
m E Di C A l o f f i C E B u i lD i n g P oR t f o l i o
Health Care REIT’s medical facilities team enjoyed significant
accomplishments in 2012. Led by $907 million of medical office building
investments in 45 properties, the company’s reach in the sector continued
to grow with over 60 health system relationships portfolio-wide at year end.
Health Care REIT is at the forefront of the constantly evolving health care
landscape. The medical facilities team has developed solutions to help
health system partners address organizational changes resulting from the
Affordable Care Act, accountable care, population health management and
health technology.
One of the most significant changes in the sector involves how health care
is delivered. As health care moves off hospital campuses, health systems
are developing more medical office buildings in suburban areas, extending
brands into more convenient locations.
“To put together a more efficient, higher quality, consumer-friendly
environment is an important key to improving health care,” says George
L. Chapman, Health Care REIT’s Chairman, Chief Executive Officer and
President. “Our company is well positioned to take advantage of this
development trend through our strategic relationships with national and
regional health care-focused development firms.”
The company recently opened two medical office building developments
with Virtua Health, a comprehensive health care system headquartered in
Marlton, New Jersey. Located in Moorestown, New Jersey and Voorhees,
New Jersey, the 181,000-square-foot and 292,000-square-foot medical
facilities were developed with a focus on quality, safety, digital technology
and an outstanding patient experience.
27
Health Care REIT also embarked on an exciting relationship with Kelsey-
Seybold Clinic. In 2012, the company acquired Kelsey-Seybold’s first,
second, fourth and sixth largest clinics. In addition to acquiring over 550,000
square feet of institutional-quality MOBs affiliated with Kelsey-Seybold, the
company also started two Kelsey-Seybold-related development projects last
year. In 2013, there will be opportunity to expand the strategic relationship
with new development projects, as Kelsey-Seybold continues to increase its
market share in and around the Houston metropolitan area.
In December 2012, Kelsey-Seybold was the first U.S. health care
organization to receive accreditation as an Accountable Care Organization
(ACO). Focused on affordable, quality care, ACOs are accountable for
results on quality measures, patient satisfaction and the total cost of care,
all of which are measured and reported on by independent benchmarking
and surveying companies. “We are honored to receive the first ACO
accreditation,” says Spencer R. Berthelsen, MD, Chairman and Managing
Director of Kelsey-Seybold Clinic. “It confirms our successful creation of a
fully coordinated, accountable model of care at Kelsey-Seybold. We believe
the model of care coordination, high-quality outcomes and efficiency have
always been the future of health care.”
Health Care REIT’s Management Services Group also enjoyed a milestone
year, achieving a top 5% ranking in the highly regarded Kingsley Index
for Overall Satisfaction and top 10% in Satisfaction with Property
Management. The distinction illustrates Health Care REIT’s relationship
focus. Beyond accolades, the team also drove strong results. The company’s
MOB occupancy improved to an industry-leading 94.4%. The property
management team signed over 267,000 square feet of new leases in 2012
and achieved a tenant retention rate of 82%.
28
P oR t f o l i o m A P
ALASKA
29
Seniors Housing Triple-Net
Skilled Nursing/Post-Acute
Medical Office
Seniors Housing Operating
Hospital
Life Science
Management Services Group
UNITED KINGDOM
Seniors Housing Triple-Net
Skilled Nursing/Post-Acute
Medical Office
Seniors Housing Operating
Hospital
Life Science
Management Services Group
30
P o R t f o l i o D i v E R s i f i C A t i o n
The strength and quality of Health Care REIT’s portfolio is exceptional. With the top 10 operators constituting
only 59.0% of the portfolio, the company leads the health care REIT sector in portfolio diversification.
t e n a n t D i v e r s i f i c a t i o n 1
sunrise
genesis
merrill gardens
Belmont village
Benchmark
Brandywine
senior lifestyle
Brookdale
Chartwell
senior living Communities
other
20.1%
12.5%
5.1%
4.2%
3.9%
3.4%
2.8%
2.7%
2.3%
2.0%
41.0%
g e o g r a p h i c C o n c e n t r a t i o n 1
E n t E R P R i sE v A l uE g R o W t h
$ Billions
CA
nJ
tx
mA
fl
PA
WA
il
ny
Ct
other
10.9%
8.2%
7.3%
6.1%
5.5%
4.3%
3.9%
3.9%
3.0%
2.6%
44.3%
30
25
20
15
10
5
0
$ 3.7
2005
31
$26.2
$19.1
$ 5.7
$6.8
$7.6
$8.2
$12.1
2006
2007
2008
2009
2010
2011
2012
i n vE s t mE n t B Al A n C E g R o W t h
D e c e m b e r 3 1 , 2 0 0 7 – $ 5 . 5 B i l l i o n 2
seniors housing – nnn
skilled nursing/Post-Acute
medical office Building
hospital
life science
seniors housing – operating
36.3%
31.7%
24.9%
7.1%
0.0%
0.0%
D e c e m b e r 3 1 , 2 0 1 1 – $ 1 5 . 5 B i l l i o n 2
seniors housing – nnn
skilled nursing/Post-Acute
medical office Building
hospital
life science
seniors housing – operating
28.1%
24.6%
19.0%
6.4%
2.4%
19.5%
D e c e m b e r 3 1 , 2 0 1 2 Pf – $ 2 3 . 9 B i l l i o n 1 , 2
seniors housing – nnn
skilled nursing/Post-Acute
medical office Building
hospital
life science
seniors housing – operating
22.7%
15.3%
16.4%
4.0%
1.5%
40.1%
R E t uR n s s i nC E i nC E P t i o n
Since it was founded in 1970, Health Care REIT has generated
a 16.1% average annual total return, including dividend
reinvestment. In February 2013, the company paid its 167th
consecutive dividend. The company’s dividend yield as of
February 25, 2013 was 4.8%.
18.3%
13.0%
15.6%
14.0%
16.1%
20%
15%
10%
5%
0%
1 year
5 years
10 years
20 years
since inception
1 Investment balance as of 12/31/2012 and pro forma for total announced $4.3 billion Sunrise acquisitions.
2 Gross real estate investments including HCN’s share of joint ventures; percentages represent allocation by investment balance
32
t h E h E Al t h CA R E m A R K Et :
s t R o n g P o tE n t iA l f oR g Ro W t h
All indicators suggest spending on health care will increase substantially
in the coming years. The Bureau of Economic Analysis ranks health care
as the largest industry in the United States economy. The National Health
Expenditures Report published by the Centers for Medicare and Medicaid
Services predicts average annual health spending growth of 5.8% over the
current decade, outpacing the expected growth rate for the overall economy
by 1.1%. Additionally, when the Affordable Care Act takes full effect in
2014, the average annual growth rate is expected to accelerate to 8.3%.
By 2020, the report predicts health spending will reach $4.6 trillion,
representing 19.8% of GDP, up from $2.0 trillion in spending and 16%
of GDP in 2005.
Taking into account the anticipated growth in health care spending over
the next 10 years, health care real estate will likely experience similar
demand growth. Meanwhile, with the total value of health care real estate
estimated close to $1 trillion, only about 8% is owned by public REITs.
Health Care REIT is immersed in this expanding health care environment,
seeking partnerships with providers that facilitate collaboration across
the health care continuum and deliver cost-efficient wellness in patient-
focused, conveniently located facilities.
Health Care REIT has become a thought leader, dedicated to helping
providers explore new ways of managing facilities for better patient
outcomes while discovering new cost-savings opportunities.
As the partner of choice in seniors housing, Health Care REIT, along with
its portfolio of providers, is working to shape the promising future of the
health care industry.
33
n o n -g A A P RE C o nC i l iA t i o n s
Health Care REIT, Inc. (HCN) believes net income attributable to common stockholders (NICS), as defined by U.S. generally accepted accounting
principles (U.S. GAAP), is the most appropriate earnings measurement. However, HCN considers Same Store Cash Net Operating Income (SSCNOI)
and Revenues Per Occupied Room (REVPOR) to be useful supplemental measures of its operating performance. Please refer to “Item 7 –
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” of HCN’s Annual Report
on Form 10-K for the year ended December 31, 2012, for a description of SSCNOI. REVPOR represents the average revenues generated per occupied
room per month at HCN’s seniors housing properties. It is calculated as total revenues divided by average monthly occupied room days. HCN uses
REVPOR to evaluate the revenue-generating capacity and profit potential of its seniors housing portfolio independent of fluctuating occupancy rates. It
is also used in comparison against industry and competitor statistics, if known, to evaluate the quality of HCN’s seniors housing portfolio. For purposes
of SSCNOI and same store REVPOR as used herein, same store is defined as those revenue-generating properties in the portfolio for the relevant
year-over-year periods presented. As such, properties acquired, developed or classified in discontinued operations during those periods are generally
excluded from the same store amounts. HCN’s supplemental reporting measures and similarly entitled financial measures are widely used by investors,
equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. HCN’s management
uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. HCN’s
Board of Directors also utilizes these measures to evaluate management. None of the supplemental reporting measures represent net income or
cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of
profitability or liquidity. Finally, the supplemental reporting measures, as defined by HCN, may not be comparable to similarly entitled items reported by
other real estate investment trusts or other companies. Dollars in thousands, except for REVPOR.
Three months ended
SSCNOI Reconciliations
3/31/12
3/31/11
6/30/12
6/30/11
9/30/12
9/30/11 12/31/12 12/31/11
Net income attributable to common
stockholders
$ 39,307 $ 23,372 $ 54,735 $ 69,847 $ 37,269 $ 36,607 $ 90,576 $ 27,282
Interest expense1
93,722
59,330
96,762
84,773
96,243
87,811
96,573
90,084
Depreciation and amortization1
127,422
74,768
132,963
111,053
132,858
115,640
140,342
122,144
General and administrative
27,751
17,714
25,870
19,561
23,679
19,735
20,039
20,190
Transaction costs
5,579
36,065
28,691
13,738
8,264
6,739
19,074
13,682
Loss (gain) on derivatives
555
-
(2,676)
Loss (gain) on extinguishment of debt
Provision for loan losses
-
-
-
576
-
-
409
215
-
(113)
-
-
(1,566)
(979)
248
-
168
27,008
132
-
1,463
Income tax expense (benefit)
1,470
129
1,447
211
836
223
3,858
825
Non-operating expenses from
unconsolidated entities
6,701
6,974
12,776
7,301
17,354
6,874
16,849
6,858
Loss (gain) on sales of properties
(769)
(26,156)
(32,450)
(30,224)
(12,827)
(185)
(54,502)
(4,594)
Impairment of assets
Preferred dividends
-
202
-
-
6,952
-
22,335
11,992
19,207
8,680
16,719
17,353
16,602
17,234
16,602
17,234
Preferred stock redemption charge
-
-
6,242
-
-
-
-
-
Income (loss) attributable to
noncontrolling interests
(1,056)
(242)
(821)
(992)
(365)
(1,488)
(174)
(2,173)
Net operating income (NOI)
$ 319,889 $ 201,084 $ 340,834 $ 292,789 $ 354,497 $ 289,322 $ 369,893 $ 304,008
Non-cash NOI attributable to same
store properties
NOI attributable to non same
store properties
Same store cash NOI pre-HCN
ownership2
(7,194)
(6,918)
(10,503)
(12,361)
(10,801)
(17,712)
(11,862)
(12,935)
(117,844)
(28,851)
(74,624)
(45,908)
(80,393)
(28,727) (102,046)
(52,049)
-
21,686
-
10,824
-
11,356
-
7,118
Same store cash NOI (SSCNOI)
$ 194,851 $ 187,001 $ 255,707 $ 245,344 $ 263,303 $ 254,239 $ 255,985 $ 246,142 Averages
Year-over-year SSCNOI growth
4.2%
4.2%
3.6%
4.0%
4.0%
SSCNOI attributable to seniors
housing triple-net
SSCNOI attributable to medical
facilities
SSCNOI attributable to seniors housing
operating (SHO)
(91,605)
(88,819) (140,620) (135,975) (146,955) (142,573) (139,136) (134,909)
(55,043)
(54,482)
(61,795)
(59,730)
(62,937)
(61,755)
(63,280)
(61,909)
$ 48,203 $ 43,700 $ 53,292 $ 49,639 $ 53,411 $ 49,911 $ 53,569 $ 49,324
Year-over-year SHO SSCNOI growth
10.3%
7.4%
7.0%
8.6%
8.3%
Notes:
1 Includes amounts related to discontinued operations.
2 Represents the performance of certain seniors housing operating properties that were not owned by HCN in the prior year period.
34
Three months ended
Same store REVPOR reconciliation
6/30/07 6/30/08 6/30/08 6/30/09 6/30/09 6/30/10 6/30/10 6/30/11 6/30/11 6/30/12
Operators’ revenues at seniors housing
triple-net properties1
HCN revenues at seniors housing
operating properties2
$ 118,675 $ 122,770 $ 113,019 $ 114,992 $ 120,384 $ 124,271 $ 124,173 $ 108,929 $ 181,509 $ 190,353
-
-
-
-
-
-
- 19,600 118,769 122,871
Total revenues
$ 118,675 $ 122,770 $ 113,019 $ 114,992 $ 120,384 $ 124,271 $ 124,173 $ 128,529 $ 300,278 $ 313,224
Average occupied units/month
30,903 30,435
28,121
27,814
29,322
29,547 28,736
28,880
65,838 66,293
Same store REVPOR
$
3,840 $ 4,034 $ 4,019 $ 4,134 $ 4,106 $ 4,206 $ 4,321 $ 4,450 $ 4,561 $ 4,725
Same store REVPOR growth
5.0%
2.9%
2.4%
3.0%
3.6%
Notes:
1 Represents revenues reported by operators at properties leased from HCN that were open and operating during the relevant year-over-year periods. Amounts are not reconcilable to
HCN revenues.
2 Represents revenues reported by HCN at properties that were open and operating during the relevant year-over-year periods. Amounts are reconcilable to HCN revenues as follows:
Resident fees and service revenues
Less fill-up and non same store revenues
Same store resident fees and
service revenues
Seniors housing operating REVPOR reconciliation
Total resident fees and service revenues
Less non U.S. revenues
Total U.S. resident fees and service revenues
Average occupied units/month
REVPOR
Notes:
1 Represents actual data for the three months ended December 31, 2012.
2 Represents forecasted data for the three months ended March 31, 2013.
$ 123,149 $ 123,149 $ 180,439
(103,549) (4,380) (57,568)
$ 19,600 $ 118,769 $ 122,871
HCN1
Sunrise2 Pro forma
$ 199,199
(16,119)
183,080 $ 151,287 $ 334,367
12,912
7,031
19,943
$
4,701 $
7,133 $ 5,558
35
f o R m 1 0 - K
36
36
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
Commission File No. 1-8923
HEALTH CARE REIT, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
4500 Dorr Street, Toledo, Ohio
(Address of principal executive office)
34-1096634
(I.R.S. Employer
Identification No.)
43615
(Zip Code)
(419) 247-2800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $1.00 par value
6.50% Series I Cumulative
Convertible Perpetual Preferred Stock, $1.00 par value
6.50% Series J Cumulative
Redeemable Preferred Stock, $1.00 par value
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í
No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘
No Í
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
the filing requirements for at least the past 90 days. Yes Í
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 for
such shorter period that the registrant was required to submit and post such files). Yes Í
No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment of this Form 10-K. Í
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Í
Accelerated filer ‘
Non-accelerated filer ‘
(Do not check if a smaller reporting company)
Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘
No Í
The aggregate market value of the shares of voting common stock held by non-affiliates of the registrant, computed by reference to the closing
sales price of such shares on the New York Stock Exchange as of the last business day of the registrant’s most recently completed second fiscal
quarter was $12,459,634,449.
As of January 31, 2013, the registrant had 260,433,734 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for the annual stockholders’ meeting to be held May 2, 2013, are incorporated by
reference into Part III.
HEALTH CARE REIT, INC.
2012 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . .
Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
3
30
39
40
42
43
44
46
47
78
79
118
118
120
120
120
120
120
120
Item 15. Exhibits and Financial Statement Schedules
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121
PART IV
2
Item 1.
Business
General
PART I
Health Care REIT, Inc. is a real estate investment trust (“REIT”) that has been at the forefront of seniors
housing and health care real estate since the company was founded in 1970. We are an S&P 500 company
headquartered in Toledo, Ohio. Our portfolio spans the full spectrum of seniors housing and health care real
estate, including seniors housing communities, skilled nursing/post-acute facilities, medical office buildings,
inpatient and outpatient medical centers and life science facilities. Our capital programs, when combined with
comprehensive planning, development and property management services, make us a single-source solution for
acquiring, planning, developing, managing, repositioning and monetizing real estate assets. More information is
available on the Internet at www.hcreit.com.
Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay
consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders
as a result of annual increases in net operating income and portfolio growth. To meet these objectives, we invest
across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by
property type, customer and geographic location.
Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund
operations, meet debt service obligations (both principal and interest), make dividend distributions and complete
construction projects in process. We also continuously evaluate opportunities to finance future investments. New
investments are generally funded from temporary borrowings under our primary unsecured line of credit
arrangement, internally generated cash and the proceeds from investment dispositions. Our investments generate
cash from net operating income and principal payments on loans receivable. Permanent financing for future
investments, which replaces funds drawn under our primary unsecured line of credit arrangement, has historically
been provided through a combination of the issuance of public debt and equity securities and the incurrence or
assumption of secured debt.
References herein to “we,” “us,” “our” or the “Company” refer to Health Care REIT, Inc. and its
subsidiaries unless specifically noted otherwise.
Portfolio of Properties
Please see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operation — Executive Summary — Company Overview” for a table that summarizes our portfolio as of
December 31, 2012.
Property Types
We invest in seniors housing and health care real estate and evaluate our business on three reportable
segments: seniors housing triple-net, seniors housing operating, and medical facilities. For additional information
regarding our segments, please see Note 17 to our consolidated financial statements. The accounting policies of
the segments are the same as those described in the summary of significant accounting policies in Note 2 to our
consolidated financial statements. The following is a summary of our various property types.
Seniors Housing Triple-Net
Our seniors housing triple-net properties include independent living facilities, continuing care retirement
communities, assisted living facilities, Alzheimer’s/dementia facilities, skilled nursing/post-acute facilities and
combinations thereof. We invest primarily through acquisitions and development. Our properties are primarily
leased to operators under long-term, triple-net master leases. We are not involved in property management. Our
properties include stand-alone facilities that provide one level of service, combination facilities that provide
multiple levels of service, and communities or campuses that provide a wide range of services.
3
Independent Living Facilities.
Independent living facilities are age-restricted, multifamily properties with
central dining facilities that provide residents access to meals and other services such as housekeeping, linen
service, transportation and social and recreational activities.
Continuing Care Retirement Communities. Continuing care retirement communities typically include a
combination of detached homes, an independent living facility, an assisted living facility and/or a skilled nursing
facility on one campus. These communities appeal to residents because there is no need to relocate when health
and medical needs change. Resident payment plans vary, but can include entrance fees, condominium fees and
rental fees. Many of these communities also charge monthly maintenance fees in exchange for a living unit,
meals and some health services.
Assisted Living Facilities. Assisted living facilities are state regulated rental properties that provide the
same services as independent living facilities, but also provide supportive care from trained employees to
residents who require assistance with activities of daily living, including, but not limited to, management of
medications, bathing, dressing, toileting, ambulating and eating.
Alzheimer’s/Dementia Care Facilities. Certain assisted living facilities may include state licensed settings
that specialize in caring for those afflicted with Alzheimer’s disease and/or other types of dementia.
Skilled Nursing/Post-Acute Facilities. Skilled nursing/post-acute facilities are licensed daily rate or rental
properties where the majority of individuals require 24-hour nursing and/or medical care. Generally, these
properties are licensed for Medicaid and/or Medicare reimbursement. All facilities offer some level of
rehabilitation services. Some facilities focus on higher acuity patients and offer rehabilitation units specializing
in cardiac, orthopedic, dialysis, neurological or pulmonary rehabilitation.
Our seniors housing triple-net segment accounted for 41%, 46% and 60% of total revenues (including
discontinued operations) for the years ended December 31, 2012, 2011 and 2010, respectively. We lease 177
facilities to Genesis HealthCare, LLC pursuant to a long-term, triple-net master lease. In addition to rent, the
master lease requires Genesis to pay all operating costs, utilities, real estate taxes, insurance, building repairs,
maintenance costs and all obligations under the ground leases. All obligations under the master lease have been
guaranteed by FC-GEN Operations Investment, LLC. For the year ended December 31, 2012, our lease with
Genesis accounted for approximately 31% of our seniors housing triple-net segment revenues and 13% of our
total revenues.
Seniors Housing Operating
Our seniors housing operating properties include the same facility types described in “Item 1 — Business —
Property Types — Seniors Housing Triple-Net.” Properties are primarily held in consolidated joint venture
entities with operating partners. We utilize the structure proposed in the REIT Investment Diversification Act of
2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code
authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008).
Our seniors housing operating segment accounted for 37%, 32% and 7% of total revenues (including
discontinued operations) for the years ended December 31, 2012, 2011 and 2010, respectively. We have
relationships with eight operators to own and operate 154 facilities (plus 39 facilities in an unconsolidated joint
venture). In each instance, our partner provides management services to the properties pursuant to an incentive-
based management contract. We rely on our partners to effectively and efficiently manage these properties.
Please see Note 21 to our consolidated financial statements for information regarding our acquisition of Sunrise
Senior Living, Inc. on January 9, 2013. The following table provides information about our seniors housing
operating concentration for the year ended December 31, 2012:
Partner
% of Segment Revenues % of Total Revenues
Benchmark Senior Living, LLC . . . . . . . . . . . . . . . . . . . .
Merrill Gardens LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32%
31%
12%
11%
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Medical Facilities
Our medical facilities include medical office buildings, hospitals and life science facilities. We typically
lease our medical office buildings to multiple tenants and provide varying levels of property management. Our
hospital investments are typically structured similar to our seniors housing triple-net investments. Our life
science investment represents an investment in an unconsolidated joint venture entity (see Note 7 to our
consolidated financial statements). Our medical facilities segment accounted for 22%, 22% and 32% of total
revenues (including discontinued operations) for the years ended December 31, 2012, 2011 and 2010,
respectively. No single tenant exceeds 20% of segment revenues.
Medical Office Buildings. The medical office building portfolio consists of health care related buildings
that generally include physician offices, ambulatory surgery centers, diagnostic facilities, outpatient services and/
or labs. Our portfolio has a strong affiliation with health systems. Approximately 92% of our medical office
building portfolio is affiliated with health systems by having buildings on hospital campuses or serving as
satellite locations for the health system and their physicians.
Hospitals. Our hospitals generally include acute care hospitals, inpatient rehabilitation hospitals, and long-
term acute care hospitals. Acute care hospitals provide a wide range of inpatient and outpatient services,
including, but not limited to, surgery, rehabilitation, therapy and clinical laboratories. Inpatient rehabilitation
hospitals provide inpatient services for patients with intensive rehabilitation needs. Long-term acute care
hospitals provide inpatient services for patients with complex medical conditions that require more intensive
care, monitoring or emergency support than is available in most skilled nursing facilities.
Life Science Facilities. The life science portfolio consists of laboratory and office facilities specifically
designed and constructed for use by biotechnology and pharmaceutical companies. These facilities are located
adjacent
to The Massachusetts Institute of Technology, which is a well-established market known for
pharmaceutical and biotechnology research. They are similar to commercial office buildings with advanced
HVAC (heating, ventilation and air conditioning), electrical and mechanical systems.
Investments
Depending upon market conditions, we believe that new investments will be available in the future with
spreads over our cost of capital that will generate appropriate returns to our stockholders. We invest in seniors
housing and health care real estate primarily through acquisitions, developments and joint venture partnerships.
For additional information regarding acquisition and development activity, please see Note 3 to our consolidated
financial statements. We diversify our investment portfolio by property type, customer and geographic location.
In determining whether to invest in a property, we focus on the following: (1) the experience of the obligor’s/
partner’s management team; (2) the historical and projected financial and operational performance of the
property; (3) the credit of the obligor/partner; (4) the security for any lease or loan; (5) the real estate attributes of
the building and its location; (6) the capital committed to the property by the obligor/partner; and (7) the
operating fundamentals of the applicable industry. We conduct market research and analysis for all potential
investments. In addition, we review the value of all properties, the interest rates and covenant requirements of
any facility-level debt to be assumed at the time of the acquisition and the anticipated sources of repayment of
any existing debt that is not to be assumed at the time of the acquisition.
statements and other operating data for each property,
We monitor our investments through a variety of methods determined by the type of property. Our proactive
and comprehensive asset management process for seniors housing properties generally includes review of
monthly financial
review of obligor/partner
creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes,
letters of credit and other collateral. Our internal property management division actively manages and monitors
the medical office building portfolio with a comprehensive process including tenant relations, lease expirations,
the mix of health service providers, hospital/health system relationships, property performance, capital
improvement needs, and market conditions among other things. In monitoring our portfolio, our personnel use a
proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to
ascertain industry trends.
5
We evaluate the operating environment in each property’s market to determine the likely trend in operating
performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the
risk. Through these efforts, we are generally able to intervene at an early stage to address any negative trends,
and in so doing, support both the collectability of revenue and the value of our investment.
Investment Types
Real Property. Our properties are primarily comprised of land, building, improvements and related rights.
Our hospitals and seniors housing triple-net properties are generally leased to operators under long-term
operating leases. The leases generally have a fixed contractual term of 12 to 15 years and contain one or more
five to 15-year renewal options. Certain of our leases also contain purchase options. Most of our rents are
received under triple-net leases requiring the operator to pay rent and all additional charges incurred in the
operation of the leased property. The tenants are required to repair, rebuild and maintain the leased properties.
Substantially all of these operating leases are designed with escalating rent structures. Leases with fixed annual
rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a
collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded
based on the contractual cash rental payments due for the period.
At December 31, 2012, approximately 91% of our hospitals and seniors housing triple-net properties were
subject to master leases. A master lease is a lease of multiple properties to one tenant entity under a single lease
agreement. From time to time, we may acquire additional properties that are then leased to the tenant under the
master lease. The tenant is required to make one monthly payment that represents rent on all the properties that
are subject to the master lease. Typically, the master lease tenant can exercise its right to purchase the properties
or to renew the master lease only with respect to all leased properties at the same time. This bundling feature
benefits us because the tenant cannot limit the purchase or renewal to the better performing properties and
terminate the leasing arrangement with respect to the poorer performing properties. This spreads our risk among
the entire group of properties within the master lease. The bundling feature should provide a similar advantage if
the master lease tenant is in bankruptcy. Subject to certain restrictions, a debtor in bankruptcy has the right to
assume or reject each of its leases. It is our intent that a tenant in bankruptcy would be required to assume or
reject the master lease as a whole, rather than deciding on a property by property basis.
Our medical office building portfolio is primarily self-managed and consists principally of multi-tenant
properties leased to health care providers. Our leases have favorable lease terms that typically include increasers
and some form of operating expense reimbursement by the tenant. As of December 31, 2012, 83% of our
portfolio included leases with full pass through, 15% with a partial expense reimbursement (modified gross) and
2% with no expense reimbursement (gross). Our medical office building leases are non-cancellable operating
leases that have a weighted-average remaining term of 8.0 years at December 31, 2012 and are often credit
enhanced by guaranties and/or letters of credit.
Construction. We occasionally provide for the construction of properties for tenants as part of long-term
operating leases. We capitalize certain interest costs associated with funds used for the construction of properties
owned by us. The amount capitalized is based upon the amount advanced during the construction period using
the rate of interest that approximates our company-wide cost of financing. Our interest expense is reduced by the
amount capitalized. We also typically charge a transaction fee at the commencement of construction which we
defer and amortize to income over the term of the resulting lease. The construction period commences upon
funding and terminates upon the earlier of the completion of the applicable property or the end of a specified
period. During the construction period, we advance funds to the tenants in accordance with agreed upon terms
and conditions which require, among other things, periodic site visits by a Company representative. During the
construction period, we generally require an additional credit enhancement
in the form of payment and
performance bonds and/or completion guaranties. At December 31, 2012, we had outstanding construction
investments of $162,984,000 and were committed to provide additional funds of approximately $213,255,000 to
complete construction for investment properties.
Real Estate Loans. Our real estate loans are typically structured to provide us with interest income,
principal amortization and transaction fees and are generally secured by first/second mortgage liens, leasehold
mortgages, corporate guaranties and/or personal guaranties. At December 31, 2012, we had outstanding real
6
estate loans of $895,665,000. The interest yield averaged approximately 6.4% per annum on our outstanding real
estate loan balances. Our yield on real estate loans depends upon a number of factors, including the stated interest
rate, average principal amount outstanding during the term of the loan and any interest rate adjustments. The real
estate loans outstanding at December 31, 2012 are generally subject to one to 15-year terms with principal
amortization schedules and/or balloon payments of the outstanding principal balances at the end of the term.
Typically, real estate loans are cross-defaulted and cross-collateralized with other real estate loans, operating
leases or agreements between us and the obligor and its affiliates.
Investments in Unconsolidated Entities. Our investments in unconsolidated entities generally represent
interests ranging from 10% to 50% in real estate assets. Investments in less than majority owned entities where
our interests represent a general partnership interest but substantive participating or kick-out rights have been
granted to the limited partners, or where our interests do not represent the general partnership interest and we do
not control the major operating and financial policies of the entity, are reported under the equity method of
accounting. Under the equity method of accounting, our share of the investee’s earnings or losses is included in
our consolidated results of operations. To the extent that our cost basis is different from the basis reflected at the
entity level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such
amortization is included in our share of equity in earnings of the entity. The initial carrying value of investments
in unconsolidated entities is based on the amount paid to purchase the entity interest or the estimated fair value of
the assets prior to the sale of interests in the entity. Other equity investments include an investment in available-
for-sale securities. These equity investments represented a minimal ownership interest in these companies. We
evaluate our equity method investments for impairment based upon a comparison of the estimated fair value of
the equity method investment to its carrying value. When we determine a decline in the estimated fair value of
such an investment below its carrying value is other-than-temporary, an impairment is recorded. See Note 7 to
our consolidated financial statements for more information.
Principles of Consolidation
The consolidated financial statements include the accounts of our wholly-owned subsidiaries and joint
venture entities that we control, through voting rights or other means. All material intercompany transactions and
balances have been eliminated in consolidation.
At inception of the joint venture transactions, we identify entities for which control is achieved through
means other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is
the primary beneficiary of its operations. A VIE is broadly defined as an entity where either (i) the equity
investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is
insufficient to finance that entity’s activities without additional subordinated financial support. We consolidate
investments in VIEs when we are determined to be the primary beneficiary. Accounting Standards Codification
Topic 810, Consolidations, requires enterprises to perform a qualitative approach to determining whether or not a
VIE will need to be consolidated on a continuous basis. This evaluation is based on an enterprise’s ability to
direct and influence the activities of a VIE that most significantly impact that entity’s economic performance.
For investments in joint ventures, we evaluate the type of rights held by the limited partner(s), which may
preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the
limited partnership. The assessment of limited partners’ rights and their impact on the presumption of control
over a limited partnership by the sole general partner should be made when an investor becomes the sole general
partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the
limited partners, (ii) the sole general partner increases or decreases its ownership in the limited partnership
interests, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. We
similarly evaluate the rights of managing members of limited liability companies.
Borrowing Policies
We utilize a combination of debt and equity to fund investments. Our debt and equity levels are determined
by management to maintain a conservative credit profile. Generally, we intend to issue unsecured, fixed-rate
public debt with long-term maturities to approximate the maturities on our leases and loans. For short-term
7
purposes, we may borrow on our primary unsecured line of credit arrangement. We replace these borrowings
with long-term capital such as senior unsecured notes, common stock or preferred stock. When terms are deemed
favorable, we may invest in properties subject to existing mortgage indebtedness. In addition, we may obtain
secured financing for unleveraged properties in which we have invested or may refinance properties acquired on
a leveraged basis. In our agreements with our lenders, we are subject to restrictions with respect to secured and
unsecured indebtedness.
Competition
We compete with other real estate investment trusts, real estate partnerships, private equity and hedge fund
investors, banks, insurance companies, finance/investment companies, government-sponsored agencies, taxable
and tax-exempt bond funds, health care operators, developers and other investors in the acquisition, development,
leasing and financing of health care and seniors housing properties. We compete for investments based on a
number of
factors including investment structures, underwriting criteria and reputation. Our ability to
successfully compete is impacted by economic and demographic trends, availability of acceptable investment
opportunities, our ability to negotiate beneficial investment terms, availability and cost of capital, construction
and renovation costs and new and existing laws and regulations.
The operators/tenants of our properties compete on a local and regional basis with operators/tenants of
properties that provide comparable services. Operators/tenants compete for patients and residents based on a
number of factors including quality of care, reputation, physical appearance of properties, location, services
offered, family preferences, physicians, staff and price. We also face competition from other health care facilities
for tenants, such as physicians and other health care providers that provide comparable facilities and services.
For additional information on the risks associated with our business, please see “Item 1A — Risk Factors”
of this Annual Report on Form 10-K.
Employees As of January 31, 2013, we had 366 employees.
Customer Concentrations Please see Note 8 to our consolidated financial statements.
Geographic Concentrations Please see “Item 2 — Properties” of this Annual Report on Form 10-K.
Certain Government Regulations
Health Law Matters — Generally
Typically, operators of seniors housing facilities do not receive significant funding from government
programs and are largely subject to state laws, as opposed to federal laws. Operators of skilled nursing facilities
and hospitals do receive significant funding from government programs, and these facilities are subject to the
federal and state laws that regulate the type and quality of the medical and/or nursing care provided, ancillary
services (e.g., respiratory, occupational, physical and infusion therapies), qualifications of the administrative
personnel and nursing staff, the adequacy of the physical plant and equipment, reimbursement and rate setting
and operating policies. In addition, as described below, operators of these facilities are subject to extensive laws
and regulations pertaining to health care fraud and abuse, including, but not limited to, the Federal Anti-
Kickback Statute, the Federal Stark Law, and the Federal False Claims Act, as well as comparable state law
counterparts. Hospitals, physician group practice clinics, and other health care providers that operate in our
portfolio are subject to extensive federal, state, and local licensure, registration, certification, and inspection laws,
regulations, and industry standards. Our tenants’ failure to comply with any of these, and other, laws could result
in loss of accreditation; denial of reimbursement; imposition of fines; suspension, decertification, or exclusion
from federal and state health care programs; loss of license; or closure of the facility.
Licensing and Certification
The primary regulations that affect seniors housing facilities with assisted living are state licensing and
registration laws. In granting and renewing these licenses, the state regulatory agencies consider numerous
factors relating to a property’s physical plant and operations, including, but not limited to, admission and
discharge standards, staffing, and training. A decision to grant or renew a license is also affected by a property
8
owner’s record with respect to patient and consumer rights, medication guidelines, and rules. Certain of the
seniors housing facilities mortgaged to or owned by us may require the resident to pay an entrance or upfront fee,
a portion of which may be refundable. These entrance fee communities are subject to significant state regulatory
oversight, including, for example, oversight of each facility’s financial condition; establishment and monitoring
of reserve requirements, and other financial restrictions; the right of residents to cancel their contracts within a
specified period of time; lien rights in favor of residents; restrictions on change of ownership; and similar
matters. Such oversight, and the rights of residents within these entrance fee communities, may have an effect on
the revenue or operations of the operators of such facilities, and, therefore, may adversely affect us.
Certain health care facilities are subject to a variety of licensure and certificate of need (“CON”) laws and
regulations. Where applicable, CON laws generally require, among other
that a facility
demonstrate the need for (1) constructing a new facility, (2) adding beds or expanding an existing facility,
(3) investing in major capital equipment or adding new services, (4) changing the ownership or control of an
existing licensed facility, or (5) terminating services that have been previously approved through the CON
process. Certain state CON laws and regulations may restrict the ability of operators to add new properties or
expand an existing facility’s size or services. In addition, CON laws may constrain the ability of an operator to
transfer responsibility for operating a particular facility to a new operator. If we have to replace a property
operator who is excluded from participating in a federal or state health care program (as discussed below), our
ability to replace the operator may be affected by a particular state’s CON laws, regulations, and applicable
guidance governing changes in provider control.
requirements,
With respect to licensure, generally our skilled nursing facilities and acute care facilities are required to be
licensed and certified for participation in Medicare, Medicaid, and other federal health care programs. This
generally requires license renewals and compliance surveys on an annual or bi-annual basis. The failure of our
operators to maintain or renew any required license or regulatory approval as well as the failure of our operators
to correct serious deficiencies identified in a compliance survey could require those operators to discontinue
operations at a property. In addition, if a property is found to be out of compliance with Medicare, Medicaid, or
other health care program conditions of participation, the property operator may be excluded from participating
in those government health care programs. Any such occurrence may impair an operator’s ability to meet their
financial obligations to us. If we have to replace an excluded-property operator, our ability to replace the operator
may be affected by federal and state laws, regulations, and applicable guidance governing changes in provider
control. This may result in payment delays, an inability to find a replacement operator, a significant working
capital commitment from us to a new operator or other difficulties.
Reimbursement
to assisted living providers as an alternative to institutional
Seniors Housing Facilities (excluding skilled nursing facilities). Approximately 58% of our overall
revenues for the year ended December 31, 2012 were attributable to seniors housing facilities. The majority of
the revenues received by the operators of these facilities are from private pay sources. The remaining revenue
source is primarily Medicaid under certain waiver programs. As a part of the Omnibus Budget Reconciliation Act
(“OBRA”) of 1981, Congress established a waiver program enabling some states to offer Medicaid
reimbursement
long-term care services. The
provisions of OBRA and the subsequent OBRA Acts of 1987 and 1990 permit states to seek a waiver from
typical Medicaid requirements to develop cost-effective alternatives to long-term care, including Medicaid
payments for assisted living and home health. As of December 31, 2012, ten of our 42 seniors housing operators
received Medicaid reimbursement pursuant
to Medicaid waiver programs. For the twelve months ended
September 30, 2012, approximately 4% of the revenues at our seniors housing facilities were from Medicaid
reimbursement. There can be no guarantee that a state Medicaid program operating pursuant to a waiver will be
able to maintain its waiver status.
Rates paid by self-pay residents are set by the facilities and are determined by local market conditions and
operating costs. Generally, facilities receive a higher payment per day for a private pay resident than for a
Medicaid beneficiary who requires a comparable level of care. The level of Medicaid reimbursement varies from
state to state. Thus, the revenues generated by operators of our assisted living facilities may be adversely affected
by payor mix, acuity level, changes in Medicaid eligibility, and reimbursement levels. In addition, a state could
9
lose its Medicaid waiver and no longer be permitted to utilize Medicaid dollars to reimburse for assisted living
services. Changes in revenues could in turn have a material adverse effect on an operator’s ability to meet its
obligations to us.
Skilled Nursing Facilities and Hospitals. Skilled nursing facilities and hospitals typically receive most of
their revenues from the Medicare and Medicaid programs, with the balance representing reimbursement
payments from private payors,
including private insurers. Consequently, changes in federal or state
reimbursement policies may also adversely affect an operator’s ability to cover its expenses, including our rent or
debt service. Skilled nursing facilities and hospitals are subject to periodic pre- and post-payment reviews, and
other audits by federal and state authorities. A review or audit of a property operator’s claims could result in
recoupments, denials, or delay of payments in the future, which could have a material adverse effect on the
operator’s ability to meet its financial obligations to us. Due to the significant judgments and estimates inherent
in payor settlement accounting, no assurance can be given as to the adequacy of any reserves maintained by our
property operators to cover potential adjustments to reimbursements, or to cover settlements made to payors. In
fact, in December 2010, the Department of Health and Human Services Office of Inspector General (“OIG”)
released a report focusing on skilled nursing facilities’ billing practices for Medicare Part A payments, and found
that between 2006-2008 skilled nursing facilities increasingly billed for higher paying Resource Utilization
Groups (“RUGs”), the payment classification mechanism for the Medicare program, even though beneficiary
characteristics remained largely unchanged. In particular, from 2006 to 2008, OIG found that the percentage of
RUGs for ultra high therapy increased from 17% to 28%, despite the fact that beneficiaries’ ages and diagnoses
at admission were largely unchanged during that time period. In November 2012, the OIG released a report
focused on inappropriate payments to skilled nursing facilities, and found that of the 499 claims from 2009 that
were reviewed in the study, skilled nursing facilities billed 25% of the claims in error and misreported
information on the Minimum Data Set (“MDS”) for 47% of the claims. Recent attention on skilled nursing
billing practices and payments or ongoing government pressure to reduce spending by government health care
programs, could result in lower payments to skilled nursing facilities and, as a result, may impair an operator’s
ability to meet its financial obligations to us.
Medicare Reimbursement and Skilled Nursing Facilities. For the twelve months ended September 30,
2012, approximately 29% of the revenues at our skilled nursing facilities (which comprised 20% of our overall
revenues for the year ended December 31, 2012) were paid by Medicare. Skilled nursing facilities are reimbursed
under the Medicare Skilled Nursing Facility Prospective Payment System (“SNF PPS”). There is a risk that some
skilled nursing facilities’ costs will exceed the fixed payments under the SNF PPS, and there is also a risk that
payments under the SNF PPS may be set below the costs to provide certain items and services, which could
result
in immediate financial difficulties for skilled nursing facilities, and could cause operators to seek
bankruptcy protection. Skilled nursing facilities have faced these types of difficulties since the implementation of
the SNF PPS.
The Centers for Medicare & Medicaid Services (“CMS”), an agency of the U.S. Department of Health and
Human Services (“HHS”), made a positive payment update for skilled nursing facilities for fiscal year 2013. For
fiscal year 2013, skilled nursing facilities received a 1.8% increase in RUG payments, resulting from a 2.5%
market basket update less a 0.7% multi-factor productivity adjustment . In addition, on November 21, 2011, the
Joint Select Committee on Deficit Reduction, which was created by the Budget Control Act of 2011, concluded
its work, and issued a statement that it was not able to make a bipartisan agreement, thus triggering the
sequestration process. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act
of 2012, which delayed the sequestration process until March 2013. The sequestration process, if triggered, will
result in spending reductions, including Medicare cuts. The American Taxpayer Relief Act of 2012 also
increased the multiple procedure discount for Part B therapy services from 25% to 50% effective April 2013.
In addition, Section 5008 of the Deficit Reduction Act of 2005 directed the Secretary of HHS to conduct a
Post Acute Care Payment Reform Demonstration (“PAC-PRD”) program, for a three year period, beginning
January 1, 2008, to assess the costs and outcomes of patients discharged from hospitals in a variety of post-acute
care settings, including skilled nursing facilities. The demonstration program’s results and recommendations
were reported to Congress in a January 2012 report. The results and recommendations could lead to future
changes in Medicare coverage, reimbursement, and reporting requirements for post-acute care.
10
The Balanced Budget Act of 1997 mandated caps on Medicare reimbursement for certain therapy services.
However, Congress imposed various waivers on the implementation of those caps. The Middle Class Tax Relief
and Job Creation Act of 2012 made a number of changes, including, effective on October 1, 2012, applying the
therapy caps to outpatient hospitals, creating two new threshold amounts of $3,700 (one for each therapy cap
amount), and requiring a manual medical review process of claims over these new thresholds. The Middle Class
Tax Relief and Job Creation Act of 2012 also extended the waiver program related to therapy caps through the
end of 2012. These therapy caps may negatively impact payments to skilled nursing facilities. However,
members of MedPAC recently stated that they would prefer not to have hard caps, which indicates that the
waiver program for therapy caps will likely continue.
If the waiver program expires, patients will need to use private funds to pay for the cost of therapy above the
caps. If patients are unable to satisfy their out-of-pocket cost responsibility to reimburse an operator for services
rendered, the operator’s ability to meet its financial obligations to us could be adversely impacted.
Medicare Reimbursement and Hospitals. For
the twelve months ended September 30, 2012,
approximately 52% of the revenues at our hospitals (which comprised 5% of our overall revenues for the year
ended December 31, 2012) were from Medicare reimbursements. Hospitals, generally, are reimbursed by
Medicare under the Hospital Inpatient Prospective Payment System (“PPS”), the Hospital Outpatient Prospective
Payment System (“OPPS”), the Long Term Care Hospital Prospective Payment System (“LTCH PPS”), or the
Inpatient Rehabilitation Facility Prospective Payment System (“IRF PPS”). Acute care hospitals provide a wide
range of inpatient and outpatient services, including, but not limited to, surgery, rehabilitation, therapy, and
clinical laboratory services. Long-term acute care hospitals provide inpatient services for patients with medical
conditions that are often complex and that require more intensive care, monitoring or emergency support than
that available in most skilled nursing facilities. Inpatient rehabilitation facilities provide intensive rehabilitation
services in an inpatient setting for patients requiring at least three hours of rehabilitation services a day.
With respect to Medicare’s PPS for regular hospitals, reimbursement for inpatient services is made on the
basis of a fixed, prospective rate, based on the principal diagnosis of the patient. Hospitals may be at risk to the
extent that their costs in treating a specific case exceed the fixed payment amount. The diagnosis related group
(“DRG”) reimbursement system was updated in 2008 to expand the number of DRGs from 538 to 745 in order to
better distinguish more severe conditions. The addition of new DRGs raised the total number of DRGs to 751. In
some cases, a hospital might be able to qualify for an outlier payment if the hospital’s losses exceed a threshold.
On August 1, 2012, CMS published a final rule for the inpatient prospective payment system, which sets forth
acute care and long-term care hospital payment rate changes for the 2013 fiscal year. Specifically, CMS estimates that,
for fiscal year 2013, the Medicare rates for inpatient stays at acute care hospitals will increase by 2.8% for those
hospitals that successfully participate in the Hospital Inpatient Quality Reporting Program, while those that do not
successfully participate in that program would receive a payment rate increase of 0.8%. CMS also implemented a
3.75% one-time budget neutrality adjustment to the long-term care hospital rate that would be phased in over three
years. The first year phase in of that adjustment will be 1.3%, which would apply to payments or discharges on or after
December 29, 2012. CMS adopted a one-year extension of the existing moratorium on the 25% threshold policy,
through fiscal year 2013, beginning on or after October 1, 2012 and before October 1, 2013. CMS clarified its
regulations to reflect an existing policy that the Inpatient Prospective Payment System comparable per diem amount is
capped at an amount comparable to what would have been a full payment under the Inpatient Prospective Payment
System and that cap applies to short stay cases in long-term care hospitals with discharges occurring on or after
December 29, 2012. The legislative moratorium on new long-term hospitals and satellite facilities is set to expire at the
end of 2012. Additionally, on July 30, 2012, CMS released notices updating the payment rates for inpatient
rehabilitation facilities (“IRFs”). For IRF discharges occurring on or after October 1, 2012 and on or before
September 30, 2013, CMS is implementing a net 1.9% rate increase.
On November 1, 2012, CMS published the calendar year 2013 final rule with comment period for outpatient
care hospitals and ambulatory surgery centers. CMS estimates that the rates and policies in the final rule will
increase payment rates for ambulatory surgery centers by 0.6%.
Medicare Reimbursement and Physicians. CMS annually adjusts the Medicare Physician Fee Schedule
payment rates based on an update formula that includes application of the Sustainable Growth Rate (“SGR”). On
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November 1, 2011, CMS published the calendar year 2012 Physician Fee Schedule final rule for a negative
27.4% update under the statutory SGR formula. In February 2012, Congress passed the Middle Class Tax Relief
and Job Creation Act of 2012, which blocked the cut through the end of 2012. On November 1, 2012, CMS
published the calendar year 2013 Physician Fee Schedule final rule with comment period. The final rule calls for
a negative 26.5% update under the statutory SGR formula. Congress has overridden the required reduction every
year from 2003 through the end of 2012. The final rule continues implementation of quality and cost measures
that will be used in establishing a new value-based modifier that would adjust physician payments based on
whether they are providing higher quality and more efficient care. The Health Reform Laws, as defined below,
require CMS to begin making payment adjustments to certain physicians and physician groups on January 1,
2015, and to apply the modifier to all physicians by January 1, 2017. Calendar year 2013 is the initial
performance year for purposes of adjusting payments in calendar year 2015.
Medicaid Reimbursement. Medicaid is a major payor source for residents in our skilled nursing facilities
and hospitals. For the twelve months ended September 30, 2012, approximately 49% of the revenues of our
skilled nursing facilities and 11% of the revenues of our hospitals were attributable to Medicaid reimbursement
payments. The federal and state governments share responsibility for financing Medicaid. The federal matching
rate, known as the Federal Medical Assistance Percentage (“FMAP”), varies by state based on relative per capita
income, but is at least 50% in all states. On average, Medicaid is the largest component of total state spending,
representing approximately 23.7% of total state expenditures in state fiscal year 2011. The percentage of
Medicaid dollars used for long-term care varies from state to state, due in part to different ratios of elderly
population and eligibility requirements. Within certain federal guidelines, states have a fairly wide range of
discretion to determine eligibility and reimbursement methodology. Many states reimburse long-term care
facilities using fixed daily rates, which are applied prospectively based on patient acuity and the historical costs
incurred in providing patient care. Reasonable costs typically include allowances for staffing, administrative and
general expenses, property, and equipment (e.g., real estate taxes, depreciation and fair rental).
In most states, Medicaid does not fully reimburse the cost of providing skilled nursing services. Certain
states are attempting to slow the rate of growth in Medicaid expenditures by freezing rates or restricting
eligibility and benefits. Our skilled nursing portfolio’s average Medicaid rate will likely vary throughout the year
as states continue to make interim changes to their budgets and Medicaid funding. In addition, Medicaid
reimbursement rates may decline if revenues in a particular state are not sufficient to fund budgeted expenditures.
President Obama’s proposed fiscal year budget for 2013, released on February 13, 2012, includes a proposal to
place new limits on state provider taxes that are used to pay the state share of Medicaid and has the potential to
further impact Medicaid reimbursement rates. The President’s budget includes a proposal to phase down the
Medicaid provider tax, a tax paid by health care providers to help fund state Medicaid programs, beginning with
a reduction from the current law level of 6.0% to 4.5% in fiscal year 2015. The President’s budget also includes a
proposal to replace the Federal matching rate for state Medicaid and the Children’s Health Insurance Program
with a single matching rate specific to each state.
The Medicare Part D drug benefit became effective January 1, 2006. Since that date, low-income Medicare
beneficiaries (eligible for both Medicare and full Medicaid benefits), including those nursing home residents who
are dually eligible for both programs, may enroll and receive outpatient prescription drugs under Medicare, not
Medicaid. Medicare Part D has resulted in increased administrative responsibilities for nursing home operators
because enrollment in Medicare Part D is voluntary and residents must choose between multiple prescription
drug plans. Operators may also experience increased expenses to the extent that a particular drug prescribed to a
patient is not listed on the Medicare Part D drug plan formulary for the plan in which the patient is enrolled.
The reimbursement methodologies applied to health care facilities continue to evolve. Federal and state
authorities have considered and may seek to implement new or modified reimbursement methodologies that may
negatively impact health care property operations. The impact of any such changes, if implemented, may result in
a material adverse effect on our skilled nursing and hospital property operations. No assurance can be given that
current revenue sources or levels will be maintained. Accordingly, there can be no assurance that payments under
a government health care program are currently, or will be in the future, sufficient to fully reimburse the property
operators for their operating and capital expenses. As a result, an operator’s ability to meet its financial
obligations to us could be adversely impacted.
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Finally, the Patient Protection and Affordable Care Act of 2010 (“PPACA”) and the Health Care and
Education Reconciliation Act of 2010, which amends the PPACA (collectively, the “Health Reform Laws”)
(further discussed below) may have a significant impact on Medicare, Medicaid, other federal health care
programs, and private insurers, which impact the reimbursement amounts received by skilled nursing facilities
and other health care providers. The Health Reform Laws could have a substantial and material adverse effect on
all parties directly or indirectly involved in the health care system.
Other Related Laws
Skilled nursing facilities and hospitals (and seniors housing facilities that receive Medicaid payments) are
subject to federal, state, and local laws, regulations, and applicable guidance that govern the operations and
financial and other arrangements that may be entered into by health care providers. Certain of these laws prohibit
direct or indirect payments of any kind for the purpose of inducing or encouraging the referral of patients for
medical products or services reimbursable by government health care programs. Other laws require providers to
furnish only medically necessary services and submit to the government valid and accurate statements for each
service. Still, other laws require providers to comply with a variety of safety, health and other requirements
relating to the condition of the licensed property and the quality of care provided. Sanctions for violations of
these laws, regulations, and other applicable guidance may include, but are not limited to, criminal and/or civil
penalties and fines, loss of licensure, immediate termination of government payments, and exclusion from any
government health care program. In certain circumstances, violation of these rules (such as those prohibiting
abusive and fraudulent behavior) with respect to one property may subject other facilities under common control
or ownership to sanctions, including exclusion from participation in the Medicare and Medicaid programs, as
well as other government health care programs. In the ordinary course of its business, a property operator is
regularly subjected to inquiries, investigations, and audits by the federal and state agencies that oversee these
laws and regulations.
All health care providers, including, but not limited to skilled nursing facilities and hospitals (and seniors
housing facilities that receive Medicaid payments) are also subject to the Federal Anti-Kickback Statute, which
generally prohibits persons from offering, providing, soliciting, or receiving remuneration to induce either the
referral of an individual or the furnishing of a good or service for which payment may be made under a federal
health care program, such as Medicare or Medicaid. Skilled nursing facilities and hospitals are also subject to the
Federal Ethics in Patient Referral Act of 1989, commonly referred to as the Stark Law. The Stark Law generally
prohibits the submission of claims to Medicare for payment if the claim results from a physician referral for
certain designated services and the physician has a financial relationship with the health service provider that
does not qualify under one of the exceptions for a financial relationship under the Stark Law. Similar prohibitions
on physician self-referrals and submission of claims apply to state Medicaid programs. Further, health care
providers, including, but not limited to, skilled nursing facilities and hospitals (and seniors housing facilities that
receive Medicaid payments), are subject to substantial financial penalties under the Civil Monetary Penalties Act
the Federal False Claims Act’s
and the Federal False Claims Act and,
to
“whistleblower” provisions. Private enforcement of health care fraud has increased due in large part
amendments to the Federal False Claims Act that encourage private individuals to sue on behalf of the
government. These whistleblower suits brought by private individuals, known as qui tam actions, may be filed by
almost anyone, including present and former patients, nurses and other employees. Such whistleblower actions
have been brought against nursing facilities on the basis of the alleged failure of the nursing facility to meet
applicable regulations relating to its operations. Significantly, if a claim is successfully adjudicated, the Federal
False Claims Act provides for treble damages up to $11,000 per claim.
in particular, actions under
Prosecutions, investigations, or whistleblower actions could have a material adverse effect on a property
operator’s liquidity, financial condition, and operations, which could adversely affect the ability of the operator
to meet its financial obligations to us. Finally, various state false claim act and anti-kickback laws may also apply
to each property operator. Violation of any of the foregoing statutes can result in criminal and/or civil penalties
that could have a material adverse effect on the ability of an operator to meet its financial obligations to us.
Other legislative developments, including the Health Insurance Portability and Accountability Act of 1996
(“HIPAA”), have greatly expanded the definition of health care fraud and related offenses and broadened its
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scope to include private health care plans in addition to government payors. Congress also has greatly increased
funding for the Department of Justice, Federal Bureau of Investigation and the Office of the Inspector General of
the Department of Health and Human Services to audit, investigate and prosecute suspected health care fraud.
Moreover, a significant portion of the billions in health care fraud recoveries over the past several years has also
been returned to government agencies to further fund their fraud investigation and prosecution efforts.
Additionally, other HIPAA provisions and regulations provide for communication of health information through
standard electronic transaction formats and for the privacy and security of health information. In order to comply with
the regulations, health care providers often must undertake significant operational and technical implementation
efforts. Operators also may face significant financial exposure if they fail to maintain the privacy and security of
medical records and other personal health information about individuals. The Health Information Technology for
Economic and Clinical Health (“HITECH”) Act, passed in February 2009, strengthened the HHS Secretary’s authority
to impose civil money penalties for HIPAA violations occurring after February 18, 2009. HITECH directs the HHS
Secretary to provide for periodic audits to ensure covered entities and their business associates (as that term is defined
under HIPAA) comply with the applicable HITECH requirements, increasing the likelihood that a HIPAA violation
will result in an enforcement action. CMS issued an interim Final Rule which conformed HIPAA enforcement
regulations to the HITECH Act, increasing the maximum penalty for multiple violations of a single requirement or
prohibition to $1.5 million. Higher penalties may accrue for violations of multiple requirements or prohibitions.
Additionally, on January 17, 2013, CMS released a final rule, which expands the applicability of HIPAA and HITECH
and strengthens the government’s ability to enforce these laws. The final rule broadens the definition of “business
associate” and provides for civil money penalty liability against covered entities and business associates for the acts of
their agents regardless of whether a business associate agreement is in place. Additionally, the final rule adopts certain
changes to the HIPAA enforcement regulations to incorporate the increased and tiered civil monetary penalty structure
provided by HITECH, and makes business associates of covered entities directly liable under HIPAA for compliance
with certain of the HIPAA privacy standards and HIPAA security standards. HIPAA violations are also potentially
subject to criminal penalties.
In November 2002, CMS began an ongoing national Nursing Home Quality Initiative (“NHQI”). Under this
initiative, historical survey information, the NHQI Pilot Evaluation Report and the NHQI Overview is made
available to the public on-line. The NHQI website provides consumer and provider information regarding the
quality of care in nursing homes. The data allows consumers, providers, states, and researchers to compare
quality information that shows how well nursing homes are caring for their residents’ physical and clinical needs.
The posted nursing home quality measures come from resident assessment data that nursing homes routinely
collect on the residents at specified intervals during their stay. If the operators of nursing facilities are unable to
achieve quality of care ratings that are comparable or superior to those of their competitors, they may lose market
share to other facilities, reducing their revenues and adversely impacting their ability to make rental payments.
Finally, government investigations and enforcement actions brought against the health care industry have
increased dramatically over the past several years and are expected to continue. Some of these enforcement
actions represent novel legal theories and expansions in the application of the Federal False Claims Act. The
costs for an operator of a health care property associated with both defending such enforcement actions and the
undertakings in settling these actions can be substantial and could have a material adverse effect on the ability of
an operator to meet its obligations to us.
Taxation
Federal Income Tax Considerations
The following summary of the taxation of the Company and the material federal tax consequences to the
holders of our debt and equity securities is for general information only and is not tax advice. This summary does
not address all aspects of taxation that may be relevant to certain types of holders of stock or securities
(including, but not limited to, insurance companies, tax-exempt entities, financial institutions or broker-dealers,
persons holding shares of common stock as part of a hedging, integrated conversion, or constructive sale
transaction or a straddle, traders in securities that use a mark-to-market method of accounting for their securities,
investors in pass-through entities and foreign corporations and persons who are not citizens or residents of the
United States).
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This summary does not discuss all of the aspects of U.S. federal income taxation that may be relevant to you
in light of your particular investment or other circumstances. In addition, this summary does not discuss any state
or local income taxation or foreign income taxation or other tax consequences. This summary is based on current
U.S. federal income tax law. Subsequent developments in U.S. federal income tax law, including changes in law
or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal
income tax consequences of purchasing, owning and disposing of our securities as set forth in this summary.
Before you purchase our securities, you should consult your own tax advisor regarding the particular
U.S. federal, state, local, foreign and other tax consequences of acquiring, owning and selling our securities.
General
We elected to be taxed as a real estate investment trust (a “REIT”) commencing with our first taxable year.
We intend to continue to operate in such a manner as to qualify as a REIT, but there is no guarantee that we will
qualify or remain qualified as a REIT for subsequent years. Qualification and taxation as a REIT depends upon
our ability to meet a variety of qualification tests imposed under federal income tax law with respect to income,
assets, distribution level and diversity of share ownership as discussed below under “— Qualification as a REIT.”
There can be no assurance that we will be owned and organized and will operate in a manner so as to qualify or
remain qualified.
In any year in which we qualify as a REIT, in general, we will not be subject to federal income tax on that
portion of our REIT taxable income or capital gain that is distributed to stockholders. We may, however, be
subject to tax at normal corporate rates on any taxable income or capital gain not distributed. If we elect to retain
and pay income tax on our net long-term capital gain, stockholders are required to include their proportionate
share of our undistributed long-term capital gain in income, but they will receive a refundable credit for their
share of any taxes paid by us on such gain.
Despite the REIT election, we may be subject to federal income and excise tax as follows:
• To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than
100%, of our “REIT taxable income,” as adjusted, we will be subject to tax on the undistributed amount
at regular corporate tax rates;
• We may be subject to the “alternative minimum tax” (the “AMT”) on certain tax preference items to the
extent that the AMT exceeds our regular tax;
• If we have net income from the sale or other disposition of “foreclosure property” that is held primarily
for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure
property, such income will be taxed at the highest corporate rate;
• Any net income from prohibited transactions (which are, in general, sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business, other than dispositions of
foreclosure property and dispositions of property due to an involuntary conversion) will be subject to a
100% tax;
• If we fail to satisfy either the 75% or 95% gross income tests (as discussed below), but nonetheless
maintain our qualification as a REIT because certain other requirements are met, we will be subject to a
100% tax on an amount equal to (1) the gross income attributable to the greater of (i) 75% of our gross
income over the amount of qualifying gross income for purposes of the 75% gross income test (discussed
below) or (ii) 95% of our gross income over the amount of qualifying gross income for purposes of the
95% gross income test (discussed below) multiplied by (2) a fraction intended to reflect our profitability;
• If we fail to distribute during each year at least the sum of (1) 85% of our REIT ordinary income for the
year, (2) 95% of our REIT capital gain net income for such year (other than capital gain that we elect to
retain and pay tax on) and (3) any undistributed taxable income from preceding periods, we will be
subject
to a 4% excise tax on the excess of such required distribution over amounts actually
distributed; and
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• We will be subject to a 100% tax on the amount of any rents from real property, deductions or excess
interest paid to us by any of our “taxable REIT subsidiaries” that would be reduced through reallocation
under certain federal income tax principles in order to more clearly reflect income of the taxable REIT
subsidiary. See “— Qualification as a REIT — Investments in Taxable REIT Subsidiaries.”
• We may be subject to the corporate “alternative minimum tax” on any items of tax preference, including
any deductions of net operating losses.
If we acquire any assets from a corporation, which is or has been a “C” corporation, in a carryover basis
transaction, we could be liable for specified liabilities that are inherited from the “C” corporation. A “C”
corporation is generally defined as a corporation that is required to pay full corporate level federal income tax. If
we recognize gain on the disposition of the assets during the ten-year period beginning on the date on which the
assets were acquired by us, then, to the extent of the assets’ “built-in gain” (i.e., the excess of the fair market
value of the asset over the adjusted tax basis in the asset, in each case determined as of the beginning of the ten-
year period), we will be subject to tax on the gain at the highest regular corporate rate applicable. The results
described in this paragraph with respect to the recognition of built-in gain assume that the built-in gain assets, at
the time the built-in gain assets were subject to a conversion transaction (either where a “C” corporation elected
REIT status or a REIT acquired the assets from a “C” corporation), were not treated as sold to an unrelated party
and gain recognized. For those properties that are subject to the built-in-gains tax, if triggered by a sale within the
ten-year period beginning on the date on which the properties were acquired by us, then the potential amount of
built-in-gains tax will be an additional factor when considering a possible sale of the properties. See Note 18 to
our consolidated financial statements for additional information regarding the built-in gains tax.
Qualification as a REIT
A REIT is defined as a corporation, trust or association:
(1) which is managed by one or more trustees or directors;
(2)
the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of
beneficial interest;
(3) which would be taxable as a domestic corporation but for the federal income tax law relating to REITs;
(4) which is neither a financial institution nor an insurance company;
(5)
the beneficial ownership of which is held by 100 or more persons in each taxable year of the REIT
except for its first taxable year;
(6) not more than 50% in value of the outstanding stock of which is owned during the last half of each
taxable year, excluding its first taxable year, directly or indirectly, by or for five or fewer individuals
(which includes certain entities) (the “Five or Fewer Requirement”); and
(7) which meets certain income and asset tests described below.
Conditions (1) to (4), inclusive, must be met during the entire taxable year and condition (5) must be met
during at least 335 days of a taxable year of 12 months or during a proportionate part of a taxable year of less
than 12 months. For purposes of conditions (5) and (6), pension funds and certain other tax-exempt entities are
treated as individuals, subject to a “look-through” exception in the case of condition (6).
Based on publicly available information, we believe we have satisfied the share ownership requirements set
forth in (5) and (6) above. In addition, Article VI of our by-laws provides for restrictions regarding ownership
and transfer of shares. These restrictions are intended to assist us in continuing to satisfy the share ownership
requirements described in (5) and (6) above. These restrictions, however, may not ensure that we will, in all
cases, be able to satisfy the share ownership requirements described in (5) and (6) above.
We have complied with, and will continue to comply with, regulatory rules to send annual letters to certain
of our stockholders requesting information regarding the actual ownership of our stock. If, despite sending the
annual letters, we do not know, or after exercising reasonable diligence would not have known, whether we
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failed to meet the Five or Fewer Requirement, we will be treated as having met the Five or Fewer Requirement.
If we fail to comply with these regulatory rules, we will be subject to a monetary penalty. If our failure to comply
was due to intentional disregard of the requirement, the penalty would be increased. However, if our failure to
comply were due to reasonable cause and not willful neglect, no penalty would be imposed.
We may own a number of properties through wholly owned subsidiaries. A corporation will qualify as a
“qualified REIT subsidiary” if 100% of its stock is owned by a REIT, and the REIT does not elect to treat the
subsidiary as a taxable REIT subsidiary. A “qualified REIT subsidiary” will not be treated as a separate
corporation, and all assets,
liabilities and items of income, deductions and credits of a “qualified REIT
subsidiary” will be treated as assets, liabilities and items (as the case may be) of the REIT. A “qualified REIT
subsidiary” is not subject to federal income tax, and our ownership of the voting stock of a qualified REIT
subsidiary will not violate the restrictions against ownership of securities of any one issuer which constitute more
than 10% of the value or total voting power of such issuer or more than 5% of the value of our total assets, as
described below under “— Asset Tests.”
If we invest in a partnership, a limited liability company or a trust taxed as a partnership or as a disregarded
entity, we will be deemed to own a proportionate share of the partnership’s, limited liability company’s or trust’s
assets. Likewise, we will be treated as receiving our share of the income and loss of the partnership, limited
liability company or trust, and the gross income will retain the same character in our hands as it has in the hands
of the partnership, limited liability company or trust. These “look-through” rules apply for purposes of the
income tests and assets tests described below.
Income Tests. There are two separate percentage tests relating to our sources of gross income that we must
satisfy for each taxable year.
• At least 75% of our gross income (excluding gross income from certain sales of property held primarily
for sale) must be directly or indirectly derived each taxable year from “rents from real property,” other
income from investments relating to real property or mortgages on real property or certain income from
qualified temporary investments.
• At least 95% of our gross income (excluding gross income from certain sales of property held primarily
for sale) must be directly or indirectly derived each taxable year from any of the sources qualifying for
the 75% gross income test and from dividends (including dividends from taxable REIT subsidiaries) and
interest.
As to transactions entered into in taxable years beginning after October 22, 2004 and on or prior to July 30,
2008, any of our income from a “clearly identified” hedging transaction that is entered into by us in the normal
course of business, directly or indirectly, to manage the risk of interest rate movements, price changes or
currency fluctuations with respect to borrowings or obligations incurred or to be incurred by us, or such other
risks that are prescribed by the Internal Revenue Service, is excluded from the 95% gross income test.
For transactions entered into after July 30, 2008, any of our income from a “clearly identified” hedging
transaction that is entered into by us in the normal course of business, directly or indirectly, to manage the risk of
interest rate movements, price changes or currency fluctuations with respect to borrowings or obligations
incurred or to be incurred by us is excluded from the 95% and 75% gross income tests.
For transactions entered into after July 30, 2008, any of our income from a “clearly identified” hedging
transaction entered into by us primarily to manage risk of currency fluctuations with respect to any item of
income or gain that is included in gross income in the 95% and 75% gross income tests is excluded from the 95%
and 75% gross income tests.
In general, a hedging transaction is “clearly identified” if (1) the transaction is identified as a hedging
transaction before the end of the day on which it is entered into and (2) the items or risks being hedged are
identified “substantially contemporaneously” with the hedging transaction. An identification is not substantially
contemporaneous if it is made more than 35 days after entering into the hedging transaction.
As to gains and items of income recognized after July 30, 2008, “passive foreign exchange gain” for any
taxable year will not constitute gross income for purposes of the 95% gross income test and “real estate foreign
17
exchange gain” for any taxable year will not constitute gross income for purposes of the 75% gross income test.
Real estate foreign exchange gain is foreign currency gain (as defined in Internal Revenue Code
Section 988(b)(1)) which is attributable to: (i) any qualifying item of income or gain for purposes of the 75%
gross income test; (ii) the acquisition or ownership of obligations secured by mortgages on real property or
interests in real property; or (iii) becoming or being the obligor under obligations secured by mortgages on real
property or on interests in real property. Real estate foreign exchange gain also includes Internal Revenue Code
Section 987 gain attributable to a qualified business unit (a “QBU”) of a REIT if the QBU itself meets the 75%
income test for the taxable year and the 75% asset test at the close of each quarter that the REIT has directly or
indirectly held the QBU. Real estate foreign exchange gain also includes any other foreign currency gain as
determined by the Secretary of the Treasury. Passive foreign exchange gain includes all real estate foreign
exchange gain and foreign currency gain which is attributable to: (i) any qualifying item of income or gain for
purposes of the 95% gross income test; (ii) the acquisition or ownership of obligations; (iii) becoming or being
the obligor under obligations; and (iv) any other foreign currency gain as determined by the Secretary of the
Treasury.
Generally, other than income from “clearly identified” hedging transactions entered into by us in the normal
course of business, any foreign currency gain derived by us from dealing, or engaging in substantial and regular
trading, in securities will constitute gross income which does not qualify under the 95% or 75% gross income
tests.
Rents received by us will qualify as “rents from real property” for purposes of satisfying the gross income
tests for a REIT only if several conditions are met:
• The amount of rent must not be based in whole or in part on the income or profits of any person, although
rents generally will not be excluded merely because they are based on a fixed percentage or percentages
of receipts or sales.
• Rents received from a tenant will not qualify as rents from real property if the REIT, or an owner of 10%
or more of the REIT, also directly or constructively owns 10% or more of the tenant, unless the tenant is
our taxable REIT subsidiary and certain other requirements are met with respect to the real property being
rented.
• If rent attributable to personal property leased in connection with a lease of real property is greater than
15% of the total rent received under the lease, then the portion of rent attributable to such personal
property will not qualify as “rents from real property.”
• For rents to qualify as rents from real property, we generally must not furnish or render services to
tenants, other than through a taxable REIT subsidiary or an “independent contractor” from whom we
derive no income, except that we may directly provide services that are “usually or customarily rendered”
in the geographic area in which the property is located in connection with the rental of real property for
occupancy only, or are not otherwise considered “rendered to the occupant for his convenience.”
• For taxable years beginning after July 30, 2008, the REIT may lease “qualified health care properties” on
an arm’s-length basis to a taxable REIT subsidiary if the property is operated on behalf of such subsidiary
by a person who qualifies as an “independent contractor” and who is, or is related to a person who is,
actively engaged in the trade or business of operating health care facilities for any person unrelated to us
or our taxable REIT subsidiary, an “eligible independent contractor.” Generally, the rent that the REIT
receives from the taxable REIT subsidiary will be treated as “rents from real property.” A “qualified
health care property” includes any real property and any personal property that is, or is necessary or
incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility,
qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary
services to patients and which is operated by a provider of such services which is eligible for participation
in the Medicare program with respect to such facility.
A REIT is permitted to render a de minimis amount of impermissible services to tenants and still treat
amounts received with respect to that property as rent from real property. The amount received or accrued by the
REIT during the taxable year for the impermissible services with respect to a property may not exceed 1% of all
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amounts received or accrued by the REIT directly or indirectly from the property. The amount received for any
service or management operation for this purpose shall be deemed to be not less than 150% of the direct cost of
the REIT in furnishing or rendering the service or providing the management or operation. Furthermore,
impermissible services may be furnished to tenants by a taxable REIT subsidiary subject to certain conditions,
and we may still treat rents received with respect to the property as rent from real property.
The term “interest” generally does not include any amount if the determination of the amount depends in
whole or in part on the income or profits of any person, although an amount generally will not be excluded from
the term “interest” solely by reason of being based on a fixed percentage of receipts or sales.
If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may
nevertheless qualify as a REIT for such year if we are eligible for relief. These relief provisions generally will be
available if (1) following our identification of the failure, we file a schedule for such taxable year describing each
item of our gross income, and (2) the failure to meet such tests was due to reasonable cause and not due to willful
neglect.
It is not now possible to determine the circumstances under which we may be entitled to the benefit of these
relief provisions. If these relief provisions apply, a 100% tax is imposed on an amount equal to (a) the gross
income attributable to (1) 75% of our gross income over the amount of qualifying gross income for purposes of
the 75% income test and (2) 95% of our gross income over the amount of qualifying gross income for purposes
of the 95% income test, multiplied by (b) a fraction intended to reflect our profitability.
The Secretary of the Treasury is given broad authority to determine whether particular items of income or
gain qualify or not under the 75% and 95% gross income tests, or are to be excluded from the measure of gross
income for such purposes.
Asset Tests. Within 30 days after the close of each quarter of our taxable year, we must also satisfy several
tests relating to the nature and diversification of our assets determined in accordance with generally accepted
accounting principles. At least 75% of the value of our total assets must be represented by real estate assets, cash,
cash items (including receivables arising in the ordinary course of our operation), government securities and
qualified temporary investments. Although the remaining 25% of our assets generally may be invested without
restriction, we are prohibited from owning securities representing more than 10% of either the vote (the “10%
vote test”) or value (the “10% value test”) of the outstanding securities of any issuer other than a qualified REIT
subsidiary, another REIT or a taxable REIT subsidiary. Further, no more than 25% of the total assets may be
represented by securities of one or more taxable REIT subsidiaries (the “25% asset test”) and no more than 5% of
the value of our total assets may be represented by securities of any non-governmental issuer other than a
qualified REIT subsidiary (the “5% asset test”), another REIT or a taxable REIT subsidiary. Each of the 10%
vote test, the 10% value test and the 25% and 5% asset tests must be satisfied at the end of each quarter. There
are special rules which provide relief if the value related tests are not satisfied due to changes in the value of the
assets of a REIT.
Certain items are excluded from the 10% value test, including: (1) straight debt securities (as defined in
Internal Revenue Code Section 1361(c)(5)) of an issuer (including straight debt that provides certain contingent
payments); (2) any loan to an individual or an estate; (3) any rental agreement described in Section 467 of the
Internal Revenue Code, other than with a “related person”; (4) any obligation to pay rents from real property;
(5) certain securities issued by a state or any subdivision thereof, the District of Columbia, a foreign government,
or any political subdivision thereof, or the Commonwealth of Puerto Rico; (6) any security issued by a REIT; and
(7) any other arrangement that, as determined by the Secretary of the Treasury, is excepted from the definition of
security (“excluded securities”). Special rules apply to straight debt securities issued by corporations and entities
taxable as partnerships for federal income tax purposes. If a REIT, or its taxable REIT subsidiary, holds
(1) straight debt securities of a corporate or partnership issuer and (2) securities of such issuer that are not
excluded securities and have an aggregate value greater than 1% of such issuer’s outstanding securities, the
straight debt securities will be included in the 10% value test.
A REIT’s interest as a partner in a partnership is not treated as a security for purposes of applying the 10%
value test to securities issued by the partnership. Further, any debt instrument issued by a partnership will not be
a security for purposes of applying the 10% value test (1) to the extent of the REIT’s interest as a partner in the
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partnership and (2) if at least 75% of the partnership’s gross income (excluding gross income from prohibited
transactions) would qualify for the 75% gross income test. For purposes of the 10% value test, a REIT’s interest
in a partnership’s assets is determined by the REIT’s proportionate interest in any securities issued by the
partnership (other than the excluded securities described in the preceding paragraph).
For taxable years beginning after July 30, 2008, if the REIT or its QBU uses a foreign currency as its
functional currency, the term “cash” includes such foreign currency, but only to the extent such foreign currency
is (i) held for use in the normal course of the activities of the REIT or QBU which give rise to items of income or
gain that are included in the 95% and 75% gross income tests or are directly related to acquiring or holding assets
qualifying under the 75% asset test, and (ii) not held in connection with dealing or engaging in substantial and
regular trading in securities.
With respect to corrections of failures as to violations of the 10% vote test, the 10% value test or the 5%
asset test, a REIT may avoid disqualification as a REIT by disposing of sufficient assets to cure a violation that
does not exceed the lesser of 1% of the REIT’s assets at the end of the relevant quarter or $10,000,000, provided
that the disposition occurs within six months following the last day of the quarter in which the REIT first
identified the assets. For violations of any of the REIT asset tests due to reasonable cause and not willful neglect
that exceed the thresholds described in the preceding sentence, a REIT can avoid disqualification as a REIT after
the close of a taxable quarter by taking certain steps, including disposition of sufficient assets within the six
month period described above to meet the applicable asset test, paying a tax equal to the greater of $50,000 or the
highest corporate tax rate multiplied by the net income generated by the non-qualifying assets during the period
of time that the assets were held as non-qualifying assets and filing a schedule with the Internal Revenue Service
that describes the non-qualifying assets.
Investments in Taxable REIT Subsidiaries. REITs may own more than 10% of the voting power and value
of securities in taxable REIT subsidiaries. We and any taxable corporate entity in which we own an interest are
allowed to jointly elect to treat such entity as a “taxable REIT subsidiary.”
Certain of our subsidiaries have elected to be treated as a taxable REIT subsidiary. Taxable REIT
subsidiaries are subject to full corporate level federal taxation on their earnings but are permitted to engage in
certain types of activities that cannot be performed directly by REITs without jeopardizing their REIT status. Our
taxable REIT subsidiaries will attempt to minimize the amount of these taxes, but there can be no assurance
whether or the extent to which measures taken to minimize taxes will be successful. To the extent our taxable
REIT subsidiaries are required to pay federal, state or local taxes, the cash available for distribution as dividends
to us from our taxable REIT subsidiaries will be reduced.
The amount of interest on related-party debt that a taxable REIT subsidiary may deduct is limited. Further, a
100% tax applies to any interest payments by a taxable REIT subsidiary to its affiliated REIT to the extent the
interest rate is not commercially reasonable. A taxable REIT subsidiary is permitted to deduct interest payments
to unrelated parties without any of these restrictions.
The Internal Revenue Service may reallocate costs between a REIT and its taxable REIT subsidiary where
there is a lack of arm’s-length dealing between the parties. Any deductible expenses allocated away from a
taxable REIT subsidiary would increase its tax liability. Further, any amount by which a REIT understates its
deductions and overstates those of its taxable REIT subsidiary may, subject to certain exceptions, be subject to a
100% tax. Additional taxable REIT subsidiary elections may be made in the future for additional entities in
which we obtain an interest.
Annual Distribution Requirements.
In order to avoid being taxed as a regular corporation, we are required
to make distributions (other than capital gain distributions) to our stockholders which qualify for the dividends
paid deduction in an amount at least equal to (1) the sum of (i) 90% of our “REIT taxable income” (computed
without regard to the dividends paid deduction and our net capital gain) and (ii) 90% of the after-tax net income,
if any, from foreclosure property, minus (2) a portion of certain items of non-cash income. These distributions
must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely
file our tax return for that year and if paid on or before the first regular distribution payment after such
declaration. The amount distributed must not be preferential. This means that every stockholder of the class of
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stock to which a distribution is made must be treated the same as every other stockholder of that class, and no
class of stock may be treated otherwise than in accordance with its dividend rights as a class. To the extent that
we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our “REIT
taxable income,” as adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates.
As discussed above, we may be subject to an excise tax if we fail to meet certain other distribution requirements.
We believe we have satisfied the annual distribution requirements for the year of our initial REIT election and
each year thereafter through the year ended December 31, 2012. Although we intend to make timely distributions
sufficient to satisfy these annual distribution requirements for subsequent years, economic, market, legal, tax or
other factors could limit our ability to meet those requirements. See “Item 1A — Risk Factors.”
It is also possible that, from time to time, we may not have sufficient cash or other liquid assets to meet the
90% distribution requirement, or to distribute such greater amount as may be necessary to avoid income and
excise taxation, due to, among other things, (1) timing differences between (i) the actual receipt of income and
actual payment of deductible expenses and (ii) the inclusion of income and deduction of expenses in arriving at
our taxable income, or (2) the payment of severance benefits that may not be deductible to us. In the event that
timing differences occur, we may find it necessary to arrange for borrowings or, if possible, pay dividends in the
form of taxable stock dividends in order to meet the distribution requirement.
Under certain circumstances, in the event of a deficiency determined by the Internal Revenue Service, we
may be able to rectify a resulting failure to meet the distribution requirement for a year by paying “deficiency
dividends” to stockholders in a later year, which may be included in our deduction for distributions paid for the
earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends; however,
we will be required to pay applicable penalties and interest based upon the amount of any deduction taken for
deficiency dividend distributions.
Failure to Qualify as a REIT
If we fail to qualify for taxation as a REIT in any taxable year, we will be subject to federal income tax,
including any applicable alternative minimum tax, on our taxable income at regular corporate rates. Distributions
to stockholders in any year in which we fail to qualify as a REIT will not be deductible nor will any particular
amount of distributions be required to be made in any year. All distributions to stockholders will be taxable as
ordinary income to the extent of current and accumulated earnings and profits allocable to these distributions
and, subject
to certain limitations, will be eligible for the dividends received deduction for corporate
stockholders. Unless entitled to relief under specific statutory provisions, we also will be disqualified from
taxation as a REIT for the four taxable years following the year during which qualification was lost. It is not
possible to state whether in all circumstances we would be entitled to statutory relief. Failure to qualify for even
one year could result in our need to incur indebtedness or liquidate investments in order to pay potentially
significant resulting tax liabilities.
In addition to the relief described above under “— Income Tests” and “— Asset Tests,” relief is available in
the event that we violate a provision of the Internal Revenue Code that would result in our failure to qualify as a
REIT if: (1) the violation is due to reasonable cause and not due to willful neglect; (2) we pay a penalty of
$50,000 for each failure to satisfy the provision; and (3) the violation does not include a violation described
under “— Income Tests” or “— Asset Tests” above. It is not now possible to determine the circumstances under
which we may be entitled to the benefit of these relief provisions.
Federal Income Taxation of Holders of Our Stock
Treatment of Taxable U.S. Stockholders. The following summary applies to you only if you are a
“U.S. stockholder.” A “U.S. stockholder” is a holder of shares of stock who, for United States federal income tax
purposes, is:
• a citizen or resident of the United States;
• a corporation, partnership or other entity classified as a corporation or partnership for these purposes,
created or organized in or under the laws of the United States or of any political subdivision of the United
States, including any state;
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• an estate, the income of which is subject to United States federal income taxation regardless of its
source; or
• a trust, if, in general, a U.S. court is able to exercise primary supervision over the trust’s administration
and one or more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to
control all of the trust’s substantial decisions.
So long as we qualify for taxation as a REIT, distributions on shares of our stock made out of the current or
accumulated earnings and profits allocable to these distributions (and not designated as capital gain dividends)
will be includable as ordinary income for federal income tax purposes. None of these distributions will be
eligible for the dividends received deduction for U.S. corporate stockholders.
Generally, for taxable years following the year ended December 31, 2012, the maximum marginal rate of
tax payable by individuals on dividends received from corporations that are subject to a corporate level of tax is
20%. Except in limited circumstances, this tax rate will not apply to dividends paid to you by us on our shares,
because generally we are not subject to federal income tax on the portion of our REIT taxable income or capital
gains distributed to our stockholders. The reduced maximum federal income tax rate will apply to that portion, if
any, of dividends received by you with respect to our shares that are attributable to: (1) dividends received by us
from non-REIT corporations or other taxable REIT subsidiaries; (2) income from the prior year with respect to
which we were required to pay federal corporate income tax during the prior year (if, for example, we did not
distribute 100% of our REIT taxable income for the prior year); or (3) the amount of any earnings and profits that
were distributed by us and accumulated in a non-REIT year.
Distributions that are designated as capital gain dividends will be taxed as long-term capital gains (to the
extent they do not exceed our actual net capital gain for the taxable year), without regard to the period for which
you held our stock. However, if you are a corporation, you may be required to treat a portion of some capital gain
dividends as ordinary income.
If we elect to retain and pay income tax on any net long-term capital gain, you would include in income, as
long-term capital gain, your proportionate share of this net long-term capital gain. You would also receive a
refundable tax credit for your proportionate share of the tax paid by us on such retained capital gains, and you
would have an increase in the basis of your shares of our stock in an amount equal to your includable capital
gains less your share of the tax deemed paid.
You may not include in your federal income tax return any of our net operating losses or capital losses.
Federal income tax rules may also require that certain minimum tax adjustments and preferences be apportioned
to you. In addition, any distribution declared by us in October, November or December of any year on a specified
date in any such month shall be treated as both paid by us and received by you on December 31 of that year,
provided that the distribution is actually paid by us no later than January 31 of the following year.
We will be treated as having sufficient earnings and profits to treat as a dividend any distribution up to the
amount required to be distributed in order to avoid imposition of the 4% excise tax discussed under “— General”
and “— Qualification as a REIT — Annual Distribution Requirements” above. As a result, you may be required
to treat as taxable dividends certain distributions that would otherwise result in a tax-free return of capital.
Moreover, any “deficiency dividend” will be treated as a dividend (an ordinary dividend or a capital gain
dividend, as the case may be), regardless of our earnings and profits. Any other distributions in excess of current
or accumulated earnings and profits will not be taxable to you to the extent these distributions do not exceed the
adjusted tax basis of your shares of our stock. You will be required to reduce the tax basis of your shares of our
stock by the amount of these distributions until the basis has been reduced to zero, after which these distributions
will be taxable as capital gain, if the shares of our stock are held as capital assets. The tax basis as so reduced will
be used in computing the capital gain or loss, if any, realized upon sale of the shares of our stock. Any loss upon
a sale or exchange of shares of our stock which were held for six months or less (after application of certain
holding period rules) will generally be treated as a long-term capital loss to the extent you previously received
capital gain distributions with respect to these shares of our stock.
Upon the sale or exchange of any shares of our stock to or with a person other than us or a sale or exchange
of all shares of our stock (whether actually or constructively owned) with us, you will generally recognize capital
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gain or loss equal to the difference between the amount realized on the sale or exchange and your adjusted tax
basis in these shares of our stock. This gain will be capital gain if you held these shares of our stock as a capital
asset.
If we redeem any of your shares in us, the treatment can only be determined on the basis of particular facts
at the time of redemption. In general, you will recognize gain or loss (as opposed to dividend income) equal to
the difference between the amount received by you in the redemption and your adjusted tax basis in your shares
redeemed if such redemption: (1) results in a “complete termination” of your interest in all classes of our equity
securities; (2) is a “substantially disproportionate redemption”; or (3) is “not essentially equivalent to a dividend”
with respect to you. In applying these tests, you must take into account your ownership of all classes of our
equity securities (e.g., common stock, preferred stock, depositary shares and warrants). You also must take into
account any equity securities that are considered to be constructively owned by you.
If, as a result of a redemption by us of your shares, you no longer own (either actually or constructively) any
of our equity securities or only own (actually and constructively) an insubstantial percentage of our equity
securities, then it is probable that the redemption of your shares would be considered “not essentially equivalent
to a dividend” and, thus, would result in gain or loss to you. However, whether a distribution is “not essentially
equivalent to a dividend” depends on all of the facts and circumstances, and if you rely on any of these tests at
the time of redemption, you should consult your tax advisor to determine their application to the particular
situation.
Generally, if the redemption does not meet the tests described above, then the proceeds received by you
from the redemption of your shares will be treated as a distribution taxable as a dividend to the extent of the
allocable portion of current or accumulated earnings and profits. If the redemption is taxed as a dividend, your
adjusted tax basis in the redeemed shares will be transferred to any other shareholdings in us that you own. If you
own no other shareholdings in us, under certain circumstances, such basis may be transferred to a related person,
or it may be lost entirely.
Gain from the sale or exchange of our shares held for more than one year is generally taxed at a maximum
long-term capital gain rate of 20% in the case of stockholders who are individuals and 35% in the case of
stockholders that are corporations. Pursuant to Internal Revenue Service guidance, we may classify portions of
our capital gain dividends as gains eligible for the long-term capital gains rate or as gain taxable to individual
stockholders at a maximum rate of 25%. Capital losses recognized by a stockholder upon the disposition of our
shares held for more than one year at the time of disposition will be considered long term capital losses, and are
generally available only to offset capital gain income of the stockholder but not ordinary income (except in the
case of individuals, who may offset up to $3,000 of ordinary income each year).
An additional tax of 3.8% generally will be imposed on the “net investment income” of U.S. stockholders
who meet certain requirements and are individuals, estates or certain trusts for taxable years beginning after
December 31, 2012. Among other items, “net investment income” generally includes gross income from
dividends and net gain attributable to the disposition of certain property, such as shares of our common stock or
warrants. In the case of individuals, this tax will only apply to the extent such individual’s modified adjusted
gross income exceeds $200,000 ($250,000 for married couples filing a joint return and surviving spouses, and
$125,000 for married individuals filing a separate return). U.S. stockholders should consult their tax advisors
regarding the possible applicability of this additional tax in their particular circumstances.
Treatment of Tax-Exempt U.S. Stockholders. Tax-exempt entities, including qualified employee pension
and profit sharing trusts and individual retirement accounts (“Exempt Organizations”), generally are exempt from
federal income taxation. However, they are subject to taxation on their unrelated business taxable income
(“UBTI”). The Internal Revenue Service has issued a published revenue ruling that dividend distributions from a
REIT to an exempt employee pension trust do not constitute UBTI, provided that the shares of the REIT are not
otherwise used in an unrelated trade or business of the exempt employee pension trust. Based on this ruling,
amounts distributed by us to Exempt Organizations generally should not constitute UBTI. However, if an Exempt
Organization finances its acquisition of the shares of our stock with debt, a portion of its income from us will
constitute UBTI pursuant to the “debt financed property” rules. Likewise, a portion of the Exempt Organization’s
income from us would constitute UBTI if we held a residual interest in a real estate mortgage investment conduit.
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In addition, in certain circumstances, a pension trust that owns more than 10% of our stock is required to treat a
percentage of our dividends as UBTI. This rule applies to a pension trust holding more than 10% of our stock only if:
(1) the percentage of our income that is UBTI (determined as if we were a pension trust) is at least 5%; (2) we qualify
as a REIT by reason of the modification of the Five or Fewer Requirement that allows beneficiaries of the pension trust
to be treated as holding shares in proportion to their actuarial interests in the pension trust; and (3) either (i) one
pension trust owns more than 25% of the value of our stock, or (ii) a group of pension trusts individually holding more
than 10% of the value of our stock collectively own more than 50% of the value of our stock.
Backup Withholding and Information Reporting. Under certain circumstances, you may be subject to
backup withholding at applicable rates on payments made with respect to, or cash proceeds of a sale or exchange
of, shares of our stock. Backup withholding will apply only if you: (1) fail to provide a correct taxpayer
identification number, which if you are an individual, is ordinarily your social security number; (2) furnish an
incorrect taxpayer identification number; (3) are notified by the Internal Revenue Service that you have failed to
properly report payments of interest or dividends; or (4) fail to certify, under penalties of perjury, that you have
furnished a correct taxpayer identification number and that the Internal Revenue Service has not notified you that
you are subject to backup withholding.
Backup withholding will not apply with respect to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. You should consult with a tax advisor regarding qualification for
exemption from backup withholding, and the procedure for obtaining an exemption. Backup withholding is not
an additional tax. Rather, the amount of any backup withholding with respect to a payment to a stockholder will
be allowed as a credit against such stockholder’s United States federal income tax liability and may entitle such
stockholder to a refund, provided that the required information is provided to the Internal Revenue Service. In
addition, withholding a portion of capital gain distributions made to stockholders may be required for
stockholders who fail to certify their non-foreign status.
Taxation of Foreign Stockholders. The following summary applies to you only if you are a foreign person.
The federal taxation of foreign persons is a highly complex matter that may be affected by many considerations.
Except as discussed below, distributions to you of cash generated by our real estate operations in the form of
ordinary dividends, but not by the sale or exchange of our capital assets, generally will be subject
to
U.S. withholding tax at a rate of 30%, unless an applicable tax treaty reduces that tax and you file with us the
required form evidencing the lower rate.
In general, you will be subject to United States federal income tax on a graduated rate basis rather than
withholding with respect to your investment in our stock if such investment is “effectively connected” with your
conduct of a trade or business in the United States. A corporate foreign stockholder that receives income that is,
or is treated as, effectively connected with a United States trade or business may also be subject to the branch
profits tax, which is payable in addition to regular United States corporate income tax. The following discussion
will apply to foreign stockholders whose investment in us is not so effectively connected. We expect to withhold
United States income tax, as described below, on the gross amount of any distributions paid to you unless (1) you
file an Internal Revenue Service Form W-8ECI with us claiming that the distribution is “effectively connected”
or (2) certain other exceptions apply.
Distributions by us that are attributable to gain from the sale or exchange of a United States real property
interest will be taxed to you under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) as if
these distributions were gains “effectively connected” with a United States trade or business. Accordingly, you
will be taxed at the normal capital gain rates applicable to a U.S. stockholder on these amounts, subject to any
applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien
individuals. Distributions subject to FIRPTA may also be subject to a branch profits tax in the hands of a
corporate foreign stockholder that is not entitled to treaty exemption.
We will be required to withhold from distributions subject to FIRPTA, and remit to the Internal Revenue
Service, 35% of designated capital gain dividends, or, if greater, 35% of the amount of any distributions that
could be designated as capital gain dividends. In addition, if we designate prior distributions as capital gain
dividends, subsequent distributions, up to the amount of the prior distributions not withheld against, will be
treated as capital gain dividends for purposes of withholding.
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Any capital gain dividend with respect to any class of stock that is “regularly traded” on an established
securities market will be treated as an ordinary dividend if the foreign stockholder did not own more than 5% of
such class of stock at any time during the taxable year. Foreign stockholders generally will not be required to
report distributions received from us on U.S. federal income tax returns and all distributions treated as dividends
for U.S. federal income tax purposes (including any such capital gain dividends) will be subject to a 30%
U.S. withholding tax (unless reduced under an applicable income tax treaty) as discussed above. In addition, the
branch profits tax will not apply to such distributions.
Unless our shares constitute a “United States real property interest” within the meaning of FIRPTA or are
effectively connected with a U.S. trade or business, a sale of our shares by you generally will not be subject to
United States taxation. Our shares will not constitute a United States real property interest if we qualify as a
“domestically controlled REIT.” We believe that we, and expect to continue to, qualify as a domestically
controlled REIT. A domestically controlled REIT is a REIT in which at all times during a specified testing period
less than 50% in value of its shares is held directly or indirectly by foreign stockholders. However, if you are a
nonresident alien individual who is present in the United States for 183 days or more during the taxable year and
certain other conditions apply, you will be subject to a 30% tax on such capital gains. In any event, a purchaser of
our shares from you will not be required under FIRPTA to withhold on the purchase price if the purchased shares
are “regularly traded” on an established securities market or if we are a domestically controlled REIT. Otherwise,
under FIRPTA, the purchaser may be required to withhold 10% of the purchase price and remit such amount to
the Internal Revenue Service.
Backup withholding tax and information reporting will generally not apply to distributions paid to you
outside the United States that are treated as: (1) dividends to which the 30% or lower treaty rate withholding tax
discussed above applies; (2) capital gains dividends; or (3) distributions attributable to gain from the sale or
exchange by us of U.S. real property interests. Payment of the proceeds of a sale of stock within the United States
or conducted through certain U.S. related financial intermediaries is subject to both backup withholding and
information reporting unless the beneficial owner certifies under penalties of perjury that he or she is not a
U.S. person (and the payor does not have actual knowledge that the beneficial owner is a U.S. person) or
otherwise established an exemption. You may obtain a refund of any amounts withheld under the backup
withholding rules by filing the appropriate claim for refund with the Internal Revenue Service.
Withholding tax at a rate of 30% will be imposed on certain payments to you or certain foreign financial
institutions (including investment funds) and other non-US persons receiving payments on your behalf, including
distributions in respect of shares of our stock and gross proceeds from the sale of shares of our stock, if you or
such institutions fail to comply with certain due diligence, disclosure and reporting rules, as set forth in recently
issued Treasury regulations. Accordingly, the entity through which shares of our stock are held will affect the
determination of whether such withholding is required. Withholding will apply to payments of dividends made
after December 31, 2013, and to payments of gross proceeds from a sale of shares of our stock made after
December 31, 2016. Stockholders that are otherwise eligible for an exemption from, or reduction of, U.S.
withholding taxes with respect to such dividends and proceeds will be required to seek a refund from the Internal
Revenue Service to obtain the benefit of such exemption or reduction. Additional requirements and conditions
may be imposed pursuant to an intergovernmental agreement, if and when entered into, between the United
States and such institution’s home jurisdiction. We will not pay any additional amounts to any stockholders in
respect of any amounts withheld. You are encouraged to consult with your tax advisor regarding U.S.
withholding taxes and the application of the recently issued Treasury regulations in light of your particular
circumstances.
U.S. Federal Income Taxation of Holders of Depositary Shares
Owners of our depositary shares will be treated as if you were owners of the series of preferred stock
represented by the depositary shares. Thus, you will be required to take into account the income and deductions
to which you would be entitled if you were a holder of the underlying series of preferred stock.
Conversion or Exchange of Shares for Preferred Stock. No gain or loss will be recognized upon the
withdrawal of preferred stock in exchange for depositary shares and the tax basis of each share of preferred stock
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will, upon exchange, be the same as the aggregate tax basis of the depositary shares exchanged. If you held your
depositary shares as a capital asset at the time of the exchange for shares of preferred stock, the holding period
for your shares of preferred stock will include the period during which you owned the depositary shares.
U.S. Federal Income and Estate Taxation of Holders of Our Debt Securities
is a non-U.S. holder, as defined below,
The following is a general summary of the United States federal income tax consequences and, in the case
that you are a holder that
the United States federal estate tax
consequences, of purchasing, owning and disposing of debt securities periodically offered under one or more
indentures (the “notes”). This summary assumes that you hold the notes as capital assets. This summary applies
to you only if you are the initial holder of the notes and you acquire the notes for a price equal to the issue price
of the notes. The issue price of the notes is the first price at which a substantial amount of the notes is sold other
than to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers. In addition, this summary does not consider any foreign, state, local or other tax laws that
may be applicable to us or a purchaser of the notes.
U.S. Holders
The following summary applies to you only if you are a U.S. holder, as defined below.
Definition of a U.S. Holder. A “U.S. holder” is a beneficial owner of a note or notes that is for United
States federal income tax purposes:
• a citizen or resident of the United States;
• a corporation, partnership or other entity classified as a corporation or partnership for these purposes,
created or organized in or under the laws of the United States or of any political subdivision of the United
States, including any state;
• an estate, the income of which is subject to United States federal income taxation regardless of its
source; or
• a trust, if, in general, a U.S. court is able to exercise primary supervision over the trust’s administration
and one or more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to
control all of the trust’s substantial decisions.
Payments of Interest. Stated interest on the notes generally will be taxed as ordinary interest income from
domestic sources at the time it is paid or accrues in accordance with your method of accounting for tax purposes.
Sale, Exchange or Other Disposition of Notes. The adjusted tax basis in your note acquired at a premium
will generally be your cost. You generally will recognize taxable gain or loss when you sell or otherwise dispose
of your notes equal to the difference, if any, between:
• the amount realized on the sale or other disposition, less any amount attributable to any accrued interest,
which will be taxable in the manner described under “— Payments of Interest” above; and
• your adjusted tax basis in the notes.
Your gain or loss generally will be capital gain or loss. This capital gain or loss will be long-term capital
gain or loss if at the time of the sale or other disposition you have held the notes for more than one year. Subject
to limited exceptions, your capital losses cannot be used to offset your ordinary income (except in the case of
individuals, who may offset up to $3,000 of ordinary income each year).
Backup Withholding and Information Reporting.
In general, “backup withholding” may apply to any
payments made to you of principal and interest on your note, and to payment of the proceeds of a sale or other
disposition of your note before maturity, if you are a non-corporate U.S. holder and: (1) fail to provide a correct
taxpayer identification number, which if you are an individual, is ordinarily your social security number;
(2) furnish an incorrect taxpayer identification number; (3) are notified by the Internal Revenue Service that you
have failed to properly report payments of interest or dividends; or (4) fail to certify, under penalties of perjury,
that you have furnished a correct taxpayer identification number and that the Internal Revenue Service has not
notified you that you are subject to backup withholding.
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The amount of any reportable payments, including interest, made to you (unless you are an exempt
recipient) and the amount of tax withheld, if any, with respect to such payments will be reported to you and to the
Internal Revenue Service for each calendar year. You should consult your tax advisor regarding your
qualification for an exemption from backup withholding and the procedures for obtaining such an exemption, if
applicable. The backup withholding tax is not an additional tax and will be credited against your U.S. federal
income tax liability, provided that correct information is provided to the Internal Revenue Service.
Non-U.S. Holders
The following summary applies to you if you are a beneficial owner of a note and are not a U.S. holder, as
defined above (a “non-U.S. holder”).
Special rules may apply to certain non-U.S. holders such as “controlled foreign corporations,” “passive
foreign investment companies” and “foreign personal holding companies.” Such entities are encouraged to
consult their tax advisors to determine the United States federal, state, local and other tax consequences that may
be relevant to them.
U.S. Federal Withholding Tax. Subject to the discussion below, U.S. federal withholding tax will not
apply to payments by us or our paying agent, in its capacity as such, of principal and interest on your notes under
the “portfolio interest” exception of the Internal Revenue Code, provided that:
• you do not, directly or indirectly, actually or constructively, own 10% or more of the total combined
voting power of all classes of our stock entitled to vote;
• you are not (1) a controlled foreign corporation for U.S. federal income tax purposes that is related,
directly or indirectly, to us through sufficient stock ownership, as provided in the Internal Revenue Code,
or (2) a bank receiving interest described in Section 881(c)(3)(A) of the Internal Revenue Code;
• such interest is not effectively connected with your conduct of a U.S. trade or business; and
• you provide a signed written statement, under penalties of perjury, which can reliably be related to you,
certifying that you are not a U.S. person within the meaning of the Internal Revenue Code and providing
your name and address to:
• us or our paying agent; or
• a securities clearing organization, bank or other financial institution that holds customers’ securities in
the ordinary course of its trade or business and holds your notes on your behalf and that certifies to us
or our paying agent under penalties of perjury that it, or the bank or financial institution between it and
you, has received from you your signed, written statement and provides us or our paying agent with a
copy of such statement.
Treasury regulations provide that:
• if you are a foreign partnership, the certification requirement will generally apply to your partners, and
you will be required to provide certain information;
• if you are a foreign trust, the certification requirement will generally be applied to you or your beneficial
owners depending on whether you are a “foreign complex trust,” “foreign simple trust,” or “foreign
grantor trust” as defined in the Treasury regulations; and
• look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts.
If you are a foreign partnership or a foreign trust, you should consult your own tax advisor regarding your
status under these Treasury regulations and the certification requirements applicable to you.
If you cannot satisfy the portfolio interest requirements described above, payments of interest will be subject
to the 30% United States withholding tax, unless you provide us with a properly executed (1) Internal Revenue
Service Form W-8BEN claiming an exemption from or reduction in withholding under the benefit of an
applicable treaty or (2) Internal Revenue Service Form W-8ECI stating that interest paid on the note is not
subject to withholding tax because it is effectively connected with your conduct of a trade or business in the
United States. Alternative documentation may be applicable in certain circumstances.
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If you are engaged in a trade or business in the United States and interest on a note is effectively connected
with the conduct of that trade or business, you will be required to pay United States federal income tax on that
interest on a net income basis (although you will be exempt from the 30% withholding tax provided the
certification requirement described above is met) in the same manner as if you were a U.S. person, except as
otherwise provided by an applicable tax treaty. If you are a foreign corporation, you may be required to pay a
branch profits tax on the earnings and profits that are effectively connected to the conduct of your trade or
business in the United States.
Withholding tax at a rate of 30% will be imposed on payments of interest (including original issue discount)
and gross proceeds of sale in respect of debt instruments to you or certain foreign financial institutions (including
investment funds) and other non-US persons receiving payments on your behalf, if you or such institutions fail to
comply with certain due diligence, disclosure and reporting rules, as set forth in recently issued Treasury
regulations. However, the Treasury regulations generally exempt from such withholding requirement obligations,
such as debt instruments, issued before January 1, 2014, provided that any material modification of such an
obligation made after such date will result in such obligation being considered newly issued as of the effective
date of such modification. These withholding rules are generally effective with respect to payments of interest
made after December 31, 2013, and with respect to proceeds of sales received after December 31, 2016. We will
not pay any additional amounts to any holders or our debt instruments in respect of any amounts withheld. You
are encouraged to consult with your tax advisor regarding U.S. withholding taxes and the application of the
recently issued Treasury regulations in light of your particular circumstances.
Sale, Exchange or other Disposition of Notes. You generally will not have to pay U.S. federal income tax
on any gain or income realized from the sale, redemption, retirement at maturity or other disposition of your
notes, unless:
• in the case of gain, you are an individual who is present in the United States for 183 days or more during
the taxable year of the sale or other disposition of your notes, and specific other conditions are met;
• you are subject to tax provisions applicable to certain United States expatriates; or
• the gain is effectively connected with your conduct of a U.S. trade or business.
If you are engaged in a trade or business in the United States, and gain with respect to your notes is
effectively connected with the conduct of that trade or business, you generally will be subject to U.S. income tax
on a net basis on the gain. In addition, if you are a foreign corporation, you may be subject to a branch profits tax
on your effectively connected earnings and profits for the taxable year, as adjusted for certain items.
U.S. Federal Estate Tax.
If you are an individual and are not a U.S. citizen or a resident of the United
States, as specially defined for U.S. federal estate tax purposes, at the time of your death, your notes will
generally not be subject to the U.S. federal estate tax, unless, at the time of your death (1) you owned actually or
constructively 10% or more of the total combined voting power of all our classes of stock entitled to vote, or
(2) interest on the notes is effectively connected with your conduct of a U.S. trade or business.
Backup Withholding and Information Reporting. Backup withholding will not apply to payments of
principal or interest made by us or our paying agent, in its capacity as such, to you if you have provided the
required certification that you are a non-U.S. holder as described in “— U.S. Federal Withholding Tax” above,
and provided that neither we nor our paying agent have actual knowledge that you are a U.S. holder, as described
in “— U.S. Holders” above. We or our paying agent may, however, report payments of interest on the notes.
The gross proceeds from the disposition of your notes may be subject to information reporting and backup
withholding tax. If you sell your notes outside the United States through a non-U.S. office of a non-U.S. broker
and the sales proceeds are paid to you outside the United States, then the U.S. backup withholding and
information
information reporting requirements generally will not apply to that payment. However, U.S.
reporting, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made
outside the United States, if you sell your notes through a non-U.S. office of a broker that:
• is a U.S. person, as defined in the Internal Revenue Code;
• derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the
United States;
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• is a “controlled foreign corporation” for U.S. federal income tax purposes; or
• is a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons who
in the aggregate hold more than 50% of the income or capital interests in the partnership, or the foreign
partnership is engaged in a U.S. trade or business, unless the broker has documentary evidence in its files
that you are a non-U.S. person and certain other conditions are met or you otherwise establish an
exemption. If you receive payments of the proceeds of a sale of your notes to or through a U.S. office of a
broker, the payment is subject to both U.S. backup withholding and information reporting unless you
provide a Form W-8BEN certifying that you are a non-U.S. person or you otherwise establish an
exemption.
You should consult your own tax advisor regarding application of backup withholding in your particular
circumstance and the availability of and procedure for obtaining an exemption from backup withholding. Any
amounts withheld under the backup withholding rules from a payment to you will be allowed as a refund or
credit against your U.S. federal income tax liability, provided the required information is furnished to the Internal
Revenue Service.
U.S. Federal Income and Estate Taxation of Holders of Our Warrants
Exercise of Warrants. You will not generally recognize gain or loss upon the exercise of a warrant. Your
basis in the debt securities, preferred stock, depositary shares or common stock, as the case may be, received
upon the exercise of the warrant will be equal to the sum of your adjusted tax basis in the warrant and the
exercise price paid. Your holding period in the debt securities, preferred stock, depositary shares or common
stock, as the case may be, received upon the exercise of the warrant will not include the period during which the
warrant was held by you.
Expiration of Warrants. Upon the expiration of a warrant, you will recognize a capital loss in an amount
equal to your adjusted tax basis in the warrant.
Sale or Exchange of Warrants. Upon the sale or exchange of a warrant to a person other than us, you will
recognize gain or loss in an amount equal to the difference between the amount realized on the sale or exchange
and your adjusted tax basis in the warrant. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if the warrant was held for more than one year. Upon the sale of the warrant to us, the Internal
Revenue Service may argue that you should recognize ordinary income on the sale. You are advised to consult
your own tax advisors as to the consequences of a sale of a warrant to us.
Potential Legislation or Other Actions Affecting Tax Consequences
Current and prospective securities holders should recognize that the present federal income tax treatment of
an investment in us may be modified by legislative, judicial or administrative action at any time and that any
such action may affect investments and commitments previously made. The rules dealing with federal income
taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue
Service and the Treasury Department, resulting in revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in federal tax laws and interpretations of these laws
could adversely affect the tax consequences of an investment in us.
State, Local and Foreign Taxes
We, and holders of our debt and equity securities, may be subject to state, local or foreign taxation in
various jurisdictions, including those in which we or they transact business, own property or reside. It should be
noted that we own properties located in a number of state, local and foreign jurisdictions, and may be required to
file tax returns in some or all of those jurisdictions. The state, local or foreign tax treatment of us and holders of
our debt and equity securities may not conform to the U.S. federal income tax consequences discussed above.
Consequently, you are urged to consult your advisor regarding the application and effect of state, local and
foreign tax laws with respect to any investment in our securities.
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Internet Access to Our SEC Filings
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports, as well as our proxy statements and other materials that are filed with, or furnished
to,
free of charge, on the Internet at
www.hcreit.com, as soon as reasonably practicable after they are filed with, or furnished to, the Securities and
Exchange Commission.
the Securities and Exchange Commission are made available,
Item 1A. Risk Factors
Forward-Looking Statements and Risk Factors
This section discusses the most significant factors that affect our business, operations and financial
condition. It does not describe all risks and uncertainties applicable to us, our industry or ownership of our
securities. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that
we currently think are not material, actually occur, we could be materially adversely affected. In that event, the
value of our securities could decline.
This Annual Report on Form 10-K and the documents incorporated by reference contain statements that
constitute “forward-looking statements” as that term is defined in the federal securities laws. These forward-
looking statements include, but are not limited to, those regarding:
• the possible expansion of our portfolio, including our ability to close our anticipated acquisitions and
investments on currently anticipated terms, or within currently anticipated timeframes, or at all;
• the sale of properties;
• the performance of our operators/tenants and properties;
• our ability to enter into agreements with new viable tenants for vacant space or for properties that we take
back from financially troubled tenants, if any;
• our occupancy rates;
• our ability to acquire, develop and/or manage properties;
• our ability to make distributions to stockholders;
• our policies and plans regarding investments, financings and other matters;
• our ability to successfully manage the risks associated with international expansion and operations;
• our tax status as a real estate investment trust;
• our critical accounting policies;
• our ability to appropriately balance the use of debt and equity;
• our ability to access capital markets or other sources of funds; and
• our ability to meet our earnings guidance.
When we use words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,”
“estimate” or similar expressions, we are making forward-looking statements. Forward-looking statements are
not guarantees of future performance and involve risks and uncertainties. Our expected results may not be
achieved, and actual results may differ materially from our expectations. This may be a result of various factors,
including, but not limited to:
• the status of the economy;
• the status of capital markets, including availability and cost of capital;
• issues facing the health care industry, including compliance with, and changes to, regulations and
payment policies, responding to government investigations and punitive settlements and operators’/
tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance;
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• changes in financing terms;
• competition within the health care, seniors housing and life science industries;
• negative developments in the operating results or financial condition of operators/tenants, including, but
not limited to, their ability to pay rent and repay loans;
• our ability to transition or sell facilities with profitable results;
• the failure to make new investments as and when anticipated;
• acts of God affecting our properties;
• our ability to re-lease space at similar rates as vacancies occur;
• our ability to timely reinvest sale proceeds at similar rates to assets sold;
• operator/tenant or joint venture partner bankruptcies or insolvencies;
• the cooperation of joint venture partners;
• government
regulations affecting Medicare and Medicaid reimbursement
rates and operational
requirements;
• regulatory approval and market acceptance of the products and technologies of life science tenants;
• liability or contract claims by or against operators/tenants;
• unanticipated difficulties and/or expenditures relating to future acquisitions;
• environmental laws affecting our properties;
• changes in rules or practices governing our financial reporting;
• the movement of U.S. and foreign currency exchange rates;
• qualification as a REIT;
• key management personnel recruitment and retention; and
• the risks described below:
Risk factors related to our operators’ revenues and expenses
Our operators’ revenues are primarily driven by occupancy, private pay rates, and Medicare and Medicaid
reimbursement, if applicable. Expenses for these facilities are primarily driven by the costs of labor, food,
utilities, taxes, insurance and rent or debt service. Revenues from government reimbursement have, and may
continue to, come under pressure due to reimbursement cuts and state budget shortfalls. Operating costs continue
to increase for our operators. To the extent that any decrease in revenues and/or any increase in operating
expenses result in a property not generating enough cash to make payments to us, the credit of our operator and
the value of other collateral would have to be relied upon. To the extent the value of such property is reduced, we
may need to record an impairment for such asset. Furthermore, if we determine to dispose of an underperforming
property, such sale may result in a loss. Any such impairment or loss on sale would negatively affect our
financial results.
The continued weakened economy may have an adverse effect on our operators and tenants, including their
ability to access credit or maintain occupancy and/or private pay rates. If the operations, cash flows or financial
condition of our operators are materially adversely impacted by economic conditions, our revenue and operations
may be adversely affected.
Increased competition may affect our operators’ ability to meet their obligations to us
The operators of our properties compete on a local and regional basis with operators of properties and other
health care providers that provide comparable services. We cannot be certain that the operators of all of our
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facilities will be able to achieve and maintain occupancy and rate levels that will enable them to meet all of their
obligations to us. Our operators are expected to encounter increased competition in the future that could limit
their ability to attract residents or expand their businesses.
Risk factors related to obligor bankruptcies
We are exposed to the risk that our obligors may not be able to meet the rent, principal and interest or other
payments due us, which may result in an obligor bankruptcy or insolvency, or that an obligor might become
subject to bankruptcy or insolvency proceedings for other reasons. Although our operating lease agreements
provide us with the right to evict a tenant, demand immediate payment of rent and exercise other remedies, and
our loans provide us with the right to terminate any funding obligation, demand immediate repayment of
principal and unpaid interest, foreclose on the collateral and exercise other remedies, the bankruptcy and
insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. An obligor in
bankruptcy or subject to insolvency proceedings may be able to limit or delay our ability to collect unpaid rent in
the case of a lease or to receive unpaid principal and interest in the case of a loan, and to exercise other rights and
remedies.
We may be required to fund certain expenses (e.g., real estate taxes and maintenance) to preserve the value
of an investment property, avoid the imposition of liens on a property and/or transition a property to a new
tenant. In some instances, we have terminated our lease with a tenant and relet the property to another tenant. In
some of those situations, we have provided working capital loans to and limited indemnification of the new
obligor. If we cannot transition a leased property to a new tenant, we may take possession of that property, which
may expose us to certain successor liabilities. Should such events occur, our revenue and operating cash flow
may be adversely affected.
Transfers of health care facilities may require regulatory approvals and these facilities may not have
efficient alternative uses
Transfers of health care facilities to successor operators frequently are subject to regulatory approvals or
notifications, including, but not limited to, change of ownership approvals under certificate of need (“CON”) or
determination of need laws, state licensure laws and Medicare and Medicaid provider arrangements, that are not
required for transfers of other types of real estate. The replacement of a health care facility operator could be
delayed by the approval process of any federal, state or local agency necessary for the transfer of the facility or
the replacement of the operator licensed to manage the facility. Alternatively, given the specialized nature of our
facilities, we may be required to spend substantial time and funds to adapt these properties to other uses. If we
are unable to timely transfer properties to successor operators or find efficient alternative uses, our revenue and
operations may be adversely affected.
Risk factors related to government regulations
Some of our obligors’ businesses are affected by government reimbursement. To the extent that an operator/
tenant receives a significant portion of its revenues from government payors, primarily Medicare and Medicaid,
such revenues may be subject to statutory and regulatory changes, retroactive rate adjustments, recovery of
program overpayments or set-offs, court decisions, administrative rulings, policy interpretations, payment or
other delays by fiscal intermediaries or carriers, government funding restrictions (at a program level or with
to specific facilities) and interruption or delays in payments due to any ongoing government
respect
investigations and audits at such property. In recent years, government payors have frozen or reduced payments
to health care providers due to budgetary pressures. Health care reimbursement will likely continue to be of
paramount importance to federal and state authorities. We cannot make any assessment as to the ultimate timing
or effect any future legislative reforms may have on the financial condition of our obligors and properties. There
can be no assurance that adequate reimbursement levels will be available for services provided by any property
operator, whether the property receives reimbursement from Medicare, Medicaid or private payors. Significant
limits on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse
effect on an obligor’s liquidity, financial condition and results of operations, which could adversely affect the
ability of an obligor to meet its obligations to us. See “Item 1 — Business — Certain Government Regulations —
Reimbursement” above.
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Our operators and tenants generally are subject to varying levels of federal, state, local, and industry-
regulated licensure, certification and inspection laws, regulations, and standards. Our operators’ or tenants’
failure to comply with any of these laws, regulations, or standards could result in loss of accreditation, denial of
reimbursement, imposition of fines, suspension, decertification or exclusion from federal and state health care
programs, loss of license or closure of the facility. Such actions may have an effect on our operators’ or tenants’
ability to make lease payments to us and, therefore, adversely impact us. See “Item 1 — Business — Certain
Government Regulations — Other Related Laws” above.
Many of our properties may require a license, registration, and/or CON to operate. Failure to obtain a
license, registration, or CON, or loss of a required license, registration, or CON would prevent a facility from
operating in the manner intended by the operators or tenants. These events could materially adversely affect our
operators’ or tenants’ ability to make rent payments to us. State and local laws also may regulate the expansion,
including the addition of new beds or services or acquisition of medical equipment, and the construction or
renovation of health care facilities, by requiring a CON or other similar approval from a state agency. See
“Item 1 — Business — Certain Government Regulations — Licensing and Certification” above.
The Patient Protection and Affordable Care Act of 2010, as modified by the Health Care and Education
Reconciliation Act of 2010 (collectively, the “Health Reform Laws”), provides states with an increased federal medical
assistance percentage under certain conditions. On June 28, 2012, The United States Supreme Court upheld the
individual mandate of the Health Reform Laws but partially invalidated the expansion of Medicaid. The ruling on
Medicaid expansion will allow states not to participate in the expansion — and to forego funding for the Medicaid
expansion — without losing their existing Medicaid funding. Given that the federal government substantially funds the
Medicaid expansion, it is unclear whether any state will pursue this option, although at least some appear to be
considering this option at this time. The participation by states in the Medicaid expansion could have the dual effect of
increasing our tenants’ revenues, through new patients, but further straining state budgets. While the federal
government will pay for approximately 100% of those additional costs from 2014 to 2016, states will be expected to
begin paying for part of those additional costs in 2017. With increasingly strained budgets, it is unclear how states will
pay their share of these additional Medicaid costs and what other health care expenditures could be reduced as a result.
A significant reduction in other health care related spending by states to pay for increased Medicaid costs could affect
our tenants’ revenue streams. See “Item 1 — Business — Certain Government Regulations — Reimbursement” above
and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Health
Care Industry — Health Reform Laws” below.
More generally, and because of the dynamic nature of the legislative and regulatory environment for health
care products and services, and in light of existing federal deficit and budgetary concerns, we cannot predict the
impact that broad-based, far-reaching legislative or regulatory changes could have on the U.S. economy, our
business or that of our tenants.
Risk factors related to liability claims and insurance costs
In recent years, skilled nursing and seniors housing operators have experienced substantial increases in both
the number and size of patient care liability claims. As a result, general and professional liability costs have
increased in some markets. General and professional liability insurance coverage may be restricted or very
costly, which may adversely affect the property operators’ future operations, cash flows and financial condition,
and may have a material adverse effect on the property operators’ ability to meet their obligations to us.
Unfavorable resolution of pending and future litigation matters and disputes could have a material adverse
effect on our financial condition.
From time to time, we may be directly involved in a number of legal proceedings, lawsuits and other claims.
We may also be named as defendants in lawsuits allegedly arising out of our actions or the actions of our
operators/tenants or managers in which such operators/tenants or managers have agreed to indemnify, defend and
hold us harmless from and against various claims, litigation and liabilities arising in connection with their
respective businesses. An unfavorable resolution of pending or future litigation may have a material adverse
effect on our business, results of operations and financial condition. Regardless of its outcome, litigation may
result in substantial costs and expenses and significantly divert the attention of management. There can be no
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assurance that we will be able to prevail in, or achieve a favorable settlement of, pending or future litigation. In
addition, pending litigation or future litigation, government proceedings or environmental matters could lead to
increased costs or interruption of our normal business operations.
Risk factors related to acquisitions
We are exposed to the risk that some of our acquisitions may not prove to be successful. We could
encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent
liabilities, and acquired properties might require significant management attention that would otherwise be
devoted to our ongoing business. If we agree to provide construction funding to an operator/tenant and the
project is not completed, we may need to take steps to ensure completion of the project. Such expenditures may
negatively affect our results of operations. Furthermore,
there can be no assurance that our anticipated
acquisitions and investments, the completion of which is subject to various conditions, will be consummated in
accordance with anticipated timing, on anticipated terms, or at all.
Risk factors related to joint ventures
We have entered into, and may continue in the future to enter into, partnerships or joint ventures with other
persons or entities. Joint venture investments involve risks that may not be present with other methods of
ownership, including the possibility that our partner might become insolvent, refuse to make capital contributions
when due or otherwise fail to meet its obligations, which may result in certain liabilities to us for guarantees and
other commitments; that our partner might at any time have economic or other business interests or goals that are
or become inconsistent with our interests or goals; that we could become engaged in a dispute with our partner,
which could require us to expend additional resources to resolve such disputes and could have an adverse impact
on the operations and profitability of the joint venture; and that our partner may be in a position to take action or
withhold consent contrary to our instructions or requests. In addition, our ability to transfer our interest in a joint
venture to a third party may be restricted. In some instances, we and/or our partner may have the right to trigger a
buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when
we otherwise would not have initiated such a transaction. Our ability to acquire our partner’s interest may be
limited if we do not have sufficient cash, available borrowing capacity or other capital resources. In such event,
we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it. Joint
ventures may require us to share decision-making authority with our partners, which could limit our ability to
control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions
may require partner approval, such as the sale, acquisition or financing of a property.
Risk factors related to our seniors housing operating properties
We are exposed to various operational risks with respect to our seniors housing operating properties that may
increase our costs or adversely affect our ability to generate revenues. These risks include fluctuations in occupancy,
Medicare and Medicaid reimbursement, if applicable, and private pay rates; economic conditions; competition; federal,
state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards; the
availability and increases in cost of general and professional liability insurance coverage; state regulation and rights of
residents related to entrance fees; the availability and increases in the cost of labor (as a result of unionization or
otherwise). Any one or a combination of these factors may adversely affect our revenue and operations.
Risk factors related to life science facilities
Our tenants in the life science industry face high levels of regulation, expense and uncertainty that may
adversely affect their ability to make payments to us. Research, development and clinical testing of products and
technologies can be very expensive and sources of funds may not be available to our life science tenants in the
future. The products and technologies that are developed and manufactured by our life science tenants may
require regulatory approval prior to being made, marketed, sold and used. The regulatory process can be costly,
long and unpredictable. Even after a tenant gains regulatory approval and market acceptance, the product still
presents regulatory and liability risks, such as safety concerns, competition from new products and eventually the
expiration of patent protection. These factors may affect the ability of our life science tenants to make timely
payments to us, which may adversely affect our revenue and operations.
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Risk factors related to indebtedness
Permanent financing for our investments is typically provided through a combination of public offerings of
debt and equity securities and the incurrence or assumption of secured debt. The incurrence or assumption of
indebtedness may cause us to become more leveraged, which could (1) require us to dedicate a greater portion of
our cash flow to the payment of debt service, (2) make us more vulnerable to a downturn in the economy,
(3) limit our ability to obtain additional financing, or (4) negatively affect our credit ratings or outlook by one or
more of the rating agencies.
Our debt agreements contain various covenants, restrictions and events of default. Among other things,
these provisions require us to maintain certain financial ratios and minimum net worth and impose certain limits
on our ability to incur indebtedness, create liens and make investments or acquisitions. Breaches of these
covenants could result in defaults under the instruments governing the applicable indebtedness, in addition to any
other indebtedness cross-defaulted against such instruments. These defaults could have a material adverse impact
on our business, results of operations and financial condition.
In addition, adverse economic conditions may impact the availability of additional funds or could cause the
terms on which we are able to borrow additional funds to become unfavorable. In those circumstances, we may
be required to raise additional equity in the capital markets. Our access to capital depends upon a number of
factors over which we have little or no control, including rising interest rates, inflation and other general market
conditions and the market’s perception of our growth potential and our current and potential future earnings and
cash distributions and the market price of the shares of our capital stock. We cannot assure you that we will be
able to raise the capital necessary to make future investments or to meet our obligations and commitments as they
mature.
Risk factors related to our credit ratings
We plan to manage the Company to maintain a capital structure consistent with our current profile, but there
can be no assurance that we will be able to maintain our current credit ratings. Any downgrades in terms of
ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and
availability of capital, which could in turn have a material adverse impact on our consolidated results of
operations, liquidity and/or financial condition.
Risk factors related to swaps
We enter into interest rate swap agreements from time to time to manage some of our exposure to interest
rate and foreign currency exchange rate volatility. These swap agreements involve risks, such as the risk that
counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may
not be effective in reducing our exposure to changes in interest rates or foreign currency exchange rates. When
we use forward-starting interest rate swaps, there is a risk that we will not complete the long-term borrowing
against which the swap is intended to hedge. If such events occur, our results of operations may be adversely
affected.
Risk factors related to environmental laws
Under various federal and state laws, owners or operators of real estate may be required to respond to the
presence or release of hazardous substances on the property and may be held liable for property damage, personal
injuries or penalties that result from environmental contamination or exposure to hazardous substances. We may
become liable to reimburse the government for damages and costs it incurs in connection with the contamination.
Generally, such liability attaches to a person based on the person’s relationship to the property. Our tenants or
borrowers are primarily responsible for the condition of the property. Moreover, we review environmental site
assessments of the properties that we own or encumber prior to taking an interest in them. Those assessments are
designed to meet the “all appropriate inquiry” standard, which we believe qualifies us for the innocent purchaser
defense if environmental liabilities arise. Based upon such assessments, we do not believe that any of our
properties are subject to material environmental contamination. However, environmental liabilities may be
present in our properties and we may incur costs to remediate contamination, which could have a material
adverse effect on our business or financial condition or the business or financial condition of our obligors.
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Risk factors related to facilities that require entrance fees
Certain of our seniors housing facilities require the payment of an upfront entrance fee by the resident, a
portion of which may be refundable by the operator. Some of these facilities are subject to substantial oversight
by state regulators relating to these funds. As a result of this oversight, residents of these facilities may have a
variety of rights, including, for example, the right to cancel their contracts within a specified period of time and
certain lien rights. The oversight and rights of residents within these facilities may have an effect on the revenue
or operations of the operators of such facilities and therefore may negatively impact us.
Risk factors related to facilities under construction or development
At any given time, we may be in the process of constructing one or more new facilities that ultimately will
require a CON and license before they can be utilized by the operator for their intended use. The operator also
may need to obtain Medicare and Medicaid certification and enter into Medicare and Medicaid provider
agreements and/or third party payor contracts. In the event that the operator is unable to obtain the necessary
CON, licensure, certification, provider agreements or contracts after the completion of construction, there is a
risk that we will not be able to earn any revenues on the facility until either the initial operator obtains a license
or certification to operate the new facility and the necessary provider agreements or contracts or we find and
contract with a new operator that is able to obtain a license to operate the facility for its intended use and the
necessary provider agreements or contracts.
In connection with our renovation, redevelopment, development and related construction activities, we may
be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other
in increased costs or our
required governmental permits and authorizations. These factors could result
abandonment of these projects. In addition, we may not be able to obtain financing on favorable terms, which
may render us unable to proceed with our development activities, and we may not be able to complete
construction and lease-up of a property on schedule, which could result in increased debt service expense or
construction costs.
Additionally, the time frame required for development, construction and lease-up of these properties means
that we may have to wait years for significant cash returns. Because we are required to make cash distributions to
our stockholders, if the cash flow from operations or refinancing is not sufficient, we may be forced to borrow
additional money to fund such distributions. Newly developed and acquired properties may not produce the cash
flow that we expect, which could adversely affect our overall financial performance.
In deciding whether to acquire or develop a particular property, we make assumptions regarding the
expected future performance of that property. In particular, we estimate the return on our investment based on
expected occupancy, rental rates and capital costs. If our financial projections with respect to a new property are
inaccurate as a result of increases in capital costs or other factors, the property may fail to perform as we
expected in analyzing our investment. Our estimate of the costs of repositioning or redeveloping an acquired
property may prove to be inaccurate, which may result in our failure to meet our profitability goals. Additionally,
we may acquire new properties that are not fully leased, and the cash flow from existing operations may be
insufficient to pay the operating expenses and debt service associated with that property.
We do not know if our tenants will renew their existing leases, and if they do not, we may be unable to lease
the properties on as favorable terms, or at all
We cannot predict whether our tenants will renew existing leases at the end of their lease terms, which
expire at various times. If these leases are not renewed, we would be required to find other tenants to occupy
those properties or sell them. There can be no assurance that we would be able to identify suitable replacement
tenants or enter into leases with new tenants on terms as favorable to us as the current leases or that we would be
able to lease those properties at all.
36
Our ownership of properties through ground leases exposes us to the loss of such properties upon breach or
termination of the ground leases
We have acquired an interest in certain of our properties by acquiring a leasehold interest in the property on
which the building is located, and we may acquire additional properties in the future through the purchase of
interests in ground leases. As the lessee under a ground lease, we are exposed to the possibility of losing the
property upon termination of the ground lease or an earlier breach of the ground lease by us.
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in
the performance of our properties
Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our properties
in response to changes in economic and other conditions will be limited. No assurances can be given that we will
recognize full value for any property that we are required to sell for liquidity reasons. Our inability to respond
rapidly to changes in the performance of our investments could adversely affect our financial condition and
results of operations. In addition, we are exposed to the risks inherent in concentrating investments in real estate,
and in particular, the seniors housing and health care industries. A downturn in the real estate industry could
adversely affect the value of our properties and our ability to sell properties for a price or on terms acceptable to
us.
Risk factors related to reinvestment of sale proceeds
From time to time, we will have cash available from (1) the proceeds of sales of our securities, (2) principal
payments on our loans receivable and (3) the sale of properties, including non-elective dispositions, under the
terms of master leases or similar financial support arrangements. In order to maintain current revenues and
continue generating attractive returns, we expect to re-invest these proceeds in a timely manner. We compete for
real estate investments with a broad variety of potential investors. This competition for attractive investments
may negatively affect our ability to make timely investments on terms acceptable to us.
Failure to properly manage our rapid growth could distract our management or increase our expenses
We have experienced rapid growth and development in a relatively short period of time and expect to
continue this rapid growth in the future. This growth has resulted in increased levels of responsibility for our
management. Future property acquisitions could place significant additional demands on, and require us to
expand, our management, resources and personnel. Our failure to manage any such rapid growth effectively
could harm our business and, in particular, our financial condition, results of operations and cash flows, which
could negatively affect our ability to make distributions to stockholders. Our growth could also increase our
capital requirements, which may require us to issue potentially dilutive equity securities and incur additional
debt.
Ownership of property outside the United States may subject us to different or greater risks than those
associated with our domestic operations
We have operations in Canada and the United Kingdom. International development, ownership, and
operating activities involve risks that are different from those we face with respect to our domestic properties and
operations. These risks include, but are not limited to, any international currency gain recognized with respect to
changes in exchange rates may not qualify under the 75% gross income test or the 95% gross income test that we
must satisfy annually in order to qualify and maintain our status as a REIT; challenges with respect to the
repatriation of foreign earnings and cash; changes in foreign political, regulatory, and economic conditions,
including regionally, nationally, and locally; challenges in managing international operations; challenges of
complying with a wide variety of foreign laws and regulations, including those relating to real estate, corporate
governance, operations, taxes, employment and legal proceedings; foreign ownership restrictions with respect to
operations in countries; differences in lending practices and the willingness of domestic or foreign lenders to
provide financing; regional or country-specific business cycles and economic instability; and changes in
applicable laws and regulations in the United States that affect foreign operations. If we are unable to
successfully manage the risks associated with international expansion and operations, our results of operations
and financial condition may be adversely affected.
37
Risk factors related to changes in currency exchange rates
As we expand our operations internationally, currency exchange rate fluctuations could affect our results of
operations and financial position. We expect to generate an increasing portion of our revenue and expenses in
such foreign currencies as the Canadian dollar and the British pound. Although we may enter into foreign
exchange agreements with financial institutions and/or obtain local currency mortgage debt in order to reduce our
exposure to fluctuations in the value of foreign currencies, we cannot assure you that foreign currency
fluctuations will not have a material adverse effect on us.
We might fail to qualify or remain qualified as a REIT
We intend to operate as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), and
believe we have and will continue to operate in such a manner. If we lose our status as a REIT, we will face
serious income tax consequences that will substantially reduce the funds available for satisfying our obligations
and for distribution to our stockholders because:
• we would not be allowed a deduction for distributions to stockholders in computing our taxable income
and would be subject to U.S. federal income tax at regular corporate rates;
• we could be subject to the federal alternative minimum tax and possibly increased state and local
taxes; and
• unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a
REIT for four taxable years following the year during which we were disqualified.
Since REIT qualification requires us to meet a number of complex requirements, it is possible that we may
fail to fulfill them, and if we do, our earnings will be reduced by the amount of U.S. federal and other income
taxes owed. A reduction in our earnings would affect the amount we could distribute to our stockholders. If we
do not qualify as a REIT, we would not be required to make distributions to stockholders since a non-REIT is not
required to pay dividends to stockholders in order to maintain REIT status or avoid an excise tax. See “Item 1 —
Business — Taxation — Federal Income Tax Considerations” for a discussion of the provisions of the Code that
apply to us and the effects of failure to qualify as a REIT.
In addition, if we fail to qualify as a REIT, all distributions to stockholders would continue to be treated as
dividends to the extent of our current and accumulated earnings and profits, although corporate stockholders may
be eligible for the dividends received deduction, and individual stockholders may be eligible for taxation at the
rates generally applicable to long-term capital gains (currently at a maximum rate of 20%) with respect to
distributions.
As a result of all these factors, our failure to qualify as a REIT also could impair our ability to implement
our business strategy and would adversely affect the value of our common stock.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which
there are only limited judicial and administrative interpretations. The determination of various factual matters
and circumstances not entirely within our control may affect our ability to remain qualified as a REIT. Although
we believe that we qualify as a REIT, we cannot assure you that we will continue to qualify or remain qualified
as a REIT for U.S. federal income tax purposes. See “Item 1 — Business — Taxation — Federal Income Tax
Considerations” included in this Annual Report on Form 10-K.
The 90% annual distribution requirement will decrease our liquidity and may limit our ability to engage in
otherwise beneficial transactions
To comply with the 90% distribution requirement applicable to REITs and to avoid the nondeductible excise
tax, we must make distributions to our stockholders. See “Item 1 — Business — Taxation — Federal Income
Tax Considerations — Qualification as a REIT — Annual Distribution Requirements” included in this Annual
Report on Form 10-K. Although we anticipate that we generally will have sufficient cash or liquid assets to
enable us to satisfy the REIT distribution requirement, it is possible that, from time to time, we may not have
sufficient cash or other liquid assets to meet the 90% distribution requirement, or we may decide to retain cash or
38
distribute such greater amount as may be necessary to avoid income and excise taxation. This may be due to
timing differences between the actual receipt of income and actual payment of deductible expenses, on the one
hand, and the inclusion of that income and deduction of those expenses in arriving at our taxable income, on the
other hand. In addition, non-deductible expenses such as principal amortization or repayments or capital
expenditures in excess of non-cash deductions may cause us to fail to have sufficient cash or liquid assets to
enable us to satisfy the 90% distribution requirement. In the event that timing differences occur, or we deem it
appropriate to retain cash, we may borrow funds, issue additional equity securities (although we cannot assure
you that we will be able to do so), pay taxable stock dividends, if possible, distribute other property or securities
or engage in another transaction intended to enable us to meet the REIT distribution requirements. This may
require us to raise additional capital to meet our obligations.
The lease of qualified health care properties to a taxable REIT subsidiary is subject to special requirements
We lease certain qualified health care properties to taxable REIT subsidiaries (or limited liability companies
of which the taxable REIT subsidiaries are members), which lessees contract with managers (or related parties)
to manage the health care operations at these properties. The rents from this taxable REIT subsidiary lessee
structure are treated as qualifying rents from real property if (1) they are paid pursuant to an arms-length lease of
a qualified health care property with a taxable REIT subsidiary and (2) the manager qualifies as an eligible
independent contractor (as defined in the Code). If any of these conditions are not satisfied, then the rents will
not be qualifying rents. See “Item 1 — Business — Taxation — Federal Income Tax Considerations —
Qualification as a REIT — Income Tests.”
If certain sale-leaseback transactions are not characterized by the Internal Revenue Service as “true
leases,” we may be subject to adverse tax consequences
We have purchased certain properties and leased them back to the sellers of such properties, and we may
enter into similar transactions in the future. We intend for any such sale-leaseback transaction to be structured in
such a manner that the lease will be characterized as a “true lease,” thereby allowing us to be treated as the owner
of the property for U.S. federal income tax purposes. However, depending on the terms of any specific
transaction, the Internal Revenue Service might take the position that the transaction is not a “true lease” but is
more properly treated in some other manner. In the event any sale-leaseback transaction is challenged and
successfully re-characterized by the Internal Revenue Service, we would not be entitled to claim the deductions
for depreciation and cost recovery generally available to an owner of property. Furthermore, if a sale-leaseback
transaction were so re-characterized, we might fail
tests or income tests and,
consequently, could lose our REIT status effective with the year of re-characterization. See “Item 1 — Business
— Taxation — Federal Income Tax Considerations — Qualification as a REIT — Asset Tests” and “— Income
Tests.” Alternatively, the amount of our REIT taxable income could be recalculated, which may cause us to fail
to meet the REIT annual distribution requirements for a taxable year. See “Item 1 — Business — Taxation —
Federal Income Tax Considerations — Qualification as a REIT — Annual Distribution Requirements.”
to satisfy the REIT asset
Other risk factors
We are also subject to other risks. First, our certificate of incorporation and by-laws contain anti-takeover
provisions (restrictions on share ownership and transfer and super majority stockholder approval requirements
for business combinations) that could make it more difficult for or even prevent a third party from acquiring us
without the approval of our incumbent Board of Directors. Provisions and agreements that inhibit or discourage
takeover attempts could reduce the market value of our common stock.
Additionally, we are dependent on key personnel. Although we have entered into employment agreements
with our executive officers, losing any one of them could, at least temporarily, have an adverse impact on our
operations. We believe that losing more than one could have a material adverse impact on our business.
Item 1B. Unresolved Staff Comments
None.
39
Item 2. Properties
We own our corporate headquarters located at 4500 Dorr Street, Toledo, Ohio 43615. We also own
corporate offices in Tennessee, lease corporate offices in Florida and California and have ground leases relating
to certain of our properties. The following table sets forth certain information regarding the properties that
comprise our consolidated real property and real estate loan investments as of December 31, 2012 (dollars in
thousands):
Property Location
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Connecticut . . . . . . . . . . . . . . . . . . . . . . . . . .
Delaware . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . .
Massachusetts . . . . . . . . . . . . . . . . . . . . . . . .
Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mississippi . . . . . . . . . . . . . . . . . . . . . . . . . .
Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Montana . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Hampshire . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . .
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . .
New York . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . .
Rhode Island . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . . . . . . . . . . .
West Virginia . . . . . . . . . . . . . . . . . . . . . . . .
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total domestic . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seniors Housing Triple-Net
Seniors Housing Operating
Number of
Properties
Total
Investment
Annualized
Revenues(1)
Number of
Properties
Total
Investment
Annualized
Revenues(1)
2
2
3
4
23
10
39
7
1
13
18
3
8
11
1
—
27
34
8
3
3
2
1
4
2
12
56
—
9
45
28
16
1
45
3
8
25
39
1
2
7
7
24
15
572
1
573
$
20,922
14,287
31,144
85,485
215,401
157,444
630,924
148,727
17,253
293,843
249,678
49,559
158,640
66,869
4,914
—
409,017
451,096
117,961
38,769
32,734
30,470
6,914
37,170
68,255
185,972
1,215,282
—
212,913
272,994
239,641
115,027
3,643
803,478
47,576
274,269
201,670
369,178
6,226
27,728
95,018
121,856
391,682
195,883
8,117,512
37,138
$8,154,650
$
1,688
1,364
4,296
9,771
22,354
15,741
50,877
10,068
1,970
25,015
24,969
3,868
15,494
8,764
1,376
—
35,300
53,093
9,982
4,117
3,280
2,790
1,366
4,067
7,483
19,868
96,180
—
16,177
29,218
32,809
13,494
733
81,401
5,001
14,502
25,380
55,205
887
2,917
9,752
12,517
41,102
19,913
796,149
673
$796,822
2
4
40
2
14
—
1
5
—
5
—
1
2
1
—
1
—
13
—
1
—
2
—
—
2
2
—
1
—
—
3
2
—
—
3
—
2
12
1
1
—
18
—
—
141
13
154
$
33,059
43,930
1,095,637
59,281
340,487
—
5,706
42,996
—
287,632
—
36,109
52,492
23,099
—
25,884
—
319,158
—
26,297
—
71,148
—
—
34,233
51,208
—
20,102
—
—
191,366
39,856
—
—
73,594
—
55,093
267,899
17,877
29,373
580,834(2)
537,028
—
—
4,361,378
587,158
$4,948,536
$
5,494
16,143
268,985
17,414
101,889
—
4,366
20,149
—
45,930
—
5,729
10,515
6,416
—
5,269
—
83,638
—
6,875
—
9,562
—
—
8,664
10,103
—
1,375
—
—
13,233
2,166
—
—
21,656
—
15,379
66,923
9,828
6,172
30,261(2)
83,980
—
—
878,114
76,434
$954,548
(1) Reflects annualized revenues adjusted for timing of investment.
(2) Amounts represent loan and related interest income for loan to Sunrise Senior Living that was acquired upon merger consummation on
January 9, 2013. See Notes 6 and 21 to our consolidated financial statements for additional information.
40
Property Location
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Missouri
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical Facilities
Number of
Properties
Total
Investment
Annualized
Revenues(1)
3
1
4
1
16
1
41
11
1
3
7
5
1
2
1
1
1
5
6
3
6
8
3
8
10
10
2
1
1
8
47
4
5
19
$
33,842
24,996
78,379
28,238
508,627
6,008
548,568
190,250
19,288
28,369
136,101
45,450
27,583
20,111
25,172
21,119
9,270
100,419
156,078
149,739
72,865
279,849
39,271
89,684
55,385
100,298
17,475
766
18,714
97,935
870,139
68,400
149,070
302,365
$
4,467
3,309
9,554
2,836
56,676
622
52,370
22,004
2,677
4,863
15,732
8,154
3,172
1,814
2,933
69
4,249
13,619
14,099
16,885
6,410
46,813
3,198
9,520
5,930
10,493
2,344
—
3,286
9,494
78,499
6,327
7,804
30,112
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
246
$4,319,823
$460,334
(1) Reflects annualized revenues adjusted for timing of investment.
41
The following table sets forth occupancy, coverages and average annualized revenues for certain property
types (excluding investments in unconsolidated entities):
Occupancy(1)
Coverages(1,2)
Average Annualized Revenues(3)
2012
2011
2012
2011
2012
2011
Seniors housing triple-net(4) . . . . . . .
. . . . . .
Skilled nursing/post-acute(4)
Seniors housing operating(5)
. . . . . .
Hospitals(4) . . . . . . . . . . . . . . . . . . . .
Medical office buildings(6) . . . . . . . .
89.9% 88.2% 1.34x
87.4% 88.0% 1.75x
92.3% 90.1%
n/a
60.3% 59.0% 2.40x
n/a
94.4% 93.4%
1.38x
2.22x
n/a
2.47x
n/a
$14,509
11,681
54,183
49,244
28
$15,001 per unit
9,954 per bed
47,432 per unit
43,929 per bed
27 per sq. ft.
(1) We use unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy and coverages for
properties other than medical office buildings and have not independently verified the information.
(2) Represents the ratio of our triple-net customers’ earnings before interest, taxes, depreciation, amortization, rent and management fees to
contractual rent or interest due us. Data reflects the 12 months ended September 30 for the periods presented.
(3) Represents annualized revenues divided by total beds, units or square feet as presented in the tables above.
(4) Occupancy represents average quarterly operating occupancy based on the quarters ended September 30 and excludes properties that are
unstabilized, closed or for which data is not available or meaningful.
(5) Occupancy for seniors housing operating represents average occupancy for the three months ended December 31.
(6) Medical office building occupancy represents the percentage of total rentable square feet leased and occupied (including month-to-month
and holdover leases and excluding terminations and discontinued operations) as of December 31.
The following table sets forth information regarding lease expirations for certain portions of our portfolio as
of December 31, 2012 (dollars in thousands):
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Thereafter
Expiration Year
Seniors housing triple-net:
Properties . . . . . . . . . . . .
Base rent(1)
% of base rent . . . . . . . . .
18
. . . . . . . . . . . $ 13,437
15
$ 25,900
$
1
4,669
$
1.8%
3.4%
0.6%
Hospitals:
Properties . . . . . . . . . . . .
Base rent(1)
% of base rent . . . . . . . . .
. . . . . . . . . . . $
—
— $
0.0%
—
— $
0.0%
—
— $
0.0%
Medical office buildings:
—
— $
0.0%
—
— $
0.0%
34
15,594
51
$ 37,194
$
2.1%
4.9%
12
—
— $ 14,944
0.0%
2.0%
55
$ 60,927
$
10
12,817
357
$ 566,733
8.1%
1.7%
77.1%
3
2,350
$
2.9%
—
— $
0.0%
—
— $
0.0%
—
— $
0.0%
—
— $
0.0%
—
— $
0.0%
23
77,818
97.1%
Square feet
Base rent(1)
% of base rent . . . . . . . . .
. . . . . . . . . . . 600,865
. . . . . . . . . . . $ 25,283
641,228
$ 13,384
724,578
$ 15,806
752,263
$ 16,413
1,073,659
25,464
$
693,746
$ 14,679
652,059
$ 15,096
693,517
$ 15,650
823,656
$ 20,233
1,944,163
38,860
$
3,091,420
77,721
$
9.1%
4.8%
5.7%
5.9%
9.1%
5.3%
5.4%
5.6%
7.3%
13.9%
27.9%
(1) The most recent monthly base rent including straight line for leases with fixed escalators or annual cash rents with contingent escalators.
Base rent does not include tenant recoveries or amortization of above and below market lease intangibles.
Item 3. Legal Proceedings
From time to time, there are various legal proceedings pending to which we are a party or to which some of
our properties are subject arising in the normal course of business. We do not believe that the ultimate resolution
of these proceedings will have a material adverse effect on our consolidated financial position or results of
operations.
In August 2012, we entered into a merger agreement with Sunrise Senior Living, Inc. (“Sunrise”).
Following the announcement of the merger agreement, complaints were filed in the U.S. District Court for the
Eastern District of Virginia and the Chancery Court for the State of Delaware challenging the merger. The
complaints challenge the merger on behalf of a putative class of Sunrise public stockholders, and name as
defendants Sunrise, its directors and us. The complaints generally allege that the individual defendants breached
their fiduciary duties in connection with the merger and that the entity defendants aided and abetted that breach.
The complaint filed in the U.S. District Court for the Eastern District of Virginia additionally alleges that the
preliminary proxy statement filed with the Securities and Exchange Commission by Sunrise fails to provide
material information in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated
thereunder. The complaints seek, among other things, injunctive relief against the merger, unspecified damages
42
and an award of plaintiffs’ expenses, including attorneys’ fees. On December 5, 2012, the parties executed a
Memorandum of Understanding (the “MOU”) that provisionally settles the lawsuits subject to a number of
conditions. On January 17, 2013, the parties filed a Joint Motion to Stay the Proceedings in the U.S. District
Court for the Eastern District of Virginia based upon the MOU and, on January 23, 2013, the U.S. District Court
for the Eastern District of Virginia entered an order staying the proceedings for six (6) months as the parties
complete the settlement process. On February 11, 2013, the parties filed a [Proposed] Order Staying All
Proceedings in the Chancery Court for the State of Delaware and, on February 13, 2013, the Chancery Court for
the State of Delaware entered an order staying the proceedings pending the completion of the settlement process
in the lawsuit in the U.S. District Court for the Eastern District of Virginia. On January 9, 2013, we completed
our acquisition of the Sunrise property portfolio. Please see Note 21 to our consolidated financial statements for
additional information.
Item 4. Mine Safety Disclosures
None.
43
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
There were 4,936 stockholders of record as of January 31, 2013. The following table sets forth, for the
periods indicated, the high and low prices of our common stock on the New York Stock Exchange (NYSE:HCN),
and common dividends paid per share:
2012
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales Price
Dividends
High
Low
Paid
$57.66
58.34
62.80
61.33
$52.74
55.21
54.63
55.17
$53.26
52.40
56.48
56.88
$46.75
49.79
41.03
43.65
$0.740
0.740
0.740
0.740
$0.690
0.715
0.715
0.715
Our Board of Directors has approved a new quarterly cash dividend rate of $0.765 per share of common
stock per quarter, commencing with the February 2013 dividend. The declaration and payment of quarterly
dividends remains subject to the review and approval of the Board of Directors.
Stockholder Return Performance Presentation
Set forth below is a line graph comparing the yearly percentage change and the cumulative total stockholder
return on our shares of common stock against the cumulative total return of the S & P Composite-500 Stock
Index and the FTSE NAREIT Equity Index. As of December 31, 2012, 126 companies comprised the FTSE
NAREIT Equity Index. The Index consists of REITs identified by NAREIT as equity (those REITs which have at
least 75% of their investments in real property). The data are based on the closing prices as of December 31 for
each of the five years. 2007 equals $100 and dividends are assumed to be reinvested.
S&P 500
Health Care REIT, Inc.
FTSE NAREIT Equity
s
r
a
l
l
o
D
250
200
150
100
50
0
2007
2008
2009
2010
2011
2012
S & P 500
Health Care REIT, Inc.
FTSE NAREIT Equity
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
100.00
100.00
100.00
63.00
79.68
100.30
113.19
62.27
79.70
91.68
129.42
101.98
93.61
156.94
110.42
108.59
185.53
132.18
44
Except
to the extent
that we specifically incorporate this information by reference,
the foregoing
Stockholder Return Performance Presentation shall not be deemed incorporated by reference by any general
statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of
1933, as amended, or under the Securities Exchange Act of 1934, as amended. This information shall not
otherwise be deemed filed under such acts.
Period
Issuer Purchases of Equity Securities
Total Number
of Shares
Purchased(1)
Average Price Paid
Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs(2)
Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans or
Programs
October 1, 2012 through October 31, 2012 . . . .
—
$ —
November 1, 2012 through November 30,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,804
59.37
December 1, 2012 through December 31,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,804
—
$59.37
(1) During the three months ended December 31, 2012, the company acquired shares of common stock held by employees who tendered
owned shares to satisfy tax withholding obligations.
(2) No shares were purchased as part of publicly announced plans or programs.
45
Item 6. Selected Financial Data
The following selected financial data for the five years ended December 31, 2012 are derived from our
audited consolidated financial statements (in thousands, except per share data):
Operating Data
Revenues(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations before income taxes and
income from unconsolidated entities . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from unconsolidated entities . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net(1)
. . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock redemption charge . . . . . . . . . . . . . . . . . . . . ..
Net income (loss) attributable to noncontrolling interests . . . .
Year Ended December 31,
2008
2009
2010
2011
2012
$407,458
313,044
$445,564
337,628
$578,571
542,071
$1,330,060
1,217,450
$1,822,099
1,636,446
94,414
(1,306)
—
93,108
190,317
283,425
23,201
—
126
107,936
(168)
—
107,768
85,159
192,927
22,079
—
(342)
36,500
(364)
6,673
42,809
86,075
128,884
21,645
—
357
112,610
(1,388)
5,772
116,994
95,722
212,716
60,502
—
(4,894)
185,653
(7,612)
2,482
180,523
114,317
294,840
69,129
6,242
(2,415)
Net income attributable to common stockholders . . . . . . . . . .
$260,098
$171,190
$106,882
$ 157,108
$ 221,884
Other Data
Average number of common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,732
94,309
114,207
114,612
127,656
128,208
173,741
174,401
224,343
225,953
Per Share Data
Basic:
Income from continuing operations attributable to common
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net
Net income attributable to common stockholders* . . . . . . .
Diluted:
Income from continuing operations attributable to common
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net
Net income attributable to common stockholders* . . . . . . .
Cash distributions per common share . . . . . . . . . . . . . . . . . . .
*
Amounts may not sum due to rounding
$
$
$
$
$
0.74
2.03
2.77
0.74
2.02
2.76
2.70
$
$
$
$
$
0.75
0.75
1.50
0.75
0.74
1.49
2.72
$
$
$
$
$
0.16
0.67
0.84
0.16
0.67
0.83
2.74
$
$
$
$
$
0.35
0.55
0.90
0.35
0.55
0.90
2.835
$
$
$
$
$
0.48
0.51
0.99
0.48
0.51
0.98
2.960
(1) We have reclassified the income and expenses attributable to properties sold prior to or held for sale at December 31, 2012, to
discontinued operations for all periods presented. See Note 5 to our audited consolidated financial statements.
2008
2009
2010
2011
2012
December 31,
Balance Sheet Data
Net real estate investments . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . .
Total long-term obligations . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . .
Total preferred stock . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . .
$5,854,179
6,215,031
2,847,676
2,976,746
289,929
3,238,285
$6,080,620
6,367,186
2,414,022
2,559,735
288,683
3,807,451
$8,590,833
9,451,734
4,469,736
4,714,081
291,667
4,733,100
$13,942,350
14,924,606
7,240,752
7,612,309
1,010,417
7,278,647
$17,423,009
19,549,109
8,531,899
8,993,998
1,022,917
10,520,519
46
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXECUTIVE SUMMARY
Company Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Market Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key Transactions in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key Performance Indicators, Trends and Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RESULTS OF OPERATIONS
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seniors Housing Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Housing Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Segment/Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NON-GAAP FINANCIAL MEASURES & OTHER
FFO Reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA Reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOI Reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health Care Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48
48
49
50
51
53
53
54
54
55
56
57
61
63
66
69
69
70
71
75
47
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is based primarily on the consolidated financial statements of Health
Care REIT, Inc. for the periods presented and should be read together with the notes thereto contained in this
Annual Report on Form 10-K. Other important factors are identified in “Item 1 — Business” and “Item 1A —
Risk Factors” above.
Executive Summary
Company Overview
Health Care REIT, Inc. is a real estate investment trust (“REIT”) that has been at the forefront of seniors
housing and health care real estate since the company was founded in 1970. We are an S&P 500 company
headquartered in Toledo, Ohio. Our portfolio spans the full spectrum of seniors housing and health care real
estate, including seniors housing communities, skilled nursing/post-acute facilities, medical office buildings,
inpatient and outpatient medical centers and life science facilities. Our capital programs, when combined with
comprehensive planning, development and property management services, make us a single-source solution for
acquiring, planning, developing, managing, repositioning and monetizing real estate assets.
The following table summarizes our consolidated portfolio as of December 31, 2012:
Type of Property
Investments
(in thousands)
Percentage of
Investments
Number of
Properties
Seniors housing triple-net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seniors housing operating(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical facilities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,154,650
4,948,536
4,319,823
46.8%
28.4%
24.8%
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,423,009
100.0%
573
154
246
973
(1) Excludes 39 properties with an investment amount of $427,187,000 which relates to our share of investments in unconsolidated entities
with Chartwell. Please see Note 7 to our consolidated financial statements for additional information.
(2) Excludes 13 properties with an investment amount of $375,780,000 which relates to our share of investments in unconsolidated entities
with Forest City and a strategic medical partnership. Please see Note 7 to our consolidated financial statements for additional
information.
Business Strategy
Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay
consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders
as a result of annual increases in net operating income and portfolio growth. To meet these objectives, we invest
across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by
property type, customer and geographic location.
Substantially all of our revenues are derived from operating lease rentals, resident fees and services, and
interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund
distributions and depend upon the continued ability of our obligors to make contractual rent and interest
payments to us and the profitability of our operating properties. To the extent that our customers/partners
experience operating difficulties and become unable to generate sufficient cash to make payments to us, there
could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.
To mitigate this risk, we monitor our investments through a variety of methods determined by the type of
property. Our proactive and comprehensive asset management process for seniors housing properties generally
includes review of monthly financial statements and other operating data for each property, review of obligor/
partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real
estate taxes, letters of credit and other collateral. Our internal property management division actively manages
and monitors the medical office building portfolio with a comprehensive process including tenant relations, lease
expirations, the mix of health service providers, hospital/health system relationships, property performance,
capital improvement needs, and market conditions among other things. In monitoring our portfolio, our personnel
use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive
48
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
research to ascertain industry trends. We evaluate the operating environment in each property’s market to
determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we
seek to mitigate, eliminate or transfer the risk. Through these efforts, we are generally able to intervene at an
early stage to address any negative trends, and in so doing, support both the collectability of revenue and the
value of our investment.
In addition to our asset management and research efforts, we also structure our investments to help mitigate
payment risk. Operating leases and loans are normally credit enhanced by guaranties and/or letters of credit. In
addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-
collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.
For the year ended December 31, 2012, rental income, resident fees and services and interest and other
income represented 61%, 37%, and 2% respectively, of total revenues (including discontinued operations).
Substantially all of our operating leases are designed with escalating rent structures. Leases with fixed annual
rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a
collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded
based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a
number of factors, including the stated interest rate, the average principal amount outstanding during the term of
the loan and any interest rate adjustments.
Our primary sources of cash include rent and interest receipts, resident fees and services, borrowings under
our primary unsecured line of credit arrangement, public issuances of debt and equity securities, proceeds from
investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend
distributions, debt service payments (including principal and interest), real property investments (including
acquisitions, capital expenditures, construction advances and transaction costs),
loan advances, property
operating expenses and general and administrative expenses. Depending upon the availability and cost of external
capital, we believe our liquidity is sufficient to fund these uses of cash.
We also continuously evaluate opportunities to finance future investments. New investments are generally
funded from temporary borrowings under our primary unsecured line of credit arrangement, internally generated
cash and the proceeds from investment dispositions. Our investments generate cash from net operating income and
principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn
under our primary unsecured line of credit arrangement, has historically been provided through a combination of the
issuance of public debt and equity securities and the incurrence or assumption of secured debt.
Depending upon market conditions, we believe that new investments will be available in the future with
spreads over our cost of capital that will generate appropriate returns to our stockholders. It is also possible that
investment dispositions may occur in the future. To the extent
investment dispositions exceed new
investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the
proceeds from any investment dispositions in new investments. To the extent that new investment requirements
exceed our available cash on-hand, we expect to borrow under our primary unsecured line of credit arrangement.
At December 31, 2012, we had $1.0 billion of cash and cash equivalents, $107.7 million of restricted cash and
$2.0 billion of available borrowing capacity under our primary unsecured line of credit arrangement. Please see
Note 21 of our consolidated financial statements for information regarding subsequent events that impact our
liquidity.
that
Capital Market Outlook
The capital markets remain supportive of our investment strategy. For the year ended December 31, 2012,
we raised over $6.0 billion in aggregate gross proceeds through issuance of common and preferred stock,
unsecured debt and a Canadian denominated term loan. The capital raised, in combination with available cash
and borrowing capacity under our primary unsecured line of credit arrangement, supported $4.9 billion in gross
new investments for the year. We expect attractive investment opportunities to remain available in the future as
we continue to leverage the benefits of our relationship investment strategy.
49
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Key Transactions in 2012
We completed the following capital transactions during the year ended December 31, 2012:
• issued 64.4 million shares of common stock, generating $3.4 billion of proceeds in three public issuances;
• raised $120.4 million in proceeds from issuance of 2.1 million shares of common stock under our DRIP;
• issued 11.5 million shares of 6.5% preferred stock, generating $287.5 million of proceeds, and redeemed
$275 million of 7.716% preferred stock;
• issued $1.8 billion of senior unsecured notes with average rates of 3.7% and average terms of 10.5 years;
• funded $250 million Canadian denominated unsecured term loan to help hedge our Chartwell investment;
• completed the redemption/conversion of $293.7 million of 4.75% convertible senior unsecured notes; and
• extinguished $360 million of secured debt bearing a weighted-average interest rate of 4.67%.
We completed $4.9 billion of gross investments during the year, including 76% from existing relationships.
The following summarizes investments made during the year ended December 31, 2012 (dollars in thousands):
Properties
Investment
Amount(1)
Capitalization
Rates(2)
Book
Amount(3)
Acquisitions/JVs:
Seniors housing triple-net
. . . . . . . . . . . . . . .
Seniors housing operating . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . .
Total acquisitions/JVs . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Loan advances(4)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
80
35
166
$1,068,123
2,029,109
791,279
3,888,511
314,514
665,094
$4,868,119
7.3%
6.7%
6.9%
7.0%
$1,071,438
1,840,524
837,705
3,749,667
314,514
665,094
$4,729,275
(1) Represents stated purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.
(2) Represents annualized contractual or projected income to be received in cash divided by investment amounts.
(3) Represents amounts recorded on our books including fair value adjustments pursuant to U.S. GAAP. See Notes 3, 6 and 7 to our
consolidated financial statements for additional information.
(4)
Includes $580,834,000 in advances under the Sunrise loan which was acquired upon merger consummation on January 9, 2013. See Note
21 to our consolidated financial statements for additional information.
We completed $534 million of dispositions during the year, generating $635 million in proceeds and $101
million in net gains. The following summarizes dispositions made during the year ended December 31, 2012
(dollars in thousands):
Properties
Proceeds(1)
Capitalization
Rates(2)
Book
Amount(3)
Property sales:
Seniors housing triple-net
. . . . . . . . . . . . . . . . . .
Seniors housing operating . . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . .
Total property sales . . . . . . . . . . . . . . . . . . . . . . .
Loan payoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total dispositions . . . . . . . . . . . . . . . . . . . . . . . . .
73
—
18
91
5
96
$489,216
—
133,055
622,271
12,555
$634,826
8.5%
0.0%
9.9%
8.8%
$372,378
—
149,344
521,722
12,555
$534,277
(1) Represents proceeds received upon disposition including any seller financing. See Notes 5 and 6 to our consolidated financial statements
for additional information.
(2) Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
(3) Represents carrying value of assets at time of disposition.
50
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following other events occurred during the year ended December 31, 2012:
• Our Board of Directors increased the annual cash dividend to $3.06 per common share ($0.765 per share
quarterly), as compared to $2.96 per common share for 2012, beginning in February 2013. The dividend
declared for the quarter ended December 31, 2012 represents the 167th consecutive quarterly dividend
payment.
• We declassified our Board of Directors in May.
Key Performance Indicators, Trends and Uncertainties
We utilize several key performance indicators to evaluate the various aspects of our business. These
indicators are discussed below and relate to operating performance, credit strength and concentration risk.
Management uses these key performance indicators to facilitate internal and external comparisons to our
historical operating results, in making operating decisions and for budget planning purposes.
Operating Performance. We believe that net income attributable to common stockholders (“NICS”) is the
most appropriate earnings measure. Other useful supplemental measures of our operating performance include
funds from operations (“FFO”), net operating income from continuing operations (“NOI”) and same store cash
NOI (“SSCNOI”); however, these supplemental measures are not defined by U.S. generally accepted accounting
principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further
discussion and reconciliations of FFO, NOI and SSCNOI. These earnings measures and their relative per share
amounts are widely used by investors and analysts
in the valuation, comparison and investment
recommendations of companies. The following table reflects the recent historical trends of our operating
performance measures for the periods presented (in thousands):
Year Ended December 31,
2010
2011
2012
Net income attributable to common stockholders . . . . . . . . . . .
Funds from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating income from continuing operations . . . . . . . . . .
Same store cash net operating income . . . . . . . . . . . . . . . . . . .
$106,882
280,022
500,784
322,691
$157,108
524,902
952,321
331,999
$ 221,884
697,557
1,251,982
334,077
Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. The
leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt. The coverage
ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and
preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain
compliance with our debt covenants. The coverage ratios are based on adjusted earnings before interest, taxes,
depreciation and amortization (“Adjusted EBITDA”) which is discussed in further detail, and reconciled to net
income, below in “Non-GAAP Financial Measures.” Leverage ratios and coverage ratios are widely used by
investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of
companies. The following table reflects the recent historical trends for our credit strength measures for the
periods presented:
Year Ended
December 31,
2010
2011
2012
Debt to book capitalization ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt to undepreciated book capitalization ratio . . . . . . . . . . . . . . . . . . . . . . . . .
Debt to market capitalization ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted interest coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted fixed charge coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
49% 50% 45%
45% 46% 41%
38% 38% 33%
3.31x
2.58x
3.02x
2.37x
3.39x
2.76x
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Concentration Risk. We evaluate our concentration risk in terms of asset mix, investment mix, customer
mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our
investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of
our investments that are real property. In order to qualify as an equity REIT, at least 75% of our real estate
investments must be real property whereby each property, which includes the land, buildings, improvements,
intangibles and related rights, is owned by us. Investment mix measures the portion of our investments that relate
to our various property types. Customer mix measures the portion of our investments that relate to our top five
customers. Geographic mix measures the portion of our investments that relate to our top five states (or
international equivalents). The following table reflects our recent historical trends of concentration risk by
investment balance for the periods presented:
December 31,
2010
2011
2012
Asset mix:
Real property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91% 95% 91%
5%
Real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4%
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2%
3%
5%
4%
Investment mix:(1)
Seniors housing triple-net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53% 54% 47%
Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13% 20% 28%
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34% 26% 25%
Customer mix:(1)
Genesis HealthCare, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunrise Senior Living Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merrill Gardens L.L.C.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Belmont Village, LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benchmark Senior Living, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brandywine Senior Living, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Living Communities, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Star Living . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brookdale Senior Living Inc.
Remaining customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68% 59% 63%
18% 15%
6%
6%
5%
5%
7%
7%
5%
4%
6%
5%
4%
9%
8%
Geographic mix:(1)
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10% 10%
7%
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10%
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11%
7%
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59% 60% 61%
9%
9%
9%
7%
5%
6%
6%
6%
8%
(1) Excludes our share of investments in unconsolidated entities.
We evaluate our key performance indicators in conjunction with current expectations to determine if
historical trends are indicative of future results. Our expected results may not be achieved and actual results may
differ materially from our expectations. Factors that may cause actual results to differ from expected results are
52
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
described in more detail in “Forward-Looking Statements and Risk Factors” and other sections of this Annual
Report on Form 10-K. Management regularly monitors economic and other factors to develop strategic and
tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve
our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately
respond to emerging economic and company-specific trends. Please refer to “Business,” “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual
Report on Form 10-K for further discussion of these risk factors.
Corporate Governance
Maintaining investor confidence and trust has become is important in today’s business environment. Our
Board of Directors and management are strongly committed to policies and procedures that reflect the highest
level of ethical business practices. Our corporate governance guidelines provide the framework for our business
operations and emphasize our commitment to increase stockholder value while meeting all applicable legal
requirements. These guidelines meet the listing standards adopted by the New York Stock Exchange and are
available on the Internet at www.hcreit.com.
Liquidity and Capital Resources
Sources and Uses of Cash
Our primary sources of cash include rent and interest receipts, resident fees and services, borrowings under
our primary unsecured line of credit arrangement, public issuances of debt and equity securities, proceeds from
investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend
distributions, debt service payments (including principal and interest), real property investments (including
loan advances, property
acquisitions, capital expenditures, construction advances and transaction costs),
operating expenses, and general and administrative expenses. These sources and uses of cash are reflected in our
Consolidated Statements of Cash Flows and are discussed in further detail below. The following is a summary of
our sources and uses of cash flows (dollars in thousands):
Year Ended
One Year
Change
December, 31
2010
December, 31
2011
$
%
Year Ended
December, 31
2012
One Year
Change
Two Year
Change
$
%
$
%
Beginning cash and cash
equivalents . . . . . . . . . . $
35,476 $
131,570 $
96,094 271% $
163,482 $ 31,912
24% $
128,006 361%
Cash provided from (used
in):
Operating activities . . . .
Investing activities . . . .
Financing activities . . . .
Ending cash and cash
364,741
(2,312,039)
2,043,392
588,224
(4,520,129)
3,963,817
223,483 61%
818,133
(2,208,090) 96% (3,592,979)
1,920,425 94% 3,645,128
39%
229,909
453,392 124%
927,150 -21% (1,280,940) 55%
78%
(318,689)
-8% 1,601,736
equivalents . . . . . . . . . . $
131,570 $
163,482 $
31,912 24% $ 1,033,764 $ 870,282 532% $
902,194 686%
Operating Activities. The change in net cash provided from operating activities is primarily attributable to
increases in NOI which is primarily due to acquisitions. Please see “Results of Operations” for further discussion.
Investing Activities. The changes in net cash used in investing activities are primarily attributable to net
changes in real property investments, real estate loans receivable and investments in unconsolidated entities
which are summarized above in “Key Transactions in 2012.” Please refer to Notes 3, 6 and 7 of our consolidated
financial statements for additional information.
Financing Activities. The changes in net cash provided from financing activities are primarily attributable
to changes related to our long-term debt arrangements, the issuance/redemptions of common and preferred stock,
and dividend payments which are summarized above in “Key Transactions in 2012.” Please refer to Notes 9, 10
and 13 of our consolidated financial statements for additional information.
53
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Subsequent Events. Subsequent to December 31, 2012, we closed on a new unsecured line of credit
arrangement and completed our acquisition of Sunrise Senior Living, Inc. Please refer to Note 21 of our
consolidated financial statements for additional information.
Off-Balance Sheet Arrangements
At December 31, 2012, we had investments in unconsolidated entities with our ownership ranging from
10% to 50%. Please see Note 7 to our consolidated financial statements for additional information. We use
financial derivative instruments to hedge interest rate exposure. Please see Note 11 to our consolidated financial
statements for additional
information. At December 31, 2012, we had nine outstanding letter of credit
obligations. Please see Note 12 to our consolidated financial statements for additional information.
Contractual Obligations
The following table summarizes our payment
requirements under contractual obligations as of
December 31, 2012 (in thousands):
Payments Due by Period
Contractual Obligations
Total
2013
2014-2015
2016-2017
Thereafter
Unsecured line of credit arrangements . . . .
Senior unsecured notes(1) . . . . . . . . . . . . . . .
Secured debt(1) . . . . . . . . . . . . . . . . . . . . . . .
Contractual interest obligations . . . . . . . . . .
Capital lease obligations . . . . . . . . . . . . . . .
Operating lease obligations . . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . .
$
— $
— $
— $
— $
6,145,457
2,728,500
3,601,325
85,853
699,990
2,340,618
6,522
300,000
175,652
411,053
73,562
11,046
2,221,934
—
501,054
590,095
756,197
10,203
22,339
118,684
1,580
1,150,000
765,624
607,765
1,118
22,348
—
2,463
—
4,194,403
1,197,129
1,826,310
970
644,257
—
2,479
Total contractual obligations . . . . . . . . . . . .
$15,608,265
$3,193,247
$2,000,152
$2,549,318
$7,865,548
(1) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected
on the balance sheet.
At December 31, 2012, we had a $2,000,000,000 unsecured line of credit arrangement that is described in
Note 9 to our consolidated financial statements. At December 31, 2012, we had no balance outstanding under the
unsecured line of credit arrangement. Please see Note 21 to our consolidated financial statements for subsequent
event information regarding our unsecured line of credit arrangement.
We have $6,145,457,000 of senior unsecured notes principal outstanding with fixed annual interest rates
ranging from 2.25% to 6.50%, payable semi-annually. A total of $494,403,000 of our senior unsecured notes are
convertible notes that also contain put features. Please see Note 10 to our consolidated financial statements for
additional
information. In addition, we have a $250,000,000 Canadian denominated unsecured term loan
(approximately $251,054,000 USD at exchange rates on December 31, 2012.) The loan matures on July 27, 2015
and includes an option to extend for an additional year at our discretion. Total contractual interest obligations on
senior unsecured notes and the Canadian term loan totaled $2,777,745,000 at December 31, 2012.
We have consolidated secured debt with total outstanding principal of $2,311,586,000, collateralized by
owned properties, with annual interest rates ranging from 1.00% to 10.00%, payable monthly. The carrying
values of the properties securing the debt totaled $3,953,516,000 at December 31, 2012. Total contractual interest
obligations on consolidated secured debt totaled $757,025,000 at December 31, 2012. Our share of non-recourse
secured debt associated with unconsolidated entities (as reflected in the contractual obligations table above) is
$416,914,000 at December 31, 2012. Our share of contractual interest obligations on our unconsolidated entities’
secured debt is $66,555,000 at December 31, 2012.
54
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
At December 31, 2012, we had operating lease obligations of $699,990,000 relating primarily to ground
leases at certain of our properties and office space leases and capital lease obligations of $85,853,000 relating to
certain lease investment properties that contain bargain purchase options.
Purchase obligations include $2,047,400,000 representing the cash portion of the Sunrise merger and
management business sale commitments discussed in Note 21 to our audited financial statements. Purchase
obligations also include unfunded construction commitments and contingent purchase obligations. At
December 31, 2012, we had outstanding construction financings of $162,984,000 for leased properties and were
committed to providing additional financing of approximately $213,255,000 to complete construction. At
December 31, 2012, we had contingent purchase obligations totaling $79,963,000. These contingent purchase
obligations relate to unfunded capital improvement obligations and contingent obligations on acquisitions. Upon
funding, amounts due from the tenant are increased to reflect the additional investment in the property.
Other long-term liabilities relate to our Supplemental Executive Retirement Plan, which is discussed in Note
19 to our consolidated financial statements.
Capital Structure
As of December 31, 2012, we had total equity of $10,520,519,000 and a total debt balance of
$8,450,347,000, which represents a debt to total book capitalization ratio of 45%. Our ratio of debt to market
capitalization was 33% at December 31, 2012. For the year ended December 31, 2012, our adjusted interest
coverage ratio was 3.31x and our adjusted fixed charge coverage ratio was 2.58x. Also, at December 31, 2012,
we had $1,033,764,000 of cash and cash equivalents, $107,657,000 of restricted cash and $2,000,000,000 of
available borrowing capacity under our primary unsecured line of credit arrangement.
Our debt agreements contain various covenants, restrictions and events of default. Certain agreements
require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to
incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2012, we were in
compliance with all of the covenants under our debt agreements. Please refer to the section entitled “Non-GAAP
Financial Measures” for further discussion. None of our debt agreements contain provisions for acceleration
which could be triggered by our debt ratings. However, under our primary unsecured line of credit arrangement,
the ratings on our senior unsecured notes are used to determine the fees and interest charged. A summary of
certain covenants and our results as of and for the year ended December 31, 2012 is as follows:
Covenant
Total Indebtedness to Book Capitalization Ratio
maximum:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured Indebtedness to Total Assets Ratio maximum: . . . . . .
Total Indebtedness to Total Assets maximum: . . . . . . . . . . . . .
Unsecured Debt to Unencumbered Assets maximum:
. . . . . . .
. . . . . . . . . . . . . .
Adjusted Interest Coverage Ratio minimum:
. . . . . . . . . . . . . .
Adjusted Fixed Charge Coverage minimum:
Per Agreement
Unsecured
Line of
Credit(1)
Senior
Unsecured
Notes
Actual At
December 31,
2012
60%
30%
n/a
60%
n/a
1.50x
n/a
40%
60%
n/a
1.50x
n/a
45%
12%
44%
38%
3.31x
2.58x
(1) Canadian denominated term loan covenants are the same as those contained in our primary unsecured line of credit agreement.
We plan to manage the company to maintain compliance with our debt covenants and with a capital
structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the
rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn
have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.
On May 4, 2012, we filed an open-ended automatic or “universal” shelf registration statement with the
Securities and Exchange Commission covering an indeterminate amount of future offerings of debt securities,
common stock, preferred stock, depositary shares, warrants and units. As of January 31, 2013, we had an
55
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
effective registration statement on file in connection with our enhanced dividend reinvestment plan under which
we may issue up to 10,000,000 shares of common stock. As of January 31, 2013, 3,752,914 shares of common
stock remained available for issuance under this registration statement. We have entered into separate Equity
Distribution Agreements with each of UBS Securities LLC, RBS Securities Inc., KeyBanc Capital Markets Inc.
and Credit Agricole Securities (USA) Inc. relating to the offer and sale from time to time of up to $630,015,000
aggregate amount of our common stock (“Equity Shelf Program”). As of January 31, 2013, we had $457,112,000
of remaining capacity under the Equity Shelf Program. Depending upon market conditions, we anticipate issuing
securities under our registration statements to invest in additional properties and to repay borrowings under our
unsecured line of credit arrangements.
Results of Operations
Our primary sources of revenue include rent, resident fees and services, and interest income. Our primary
expenses include interest expense, depreciation and amortization, property operating expenses, transaction costs
and general and administrative expenses. These revenues and expenses are reflected in our Consolidated
Statements of Comprehensive Income and are discussed in further detail below. The following is a summary of
our results of operations (dollars in thousands, except per share amounts):
Year Ended
One Year
Change
December 31,
2010
December 31,
2011
Amount %
Year Ended
December 31,
2012
One Year
Change
Two Year
Change
Amount % Amount %
Net income attributable to
common stockholders . . . $106,882
280,022
568,429
Funds from operations . . . .
Adjusted EBITDA . . . . . . .
Net operating income from
continuing operations . . .
Same store cash NOI . . . . .
Per share data (fully
$157,108 $ 50,226 47% $ 221,884 $ 64,776 41% $115,002 108%
172,655 33% 417,535 149%
244,880 87%
524,902
697,557
292,566 30% 695,662 122%
403,096 71% 1,264,091
971,525
500,784
322,691
952,321
331,999
451,537 90% 1,251,982
334,077
3%
9,308
299,661 31% 751,198 150%
4%
1% 11,386
2,078
diluted):
Net income attributable
to common
stockholders . . . . . . . . $
Funds from operations . .
Adjusted interest coverage
$
0.83
2.18
0.90 $
3.01
8% $
0.07
0.83 38%
0.98 $
3.09
0.08
0.08
9% $
3%
0.15
0.91
18%
42%
ratio . . . . . . . . . . . . . . . .
3.39x
3.02x
-0.37x -11%
3.31x
0.29x 10% -0.08x
-2%
Adjusted fixed charge
coverage ratio . . . . . . . . .
2.76x
2.37x
-0.39x -14%
2.58x
0.21x
9% -0.18x
-7%
56
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following table represents the changes in outstanding common stock for the period from January 1,
2010 to December 31, 2012 (in thousands):
December 31,
2010
Year Ended
December 31,
2011
December 31,
2012
Beginning balance . . . . . . . . . . . . . . . . . . . . .
Public offerings . . . . . . . . . . . . . . . . . . . . . . .
DRIP issuances . . . . . . . . . . . . . . . . . . . . . . .
ESP issuances . . . . . . . . . . . . . . . . . . . . . . . .
Senior note conversions . . . . . . . . . . . . . . . .
Preferred stock conversions . . . . . . . . . . . . .
Option exercises . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
123,385
20,700
1,957
431
—
339
129
156
Ending balance . . . . . . . . . . . . . . . . . . . . . . .
147,097
Average number of shares outstanding:
147,097
41,400
2,534
849
—
—
232
163
192,275
192,275
64,400
2,136
—
1,040
—
341
182
Totals
123,385
126,500
6,627
1,280
1,040
339
702
501
260,374
260,374
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127,656
128,208
173,741
174,401
224,343
225,953
We evaluate our business and make resource allocations on our three business segments: seniors housing
triple-net, seniors housing operating and medical facilities. The primary performance measures for our properties
are NOI and SSCNOI, which are discussed below. Please see Note 17 to our consolidated financial statements for
additional information.
Seniors Housing Triple-net
The following is a summary of our NOI for the seniors housing triple-net segment (dollars in thousands):
Year Ended
December 31, December 31,
2010
2011
One Year
Change
$
%
Year Ended
December 31,
2012
One Year
Change
$
%
Two Year
Change
$
%
$217,230
$224,497
$
7,267
3% $226,481
$
1,984
1% $
9,251
4%
7,591
6,254
(1,337) -18%
4,688
(1,566) -25% (2,903) -38%
SSCNOI(1)
Non-cash NOI
. . . . . . . . . .
attributable to same
store properties(1) . . .
NOI attributable to non
same store
properties(2)
. . . . . . .
98,246
356,888
258,642 263% 488,430
131,542 37% 390,184 397%
NOI . . . . . . . . . . . . . . .
$323,067
$587,639
$264,572
82% $719,599
$131,960 22% $396,532 123%
(1) Due to increases in cash and non-cash revenues (described below) related to 235 same store properties.
(2) Primarily due to acquisitions of properties, which totaled 46, 184 and 51 for the years ended December 31, 2010, 2011 and 2012,
respectively, and conversions of construction projects into revenue-generating properties, which totaled nine, seven and 11 for the years
ended December 31, 2010, 2011 and 2012, respectively.
57
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a summary of our results of operations for the seniors housing triple-net segment (dollars
in thousands):
Revenues:
Year Ended
December 31, December 31,
2010
2011
One Year
Change
$
%
Year Ended
December 31,
2012
One Year
Change
$
%
Two Year
Change
$
%
Rental income . . . . . . . . . . . . . . .
$283,505
$546,951
$263,446
93% $692,807
$145,856
27% $409,302
Interest income . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . .
36,176
3,386
34,068
6,620
(2,108)
3,234
-6%
96%
24,380
2,412
(9,688)
-28% (11,796)
(4,208)
-64%
(974)
144%
-33%
-29%
Net operating income from
continuing operations
(NOI) . . . . . . . . . . . . . . . . . .
Expenses:
323,067
587,639
264,572
82% 719,599
131,960
22% 396,532
123%
Interest expense . . . . . . . . . . . . . .
(4,524)
Loss (gain) on derivatives, net . . .
Depreciation and amortization . . .
Transaction costs . . . . . . . . . . . . .
Loss (gain) on extinguishment of
debt, net . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . .
—
81,718
20,612
7,791
29,684
238
—
158,882
27,993
4,762
n/a
— n/a
4,601
96
4,363 1833%
9,125
-202%
96
n/a
96
n/a
77,164
7,381
94% 203,987
45,105
28% 122,269
36%
35,705
7,712
28%
15,093
150%
73%
—
—
(7,791)
-100%
(29,684)
-100%
2,405
27,008
2,405
27,008
86,689
n/a
n/a
(5,386)
(2,676)
-69%
-9%
46% 138,521
102%
135,281
187,113
51,832
38% 273,802
Income from continuing operations
before income taxes and income
(loss) from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . .
Income (loss) from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . .
Income from continuing
187,786
400,526
212,740
113% 445,797
45,271
11% 258,011
137%
—
—
(143)
(143)
n/a
(2,852)
(2,709) 1894%
(2,852)
n/a
(9)
(9)
n/a
(33)
(24)
267%
(33)
n/a
operations . . . . . . . . . . . . . . . . . . .
187,786
400,374
212,588
113% 442,912
42,538
11% 255,126
136%
Discontinued operations:
Gain (loss) on sales of properties,
net . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets . . . . . . . . . .
Income from discontinued
36,274
—
operations, net
. . . . . . . . . . . . .
50,269
Discontinued operations, net . . . .
86,543
59,108
(1,103)
40,869
98,874
22,834
63% 116,838
57,730
98%
80,564
222%
(1,103)
n/a
(14,699)
(13,596) 1233% (14,699)
n/a
(9,400)
-19%
36,040
(4,829)
-12% (14,229)
-28%
12,331
14% 138,179
39,305
40%
51,636
60%
Net income . . . . . . . . . . . . . . . . . . . .
274,329
499,248
224,919
82% 581,091
81,843
16% 306,762
112%
Less: Net income attributable to
noncontrolling interests . . . . . . . .
(18)
218
236
n/a
429
211
97%
447 -2483%
Net income attributable to common
stockholders . . . . . . . . . . . . . . . . .
$274,347
$499,030
$224,683
82% $580,662
$ 81,632
16% $306,315
112%
58
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The increase in rental income is primarily attributable to the acquisitions of new properties and the
conversion of newly constructed seniors housing triple-net properties from which we receive rent. Certain of our
leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or
changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-
line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for
the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion
of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the
extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or
below current rent rates, resulting in an increase or decrease in rental income. For the three months ended
December 31, 2012, we had no lease renewals but we had 12 leases with rental rate increasers ranging from
0.16% to 0.30% in our seniors housing triple-net portfolio. The decrease in interest income is attributable to loan
payoffs (see Note 6 to our consolidated financial statements for additional information).
Interest expense for the years ended December 31, 2012, 2011 and 2010 represents $13,572,000,
$15,306,000 and $15,111,000, respectively, of secured debt interest expense offset by interest allocated to
discontinued operations. The change in secured debt interest expense is due to the net effect and timing of
assumptions, extinguishments and principal amortizations. The following is a summary of our seniors housing
triple-net property secured debt principal activity (dollars in thousands):
Year Ended December 31, 2010 Year Ended December 31, 2011 Year Ended December 31, 2012
Beginning balance . . . . .
Debt transferred . . . . . . .
Debt issued . . . . . . . . . . .
Debt assumed . . . . . . . . .
Debt extinguished . . . . .
Principal payments . . . . .
Amount
$ 298,492
(131,214)
81,977
78,794
(150,982)
(4,205)
Weighted Avg.
Interest Rate
5.998%
6.100%
4.600%
5.867%
5.924%
4.388%
Amount
$172,862
—
—
90,120
—
(3,982)
Weighted Avg.
Interest Rate
5.265%
0.000%
0.000%
4.819%
0.000%
5.556%
Amount
$ 259,000
—
9,387
83,002
(128,818)
(3,830)
Ending balance . . . . . . . .
$ 172,862
5.265%
$259,000
5.105%
$ 218,741
Weighted Avg.
Interest Rate
5.105%
0.000%
4.080%
5.304%
4.743%
5.556%
5.393%
Monthly averages . . . . . .
$ 242,123
5.663%
$234,392
5.141%
$ 216,314
5.254%
In connection with secured debt extinguishments, we recognized losses of $7,791,000 and $2,405,000
during the years ended December 31, 2010 and 2012, respectively.
Depreciation and amortization increased primarily as a result of new property acquisitions and the
conversions of newly constructed investment properties. To the extent that we acquire or dispose of additional
properties in the future, our provision for depreciation and amortization will change accordingly.
Transaction costs 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 similar costs.
59
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Changes in gains on sales of properties are related to property sales which totaled 31, 39 and 73 for the years
ended December 31, 2010, 2011 and 2012, respectively. We recognized impairment losses on certain held-for-
sale facilities as the fair value less estimated costs to sell exceeded our carrying values. The following illustrates
the reclassification impact as a result of classifying the properties sold prior to or held for sale at December 31,
2012 as discontinued operations for the periods presented. Please refer to Note 5 to our consolidated financial
statements for further discussion.
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Year Ended December 31,
2010
2011
2012
$99,398
$75,367
$55,274
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,635
29,494
15,058
19,439
8,971
10,263
Income (loss) from discontinued operations, net . . . . . . . . . . . . . . . .
$50,269
$40,869
$36,040
During the year ended December 31, 2010, we recorded $29,684,000 of provision for loan losses, which is
primarily attributable to the write-off of loans related to certain early stage seniors housing and CCRC
development projects. We did not record any provision for loan loss or have any loan write-offs for seniors
housing triple-net investments during the year ended December 31, 2011. During the year ended December 31,
2012, we wrote off loans totaling $27,008,000, which is attributable to the write-off of one loan at an entrance fee
community. The provision for loan losses is related to our critical accounting estimate for the allowance for loan
losses and is discussed in “Critical Accounting Policies” and Note 6 to our consolidated financial statements.
During the year ended December 31, 2012 a portion of our seniors housing triple-net properties were formed
through partnership interests. Net income attributable to noncontrolling interests for the year ended December 31,
2012 represents our partners’ share of net income (loss) relating to those properties. In connection with a seniors
housing triple-net partnership, we also acquired a minority interest in a separate unconsolidated entity. This
in unconsolidated entities on our consolidated balance sheet.
investment
Accordingly, our proportionate share of net income (loss) is reflected as income (loss) from unconsolidated
entities on our consolidated income statement.
is reflected as an investment
60
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Seniors Housing Operating
As discussed in Note 3 to our consolidated financial statements, we completed additional acquisitions within
our seniors housing operating segment during the year ended December 31, 2012. The results of operations for
these properties have been included in our consolidated results of operations from the dates of acquisition. The
seniors housing operating acquisitions were structured under RIDEA, which is discussed in Note 18 to our
consolidated financial statements. When considering new acquisitions utilizing the RIDEA structure, we look for
opportunities with best-in-class operators with a strong seasoned leadership team, high-quality real estate in
attractive markets, growth potential above the standard rent escalators in our triple-net lease seniors housing
portfolio, and alignment of economic interests with our operating partner. Our seniors housing operating
properties offer us the opportunity for external growth because we have the right to fund future seniors housing
investment opportunities sourced by our operating partners. There were no seniors housing operating segment
investments prior to September 1, 2010. As such, the increases in NOI are almost entirely attributable to property
acquisitions which totaled 32, 58, and 80 for the years ended December 31, 2010, 2011 and 2012, respectively.
The following is a summary of our seniors housing operating results of operations (dollars in thousands):
Year Ended
December 31, December 31,
2010
2011
One Year
Change
$
%
Year Ended
December 31,
2012
One Year
Change
$
%
Two Year
Change
$
%
Revenues:
Resident fees and
services . . . . . . . . . . . . . .
Interest income . . . . . . . . . .
$ 51,006
—
$456,085
—
$405,079 794% $697,494
6,208
— n/a
$241,409
6,208
53% $646,488 1267%
6,208
n/a
n/a
Property operating expenses . .
Net operating income from
continuing operations
(NOI) . . . . . . . . . . . . . . . .
Other expenses:
Interest expense . . . . . . . . . .
Loss (gain) on derivatives,
net
. . . . . . . . . . . . . . . . . .
Depreciation and
amortization . . . . . . . . . . .
Transaction costs . . . . . . . . .
Loss (gain) on
extinguishment of debt,
net
. . . . . . . . . . . . . . . . . .
Income from continuing
operations before income
from unconsolidated
entities . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . .
Income from unconsolidated
entities . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . .
Less: Net income (loss)
attributable to
noncontrolling interests . . . .
Net income (loss) attributable
51,006
32,621
456,085
314,142
405,079 794% 703,702
281,521 863% 471,678
247,617
157,536
54% 652,696 1280%
50% 439,057 1346%
18,385
141,943
123,558 672% 232,024
90,081
63% 213,639 1162%
7,794
46,342
38,548 495%
67,524
21,182
46% 59,730
766%
—
—
— n/a
(1,921)
(1,921) n/a
(1,921)
n/a
15,504
20,936
138,192
36,328
122,688 791% 165,798
12,756
74%
15,392
27,606
(23,572)
20% 150,294
-65% (8,180)
969%
-39%
—
(979)
(979) n/a
(2,697)
(1,718) 175% (2,697)
n/a
44,234
219,883
175,649 397% 241,460
21,577
10% 197,226
446%
(25,849)
(229)
(77,940)
—
(52,091) 202%
229
n/a
(9,436)
(1,086)
68,504
(1,086) n/a
-88% 16,413
-63%
(857) 374%
—
(1,531)
(1,531) n/a
(6,364)
(4,833) 316% (6,364)
n/a
(26,078)
(79,471)
(53,393) 205% (16,886)
62,585
-79%
9,192
-35%
(1,656)
(6,006)
(4,350) 263%
(3,015)
2,991
-50% (1,359)
82%
to common stockholders . . .
$(24,422)
$ (73,465) $ (49,043) 201% (13,871)
59,594
-81% 10,551
-43%
61
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Fluctuations in revenues and property operating expenses are primarily a result of acquisitions subsequent to
September 30, 2010. Interest
income relates to the Sunrise loan funded during the three months ended
December 31, 2012 (please see Note 6 to our consolidated financial statements for additional information). The
fluctuations in depreciation and amortization are due to acquisitions offset by variations in amortization of short-
lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these
amounts will change accordingly. Loss from unconsolidated entities during the year ended December 31, 2012 is
primarily attributable to depreciation and amortization of short-lived intangible assets related to our joint venture
with Chartwell described in Note 7 to our consolidated financial statements.
Interest expense represents secured debt interest expense as well as interest expense related to our unsecured
Canadian term loan discussed further in Note 10 of our audited consolidated financial statements. The following
is a summary of our seniors housing operating property secured debt principal activity, which excludes the
Canadian term loan (dollars in thousands):
Year Ended December 31, 2010 Year Ended December 31, 2011 Year Ended December 31, 2012
Beginning balance . . . . .
Debt transferred . . . . . . .
Debt issued . . . . . . . . . . .
Debt assumed . . . . . . . . .
Debt extinguished . . . . . .
Foreign currency . . . . . . .
Principal payments . . . . .
Amount
$
—
131,214
75,179
318,125
(35,017)
—
(1,795)
Weighted Avg.
Interest Rate
Amount
Weighted Avg.
Interest Rate
Amount
Weighted Avg.
Interest Rate
0.000% $ 487,706
—
6.100%
114,903
6.386%
780,955
5.855%
(55,317)
6.723%
—
0.000%
(9,648)
6.165%
5.939% $1,318,599
0.000%
—
148,031
5.779%
115,371
4.269%
(193,962)
5.949%
0.000%
187
(18,700)
5.474%
4.665%
0.000%
4.220%
5.512%
4.395%
5.624%
4.850%
Ending balance . . . . . . . .
$487,706
5.939% $1,318,599
4.665% $1,369,526
4.874%
Monthly averages . . . . . .
$350,259
5.957% $ 969,265
5.679% $1,366,758
4.866%
In connection with secured debt extinguishments, we recognized gains of $979,000 and $2,697,000 during
the years ended December 31, 2011 and 2012, respectively. In addition, during the year ended December 31,
2012, we recognized a net realized gain on derivatives of $1,921,000 associated with our Chartwell transaction
discussed in Note 7 to our audited consolidated financial statements.
Transaction costs were incurred in connection with acquisitions that occurred during the relevant periods.
Transaction costs generally include due diligence costs and fees for legal and valuation services, charges
associated with the termination of pre-existing relationships computed based on the fair value of the assets
acquired and lease termination fees. The decline in transaction costs from 2011 to 2012 is primarily attributable
to termination of pre-existing relationships incurred during 2011. The majority of our seniors housing operating
properties are formed through partnership interests. Net income attributable to noncontrolling interests for the
year ended December 31, 2012 represents our partners’ share of net income (loss) related to those properties.
62
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Medical Facilities
The following is a summary of our NOI for the medical facilities segment (dollars in thousands):
Year Ended
December 31, December 31,
2010
2011
One Year
Change
$
%
Year Ended
December 31,
2012
One Year
Change
$
%
Two Year
Change
$
%
SSCNOI(1) . . . . . . . . . . . . . . $105,461
Non-cash NOI attributable
$107,502 $ 2,041
2% $107,596 $
94
0% $
2,135
2%
to same store
properties(1) . . . . . . . . . . .
NOI attributable to non
same store
properties(2) . . . . . . . . . . .
5,862
4,426
(1,436) -24%
2,909
(1,517) -34% (2,953) -50%
45,135
110,121
64,986 144% 188,942
78,821
72% 143,807 319%
NOI . . . . . . . . . . . . . . . . . . . $156,458
$222,049 $65,591
42% $299,447 $77,398
35% $142,989
91%
(1) Due to increases in cash and non-cash revenues (described below) related to 95 same store properties.
(2) Primarily due to acquisitions of properties, which totaled 36, 35 and 34 for the years ended December 31, 2010, 2011 and 2012,
respectively, and conversions of construction projects into revenue-generating properties, which totaled four, seven and five for the years
ended December 31, 2010, 2011 and 2012, respectively.
63
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a summary of our results of operations for the medical facilities segment (dollars in
thousands):
Revenues:
Year Ended
December 31, December 31,
One Year
Change
Year Ended
December 31,
One Year
Change
Two Year
Change
2010
2011
$
%
2012
$
%
$
%
Rental income . . . . . . . . . . . . .
Interest income . . . . . . . . . . . .
Other income . . . . . . . . . . . . . .
$195,960
4,679
985
$274,659
7,002
3,985
$ 78,699
2,323
3,000
40% $387,462
8,477
50%
1,947
305%
$112,803
1,475
(2,038)
41% $191,502
3,798
21%
962
-51%
98%
81%
98%
Property operating expenses . . . .
Net operating income from
continuing operations
(NOI) . . . . . . . . . . . . . . . . . .
Other expenses:
Interest expense . . . . . . . . . . . .
Depreciation and
amortization . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . .
Loss (gain) on extinguishment
of debt, net . . . . . . . . . . . . . .
Provision for loan losses . . . . .
Income from continuing
operations before income taxes
and income from
unconsolidated entities . . . . . .
Income tax expense . . . . . . . . . . .
Income from unconsolidated
entities . . . . . . . . . . . . . . . . . . .
Income from continuing
201,624
45,166
285,646
63,597
84,022
18,431
42% 397,886
98,439
41%
112,240
34,842
39% 196,262
55% 53,273
97%
118%
156,458
222,049
65,591
42% 299,447
77,398
35% 142,989
91%
17,579
21,909
4,330
25%
31,540
9,631
44% 13,961
79%
67,943
5,112
1,308
—
96,808
5,903
28,865
791
42% 146,103
13,148
15%
49,295
51% 78,160
8,036
7,245 123%
115%
157%
—
2,010
(1,308) -100%
2,010
n/a
(483)
—
(483) n/a
(2,010) n/a
(1,791)
n/a
— n/a
91,942
126,630
34,688
38% 190,308
63,678
50% 98,366
107%
64,516
(77)
95,419
(361)
30,903
48% 109,139
(2,381)
(284) 369%
13,720
69%
14% 44,623
(2,020) 560% (2,304) 2992%
6,673
7,312
639
10%
8,879
1,567
21%
2,206
33%
operations . . . . . . . . . . . . . . . .
71,112
102,370
31,258
44% 115,637
13,267
13% 44,525
63%
Discontinued operations:
Gain (loss) on sales of
properties, net
. . . . . . . . . . .
Impairment of assets . . . . . . . .
Income (loss) from
discontinued operations,
net
. . . . . . . . . . . . . . . . . . . .
Discontinued operations,
(159)
(947)
2,052
(11,091)
2,211
(16,289)
(10,144) 1071% (14,588)
n/a
(18,341) -894% (16,130)10145%
32% (13,641) 1440%
(3,497)
638
5,887
5,249
823%
7,015
1,128
19%
6,377 1000%
net
. . . . . . . . . . . . . . . . . . . .
(468)
(3,152)
(2,684) 574% (23,862)
(20,710) 657% (23,394) 4999%
Net income (loss) . . . . . . . . . . . . .
Less: Net income (loss)
attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to
70,644
99,218
28,574
40%
91,775
(7,443)
-8% 21,131
30%
2,031
894
(1,137)
-56%
171
(723)
-81% (1,860)
-92%
common stockholders . . . . . . .
$ 68,613
$ 98,324
$ 29,711
43% $ 91,604
$ (6,720)
-7% $ 22,991
34%
64
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The increase in rental income is primarily attributable to the acquisitions of new properties and the
construction conversions of medical facilities from which we receive rent. Certain of our leases contain annual
rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so
no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental
payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not
continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new
acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates,
resulting in an increase or decrease in rental income. For the three months ended December 31, 2012, our
consolidated medical office building portfolio signed 50,323 square feet of new leases and 172,647 square feet of
renewals. The weighted-average term of these leases was five years, with a rate of $20.55 per square foot and
tenant improvement and lease commission costs of $8.77 per square foot. Substantially all of these leases during
the referenced quarter contain an annual fixed or contingent escalation rent structure ranging from the change in
CPI to 3%. For the three months ended December 31, 2012, we had no lease renewals but we had one lease with
a rental rate increaser of 2.0% in our hospital portfolio. Interest income increased from the prior period primarily
due to an increase in outstanding balances for medical facility real estate loans.
Interest expense for the years ended December 31, 2012, 2011 and 2010 represents $38,786,000,
$31,477,000, and $24,926,000, respectively, of secured debt interest expense offset by interest allocated to
discontinued operations. The change in secured debt interest expense is primarily due to the net effect and timing
of assumptions, extinguishments and principal amortizations. The following is a summary of our medical
facilities secured debt principal activity (dollars in thousands):
Year Ended December 31, 2010 Year Ended December 31, 2011 Year Ended December 31, 2012
Amount
Weighted Avg.
Interest Rate
Beginning balance . . . . . . . . . $314,065
167,737
Debt assumed . . . . . . . . . . . . .
(8,494)
Debt extinguished . . . . . . . . .
(9,831)
Principal payments . . . . . . . . .
5.677%
6.637%
6.045%
6.279%
Amount
$463,477
69,779
—
(13,190)
Weighted Avg.
Interest Rate
5.286%
5.921%
0.000%
6.208%
Amount
$520,066
246,371
(37,622)
(15,095)
Ending balance . . . . . . . . . . . . $463,477
5.286%
$520,066
5.981%
$713,720
Weighted Avg.
Interest Rate
5.981%
5.888%
5.858%
6.180%
5.950%
Monthly averages . . . . . . . . . . $458,196
5.961%
$489,923
6.179%
$669,753
5.952%
In connection with secured debt extinguishments, we recognized a loss of $1,308,000 and a gain of
$483,000 during the years ended December 31, 2010 and 2012, respectively.
The increase in property operating expenses and depreciation and amortization is primarily attributable to
acquisitions and construction conversions of new medical facilities for which we incur certain property operating
expenses offset by property operating expenses associated with discontinued operations.
Transaction costs for the year ended December 31, 2012 represent costs incurred in connection with the
acquisition of new properties.
During the year ended December 31, 2011, we recorded $2,010,000 of provision for loan losses, which is
primarily attributable to the write-off of a hospital loan.
Income from unconsolidated entities includes our share of net income related to our joint venture investment
with Forest City Enterprises and certain unconsolidated property investments related to our strategic joint venture
relationship with a national medical office building company. See Note 7 to our consolidated financial statements
for additional information.
65
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Changes in gains/losses on sales of properties is related to property sales which totaled seven, three and 20
for the years ended December 31, 2010, 2011, and 2012, respectively. We recognized impairment losses on
certain held for sale facilities as the fair value less estimated costs to sell exceeded our carrying values. The
following illustrates the reclassification impact as a result of classifying the properties sold prior to or held for
sale at December 31, 2012 as discontinued operations for the periods presented. Please refer to Note 5 to our
consolidated financial statements for further discussion.
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Year Ended December 31,
2010
2011
2012
$24,547
$31,870
$24,049
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,347
8,678
7,884
9,568
6,131
10,284
7,246
2,354
7,434
Income (loss) from discontinued operations, net . . . . . . . . . . . . . . . .
$
638
$ 5,887
$ 7,015
Net
income attributable to non-controlling interests primarily relates to certain properties that are
consolidated in our operating results but where we have less than a 100% ownership interest.
Non-Segment/Corporate
The following is a summary of our results of operations for the non-segment/corporate activities (dollars in
thousands):
Revenues:
Year Ended
December 31, December 31,
2010
2011
One Year
Change
$
%
Year Ended
December 31,
2012
One Year
Change
$
%
Two Year
Change
$
%
Other income . . . . . . . . . $
2,874
$
690 $
(2,184)
-76% $
912 $
222
32% $
(1,962)
-68%
Expenses:
Interest expense . . . . . . .
General and
administrative . . . . . . .
Loss (gain) on
extinguishments of
debt, net
. . . . . . . . . . .
Loss from continuing
operations before income
taxes . . . . . . . . . . . . . . . .
Income tax expense
113,129
228,884
115,755
102% 263,418
34,534
15% 150,289
133%
54,626
77,201
22,575
41%
97,341
20,140
26%
42,715
78%
25,072
— (25,072) -100%
—
— n/a
(25,072) -100%
192,827
306,085
113,258
59% 360,759
54,674
18% 167,932
87%
(189,953)
(305,395)
(115,442)
61% (359,847)
(54,452)
18% (169,894)
89%
(benefit) . . . . . . . . . . . . .
(58)
(884)
(826) 1424%
(1,293)
(409)
46%
(1,235) 2129%
Net loss . . . . . . . . . . . . . . . .
Preferred stock
dividends . . . . . . . . . . . .
Preferred stock redemption
charge . . . . . . . . . . . . . . .
Net loss attributable to
(190,011)
(306,279)
(116,268)
61% (361,140)
(54,861)
18% (171,129)
90%
21,645
60,502
38,857
180%
69,129
8,627
14%
47,484
219%
—
—
— n/a
6,242
6,242
n/a
6,242
n/a
common stockholders . . $(211,656)
$(366,781) $(155,125)
73% $(436,511) $(69,730)
19% $(224,855) 106%
66
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Other income primarily represents income from non-real estate activities such as interest earned on
temporary investments of cash reserves.
The following is a summary of our non-segment/corporate interest expense (dollars in thousands):
Year Ended
December 31, December 31,
2010
2011
One Year
Change
$
%
Year Ended
December 31,
2012
One Year
Change
$
%
Two Year
Change
$
%
Senior unsecured notes . . . $122,492
Secured debt
645
Unsecured lines of
. . . . . . . . . . .
credit
. . . . . . . . . . . . . . .
. . . . . .
Capitalized interest
Interest SWAP savings . . .
Loan expense . . . . . . . . . . .
3,974
(20,792)
(161)
6,971
$222,559 $100,067
(41)
604
82% $249,564 $27,005 12% $127,072 104%
(88) -14%
(47)
-6%
-8%
557
7,917
(13,164)
(161)
11,129
3,943
7,628 -37%
— 0%
99% 11,769
(9,777)
(96)
60% 11,401
4,158
3,852 49%
7,795 196%
3,387 -26% 11,015 -53%
65 -40%
64%
65 -40%
2%
272
4,430
Totals . . . . . . . . . . . . . . . . . $113,129
$228,884 $115,755 102% $263,418 $34,534 15% $150,289 133%
The change in interest expense on senior unsecured notes is due to the net effect of issuances and
extinguishments. Please refer to Note 10 of our consolidated financial statements for additional information. We
capitalize certain interest costs associated with funds used for the construction of properties owned directly by us.
The amount capitalized is based upon the balances outstanding during the construction period using the rate of
interest that approximates our cost of financing. Our interest expense is reduced by the amount capitalized.
Please see Note 11 to our consolidated financial statements for a discussion of our interest rate swap agreements
and their impact on interest expense. Loan expense represents the amortization of deferred loan costs incurred in
connection with the issuance and amendments of debt. Loan expense changes are due to amortization of charges
for costs incurred for senior unsecured note issuance. The change in interest expense on the unsecured line of
credit arrangements is due primarily to the net effect and timing of draws, paydowns and variable interest rate
changes. Please refer to Note 9 of our consolidated financial statements for additional information regarding our
unsecured line of credit arrangements.
General and administrative expenses as a percentage of consolidated revenues (including revenues from
discontinued operations) for the years ended December 31, 2012, 2011 and 2010 were 5.12%, 5.37% and 7.78%,
respectively. The increase in general and administrative expenses is primarily related to costs associated with our
initiatives to attract and retain appropriate personnel to achieve our business objectives. The decline in percent of
revenue is primarily related to the increasing revenue base as a result of our acquisitions.
The changes in preferred stock dividends and redemption charge are primarily attributable to the net effect
of issuances, redemptions and conversions. Please see Note 13 to our consolidated financial statements for
additional information.
Non-GAAP Financial Measures
We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement.
However, we consider FFO to be a useful supplemental measure of our operating performance. Historical cost
accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate
assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate
values have historically risen or fallen with market conditions, many industry investors and analysts have
considered presentations of operating results for real estate companies that use historical cost accounting to be
insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created FFO as
a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net
income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding
gains (or losses) from sales of real estate and impairment of depreciable assets, plus depreciation and
amortization, and after adjustments for unconsolidated entities.
67
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Net operating income from continuing operations (“NOI”) is used to evaluate the operating performance of
our properties. We define NOI as total revenues, including tenant reimbursements, less property level operating
expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and
interest expense. Property operating expenses represent costs associated with managing, maintaining and
servicing tenants for our seniors housing operating and medical facility properties. These expenses include, but
are not limited to, property-related payroll and benefits, property management fees, marketing, housekeeping,
food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent
costs unrelated to property operations or transaction costs. These expenses include, but are not limited to, payroll
and benefits, professional services, office expenses and depreciation of corporate fixed assets. Same store cash
NOI (“SSCNOI”) is used to evaluate the cash-based operating performance of our properties under a consistent
population which eliminates changes in the composition of our portfolio. As used herein, same store is generally
defined as those revenue-generating properties in the portfolio for the full three year reporting period. Any
properties acquired, developed, transitioned or classified in discontinued operations during that period are
excluded from the same store amounts. We believe NOI and SSCNOI provide investors relevant and useful
information because they measure the operating performance of our properties at the property level on an
unleveraged basis. We use NOI and SSCNOI to make decisions about resource allocations and to assess the
property level performance of our properties.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. We believe that EBITDA,
along with net income and cash flow provided from operating activities, is an important supplemental measure
because it provides additional information to assess and evaluate the performance of our operations. We
primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total
interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges
include total interest, secured debt principal amortization and preferred dividends.
A covenant in our primary unsecured line of credit arrangement and Canadian denominated term loan
contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy
these covenants could result in an event of default that could have a material adverse impact on our cost and
availability of capital, which could in turn have a material adverse impact on our consolidated results of
operations, liquidity and/or financial condition. Due to the materiality of these debt agreements and the financial
covenants, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for
stock-based compensation expense, provision for loan losses and gain/loss on extinguishment of debt. We use
Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA
divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding
capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends.
Our covenant requires an adjusted fixed charge ratio of at least 1.50 times.
Other than Adjusted EBITDA, our supplemental reporting measures and similarly entitled financial
measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison,
rating and investment recommendations of companies. Management uses these financial measures to facilitate
internal and external comparisons to our historical operating results and in making operating decisions.
Additionally, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA
is used solely to determine our compliance with a financial covenant in our primary line of credit arrangement
and Canadian denominated term loan and is not being presented for use by investors for any other purpose. None
of our supplemental measures represent net income or cash flow provided from operating activities as determined
in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity.
Finally, the supplemental measures, as defined by us, may not be comparable to similarly entitled items reported
by other real estate investment trusts or other companies.
The table below reflects the reconciliation of FFO to net income attributable to common stockholders, the
most directly comparable U.S. GAAP measure, for the periods presented. The provisions for depreciation and
amortization include provisions for depreciation and amortization from discontinued operations. Noncontrolling
the noncontrolling interests’ share of transaction costs and depreciation and
interest amounts represent
68
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
amortization. Unconsolidated entity amounts represent our share of unconsolidated entities’ depreciation and
amortization. Amounts are in thousands except for per share data.
FFO Reconciliation:
Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on sales of properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funds from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average common shares outstanding:
Year Ended December 31,
2010
2011
2012
$106,882
202,543
947
(36,115)
(2,749)
8,514
$157,108
423,605
12,194
(61,160)
(18,557)
11,712
$ 221,884
533,585
29,287
(100,549)
(21,058)
34,408
$280,022
$524,902
$ 697,557
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127,656
128,208
173,741
174,401
224,343
225,953
Per share data:
Net income attributable to common stockholders
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funds from operations
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
0.84
0.83
2.19
2.18
$
$
0.90
0.90
3.02
3.01
0.99
0.98
3.11
3.09
The table below reflects the reconciliation of Adjusted EBITDA to net
the most directly
comparable U.S. GAAP measure, for the periods presented. Interest expense and the provisions for depreciation
and amortization include discontinued operations. Dollars are in thousands.
income,
Year Ended December 31,
2010
2011
2012
Adjusted EBITDA Reconciliation:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$128,884
160,960
364
202,543
11,823
29,684
34,171
$212,716
321,999
1,388
423,605
10,786
2,010
(979)
$ 294,840
383,300
7,612
533,585
18,521
27,008
(775)
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$568,429
$971,525
$1,264,091
Adjusted Interest Coverage Ratio:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$160,960
20,792
(13,945)
$321,999
13,164
(13,905)
$ 383,300
9,777
(11,395)
Total interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
167,807
$568,429
321,258
$971,525
381,682
$1,264,091
Adjusted interest coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.39x
3.02x
3.31x
Adjusted Fixed Charge Coverage Ratio:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured debt principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$160,960
20,792
(13,945)
16,652
21,645
$321,999
13,164
(13,905)
27,804
60,502
$ 383,300
9,777
(11,395)
38,554
69,129
Total fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
206,104
$568,429
409,564
$971,525
489,365
$1,264,091
Adjusted fixed charge coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.76x
2.37x
2.58x
69
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following tables reflect the reconciliation of NOI and SSCNOI to net income attributable to common
stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. Amounts are in
thousands.
Year Ended December 31,
2010
2011
2012
NOI Reconciliation:
Total revenues:
Seniors housing triple-net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-segment/corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 323,067
51,006
201,624
2,874
$ 587,639
456,085
285,646
690
$
719,599
703,702
397,886
912
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
578,571
1,330,060
1,822,099
Property operating expenses:
Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating income:
Seniors housing triple-net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-segment/corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,621
45,166
77,787
323,067
18,385
156,458
2,874
314,142
63,597
471,678
98,439
377,739
570,117
587,639
141,943
222,049
690
719,599
232,024
299,447
912
Net operating income from continuing operations . . . . . . . . . . . . . .
$ 500,784
$ 952,321
$ 1,251,982
Reconciling items:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on derivatives, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on extinguishment of debt
. . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net
. . . . . . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock redemption charge . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (income) attributable to noncontrolling interests . . . . . . . . . . . . .
(133,978)
—
(165,165)
(54,626)
(46,660)
(34,171)
(29,684)
(364)
6,673
86,075
(21,645)
—
(357)
(297,373)
—
(393,882)
(77,201)
(70,224)
979
(2,010)
(1,388)
5,772
95,722
(60,502)
—
4,894
(367,083)
1,825
(515,888)
(97,341)
(61,609)
775
(27,008)
(7,612)
2,482
114,317
(69,129)
(6,242)
2,415
(393,902)
(795,213)
(1,030,098)
Net income (loss) attributable to common stockholders . . . . . . . . . . . . . .
$ 106,882
$ 157,108
$
221,884
70
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Year Ended December 31,
2010
2011
2012
Same Store Cash NOI Reconciliation:
Net operating income from continuing operations:
Seniors housing triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 323,067
18,385
156,458
$ 587,639
141,943
222,049
$
719,599
232,024
299,447
Total
Adjustments:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
497,910
951,631
1,251,070
Seniors housing triple-net:
Non-cash NOI on same store properties . . . . . . . . . . . . . . . . . . . . . . .
NOI attributable to non same store properties . . . . . . . . . . . . . . . . . .
(7,591)
(98,246)
(6,254)
(356,888)
(4,688)
(488,430)
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(105,837)
(363,142)
(493,118)
Seniors housing operating:
Non-cash NOI on same store properties . . . . . . . . . . . . . . . . . . . . . . .
NOI attributable to non same store properties . . . . . . . . . . . . . . . . . .
—
(18,385)
—
(141,943)
—
(232,024)
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18,385)
(141,943)
(232,024)
Medical facilities:
Non-cash NOI on same store properties . . . . . . . . . . . . . . . . . . . . . . .
NOI attributable to non same store properties . . . . . . . . . . . . . . . . . .
(5,862)
(45,135)
(4,426)
(110,121)
(2,909)
(188,942)
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(50,997)
(114,547)
(191,851)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(244,601)
(876,122)
(1,340,868)
Same store cash net operating income:
Seniors housing triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
217,230
—
105,461
224,497
—
107,502
226,481
—
107,596
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 322,691
$ 331,999
$
334,077
Health Care Industry
The demand for health care services, and consequently health care properties,
is projected to reach
unprecedented levels in the near future. The Centers for Medicare and Medicaid Services (“CMS”) projects that
national health expenditures will rise to $3.3 trillion in 2015 or 18.2% of gross domestic product (“GDP”). The
average annual growth in national health expenditures for 2011 through 2021 is expected to be 5.9%.
While demographics are the primary driver of demand, economic conditions and availability of services
contribute to health care service utilization rates. We believe the health care property market may be less
susceptible to fluctuations and economic downturns relative to other property sectors. Investor interest in the
market remains strong, especially in specific sectors such as private-pay senior living and medical office
buildings. As a REIT, we believe we are situated to benefit from any turbulence in the capital markets due to our
access to capital.
The total U.S. population is projected to increase by 18.6% through 2030. The elderly population aged 65
and over is projected to increase by 78.3% through 2030. The elderly are an important component of health care
utilization, especially independent living services, assisted living services, skilled nursing services, inpatient and
outpatient hospital services and physician ambulatory care. Most health care services are provided within a health
71
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
care facility such as a hospital, a physician’s office or a seniors housing community. Therefore, we believe there
will be continued demand for companies, such as ours, with expertise in health care real estate.
Health care real estate investment opportunities tend to increase as demand for health care services
increases. We recognize the need for health care real estate as it correlates to health care service demand. Health
care providers require real estate to house their businesses and expand their services. We believe that investment
opportunities in health care real estate will continue to be present due to:
• The specialized nature of the industry, which enhances the credibility and experience of our company;
• The projected population growth combined with stable or increasing health care utilization rates, which
ensures demand; and
• The on-going merger and acquisition activity.
Health Reform Laws
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act of
2010 (the “PPACA”) and the Health Care and Education Reconciliation Act of 2010, which amends the PPACA
(collectively, the “Health Reform Laws”). The Health Reform Laws contain various provisions that may directly
impact us or the operators and tenants of our properties. Some provisions of the Health Reform Laws may have a
positive impact on our operators’ or tenants’ revenues, by, for example, increasing coverage of uninsured
individuals, while others may have a negative impact on the reimbursement of our operators or tenants by, for
example, altering the market basket adjustments for certain types of health care facilities. The Health Reform
Laws also enhance certain fraud and abuse penalty provisions that could apply to our operators and tenants, in the
event of one or more violations of the federal health care regulatory laws. In addition, there are provisions that
impact the health coverage that we and our operators and tenants provide to our respective employees. We cannot
predict whether the existing Health Reform Laws, or future health care reform legislation or regulatory changes,
will have a material impact on our operators’ or tenants’ property or business. If the operations, cash flows or
financial condition of our operators and tenants are materially adversely impacted by the Health Reform Laws or
future legislation, our revenue and operations may be adversely affected as well. On June 28, 2012, The United
States Supreme Court upheld the individual mandate of the Health Reform Laws but partially invalidated the
expansion of Medicaid. The ruling on Medicaid expansion will allow States not to participate in the expansion —
and to forego funding for the Medicaid expansion — without losing their existing Medicaid funding. Given that
the federal government substantially funds the Medicaid expansion, it is unclear whether any state will pursue
this option, although at least some appear to be considering this option at this time.
Impact to Reimbursement of the Operators and Tenants of Our Properties. The Health Reform Laws
provide for various changes to the reimbursement that our operators and tenants may receive. One such change is
a reduction to the market basket adjustments for inpatient acute hospitals, long-term care hospitals, inpatient
rehabilitation facilities, home health agencies, psychiatric hospitals, hospice care and outpatient hospitals. Since
2010, the otherwise applicable percentage increase to the market basket for inpatient acute hospitals has
decreased. Since 2012, inpatient acute hospitals have also faced a downward adjustment of the annual percentage
increase to the market basket rate by a “productivity adjustment.” The productivity adjustment may cause the
annual percentage increase to be less than zero, which would mean that inpatient acute hospitals could face
payment rates for a fiscal year that are less than the payment rates for the preceding year.
A similar productivity adjustment has applied to skilled nursing facilities since 2012, which means that the
payment rates for skilled nursing facilities may decrease from one year to the next. Long-term care hospitals have
faced a specified percentage decrease in their annual update for discharges since 2010. Additionally, since 2012,
long-term care hospitals have been subject to the productivity adjustments, which may decrease the federal
payment rates for long-term care hospitals. Similar productivity adjustments and other adjustments to payment
rates have applied to inpatient rehabilitation facilities, psychiatric hospitals and outpatient hospitals since 2010.
The Health Reform Laws revise other reimbursement provisions that may affect our business. For example,
the Health Reform Laws reduce states’ Medicaid disproportionate share hospital (“DSH”) allotments, starting in
72
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2014 through 2020. These allotments would have provided additional funding for DSH hospitals that are
operators or tenants of our properties, and thus, any reduction might negatively impact these operators or tenants.
Additionally, under the Health Reform Laws, beginning in fiscal year 2015, Medicare payments will
decrease to hospitals for treatment associated with hospital acquired conditions. This decreased payment rate
may negatively impact our operators or tenants. To account for excess readmissions, the Health Reform Laws
also call for a reduction of 1% in payments for those hospitals with higher-than-average risk-adjusted
readmission rates beginning October 1, 2012, 2% beginning in fiscal year 2014, and 3% from fiscal year 2015
onward. These reductions in payments to our operators or tenants may affect their ability to make payments to us.
The Health Reform Laws additionally call for the creation of the Independent Payment Advisory Board (the
“Board”), which will be responsible for establishing payment policies, including recommendations in the event
that Medicare costs exceed a certain threshold. Proposals for recommendations submitted by the Board prior to
December 31, 2018 may not include recommendations that would reduce payments for hospitals, skilled nursing
facilities, and physicians, among other providers, prior to December 31, 2019. On March 22, 2012, the House of
Representatives approved legislation that would repeal the Board. While this legislation was not passed by the
Senate, if such a repeal were signed into law in the future, reimbursement to our tenants and operators may be
impacted.
The Health Reform Laws also create other mechanisms that could permit significant changes to payment. For
example, the Health Reform Laws establish the Center for Medicare and Medicaid Innovation to test innovative
payment and service delivery models to reduce program expenditures through the use of demonstration programs
that can waive existing reimbursement methodologies. As another example, on November 2, 2011, CMS published
the final rule implementing section 3022 of the Health Reform Laws, which contains provisions relating to
Medicare payment to providers and suppliers participating in Accountable Care Organizations (“ACOs”) under the
Medicare Shared Servings Program. Under the program, Medicare will share a percentage of savings with ACOs
that meet certain quality and saving requirements, thereby allowing providers to receive incentive payments in
addition to their traditional fee-for-service payments. Under the program, more experienced providers may assume
the risk of losses in exchange for greater potential rewards: ACOs may share up to 50% of the savings under the
one-sided model and up to 60% of the savings under the two-sided model, depending on their quality and
performance. The amount of shared losses for which an ACO is liable in the two-sided model may not exceed the
following percentages of its updated benchmark: 5% in the first performance year, 7.5% in the second year, and
10% in the third year. These shared losses could affect the ability of ACO operators or tenants to meet their
financial obligations to us. The Health Reform Laws also provide additional Medicaid funding to allow states to
carry out the expansion of Medicaid coverage to certain financially-eligible individuals beginning in 2014, and also
permit states to expand their Medicaid coverage to these individuals since April 1, 2010, if certain conditions are
met. The Health Reform Laws also extend certain payment rules related to long-term acute care hospitals found in
the Medicare, Medicaid, and SCHIP Extension Act of 2007 (“MMSEA”).
Additionally, although the Health Reform Laws delayed implementation of the Resource Utilization Group,
Version Four (“RUG-IV”), which revises the payment classification system for skilled nursing facilities, the
Medicare and Medicaid Extenders Act of 2010 repealed this delay retroactively to October 1, 2010. The
implementation of the RUG-IV classification may impact our tenants and operators by revising the classifications
of certain patients. The federal reimbursement for certain facilities, such as skilled nursing facilities, incorporates
adjustments to account for facility case-mix. The Health Reform Laws also extend certain payment rules related
to long-term acute care hospitals found in the MMSEA. The MMSEA delayed the implementation of a policy
referred to as the “25% threshold rule” that would limit the proportion of patients who can be admitted from a co-
located or host hospital during a cost reporting period and be paid under the long-term care hospital prospective
payment system. The Health Reform Laws further extended the delay, which expired at various points in
calendar year 2012, depending on the start of the provider’s cost reporting period.
Finally, many other changes resulting from the Health Reform Laws, or implementing regulations or
guidance may negatively impact our operators and tenants. We will continue to monitor and evaluate the Health
Reform Laws and implementing regulations and guidance to determine other potential effects of the reform.
73
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Impact of Fraud and Abuse Provisions. The Health Reform Laws revise health care fraud and abuse
provisions that will affect our operators and tenants. Specifically, the Health Reform Laws allow for up to treble
damages under the Federal False Claims Act for violations related to state-based health insurance exchanges
authorized by the Health Reform Laws, which will be implemented beginning in 2014. The Health Reform Laws
also impose new civil monetary penalties for false statements or actions that lead to delayed inspections, with
penalties of up to $15,000 per day for failure to grant timely access and up to $50,000 for a knowing violation.
Additionally, the Health Reform Laws require certain entities — including providers, suppliers, Medicaid
managed care organizations, Medicare Advantage organizations, and prescription drug program sponsors — to
report and return overpayments to the appropriate payer by the later of (a) sixty (60) days after the date the
overpayment was “identified,” or (b) the date that the “corresponding cost report” is due. The entity also must
notify the payer in writing of the reason for the overpayment. A violation of these requirements may result in
criminal liability, civil liability under the FCA, and/or exclusion from the federal health care programs. On
February 14, 2012, CMS published a proposed rule implementing the Health Reform Laws requirement that
health care providers and suppliers report and return self-identified overpayments by the later of 60 days after the
date the overpayment was identified, or the date any corresponding cost report is due, if applicable. The Health
Reform Laws also amend the Federal Anti-Kickback Statute (“AKS”) to state that any items or services
“resulting from” a violation of the AKS constitutes a “false or fraudulent claim” under the Federal False Claims
Act. The Health Reform Laws also provide for additional funding to investigate and prosecute health care fraud
and abuse. Accordingly, the increased penalties under the Health Reform Laws for fraud and abuse violations
may have a negative impact on our operators and tenants in the event that the government brings an enforcement
action or subjects them to penalties.
Further, CMS published final rulemaking to implement the enhanced provider and supplier screening
provisions called for in the Health Reform Laws. Under the final rule, beginning March 25, 2011, all enrolling
and participating providers and suppliers are assessed an annual administrative fee and are placed in one of three
risk levels (limited, moderate, and high) based on an assessment of the individual’s or entity’s overall risk of
fraud, waste and abuse. This rule also allows for the temporary suspension of Medicare payments to providers or
suppliers in the event CMS receives credible information that an overpayment, fraud, or willful misrepresentation
has occurred. The Health Reform Laws granted the Secretary of the Department of Health and Human Services
significant discretionary authority to suspend, exclude, or impose fines on providers and suppliers based on the
agency’s determination that such a provider or supplier is “high-risk,” and, as a result, this final rulemaking has
the potential to materially adversely affect our operators and tenants who may be evaluated under the enhanced
screening process.
On November 2, 2011, CMS and OIG jointly published the final rule establishing waivers of certain fraud
and abuse laws to ACOs. These waivers include automatic AKS, Stark, and Civil Monetary Penalty Law waivers
that may be applied in certain situations and that will apply uniformly to each ACO, ACO participant, and ACO
provider/supplier. Notably, the final rule states that CMS and OIG intend to closely monitor ACOs through June
2013 to ensure that these waivers are not causing “undesirable effects” and need to be narrowed to prevent fraud
and abuse.
Additionally, provisions of Title VI of the Health Care Reform Laws are designed to increase transparency
and program integrity by skilled nursing facilities, other nursing facilities and similar providers. Specifically,
skilled nursing facilities and other providers and suppliers will be required to institute compliance and ethics
programs. Additionally, the Health Reform Laws make it easier for consumers to file complaints against nursing
homes by mandating that states establish complaint websites. The provisions calling for enhanced transparency
will increase the administrative burden and costs on these providers.
Impact to the Health Care Plans Offered to Our Employees. The Health Reform Laws affect employers
that provide health plans to their employees. The new laws change the tax treatment of the Medicare Part D
retiree drug subsidy and extend dependent coverage for dependents up to age 26, among other changes. We
continue to evaluate our health care plans for these changes as new reform laws are enacted. These changes may
affect our operators and tenants as well.
74
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to
make estimates and assumptions. Management considers accounting estimates or assumptions critical if:
• the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment
necessary to account for highly uncertain matters or the susceptibility of such matters to change; and
• the impact of the estimates and assumptions on financial condition or operating performance is material.
Management has discussed the development and selection of its critical accounting policies with the Audit
Committee of the Board of Directors and the Audit Committee has reviewed the disclosure presented below
relating to them. Management believes the current assumptions and other considerations used to estimate
amounts reflected in our consolidated financial statements are appropriate and are not reasonably likely to change
in the future. However, since these estimates require assumptions to be made that were uncertain at the time the
estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other
considerations used in estimating amounts reflected in our consolidated financial statements, the resulting
changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial
condition. Please refer to Note 1 of our audited consolidated financial statements for further information on
significant accounting policies that impact us. There were no material changes to these policies in 2012.
The following table presents information about our critical accounting policies, as well as the material
assumptions used to develop each estimate:
Nature of Critical
Accounting Estimate
Principles of Consolidation
the
The consolidated financial statements include our accounts,
accounts of our wholly-owned subsidiaries and the accounts of joint
venture entities in which we own a majority voting interest with the
ability to control operations and where no substantive participating
rights or substantive kick out
rights have been granted to the
noncontrolling interests. In addition, we consolidate those entities
deemed to be variable interest entities in which we are determined to
be the primary beneficiary. All material intercompany transactions and
balances have been eliminated in consolidation.
Income Taxes
As part of
the process of preparing our consolidated financial
statements, significant management judgment is required to evaluate
our compliance with REIT requirements.
75
Assumptions/
Approach Used
the activities
We make judgments about which entities are VIEs based on an
assessment of whether (i) the equity investors as a group, if any,
do not have a controlling financial interest, or (ii) the equity
investment at risk is insufficient to finance that entity’s activities
without additional subordinated financial support. We make
judgments with respect to our level of influence or control of an
entity and whether we are (or are not) the primary beneficiary of
a VIE. Consideration of various factors includes, but
is not
limited to, our ability to direct
that most
significantly impact the entity’s economic performance, our form
representation on the entity’s
of ownership interest, our
governing body, the size and seniority of our investment, our
ability and the rights of other investors to participate in policy
making decisions, replace the manager and/or liquidate the entity,
if applicable. Our ability to correctly assess our influence or
control over an entity at inception of our involvement or on a
continuous basis when determining the primary beneficiary of a
VIE affects the presentation of these entities in our consolidated
financial statements. If we perform a primary beneficiary analysis
at a date other than at inception of the variable interest entity, our
assumptions may be different and may result in the identification
of a different primary beneficiary.
Our determinations are based on interpretation of tax laws, and
our conclusions may have an impact on the income tax expense
recognized. Adjustments to income tax expense may be required
as a result of: (i) audits conducted by federal and state tax
authorities, (ii) our ability to qualify as a REIT, (iii) the potential
for built-in-gain recognized related to prior-tax-free acquisitions
of C corporations, and (iv) changes in tax laws. Adjustments
required in any given period are included in income.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Nature of Critical
Accounting Estimate
Assumptions/
Approach Used
Business Combinations
We make estimates as part of our allocation of the purchase price
of acquisitions to the various components of the acquisition based
upon the relative fair value of each component. The most
significant components of our allocations are typically the
allocation of fair value to the buildings as-if-vacant, land and in-
place leases. In the case of the fair value of buildings and the
allocation of value to land and other intangibles, our estimates of
the values of these components will affect
the amount of
depreciation and amortization we record over the estimated
useful life of the property acquired or the remaining lease term.
In the case of the value of in-place leases, we make our best
estimates based on our evaluation of the specific characteristics
of each tenant’s lease. Factors considered include estimates of
carrying costs during hypothetical expected lease-up periods,
market conditions and costs to execute similar leases. Our
assumptions affect the amount of future revenue that we will
recognize over the remaining lease term for the acquired in-place
leases.
We compute depreciation and amortization on our properties
using the straight-line method based on their estimated useful
lives which range from 15 to 40 years for buildings and five to
15 years for improvements. Amortization periods for intangibles
are based on the estimated remaining useful
the
underlying agreements.
lives of
The determination of the allowance is based on a quarterly
evaluation of all outstanding loans, including general economic
conditions and estimated collectability of loan payments and
principal. We evaluate the collectability of our loans receivable
based on a combination of factors, including, but not limited to,
delinquency status, historical loan charge-offs, financial strength
of the borrower and guarantors and value of the underlying
property.
We evaluate the collectability of our revenues and related
receivables on an on-going basis. We evaluate collectability
based on assumptions and other considerations including, but not
limited to,
the
financial strength of the investment’s underlying operations as
measured by cash flows and payment coverages, the value of the
underlying collateral and guaranties and current economic
conditions.
the certainty of payment, payment history,
If our evaluation indicates that collectability is not reasonably
assured, we may place an investment on non-accrual or reserve
against all or a portion of current income as an offset to revenue.
Real property developed by us is recorded at cost, including the
capitalization of construction period interest. The cost of real property
acquired is allocated to net tangible and identifiable intangible assets
based on their respective fair values. Tangible assets primarily consist
of land, buildings and improvements. The remaining purchase price is
allocated among identifiable intangible assets primarily consisting of
the above or below market component of in-place leases and the value
of in-place leases. The total amount of other intangible assets acquired
is further allocated to in-place lease values and customer relationship
values
specific
characteristics of each tenant’s lease and the Company’s overall
relationship with that respective tenant.
on management’s
evaluation
based
the
of
Allowance for Loan Losses
We maintain an allowance for loan losses in accordance with U.S.
GAAP. The allowance for loan losses is maintained at a level believed
adequate to absorb potential
losses in our loans receivable. The
determination of the allowance is based on a quarterly evaluation of all
outstanding loans. If this evaluation indicates that there is a greater risk
of loan charge-offs, additional allowances or placement on non-accrual
status may be required. A loan is impaired when, based on current
information and events, it is probable that we will be unable to collect
all amounts due as scheduled according to the contractual terms of the
original loan agreement. Consistent with this definition, all loans on
non-accrual are deemed impaired. To the extent circumstances
improve and the risk of collectability is diminished, we will return
these loans to full accrual status.
Revenue Recognition
Revenue is recorded in accordance with U.S. GAAP, which requires
that revenue be recognized after four basic criteria are met. These four
criteria include persuasive evidence of an arrangement, the rendering
of service, fixed and determinable income and reasonably assured
collectability. If the collectability of revenue is determined incorrectly,
the amount and timing of our reported revenue could be significantly
affected. Interest income on loans is recognized as earned based upon
the principal amount outstanding subject
to an evaluation of
collectability risk. Substantially all of our operating leases contain
fixed and/or contingent escalating rent structures. Leases with fixed
annual rental escalators are generally recognized on a straight-line
to a collectability
basis over
assessment. Rental income related to leases with contingent rental
escalators is generally recorded based on the contractual cash rental
payments due for the period. We recognize resident fees and services,
other than move-in fees, monthly as services are provided. Lease
agreements with residents generally have a term of one year and are
cancelable by the resident with 30 days’ notice.
lease period,
the initial
subject
76
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Nature of Critical
Accounting Estimate
Assumptions/
Approach Used
Impairment of Long-Lived Assets
impairment
for potential
long-lived assets
in
We review our
accordance with U.S. GAAP. An impairment charge must be
recognized when the carrying value of a long-lived asset
is not
recoverable. The carrying value is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the use and
eventual disposition of the asset. If it is determined that a permanent
impairment of a long-lived asset has occurred, the carrying value of the
asset
is reduced to its fair value and an impairment charge is
recognized for the difference between the carrying value and the fair
value.
Fair Value of Derivative Instruments
The valuation of derivative instruments is accounted for in accordance
with U.S. GAAP, which requires companies to record derivatives at
fair market value on the balance sheet as assets or liabilities.
The net book value of long-lived assets is reviewed quarterly on
a property by property basis to determine if there are indicators
of
impairment. These indicators may include anticipated
operating losses at the property level, the tenant’s inability to
make rent payments, a decision to dispose of an asset before the
end of its estimated useful life and changes in the market that
may permanently reduce the value of the property. If indicators
of impairment exist, then the undiscounted future cash flows
from the most likely use of the property are compared to the
current net book value. This analysis requires us to determine if
indicators of impairment exist and to estimate the most likely
stream of cash flows to be generated from the property during
the period the property is expected to be held.
The valuation of derivative instruments requires us to make
the fair value of the
estimates and judgments that affect
instruments. Fair values for our derivatives are estimated by
utilizing pricing models that consider forward yield curves and
discount rates. Such amounts and their recognition are subject
to significant estimates which may change in the future.
Impact of Inflation
During the past three years, inflation has not significantly affected our earnings because of the moderate
inflation rate. Additionally, our earnings are primarily long-term investments with predictable rates of return.
These investments are mainly financed with a combination of equity, senior unsecured notes and borrowings
under our primary unsecured line of credit arrangement. During inflationary periods, which generally are
accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new
investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains
moderate and long-term interest rates do not increase significantly, we believe that inflation will not impact the
availability of equity and debt financing for us.
77
Item 7A. 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. We seek to mitigate the underlying foreign currency exposures with
gains and losses on derivative contracts hedging these exposures. We seek to mitigate the effects of fluctuations
in interest rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent
possible. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These
decisions are principally based on our policy to match our variable rate investments with comparable borrowings,
but are also based on the general trend in interest rates at the applicable dates and our perception of the future
volatility of interest rates. This section is presented to provide a discussion of the risks associated with potential
fluctuations in interest rates.
We historically borrow on our primary unsecured line of credit arrangement to acquire, construct or make
loans relating to health care and seniors housing properties. Then, as market conditions dictate, we will issue
equity or long-term fixed rate debt to repay the borrowings under our unsecured line of credit arrangements.
A change in interest rates will not affect the interest expense associated with our fixed rate debt. Interest rate
changes, however, will affect the fair value of our fixed rate debt. Changes in the interest rate environment upon
maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether
the debt is replaced with other fixed rate debt, variable rate debt or equity or repaid by the sale of assets. To
illustrate the impact of changes in the interest rate markets, we performed a sensitivity analysis on our fixed rate
debt instruments whereby we modeled the change in net present values arising from a hypothetical 1% increase
in interest rates to determine the instruments’ change in fair value. The following table summarizes the analysis
performed as of the dates indicated (in thousands):
December 31, 2012
December 31, 2011
Principal
balance
Change in
fair value
Principal
balance
Change in
fair value
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior unsecured notes(1)
Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,145,457
2,024,454
$(451,478) $4,464,927
1,693,283
(96,290)
$(342,460)
(82,583)
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,169,911
$(547,768) $6,158,210
$(425,043)
(1) 2012 amounts include the Canadian denominated unsecured term loan.
Our variable rate debt, including our unsecured line of credit arrangements, is reflected at fair value. At
December 31, 2012, we had no amounts outstanding related to our variable rate lines of credit and $276,006,000
outstanding related to our variable rate secured debt. Assuming no changes in outstanding balances, a 1%
increase in interest rates would result in increased annual interest expense of $2,760,000. At December 31, 2011,
we had $610,000,000 outstanding related to our variable rate line of credit and $415,101,000 outstanding related
to our variable rate secured debt. Assuming no changes in outstanding balances, a 1% increase in interest rates
would have resulted in increased annual interest expense of $10,251,000.
See Note 11 of our consolidated financial statements for information on our derivative instruments.
We are subject to risks associated with debt financing, including the risk that existing indebtedness may not
be refinanced or that the terms of refinancing may not be as favorable as the terms of current indebtedness. The
majority of our borrowings were completed under indentures or contractual agreements that limit the amount of
indebtedness we may incur. Accordingly, in the event that we are unable to raise additional equity or borrow
money because of these limitations, our ability to acquire additional properties may be limited.
For additional information regarding fair values of financial instruments, see “Item 7 — Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” and
Note 16 to our audited consolidated financial statements.
78
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Health Care REIT, Inc.
We have audited the accompanying consolidated balance sheets of Health Care REIT, Inc. as of
December 31, 2012 and 2011, and the related consolidated statements of comprehensive income, equity, and cash
flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial
statement schedules listed in Item 15(a)(2) of this Form 10-K. These financial statements and schedules are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Health Care REIT, Inc. at December 31, 2012 and 2011, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Health Care REIT, Inc.’s internal control over financial reporting as of December 31, 2012,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 26, 2013 expressed an unqualified
opinion thereon.
Toledo, Ohio
February 26, 2013
/s/ ERNST & YOUNG LLP
79
CONSOLIDATED BALANCE SHEETS
HEALTH CARE REIT, INC. AND SUBSIDIARIES
December 31, December 31,
2012
2011
(In thousands)
Assets
Real estate investments:
Real property owned:
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real property held for sale, net of accumulated depreciation . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross real property owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Net real property owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets:
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred loan expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and equity
Liabilities:
Borrowings under unsecured line of credit arrangements . . . . . . . . . . . . . .
Senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity:
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . .
Other equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Health Care REIT, Inc. stockholders’ equity . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,365,391
15,635,127
673,684
245,213
162,984
18,082,399
(1,555,055)
16,527,344
895,665
17,423,009
438,936
68,321
66,327
1,033,764
107,657
411,095
2,126,100
$19,549,109
$
—
6,114,151
2,336,196
81,552
462,099
8,993,998
34,592
1,022,917
260,396
10,543,690
(17,875)
2,184,819
(3,694,579)
(11,028)
6,461
10,294,801
225,718
10,520,519
$19,549,109
$ 1,116,756
13,073,747
428,199
36,115
189,502
14,844,319
(1,194,476)
13,649,843
292,507
13,942,350
241,722
68,321
58,584
163,482
69,620
380,527
982,256
$14,924,606
$
610,000
4,434,107
2,112,649
83,996
371,557
7,612,309
33,650
1,010,417
192,299
7,019,714
(13,535)
1,893,806
(2,972,129)
(11,928)
6,120
7,124,764
153,883
7,278,647
$14,924,606
See accompanying notes
80
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
HEALTH CARE REIT, INC. AND SUBSIDIARIES
Year Ended December 31,
2012
2011
2010
Revenues:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident fees and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,080,269
697,494
39,065
5,271
$ 821,610
456,085
41,070
11,295
$479,465
51,006
40,855
7,245
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,822,099
1,330,060
578,571
Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on derivatives, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
367,083
570,117
515,888
97,341
61,609
(1,825)
(775)
27,008
297,373
377,739
393,882
77,201
70,224
—
(979)
2,010
133,978
77,787
165,165
54,626
46,660
—
34,171
29,684
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,636,446
1,217,450
542,071
Income from continuing operations before income taxes and income from unconsolidated entities . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit
Income from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
185,653
(7,612)
2,482
112,610
(1,388)
5,772
36,500
(364)
6,673
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations:
180,523
116,994
42,809
Gain (loss) on sales of properties, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net
100,549
(29,287)
43,055
61,160
(12,194)
46,756
36,115
(947)
50,907
Discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114,317
95,722
86,075
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Preferred stock redemption charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income (loss) attributable to noncontrolling interests(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
294,840
69,129
6,242
(2,415)
212,716
60,502
—
(4,894)
128,884
21,645
—
357
Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 221,884
$ 157,108
$106,882
Average number of common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
224,343
225,953
173,741
174,401
127,656
128,208
Earnings per share:
Basic:
Income from continuing operations attributable to common stockholders . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to common stockholders* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted:
Income from continuing operations attributable to common stockholders . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to common stockholders* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
0.48
0.51
0.99
0.48
0.51
0.98
$
$
$
$
0.35
0.55
0.90
0.35
0.55
0.90
$
$
$
$
0.16
0.67
0.84
0.16
0.67
0.83
* Amounts may not sum due to rounding
(1) Includes amounts attributable to redeemable noncontrolling interests
See accompanying notes
81
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
HEALTH CARE REIT, INC. AND SUBSIDIARIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Unrecognized gain/(loss) on equity investments . . . . . . . . . . . . . . . . . . . . . .
Change in net unrealized gains (losses) on cash flow hedges:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain/(loss)
Reclassification adjustment realized in net income . . . . . . . . . . . . . . . . . .
Unrecognized actuarial gain/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation gain/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2012
2011
2010
$294,840
$212,716
$128,884
403
(122)
54
3,200
(1,596)
(226)
(881)
900
3,189
(1,781)
(2,115)
—
(10,307)
2,244
(199)
—
(829)
(8,208)
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .
Total comprehensive income attributable to noncontrolling interests(1)
295,740
(2,415)
211,887
(4,894)
120,676
357
Total comprehensive income attributable to stockholders . . . . . . . . . . . . . . . . .
$293,325
$206,993
$121,033
(1)
Includes amounts attributable to redeemable noncontrolling interests.
See accompanying notes
82
CONSOLIDATED STATEMENTS OF EQUITY
HEALTH CARE REIT, INC. AND SUBSIDIARIES
(in thousands)
Preferred
Stock
Common
Stock
Capital in
Excess of
Par Value
Treasury
Stock
Cumulative
Net Income
Cumulative
Dividends
Accumulated
Other
Comprehensive
Income
Other
Equity
Noncontrolling
Interests
Total
$ 288,683
123,385
3,900,666
(7,619)
1,547,669
(2,057,658)
(2,891)
4,804
10,412
$ 3,807,451
128,527
(8,208)
(3,733)
43,640
97,696
884,255
(9,689)
2,721
13,179
2,300
21,131
339
16,667
(165)
(13,518)
(348,578)
(21,645)
357
122,781
(3,301)
(741)
1,634
128,884
(8,208)
120,676
166,421
(3,301)
95,522
905,386
(9,689)
19,388
(165)
—
1,634
(348,578)
(21,645)
291,667
147,155
4,932,468
(11,352)
1,676,196
(2,427,881)
(11,099)
5,697
130,249
4,733,100
6,468
2,895
42,249
138,989
1,964,102
(22,313)
(2,183)
718,750
217,610
(829)
(483,746)
(60,502)
(3,591)
65,361
(38,136)
214,019
(829)
213,190
71,829
(38,136)
138,207
2,006,351
696,437
1,917
(483,746)
(60,502)
(1,494)
1,917
1,010,417
192,299
7,019,714
(13,535)
1,893,806
(2,972,129)
(11,928)
6,120
153,883
7,278,647
222
(7,358)
149,955
3,382,532
(9,813)
2,236
6,202
(4,340)
2,658
64,400
1,039
287,500
(275,000)
297,255
900
(6,242)
(653,321)
(69,129)
(1,480)
89,934
(16,619)
295,775
900
296,675
90,156
(23,977)
145,739
3,446,932
277,687
3,275
(275,040)
2,875
(653,321)
(69,129)
(2,534)
2,875
Balances at December 31, 2009 . . . . . . . . . . . .
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:
Total comprehensive income . . . . . . . . . . . . . .
Contributions by noncontrolling interests . . . .
Distributions to noncontrolling interests . . . . .
Amounts related to issuance of common stock
from dividend reinvestment and stock
incentive plans, net of forfeitures . . . . . . . .
Net proceeds from sale of common stock . . . .
Equity component of convertible debt . . . . . . .
Equity consideration in business
combinations . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of preferred stock . . . . . . . . . . . .
Conversion of preferred stock . . . . . . . . . . . . .
Option compensation expense . . . . . . . . . . . . .
Cash dividends paid:
Common stock cash dividends . . . . . . . . . .
Preferred stock cash dividends . . . . . . . . . .
Balances at December 31, 2010 . . . . . . . . . . . .
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:
Total comprehensive income . . . . . . . . . . . . . .
Contributions by noncontrolling interests . . . .
Distributions to noncontrolling interests . . . . .
Amounts related to issuance of common stock
from dividend reinvestment and stock
incentive plans, net of forfeitures . . . . . . . .
Net proceeds from sale of common stock . . . .
Proceeds from issuance of preferred shares . . .
Option compensation expense . . . . . . . . . . . . .
Cash dividends paid:
Common stock cash dividends . . . . . . . . . .
Preferred stock cash dividends . . . . . . . . . .
Balances at December 31, 2011 . . . . . . . . . . . .
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:
Total comprehensive income . . . . . . . . . . . . . .
Contributions by noncontrolling interests . . . .
Distributions to noncontrolling interests . . . . .
Amounts related to issuance of common stock
from dividend reinvestment and stock
incentive plans, net of forfeitures . . . . . . . .
Net proceeds from sale of common stock . . . .
Net proceeds from sale of preferred stock . . . .
Equity component of convertible debt . . . . . . .
Redemption of preferred stock . . . . . . . . . . . .
Option compensation expense . . . . . . . . . . . . .
Cash dividends paid:
Common stock cash dividends . . . . . . . . . .
Preferred stock cash dividends . . . . . . . . . .
Balances at December 31, 2012 . . . . . . . . . . . .
$1,022,917
$260,396
$10,543,690
$(17,875)
$2,184,819
$(3,694,579)
$(11,028)
$ 6,461
$225,718
$10,520,519
See accompanying notes
83
CONSOLIDATED STATEMENTS OF CASH FLOWS
HEALTH CARE REIT, INC. AND SUBSIDIARIES
(In thousands)
Operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided from (used in)
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on derivatives, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on extinguishment of debt, net
Income from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental income in excess of cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization related to above (below) market leases, net . . . . . . . . . . . . . . . .
Loss (gain) on sales of properties, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions by unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accrued expenses and other liabilities . . . . . . . . . . . . .
Decrease (increase) in receivables and other assets . . . . . . . . . . . . . . . . . . . . .
Net cash provided from (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . .
Investing activities
Investment in real property, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments, net of payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal collected on real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . .
Contributions to unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions by unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from (payments on) derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of real property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided from (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . .
Financing activities
Net increase (decrease) under unsecured lines of credit arrangements . . . . . . . .
Proceeds from issuance of senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . .
Payments to extinguish senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from the issuance of secured debt
Payments on secured debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from the issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from the issuance of preferred stock . . . . . . . . . . . . . . . . . . . . . . .
Redemption of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in deferred loan expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions by noncontrolling interests(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash distributions to stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2012
2011
2010
$
294,840
$
212,716
$
128,884
533,585
15,185
27,008
29,287
18,521
(1,825)
(775)
(2,482)
(32,362)
165
(100,549)
17,607
38,213
(18,285)
818,133
423,605
16,851
2,010
12,194
10,786
—
(979)
(5,772)
(31,578)
(2,507)
(61,160)
6,149
10,653
(4,744)
588,224
202,543
17,169
29,684
947
11,823
—
34,171
(6,673)
(6,594)
(2,856)
(36,115)
—
12,293
(20,535)
364,741
(3,345,111)
(9,777)
(665,094)
25,425
35,020
(227,735)
13,136
6,652
(35,766)
610,271
(4,905,122)
(13,164)
(51,477)
(22,986)
188,811
(2,784)
9,135
—
30,248
247,210
(2,074,176)
(20,792)
(97,265)
(133,894)
43,495
(196,413)
103
—
(52,124)
219,027
(3,592,979)
(4,520,129)
(2,312,039)
(610,000)
2,025,708
(370,524)
157,418
(406,210)
3,581,292
277,687
(275,000)
(7,152)
24,115
(29,353)
(722,450)
(403)
310,000
1,381,086
(3)
119,030
(83,998)
2,137,594
696,437
—
(28,867)
8,604
(30,705)
(544,248)
(1,113)
160,000
1,821,683
(495,542)
154,306
(217,711)
995,438
—
—
(3,869)
2,611
(3,301)
(370,223)
—
Net cash provided from (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . .
3,645,128
3,963,817
2,043,392
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . .
870,282
163,482
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,033,764
Supplemental cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
369,511
3,071
31,912
131,570
163,482
285,884
389
$
$
96,094
35,476
131,570
156,207
319
$
$
(1)
Includes amounts attributable to redeemable noncontrolling interests.
See accompanying notes.
84
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Health Care REIT, Inc., an S&P 500 company with headquarters in Toledo, Ohio, is an equity real estate
investment trust (“REIT”) that invests in seniors housing and health care real estate. Our full service platform
offers property management and development services to our customers. As of December 31, 2012, our
diversified portfolio consisted of 1,025 properties in 46 states, the United Kingdom, and Canada. Founded in
1970, we were the first real estate investment trust to invest exclusively in health care facilities.
2. Accounting Policies and Related Matters
Principles of Consolidation
The consolidated financial statements include the accounts of our wholly-owned subsidiaries and joint
venture entities that we control, through voting rights or other means. All material intercompany transactions and
balances have been eliminated in consolidation.
At inception of joint venture transactions, we identify entities for which control is achieved through means
other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is the
primary beneficiary of its operations. A VIE is broadly defined as an entity where either (i) the equity investors
as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to
finance that entity’s activities without additional subordinated financial support. We consolidate investments in
VIEs when we are determined to be the primary beneficiary. Accounting Standards Codification Topic 810,
Consolidations (“ASC 810”), requires enterprises to perform a qualitative approach to determining whether or
not a VIE will need to be consolidated on a continuous basis. This evaluation is based on an enterprise’s ability to
direct and influence the activities of a VIE that most significantly impact that entity’s economic performance.
For investments in joint ventures, we evaluate the type of rights held by the limited partner(s), which may
preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the
limited partnership. The assessment of limited partners’ rights and their impact on the presumption of control
over a limited partnership by the sole general partner should be made when an investor becomes the sole general
partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the
limited partners, (ii) the sole general partner increases or decreases its ownership in the limited partnership, or
(iii) there is an increase or decrease in the number of outstanding limited partnership interests. We similarly
evaluate the rights of managing members of limited liability companies.
Use of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles
(“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recorded in accordance with U.S. GAAP, which requires that revenue be recognized after four
basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service,
fixed and determinable income and reasonably assured collectability. Interest income on loans is recognized as
earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially
all of our operating leases contain escalating rent structures. Leases with fixed annual rental escalators are
generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment.
Rental income related to leases with contingent rental escalators is generally recorded based on the contractual
cash rental payments due for the period. Leases in our medical office building portfolio typically include some
form of operating expense reimbursement by the tenant. Certain payments made to operators are treated as lease
85
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
incentives and amortized as a reduction of revenue over the lease term. We recognize resident fees and services,
other than move-in fees, monthly as services are provided. Lease agreements with residents generally have a term
of one year and are cancelable by the resident with 30 days’ notice.
Cash and Cash Equivalents
Cash and cash equivalents consist of all highly liquid investments with an original maturity of three months
or less.
Restricted Cash
Restricted cash primarily consists of amounts held by lenders to provide future payments for real estate
taxes, insurance, tenant and capital improvements and amounts held in escrow relating to acquisitions we are
entitled to receive over a period of time as outlined in the escrow agreement.
Deferred Loan Expenses
Deferred loan expenses are costs incurred by us in connection with the issuance, assumption and
amendments of debt arrangements. We amortize these costs over the term of the debt using the straight-line
method, which approximates the effective interest method.
Investments in Unconsolidated Entities
Investments in less than majority owned entities where our interests represent a general partnership interest
but substantive participating or kick-out rights have been granted to the limited partners, or where our interests
do not represent the general partnership interest and we do not control the major operating and financial policies
of the entity, are reported under the equity method of accounting. Under the equity method of accounting, our
share of the investee’s earnings or losses is included in our consolidated results of operations. To the extent that
our cost basis is different from the basis reflected at the entity level, the basis difference is generally amortized
over the lives of the related assets and liabilities, and such amortization is included in our share of equity in
earnings of the entity. The initial carrying value of investments in unconsolidated entities is based on the amount
paid to purchase the entity interest or the estimated fair value of the assets prior to the sale of interests in the
entity. Other equity investments include an investment in available-for-sale securities. These equity investments
represented a minimal ownership interest in these companies. We evaluate our equity method investments for
impairment based upon a comparison of the estimated fair value of the equity method investment to its carrying
value. When we determine a decline in the estimated fair value of such an investment below its carrying value is
other-than-temporary, an impairment is recorded.
Redeemable Noncontrolling Interests
Certain noncontrolling interests are redeemable at fair value. Accordingly, we record the carrying amount of
the noncontrolling interests at the greater of (i) the initial carrying amount, increased or decreased for the
noncontrolling interest’s share of net income or loss and its share of other comprehensive income or loss and
dividends or (ii) the redemption value. In accordance with ASC 810, the redeemable noncontrolling interests
were classified outside of permanent equity, as a mezzanine item, in the balance sheet.
Real Property Owned
Real property developed by us is recorded at cost, including the capitalization of construction period
interest. Expenditures for repairs and maintenance are expensed as incurred. Property acquisitions are accounted
for as business combinations where we measure the assets acquired, liabilities (including assumed debt and
86
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
contingencies) and any noncontrolling interests at their fair values on the acquisition date. The cost of real
property acquired, which represents substantially all of the purchase price, is allocated to net tangible and
identifiable intangible assets based on their respective fair values. These properties are depreciated on a straight-
line basis over their estimated useful lives which range from 15 to 40 years for buildings and 5 to 15 years for
improvements. Tangible assets primarily consist of land, buildings and improvements, including those related to
including tenant
capital
improvements and lease commissions, to represent the acquisition of productive assets and, accordingly, such
costs are reflected as investment activities in our statement of cash flows.
leases. We consider costs incurred in conjunction with re-leasing properties,
The remaining purchase price is allocated among identifiable intangible assets primarily consisting of the
above or below market component of in-place leases and the value associated with the presence of in-place
tenants or residents. The value allocable to the above or below market component of the acquired in-place lease
is determined based upon the present value (using a discount rate which reflects the risks associated with the
acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its
remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over
the remaining term of the lease. The amounts allocated to above market leases are included in acquired lease
intangibles and below market leases are included in other liabilities in the balance sheet and are amortized to
rental income over the remaining terms of the respective leases.
relationship values for
in-place tenants based on management’s evaluation of
The total amount of other intangible assets acquired is further allocated to in-place lease values and
customer
the specific
characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics
considered by management in allocating these values include the nature and extent of our existing business
relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit
quality and expectations of lease renewals, among other factors. The total amount of other intangible assets
acquired is further allocated to in-place lease values for in-place residents with such value representing (i) value
associated with lost revenue related to tenant reimbursable operating costs that would be incurred in an assumed
re-leasing period, and (ii) value associated with lost rental revenue from existing leases during an assumed re-
leasing period. This intangible asset will be amortized over the assumed re-leasing period.
The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if
facts and circumstances suggest that the assets may be impaired or that the depreciable life may need to be
changed. We consider external factors relating to each asset and the existence of a master lease which may link
the cash flows of an individual asset to a larger portfolio of assets leased to the same tenant. If these factors and
the projected undiscounted cash flows of the asset over the remaining depreciation period indicate that the asset
will not be recoverable, the carrying value is reduced to the estimated fair market value. In addition, we are
exposed to the risks inherent in concentrating investments in real estate, and in particular, the seniors housing and
health care industries. A downturn in the real estate industry could adversely affect the value of our properties
and our ability to sell properties for a price or on terms acceptable to us.
Capitalization of Construction Period Interest
We capitalize interest costs associated with funds used for the construction of properties owned directly by
us. The amount capitalized is based upon the balance outstanding during the construction period using the rate of
interest which approximates our cost of financing. We capitalize interest costs related to construction of real
property owned by us. Our interest expense reflected in the consolidated statements of comprehensive income
has been reduced by the amounts capitalized.
87
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Gain on Sale of Assets
We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received
from purchasers prior to closing are recorded as deposits and classified as other assets on our consolidated
balance sheets. Gains on assets sold are recognized using the full accrual method upon closing when (i) the
collectability of the sales price is reasonably assured, (ii) we are not obligated to perform significant activities
after the sale to earn the profit, (iii) we have received adequate initial investment from the purchaser and
(iv) other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales
satisfy the requirements of gain recognition on sales of real estate.
Real Estate Loans Receivable
Real estate loans receivable consist of mortgage loans and other real estate loans. Interest income on loans is
recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risks.
The loans are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an
assignment of the partnership interest in, the related properties, corporate guaranties and/or personal guaranties.
Allowance for Losses on Loans Receivable
The allowance for losses on loans receivable is maintained at a level believed adequate to absorb potential
losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of these
loans, including general economic conditions and estimated collectability of loan payments. We evaluate the
collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency
status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying
collateral. If such factors indicate that there is greater risk of loan charge-offs, additional allowances or
placement on non-accrual status may be required. A loan is impaired when, based on current information and
events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual
terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed
impaired. To the extent circumstances improve and the risk of collectability is diminished, we will return these
loans to full accrual status. While a loan is on non-accrual status, any cash receipts are applied against the
outstanding principal balance.
Goodwill
We account for goodwill in accordance with U.S. GAAP. Goodwill is tested annually for impairment and is
tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An
impairment loss is recognized to the extent that the carrying amount, including goodwill, exceeds the reporting
unit’s fair value and the implied fair value of goodwill is less than the carrying amount of that goodwill. We have
not had any goodwill impairments.
Fair Value of Derivative Instruments
Derivatives are recorded at fair value on the balance sheet as assets or liabilities. The valuation of derivative
instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values
of our derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The
fair value of our forward exchange contracts are estimated by pricing models that consider foreign currency spot
rates, forward trade rates and discount rates. Such amounts and the recognition of such amounts are subject to
significant estimates that may change in the future. See Note 11 for additional information.
88
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Federal Income Tax
We have elected to be treated as a REIT under the applicable provisions of the Internal Revenue Code of
1986, as amended (the “Code”), commencing with our first taxable year, and made no provision for federal
income tax purposes prior to our acquisition of our “taxable REIT subsidiaries.” As a result of these as well as
subsequent acquisitions, we now record income tax expense or benefit with respect to certain of our entities that
are taxed as taxable REIT subsidiaries under provisions similar to those applicable to regular corporations and
not under the REIT provisions.
We account for deferred income taxes using the asset and liability method and recognize deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in our financial
statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the
differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability
that results from a change in circumstances, and that causes a change in our judgment about expected future tax
consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also
reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe
it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or
decrease in the valuation allowance that results from a change in circumstances, and that causes a change in our
judgment about the realizability of the related deferred tax asset, is included in the tax provision when such
changes occur. See Note 18 for additional information.
Foreign Currency
Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. We
translate the results of operations of our foreign subsidiaries into U.S. dollars using average rates of exchange in
effect during the period, and we translate balance sheet accounts using exchange rates in effect at the end of the
period. We record resulting currency translation adjustments in accumulated other comprehensive income, a
component of stockholders’ equity, on our consolidated balance sheets. We record transaction gains and losses in
our consolidated statements of comprehensive income.
Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the
weighted-average number of shares outstanding for the period adjusted for non-vested shares of restricted stock.
The computation of diluted earnings per share is similar to basic earnings per share, except that the number of
shares is increased to include the number of additional common shares that would have been outstanding if the
potentially dilutive common shares had been issued.
New Accounting Standards
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRS” (“ASU 2011-04”), which requires
incremental fair value disclosures in the notes to the financial statements. We have adopted ASU 2011-04
effective January 1, 2012. The adoption of this guidance did not have a material impact on our consolidated
financial position or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU
2011-05”), which requires entities to present net income and other comprehensive income in either a single
continuous statement or in two separate, but consecutive, statements of net income and other comprehensive
89
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
income. We have adopted ASU 2011-05 effective January 1, 2012 and presented total comprehensive income on
the consolidated statements of comprehensive income. Further disclosures including reconciliation from net
income to total comprehensive income will be required on an annual basis. The provisions of ASU No. 2011-12,
“Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of
Accumulated Other Comprehensive Income in ASU 2011-05” delayed the requirement
to present certain
reclassifications on the face of the financial statements.
Reclassifications
Certain amounts in prior years have been reclassified to conform to current year presentation.
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, 2012, 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 is our purchase price allocations and other seniors housing triple-net real property investment
activity for the periods presented (in thousands):
Year Ended December 31,
2012(1)
2011
2010
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land and land improvements
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
87,242
984,077
119
$ 212,156
3,108,508
9,101
$
61,290
967,239
—
Total assets acquired(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,071,438
(89,881)
(3,542)
3,329,765
(93,431)
(91,290)
1,028,529
(84,086)
(26,345)
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash acquisition related activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash disbursed for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Capitalized interest
Cash disbursed for construction in progress . . . . . . . . . . . . . . . . . . . . . . . . .
Capital improvements to existing properties . . . . . . . . . . . . . . . . . . . . . . . .
(93,423)
921
(17,215)
(616)
961,105
179,684
(6,041)
173,643
67,026
(184,721)
—
—
(2,532)
3,142,512
182,626
(5,752)
176,874
—
(110,431)
—
—
(9,922)
908,176
85,993
(6,396)
79,597
21,833
Total cash invested in real property, net of cash acquired . . . . . . . . . . .
$1,201,774
$3,319,386
$1,009,606
(1)
Includes acquisitions with an aggregate purchase price of $37,772,000 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.
90
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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,
2012(1)
2011
2010
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables and other assets
$ 146,332
1,341,560
118,077
1,296
10,125
$ 112,350
1,512,764
122,371
20,699
901
$ 75,620
676,623
63,757
—
16,459
Total assets acquired(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,617,390
(124,190)
(17,347)
1,769,085
(796,272)
(44,483)
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(141,537)
—
(56,884)
(840,755)
(6,017)
(69,984)
832,459
(305,167)
(6,849)
(312,016)
(43,641)
(101,091)
Cash disbursed for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital improvements to existing properties . . . . . . . . . . . . . . . . . . . . . . .
1,418,969
21,751
852,329
15,880
375,711
1,735
Total cash invested in real property, net of cash acquired . . . . . . . . .
$1,440,720
$ 868,209
$ 377,446
(1)
Includes acquisitions with an aggregate purchase price of $1,370,128,000 for which the allocation of the purchase price consideration is
preliminary and subject to change.
(2) Excludes $20,691,000, $38,952,000 and $8,532,000 of cash acquired during the years ended December 31, 2012, 2011 and 2010,
respectively.
91
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Medical Facilities Activity
Accrued contingent consideration related to certain medical facility acquisitions was $34,692,000 and
$39,827,000 as of December 31, 2012 and 2011, 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,
2012(1)
2011
2010
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land and land improvements
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired lease intangibles
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 68,619
648,409
115,233
975
—
4,469
$ 48,342
520,976
60,609
100
—
3,053
$ 49,632
513,152
67,929
—
68,321
—
Total assets acquired(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured debt
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash acquisition related activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash disbursed for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash disbursed for construction in progress . . . . . . . . . . . . . . . . . . . . . . . . .
Capital improvements to existing properties . . . . . . . . . . . . . . . . . . . . . . . . .
837,705
(267,527)
(25,928)
(293,455)
—
(193)
—
(880)
543,177
134,830
(3,736)
(18,327)
112,767
46,673
633,080
(72,225)
(34,214)
(106,439)
—
(7,211)
—
—
519,430
165,593
(7,412)
(33,451)
124,730
24,031
699,034
(170,255)
(75,010)
(245,265)
(2,721)
(10,848)
(16,667)
—
423,533
252,595
(13,924)
(11,435)
227,236
36,354
Total cash invested in real property, net of cash acquired . . . . . . . . . . . .
$ 702,617
$ 668,191
$ 687,123
(1)
Includes acquisitions with an aggregate purchase price of $190,799,000 for which the allocation of the purchase price consideration is
preliminary and subject to change.
(2) Goodwill represents the estimated fair value of the future development pipeline expected to be generated. Cash flows from this future
pipeline are expected to come from development activities and the ability to perform the management functions at the assets after the
properties are developed.
(3) Excludes $2,154,000 of cash acquired during the year ended December 31, 2011.
92
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Construction Activity
The following is a summary of the construction projects that were placed into service and began generating
revenues during the periods presented:
December 31,
2012
Year Ended
December 31,
2011
December 31,
2010
Development projects:
Seniors housing triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$146,913
189,135
Total development projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expansion projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
336,048
4,983
$114,161
355,935
470,096
45,414
$273,034
162,376
435,410
3,216
Total construction in progress conversions . . . . . . . . . . . . . . . . . . . . . . .
$341,031
$515,510
$438,626
At December 31, 2012, 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):
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,039,427
980,258
952,029
950,079
929,224
7,579,800
$12,430,817
4. Real Estate Intangibles
The following is a summary of our real estate intangibles, excluding those classified as held for sale, as of
the dates indicated (dollars in thousands):
December 31, 2012
December 31, 2011
Assets:
In place lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Above market tenant leases . . . . . . . . . . . . . . . . . . . . . . . . . . .
Below market ground leases . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross historical cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 541,729
56,086
61,450
14,419
673,684
(257,242)
$ 332,645
35,973
51,316
8,265
428,199
(148,380)
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 416,442
$ 279,819
Weighted-average amortization period in years . . . . . . . . . . .
16.4
17.0
Liabilities:
Below market tenant leases . . . . . . . . . . . . . . . . . . . . . . . . . . .
Above market ground leases . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross historical cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 77,036
9,490
86,526
(27,753)
$ 67,284
5,020
72,304
(21,387)
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 58,773
$ 50,917
Weighted-average amortization period in years . . . . . . . . . . .
14.3
12.3
93
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of real estate intangible amortization for the periods presented (in thousands):
Rental income related to above/below market tenant leases, net . . . . . . . . . . . .
Property operating expenses related to above/below market ground leases,
Year Ended December 31,
2012
2011
2010
$
1,120
$ 3,340 $ 3,829
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,285)
(1,161)
(1,049)
Depreciation and amortization related to in place lease intangibles and lease
commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(103,044)
(98,856)
(18,298)
The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods
presented (in thousands):
Assets
Liabilities
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $112,730 $ 7,200
6,616
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,645
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,233
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,920
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,159
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,787
29,220
23,201
23,453
165,051
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $416,442 $58,773
5. Dispositions, Assets Held for Sale and Discontinued Operations
Impairment of assets as reflected in our consolidated statements of comprehensive income relate to
properties designated as held for sale and represent the charges necessary to adjust the carrying values to
estimated fair values less costs to sell based on current sales price expectations. The following is a summary of
our real property disposition activity for the periods presented (in thousands):
Year Ended
December 31,
2012
December 31,
2011
December 31,
2010
Real property dispositions:
Seniors housing triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $372,378
149,344
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$150,755
35,295
$170,290
14,092
Total dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Gain (loss) on sales of real property, net . . . . . . . . . . . . . . .
Seller financing on sales of real property . . . . . . . . . . . . . . .
521,722
100,549
(12,000)
186,050
61,160
—
184,382
36,115
(1,470)
Proceeds from real property sales . . . . . . . . . . . . . . . . . . . . . . . . . $610,271
$247,210
$219,027
94
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2012, $46,201,000 of sales proceeds is on deposit
in an Internal Revenue Code
Section 1031 exchange account escrow account with a qualified intermediary. We have reclassified the income
and expenses attributable to all properties sold prior to or held for sale at December 31, 2012 to discontinued
operations. Expenses include an allocation of interest expense based on property carrying values and our
weighted-average cost of debt. The following illustrates the reclassification impact as a result of classifying
properties as discontinued operations for the periods presented (in thousands):
Year Ended December 31,
2012
2011
2010
Revenues:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $79,323 $107,236 $123,945
Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,217
2,354
17,697
24,626
6,131
29,723
26,982
8,678
37,378
Income (loss) from discontinued operations, net . . . . . . . . . . . . . . . . . . . . $43,055 $ 46,756 $ 50,907
6. Real Estate Loans Receivable
The following is a summary of our real estate loans receivable (in thousands):
December 31,
2012
2011
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 87,955
807,710
$ 63,934
228,573
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$895,665
$292,507
The following is a summary of our real estate loan activity for the periods presented (in thousands):
December 31, 2012
December 31, 2011
December 31, 2010
Year Ended
Seniors
Housing
Triple-net Operating(1) Facilities Totals Triple-net Facilities Totals Triple-net Facilities Totals
Seniors
Housing Medical
Seniors
Housing Medical
Seniors
Housing Medical
Advances:
Investments in new
loans . . . . . . . . . . .
Draws on existing
loans . . . . . . . . . . .
Sub-total
. . . . . . . .
Less: Seller financing
on property sales . .
Net cash advances on
real estate loans . . .
Receipts:
$ 2,220
$580,834
$38,336 $621,390 $ 18,541
$ — $ 18,541
$ 9,742
$41,644 $51,386
41,754
43,974
—
1,950
43,704
29,752
580,834
40,286
665,094
48,293
3,184
3,184
32,936
46,113
1,236
47,349
51,477
55,855
42,880
98,735
—
—
—
—
—
—
—
—
(1,470)
(1,470)
43,974
580,834
40,286
665,094
48,293
3,184
51,477
55,855
41,410
97,265
Loan payoffs . . . . . . .
Principal payments on
loans . . . . . . . . . . .
Total receipts on real
estate loans . . . . . .
10,387
19,786
30,173
—
—
—
2,168
12,555
162,705
2,943
165,648
5,619
6,233
11,852
2,679
22,465
17,856
5,307
23,163
24,203
7,440
31,643
4,847
35,020
180,561
8,250
188,811
29,822
13,673
43,495
Net advances (receipts)
on real estate loans . .
$13,801
$580,834
$35,439 $630,074 $(132,268) $(5,066) $(137,334) $26,033
$27,737 $53,770
(1) Represents loan to Sunrise Senior Living, Inc. that was acquired upon merger consummation on January 9, 2013 as discussed in Note 21.
95
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the allowance for losses on loans receivable for the periods presented (in
thousands):
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $ 1,276
2,010
(3,286)
27,008
(27,008)
$ 5,183
29,684
(33,591)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $ — $ 1,276
Year Ended December 31,
2012(1)
2011(2)
2010(3)
(1) Provision and charge-off amounts relate to one entrance fee community in our seniors housing triple-net segment.
(2) Provision and charge-off amounts relate to one hospital in our medical facilities segment.
(3) Provision and charge-off amounts relate to certain early stage seniors housing and CCRC development projects in our seniors housing
triple-net segment.
The following is a summary of our loan impairments (in thousands):
Balance of impaired loans at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,230 $6,244 $ 9,691
— 1,276
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Balance of impaired loans not reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,230 $6,244 $ 8,415
Year Ended December 31,
2012
2011
2010
Average impaired loans for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,237 $7,968 $38,409
103
Interest recognized on impaired loans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
—
(1) Represents interest recognized prior to placement on non-accrual status.
7.
Investments in Unconsolidated Entities
During the year ended December 31, 2010, we entered into a joint venture investment with Forest City
Enterprises (NYSE:FCE.A and FCE.B). We acquired a 49% interest in a seven-building life science campus
located at University Park in Cambridge, Massachusetts, which is immediately adjacent to the campus of the
Massachusetts Institute of Technology. At December 31, 2012, our investment of $174,692,000 is recorded as an
investment in unconsolidated entities on the balance sheet. The aggregate remaining unamortized basis difference
of our investment in this joint venture of $448,000 at December 31, 2012 is primarily attributable to real estate
and related intangible assets and will be amortized over the life of the related properties and included in the
reported amount of income from unconsolidated entities.
On December 31, 2010, we formed a strategic partnership with a national medical office building company
whereby the partnership invested in 17 medical office properties. We own a controlling interest in 11 properties
and consolidate them. Consolidation is based on a combination of ownership interest and control of operational
decision-making authority. We do not own a controlling interest in six properties and account for them under the
equity method. Our investment in the strategic partnership provides us access to health systems and includes
development and property management resources.
During the three months ended June 30, 2012, we entered into a joint venture with Chartwell Retirement
Residences (TSX:CSH.UN). The portfolio contains 42 properties in Canada, 39 of which are owned 50% by us
and Chartwell, and three of which we wholly own. All properties are managed by Chartwell. In connection with
the 39 properties, we invested $223,134,000 of cash which was recorded as an investment in unconsolidated
entities on the balance sheet. The 39 properties are accounted for under the equity method of accounting and do
96
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
not qualify as VIEs (variable interest entities). The joint venture is structured under RIDEA. The aggregate
remaining unamortized basis difference of our investment in this joint venture of $8,656,000 at December 31,
2012 is primarily attributable to transaction costs that will be amortized over the weighted-average useful life of
the related properties and included in the reported amount of income from unconsolidated entities.
The results of operations for these properties have been included in our consolidated results of operations
from the date of acquisition by the joint ventures and are reflected in our statements of comprehensive income as
income or loss from unconsolidated entities. The following is a summary of our income from and investments in
unconsolidated entities (dollars in thousands):
Percentage
Ownership
Properties
Year Ended December 31,
December 31,
2012
Income
(loss)
2011
Income
(loss)
2010
Income
(loss)
2012
Assets
2011
Assets
Seniors housing triple-net(1) . . . . .
Seniors housing operating . . . . . .
Medical facilities . . . . . . . . . . . . .
10% to 49%
33% to 50%
36% to 49%
21
39
13
$
(33) $
(6,364)
8,879
(9) $ — $ 34,618
— 217,701
186,617
6,673
(1,531)
7,312
$ 30,975
15,429
195,318
Total . . . . . . . . . . . . . . . . . . . . . . .
$ 2,482
$ 5,772 $6,673
$438,936
$241,722
(1) Asset amounts include an available-for-sale equity investment. See Note 16 for additional information.
8. Customer Concentration
The following table summarizes certain information about our customer concentration as of December 31,
2012 (dollars in thousands):
Number of
Properties
Total
Investment(2)
Percent of
Investment(3)
Concentration by investment:(1)
Genesis HealthCare . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunrise Senior Living . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merrill Gardens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Belmont Village . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benchmark Senior Living . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
177
10
48
19
35
684
973
$ 2,682,822
1,087,357
1,084,536
896,692
842,760
10,828,842
15%
6%
6%
5%
5%
63%
$17,423,009
100%
(1) Genesis is in our seniors housing triple-net segment whereas the other top five customers are in our seniors housing operating segment.
(2) Excludes our share of investments in unconsolidated entities. Please see Note 7 for additional information.
(3) Investments with our top five customers comprised 41% of total investments at December 31, 2011.
9. Borrowings Under Line of Credit Arrangement and Related Items
Please see Note 21 regarding line of credit activity that occurred subsequent to December 31, 2012. At
December 31, 2012, we had a $2,000,000,000 unsecured line of credit arrangement with a consortium of 31
banks with an option to upsize the facility by up to an additional $500,000,000 through an accordion feature,
allowing for an aggregate commitment of up to $2,500,000,000. The revolving credit facility was scheduled to
expire July 27, 2015. Borrowings under the agreement are subject to interest payable in periods no longer than
three months at either the agent bank’s prime rate of interest or the applicable margin over LIBOR interest rate,
at our option (1.56% at December 31, 2012). The applicable margin is based on certain of our debt ratings and
97
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
was 1.35% at December 31, 2012. In addition, we pay a facility fee annually to each bank based on the bank’s
commitment amount. The facility fee depends on certain of our debt ratings and was 0.25% at December 31,
2012. Principal is due upon expiration of the agreement. In addition, at December 31, 2012, we had a $5,000,000
unsecured revolving demand note undrawn and bearing interest at 1-month LIBOR plus 110 basis points.
The following information relates to aggregate borrowings under our unsecured lines of credit arrangements
for the periods presented (dollars in thousands):
Balance outstanding at year end . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum amount outstanding at any month end . . . . . . . . . . . .
Average amount outstanding (total of daily principal balances
Year Ended December 31,
2012
2011
2010
$
$897,000
— $610,000
$710,000
$300,000
$560,000
divided by days in period) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$191,378
$240,104
$268,762
Weighted-average interest rate (actual interest expense divided
by average borrowings outstanding)
. . . . . . . . . . . . . . . . . . . .
1.80%
1.51%
1.48%
10. Senior Unsecured Notes and Secured Debt
We may repurchase, redeem or refinance convertible and non-convertible senior unsecured notes from time
to time, taking advantage of favorable market conditions when available. We may purchase senior notes for cash
through open market purchases, privately negotiated transactions, a tender offer or, in some cases, through the
early redemption of such securities pursuant to their terms. The non-convertible senior unsecured notes are
redeemable at our option, at any time in whole or from time to time in part, at a redemption price equal to the
sum of (1) the principal amount of the notes (or portion of such notes) being redeemed plus accrued and unpaid
interest thereon up to the redemption date and (2) any “make-whole” amount due under the terms of the notes in
connection with early redemptions. Redemptions and repurchases of debt, if any, will depend on prevailing
market conditions, our liquidity requirements, contractual restrictions and other factors. At December 31, 2012,
the annual principal payments due on these debt obligations were as follows (in thousands):
Senior
Unsecured Notes(1,2)
Secured
Debt(1,3)
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 300,000
—
501,054
700,000
450,000
4,194,403
$ 110,034
204,783
224,486
328,730
320,943
1,122,610
Totals
$ 410,034
204,783
725,540
1,028,730
770,943
5,317,013
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,145,457
$2,311,586
$8,457,043
(1) Amounts represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments as reflected
on the consolidated balance sheet.
(2) Annual interest rates range from 2.25% to 6.5%, excluding the Canadian denominated unsecured term loan.
(3) Annual
interest rates range from 1.0% to 10.0%. Carrying value of the properties securing the debt
totaled $3,953,516,000 at
December 31, 2012.
(4) On July 30, 2012, we completed funding on a $250,000,000 Canadian denominated unsecured term loan (approximately $251,054,000
USD at exchange rates on December 31, 2012). The loan matures on July 27, 2015 (with an option to extend for an additional year at our
discretion) and bears interest at the Canadian Dealer Offered Rate plus 145 basis points (2.67% at December 31, 2012).
98
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the twelve months ended December 31, 2010, we issued $494,403,000 of 3.00% senior unsecured
convertible notes due December 2029, generating net proceeds of $486,084,000. The notes are convertible, in
certain circumstances, into cash and, if applicable, shares of common stock at an initial conversion rate of
19.5064 shares per $1,000 principal amount of notes, which represents an initial conversion price of $51.27 per
share. In general, upon conversion, the holder of each note would receive, in respect of the conversion value of
such note, cash up to the principal amount of such note and common stock for the note’s conversion value in
excess of such principal amount. In addition, on each of December 1, 2014, December 1, 2019 and December 1,
2024, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100%
of the principal amount of the notes to be purchased, plus any accrued and unpaid interest. The notes are
bifurcated into a debt component and an equity component since they may be settled in cash upon conversion.
The value of the debt component is based upon the estimated fair value of a similar debt instrument without the
conversion feature at the time of issuance. The difference between the contractual principal on the debt and the
value allocated to the debt of $29,925,000 was recorded as an equity component and represents the conversion
feature of the instrument. The excess of the contractual principal amount of the debt over its estimated fair value
is amortized to interest expense using the effective interest method over the period used to estimate the fair value.
The following is a summary of our senior unsecured note principal activity, excluding the Canadian
denominated unsecured term loan, during the periods presented (dollars in thousands):
December 31, 2012
Year Ended
December 31, 2011
December 31, 2010
Amount
Weighted Avg.
Interest Rate
Amount
Weighted Avg.
Interest Rate
Amount
Weighted Avg.
Interest Rate
Beginning balance . . .
Debt issued . . . . . . . .
Debt extinguished . . .
Debt redeemed . . . . .
$4,464,927
1,800,000
(76,853)
(293,671)
5.133%
3.691%
8.000%
4.750%
$3,064,930
1,400,000
(3)
—
5.129%
5.143%
4.750%
0.000%
$1,661,853
1,844,403
(441,326)
—
Ending balance . . . . .
$5,894,403
4.675%
$4,464,927
5.133%
$3,064,930
5.557%
4.653%
4.750%
0.000%
5.129%
The following is a summary of our secured debt principal activity for the periods presented (dollars in
thousands):
December 31, 2012
December 31, 2011
December 31, 2010
Amount
Weighted Avg.
Interest Rate
Amount
Weighted Avg.
Interest Rate
Amount
Weighted Avg.
Interest Rate
Year Ended
Beginning balance . . . . . .
Debt issued . . . . . . . . . . . .
Debt assumed . . . . . . . . . .
Debt extinguished . . . . . . .
Foreign currency . . . . . . . .
Principal payments . . . . . .
$2,108,384
157,418
444,744
(360,403)
187
(38,744)
5.285% $1,133,715
116,903
4.212%
940,854
5.681%
(55,317)
4.672%
—
5.637%
(27,771)
5.456%
5.972% $ 623,045
157,156
5.697%
564,656
4.444%
(194,493)
5.949%
0.000%
—
(16,649)
5.845%
5.842%
5.454%
6.089%
6.073%
0.000%
5.792%
Ending balance . . . . . . . . .
$2,311,586
5.140% $2,108,384
5.285% $1,133,715
5.972%
Our debt agreements contain various covenants, restrictions and events of default. Certain agreements
require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to
incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2012, we were in
compliance with all of the covenants under our debt agreements.
99
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Derivative Instruments
We are exposed to various market risks, including the potential loss arising from adverse changes in interest
rates. We may elect to use financial derivative instruments to hedge interest rate exposure. These decisions are
principally based on our policy to manage the general trend in interest rates at the applicable dates and our
perception of the future volatility of interest rates. In addition, non-U.S. investments expose us to the potential
losses associated with adverse changes in foreign currency to U.S. Dollar exchange rates. We elected to manage
this risk through the use of a forward exchange contract and issuing debt in the foreign currency.
Interest Rate Swap Contracts Designated as Cash Flow Hedges
For instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss
on the derivative is reported as a component of other comprehensive income (“OCI”), and reclassified into
earnings in the same period, or periods, during which the hedged transaction affects earnings. Gains and losses
on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of
effectiveness are recognized in earnings. As of December 31, 2012, we had one interest rate swap for a total
aggregate notional amount of $11,905,000. The swap hedges interest payments associated with long-term LIBOR
based borrowings and matures on December 31, 2013. Approximately $1,973,000 of losses, which are included
in accumulated other comprehensive income (“AOCI”), are expected to be reclassified into earnings in the next
12 months.
Foreign Currency Hedges
For instruments that are designated and qualify as net investment hedges, the variability in the foreign
currency to U.S. dollar of the instrument is recorded as a cumulative translation adjustment component of
OCI. The balance of the cumulative translation adjustment will be reclassified to earnings when the hedged
investment is sold or substantially liquidated. On February 15, 2012, we entered into a forward exchange contract
to purchase $250,000,000 Canadian Dollars at a fixed rate in the future. The forward contract was used to limit
exposure to fluctuations in the Canadian Dollar to U.S. Dollar exchange rate associated with our initial cash
investment funded for the Chartwell transaction. On May 3, 2012, this forward exchange contract was settled for
a gain of $2,772,000, which was reflected on the consolidated statement of comprehensive income, and the
proceeds were used to fund our investment. On May 3, 2012, we also entered into a forward contract to sell
$250,000,000 Canadian dollars at a fixed rate on July 31, 2012 to hedge our net investment. We settled the
forward contract on July 31, 2012 with the net loss reflected in OCI. Upon settlement of the forward contract we
entered into a $250,000,000 Canadian Dollar term loan which has been designated as a net investment hedge of
our Chartwell investment and changes in fair value are reported in OCI as no ineffectiveness is anticipated.
On August 30, 2012, we entered into two cross currency swaps to purchase £125,000,000. The swaps were
used to limit exposure to fluctuations in the Pound Sterling to U.S. Dollar exchange rate associated with our
initial cash investment funded for the Sunrise transaction discussed in Note 21. The cross currency swaps have
been designated as a net investment hedge, and changes in fair value are reported in OCI as no ineffectiveness is
anticipated.
On September 17, 2012, we entered into two forward exchange contracts to purchase $14,000,000 Canadian
Dollars and £23,000,000 at a fixed rate in the future. The forward contracts were used to limit exposure to
fluctuations in foreign currency associated with future international transactions.
100
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following presents the impact of derivative instruments on the statement of comprehensive income and
OCI for the periods presented (dollars in thousands):
Gain (loss) on interest rate swap
recognized in OCI (effective
portion) . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on interest rate swaps
reclassified from AOCI into
income (effective portion) . . . . . . .
Gain (loss) on forward exchange
Location
December 31,
2012
Year Ended
December 31,
2011
December 31,
2010
OCI
$ 3,200
$3,189
$(10,307)
Interest expense
(1,596)
1,781
(2,244)
contracts recognized in income . . .
Realized gain
1,921
Gain (loss) on interest rate swaps
recognized in income . . . . . . . . . .
Realized loss
(96)
Gain (loss) on forward exchange
contracts designated as net
investment hedge recognized in
OCI . . . . . . . . . . . . . . . . . . . . . . . .
12. Commitments and Contingencies
OCI
(5,134)
—
—
—
—
—
—
At December 31, 2012, we had nine outstanding letter of credit obligations totaling $7,172,000 and expiring
between 2013 and 2014. At December 31, 2012, we had outstanding construction in process of $162,984,000 for
leased properties and were committed to providing additional funds of approximately $213,255,000 to complete
construction. At December 31, 2012, we had contingent purchase obligations totaling $79,963,000, excluding our
Sunrise-related commitment described in Note 21. These contingent purchase obligations relate to unfunded
capital improvement obligations and contingent obligations on acquisitions. Rents due from the tenant are
increased to reflect the additional investment in the property.
We evaluate our leases for operating versus capital lease treatment in accordance with ASC Topic 840
“Leases.” A lease is classified as a capital lease if it provides for transfer of ownership of the leased asset at the
end of the lease term, contains a bargain purchase option, has a lease term greater than 75% of the economic life
of the leased asset, or if the net present value of the future minimum lease payments are in excess of 90% of the
fair value of the leased asset. Certain leases contain bargain purchase options and have been classified as capital
leases. At December 31, 2012, we had operating lease obligations of $699,990,000 relating to certain ground
leases and Company office space. We incurred rental expense relating to company office space of $1,534,000,
$1,901,000 and $1,280,000 for the years ended December 31, 2012, 2011 and 2010, respectively. Regarding the
ground leases, we have sublease agreements with certain of our operators that require the operators to reimburse
us for our monthly operating lease obligations. At December 31, 2012, aggregate future minimum rentals to be
received under these noncancelable subleases totaled $47,632,000.
101
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2012, future minimum lease payments due under operating and capital leases are as
follows (in thousands):
Operating Leases
Capital Leases(1)
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11,046
11,267
11,072
11,168
11,180
644,257
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$699,990
$73,562
1,219
8,984
559
559
970
$85,853
(1) Amounts above represent principal and interest obligations under capital lease arrangements. Related assets with a gross value of
$186,343,000 and accumulated depreciation of $8,639,000 are recorded in real property.
13. Stockholders’ Equity
The following is a summary of our stockholder’s equity capital accounts as of the dates indicated:
December 31, 2012
December 31, 2011
Preferred Stock, $1.00 par value:
Authorized shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,000,000
26,224,854
26,224,854
Common Stock, $1.00 par value:
Authorized shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
400,000,000
260,780,109
260,373,754
50,000,000
25,724,854
25,724,854
400,000,000
192,604,918
192,275,248
Preferred Stock. The following is a summary of our preferred stock activity during the periods presented
(dollars in thousands, except per share amounts):
December 31, 2012
December 31, 2011
December 31, 2010
Shares
Weighted Avg.
Dividend Rate
Shares
Weighted Avg.
Dividend Rate
Shares
Weighted Avg.
Dividend Rate
Year Ended
Beginning balance . . . . .
Shares issued . . . . . . . . .
Shares redeemed . . . . . .
Shares converted . . . . . .
25,724,854
11,500,000
(11,000,000)
—
7.013%
6.500%
7.716%
0.000%
11,349,854
14,375,000
—
—
7.663%
6.500%
0.000%
0.000%
11,474,093
349,854
(5,513)
(468,580)
7.697%
6.000%
7.500%
7.262%
Ending balance . . . . . . .
26,224,854
6.493%
25,724,854
7.013%
11,349,854
7.663%
During the three months ended December 31, 2010, we issued 349,854 shares of 6.00% Series H
Cumulative Convertible and Redeemable Preferred Stock in connection with a business combination. These
shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred
stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus
accrued and unpaid dividends on such shares to the redemption date, on or after December 31, 2015.
102
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the three months ended March 31, 2011, we issued 14,375,000 of 6.50% Series I Cumulative
Convertible Perpetual Preferred Stock. These shares have a liquidation value of $50.00 per share. Dividends are
payable quarterly in arrears. The preferred stock is not redeemable by us. The preferred shares are convertible, at
the holder’s option, into 0.8460 shares of common stock (equal to an initial conversion price of approximately
$59.10).
During the three months ended March 31, 2012, we issued 11,500,000 of 6.50% Series J Cumulative
Redeemable Preferred Stock. Dividends are payable quarterly in arrears. The preferred stock, which has no stated
maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends
on such shares to the redemption date, on or after March 7, 2017.
Common Stock. The following is a summary of our common stock issuances during the periods indicated
(dollars in thousands, except per share amounts):
Shares Issued Average Price Gross Proceeds Net Proceeds
September 2010 public issuance . . . . . . . . . . . . . . . . . .
December 2010 public issuance . . . . . . . . . . . . . . . . . . .
2010 Dividend reinvestment plan issuances . . . . . . . . .
2010 Equity shelf program issuances . . . . . . . . . . . . . .
2010 Option exercises . . . . . . . . . . . . . . . . . . . . . . . . . .
9,200,000
11,500,000
1,957,364
431,082
129,054
$45.75
43.75
43.95
44.94
31.17
$ 420,900
503,125
86,034
19,371
4,022
$ 403,921
482,448
86,034
19,013
4,022
2010 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,217,500
$1,033,452
$ 995,438
March 2011 public issuance . . . . . . . . . . . . . . . . . . . . . .
November 2011 public issuance . . . . . . . . . . . . . . . . . .
2011 Dividend reinvestment plan issuances . . . . . . . . .
2011 Equity shelf program issuances . . . . . . . . . . . . . .
2011 Option exercises . . . . . . . . . . . . . . . . . . . . . . . . . .
28,750,000
12,650,000
2,534,707
848,620
232,081
$49.25
50.00
48.44
50.53
37.17
$1,415,938
632,500
122,794
42,888
8,628
$1,358,543
606,595
121,846
41,982
8,628
2011 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,015,408
$2,222,748
$2,137,594
February 2012 public issuance . . . . . . . . . . . . . . . . . . . .
August 2012 public issuance . . . . . . . . . . . . . . . . . . . . .
September 2012 public issuance . . . . . . . . . . . . . . . . . .
2012 Dividend reinvestment plan issuances . . . . . . . . .
2012 Option exercises . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 Senior note conversions . . . . . . . . . . . . . . . . . . . .
20,700,000
13,800,000
29,900,000
2,136,140
341,371
1,039,721
$53.50
58.75
56.00
56.37
40.86
$1,107,450
810,750
1,674,400
120,411
13,949
—
$1,062,256
778,011
1,606,665
120,411
13,949
—
2012 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67,917,232
$3,726,960
$3,581,292
103
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dividends. The increase in dividends is primarily attributable to increases in our common and preferred
shares outstanding as described above. Please refer to Notes 2 and 18 for information related to federal income
tax of dividends. The following is a summary of our dividend payments (in thousands, except per share
amounts):
Year Ended
December 31, 2012
December 31, 2011
December 31, 2010
Per Share
Amount
Per Share Amount
Per Share
Amount
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . $2.96000 $653,321 $2.83500 $483,746 $2.74000 $348,578
7,875
Series D Preferred Stock . . . . . . . . . . . . . . . . . .
94
Series E Preferred Stock . . . . . . . . . . . . . . . . ..
13,344
Series F Preferred Stock . . . . . . . . . . . . . . . . . .
332
Series G Preferred Stock . . . . . . . . . . . . . . . . ..
—
Series H Preferred Stock . . . . . . . . . . . . . . . . . .
—
Series I Preferred Stock . . . . . . . . . . . . . . . . . . .
—
Series J Preferred Stock . . . . . . . . . . . . . . . . . . .
1.96875
— 1.12500
1.90625
— 1.40640
—
—
—
0.50301
—
0.48715
—
2.85840
3.25000
1.39038
1.96875
—
1.90625
—
2.85840
1.33159
—
2,012
—
3,410
—
1,000
46,719
15,988
1,000
38,283
—
13,344
7,875
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$722,450
$544,248
$370,223
Accumulated Other Comprehensive Income. The following is a summary of accumulated other
comprehensive income/(loss) as of the dates indicated (in thousands):
December 31, 2012 December 31, 2011
Unrecognized gains (losses) on cash flow hedges . . . . . . . . . . . . . . .
Unrecognized gains (losses) on equity investments . . . . . . . . . . . . . .
Unrecognized gains (losses) on foreign currency translation . . . . . . .
Unrecognized actuarial gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . .
$ (6,957)
(216)
(881)
(2,974)
$ (8,561)
(619)
—
(2,748)
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(11,028)
$(11,928)
Other Equity. Other equity consists of accumulated option compensation expense, which represents the
amount of amortized compensation costs related to stock options awarded to employees and directors. Expense,
which is recognized as the options vest based on the market value at the date of the award, totaled $2,875,000,
$1,917,000 and $1,634,000 for the years ended December 31, 2012, 2011 and 2010, respectively.
14. Stock Incentive Plans
Our Amended and Restated 2005 Long-Term Incentive Plan authorizes up to 6,200,000 shares of common
stock to be issued at the discretion of the Compensation Committee of the Board of Directors. The 2005 Plan
replaced the 1995 Stock Incentive Plan and the Stock Plan for Non-Employee Directors. The options granted to
officers and key employees under the 1995 Plan vested through 2010 and expire ten years from the date of grant.
Our non-employee directors, officers and key employees are eligible to participate in the 2005 Plan. The 2005
Plan allows for the issuance of, among other things, stock options, restricted stock, deferred stock units and
dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range
from three years for non-employee directors to five years for officers and key employees. Options expire
ten years from the date of grant.
104
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Valuation Assumptions
The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option
pricing model with the following weighted-average assumptions:
December 31, 2012 December 31, 2011 December 31, 2010
Year Ended
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (in years) . . . . . . . . . . . . . . . . . . . . . .
Weighted-average fair value . . . . . . . . . . . . . . . . . .
5.16%
35.15%
1.48%
7.0
$11.11
5.74%
34.80%
2.87%
7.0
$ 9.60
6.28%
34.08%
3.23%
7.0
$ 7.82
The dividend yield represented the dividend yield of our common stock on the dates of grant. Our
computation of expected volatility was based on historical volatility. The risk-free interest rates used were the
7-year U.S. Treasury Notes yield on the date of grant. The expected life was based on historical experience of
similar awards, giving consideration to the contractual terms, vesting schedules and expectations regarding future
employee behavior.
Option Award Activity
The following table summarizes information about stock option activity for the periods presented:
Stock Options
Year Ended
December 31, 2012
December 31, 2011
December 31, 2010
Number of
Shares
(000’s)
Weighted
Average
Exercise Price
Number of
Shares
(000’s)
Weighted
Average
Exercise Price
Number of
Shares
(000’s)
Weighted
Average
Exercise Price
Options at beginning of year . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . .
Options terminated . . . . . . . . . . . . . . . . .
1,252
332
(341)
(81)
Options at end of period . . . . . . . . . . . . .
1,162
$42.12
57.33
40.11
51.81
$46.40
1,207
289
(232)
(12)
1,252
$39.45
49.17
36.92
43.09
$42.12
1,062
280
(129)
(6)
1,207
$37.71
43.29
33.58
37.82
$39.45
Options exercisable at end of period . . .
Weighted average fair value of options
granted during the period . . . . . . . . . .
313
$40.82
427
$39.45
440
$37.76
$11.11
$ 9.60
$ 7.82
The following table summarizes information about stock options outstanding at December 31, 2012:
Range of Per
Share Exercise
Prices
Options Outstanding
Options Exercisable
Number
Outstanding
(thousands)
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contract Life
Number
Exercisable
(thousands)
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contract Life
$30-$40 . . . . . . . . . . . . . . . . . . . . .
$40-$50 . . . . . . . . . . . . . . . . . . . . .
$50+ . . . . . . . . . . . . . . . . . . . . . . . .
271
593
298
$36.80
45.31
57.33
Totals . . . . . . . . . . . . . . . . . . . . . . .
1,162
$46.40
6.3
7.7
10.0
6.9
132
181
—
313
$36.58
43.90
—
$40.82
5.5
6.3
—
6.0
Aggregate intrinsic value . . . . . . . $17,095,000
$6,341,000
105
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
options and the quoted price of our common stock for the options that were in-the-money at December 31, 2012.
During the years ended December 31, 2012, 2011 and 2010, the aggregate intrinsic value of options exercised
under our stock incentive plans was $6,186,000, $3,390,000 and $1,798,000, respectively (determined as of the
date of option exercise). Cash received from option exercises under our stock incentive plans was $13,949,000,
$8,628,000 and $4,022,000 for the years ended December 31, 2012, 2011 and 2010, respectively.
As of December 31, 2012, there was approximately $5,104,000 of total unrecognized compensation cost
related to unvested stock options granted under our stock incentive plans. That cost is expected to be recognized
over a weighted-average period of 4 years. As of December 31, 2012, there was approximately $24,796,000 of
total unrecognized compensation cost related to unvested restricted stock granted under our stock incentive plans.
That cost is expected to be recognized over a weighted-average period of 3 years.
The following table summarizes information about non-vested stock incentive awards as of December 31,
2012 and changes for the year ended December 31, 2012:
Stock Options
Restricted Stock
Number of
Shares
(000’s)
Weighted-Average
Grant Date
Fair Value
Number of
Shares
(000’s)
Weighted-Average
Grant Date
Fair Value
Non-vested at December 31, 2011 . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . .
Terminated . . . . . . . . . . . . . . . . . . . . .
Non-vested at December 31, 2012 . . .
825
(211)
332
(97)
849
$ 7.40
6.96
11.11
7.29
$ 8.97
508
(228)
404
(83)
601
$44.91
47.38
57.31
42.75
$52.60
We use the Black-Scholes-Merton option pricing model to estimate the value of stock option grants and
to continue to use this acceptable option valuation model. We recognize compensation cost for
expect
share-based grants on a straight-line basis through the date the awards become fully vested or to the retirement
eligible date, if sooner. Compensation cost totaled $18,521,000, $10,786,000 and $11,823,000 for the years
ended December 31, 2012, 2011 and 2010, respectively.
106
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except
per share data):
Year Ended December 31,
2012
2011
2010
Numerator for basic and diluted earnings per share — net
income attributable to common stockholders . . . . . . . . . . . . .
$221,884
$157,108
$106,882
Denominator for basic earnings per share: weighted-average
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
224,343
173,741
127,656
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested restricted shares . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior unsecured notes . . . . . . . . . . . . . . . . . . . . .
Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per share: adjusted-weighted
231
312
1,067
1,610
176
246
238
660
125
420
7
552
average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
225,953
174,401
128,208
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.99
0.98
$
$
0.90
0.90
$
$
0.84
0.83
The diluted earnings per share calculations exclude the dilutive effect of 182,000, 0 and 280,000 stock
options for the years ended December 31, 2012, 2011 and 2010, respectively, because the exercise prices were
more than the average market price. The Series H Cumulative Convertible and Redeemable Preferred Stock
issued in 2010 was excluded from the calculations for 2010 and 2011 as the effect of the conversions was
anti-dilutive. The Series I Cumulative Convertible Perpetual Preferred Stock issued in 2011 was excluded from
the calculations for 2011 and 2012 as the effect of the conversions was anti-dilutive.
16. Disclosure about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value.
Mortgage Loans and Other Real Estate Loans Receivable — The fair value of mortgage loans and other real
estate loans receivable is generally estimated by using level two and level three inputs such as discounting the
estimated future cash flows using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Cash and Cash Equivalents — The carrying amount approximates fair value.
Available-for-sale Equity Investments — Available-for-sale equity investments are recorded at their fair
value based on level one publicly available trading prices.
Borrowings Under Unsecured Line of Credit Arrangements — The carrying amount of the unsecured line of
credit arrangements approximates fair value because the borrowings are interest rate adjustable.
Senior Unsecured Notes — The fair value of the senior unsecured notes payable was estimated based on
level one publicly available trading prices.
107
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Secured Debt — The fair value of fixed rate secured debt is estimated using level two inputs by discounting
the estimated future cash flows using the current rates at which similar loans would be made with similar credit
ratings and for the same remaining maturities. The carrying amount of variable rate secured debt approximates
fair value because the borrowings are interest rate adjustable.
Interest Rate Swap Agreements — Interest rate swap agreements are recorded as assets or liabilities on the
balance sheet at fair market value. Fair market value is estimated using level two inputs by utilizing pricing
models that consider forward yield curves and discount rates.
Foreign Currency Forward Contracts — Foreign currency forward contracts are recorded as assets or
liabilities on the balance sheet at fair market value. Fair market value is determined using level two inputs by
estimating the future value of the currency pair based on existing exchange rates, comprised of current spot and
traded forward points, and calculating a present value of the net amount using a discount factor based on
observable traded interest rates.
The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):
December 31, 2012
December 31, 2011
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial Assets:
Mortgage loans receivable . . . . . . . . . . .
Other real estate loans receivable . . . . . .
Available-for-sale equity investments . . .
Cash and cash equivalents . . . . . . . . . . . .
$
87,955
807,710
1,384
1,033,764
$
88,975
820,195
1,384
1,033,764
$
63,934
228,573
980
163,482
$
64,194
231,308
980
163,482
Financial Liabilities:
Borrowings under unsecured lines of
credit arrangements . . . . . . . . . . . . . . .
Senior unsecured notes . . . . . . . . . . . . . .
Secured debt
. . . . . . . . . . . . . . . . . . . . . .
Interest rate swap agreements . . . . . . . . .
Foreign currency forward contracts . . . .
$
— $
6,114,151
2,336,196
264
7,247
— $ 610,000
4,434,107
2,112,649
2,854
—
6,793,424
2,515,145
264
7,247
$ 610,000
4,709,736
2,297,278
2,854
—
U.S. GAAP provides authoritative guidance for measuring and disclosing fair value measurements of assets
and liabilities. The guidance defines fair value as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. The guidance also establishes a fair
value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to
measure fair value:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities. Please see
Note 2 for additional information.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
108
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Items Measured at Fair Value on a Recurring Basis
The market approach is utilized to measure fair value for our financial assets and liabilities reported at fair
value on a recurring basis. The market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities.
Fair Value Measurements as of
December 31, 2012
Total
Level 1
Level 2
Level 3
Available-for-sale equity investments(1)
. . . . . . . . . . . . . . . .
Interest rate swap agreements(2) . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency forward contract(2) . . . . . . . . . . . . . . . . . . .
$ 1,384
(264)
(7,247)
$1,384
—
—
$ — $—
—
—
(264)
(7,247)
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(6,127)
$1,384
$(7,511)
$—
(1) Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement
date.
(2) Please see Note 11 for additional information.
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in
our balance sheet that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not
measured at fair value on a recurring basis, they are not included in the tables above. Assets, liabilities and
noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired/assumed in
business combinations (see Note 3) and asset impairments (see Note 5 for impairments of real property and Note
6 for impairments of loans receivable). We have determined that the fair value measurements included in each of
these assets and liabilities rely primarily on Company-specific inputs and our assumptions about the use of the
assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each
of these fair value measurements generally reside within Level 3 of the fair value hierarchy. We estimate the fair
value of real estate and related intangibles using the income approach and unobservable data such as net
operating income and estimated capitalization and discount rates. We also consider local and national industry
market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our
estimation of fair value. We estimate the fair value of assets held for sale based on current sales price
expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair
value of secured debt assumed in business combinations using current interest rates at which similar borrowings
could be obtained on the transaction date.
17. Segment Reporting
We invest in seniors housing and health care real estate. We evaluate our business and make resource
allocations on our five operating segments: seniors housing triple-net, seniors housing operating, medical office
buildings, hospitals and life science. Our seniors housing triple-net properties include skilled nursing/post-acute
facilities, assisted living facilities, independent living/continuing care retirement communities and combinations
thereof. Under the seniors housing triple-net segment, we invest in seniors housing and health care real estate
through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased
under triple-net leases and we are not involved in the management of the property. Our seniors housing operating
properties include seniors housing communities that are owned and/or operated through RIDEA structures (see
Note 3).
Our medical facility properties include medical office buildings, hospitals and life science buildings which
are aggregated into our medical facilities reportable segment. Our medical office buildings are typically leased to
109
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
multiple tenants and generally require a certain level of property management. Our hospital investments are
leased and we are not involved in the management of the property. Our life science investment represents an
investment in an unconsolidated entity (see Note 7).
The accounting policies of the segments are the same as those described in the summary of significant
accounting policies (see Note 2). The results of operations for all acquisitions described in Note 3 are included in
our consolidated results of operations from the acquisition dates and are components of the appropriate segments.
There are no intersegment sales or transfers.
We evaluate performance based upon net operating income from continuing operations (“NOI”) of each
segment. We define NOI as total revenues, including tenant reimbursements, less property level operating
expenses, which exclude depreciation and amortization, general and administrative expenses, transaction costs,
provision for loan losses and interest expense. We believe NOI provides investors relevant and useful
information because it measures the operating performance of our properties at the property level on an
unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level
performance of our properties.
Non-segment revenue consists mainly of interest income on non-real estate investments and other income.
Non-segment assets consist of corporate assets including cash, deferred loan expenses and corporate offices and
equipment among others. Non-property specific revenues and expenses are not allocated to individual segments
in determining NOI.
Summary information for the reportable segments (which excludes unconsolidated entities) during the years
ended December 31, 2012, 2011 and 2010 is as follows (in thousands):
Seniors
Housing
Operating
Seniors
Housing
Triple-net
Medical
Facilities
Non-segment
/ Corporate
Total
Year Ended December 31, 2012:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 692,807 $
Resident fees and services . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,380
2,412
— 697,494
6,208
—
— $ 387,462 $
—
8,477
1,947
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operating expenses . . . . . . . . . . . . . . . .
719,599
703,702
— (471,678)
397,886
(98,439)
— $ 1,080,269
697,494
—
39,065
—
5,271
912
912
—
1,822,099
(570,117)
Net operating income from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
719,599
232,024
299,447
912
1,251,982
Reconciling items:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) gain on derivatives, net
. . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . ..
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) gain on extinguishment of debt, net . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . .
(4,601)
(96)
(203,987)
—
(35,705)
(2,405)
(27,008)
(67,524)
1,921
(165,798)
—
(12,756)
2,697
—
(31,540)
—
(146,103)
—
(13,148)
483
—
(263,418)
—
—
(97,341)
—
—
—
(367,083)
1,825
(515,888)
(97,341)
(61,609)
775
(27,008)
Income (loss) from continuing operations before
income taxes and income from
unconsolidated entities . . . . . . . . . . . . . . . . . . $ 445,797 $
(9,436) $ 109,139 $ (359,847) $
185,653
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,447,698 $5,323,777 $4,706,159 $1,071,475 $19,549,109
110
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Seniors
Housing
Triple-net
Seniors
Housing
Operating
Medical
Facilities
Non-segment
/ Corporate
Total
Year Ended December 31, 2011:
Rental income . . . . . . . . . . . . . . . . . . . . . . . $ 546,951
—
Resident fees and services . . . . . . . . . . . . . .
34,068
Interest income . . . . . . . . . . . . . . . . . . . . . .
6,620
Other income . . . . . . . . . . . . . . . . . . . . . . . .
$
$
— $ 274,659
—
7,002
3,985
456,085
—
—
— $
—
—
690
821,610
456,085
41,070
11,295
Total revenues . . . . . . . . . . . . . . . . . . . . . . .
Property operating expenses . . . . . . . . . . . .
587,639
456,085
— (314,142)
285,646
(63,597)
Net operating income from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . .
587,639
141,943
222,049
690
—
690
Reconciling items:
Interest expense . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . .
General and administrative . . . . . . . . . . . ..
Transaction costs . . . . . . . . . . . . . . . . . . . . .
(Loss) gain on extinguishment of debt,
net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . .
(238)
(158,882)
(46,342)
(138,192)
—
—
(27,993)
(36,328)
—
—
979
—
(21,909)
(96,808)
—
(5,903)
—
(2,010)
(228,884)
—
(77,201)
—
—
—
1,330,060
(377,739)
952,321
(297,373)
(393,882)
(77,201)
(70,224)
979
(2,010)
Income (loss) from continuing operations
before income taxes and income from
unconsolidated entities . . . . . . . . . . . . . . $ 400,526
$ (77,940) $
95,419
$(305,395) $
112,610
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $7,823,953
$3,041,238
$3,795,940
$ 263,475
$14,924,606
111
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Seniors
Housing
Triple-net
Seniors
Housing
Operating
Medical
Facilities
Non-segment
/ Corporate
Total
Year Ended December 31, 2010:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resident fees and services . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$283,505
$
— 51,006
—
—
36,176
3,386
— $195,960
—
4,679
985
$
— $ 479,465
51,006
—
40,855
—
7,245
2,874
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operating expenses . . . . . . . . . . . . . . . . . . .
323,067
51,006
— (32,621)
201,624
(45,166)
2,874
—
578,571
(77,787)
Net operating income from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
323,067
18,385
156,458
2,874
500,784
Reconciling items:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on extinguishment of debt, net
. . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations before
income taxes and income from unconsolidated
entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,524
(81,718)
—
(20,612)
(7,791)
(29,684)
(7,794)
(15,504)
—
(20,936)
—
—
(17,579)
(67,943)
—
(5,112)
(1,308)
—
(113,129)
(133,978)
— (165,165)
(54,626)
(46,660)
(34,171)
(29,684)
(54,626)
—
(25,072)
—
$187,786
$(25,849) $ 64,516
$(189,953) $ 36,500
Our portfolio of properties and other investments are located in the United States, the United Kingdom and
Canada. Revenues and assets are attributed to the country in which the property is physically located. For the
year ended December 31, 2012, $25,321,000 (or 1.4% of our revenues) and $856,895,000 (or 4.4% of our assets)
were located outside the United States. There were no revenues or assets located outside the United States for the
years ended December 31, 2011 and 2010.
18. Income Taxes and Distributions
We elected to be taxed as a REIT commencing with our first taxable year. To qualify as a REIT for federal
income tax purposes, at least 90% of taxable income (excluding 100% of net capital gains) must be distributed to
stockholders. REITs that do not distribute a certain amount of current year taxable income in the current year are
also subject to a 4% federal excise tax. The main differences between undistributed net income for federal
income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting
purposes, basis differences in acquisitions, recording of impairments, differing useful lives and depreciation and
amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt
expense for tax purposes.
112
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash distributions paid to common stockholders, for federal income tax purposes, are as follows for the
periods presented:
Per Share:
Year Ended December 31,
2012
2011
2010
Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecaptured section 1250 gains . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.5000
1.3376
0.1176
0.0048
$1.1472
1.4227
0.1059
0.1592
$0.7774
1.7408
0.0190
0.2028
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2.9600
$2.8350
$2.7400
Our consolidated provision for income taxes is as follows for the periods presented (dollars in thousands):
Year Ended December 31,
2012
2011
2010
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,785
2,827
$ 389
999
$319
45
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,612
$1,388
$364
REITs generally are not subject to U.S. federal income taxes on that portion of REIT taxable income or
capital gain that is distributed to stockholders. For the tax year ended December 31, 2012, as a result of
acquisitions located in Canada and the United Kingdom, we were subject to foreign income taxes under the
respective tax laws of these jurisdictions. The provision for income taxes for the year ended December 31, 2012
primarily relates to state taxes, foreign taxes, requirements of ASC 740-10, and taxes on TRS income.
For the tax year ended December 31, 2012, the Canadian and United Kingdom tax expense amount included
in the consolidated provision for income taxes was $596,000. We did not hold an interest in any entity located in
a foreign jurisdiction for the years ended December 31, 2011 and 2010.
A reconciliation of income tax expense, which is computed by applying the federal corporate tax rate for the
years ended December 31, 2012, 2011 and 2010, to the income tax provision/(benefit) is as follows for the
periods presented (dollars in thousands):
Year Ended December 31,
2012
2011
2010
Tax at statutory rate on earnings from continuing operations
before unconsolidated entities, noncontrolling interests and
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax at statutory rate on earnings not subject to federal income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 64,979
9,234
$ 54,750
(4,732)
$ 26,111
317
(72,640)
6,039
(48,630)
—
(26,064)
—
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,612
$ 1,388
$
364
113
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Each TRS and foreign entity subject to income taxes is a tax paying component for purposes of classifying
deferred tax assets and liabilities. The tax effects of taxable and deductible temporary differences, as well as tax
attributes, are summarized as follows for the periods presented (dollars in thousands):
Year Ended December 31,
2012
2011
2010
Property, primarily differences in depreciation and amortization,
the tax basis of land assets and the treatment of interests and
certain costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss and interest deduction carryforwards . . . . . . . . . . . . .
Expense accruals and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (2,144)
8,552
4,372
(12,199)
$(1,577)
1,488
5,749
(2,965)
$
(29)
7,080
1,980
(7,697)
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (1,419)
$ 2,695
$ 1,334
At December 31, 2012, we recorded a valuation allowance related to the deferred tax assets of our U.S.
taxable REIT subsidiaries and Canadian entities. These tax attributes are carried forward in order to offset
taxable income in future years. The valuation allowances have been established for these assets based upon our
assessment of whether it is more likely than not that such assets may not be realized. During the year ended
December 31, 2012, the valuation allowance increased primarily due to additional deferred tax assets recorded
for Canadian net operating losses. At December 31, 2012, we had a net operating loss (“NOL”) carryforward
related to Canadian entities of $32,061,000. These Canadian losses have a 20-year carryforward period. The
valuation allowance rollforward is summarized as follows for the periods presented (dollars in thousands):
Year Ended December 31,
2012
2011
2010
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,965
9,234
—
$ 7,697
—
(4,732)
$7,380
317
—
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,199
$ 2,965
$7,697
As a result of certain acquisitions, we are subject to corporate level taxes for any related asset dispositions
that may occur during the ten-year period immediately after such assets were owned by a C corporation (“built-in
gains tax”). The amount of income potentially subject to this special corporate level tax is generally equal to the
lesser of (a) the excess of the fair value of the asset over its adjusted tax basis as of the date it became a REIT
asset, or (b) the actual amount of gain. Some but not all gains recognized during this period of time could be
offset by available net operating losses and capital loss carryforwards. As of December 31, 2012, we have
acquired an additional 40 assets with built-in gains as of the date of acquisition that could be subject to the built-
in gains tax if disposed of prior to the expiration of the applicable ten-year period. We have not recorded a
deferred tax liability as a result of the potential built-in gains tax based on our intentions with respect to such
properties and available tax planning strategies.
Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”),
for taxable years beginning after July 30, 2008, the REIT may lease “qualified health care properties” on an
arm’s-length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as
an “eligible independent contractor.” Generally, the rent received from the TRS will meet the related party rent
exception and will be treated as “rents from real property.” A “qualified health care property” includes real
property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility,
assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which
extends medical or nursing or ancillary services to patients. We have entered into various joint ventures that were
114
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
structured under RIDEA. Resident level rents and related operating expenses for these facilities are reported in
the consolidated financial statements and are subject to federal taxes as the operations of such facilities are
included in a TRS. Certain net operating loss carryforwards could be utilized to offset taxable income in future
years.
Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service (“IRS”)
for the year ended December 31, 2008 and subsequent years and are subject to audit by state taxing authorities
for the year ended December 31, 2007 and subsequent years. In the future, we will be subject to audit by the
Canada Revenue Agency (“CRA”) and provincial authorities generally for periods subsequent to our REIT
acquisition in May 2012 related to entities acquired or formed in connection with the acquisition, and by HM
Revenue & Customs for periods subsequent to our REIT acquisition in August 2012 related to entities acquired
or formed in connection with the acquisition.
At December 31, 2012, we had a net operating loss (“NOL”) carryforward related to the REIT of
$96,253,000. Due to our uncertainty regarding the realization of certain deferred tax assets, we have not recorded
a deferred tax asset related to NOLs generated by the REIT. These amounts can be used to offset future taxable
income (and/or taxable income for prior years if an audit determines that tax is owed), if any. The REIT will be
entitled to utilize NOLs and tax credit carryforwards only to the extent that REIT taxable income exceeds our
deduction for dividends paid. The NOL carryforwards will expire through 2032.
We apply the rules under ASC 740-10 “Accounting for Uncertainty in Income Taxes” for uncertain tax
positions using a “more likely than not” recognition threshold for tax positions. Pursuant to these rules, we will
initially recognize the financial statement effects of a tax position when it is more likely than not, based on the
technical merits of the tax position, that such a position will be sustained upon examination by the relevant tax
authorities. If the tax benefit meets the “more likely than not” threshold, the measurement of the tax benefit will
be based on our estimate of the ultimate tax benefit to be sustained if audited by the taxing authority. The
following table summarizes the activity related to our unrecognized tax benefits for the periods presented (dollars
in thousands):
Year Ended December 31,
2012
2011
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross unrecognized tax benefits at beginning of year
Increases (decreases) in unrecognized tax benefits related to a prior year . . . . . . . . . . . . .
Increases (decreases) in unrecognized tax benefits related to the current year . . . . . . . . . .
Lapse in statute of limitations for assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,098
(248)
394
(146)
Gross unrecognized tax benefits at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,098
$ —
—
6,098
—
$6,098
Of the total $6,098,000 of total liability for gross unrecognized tax benefits at December 31, 2012,
$5,916,000 (exclusive of accrued interest and penalties) relates to the April 1, 2011 Genesis HealthCare
Corporation transaction (“Genesis Acquisition”) and is included in accrued expenses and other liabilities on the
consolidated balance sheet. As a part of the Genesis Acquisition, we received a full indemnification from
FC-GEN Operations Investment, LLC covering income taxes or other taxes as well as interest and penalties
relating to tax positions taken by FC-GEN Operations Investment, LLC prior to the acquisition. Accordingly, an
offsetting indemnification asset is recorded in receivables and other assets on the consolidated balance sheet.
Such indemnification asset is reviewed for collectability periodically.
There is no amount of unrecognized tax benefits, currently accrued for, that would have a material impact
on the effective tax rate to the extent that would be recognized. There were insignificant uncertain tax positions
as of December 31, 2012 for which it is reasonably possible that the amount of unrecognized tax benefits would
decrease during 2013. Interest and penalties totaled $299,000 and $815,000, respectively, for the year ended
115
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012 and are included in income tax expense. Of these amounts, $221,000 and $638,000 of
interest and penalties, respectively, relate to the Genesis Acquisition and are offset by the indemnification asset.
19. Retirement Arrangements
Under the retirement plan and trust (the “401(k) Plan”), eligible employees may make contributions, and we
may make matching contributions and a profit sharing contribution. Our contributions to the 401(k) Plan totaled
$2,140,000, $1,558,000 and $1,341,000 in 2012, 2011 and 2010, respectively.
We have a Supplemental Executive Retirement Plan (“SERP”), a non-qualified defined benefit pension
plan, which provides one executive officer with supplemental deferred retirement benefits. The SERP provides
an opportunity for the participant to receive retirement benefits that cannot be paid under our tax-qualified plans
because of the restrictions imposed by ERISA and the Internal Revenue Code of 1986, as amended. Benefits are
based on compensation and length of service and the SERP is unfunded. Benefit payments are expected to total
$4,043,000 during the next five fiscal years and $2,479,000 thereafter. We use a December 31 measurement date
for the SERP. The accrued liability on our balance sheet for the SERP was $6,665,000 at December 31, 2012
($5,623,000 at December 31, 2011).
20. Quarterly Results of Operations (Unaudited)
The following is a summary of our unaudited quarterly results of operations for the years ended
December 31, 2012 and 2011 (in thousands, except per share data). The sum of individual quarterly amounts may
not agree to the annual amounts included in the consolidated statements of income due to rounding.
Year Ended December 31, 2012
1st Quarter 2nd Quarter 3rd Quarter(2) 4th Quarter
Revenues — as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $435,359
(17,230)
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$453,082
(13,194)
$474,139
(10,720)
$500,663
—
Revenues — as adjusted(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . $418,129
$439,888
$463,419
$500,663
Net income (loss) attributable to common stockholders . . . . . $ 39,307
$ 54,735
$ 37,269
$ 90,576
Net income (loss) attributable to common stockholders per
share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.20
0.19
$
0.26
0.25
$
0.17
0.16
$
0.35
0.35
Year Ended December 31, 2011
1st Quarter
2nd Quarter
3rd Quarter(3)
4th Quarter(4)
Revenues — as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $255,477
(26,859)
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$381,059
(24,361)
$384,786
(24,607)
$407,391
(22,826)
Revenues — as adjusted(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . $228,618
$356,698
$360,179
$384,565
Net income attributable to common stockholders . . . . . . . . . $ 23,372
$ 69,847
$ 36,607
$ 27,282
Net income attributable to common stockholders per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.15
0.15
$
0.40
0.39
$
0.21
0.21
$
0.15
0.15
(1) We have reclassified the income attributable to the properties sold prior to or held for sale at December 31, 2012 to discontinued
operations. See Note 5.
(2) The decreases in net income and amounts per share are primarily attributable to gains on sales of real estate totaling $32,450,000 for the
second quarter as compared to $12,827,000 for the third quarter.
(3) The decreases in net income and amounts per share are primarily attributable to gains on sales of real estate totaling $30,224,000 for the
second quarter as compared to $185,000 for the third quarter.
(4) The decreases in net income and amounts per share are primarily attributable to impairment charges of $11,992,000.
116
HEALTH CARE REIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. Subsequent Events
Line of Credit Modification
On January 8, 2013, we closed a $2,750,000,000 unsecured line of credit arrangement consisting of a
$2,250,000,000 revolver and a $500,000,000 term loan. The facility replaced our existing $2,000,000,000
unsecured line of credit arrangement described in Note 9. The revolver matures on March 31, 2017, but can be
extended for an additional year at our option. The term loan matures on March 31, 2016, but can be extended up
to two years at our option. The revolver bears interest at LIBOR plus 117.5 basis points and has an annual facility
fee of 22.5 basis points. The term loan bears interest at LIBOR plus 135 basis points. We have an option to
upsize the facility by up to an additional $1,000,000,000 through an accordion feature, allowing for aggregate
commitments of up to $3,750,000,000. The facility also allows us to borrow up to $500,000,000 in alternate
currencies.
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.
Subsequent to December 31, 2012, we completed our acquisition of the Sunrise property portfolio. The total
estimated purchase price of approximately $3,281,300,000 (which includes certain seniors housing operating
investments that occurred during the year ended December 31, 2012 and are included in Notes 3 and 6) is
comprised of approximately $3,084,400,000 cash consideration and $133,900,000 of assumed debt (excluding
our pro rata share of debt at unconsolidated entities) and excludes fair value and other purchase price accounting
adjustments. As of December 31, 2012, we were committed to fund an additional $2,021,400,000 in cash which
was sourced from cash on-hand and our new unsecured line of credit arrangement described above.
In connection with the Merger Agreement, Sunrise agreed to sell its management business and certain
additional assets and liabilities to Red Fox Management, LP (the “Management Business Buyer”). Immediately
prior to our acquisition of the Sunrise property portfolio on January 9, 2013, the Management Business Buyer
acquired the Sunrise management company for $130,000,000, with the Company investing $26,000,000 for a
20% ownership interest. The Management Business Buyer will provide management services to the communities
under an incentive-based management contract.
Initial accounting for the entire acquisition is incomplete as of February 26, 2013 due to the complexity of
the transaction. No measurement period adjustments were recognized for the year ending December 31, 2012 as
the transaction closed after year-end. Pro forma financial information has not been provided herein due to a lack
of sufficient information at the time of the filing.
117
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls
and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of the end
of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered
by this report.
Management’s Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended). The Company’s
internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
the transactions and dispositions of the assets of the Company; (2) provide
accurately and fairly reflect
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the Company’s assets that could have a material effect on the financial statements. Because of
its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2012 based on the criteria established by the Committee of Sponsoring Organizations of the
Treadway Commission in a report entitled Internal Control — Integrated Framework. Based on this assessment,
using the criteria above, management concluded that the Company’s system of internal control over financial
reporting was effective as of December 31, 2012.
The independent registered public accounting firm of Ernst & Young LLP, as auditors of the Company’s
consolidated financial statements, has issued an attestation report on the Company’s internal control over
financial reporting.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934, as amended) occurred during the fourth quarter of the one-year period covered by this
report that materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
118
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
The Board of Directors and Shareholders of Health Care REIT, Inc.
We have audited Health Care REIT, Inc.’s internal control over financial reporting as of December 31,
2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Health Care REIT, Inc.’s
management
is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Health Care REIT, Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Health Care REIT, Inc. as of December 31, 2012 and 2011,
and the related consolidated statements of comprehensive income, equity, and cash flows for each of the three
years in the period ended December 31, 2012 and our report dated February 26, 2013 expressed an unqualified
opinion thereon.
/s/ ERNST & YOUNG LLP
Toledo, Ohio
February 26, 2013
119
Item 9B. Other Information
None.
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item is incorporated herein by reference to the information under the
headings “Election of Directors,” “Executive Officers,” “Board and Committees,” “Communications with the
Board” and “Security Ownership of Directors and Management and Certain Beneficial Owners — Section 16(a)
Compliance” in our definitive proxy statement, which will be filed with the Securities and Exchange
Commission (the “Commission”) prior to April 30, 2013.
We have adopted a Code of Business Conduct & Ethics that applies to our directors, officers and employees.
The code is posted on the Internet at www.hcreit.com. Any amendment to, or waivers from, the code that relate
to any officer or director of the Company will be promptly disclosed on the Internet at www.hcreit.com.
In addition,
the Board has adopted charters for the Audit, Compensation and Nominating/Corporate
Governance Committees. These charters are posted on the Internet at www.hcreit.com.
Item 11.
Executive Compensation
The information required by this Item is incorporated herein by reference to the information under the
headings “Executive Compensation,” “Compensation Committee Report” and “Director Compensation” in our
definitive proxy statement, which will be filed with the Commission prior to April 30, 2013.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item is incorporated herein by reference to the information under the
headings “Security Ownership of Directors and Management and Certain Beneficial Owners” and “Equity
Compensation Plan Information” in our definitive proxy statement, which will be filed with the Commission
prior to April 30, 2013.
Item 13.
Certain Relationships and Related Transactions and Director Independence
The information required by this Item is incorporated herein by reference to the information under the
headings “Board and Committees — Independence and Meetings” and “Certain Relationships and Related
Transactions” in our definitive proxy statement, which will be filed with the Commission prior to April 30, 2013.
Item 14.
Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the information under the
headings “Ratification of the Appointment of the Independent Registered Public Accounting Firm” and “Pre-
Approval Policies and Procedures” in our definitive proxy statement, which will be filed with the Commission
prior to April 30, 2013.
120
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Our Consolidated Financial Statements are included in Part II, Item 8:
PART IV
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets — December 31, 2012 and 2011 . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income — Years ended December 31,
79
80
2012, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
Consolidated Statements of Equity — Years ended December 31, 2012, 2011 and
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows — Years ended December 31, 2012, 2011 and
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83
84
85
2. The following Financial Statement Schedules are included in Item 15(c):
III — Real Estate and Accumulated Depreciation
IV — Mortgage Loans on Real Estate
3. Exhibit Index:
The information required by this item is set forth on the Exhibit Index that follows the Financial
Statement Schedules to this Annual Report on Form 10-K.
(b) Exhibits:
The exhibits listed on the Exhibit Index are either filed with this Form 10-K or incorporated by
reference in accordance with Rule 12b-32 of the Securities Exchange Act of 1934.
(c) Financial Statement Schedules:
Financial statement schedules are included beginning on page 123.
121
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 hereunto duly authorized.
HEALTH CARE REIT, INC.
By:
/S/ GEORGE L. CHAPMAN
Chairman, Chief Executive Officer, President and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on
February 26, 2013, by the following person on behalf of the Company and in the capacities indicated.
/S/ WILLIAM C. BALLARD, JR.**
William C. Ballard, Jr., Director
/S/ THOMAS J. DEROSA**
Thomas J. DeRosa, Director
/S/
JEFFREY H. DONAHUE**
Jeffrey H. Donahue, Director
/S/ PETER J. GRUA**
Peter J. Grua, Director
/S/ FRED S. KLIPSCH**
Fred S. Klipsch, Director
/S/ SHARON M. OSTER**
Sharon M. Oster, Director
JEFFREY R. OTTEN**
/S/
Jeffrey R. Otten, Director
/S/
JUDITH C. PELHAM**
Judith C. Pelham, Director
/S/ R. SCOTT TRUMBULL**
R. Scott Trumbull, Director
/S/ GEORGE L. CHAPMAN
George L. Chapman, Chairman, Chief Executive
Officer, President and Director
(Principal Executive Officer)
/S/ SCOTT A. ESTES**
Scott A. Estes, Executive Vice President and Chief
Financial Officer (Principal Financial Officer)
/S/ PAUL D. NUNGESTER, JR.**
Paul D. Nungester, Jr., Senior Vice President and
Controller (Principal Accounting Officer)
**By:
/s/ GEORGE L. CHAPMAN
George L. Chapman, Attorney-in-Fact
122
Health Care REIT, Inc.
Schedule III
Real Estate and Accumulated Depreciation
December 31, 2012
(Dollars in thousands)
Description
Encumbrances
Land
Building &
Improvements
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Land
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
Seniors housing triple-net:
Aboite Twp, IN . . . . . . . . . . . . . . . . . . .
Agawam, MA . . . . . . . . . . . . . . . . . . . .
Agawam, MA . . . . . . . . . . . . . . . . . . . .
Agawam, MA . . . . . . . . . . . . . . . . . . . .
Agawam, MA . . . . . . . . . . . . . . . . . . . .
Agawam, MA . . . . . . . . . . . . . . . . . . . .
Akron, OH . . . . . . . . . . . . . . . . . . . . . . .
Akron, OH . . . . . . . . . . . . . . . . . . . . . . .
Alliance, OH . . . . . . . . . . . . . . . . . . . . .
Amelia Island, FL . . . . . . . . . . . . . . . . .
Ames, IA . . . . . . . . . . . . . . . . . . . . . . . .
Anderson, SC . . . . . . . . . . . . . . . . . . . .
Andover, MA . . . . . . . . . . . . . . . . . . . .
Annapolis, MD . . . . . . . . . . . . . . . . . . .
Ansted, WV . . . . . . . . . . . . . . . . . . . . . .
Asheboro, NC . . . . . . . . . . . . . . . . . . . .
Asheville, NC . . . . . . . . . . . . . . . . . . . .
Asheville, NC . . . . . . . . . . . . . . . . . . . .
Aspen Hill, MD . . . . . . . . . . . . . . . . . . .
Aurora, OH . . . . . . . . . . . . . . . . . . . . . .
Aurora, CO . . . . . . . . . . . . . . . . . . . . . .
Aurora, CO . . . . . . . . . . . . . . . . . . . . . .
Austin, TX . . . . . . . . . . . . . . . . . . . . . . .
Aventura, FL . . . . . . . . . . . . . . . . . . . . .
Avon, IN . . . . . . . . . . . . . . . . . . . . . . . .
Avon Lake, OH . . . . . . . . . . . . . . . . . . .
Ayer, MA . . . . . . . . . . . . . . . . . . . . . . .
Baltic, OH . . . . . . . . . . . . . . . . . . . . . . .
Baltimore, MD . . . . . . . . . . . . . . . . . . .
Baltimore, MD . . . . . . . . . . . . . . . . . . .
Bartlesville, OK . . . . . . . . . . . . . . . . . . .
Baytown, TX . . . . . . . . . . . . . . . . . . . . .
Baytown, TX . . . . . . . . . . . . . . . . . . . . .
Beachwood, OH . . . . . . . . . . . . . . . . . .
Beattyville, KY . . . . . . . . . . . . . . . . . . .
Bedford, NH . . . . . . . . . . . . . . . . . . . . .
Bellevue, WI . . . . . . . . . . . . . . . . . . . . .
Benbrook, TX . . . . . . . . . . . . . . . . . . . .
Bethel Park, PA . . . . . . . . . . . . . . . . . . .
Bluefield, VA . . . . . . . . . . . . . . . . . . . .
Boca Raton, FL . . . . . . . . . . . . . . . . . . .
Boonville, IN . . . . . . . . . . . . . . . . . . . . .
Bradenton, FL . . . . . . . . . . . . . . . . . . . .
Bradenton, FL . . . . . . . . . . . . . . . . . . . .
Braintree, MA . . . . . . . . . . . . . . . . . . . .
Brandon, MS . . . . . . . . . . . . . . . . . . . . .
Bremerton, WA . . . . . . . . . . . . . . . . . . .
Bremerton, WA . . . . . . . . . . . . . . . . . . .
Brick, NJ . . . . . . . . . . . . . . . . . . . . . . . .
Brick, NJ . . . . . . . . . . . . . . . . . . . . . . . .
Brick, NJ . . . . . . . . . . . . . . . . . . . . . . . .
Bridgewater, NJ . . . . . . . . . . . . . . . . . . .
Bridgewater, NJ . . . . . . . . . . . . . . . . . . .
Bridgewater, NJ . . . . . . . . . . . . . . . . . . .
Broadview Heights, OH . . . . . . . . . . . .
Brookline, MA . . . . . . . . . . . . . . . . . . .
Brooklyn Park, MD . . . . . . . . . . . . . . . .
Burleson, TX . . . . . . . . . . . . . . . . . . . . .
Burlington, NC . . . . . . . . . . . . . . . . . . .
Burlington, NC . . . . . . . . . . . . . . . . . . .
Burlington, NJ . . . . . . . . . . . . . . . . . . . .
Burlington, NJ . . . . . . . . . . . . . . . . . . . .
Byrdstown, TN . . . . . . . . . . . . . . . . . . .
Cambridge, MD . . . . . . . . . . . . . . . . . . .
Canton, MA . . . . . . . . . . . . . . . . . . . . . .
Canton, OH . . . . . . . . . . . . . . . . . . . . . .
Cape Coral, FL . . . . . . . . . . . . . . . . . . .
Cape Coral, FL . . . . . . . . . . . . . . . . . . .
Carmel, IN . . . . . . . . . . . . . . . . . . . . . . .
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9,934
—
—
—
—
—
—
—
—
9,317
—
—
—
—
—
—
—
—
—
—
—
3,031
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9,387
—
$1,770
880
1,230
930
920
920
290
630
270
3,290
330
710
1,310
1,010
240
290
204
280
—
1,760
2,600
2,440
730
4,540
1,830
790
—
50
1,350
900
100
450
540
1,260
100
2,250
1,740
1,550
1,700
900
1,440
190
252
480
170
1,220
390
830
1,290
1,170
690
1,850
1,730
1,800
920
2,760
1,290
670
280
460
1,700
1,170
—
490
820
300
530
760
2,370
$ 1,601
2,134
289
229
36
45
491
229
107
20,122
—
419
27
50
43
165
—
351
457
41
7,915
—
—
—
—
32
3
189
321
90
—
—
—
—
660
5
571
—
—
32
—
—
—
—
1,290
—
144
150
102
223
51
—
260
40
2,393
2,540
29
—
707
—
382
167
269
207
263
—
—
—
421
$19,930
16,112
13,618
15,304
10,661
10,562
8,219
7,535
7,723
24,310
8,870
6,290
12,647
24,825
14,113
5,032
3,489
1,955
9,008
14,148
5,906
28,172
18,970
33,986
14,470
10,421
22,074
8,709
14,884
5,039
1,380
6,150
11,110
23,478
6,900
28,831
18,260
13,553
16,007
12,463
31,048
5,510
3,298
9,953
7,157
10,241
2,210
10,420
25,247
17,372
17,125
3,050
48,201
31,810
12,400
9,217
16,329
13,985
4,297
5,467
12,554
19,205
2,414
15,843
8,201
2,098
3,281
18,868
57,175
123
$1,770
880
1,230
930
920
920
290
630
270
3,288
330
710
1,310
1,010
240
290
204
280
—
1,760
2,600
2,440
730
4,540
1,830
790
—
50
1,350
900
100
450
540
1,260
100
2,250
1,740
1,550
1,700
900
1,440
190
252
480
170
1,220
390
830
1,290
1,179
690
1,850
1,739
1,800
920
2,760
1,290
670
280
460
1,700
1,170
—
490
820
300
530
760
2,370
$21,531
18,246
13,906
15,533
10,697
10,607
8,710
7,764
7,830
44,434
8,870
6,709
12,674
24,876
14,156
5,197
3,489
2,306
9,465
14,189
13,821
28,172
18,970
33,986
14,470
10,452
22,077
8,898
15,204
5,129
1,380
6,150
11,110
23,478
7,560
28,836
18,831
13,553
16,007
12,495
31,048
5,510
3,298
9,953
8,447
10,241
2,354
10,570
25,349
17,586
17,176
3,050
48,452
31,850
14,793
11,757
16,358
13,985
5,004
5,467
12,936
19,372
2,683
16,050
8,464
2,098
3,281
18,868
57,596
$1,222
5,213
709
762
556
551
1,821
1,414
1,539
6,432
639
1,955
679
1,185
662
1,340
1,375
669
482
811
2,915
4,425
2,931
305
1,089
622
1,056
1,716
754
302
634
1,883
1,009
7,182
1,489
1,371
3,207
589
1,650
611
275
1,654
1,531
132
7,669
608
364
649
904
910
880
997
2,479
1,124
3,945
554
808
630
1,270
1,428
716
820
1,414
767
3,125
819
989
254
6,749
2010
2002
2011
2011
2011
2011
2005
2006
2006
2005
2010
2003
2011
2011
2011
2003
1999
2003
2011
2011
2006
2006
2007
2012
2010
2011
2011
2006
2011
2011
1996
2002
2009
2001
2005
2011
2006
2011
2007
2011
2012
2002
1996
2012
1997
2010
2006
2010
2011
2010
2010
2004
2010
2011
2001
2011
2011
2011
2003
2003
2011
2011
2004
2011
2002
1998
2002
2012
2006
2008
1993
1975
1970
1985
1967
1961
1915
1982
1998
1999
1986
1985
1993
1982
1998
1999
1992
1988
2002
1988
2007
2006
2001
2004
2001
1988
1983
1905
1969
1995
2000
2008
1990
1972
1978
2004
1984
2009
1990
1989
2000
1995
2000
1968
1999
1999
1984
2000
1998
1999
1970
1999
2001
1984
1984
1973
1988
2000
1997
1965
1994
1982
1990
1993
1998
2000
2009
2007
Description
Encumbrances
Cary, NC . . . . . . . . . . . . . . . . . . . . . . . . .
Catonsville, MD . . . . . . . . . . . . . . . . . . .
Cedar Grove, NJ . . . . . . . . . . . . . . . . . . .
Cedar Grove, NJ . . . . . . . . . . . . . . . . . . .
Centreville, MD(2)
. . . . . . . . . . . . . . . . . .
Chapel Hill, NC . . . . . . . . . . . . . . . . . . . .
Charles Town, WV . . . . . . . . . . . . . . . . .
Charleston, WV . . . . . . . . . . . . . . . . . . . .
Charleston, WV . . . . . . . . . . . . . . . . . . . .
Chelmsford, MA . . . . . . . . . . . . . . . . . . .
Chicago, IL . . . . . . . . . . . . . . . . . . . . . . .
Chicago, IL . . . . . . . . . . . . . . . . . . . . . . .
Chickasha, OK . . . . . . . . . . . . . . . . . . . . .
Cinnaminson, NJ . . . . . . . . . . . . . . . . . . .
Claremore, OK . . . . . . . . . . . . . . . . . . . .
Clark Summit, PA . . . . . . . . . . . . . . . . . .
Clark Summit, PA . . . . . . . . . . . . . . . . . .
Clarksville, TN . . . . . . . . . . . . . . . . . . . .
Cleburne, TX . . . . . . . . . . . . . . . . . . . . . .
Cleveland, TN . . . . . . . . . . . . . . . . . . . . .
Clinton, MD . . . . . . . . . . . . . . . . . . . . . .
Cloquet, MN . . . . . . . . . . . . . . . . . . . . . .
Colchester, CT . . . . . . . . . . . . . . . . . . . . .
Colts Neck, NJ . . . . . . . . . . . . . . . . . . . . .
Columbia, TN . . . . . . . . . . . . . . . . . . . . .
Columbia, TN . . . . . . . . . . . . . . . . . . . . .
Columbia, SC . . . . . . . . . . . . . . . . . . . . .
Columbia Heights, MN . . . . . . . . . . . . . .
Columbus, IN . . . . . . . . . . . . . . . . . . . . .
Columbus, IN . . . . . . . . . . . . . . . . . . . . .
Columbus, OH . . . . . . . . . . . . . . . . . . . . .
Columbus, OH . . . . . . . . . . . . . . . . . . . . .
Columbus, OH . . . . . . . . . . . . . . . . . . . . .
Concord, NC . . . . . . . . . . . . . . . . . . . . . .
Concord, NH . . . . . . . . . . . . . . . . . . . . . .
Concord, NH . . . . . . . . . . . . . . . . . . . . . .
Concord, NH . . . . . . . . . . . . . . . . . . . . . .
Conroe, TX . . . . . . . . . . . . . . . . . . . . . . .
Conyers, GA . . . . . . . . . . . . . . . . . . . . . .
Corpus Christi, TX . . . . . . . . . . . . . . . . .
Cortland, NY . . . . . . . . . . . . . . . . . . . . . .
Daniels, WV . . . . . . . . . . . . . . . . . . . . . .
Danville, VA . . . . . . . . . . . . . . . . . . . . . .
Daphne, AL . . . . . . . . . . . . . . . . . . . . . . .
Dedham, MA . . . . . . . . . . . . . . . . . . . . . .
DeForest, WI . . . . . . . . . . . . . . . . . . . . . .
Defuniak Springs, FL . . . . . . . . . . . . . . .
Denton, TX . . . . . . . . . . . . . . . . . . . . . . .
Denver, CO . . . . . . . . . . . . . . . . . . . . . . .
Denver, CO . . . . . . . . . . . . . . . . . . . . . . .
Denver, CO . . . . . . . . . . . . . . . . . . . . . . .
Dover, DE . . . . . . . . . . . . . . . . . . . . . . . .
Dover, DE . . . . . . . . . . . . . . . . . . . . . . . .
Drescher, PA . . . . . . . . . . . . . . . . . . . . . .
Dundalk, MD(2)
. . . . . . . . . . . . . . . . . . . .
Durham, NC . . . . . . . . . . . . . . . . . . . . . .
East Brunswick, NJ . . . . . . . . . . . . . . . . .
East Norriston, PA . . . . . . . . . . . . . . . . . .
Easton, MD . . . . . . . . . . . . . . . . . . . . . . .
Easton, PA . . . . . . . . . . . . . . . . . . . . . . . .
Eatontown, NJ . . . . . . . . . . . . . . . . . . . . .
Eden, NC . . . . . . . . . . . . . . . . . . . . . . . . .
Edmond, OK . . . . . . . . . . . . . . . . . . . . . .
Elizabeth City, NC . . . . . . . . . . . . . . . . .
Elizabethton, TN . . . . . . . . . . . . . . . . . . .
Englewood, NJ . . . . . . . . . . . . . . . . . . . .
Englishtown, NJ . . . . . . . . . . . . . . . . . . .
Erin, TN . . . . . . . . . . . . . . . . . . . . . . . . . .
Everett, WA . . . . . . . . . . . . . . . . . . . . . . .
Fair Lawn, NJ . . . . . . . . . . . . . . . . . . . . .
Fairfield, CA . . . . . . . . . . . . . . . . . . . . . .
Fairhope, AL . . . . . . . . . . . . . . . . . . . . . .
Fall River, MA . . . . . . . . . . . . . . . . . . . .
Fall River, MA . . . . . . . . . . . . . . . . . . . .
Fanwood, NJ . . . . . . . . . . . . . . . . . . . . . .
Fayetteville, GA . . . . . . . . . . . . . . . . . . .
Fayetteville, NY . . . . . . . . . . . . . . . . . . .
Findlay, OH . . . . . . . . . . . . . . . . . . . . . . .
Fishers, IN . . . . . . . . . . . . . . . . . . . . . . . .
Florence, NJ . . . . . . . . . . . . . . . . . . . . . .
Flourtown, PA . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition
Building &
Improvements
Land
986
549
10
21
—
783
29
47
13
1,499
—
—
—
149
1
15
54
—
—
122
—
—
495
347
—
—
5,709
—
—
—
8,255
—
13,620
55
378
545
203
—
—
—
—
49
722
—
—
354
—
—
—
1,605
—
38
90
159
—
2,196
87
285
—
—
67
—
—
2,011
336
17
401
134
—
159
1,548
—
4,856
208
121
—
500
—
—
—
108
1,500
1,330
1,830
2,850
600
354
230
440
410
1,040
1,800
2,900
85
860
155
600
400
330
520
350
2,330
340
980
780
341
590
2,120
825
610
530
530
1,010
1,010
550
780
1,760
720
980
2,740
400
700
200
410
2,880
1,360
250
1,350
1,760
2,530
3,650
2,076
400
600
2,060
1,770
1,476
1,380
1,200
900
285
1,190
390
410
200
310
930
690
440
1,400
2,420
1,460
570
620
920
2,850
560
410
200
1,500
300
1,800
4,350
15,003
10,939
27,737
14,602
2,646
22,834
17,575
5,430
10,951
19,256
17,016
1,395
6,663
1,427
11,179
6,529
2,292
5,369
5,000
20,876
4,660
4,860
14,733
2,295
3,787
4,860
14,175
3,190
6,710
5,170
5,022
4,931
3,921
18,423
43,179
3,041
7,771
19,302
1,916
18,041
17,320
3,954
8,670
9,830
5,350
10,250
8,305
9,514
14,906
13,594
7,717
22,266
40,236
32,047
10,659
34,229
28,129
24,539
6,315
23,358
4,877
8,388
2,760
4,604
4,514
12,520
8,060
5,476
24,504
14,040
9,119
5,829
34,715
55,175
12,665
3,962
1,800
14,500
2,978
14,830
124
Gross Amount at Which
Carried at Close of Period
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
5,336
15,552
10,949
27,757
14,602
3,429
22,863
17,622
5,444
12,450
19,256
17,016
1,395
6,812
1,428
11,194
6,583
2,292
5,369
5,122
20,876
4,660
5,355
14,940
2,295
3,787
10,569
14,175
3,190
6,710
12,885
5,022
17,701
3,976
18,801
43,724
3,245
7,771
19,302
1,916
18,041
17,370
4,676
8,670
9,830
5,704
10,250
8,305
9,514
16,511
13,594
7,755
22,356
40,388
32,047
12,855
34,315
28,404
24,539
6,315
23,426
4,877
8,388
4,771
4,940
4,531
12,890
8,194
5,476
24,663
15,588
9,119
10,685
34,923
55,296
12,665
4,462
1,800
14,500
2,978
14,938
1,926
759
567
1,352
726
993
1,057
823
287
2,734
313
280
635
375
630
576
344
887
799
1,684
345
165
313
795
899
1,303
2,527
469
235
1,863
2,533
1,084
3,412
1,151
867
2,021
188
592
171
604
117
808
1,238
155
3,168
840
1,867
272
1,965
2,565
1,146
396
1,063
2,063
1,532
8,207
1,198
1,474
1,205
3,579
1,138
1,294
210
1,592
1,658
242
683
2,581
2,037
1,190
4,337
162
3,953
1,655
1,904
110
1,316
762
1,090
893
737
1998
2011
2011
2011
2011
2002
2011
2011
2011
2003
2012
2012
1996
2011
1996
2011
2011
1998
2006
2001
2012
2011
2011
2010
1999
2003
2003
2011
2010
2002
2005
2006
2006
2003
2011
2011
2011
2009
2012
2005
2012
2011
2003
2012
2002
2007
2006
2010
2005
2006
2007
2011
2011
2010
2011
1997
2011
2010
2011
1993
2011
2003
2012
1998
2001
2011
2010
2001
1999
2011
2002
2012
1996
2011
2011
2012
2001
1997
2010
2002
2011
1996
1973
1964
1970
1978
1997
1997
1998
1979
1997
2005
2007
1996
1965
1996
1985
1997
1998
2007
1987
1988
2006
1986
2002
1999
1974
2000
2009
1998
2001
1968
1983
1978
1997
1972
1994
1905
2010
1998
1985
2001
1986
1998
2001
1996
2006
1980
2011
1986
1987
2009
1997
1984
2001
1978
1999
1998
1988
1962
1959
1996
1998
2001
1999
1980
1966
1997
1981
1999
1962
1998
1987
1973
1993
1982
1994
1997
1997
2000
1999
1908
Land
1,500
1,330
1,830
2,850
600
354
230
440
410
1,040
1,800
2,900
85
860
155
600
400
330
520
350
2,330
340
980
920
341
590
2,120
825
610
530
1,070
1,010
1,860
550
780
1,760
720
980
2,740
400
700
200
410
2,880
1,360
250
1,350
1,760
2,530
3,650
2,076
400
600
2,067
1,770
1,476
1,380
1,210
900
285
1,190
390
410
200
310
930
722
440
1,400
2,420
1,460
570
620
920
2,850
560
410
200
1,500
300
1,800
Description
Encumbrances
Flower Mound, TX . . . . . . . . . . . . . . . . .
Follansbee, WV . . . . . . . . . . . . . . . . . . . .
Forest City, NC . . . . . . . . . . . . . . . . . . . .
Fort Ashby, WV . . . . . . . . . . . . . . . . . . .
Franconia, NH . . . . . . . . . . . . . . . . . . . . .
Franklin, NH . . . . . . . . . . . . . . . . . . . . . .
Fredericksburg, VA . . . . . . . . . . . . . . . . .
Fredericksburg, VA . . . . . . . . . . . . . . . . .
Fredericksburg, VA . . . . . . . . . . . . . . . . .
Gardner, MA . . . . . . . . . . . . . . . . . . . . . .
Gastonia, NC . . . . . . . . . . . . . . . . . . . . . .
Gastonia, NC . . . . . . . . . . . . . . . . . . . . . .
Gastonia, NC . . . . . . . . . . . . . . . . . . . . . .
Georgetown, TX . . . . . . . . . . . . . . . . . . .
Gettysburg, PA . . . . . . . . . . . . . . . . . . . .
Glastonbury, CT . . . . . . . . . . . . . . . . . . .
Glen Mills, PA . . . . . . . . . . . . . . . . . . . . .
Glenside, PA . . . . . . . . . . . . . . . . . . . . . .
Goshen, IN . . . . . . . . . . . . . . . . . . . . . . .
Graceville, FL . . . . . . . . . . . . . . . . . . . . .
Grafton, WV . . . . . . . . . . . . . . . . . . . . . .
Granbury, TX . . . . . . . . . . . . . . . . . . . . .
Granbury, TX . . . . . . . . . . . . . . . . . . . . .
Grand Blanc, MI . . . . . . . . . . . . . . . . . . .
Grand Ledge, MI . . . . . . . . . . . . . . . . . . .
Granger, IN . . . . . . . . . . . . . . . . . . . . . . .
Greendale, WI . . . . . . . . . . . . . . . . . . . . .
Greeneville, TN . . . . . . . . . . . . . . . . . . . .
Greenfield, WI . . . . . . . . . . . . . . . . . . . . .
Greensboro, NC . . . . . . . . . . . . . . . . . . . .
Greensboro, NC . . . . . . . . . . . . . . . . . . . .
Greenville, SC . . . . . . . . . . . . . . . . . . . . .
Greenville, SC . . . . . . . . . . . . . . . . . . . . .
Greenville, NC . . . . . . . . . . . . . . . . . . . .
Greenwood, IN . . . . . . . . . . . . . . . . . . . .
Groton, CT . . . . . . . . . . . . . . . . . . . . . . .
Haddonfield, NJ . . . . . . . . . . . . . . . . . . .
Hamburg, PA . . . . . . . . . . . . . . . . . . . . . .
Hamilton, NJ . . . . . . . . . . . . . . . . . . . . . .
Hanover, IN . . . . . . . . . . . . . . . . . . . . . . .
Harleysville, PA . . . . . . . . . . . . . . . . . . .
Harriman, TN . . . . . . . . . . . . . . . . . . . . .
Hatboro, PA . . . . . . . . . . . . . . . . . . . . . . .
Hattiesburg, MS . . . . . . . . . . . . . . . . . . .
Haverford, PA . . . . . . . . . . . . . . . . . . . . .
Hemet, CA . . . . . . . . . . . . . . . . . . . . . . . .
Hermitage, TN . . . . . . . . . . . . . . . . . . . . .
Hickory, NC . . . . . . . . . . . . . . . . . . . . . .
High Point, NC . . . . . . . . . . . . . . . . . . . .
High Point, NC . . . . . . . . . . . . . . . . . . . .
High Point, NC . . . . . . . . . . . . . . . . . . . .
High Point, NC . . . . . . . . . . . . . . . . . . . .
Highland Park, IL . . . . . . . . . . . . . . . . . .
Highlands Ranch, CO . . . . . . . . . . . . . . .
Hilltop, WV . . . . . . . . . . . . . . . . . . . . . . .
Hollywood, FL . . . . . . . . . . . . . . . . . . . .
Homestead, FL . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . . .
Howell, NJ . . . . . . . . . . . . . . . . . . . . . . . .
Huntington, WV . . . . . . . . . . . . . . . . . . .
Huron, OH . . . . . . . . . . . . . . . . . . . . . . . .
Hurricane, WV . . . . . . . . . . . . . . . . . . . .
Hutchinson, KS . . . . . . . . . . . . . . . . . . . .
Indianapolis, IN . . . . . . . . . . . . . . . . . . . .
Indianapolis, IN . . . . . . . . . . . . . . . . . . . .
Jackson, NJ . . . . . . . . . . . . . . . . . . . . . . .
Jacksonville Beach, FL . . . . . . . . . . . . . .
Jamestown, TN . . . . . . . . . . . . . . . . . . . .
Jefferson, OH . . . . . . . . . . . . . . . . . . . . .
Jupiter, FL . . . . . . . . . . . . . . . . . . . . . . . .
Kalida, OH . . . . . . . . . . . . . . . . . . . . . . .
Keene, NH . . . . . . . . . . . . . . . . . . . . . . . .
Kenner, LA . . . . . . . . . . . . . . . . . . . . . . .
Kennesaw, GA . . . . . . . . . . . . . . . . . . . . .
Kennett Square, PA . . . . . . . . . . . . . . . . .
Kenosha, WI . . . . . . . . . . . . . . . . . . . . . .
Kent, WA . . . . . . . . . . . . . . . . . . . . . . . .
Kirkland, WA . . . . . . . . . . . . . . . . . . . . .
Laconia, NH . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,178
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9,931
—
10,288
10,299
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition
Building &
Improvements
Land
—
44
—
123
69
46
1,200
35
—
27
—
22
120
—
26
595
165
24
—
—
37
—
—
—
—
1,751
—
507
328
554
1,013
—
1,997
168
81
739
160
142
—
—
—
158
890
35
387
—
8
232
793
410
28
—
—
—
15
—
—
—
—
750
150
126
1,452
805
194
22,565
12,123
—
—
45
—
—
—
284
328
—
49
—
10,470
683
483
1,800
640
320
330
360
430
1,000
590
3,700
480
470
310
400
200
590
1,950
690
1,940
210
150
280
2,040
2,550
700
1,150
1,670
2,060
400
600
330
560
310
5,400
290
1,550
2,430
520
840
440
210
960
590
—
450
1,880
870
1,500
290
560
370
330
430
2,820
940
480
1,240
2,750
860
5,090
630
1,050
800
160
620
600
495
255
6,500
1,210
—
80
3,100
480
530
1,100
940
1,050
1,500
940
1,880
810
8,414
27,670
4,497
19,566
11,320
15,210
20,000
28,611
22,016
10,210
6,129
3,096
5,029
2,100
8,913
9,532
9,110
16,867
6,120
13,000
18,824
30,670
2,940
7,843
16,286
21,280
35,383
8,290
6,626
2,970
5,507
4,750
100,523
4,393
22,770
19,941
2,320
10,543
4,469
4,430
11,355
8,060
28,112
15,518
33,993
3,405
9,856
987
4,443
2,185
3,395
4,143
15,832
3,721
25,355
13,806
11,750
18,715
9,471
5,970
21,703
32,261
6,088
21,454
10,590
6,287
2,473
26,405
26,207
6,707
9,120
47,453
8,173
9,639
10,036
10,848
22,946
9,139
20,318
4,315
14,434
125
Gross Amount at Which
Carried at Close of Period
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
8,414
27,714
4,497
19,689
11,390
15,255
21,200
28,646
22,016
10,237
6,129
3,118
5,149
2,100
8,938
9,717
9,275
16,891
6,120
13,000
18,861
30,670
2,940
7,843
16,286
23,031
35,383
8,797
6,954
3,524
6,520
4,750
102,520
4,561
22,851
20,680
2,480
10,685
4,469
4,430
11,355
8,218
29,002
15,553
34,378
3,405
9,863
1,219
5,236
2,595
3,423
4,143
15,832
3,721
25,370
13,806
11,750
18,715
9,471
6,720
21,839
32,387
7,540
22,258
10,784
28,852
14,596
26,405
26,207
6,752
9,120
47,453
8,173
9,923
10,364
10,848
22,985
9,139
30,788
4,998
14,916
—
1,305
1,205
906
549
729
4,133
1,339
143
517
1,591
866
1,346
876
475
513
467
832
1,255
2,302
875
1,365
26
—
908
1,313
707
2,122
994
956
1,755
1,153
8,077
1,177
1,344
1,053
1,668
584
1,330
1,108
1,089
2,757
1,329
818
1,750
499
409
443
1,393
739
918
1,101
35
1,132
1,198
124
2,129
2,642
1,014
1,989
1,140
1,530
1,389
1,041
2,317
5,663
2,697
171
226
3,912
1,858
303
1,285
385
6,550
99
1,186
971
3,651
1,143
711
2011
2011
2003
2011
2011
2011
2005
2011
2012
2011
2003
2003
2003
1997
2011
2011
2011
2011
2005
2006
2011
2011
2012
2011
2010
2010
2012
2004
2006
2003
2003
2004
2006
2003
2010
2011
2011
2011
2001
2004
2008
2001
2011
2010
2010
2007
2011
2003
2003
2003
2003
2003
2011
2002
2011
2012
2006
2007
2007
2002
2010
2011
2005
2011
2004
2006
2006
2012
2012
2004
2006
2012
2006
2011
1998
2012
2010
2007
2007
2003
2011
—
1982
1999
1980
1971
1990
1999
1977
1992
1902
1998
1994
1996
1997
1987
1966
1993
1905
2006
1980
1986
2009
1996
—
1999
2009
1988
1979
2006
1996
1997
1997
2009
1998
2007
1975
1953
1966
1998
2000
2009
1972
1996
2009
2000
1996
2006
1994
2000
1999
1994
1998
2012
1999
1977
2001
1994
2006
2009
1995
2007
1976
1983
1986
1997
1981
1981
2001
1999
1966
1984
2002
2007
1980
2000
1998
2008
2009
2000
1996
1968
Land
1,800
640
320
330
360
430
1,000
590
3,700
480
470
310
400
200
590
2,360
690
1,940
210
150
280
2,040
2,550
700
1,150
1,670
2,060
400
600
330
560
310
5,400
290
1,550
2,430
520
840
440
210
960
590
—
450
1,882
870
1,500
290
560
370
330
430
2,820
940
480
1,240
2,750
860
5,090
630
1,064
800
160
620
600
495
255
6,500
1,210
—
80
3,100
480
530
1,100
940
1,060
1,500
940
1,880
810
Description
Encumbrances
Lake Barrington, IL . . . . . . . . . . . . . . . . .
Lake Zurich, IL . . . . . . . . . . . . . . . . . . . .
Lakewood Ranch, FL . . . . . . . . . . . . . . .
Lakewood Ranch, FL . . . . . . . . . . . . . . .
Lancaster, PA . . . . . . . . . . . . . . . . . . . . .
Lancaster, NH . . . . . . . . . . . . . . . . . . . . .
Lancaster, NH . . . . . . . . . . . . . . . . . . . . .
Langhorne, PA . . . . . . . . . . . . . . . . . . . .
Lapeer, MI . . . . . . . . . . . . . . . . . . . . . . . .
LaPlata, MD(2) . . . . . . . . . . . . . . . . . . . . .
Lawrence, KS . . . . . . . . . . . . . . . . . . . . .
Lebanon, NH . . . . . . . . . . . . . . . . . . . . . .
Lecanto, FL . . . . . . . . . . . . . . . . . . . . . . .
Lee, MA . . . . . . . . . . . . . . . . . . . . . . . . .
Leicester, England . . . . . . . . . . . . . . . . . .
Lenoir, NC . . . . . . . . . . . . . . . . . . . . . . . .
Leominster, MA . . . . . . . . . . . . . . . . . . .
Lewisburg, WV . . . . . . . . . . . . . . . . . . . .
Lexington, NC . . . . . . . . . . . . . . . . . . . . .
Lexington, KY . . . . . . . . . . . . . . . . . . . . .
Libertyville, IL . . . . . . . . . . . . . . . . . . . .
Lincoln, NE . . . . . . . . . . . . . . . . . . . . . . .
Linwood, NJ . . . . . . . . . . . . . . . . . . . . . .
Litchfield, CT . . . . . . . . . . . . . . . . . . . . .
Little Neck, NY . . . . . . . . . . . . . . . . . . . .
Loganville, GA . . . . . . . . . . . . . . . . . . . .
Longview, TX . . . . . . . . . . . . . . . . . . . . .
Longwood, FL . . . . . . . . . . . . . . . . . . . . .
Louisville, KY . . . . . . . . . . . . . . . . . . . . .
Louisville, KY . . . . . . . . . . . . . . . . . . . . .
Louisville, KY . . . . . . . . . . . . . . . . . . . . .
Lowell, MA . . . . . . . . . . . . . . . . . . . . . . .
Lowell, MA . . . . . . . . . . . . . . . . . . . . . . .
Lutherville, MD . . . . . . . . . . . . . . . . . . . .
Macungie, PA . . . . . . . . . . . . . . . . . . . . .
Mahwah, NJ . . . . . . . . . . . . . . . . . . . . . . .
Manahawkin, NJ . . . . . . . . . . . . . . . . . . .
Manalapan, NJ . . . . . . . . . . . . . . . . . . . . .
Manassas, VA . . . . . . . . . . . . . . . . . . . . .
Mansfield, TX . . . . . . . . . . . . . . . . . . . . .
Marianna, FL . . . . . . . . . . . . . . . . . . . . . .
Marietta, GA . . . . . . . . . . . . . . . . . . . . . .
Marlinton, WV . . . . . . . . . . . . . . . . . . . .
Marmet, WV . . . . . . . . . . . . . . . . . . . . . .
Martinsburg, WV . . . . . . . . . . . . . . . . . .
Martinsville, VA . . . . . . . . . . . . . . . . . . .
Matawan, NJ . . . . . . . . . . . . . . . . . . . . . .
Matthews, NC . . . . . . . . . . . . . . . . . . . . .
McConnelsville, OH . . . . . . . . . . . . . . . .
McHenry, IL . . . . . . . . . . . . . . . . . . . . . .
McHenry, IL . . . . . . . . . . . . . . . . . . . . . .
McKinney, TX . . . . . . . . . . . . . . . . . . . .
McMurray, PA . . . . . . . . . . . . . . . . . . . .
Melbourne, FL . . . . . . . . . . . . . . . . . . . . .
Melbourne, FL . . . . . . . . . . . . . . . . . . . . .
Melville, NY . . . . . . . . . . . . . . . . . . . . . .
Memphis, TN . . . . . . . . . . . . . . . . . . . . .
Memphis, TN . . . . . . . . . . . . . . . . . . . . .
Mendham, NJ . . . . . . . . . . . . . . . . . . . . .
Menomonee Falls, WI . . . . . . . . . . . . . . .
Mercerville, NJ . . . . . . . . . . . . . . . . . . . .
Meriden, CT . . . . . . . . . . . . . . . . . . . . . .
Merrillville, IN . . . . . . . . . . . . . . . . . . . .
Merrillville, IN . . . . . . . . . . . . . . . . . . . .
Middleburg Heights, OH . . . . . . . . . . . . .
Middleton, WI . . . . . . . . . . . . . . . . . . . . .
Middletown, RI . . . . . . . . . . . . . . . . . . . .
Midland, MI
. . . . . . . . . . . . . . . . . . . . . .
Milford, DE . . . . . . . . . . . . . . . . . . . . . . .
Milford, DE . . . . . . . . . . . . . . . . . . . . . . .
Millersville, MD . . . . . . . . . . . . . . . . . . .
Millville, NJ . . . . . . . . . . . . . . . . . . . . . .
Missoula, MT . . . . . . . . . . . . . . . . . . . . .
Monmouth Junction, NJ . . . . . . . . . . . . .
Monroe, NC . . . . . . . . . . . . . . . . . . . . . . .
Monroe, NC . . . . . . . . . . . . . . . . . . . . . . .
Monroe, NC . . . . . . . . . . . . . . . . . . . . . . .
Monroe Twp, NJ . . . . . . . . . . . . . . . . . . .
Monteagle, TN . . . . . . . . . . . . . . . . . . . .
Monterey, TN . . . . . . . . . . . . . . . . . . . . .
Montville, NJ . . . . . . . . . . . . . . . . . . . . . .
—
—
—
7,569
—
—
—
—
—
—
3,797
—
—
—
—
—
—
—
—
—
—
5,131
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition
Building &
Improvements
Land
3,400
1,470
650
1,000
890
430
160
1,350
220
700
250
550
200
290
6,897
190
530
260
200
1,850
6,500
390
800
1,240
3,350
1,430
610
1,260
490
430
350
1,070
680
1,100
960
785
1,020
900
750
660
340
1,270
270
540
340
349
1,830
560
190
1,576
3,550
1,570
1,440
7,070
2,540
4,280
940
390
1,240
1,020
860
1,300
643
1,080
960
420
1,480
200
400
680
680
840
550
720
470
310
450
1,160
310
—
3,500
66,179
9,830
6,714
22,388
7,623
15,804
434
24,881
7,625
19,068
8,716
20,138
6,900
18,135
30,240
3,748
6,201
3,699
3,900
11,977
40,024
13,807
21,984
17,908
38,461
22,912
5,520
6,445
10,010
7,135
4,675
13,481
3,378
19,786
29,033
—
20,361
22,624
7,446
5,251
8,910
10,519
8,430
26,483
17,180
—
20,618
4,738
7,060
—
15,300
7,389
15,805
48,257
21,319
73,283
5,963
9,660
27,169
6,984
9,929
1,472
7,084
3,413
7,780
4,006
19,703
11,025
7,816
19,216
1,020
29,944
7,490
6,209
3,681
4,799
4,021
13,193
3,318
4,195
31,002
126
—
—
—
—
80
161
28
117
—
—
—
64
—
926
—
641
25
70
1,015
—
—
—
429
102
426
—
—
—
—
163
109
92
30
1,579
17
—
122
56
530
—
—
—
—
—
31
—
—
—
—
—
6,718
—
1,894
12,990
—
722
—
1,600
375
—
109
5
3,526
—
—
600
—
39
40
56
25
85
377
57
648
857
114
75
—
410
135
Gross Amount at Which
Carried at Close of Period
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
66,179
9,830
6,714
22,388
7,702
15,964
462
24,998
7,625
19,068
8,716
20,202
6,900
19,061
30,240
4,389
6,226
3,769
4,915
11,977
40,024
13,807
22,413
18,000
38,882
22,912
5,520
6,445
10,010
7,298
4,784
13,573
3,408
21,365
29,049
—
20,483
22,680
7,976
5,251
8,910
10,519
8,430
26,483
17,211
—
20,618
4,738
7,060
—
22,018
7,389
17,699
61,247
21,319
74,003
5,963
11,260
27,544
6,984
10,039
1,477
10,610
3,413
7,780
4,606
19,703
11,064
7,855
19,273
1,045
30,030
7,867
6,266
4,329
5,656
4,135
13,268
3,318
4,605
31,137
421
459
117
295
419
757
42
1,221
82
935
114
962
1,607
5,582
—
1,161
348
210
1,389
—
1,848
964
1,178
933
2,008
215
831
222
2,650
2,443
1,637
694
213
969
1,364
—
991
795
1,875
800
1,573
94
418
1,225
802
—
589
1,295
514
—
3,105
592
489
4,901
503
3,762
1,733
652
1,281
980
518
158
6,112
195
1,735
1,229
970
598
400
940
411
1,433
1,503
341
1,175
1,446
1,119
690
1,061
2,454
1,112
2012
2011
2011
2012
2011
2011
2011
2011
2011
2011
2012
2011
2004
2002
2012
2003
2011
2011
2002
2011
2011
2010
2010
2010
2010
2012
2006
2011
2005
2002
2002
2011
2011
2011
2011
2012
2011
2011
2003
2006
2006
2012
2011
2011
2011
2003
2011
2003
2010
2006
2006
2009
2010
2007
2010
2010
2004
2010
2011
2006
2011
2011
1997
2010
2004
2001
2011
2010
2011
2011
2011
2011
2005
2011
2003
2003
2003
2011
2003
2004
2011
2000
2007
2012
2005
1928
1981
1905
1979
2012
1984
1996
1985
1986
1998
—
1998
1966
1995
1997
—
2001
2000
1997
1998
2000
1997
2007
2011
1978
1974
1975
1975
1969
1988
1994
1994
2001
1996
2007
1997
1997
1987
1986
1987
1965
1998
1946
2004
2010
2011
2009
2012
2001
1951
1981
1968
2007
1967
1968
1999
2011
1998
1991
1975
1994
1997
1905
1962
1986
1998
1996
2001
2000
1997
1996
1980
1977
1988
Land
3,400
1,470
650
1,000
890
430
160
1,350
220
700
250
550
200
290
6,897
190
530
260
200
1,850
6,500
390
800
1,250
3,355
1,430
610
1,260
490
430
350
1,070
680
1,100
960
785
1,020
900
750
660
340
1,270
270
540
340
349
1,830
560
190
1,576
3,550
1,570
1,440
7,070
2,540
4,282
940
390
1,240
1,020
860
1,300
643
1,080
960
420
1,480
200
400
680
680
840
550
720
470
310
450
1,160
310
—
3,500
Description
Encumbrances
Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition
Building &
Improvements
Land
Moorestown, NJ . . . . . . . . . . . . . . . . . . .
Morehead City, NC . . . . . . . . . . . . . . . . .
Morgantown, KY . . . . . . . . . . . . . . . . . .
Morgantown, WV . . . . . . . . . . . . . . . . . .
Morton Grove, IL . . . . . . . . . . . . . . . . . .
Mount Airy, NC . . . . . . . . . . . . . . . . . . .
Mountain City, TN . . . . . . . . . . . . . . . . .
Mt. Vernon, WA . . . . . . . . . . . . . . . . . . .
Myrtle Beach, SC . . . . . . . . . . . . . . . . . .
Nacogdoches, TX . . . . . . . . . . . . . . . . . .
Naperville, IL . . . . . . . . . . . . . . . . . . . . .
Naples, FL . . . . . . . . . . . . . . . . . . . . . . . .
Nashville, TN . . . . . . . . . . . . . . . . . . . . .
Naugatuck, CT . . . . . . . . . . . . . . . . . . . .
Needham, MA . . . . . . . . . . . . . . . . . . . . .
Neenah, WI . . . . . . . . . . . . . . . . . . . . . . .
New Braunfels, TX . . . . . . . . . . . . . . . . .
New Haven, IN . . . . . . . . . . . . . . . . . . . .
Newark, DE . . . . . . . . . . . . . . . . . . . . . . .
Newport, VT . . . . . . . . . . . . . . . . . . . . . .
Norman, OK . . . . . . . . . . . . . . . . . . . . . .
Norman, OK . . . . . . . . . . . . . . . . . . . . . .
Norristown, PA . . . . . . . . . . . . . . . . . . . .
North Andover, MA . . . . . . . . . . . . . . . .
North Andover, MA . . . . . . . . . . . . . . . .
North Augusta, SC . . . . . . . . . . . . . . . . .
North Cape May, NJ . . . . . . . . . . . . . . . .
Oak Hill, WV . . . . . . . . . . . . . . . . . . . . .
Oak Hill, WV . . . . . . . . . . . . . . . . . . . . .
Ocala, FL . . . . . . . . . . . . . . . . . . . . . . . . .
Ogden, UT . . . . . . . . . . . . . . . . . . . . . . . .
Oklahoma City, OK . . . . . . . . . . . . . . . . .
Oklahoma City, OK . . . . . . . . . . . . . . . . .
Omaha, NE . . . . . . . . . . . . . . . . . . . . . . .
Omaha, NE . . . . . . . . . . . . . . . . . . . . . . .
Oneonta, NY . . . . . . . . . . . . . . . . . . . . . .
Ormond Beach, FL . . . . . . . . . . . . . . . . .
Orwigsburg, PA . . . . . . . . . . . . . . . . . . . .
Oshkosh, WI . . . . . . . . . . . . . . . . . . . . . .
Oshkosh, WI . . . . . . . . . . . . . . . . . . . . . .
Overland Park, KS . . . . . . . . . . . . . . . . . .
Overland Park, KS . . . . . . . . . . . . . . . . . .
Overland Park, KS . . . . . . . . . . . . . . . . . .
Owasso, OK . . . . . . . . . . . . . . . . . . . . . . .
Owensboro, KY . . . . . . . . . . . . . . . . . . . .
Owensboro, KY . . . . . . . . . . . . . . . . . . . .
Owenton, KY . . . . . . . . . . . . . . . . . . . . .
Oxford, MI
. . . . . . . . . . . . . . . . . . . . . . .
Palestine, TX . . . . . . . . . . . . . . . . . . . . . .
Palm Coast, FL . . . . . . . . . . . . . . . . . . . .
Panama City Beach, FL . . . . . . . . . . . . . .
Paris, TX . . . . . . . . . . . . . . . . . . . . . . . . .
Parkersburg, WV . . . . . . . . . . . . . . . . . . .
Parkville, MD . . . . . . . . . . . . . . . . . . . . .
Parkville, MD . . . . . . . . . . . . . . . . . . . . .
Parkville, MD . . . . . . . . . . . . . . . . . . . . .
Pasadena, TX . . . . . . . . . . . . . . . . . . . . . .
Paso Robles, CA . . . . . . . . . . . . . . . . . . .
Pawleys Island, SC . . . . . . . . . . . . . . . . .
Pella, IA . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennington, NJ . . . . . . . . . . . . . . . . . . . .
Pennsauken, NJ . . . . . . . . . . . . . . . . . . . .
Petoskey, MI . . . . . . . . . . . . . . . . . . . . . .
Philadelphia, PA . . . . . . . . . . . . . . . . . . .
Philadelphia, PA . . . . . . . . . . . . . . . . . . .
Philadelphia, PA . . . . . . . . . . . . . . . . . . .
Philadelphia, PA . . . . . . . . . . . . . . . . . . .
Phillipsburg, NJ . . . . . . . . . . . . . . . . . . . .
Phillipsburg, NJ . . . . . . . . . . . . . . . . . . . .
Pigeon Forge, TN . . . . . . . . . . . . . . . . . .
Pinehurst, NC . . . . . . . . . . . . . . . . . . . . .
Piqua, OH . . . . . . . . . . . . . . . . . . . . . . . .
Pittsburgh, PA . . . . . . . . . . . . . . . . . . . . .
Plainview, NY . . . . . . . . . . . . . . . . . . . . .
Plattsmouth, NE . . . . . . . . . . . . . . . . . . .
Plymouth, MI
. . . . . . . . . . . . . . . . . . . . .
Port St. Joe, FL . . . . . . . . . . . . . . . . . . . .
Port St. Lucie, FL . . . . . . . . . . . . . . . . . .
Post Falls, ID . . . . . . . . . . . . . . . . . . . . . .
Pottsville, PA . . . . . . . . . . . . . . . . . . . . . .
Princeton, NJ . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11,524
—
—
—
—
—
—
—
—
—
—
—
—
4,419
—
—
—
—
—
—
—
—
—
—
—
—
11,710
—
—
—
—
—
—
—
—
9,955
—
—
—
—
—
6,293
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,060
200
380
190
1,900
270
220
400
6,890
390
3,470
550
4,910
1,200
1,610
630
1,200
176
560
290
55
1,480
1,200
950
1,070
332
600
240
170
1,340
360
590
760
370
380
80
—
650
900
400
1,120
3,730
4,500
215
240
225
100
1,430
180
870
900
490
390
1,350
791
1,100
720
1,770
2,020
870
1,380
900
860
2,700
2,930
540
1,810
800
300
320
290
204
1,750
3,990
250
1,490
370
8,700
2,700
950
1,730
267
1,648
615
—
—
290
660
156
11,498
—
—
—
—
99
366
—
—
—
1,488
—
—
—
1,135
54
1,293
—
36
—
—
—
699
—
—
—
—
—
73
134
3,687
—
—
340
7,295
—
37
—
—
—
1,300
—
9
—
643
212
—
—
—
693
6,022
—
426
179
—
333
2,642
62
32
193
38
117
484
—
115
94
—
114
—
4,761
2,181
202
817
51,628
3,104
3,705
15,633
19,374
6,430
5,896
2,200
41,526
5,754
29,547
5,450
29,590
15,826
13,715
15,120
19,800
3,524
21,220
3,867
1,484
33,330
19,488
21,817
17,341
2,558
22,266
24,506
721
10,564
6,700
7,513
7,017
10,230
8,864
5,020
2,739
20,632
3,800
23,237
8,360
27,076
29,105
1,380
6,760
13,275
2,400
15,791
4,320
10,957
7,717
5,452
21,288
16,071
11,186
11,768
24,080
8,630
32,590
6,716
27,620
10,780
14,452
25,709
10,433
11,239
16,898
21,175
8,114
4,180
2,690
1,885
8,572
11,969
5,650
19,990
2,055
47,230
14,217
26,964
30,888
127
Gross Amount at Which
Carried at Close of Period
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
51,892
4,752
4,320
15,633
19,374
6,720
6,556
2,356
53,024
5,754
29,547
5,450
29,590
15,924
14,081
15,120
19,800
3,524
22,708
3,867
1,484
33,330
20,623
21,870
18,634
2,558
22,302
24,506
721
10,564
7,399
7,513
7,017
10,230
8,864
5,020
2,812
20,766
7,487
23,237
8,360
27,416
36,400
1,380
6,797
13,275
2,400
15,791
5,620
10,957
7,726
5,452
21,931
16,284
11,186
11,768
24,080
9,323
38,612
6,716
28,006
10,959
14,452
26,041
13,075
11,302
16,931
21,368
8,151
4,297
3,174
1,885
8,687
12,064
5,650
20,104
2,055
51,991
16,398
27,166
31,663
2,668
1,593
1,128
414
568
1,199
3,568
375
4,281
857
1,390
1,361
3,567
781
4,576
1,032
933
1,046
4,595
211
751
431
948
1,047
879
990
1,062
1,132
73
973
1,534
932
767
730
654
679
1,495
999
1,272
2,424
1,763
2,317
2,007
608
1,528
2,912
647
906
890
877
322
2,240
1,012
801
571
595
3,664
2,656
6,600
59
860
602
739
1,259
632
532
902
1,044
399
1,510
892
755
1,899
480
424
1,093
863
3,550
1,845
1,319
977
2010
1999
2003
2011
2010
2005
2001
2006
2007
2006
2011
2004
2008
2011
2002
2010
2011
2004
2004
2011
1995
2012
2011
2011
2011
1999
2011
2011
2011
2008
2004
2007
2007
2010
2010
2007
2002
2011
2006
2007
2005
2008
2010
1996
1993
2005
2005
2010
2006
2008
2011
2005
2011
2011
2011
2011
2007
2002
2005
2012
2011
2011
2011
2011
2011
2011
2011
2011
2011
2001
2003
1997
2005
2011
2010
2010
2004
2008
2007
2011
2011
2000
1999
1965
1997
2011
1998
1976
2001
2009
2007
2001
1968
2007
1980
1994
1991
2009
1981
1998
1967
1995
1985
1995
1977
1990
1998
1995
1988
1999
2009
1998
2008
2009
1998
1999
1996
1983
1992
2005
2008
1970
2009
1988
1996
1966
1964
1979
2001
2005
2010
2005
2006
1979
1980
1972
1972
2005
1998
1997
2002
2000
1985
1997
1976
1952
1965
1972
1992
1905
1986
1998
1997
1998
1963
1999
1972
1982
2010
2008
1990
2001
Land
2,063
200
380
190
1,900
270
220
400
6,890
390
3,470
550
4,910
1,200
1,610
630
1,200
176
560
290
55
1,480
1,200
950
1,070
332
600
240
170
1,340
360
590
760
370
380
80
—
650
900
400
1,120
3,730
4,500
215
240
225
100
1,430
180
870
900
490
390
1,350
791
1,100
720
1,770
2,020
870
1,420
900
860
2,700
2,930
540
1,810
800
300
320
290
204
1,750
3,990
250
1,490
370
8,700
2,700
950
1,772
Description
Encumbrances
Initial Cost to Company
Building &
Improvements
Land
Cost Capitalized
Subsequent to
Acquisition
Quakertown, PA . . . . . . . . . . . . . . . . .
Raleigh, NC . . . . . . . . . . . . . . . . . . . . .
Raleigh, NC . . . . . . . . . . . . . . . . . . . . .
Raleigh, NC . . . . . . . . . . . . . . . . . . . . .
Reading, PA . . . . . . . . . . . . . . . . . . . .
Red Bank, NJ . . . . . . . . . . . . . . . . . . . .
Rehoboth Beach, DE . . . . . . . . . . . . . .
Reidsville, NC . . . . . . . . . . . . . . . . . . .
Reno, NV . . . . . . . . . . . . . . . . . . . . . . .
Ridgeland, MS . . . . . . . . . . . . . . . . . . .
Ridgely, TN . . . . . . . . . . . . . . . . . . . . .
Ridgewood, NJ . . . . . . . . . . . . . . . . . .
Rockledge, FL . . . . . . . . . . . . . . . . . . .
Rockville, MD . . . . . . . . . . . . . . . . . . .
Rockville, CT . . . . . . . . . . . . . . . . . . .
Rockville Centre, NY . . . . . . . . . . . . .
Rockwood, TN . . . . . . . . . . . . . . . . . .
Rocky Hill, CT . . . . . . . . . . . . . . . . . .
Rogersville, TN . . . . . . . . . . . . . . . . . .
Romeoville, IL . . . . . . . . . . . . . . . . . .
Rutland, VT . . . . . . . . . . . . . . . . . . . . .
Saint Simons Island, GA . . . . . . . . . . .
Salem, OR . . . . . . . . . . . . . . . . . . . . . .
Salisbury, NC . . . . . . . . . . . . . . . . . . .
San Angelo, TX . . . . . . . . . . . . . . . . . .
San Antonio, TX . . . . . . . . . . . . . . . . .
San Antonio, TX . . . . . . . . . . . . . . . . .
San Antonio, TX . . . . . . . . . . . . . . . . .
Sanatoga, PA . . . . . . . . . . . . . . . . . . . .
Sand Springs, OK . . . . . . . . . . . . . . . .
Sarasota, FL . . . . . . . . . . . . . . . . . . . . .
Sarasota, FL . . . . . . . . . . . . . . . . . . . . .
Sarasota, FL . . . . . . . . . . . . . . . . . . . . .
Sarasota, FL . . . . . . . . . . . . . . . . . . . . .
Sarasota, FL . . . . . . . . . . . . . . . . . . . . .
Scituate, MA . . . . . . . . . . . . . . . . . . . .
Scott Depot, WV . . . . . . . . . . . . . . . . .
Seaford, DE . . . . . . . . . . . . . . . . . . . . .
Seaford, DE . . . . . . . . . . . . . . . . . . . . .
Selbyville, DE . . . . . . . . . . . . . . . . . . .
Seven Fields, PA . . . . . . . . . . . . . . . . .
Severna Park, MD(2)
. . . . . . . . . . . . . .
Shawnee, OK . . . . . . . . . . . . . . . . . . . .
Sheboygan, WI . . . . . . . . . . . . . . . . . .
Shelbyville, KY . . . . . . . . . . . . . . . . . .
Shelton, WA . . . . . . . . . . . . . . . . . . . .
Shepherdstown, WV . . . . . . . . . . . . . .
Sherman, TX . . . . . . . . . . . . . . . . . . . .
Shillington, PA . . . . . . . . . . . . . . . . . .
Shrewsbury, NJ . . . . . . . . . . . . . . . . . .
Silver Spring, MD . . . . . . . . . . . . . . . .
Silver Spring, MD . . . . . . . . . . . . . . . .
Silvis, IL . . . . . . . . . . . . . . . . . . . . . . .
Sissonville, WV . . . . . . . . . . . . . . . . . .
Sisterville, WV . . . . . . . . . . . . . . . . . .
Smithfield, NC . . . . . . . . . . . . . . . . . .
Somerset, MA . . . . . . . . . . . . . . . . . . .
South Boston, MA . . . . . . . . . . . . . . . .
South Pittsburg, TN . . . . . . . . . . . . . . .
Southbury, CT . . . . . . . . . . . . . . . . . . .
Sparks, NV . . . . . . . . . . . . . . . . . . . . .
Spartanburg, SC . . . . . . . . . . . . . . . . .
Spencer, WV . . . . . . . . . . . . . . . . . . . .
Spring City, TN . . . . . . . . . . . . . . . . . .
Spring House, PA . . . . . . . . . . . . . . . .
St. Charles, MD . . . . . . . . . . . . . . . . . .
St. Louis, MO . . . . . . . . . . . . . . . . . . .
Statesville, NC . . . . . . . . . . . . . . . . . . .
Statesville, NC . . . . . . . . . . . . . . . . . . .
Statesville, NC . . . . . . . . . . . . . . . . . . .
Stillwater, OK . . . . . . . . . . . . . . . . . . .
Summit, NJ . . . . . . . . . . . . . . . . . . . . .
Superior, WI . . . . . . . . . . . . . . . . . . . .
Swanton, OH . . . . . . . . . . . . . . . . . . . .
Takoma Park, MD . . . . . . . . . . . . . . . .
Texarkana, TX . . . . . . . . . . . . . . . . . . .
Thomasville, GA . . . . . . . . . . . . . . . . .
Tomball, TX . . . . . . . . . . . . . . . . . . . .
Toms River, NJ . . . . . . . . . . . . . . . . . .
Topeka, KS . . . . . . . . . . . . . . . . . . . . .
Towson, MD(2) . . . . . . . . . . . . . . . . . . .
—
—
26,506
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10,754
9,912
—
6,792
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,040
10,000
3,530
2,580
980
1,050
960
170
1,060
520
300
1,350
360
—
1,500
4,290
500
1,090
350
1,895
1,190
6,440
449
370
260
6,120
560
640
980
910
475
600
1,120
950
880
1,740
350
720
830
750
484
2,120
80
80
630
530
250
700
1,020
2,120
1,250
1,150
880
600
200
290
1,010
385
430
1,860
3,700
3,350
190
420
900
580
1,890
150
310
140
80
3,080
1,020
330
1,300
192
530
1,050
1,610
260
1,180
72
—
—
—
102
97
196
857
605
427
97
478
—
—
76
142
741
1,500
—
—
87
1,270
—
168
425
1,587
—
—
37
—
—
—
—
—
—
—
58
53
—
160
60
—
—
3,774
—
—
14
—
118
270
—
—
—
54
242
—
95
5,218
—
958
—
12,669
28
3,210
156
82
—
266
8
—
—
—
—
—
—
—
409
—
346
—
—
25,389
—
59,589
16,837
19,906
21,275
24,248
3,830
11,440
7,675
5,700
16,170
4,117
16,398
4,835
20,310
7,116
6,710
3,278
—
23,655
50,060
5,171
5,697
8,800
28,169
7,315
13,360
30,695
19,654
3,175
3,400
12,489
8,825
9,854
10,640
6,876
14,029
7,995
25,912
4,663
31,273
1,400
5,320
3,870
17,049
13,806
5,221
19,569
38,116
7,278
9,252
16,420
23,948
5,400
5,680
29,577
2,002
5,628
23,613
46,526
15,750
8,810
6,085
10,780
15,555
12,165
1,447
6,183
3,627
1,400
14,152
13,735
6,370
10,136
1,403
13,899
13,300
34,627
12,712
13,280
128
Land
1,040
10,000
3,530
2,580
980
1,050
961
170
1,060
520
300
1,350
360
—
1,500
4,290
500
1,090
350
1,895
1,190
6,440
449
370
260
6,120
560
640
980
910
475
600
1,120
950
880
1,740
350
720
830
764
484
2,120
80
80
630
530
250
700
1,020
2,120
1,250
1,150
880
600
200
290
1,010
385
430
1,860
3,700
3,350
190
420
900
580
1,890
150
310
140
80
3,080
1,020
330
1,300
192
530
1,050
1,650
260
1,180
Gross Amount at Which
Carried at Close of Period
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
25,461
—
59,589
16,837
20,008
21,372
24,443
4,687
12,045
8,102
5,797
16,649
4,117
16,398
4,911
20,452
7,857
8,210
3,278
—
23,743
51,330
5,172
5,865
9,225
29,756
7,315
13,360
30,733
19,654
3,175
3,400
12,489
8,825
9,854
10,640
6,934
14,082
7,995
26,058
4,722
31,273
1,400
9,094
3,870
17,049
13,819
5,221
19,687
38,386
7,278
9,252
16,420
24,003
5,642
5,680
29,671
7,220
5,628
24,571
46,526
28,419
8,838
9,295
10,936
15,636
12,165
1,713
6,191
3,627
1,400
14,152
13,735
6,370
10,136
1,403
14,308
13,300
34,933
12,712
13,280
1,213
—
395
156
967
748
1,269
1,341
2,569
1,926
1,872
780
1,677
279
320
756
2,521
1,842
1,052
—
1,151
5,809
1,977
1,517
1,927
999
2,258
2,124
1,439
259
1,474
947
114
80
94
2,077
351
718
112
1,361
1,813
1,472
640
1,143
859
237
650
848
956
1,984
125
152
1,029
1,136
287
1,487
1,394
2,823
1,547
1,102
4,326
3,816
431
2,663
561
765
707
480
1,566
946
643
660
—
1,504
172
617
569
655
1,819
173
667
2011
2008
2012
2012
2011
2011
2010
2002
2004
2003
2001
2011
2001
2012
2011
2011
2001
2003
2003
2006
2011
2008
1999
2003
2004
2010
2002
2007
2011
2012
1996
2004
2012
2012
2012
2005
2011
2011
2012
2010
1999
2011
1996
2006
2005
2012
2011
2005
2011
2010
2012
2012
2010
2011
2011
2003
2011
1995
2004
2011
2007
2005
2011
2001
2011
2011
2010
2003
2003
2003
1995
2011
2009
2004
2012
1996
2011
2011
2010
2012
2011
Year
Built
1977
2002
1988
1994
1997
1999
1998
1998
1997
1990
1971
1970
1986
1960
2002
1979
1996
1980
1968
2007
1998
1997
1997
2011
2000
2004
1993
2002
1995
1982
1999
1998
1990
1976
1995
1977
1992
2008
1999
1981
1995
2006
1965
1989
1990
2006
1964
2000
1952
1968
2005
1981
1986
1998
1998
1961
1979
2001
2009
1997
1988
1987
1900
1996
1963
1990
1996
1999
1995
2001
—
1950
1962
1996
2006
2001
2005
2011
1973
Description
Encumbrances
Initial Cost to Company
Building &
Improvements
Land
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Land
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
Troy, OH . . . . . . . . . . . . . . . . . . . .
Troy, OH . . . . . . . . . . . . . . . . . . . .
Trumbull, CT . . . . . . . . . . . . . . . . .
Tucson, AZ . . . . . . . . . . . . . . . . . .
Tulsa, OK . . . . . . . . . . . . . . . . . . .
Tulsa, OK . . . . . . . . . . . . . . . . . . .
Tyler, TX . . . . . . . . . . . . . . . . . . . .
Uhrichsville, OH . . . . . . . . . . . . . .
Uniontown, PA . . . . . . . . . . . . . . .
Valley Falls, RI . . . . . . . . . . . . . . .
Valparaiso, IN . . . . . . . . . . . . . . . .
Valparaiso, IN . . . . . . . . . . . . . . . .
Venice, FL . . . . . . . . . . . . . . . . . . .
Venice, FL . . . . . . . . . . . . . . . . . . .
Vero Beach, FL . . . . . . . . . . . . . . .
Vero Beach, FL . . . . . . . . . . . . . . .
Vero Beach, FL . . . . . . . . . . . . . . .
Voorhees, NJ . . . . . . . . . . . . . . . . .
Voorhees, NJ(2)
. . . . . . . . . . . . . . .
Waconia, MN . . . . . . . . . . . . . . . .
Wake Forest, NC . . . . . . . . . . . . . .
Walkersville, MD . . . . . . . . . . . . .
Wall, NJ . . . . . . . . . . . . . . . . . . . . .
Wallingford, CT . . . . . . . . . . . . . .
Wareham, MA . . . . . . . . . . . . . . . .
Warren, NJ . . . . . . . . . . . . . . . . . .
Warwick, RI
. . . . . . . . . . . . . . . . .
Watchung, NJ . . . . . . . . . . . . . . . .
Waukee, IA . . . . . . . . . . . . . . . . . .
Waukesha, WI . . . . . . . . . . . . . . . .
Waxahachie, TX . . . . . . . . . . . . . .
Weatherford, TX . . . . . . . . . . . . . .
Webster, TX . . . . . . . . . . . . . . . . .
Webster, NY . . . . . . . . . . . . . . . . .
Webster, NY . . . . . . . . . . . . . . . . .
Webster Groves, MO . . . . . . . . . . .
West Bend, WI . . . . . . . . . . . . . . .
West Chester, PA . . . . . . . . . . . . .
West Chester, PA . . . . . . . . . . . . .
West Chester, PA . . . . . . . . . . . . .
West Orange, NJ . . . . . . . . . . . . . .
West Worthington, OH . . . . . . . . .
Westerville, OH . . . . . . . . . . . . . . .
Westfield, NJ(2)
. . . . . . . . . . . . . . .
Westford, MA . . . . . . . . . . . . . . . .
Westlake, OH . . . . . . . . . . . . . . . .
Westmoreland, TN . . . . . . . . . . . .
White Lake, MI . . . . . . . . . . . . . . .
Wichita, KS . . . . . . . . . . . . . . . . . .
Wichita, KS . . . . . . . . . . . . . . . . . .
Wichita, KS . . . . . . . . . . . . . . . . . .
Wilkes-Barre, PA . . . . . . . . . . . . .
Wilkes-Barre, PA . . . . . . . . . . . . .
Willard, OH . . . . . . . . . . . . . . . . . .
Williamsport, PA . . . . . . . . . . . . . .
Williamsport, PA . . . . . . . . . . . . . .
Williamstown, KY . . . . . . . . . . . .
Willow Grove, PA . . . . . . . . . . . . .
Wilmington, DE . . . . . . . . . . . . . .
Wilmington, NC . . . . . . . . . . . . . .
Windsor, CT . . . . . . . . . . . . . . . . .
Windsor, CT . . . . . . . . . . . . . . . . .
Winston-Salem, NC . . . . . . . . . . .
Winston-Salem, NC . . . . . . . . . . .
Worcester, MA . . . . . . . . . . . . . . .
Worcester, MA . . . . . . . . . . . . . . .
Wyncote, PA . . . . . . . . . . . . . . . . .
Wyncote, PA . . . . . . . . . . . . . . . . .
Wyncote, PA . . . . . . . . . . . . . . . . .
Zionsville, IN . . . . . . . . . . . . . . . .
Seniors housing triple-net
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
9,473
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10,713
—
—
13,828
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
200
470
4,440
930
1,390
1,320
650
24
310
1,080
112
108
500
1,150
263
297
2,930
1,800
1,900
890
200
1,650
1,650
490
875
2,000
1,530
1,920
1,870
1,100
650
660
360
800
1,300
1,790
620
1,350
3,290
600
2,280
510
740
2,270
920
1,330
330
2,920
1,400
1,760
630
610
570
730
300
620
70
1,300
800
210
2,250
1,800
360
5,700
3,500
2,300
2,700
1,610
900
1,610
2,000
16,730
43,384
13,399
7,110
10,087
5,268
6,716
6,817
7,433
2,558
2,962
6,000
10,674
3,187
3,263
40,070
37,299
26,040
14,726
3,003
15,103
25,350
1,210
10,313
30,810
18,564
24,880
31,878
14,910
5,763
5,261
5,940
8,968
21,127
15,469
17,790
29,237
42,258
11,894
10,687
5,090
8,287
16,589
13,829
17,926
1,822
20,179
11,000
19,007
19,747
13,842
2,301
6,447
4,946
8,487
6,430
14,736
9,494
2,991
8,539
600
2,514
13,550
54,099
9,060
22,244
21,256
7,811
22,400
4,254
—
—
—
219
—
—
—
84
10
—
—
—
—
—
—
14,729
559
—
4,334
1,742
—
355
46
1,701
86
48
346
—
—
—
—
—
—
—
—
—
95
—
—
168
—
3,105
—
203
—
2,635
55
—
—
—
95
44
—
280
428
—
109
57
—
1,700
944
459
12,239
—
—
145
182
18
1,691
200
470
4,440
930
1,390
1,320
650
24
310
1,080
112
108
500
1,150
263
297
2,930
1,800
1,900
890
200
1,650
1,690
490
875
2,000
1,530
1,960
1,870
1,100
650
660
360
800
1,300
1,790
620
1,350
3,290
600
2,280
510
740
2,270
920
1,330
330
2,920
1,400
1,760
630
610
570
730
300
620
70
1,300
800
210
2,250
1,800
360
5,700
3,500
2,300
2,700
1,610
900
1,610
6,254
16,730
43,384
13,399
7,329
10,087
5,268
6,716
6,901
7,443
2,558
2,962
6,000
10,674
3,187
3,263
54,799
37,858
26,040
19,060
4,745
15,103
25,665
1,256
12,014
30,896
18,612
25,186
31,878
14,910
5,763
5,261
5,940
8,968
21,127
15,469
17,790
29,332
42,258
11,894
10,855
5,090
11,392
16,589
14,032
17,926
4,457
20,234
11,000
19,007
19,747
13,937
2,345
6,447
5,226
8,914
6,430
14,845
9,551
2,991
10,239
1,544
2,973
25,789
54,099
9,060
22,389
21,438
7,829
24,091
1,168
3,803
1,930
2,692
561
49
796
1,308
343
378
835
946
1,472
906
1,007
1,041
6,268
1,809
1,278
547
1,640
250
792
103
3,650
1,072
924
778
277
1,206
728
801
1,826
60
136
137
472
1,411
844
242
580
1,031
6,416
890
695
5,570
1,492
1,126
2,178
414
257
695
183
96
263
464
1,424
771
493
1,137
502
100
805
4,108
4,345
1,087
1,106
1,009
386
1,378
1997
2004
2011
2005
2010
2011
2006
2006
2011
2011
2001
2001
2004
2008
2001
2001
2007
2011
2011
2011
1998
2012
2011
2011
2002
2011
2011
2011
2012
2008
2007
2006
2002
2012
2012
2011
2010
2011
2012
2012
2011
2006
1998
2011
2011
2001
2001
2010
2006
2011
2012
2011
2011
2011
2011
2011
2005
2011
2011
1999
2011
2011
2003
2005
2007
2008
2011
2011
2011
2010
1997
1971
2001
1985
1998
2012
2007
1977
1964
1975
1998
1999
1987
2009
1999
1996
2003
1965
1985
2005
1999
1997
2003
1962
1989
1999
1963
2000
2007
2009
2008
2007
2000
2001
2001
2012
2011
1974
2000
2002
1963
1980
2001
1970
1993
1985
1994
2000
1997
2012
2009
1986
1992
2012
1991
1988
1987
1905
1970
1999
1969
1974
1996
1997
2009
1993
1960
1962
1889
2009
total . . . . . . . . . . . . . . . . . . . . . .
$218,741
$623,120
$7,462,660
$341,850
$625,388
$7,802,238
$707,213
129
Health Care REIT, Inc.
Schedule III
Real Estate and Accumulated Depreciation
December 31, 2012
(Dollars in thousands)
Description
Encumbrances
Land
Building &
Improvements
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Land
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
Seniors housing operating:
Agawam, MA . . . . . . . . . . . . . . . . . . . .
Albertville, AL . . . . . . . . . . . . . . . . . . .
Albuquerque, NM . . . . . . . . . . . . . . . . .
Alhambra, CA . . . . . . . . . . . . . . . . . . . .
Altrincham, England . . . . . . . . . . . . . . .
Apple Valley, CA . . . . . . . . . . . . . . . . .
Arlington, TX . . . . . . . . . . . . . . . . . . . .
Atlanta, GA . . . . . . . . . . . . . . . . . . . . . .
Austin, TX . . . . . . . . . . . . . . . . . . . . . . .
Avon, CT . . . . . . . . . . . . . . . . . . . . . . . .
Azusa, CA . . . . . . . . . . . . . . . . . . . . . . .
Bagshot, England . . . . . . . . . . . . . . . . .
Banstead, England . . . . . . . . . . . . . . . . .
Bellingham, WA . . . . . . . . . . . . . . . . . .
Belmont, CA . . . . . . . . . . . . . . . . . . . . .
Borehamwood, England . . . . . . . . . . . .
Brighton, MA . . . . . . . . . . . . . . . . . . . .
Brookfield, CT . . . . . . . . . . . . . . . . . . .
Buffalo Grove, IL . . . . . . . . . . . . . . . . .
Burbank, CA . . . . . . . . . . . . . . . . . . . . .
Cardiff by the Sea, CA . . . . . . . . . . . . .
Carol Stream, IL . . . . . . . . . . . . . . . . . .
Centerville, MA . . . . . . . . . . . . . . . . . . .
Cincinnati, OH . . . . . . . . . . . . . . . . . . .
Citrus Heights, CA . . . . . . . . . . . . . . . .
Concord, NH . . . . . . . . . . . . . . . . . . . . .
Costa Mesa, CA . . . . . . . . . . . . . . . . . . .
Dallas, TX . . . . . . . . . . . . . . . . . . . . . . .
Danvers, MA . . . . . . . . . . . . . . . . . . . . .
Davenport, IA . . . . . . . . . . . . . . . . . . . .
Denver, CO . . . . . . . . . . . . . . . . . . . . . .
Denver, CO . . . . . . . . . . . . . . . . . . . . . .
Dublin, OH . . . . . . . . . . . . . . . . . . . . . .
East Haven, CT . . . . . . . . . . . . . . . . . . .
Encinitas, CA . . . . . . . . . . . . . . . . . . . .
Encino, CA . . . . . . . . . . . . . . . . . . . . . .
Escondido, CA . . . . . . . . . . . . . . . . . . .
Florence, AL . . . . . . . . . . . . . . . . . . . . .
Fort Worth, TX . . . . . . . . . . . . . . . . . . .
Fremont, CA . . . . . . . . . . . . . . . . . . . . .
Gardnerville, NV . . . . . . . . . . . . . . . . . .
Gig Harbor, WA . . . . . . . . . . . . . . . . . .
Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . .
Glenview, IL . . . . . . . . . . . . . . . . . . . . .
Hamden, CT . . . . . . . . . . . . . . . . . . . . .
Hemet, CA . . . . . . . . . . . . . . . . . . . . . . .
Hemet, CA . . . . . . . . . . . . . . . . . . . . . . .
Henderson, NV . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . .
Irving, TX . . . . . . . . . . . . . . . . . . . . . . .
Kanata, ON . . . . . . . . . . . . . . . . . . . . . .
Kansas City, MO . . . . . . . . . . . . . . . . . .
Kansas City, MO . . . . . . . . . . . . . . . . . .
Kennewick, WA . . . . . . . . . . . . . . . . . .
Kingwood, TX . . . . . . . . . . . . . . . . . . . .
Kirkland, WA . . . . . . . . . . . . . . . . . . . .
Lancaster, CA . . . . . . . . . . . . . . . . . . . .
Leawood, KS . . . . . . . . . . . . . . . . . . . . .
Los Angeles, CA . . . . . . . . . . . . . . . . . .
Los Angeles, CA . . . . . . . . . . . . . . . . . .
Los Angeles, CA . . . . . . . . . . . . . . . . . .
Louisville, KY . . . . . . . . . . . . . . . . . . . .
Mansfield, MA . . . . . . . . . . . . . . . . . . .
Manteca, CA . . . . . . . . . . . . . . . . . . . . .
Marysville, WA . . . . . . . . . . . . . . . . . . .
Memphis, TN . . . . . . . . . . . . . . . . . . . .
Meriden, CT . . . . . . . . . . . . . . . . . . . . .
$ 6,805
2,066
5,657
3,012
—
10,979
22,542
7,791
19,309
20,033
—
—
—
8,860
—
—
10,899
20,414
—
—
41,836
—
—
—
15,189
14,055
—
—
9,857
—
—
13,161
18,884
23,721
—
—
13,182
7,267
—
19,780
12,783
5,789
—
—
15,963
13,550
—
—
—
8,149
18,509
—
—
5,745
7,030
14,866
3,258
24,600
10,240
16,383
—
67,816
—
—
29,381
6,279
4,652
—
9,730
$ 880
170
1,270
600
5,578
480
1,660
2,058
880
1,550
570
6,537
8,781
1,500
3,000
7,074
2,100
2,250
2,850
4,940
5,880
1,730
1,300
2,060
2,300
720
2,050
1,080
1,120
1,403
2,910
1,450
1,680
2,660
1,460
5,040
1,520
353
2,080
3,400
1,143
1,560
760
2,090
1,460
1,890
430
880
3,830
960
1,040
1,030
2,278
1,820
1,930
1,820
480
3,450
700
2,490
—
—
3,540
2,420
3,320
1,300
620
1,800
1,500
$ 10,044
6,203
20,837
6,305
32,373
16,639
37,395
14,914
9,520
30,571
3,141
38,668
54,836
19,861
23,526
41,060
14,616
30,180
49,129
43,466
64,711
55,048
27,357
109,388
31,876
21,164
19,969
9,655
14,557
35,893
35,838
19,389
43,423
35,533
7,721
46,255
24,024
13,049
27,888
25,300
10,831
15,947
13,880
69,288
24,093
28,606
9,630
29,809
55,674
27,598
31,965
6,823
41,881
34,898
39,997
27,991
9,777
38,709
15,295
32,493
11,430
114,438
19,007
20,816
57,011
12,125
4,780
17,744
14,874
130
$
83
158
564
52
—
107
—
759
546
159
6,049
—
—
110
246
—
95
172
—
—
66
—
189
2,602
428
138
45
116
121
2,063
—
—
941
426
353
—
106
165
—
1,649
694
71
23,935
—
203
449
716
6
—
143
—
638
—
1,473
509
235
79
15
106
—
494
153
—
—
479
1,423
302
—
236
$ 880
170
1,272
600
5,578
480
1,660
2,059
880
1,550
570
6,537
8,781
1,500
3,000
7,074
2,100
2,250
2,850
4,940
5,880
1,730
1,300
2,060
2,300
720
2,050
1,080
1,120
1,403
2,910
1,450
1,680
2,660
1,460
5,040
1,520
350
2,080
3,400
1,144
1,560
1,520
2,090
1,460
1,890
430
880
3,830
960
1,040
1,030
2,278
1,836
1,943
1,820
480
3,450
700
2,490
—
—
3,540
2,420
3,320
1,300
620
1,800
1,500
$ 10,127
6,361
21,399
6,357
32,373
16,746
37,395
15,672
10,066
30,731
9,190
38,668
54,836
19,971
23,771
41,060
14,711
30,352
49,129
43,466
64,777
55,048
27,546
111,990
32,304
21,302
20,014
9,771
14,677
37,956
35,838
19,389
44,364
35,959
8,074
46,255
24,131
13,217
27,888
26,949
11,524
16,018
37,055
69,288
24,296
29,055
10,346
29,816
55,674
27,742
31,965
7,461
41,881
36,355
40,493
28,226
9,856
38,723
15,401
32,493
11,924
114,591
19,007
20,816
57,490
13,548
5,082
17,744
15,110
$1,119
672
2,569
554
625
2,083
214
9,456
3,817
4,460
1,549
784
—
2,350
2,651
—
1,736
3,650
261
263
4,842
276
2,403
7,006
3,897
1,732
2,257
891
1,410
3,250
196
110
4,501
5,310
2,882
285
2,677
1,512
180
5,010
7,408
1,843
5,004
362
3,001
4,961
871
1,722
3,560
2,609
225
919
1,369
4,077
5,402
4,318
914
2,570
2,075
198
962
8,162
132
138
6,447
2,608
1,242
1,544
2,667
2011
2010
2010
2011
2012
2010
2012
1997
1999
2011
1998
2012
2012
2010
2011
2012
2011
2011
2012
2012
2011
2012
2011
2007
2010
2011
2011
2011
2011
2006
2012
2012
2010
2011
2000
2012
2011
2010
2012
2005
1998
2010
2006
2012
2011
2010
2010
2011
2012
2011
2012
2007
2012
2010
2010
2010
2011
2011
2010
2012
2008
2011
2012
2012
2011
2005
2003
2012
2011
1996
1999
1984
1923
2009
1999
2000
1999
1998
1998
1953
2009
2005
1996
1971
2003
1995
1999
2003
2002
2009
2001
1998
2010
1997
2001
1965
1997
2000
2009
2007
1997
1990
2000
1988
2003
1987
1999
2001
1987
1999
1994
2007
2001
1999
1989
1988
2009
1998
1995
1999
1999
2005
1980
1986
1994
1999
2009
1999
1999
1971
2009
2001
1999
1998
1986
1998
1999
2001
Description
Encumbrances
Initial Cost to Company
Building &
Improvements
Land
Cost Capitalized
Subsequent to
Acquisition
Mesa, AZ . . . . . . . . . . . . . . . . . . . . . . .
Middletown, CT . . . . . . . . . . . . . . . . .
Middletown, RI . . . . . . . . . . . . . . . . . .
Milford, CT . . . . . . . . . . . . . . . . . . . . .
Mill Creek, WA . . . . . . . . . . . . . . . . . .
Minnetonka, MN . . . . . . . . . . . . . . . . .
Monroe, WA . . . . . . . . . . . . . . . . . . . .
Mystic, CT . . . . . . . . . . . . . . . . . . . . . .
Naples, FL . . . . . . . . . . . . . . . . . . . . . .
Nashville, TN . . . . . . . . . . . . . . . . . . .
Newton, MA . . . . . . . . . . . . . . . . . . . .
Newton, MA . . . . . . . . . . . . . . . . . . . .
Newton, MA . . . . . . . . . . . . . . . . . . . .
Niantic, CT . . . . . . . . . . . . . . . . . . . . .
North Andover, MA . . . . . . . . . . . . . .
North Chelmsford, MA . . . . . . . . . . . .
Oak Park, IL . . . . . . . . . . . . . . . . . . . .
Oceanside, CA . . . . . . . . . . . . . . . . . . .
Olympia, WA . . . . . . . . . . . . . . . . . . .
Overland Park, KS . . . . . . . . . . . . . . . .
Pembroke, ON . . . . . . . . . . . . . . . . . . .
Plano, TX . . . . . . . . . . . . . . . . . . . . . .
Providence, RI . . . . . . . . . . . . . . . . . . .
Purley, England . . . . . . . . . . . . . . . . . .
Puyallup, WA . . . . . . . . . . . . . . . . . . .
Quincy, MA . . . . . . . . . . . . . . . . . . . . .
Rancho Palos Verdes, CA . . . . . . . . . .
Redondo Beach, CA . . . . . . . . . . . . . .
Renton, WA . . . . . . . . . . . . . . . . . . . . .
Rocky Hill, CT . . . . . . . . . . . . . . . . . .
Rohnert Park, CA . . . . . . . . . . . . . . . .
Romeoville, IL . . . . . . . . . . . . . . . . . .
Roswell, GA . . . . . . . . . . . . . . . . . . . .
Roswell, GA . . . . . . . . . . . . . . . . . . . .
Sacramento, CA . . . . . . . . . . . . . . . . .
Salem, NH . . . . . . . . . . . . . . . . . . . . . .
Salt Lake City, UT . . . . . . . . . . . . . . .
San Diego, CA . . . . . . . . . . . . . . . . . . .
San Diego, CA . . . . . . . . . . . . . . . . . . .
San Jose, CA . . . . . . . . . . . . . . . . . . . .
San Jose, CA . . . . . . . . . . . . . . . . . . . .
San Juan Capistrano, CA . . . . . . . . . . .
San Ramon, CA . . . . . . . . . . . . . . . . . .
Sandy Springs, GA . . . . . . . . . . . . . . .
Santa Maria, CA . . . . . . . . . . . . . . . . .
Scottsdale, AZ . . . . . . . . . . . . . . . . . . .
Seatlle, WA . . . . . . . . . . . . . . . . . . . . .
Seattle, WA . . . . . . . . . . . . . . . . . . . . .
Seattle, WA . . . . . . . . . . . . . . . . . . . . .
Seattle, WA . . . . . . . . . . . . . . . . . . . . .
Seattle, WA . . . . . . . . . . . . . . . . . . . . .
Sevenoaks, England . . . . . . . . . . . . . .
Shelburne, VT . . . . . . . . . . . . . . . . . . .
Sidcup, England . . . . . . . . . . . . . . . . .
Solihull, England . . . . . . . . . . . . . . . . .
Sonoma, CA . . . . . . . . . . . . . . . . . . . .
South Windsor, CT . . . . . . . . . . . . . . .
Stanwood, WA . . . . . . . . . . . . . . . . . .
Stockton, CA . . . . . . . . . . . . . . . . . . . .
Sugar Land, TX . . . . . . . . . . . . . . . . . .
Sun City West, AZ . . . . . . . . . . . . . . .
Sunnyvale, CA . . . . . . . . . . . . . . . . . .
Suwanee, GA . . . . . . . . . . . . . . . . . . . .
Tacoma, WA . . . . . . . . . . . . . . . . . . . .
The Woodlands, TX . . . . . . . . . . . . . .
Toledo, OH . . . . . . . . . . . . . . . . . . . . .
Trumbull, CT . . . . . . . . . . . . . . . . . . . .
Tucson, AZ . . . . . . . . . . . . . . . . . . . . .
Tulsa, OK . . . . . . . . . . . . . . . . . . . . . .
Tulsa, OK . . . . . . . . . . . . . . . . . . . . . .
Tustin, CA . . . . . . . . . . . . . . . . . . . . . .
Vacaville, CA . . . . . . . . . . . . . . . . . . .
Vallejo, CA . . . . . . . . . . . . . . . . . . . . .
Vallejo, CA . . . . . . . . . . . . . . . . . . . . .
Vancouver, WA . . . . . . . . . . . . . . . . . .
Victoria, BC . . . . . . . . . . . . . . . . . . . .
Virginia Water, England . . . . . . . . . . .
Warwick, RI
. . . . . . . . . . . . . . . . . . . .
Waterbury, CT . . . . . . . . . . . . . . . . . . .
Whittier, CA . . . . . . . . . . . . . . . . . . . .
Wilbraham, MA . . . . . . . . . . . . . . . . .
6,201
16,026
17,044
11,956
29,622
14,935
13,791
11,956
—
—
29,000
16,745
—
—
23,530
12,401
—
13,173
7,026
3,648
—
4,286
—
—
11,586
8,585
—
7,873
22,620
10,811
13,912
—
8,000
—
10,456
21,686
—
—
—
—
—
—
9,371
—
—
—
48,543
7,758
7,575
9,263
28,965
—
20,605
—
—
15,082
—
9,922
3,009
5,775
12,886
—
—
19,180
2,619
16,352
25,566
4,852
6,367
8,321
7,014
14,306
14,322
7,550
12,011
8,168
—
16,535
25,629
11,605
11,574
950
1,430
2,480
3,210
10,150
2,080
2,560
1,400
1,716
3,900
2,250
2,500
3,360
1,320
1,960
880
1,250
2,160
550
1,540
2,603
840
2,600
9,676
1,150
1,350
5,450
—
3,080
810
6,500
854
1,107
2,080
940
980
1,360
4,200
5,810
2,850
3,280
1,390
2,430
2,214
6,050
2,500
6,790
5,190
3,420
2,630
10,670
8,131
720
9,773
6,667
1,100
3,000
2,260
2,280
960
1,250
5,420
1,560
2,400
480
2,040
2,850
830
1,330
1,500
840
900
4,000
2,330
1,820
3,716
7,106
2,400
2,460
4,470
660
576
190
325
253
419
—
243
213
1,647
—
116
1,058
195
241
209
199
—
106
195
—
—
154
485
—
241
162
—
1
34
147
1,519
58,559
498
—
112
159
115
4
—
21
—
136
68
—
217
853
261
374
64
41
143
—
145
—
—
1,318
395
264
149
1,002
—
—
—
59
93
428
129
—
293
255
22
1,335
1,786
95
107
—
—
343
368
277
146
9,087
24,242
24,628
17,364
60,274
24,360
34,460
18,274
17,306
35,788
43,614
30,681
25,099
25,986
34,976
18,478
40,383
18,352
16,689
16,269
13,630
8,538
27,546
35,251
20,776
12,584
60,034
9,557
51,824
16,351
18,700
12,646
9,627
6,486
14,781
32,721
19,691
30,707
63,078
35,098
46,823
6,942
17,488
8,360
50,658
3,890
85,369
9,350
15,555
10,257
37,291
51,963
31,041
56,163
55,336
18,400
29,295
28,474
5,983
31,423
21,778
41,682
11,538
35,053
12,379
47,129
37,685
6,179
21,285
20,861
15,299
17,100
18,000
15,407
19,042
18,977
29,937
24,635
39,547
22,151
17,639
131
Gross Amount at Which
Carried at Close of Period
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
9,663
24,432
24,953
17,617
60,693
24,360
34,703
18,487
18,953
35,788
43,730
31,739
25,294
26,227
35,185
18,677
40,383
18,458
16,884
16,269
13,630
8,691
28,031
35,251
21,017
12,746
60,034
9,558
51,858
16,498
20,219
65,945
10,125
6,486
14,893
32,880
19,805
30,711
63,078
35,119
46,823
7,078
17,556
8,360
50,875
4,743
85,631
9,724
15,619
10,298
37,434
51,963
31,187
56,163
55,336
19,718
29,690
28,738
6,132
32,425
21,778
41,682
11,538
35,111
12,472
47,557
37,814
6,179
21,578
21,116
15,321
18,435
19,786
15,502
19,149
18,977
29,937
24,978
39,915
22,428
17,784
3,228
3,227
3,143
2,361
9,422
144
4,098
1,928
14,963
2,595
4,354
3,633
3,272
2,319
3,882
1,617
212
1,777
1,976
103
429
989
4,658
—
2,616
1,480
347
1,531
3,327
1,638
3,798
5,084
6,606
50
1,842
2,942
3,288
865
4,168
2,598
290
2,276
2,060
987
3,681
572
5,152
2,134
2,161
1,515
6,455
1,104
2,534
—
893
3,657
4,022
3,681
930
3,340
127
262
1,106
2,251
1,170
6,818
4,901
36
2,709
2,959
1,289
3,481
3,674
2,153
2,425
650
—
4,046
6,036
4,200
1,769
1999
2011
2011
2011
2010
2012
2010
2011
1997
2012
2011
2011
2011
2011
2011
2011
2012
2011
2010
2012
2012
2011
2011
2012
2010
2011
2012
2011
2011
2011
2005
2006
1997
2012
2010
2011
2011
2011
2012
2011
2012
2000
2010
2012
2011
2008
2011
2010
2010
2010
2010
2012
2011
2012
2012
2005
2011
2010
2010
2011
2012
2012
2012
2011
2011
2010
2011
2012
2010
2010
2011
2005
2005
2010
2010
2012
2012
2011
2011
2010
2011
2000
1999
1998
1999
1998
1999
1994
2001
1999
1999
1996
1996
1994
2001
1995
1998
2004
2005
1995
1998
1999
1996
1998
2005
1985
1998
2004
1957
2007
2000
1986
2010
1999
1997
1978
2000
1986
2011
2001
2009
2002
2001
1989
1997
2001
1998
2009
1962
2000
2003
2005
2009
1988
2000
2009
1988
1999
1998
1988
1996
1998
2002
2000
2008
1999
1985
1998
1997
1986
1984
1965
1987
1989
1990
2006
2002
2002
1998
1998
1988
2000
Land
950
1,430
2,480
3,210
10,150
2,080
2,560
1,400
1,716
3,900
2,250
2,500
3,360
1,320
1,960
880
1,250
2,160
550
1,540
2,603
840
2,600
9,676
1,150
1,350
5,450
—
3,080
810
6,500
6,114
1,107
2,080
940
980
1,360
4,200
5,810
2,850
3,280
1,390
2,430
2,214
6,050
2,500
6,790
5,190
3,420
2,630
10,670
8,131
720
9,773
6,667
1,100
3,000
2,260
2,280
960
1,250
5,420
1,560
2,400
480
2,040
2,850
830
1,330
1,500
840
900
4,000
2,330
1,820
3,716
7,106
2,400
2,460
4,470
660
Description
Encumbrances
Initial Cost to Company
Building &
Improvements
Land
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Land
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Winchester, England . . . . . . . . . . .
Woodbridge, CT . . . . . . . . . . . . . .
Worcester, MA . . . . . . . . . . . . . . .
Yarmouth, ME . . . . . . . . . . . . . . . .
Seniors housing operating
—
9,349
14,500
18,061
7,887
1,370
1,140
450
37,873
14,219
21,664
27,711
—
166
235
200
7,887
1,370
1,140
450
37,873
14,385
21,899
27,911
744
2,775
2,145
2,477
2012
2011
2011
2011
total . . . . . . . . . . . . . . . . . . . . . .
$1,369,526
$388,015
$4,239,499
$131,030
$394,065
$4,364,478
$390,907
Year
Built
2010
1998
1999
1999
132
Health Care REIT, Inc.
Schedule III
Real Estate and Accumulated Depreciation
December 31, 2012
(Dollars in thousands)
Description
Encumbrances
Land
Building &
Improvements
Initial Cost to Company
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Land
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
Medical facilities:
Akron, OH . . . . . . . . . . . . . . . . . . . . . . .
Akron, OH . . . . . . . . . . . . . . . . . . . . . . .
Allen, TX . . . . . . . . . . . . . . . . . . . . . . . .
Alpharetta, GA . . . . . . . . . . . . . . . . . . .
Alpharetta, GA . . . . . . . . . . . . . . . . . . .
Alpharetta, GA . . . . . . . . . . . . . . . . . . .
Alpharetta, GA . . . . . . . . . . . . . . . . . . .
Alpharetta, GA . . . . . . . . . . . . . . . . . . .
Arcadia, CA . . . . . . . . . . . . . . . . . . . . . .
Atlanta, GA . . . . . . . . . . . . . . . . . . . . . .
Atlanta, GA . . . . . . . . . . . . . . . . . . . . . .
Atlanta, GA . . . . . . . . . . . . . . . . . . . . . .
Bartlett, TN . . . . . . . . . . . . . . . . . . . . . .
Bellaire, TX . . . . . . . . . . . . . . . . . . . . . .
Bellaire, TX . . . . . . . . . . . . . . . . . . . . . .
Bellevue, NE . . . . . . . . . . . . . . . . . . . . .
Bellevue, NE . . . . . . . . . . . . . . . . . . . . .
Bellingham, MA . . . . . . . . . . . . . . . . . .
Birmingham, AL . . . . . . . . . . . . . . . . . .
Birmingham, AL . . . . . . . . . . . . . . . . . .
Birmingham, AL . . . . . . . . . . . . . . . . . .
Boardman, OH . . . . . . . . . . . . . . . . . . .
Boardman, OH . . . . . . . . . . . . . . . . . . .
Boca Raton, FL . . . . . . . . . . . . . . . . . . .
Boca Raton, FL . . . . . . . . . . . . . . . . . . .
Boerne, TX . . . . . . . . . . . . . . . . . . . . . .
Bowling Green, KY . . . . . . . . . . . . . . . .
Boynton Beach, FL . . . . . . . . . . . . . . . .
Boynton Beach, FL . . . . . . . . . . . . . . . .
Boynton Beach, FL . . . . . . . . . . . . . . . .
Bridgeton, MO . . . . . . . . . . . . . . . . . . .
Bridgeton, MO . . . . . . . . . . . . . . . . . . .
Burleson, TX . . . . . . . . . . . . . . . . . . . . .
Carmel, IN . . . . . . . . . . . . . . . . . . . . . . .
Carmel, IN . . . . . . . . . . . . . . . . . . . . . . .
Cedar Grove, WI . . . . . . . . . . . . . . . . . .
Claremore, OK . . . . . . . . . . . . . . . . . . .
Clarkson Valley, MO . . . . . . . . . . . . . .
Columbia, MD . . . . . . . . . . . . . . . . . . . .
Columbus, OH . . . . . . . . . . . . . . . . . . . .
Coral Springs, FL . . . . . . . . . . . . . . . . .
Dade City, FL . . . . . . . . . . . . . . . . . . . .
Dallas, TX . . . . . . . . . . . . . . . . . . . . . . .
Dallas, TX . . . . . . . . . . . . . . . . . . . . . . .
Dayton, OH . . . . . . . . . . . . . . . . . . . . . .
Deerfield Beach, FL . . . . . . . . . . . . . . .
Delray Beach, FL . . . . . . . . . . . . . . . . .
Denton, TX . . . . . . . . . . . . . . . . . . . . . .
Edina, MN . . . . . . . . . . . . . . . . . . . . . . .
El Paso, TX . . . . . . . . . . . . . . . . . . . . . .
El Paso, TX . . . . . . . . . . . . . . . . . . . . . .
El Paso, TX . . . . . . . . . . . . . . . . . . . . . .
Everett, WA . . . . . . . . . . . . . . . . . . . . . .
Fayetteville, GA . . . . . . . . . . . . . . . . . .
Fort Wayne, IN . . . . . . . . . . . . . . . . . . .
Fort Wayne, IN . . . . . . . . . . . . . . . . . . .
Fort Worth, TX . . . . . . . . . . . . . . . . . . .
Franklin, TN . . . . . . . . . . . . . . . . . . . . .
Franklin, WI
. . . . . . . . . . . . . . . . . . . . .
Fresno, CA . . . . . . . . . . . . . . . . . . . . . .
Frisco, TX . . . . . . . . . . . . . . . . . . . . . . .
Frisco, TX . . . . . . . . . . . . . . . . . . . . . . .
Frisco, TX . . . . . . . . . . . . . . . . . . . . . . .
Gallatin, TN . . . . . . . . . . . . . . . . . . . . . .
Germantown, TN . . . . . . . . . . . . . . . . . .
Glendale, CA . . . . . . . . . . . . . . . . . . . . .
Grand Prairie, TX . . . . . . . . . . . . . . . . .
Greeley, CO . . . . . . . . . . . . . . . . . . . . . .
Green Bay, WI . . . . . . . . . . . . . . . . . . . .
$ —
—
12,080
—
—
—
—
—
9,750
—
17,993
26,745
8,215
—
—
—
—
—
—
—
—
—
—
13,259
—
—
—
4,420
3,965
5,921
—
11,359
—
—
—
—
8,131
—
—
—
—
—
14,926
28,450
—
—
—
11,994
—
10,005
—
—
—
3,202
16,822
—
—
—
5,383
—
8,881
—
—
—
—
7,960
—
—
9,017
$ 821
300
726
233
498
417
1,700
628
5,408
4,931
1,945
—
187
4,551
2,972
—
4,500
9,270
52
124
476
80
1,200
109
31
50
3,800
2,048
2,048
214
—
450
10
2,280
2,152
113
132
—
2,258
415
1,598
1,211
137
462
730
2,408
1,882
—
310
677
600
2,400
4,842
959
1,105
170
450
2,338
6,872
2,500
—
—
130
20
3,049
37
981
877
—
$ 12,079
20,200
14,520
18,205
32,729
14,406
162
16,063
23,219
18,720
23,437
42,468
15,015
46,105
33,445
15,833
109,719
—
9,950
12,238
18,994
11,787
12,800
34,002
11,659
13,317
26,700
7,692
7,403
5,611
30,221
21,221
11,619
18,820
18,591
618
12,829
35,592
18,861
6,764
10,627
5,511
28,690
53,963
6,515
7,482
34,767
19,407
15,132
17,075
6,700
32,800
26,010
7,540
22,836
8,232
13,615
12,138
7,550
35,800
18,635
15,309
16,445
19,432
12,456
18,398
6,086
6,706
14,891
133
$ —
—
—
763
2,654
27
—
1,114
1,933
2,937
—
—
1,252
—
1,966
868
—
—
201
141
196
342
—
2,096
—
—
149
375
964
7,218
278
21
220
132
2,837
—
302
—
—
—
1,080
—
1,067
—
145
187
4,857
628
—
1,471
—
424
—
721
—
—
—
1,468
—
118
246
1,566
—
478
597
198
—
125
—
$ 821
300
726
773
1,769
476
1,862
555
5,618
5,301
1,945
—
187
4,551
2,972
—
4,500
9,270
52
124
476
80
1,200
214
31
50
3,800
2,048
2,048
117
—
450
10
2,280
2,026
113
132
—
2,258
415
1,636
1,211
137
462
730
2,408
1,943
—
310
677
600
2,400
4,842
986
1,105
170
450
2,338
6,872
2,500
—
—
130
20
3,049
37
981
877
—
$ 12,079
20,200
14,520
18,428
34,111
14,375
—
17,250
24,942
21,287
23,437
42,468
16,267
46,105
35,412
16,701
109,719
—
10,151
12,379
19,190
12,130
12,800
35,993
11,659
13,317
26,849
8,067
8,367
12,927
30,499
21,242
11,838
18,952
21,554
618
13,131
35,592
18,861
6,764
11,668
5,511
29,757
53,963
6,660
7,668
39,563
20,035
15,132
18,546
6,700
33,224
26,010
8,234
22,836
8,232
13,615
13,606
7,550
35,918
18,881
16,875
16,445
19,910
13,053
18,596
6,086
6,831
14,891
$
77
1,585
1,275
1,037
3,088
1,208
—
1,157
5,175
5,415
699
1,799
3,417
7,883
6,876
1,525
7,106
—
2,196
2,593
3,744
1,214
1,723
7,475
—
870
3,066
2,140
1,855
2,524
762
2,190
871
1,810
2,171
64
2,881
3,782
—
12
3,068
282
6,340
1,883
548
727
9,440
3,560
1,321
4,344
823
7,570
1,828
1,873
473
1,204
748
2,740
820
4,109
3,859
3,692
319
2,761
2,721
3,743
277
1,700
1,429
2012
2009
2012
2011
2011
2011
2011
2011
2006
2006
2012
2012
2007
2006
2006
2010
2008
2007
2006
2006
2006
2010
2008
2006
2012
2011
2008
2006
2006
2007
2011
2010
2011
2011
2011
2010
2007
2009
2012
2012
2006
2011
2006
2012
2011
2011
2006
2007
2010
2006
2008
2008
2010
2006
2012
2006
2010
2007
2010
2008
2007
2007
2012
2010
2006
2007
2012
2007
2010
2010
2008
2006
1993
1999
2003
2007
1984
1991
1984
2006
2004
2005
2005
2010
2010
1971
1985
1989
2007
2008
1995
1993
2007
1992
1995
1997
1996
2011
2006
2007
2005
2007
1986
2005
2010
2002
1994
1992
1998
1995
2004
1988
2001
1985
2005
2003
1997
2003
2003
2011
1999
2004
2006
2011
1988
1984
1991
2004
2004
2010
1997
2002
2002
2009
1997
2002
Description
Encumbrances
Initial Cost to Company
Building &
Improvements
Land
Cost Capitalized
Subsequent to
Acquisition
Green Bay, WI . . . . . . . . . . . . . . . . . . .
Green Bay, WI . . . . . . . . . . . . . . . . . . .
Greeneville, TN . . . . . . . . . . . . . . . . . .
Greenwood, IN . . . . . . . . . . . . . . . . . .
Harker Heights, TX . . . . . . . . . . . . . . .
High Point, NC . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . .
Hudson, OH . . . . . . . . . . . . . . . . . . . . .
Jupiter, FL . . . . . . . . . . . . . . . . . . . . . .
Jupiter, FL . . . . . . . . . . . . . . . . . . . . . .
Katy, TX . . . . . . . . . . . . . . . . . . . . . . .
Kenosha, WI . . . . . . . . . . . . . . . . . . . .
Killeen, TX . . . . . . . . . . . . . . . . . . . . .
Lafayette, LA . . . . . . . . . . . . . . . . . . .
Lake St Louis, MO . . . . . . . . . . . . . . .
Lakeway, TX . . . . . . . . . . . . . . . . . . . .
Lakewood, CA . . . . . . . . . . . . . . . . . .
Lakewood, WA . . . . . . . . . . . . . . . . . .
Las Vegas, NV . . . . . . . . . . . . . . . . . .
Las Vegas, NV . . . . . . . . . . . . . . . . . .
Las Vegas, NV . . . . . . . . . . . . . . . . . .
Las Vegas, NV . . . . . . . . . . . . . . . . . .
Las Vegas , NV . . . . . . . . . . . . . . . . . .
Lenexa, KS . . . . . . . . . . . . . . . . . . . . .
Lincoln, NE . . . . . . . . . . . . . . . . . . . . .
Los Alamitos, CA . . . . . . . . . . . . . . . .
Los Gatos, CA . . . . . . . . . . . . . . . . . . .
Loxahatchee, FL . . . . . . . . . . . . . . . . .
Loxahatchee, FL . . . . . . . . . . . . . . . . .
Loxahatchee, FL . . . . . . . . . . . . . . . . .
Marinette, WI
. . . . . . . . . . . . . . . . . . .
Marlton, NJ . . . . . . . . . . . . . . . . . . . . .
Mechanicsburg, PA . . . . . . . . . . . . . . .
Merced, CA . . . . . . . . . . . . . . . . . . . . .
Meridian, ID . . . . . . . . . . . . . . . . . . . .
Merriam, KS . . . . . . . . . . . . . . . . . . . .
Merriam, KS . . . . . . . . . . . . . . . . . . . .
Merriam, KS . . . . . . . . . . . . . . . . . . . .
Merriam, KS . . . . . . . . . . . . . . . . . . . .
Merrillville, IN . . . . . . . . . . . . . . . . . .
Merrillville, IN . . . . . . . . . . . . . . . . . .
Mesa, AZ . . . . . . . . . . . . . . . . . . . . . . .
Mesquite, TX . . . . . . . . . . . . . . . . . . . .
Middletown, NY . . . . . . . . . . . . . . . . .
Milwaukee, WI . . . . . . . . . . . . . . . . . .
Milwaukee, WI . . . . . . . . . . . . . . . . . .
Milwaukee, WI . . . . . . . . . . . . . . . . . .
Milwaukee, WI . . . . . . . . . . . . . . . . . .
Monticello, MN . . . . . . . . . . . . . . . . . .
Moorestown, NJ . . . . . . . . . . . . . . . . .
Morrow, GA . . . . . . . . . . . . . . . . . . . .
Mount Juliet, TN . . . . . . . . . . . . . . . . .
Mount Vernon, IL . . . . . . . . . . . . . . . .
Murrieta, CA . . . . . . . . . . . . . . . . . . . .
Murrieta, CA . . . . . . . . . . . . . . . . . . . .
Muskego, WI . . . . . . . . . . . . . . . . . . . .
Nashville, TN . . . . . . . . . . . . . . . . . . .
Nashville , TN . . . . . . . . . . . . . . . . . . .
New Berlin, WI . . . . . . . . . . . . . . . . . .
Niagara Falls, NY . . . . . . . . . . . . . . . .
Niagara Falls, NY . . . . . . . . . . . . . . . .
Orange Village, OH . . . . . . . . . . . . . . .
Oro Valley, AZ . . . . . . . . . . . . . . . . . .
Oshkosh, WI . . . . . . . . . . . . . . . . . . . .
Oshkosh, WI . . . . . . . . . . . . . . . . . . . .
Palm Springs, FL . . . . . . . . . . . . . . . . .
Palm Springs, FL . . . . . . . . . . . . . . . . .
Palm Springs , CA . . . . . . . . . . . . . . . .
Palmer, AK . . . . . . . . . . . . . . . . . . . . .
Pearland, TX . . . . . . . . . . . . . . . . . . . .
Pearland, TX . . . . . . . . . . . . . . . . . . . .
Pewaukee, WI . . . . . . . . . . . . . . . . . . .
Phoenix, AZ . . . . . . . . . . . . . . . . . . . .
Pineville, NC . . . . . . . . . . . . . . . . . . . .
Plano, TX . . . . . . . . . . . . . . . . . . . . . .
Plano, TX . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
14,000
—
—
6,972
4,336
—
9,934
—
—
—
—
—
7,609
—
2,961
—
—
5,803
11,905
—
8,085
—
—
—
2,600
7,548
—
—
—
—
—
—
—
15,356
—
—
—
—
—
4,429
9,762
2,442
22,383
9,522
—
—
4,456
—
—
—
1,174
—
—
4,527
—
—
—
10,011
—
9,338
2,666
—
—
19,237
—
1,005
—
27,902
—
—
54,620
—
—
970
8,316
1,907
2,595
10,395
5,837
3,688
12,815
378
91
2,473
2,252
2,825
1,099
—
760
1,928
240
2,801
146
72
2,319
433
6,127
580
74
540
1,420
39
488
1,637
1,340
1,553
—
—
1,350
—
3,600
176
81
336
182
—
700
1,558
496
1,756
540
1,425
922
—
61
—
818
1,566
—
—
8,800
964
4,300
1,806
3,739
1,145
388
610
89
—
—
739
1,182
365
217
781
948
4,700
1,149
961
5,423
793
—
—
8
—
—
—
2
—
—
—
—
—
—
129
43
—
—
—
25
1,947
—
1,146
—
916
202
—
—
419
2,347
9
412
1,289
842
57
584
—
410
—
927
251
220
430
—
93
210
154
378
—
1,188
—
—
—
—
—
—
223
1,038
—
484
—
—
7,172
1,322
—
228
47
296
564
—
—
72
196
1,366
745
132
115
—
10,952
2,107
56
—
20,098
11,696
10,032
26,384
3,754
29,013
—
32,986
13,302
44,717
31,020
11,136
13,622
11,415
5,858
1,604
18,058
22,667
10,483
11,937
—
14,885
15,958
4,612
6,921
—
23,420
15,287
16,013
29,692
18,635
22,386
5,048
6,509
4,694
13,538
38,300
16,650
13,772
20,802
7,189
3,122
12,972
7,393
22,134
11,699
9,561
3,834
20,364
8,457
11,519
2,185
44,535
18,489
52,645
8,064
11,697
25,163
46,520
202,412
2,158
—
7,165
8,290
10,574
7,870
7,419
18,339
18,339
15,881
4,066
7,765
12,396
29,705
5,517
4,556
20,669
48,018
6,974
20,752
82,722
134
Gross Amount at Which
Carried at Close of Period
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
20,098
11,696
10,040
26,384
3,754
29,013
9
32,986
13,302
44,717
31,020
11,136
13,622
11,544
5,901
1,604
18,058
22,667
10,509
13,884
—
16,031
15,958
5,527
7,123
—
23,420
15,706
18,360
29,701
19,047
23,675
5,875
6,561
5,264
13,538
38,710
16,650
14,699
21,053
7,409
3,553
12,972
7,486
22,344
11,853
9,939
3,834
21,552
8,457
11,520
2,185
44,535
18,489
52,645
8,261
12,735
25,163
47,004
202,412
2,159
—
8,487
8,290
10,794
7,909
7,715
18,902
18,339
15,881
4,137
7,961
13,762
30,450
5,648
4,671
20,669
58,971
8,965
20,807
82,722
1,892
1,529
957
532
31
260
—
1,284
264
827
1,310
612
—
2,537
1,492
57
1,696
1,973
2,438
1,352
—
3,110
—
1,207
1,570
—
836
3,637
1,459
3,671
3,858
5,499
1,269
1,511
1,129
1,529
4,400
608
1,525
5,365
1,290
259
1,658
978
2,979
1,484
2,503
18
6,070
859
1,526
362
4,091
—
176
2,025
2,741
52
4,058
8,393
203
—
2,234
845
2,797
1,517
1,898
3,770
1,709
1,464
1,047
1,951
2,988
5,671
1,322
1,084
3,825
11,468
1,928
5,855
3,573
2010
2010
2010
2012
2011
2012
2011
2012
2012
2012
2012
2012
2012
2006
2007
2012
2010
2010
2006
2010
2007
2006
2012
2006
2007
2007
2011
2006
2010
2010
2007
2006
2006
2006
2006
2010
2008
2011
2009
2006
2011
2011
2011
2011
2008
2007
2008
2012
2006
2010
2010
2010
2010
2012
2011
2007
2007
2011
2010
2008
2010
2010
2006
2010
2007
2007
2007
2007
2010
2010
2006
2006
2006
2007
2006
2006
2007
2006
2006
2008
2012
Land
—
—
970
8,316
1,907
2,595
10,388
5,837
3,688
12,815
378
91
2,473
2,252
2,825
1,099
—
760
1,928
240
2,801
146
72
2,319
433
6,127
580
74
540
1,420
39
488
1,652
1,345
1,567
—
—
1,350
—
3,600
176
81
336
182
—
700
1,558
496
1,756
540
1,425
922
—
61
—
843
1,566
—
—
8,800
964
11,472
1,806
3,739
1,153
396
610
89
—
—
739
1,182
365
217
781
948
4,700
1,149
1,077
5,423
793
Year
Built
2002
2002
2005
2010
2012
2010
2005
2007
1998
1981
1986
2006
2001
2004
1986
1993
2010
1993
2008
1993
2005
1991
1997
2002
2000
2008
2003
2003
1993
1997
1993
1994
2002
1994
1971
2010
2008
1972
1980
1977
1985
2006
2008
1989
2012
1998
1930
1962
1958
1983
2008
2012
1990
2005
2012
2011
2010
1993
1986
1993
1995
2004
1985
2004
2000
2000
1993
1997
1998
2006
2000
2002
2007
1998
1988
2007
2005
Description
Encumbrances
Initial Cost to Company
Building &
Improvements
Land
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Land
Building &
Improvements
Accumulated
Depreciation(1)
Year
Acquired
Year
Built
Plantation, FL . . . . . . . . . . . . . . . .
Plantation, FL . . . . . . . . . . . . . . . .
Plymouth, WI
. . . . . . . . . . . . . . . .
Portland, ME . . . . . . . . . . . . . . . . .
Raleigh, NC . . . . . . . . . . . . . . . . . .
Redmond, WA . . . . . . . . . . . . . . . .
Reno, NV . . . . . . . . . . . . . . . . . . . .
Richmond, VA . . . . . . . . . . . . . . .
Rockwall, TX . . . . . . . . . . . . . . . .
Rogers, AR . . . . . . . . . . . . . . . . . .
Rolla, MO . . . . . . . . . . . . . . . . . . .
Roswell, NM . . . . . . . . . . . . . . . . .
Roswell, NM . . . . . . . . . . . . . . . . .
Roswell, NM . . . . . . . . . . . . . . . . .
Ruston, LA . . . . . . . . . . . . . . . . . .
Sacramento, CA . . . . . . . . . . . . . .
San Antonio, TX . . . . . . . . . . . . . .
San Antonio, TX . . . . . . . . . . . . . .
San Antonio, TX . . . . . . . . . . . . . .
San Bernardino, CA . . . . . . . . . . .
San Diego, CA . . . . . . . . . . . . . . . .
Sarasota, FL . . . . . . . . . . . . . . . . . .
Sarasota, FL . . . . . . . . . . . . . . . . . .
Seattle, WA . . . . . . . . . . . . . . . . . .
Sewell, NJ . . . . . . . . . . . . . . . . . . .
Shakopee, MN . . . . . . . . . . . . . . . .
Shakopee, MN . . . . . . . . . . . . . . . .
Sheboygan, WI . . . . . . . . . . . . . . .
Somerville, NJ . . . . . . . . . . . . . . . .
Southlake, TX . . . . . . . . . . . . . . . .
Southlake, TX . . . . . . . . . . . . . . . .
St. Louis, MO . . . . . . . . . . . . . . . .
St. Paul, MN . . . . . . . . . . . . . . . . .
Stafford, VA . . . . . . . . . . . . . . . . .
Suffern, NY . . . . . . . . . . . . . . . . . .
Suffolk, VA . . . . . . . . . . . . . . . . . .
Sugar Land, TX . . . . . . . . . . . . . . .
Summit, WI . . . . . . . . . . . . . . . . . .
Tallahassee, FL . . . . . . . . . . . . . . .
Tampa, FL . . . . . . . . . . . . . . . . . . .
Tampa, FL . . . . . . . . . . . . . . . . . . .
Tampa, FL . . . . . . . . . . . . . . . . . . .
Temple, TX . . . . . . . . . . . . . . . . . .
Tomball, TX . . . . . . . . . . . . . . . . .
Tucson, AZ . . . . . . . . . . . . . . . . . .
Tulsa, OK . . . . . . . . . . . . . . . . . . .
Van Nuys, CA . . . . . . . . . . . . . . . .
Virginia Beach, VA . . . . . . . . . . . .
Voorhees, NJ . . . . . . . . . . . . . . . . .
Voorhees, NJ . . . . . . . . . . . . . . . . .
Webster, TX . . . . . . . . . . . . . . . . .
Wellington, FL . . . . . . . . . . . . . . .
Wellington , FL . . . . . . . . . . . . . . .
West Allis, WI . . . . . . . . . . . . . . . .
West Palm Beach, FL . . . . . . . . . .
West Palm Beach, FL . . . . . . . . . .
West Seneca, NY . . . . . . . . . . . . . .
Westerville, OH . . . . . . . . . . . . . . .
Zephyrhills, FL . . . . . . . . . . . . . . .
9,428
8,765
1,370
15,697
—
—
—
—
—
—
—
1,806
5,078
—
—
—
—
18,400
—
—
—
—
—
—
—
6,932
11,743
1,892
—
11,680
18,518
7,281
26,105
—
—
—
8,905
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,768
6,071
3,475
6,602
6,092
12,051
—
—
8,563
8,848
1,250
655
1,486
5,015
1,117
2,838
132
1,062
1,931
183
883
762
710
866
2,050
4,518
—
3,700
—
3,360
62
4,410
—
420
640
1,012
3,400
592
698
336
2,681
—
622
1,530
3,513
2,899
—
1,210
2,208
4,319
2,900
1,404
1,302
3,003
—
827
6,404
—
360
107
388
1,106
628
610
917
2,122
3,875
10,666
9,262
1,870
25,500
11,200
26,697
21,972
26,305
17,056
28,680
47,640
5,851
15,984
17,171
9,790
12,756
16,251
29,905
17,303
14,300
22,003
19,140
46,348
35,787
53,360
11,360
18,089
2,216
22,244
17,905
30,524
17,247
39,507
11,260
35,220
10,979
15,527
87,666
14,719
19,572
6,464
12,234
9,851
5,071
4,925
6,025
36,187
18,289
24,251
96,006
5,940
16,933
13,697
3,309
14,740
14,618
22,435
5,403
23,907
2,378
249
—
412
1,762
—
676
—
—
—
—
—
—
—
—
913
2,307
—
—
687
1,845
—
—
2,055
4,355
8
—
—
2
—
—
939
—
313
1,985
540
—
—
2,730
—
—
—
—
880
662
20
—
237
1,313
—
8,178
381
144
—
121
116
1,759
—
3,331
8,575
8,896
1,250
655
1,486
5,015
1,117
2,838
132
1,062
1,931
183
883
762
710
866
2,050
4,518
—
3,700
—
3,360
62
4,410
—
420
640
1,012
3,400
592
698
336
2,681
—
622
1,538
3,513
2,899
—
1,210
2,208
4,319
2,900
1,404
1,302
3,003
—
895
6,422
—
2,418
107
388
1,106
628
610
1,628
2,122
3,875
13,033
9,462
1,870
25,912
12,962
26,697
22,648
26,305
17,056
28,680
47,639
5,851
15,984
17,171
9,790
13,668
18,559
29,905
17,303
14,987
23,848
19,140
46,348
37,843
57,715
11,368
18,089
2,216
22,246
17,905
30,524
18,186
39,507
11,573
37,204
11,511
15,527
87,666
17,449
19,572
6,464
12,234
9,851
5,951
5,587
6,045
36,187
18,458
25,546
96,006
12,060
17,314
13,841
3,309
14,861
14,734
23,482
5,403
27,237
3,839
4,775
214
1,395
1,064
2,049
4,960
—
735
1,504
1,984
301
680
583
388
2,764
5,471
1,754
3,735
1,617
2,491
670
81
3,140
8,221
1,112
1,252
256
2,457
752
998
3,851
2,594
1,323
1,558
1,748
—
11,954
1,295
700
321
536
121
1,721
1,377
1,955
3,281
1,647
4,899
2,689
3,056
3,181
2,668
456
3,332
3,908
4,871
14
1,273
2006
2006
2010
2011
2011
2010
2006
2012
2012
2011
2011
2011
2011
2011
2011
2006
2006
2012
2007
2008
2008
2011
2012
2010
2007
2010
2010
2010
2008
2012
2012
2007
2011
2008
2011
2010
2012
2008
2010
2012
2012
2011
2011
2006
2008
2006
2009
2011
2006
2010
2006
2006
2007
2010
2006
2006
2007
2012
2011
1997
1996
1991
2008
2007
2011
1991
2008
2008
2008
2009
2004
2006
2009
1988
1990
1999
1986
2007
1993
1992
2006
1990
2010
2009
1996
2007
1958
2007
2004
2004
2001
2007
2009
2007
2007
2005
2009
2011
2006
1985
2003
2012
1982
1995
1992
1991
2007
1997
2012
1991
2000
2003
1961
1993
1991
1990
2001
1974
Medical facilities total: . . . . . . . .
$713,720
$333,112
$4,027,512
$127,413
$345,938
$4,142,095
$456,935
135
Health Care REIT, Inc.
Schedule III
Real Estate and Accumulated Depreciation
December 31, 2012
(Dollars in thousands)
Description
Encumbrances
Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition
Buildings &
Improvements
Land
Gross Amount at Which
Carried at Close of Period
Land
Buildings &
Improvements
Accumulated
Depreciation
Year
Acquired
Year
Built
Assets held for sale:
Brighton, MA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Durham, NC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fairhaven, MA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hamden, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hopedale, MA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lakeway, TX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malabar, FL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melbourne, FL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melbourne, FL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melbourne, FL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melbourne, FL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Midwest City, OK . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Haven, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Newburyport, MA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Norwalk, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oklahoma City, OK . . . . . . . . . . . . . . . . . . . . . . . . . .
Prospect, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quincy, MA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Hill, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Torrington, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Viera, FL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Waterbury, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Waterford, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Hartford, CT . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Haven, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale total
. . . . . . . . . . . . . . . . . . . . .
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$
240
5,350
770
1,470
130
5,484
5,000
7,000
1,400
600
367
470
160
960
410
510
820
2,690
1,460
360
1,600
370
1,360
2,650
580
$
3,859
9,320
6,230
4,530
8,170
24,886
12,000
69,000
24,400
9,400
458
5,673
4,778
8,290
2,640
10,694
1,441
15,410
7,040
1,261
10,600
2,166
12,540
5,980
1,620
$42,211
$262,386
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$—
$— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,449
2,539
5,552
4,370
6,581
23,716
16,425
72,694
24,631
9,550
793
2,625
2,520
6,784
1,764
9,079
1,022
14,852
6,205
1,091
11,692
518
10,141
7,144
476
$— $245,213
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2005
2006
2004
2002
2005
2007
2010
2010
2010
2010
2011
1998
2006
2002
2004
1998
2004
2004
2002
2004
2010
2006
2002
2004
2004
1982
1980
1999
1998
1999
2011
2008
2009
2003
1986
1979
1958
1958
1999
1971
1979
1970
1999
1998
1966
1998
1972
2000
1905
1971
(1) Please see Note 2 to our consolidated financial statements for information regarding lives used for depreciation and amortization.
(2) Represents real property asset associated with a capital lease.
136
Segment
Encumbrances
Land
Seniors housing triple-net . . . . . . . . . . . . . . . . .
Seniors housing operating . . . . . . . . . . . . . . . . .
Medical facilities . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . .
Total continuing operating properties . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . .
$ 218,741
1,369,526
713,720
—
2,301,987
—
Initial Cost to Company
Buildings &
Improvements
$ 7,462,660
4,239,499
4,027,512
162,984
$ 623,120
388,015
333,112
—
1,344,247
42,210
15,892,655
262,386
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at Which
Carried at Close of Period
Buildings &
Improvements
Accumulated
Depreciation
Land
$341,850
131,030
127,413
—
600,293
—
$ 625,388
394,065
345,938
—
$ 7,802,238
4,364,478
4,142,095
162,984
1,365,391
—
16,471,795
245,213
$ 707,213
390,907
456,935
—
1,555,055
—
Total investments in real property owned . .
$2,301,987
$1,386,457
$16,155,041
$600,293
$1,365,391
$16,717,008
$1,555,055
Year Ended December 31,
2012
2011
2010
(in thousands)
Reconciliation of real property:
Investment in real estate:
Balance at beginning of year . . . . . . . . . . . . . . . . . .
Additions:
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversions from loans receivable . . . . . . . . . . .
Assumed other items, net
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed debt
Foreign currency translation . . . . . . . . . . . . . . . .
Total additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions:
Cost of real estate sold . . . . . . . . . . . . . . . . . . . .
Reclassification of accumulated depreciation
and amortization for assets held for sale . . . . .
Impairment of assets . . . . . . . . . . . . . . . . . . . . . .
$14,844,319
$ 8,992,495
$6,336,291
2,923,251
449,964
—
108,404
481,598
6,082
4,525,737
426,000
—
210,411
961,928
—
1,707,421
398,510
10,070
208,314
559,508
—
3,969,299
6,124,076
2,883,823
(581,696)
(250,047)
(216,300)
(120,236)
(29,287)
(10,011)
(12,194)
(10,372)
(947)
Total deductions . . . . . . . . . . . . . . . . . . . . . . . . . . .
(731,219)
(272,252)
(227,619)
Balance at end of year(3)
. . . . . . . . . . . . . . . . . . . .
$18,082,399
$14,844,319
$8,992,495
Accumulated depreciation:
Balance at beginning of year . . . . . . . . . . . . . . . . . .
Additions:
Depreciation and amortization expenses . . . . . . .
Amortization of above market leases . . . . . . . . .
Total additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions:
Sale of properties . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of accumulated depreciation
$ 1,194,476
$
836,966
$ 677,851
533,585
7,204
540,789
423,605
6,409
430,014
202,543
2,524
205,067
(59,974)
(63,997)
(31,919)
and amortization for assets held for sale . . . . .
(120,236)
(8,507)
(14,033)
Total deductions . . . . . . . . . . . . . . . . . . . . . . . . . . .
(180,210)
(72,504)
(45,952)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . .
$ 1,555,055
$ 1,194,476
$ 836,966
(3) The aggregate cost for tax purposes for real property equals $14,788,080,000, $13,604,448,000 and $8,802,656,000 at December 31,
2012, 2011 and 2010, respectively.
137
—
—
—
—
—
—
—
—
—
Health Care REIT, Inc.
Schedule IV — Mortgage Loans on Real Estate
December 31, 2012
(in thousands)
Monthly
Payment
Terms
Prior
Liens
Face Amount
of Mortgages
Carrying
Amount of
Mortgages
Principal Amount
of Loans Subject to
Delinquent
Principal or
Interest
$114,643
$ —
$ 22,244
$22,244
$ —
Final
Maturity
Date
12/31/17
12/01/17
6.18%
8.72%
$127,158
6.18%
12/31/17
$ 82,941
10.14%
06/01/20
$160,435
6.50%
10/01/14
$ 38,556
—
—
—
—
17,500
17,500
16,093
16,093
21,050
15,187
6,100
6,014
Description
Interest Rate
First mortgage relating to one
medical office building in
Texas
First mortgage relating to one
hospital in California
First mortgage relating to one
medical office building in
Texas
First mortgage relating to one
hospital in California
First mortgage relating to one
medical office building in
Georgia
Second mortgage relating to one
senior housing facility in New
Hampshire
First mortgage relating to one
senior housing facility in
Arizona
First mortgage relating to one
Second mortgage relating to one
hospital in California
First mortgage relating to one
hospital in California
First mortgage relating to one
medical office building in
Georgia
Totals
8.11%
10/01/16
$ 21,056
17,670
3,235
3,056
senior housing facility in Texas
10.25%
03/01/13
$ 56,307
2,635
2,498
3.55%
01/01/14
$ 12,275
4,500
2,650
2,650
—
—
9.83%
10/31/13
$138,308
15,187
13,000
1,323
10.13%
01/14/14
$131,481
8.11%
10/01/14
$
1,206
—
—
8,045
1,215
800
175
$32,857
$115,202
$87,955
$2,650
Reconciliation of mortgage loans:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions:
New mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collections of principal
Conversions to real property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclass to other real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2012
2011
2010
$ 63,934
(in thousands)
$109,283
$ 74,517
40,641
40,641
(11,819)
(3,300)
(1,501)
—
11,286
11,286
(50,579)
(4,000)
—
(2,056)
73,439
73,439
(10,540)
(10,070)
(18,063)
—
Total deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16,620)
(56,635)
(38,673)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 87,955
$ 63,934
$109,283
138
EXHIBIT INDEX
1.1(a) Form of Equity Distribution Agreement, dated as of November 12, 2010, entered into by and between the
Company and each of UBS Securities LLC, RBS Securities Inc., KeyBanc Capital Markets Inc. and
Credit Agricole Securities (USA) Inc. (filed with the Commission as Exhibit 1.1 to the Company’s
Form 8-K filed November 15, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
1.1(b) Form of Amendment No. 1, dated September 1, 2011, to the Equity Distribution Agreements entered into
by and between the Company and each of UBS Securities LLC, RBS Securities Inc., KeyBanc Capital
Markets Inc. and Credit Agricole Securities (USA) Inc. (filed with the Commission as Exhibit 1.1 to the
Company’s Form 8-K filed September 8, 2011 (File No. 001-08923), and incorporated herein by
reference thereto).
Agreement and Plan of Merger, dated as of August 21, 2012, by and among Sunrise Senior Living, Inc.,
Brewer Holdco, Inc., Brewer Holdco Sub, Inc., the Company and Red Fox, Inc. (the exhibits and
schedules to the Agreement and Plan of Merger have been omitted pursuant to Item 601(b)(2) of
Regulation S-K) (filed with the Commission as Exhibit 2.1 to the Company’s Form 8-K filed August 22,
2012 (File No. 001-08923), and incorporated herein by reference thereto).
2.1
3.1(a) Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1
to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by
reference thereto).
3.1(b) Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series A, of
the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20,
2000 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(c) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with
the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923),
and incorporated herein by reference thereto).
3.1(d) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with
the Commission as Exhibit 3.1 to the Company’s Form 8-K filed June 13, 2003 (File No. 001-08923),
and incorporated herein by reference thereto).
3.1(e) Certificate of Designation of 7 7/8% Series D Cumulative Redeemable Preferred Stock of the Company
(filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A/A filed July 8, 2003
(File No. 001-08923), and incorporated herein by reference thereto).
3.1(f) Certificate of Designation of 7 5/8% Series F Cumulative Redeemable Preferred Stock of the Company
(filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A filed September 10, 2004
(File No. 001-08923), and incorporated herein by reference thereto).
3.1(g) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with
the Commission as Exhibit 3.9 to the Company’s Form 10-Q filed August 9, 2007 (File No. 001-08923),
and incorporated herein by reference thereto).
3.1(h) Certificate of Change of Location of Registered Office and of Registered Agent of the Company (filed
with the Commission as Exhibit 3.1 to the Company’s Form 10-Q filed August 6, 2010
(File No. 001-08923), and incorporated herein by reference thereto).
3.1(i) Certificate of Designation of 6% Series H Cumulative Convertible and Redeemable Preferred Stock of
the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-Q filed May 10,
2011 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(j) Certificate of Designation of 6.50% Series I Cumulative Convertible Perpetual Preferred Stock of the
Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed March 7, 2011
(File No. 001-08923), and incorporated herein by reference thereto).
3.1(k) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with
the Commission as Exhibit 3.1 to the Company’s Form 8-K filed May 10, 2011 (File No. 001-08923),
and incorporated herein by reference thereto).
3.1(l) Certificate of Designation of 6.50% Series J Cumulative Redeemable Preferred Stock of the Company
(filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed March 8, 2012
(File No. 001-08923), and incorporated herein by reference thereto).
3.2
4.1(a)
Fourth Amended and Restated By-Laws of the Company (filed with the Commission as Exhibit 3.1 to
the Company’s Form 8-K filed November 1, 2011 (File No. 001-08923), and incorporated herein by
reference thereto).
Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth
Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 9,
2002 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(b) Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt Securities,
dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission
as Exhibit 4.2 to the Company’s Form 8-K filed September 9, 2002 (File No. 001-08923), and
incorporated herein by reference thereto).
4.1(c) Amendment No. 1, dated March 12, 2003, to Supplemental Indenture No. 1, dated as of September 6,
2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and
Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed March 14,
2003 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(d) Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt Securities,
dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission
as Exhibit 4.2 to the Company’s Form 8-K filed September 24, 2003 (File No. 001-08923), and
incorporated herein by reference thereto).
4.1(e) Amendment No. 1, dated September 16, 2003,
to Supplemental Indenture No. 2, dated as of
September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the
Company and Fifth Third Bank (filed with the Commission as Exhibit 4.4 to the Company’s Form 8-K
filed September 24, 2003 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(f) Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt Securities,
dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission
as Exhibit 4.1 to the Company’s Form 8-K filed October 30, 2003 (File No. 001-08923), and
incorporated herein by reference thereto).
4.1(g) Amendment No. 1, dated September 13, 2004, to Supplemental Indenture No. 3, dated as of October 29,
2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and
The Bank of New York Trust Company, N.A., as successor to Fifth Third Bank (filed with the
Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 13, 2004 (File No. 001-08923),
and incorporated herein by reference thereto).
4.1(h) Supplemental Indenture No. 4, dated as of April 27, 2005, to Indenture for Senior Debt Securities, dated
as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A. (filed
with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed April 28, 2005
(File No. 001-08923), and incorporated herein by reference thereto).
4.1(i) Supplemental Indenture No. 5, dated as of November 30, 2005, to Indenture for Senior Debt Securities,
dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A.
(filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed November 30, 2005
(File No. 001-08923), and incorporated herein by reference thereto).
Indenture, dated as of November 20, 2006, between the Company and The Bank of New York Trust
Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed
November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto).
4.2(a)
4.2(b) Supplemental Indenture No. 1, dated as of November 20, 2006, between the Company and The Bank of
New York Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K
filed November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto).
4.2(c) Supplemental Indenture No. 2, dated as of July 20, 2007, between the Company and The Bank of New
York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed
July 20, 2007 (File No. 001-08923), and incorporated herein by reference thereto).
Indenture, dated as of March 15, 2010, between the Company and The Bank of New York Mellon Trust
Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed March 15,
2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.3(a)
4.3(b)
Supplemental Indenture No. 1, dated as of March 15, 2010, between the Company and The Bank of
New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s
Form 8-K filed March 15, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.3(c) Amendment No. 1 to Supplemental Indenture No. 1, dated as of June 18, 2010, between the Company
and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.3 to
the Company’s Form 8-K filed June 18, 2010 (File No. 001-08923), and incorporated herein by
reference thereto).
Supplemental Indenture No. 2, dated as of April 7, 2010, between the Company and The Bank of New
York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s
Form 8-K filed April 7, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.3(d)
4.3(i)
4.3(j)
4.3(f)
4.3(h)
4.3(g)
4.3(e) Amendment No. 1 to Supplemental Indenture No. 2, dated as of June 8, 2010, between the Company
and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.3 to
the Company’s Form 8-K filed June 8, 2010 (File No. 001-08923), and incorporated herein by reference
thereto).
Supplemental Indenture No. 3, dated as of September 10, 2010, between the Company and The Bank of
New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s
Form 8-K filed September 13, 2010 (File No. 001-08923), and incorporated herein by reference
thereto).
Supplemental Indenture No. 4, dated as of November 16, 2010, between the Company and The Bank of
New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s
Form 8-K filed November 16, 2010 (File No. 001-08923), and incorporated herein by reference
thereto).
Supplemental Indenture No. 5, dated as of March 14, 2011, between the Company and The Bank of
New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s
Form 8-K filed March 14, 2011 (File No. 001-08923), and incorporated herein by reference thereto).
Supplemental Indenture No. 6, dated as of April 3, 2012, between the Company and The Bank of New
York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s
Form 8-K filed April 4, 2012 (File No. 001-08923), and incorporated herein by reference thereto).
Supplemental Indenture No. 7, dated as of December 6, 2012, between the Company and The Bank of
New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s
Form 8-K filed December 11, 2012 (File No. 001-08923), and incorporated herein by reference thereto).
Form of Indenture for Senior Subordinated Debt Securities (filed with the Commission as Exhibit 4.9 to
the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by
reference thereto).
Form of Indenture for Junior Subordinated Debt Securities (filed with the Commission as Exhibit 4.10
to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by
reference thereto).
Fifth Amended and Restated Loan Agreement, dated as of July 27, 2011, by and among the Company,
the banks signatory thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan
Securities LLC, as joint lead arrangers and joint book managers, KeyBanc Capital Markets Inc., as a
joint lead arranger, Deutsche Bank Securities Inc., as a joint lead arranger and documentation agent,
KeyBank National Association, as administrative agent, and Bank of America, N.A. and JPMorgan
Chase Bank, N.A., as co-syndication agents (filed with the Commission as Exhibit 10.1 to the
Company’s Form 8-K filed August 2, 2011 (File No. 001-08923), and incorporated herein by reference
thereto).
Credit Agreement dated as of January 7, 2013, by and among the Company, the lenders listed therein,
KeyBank National Association, as administrative agent, LC issuer and a swingline lender, Bank of
America, N.A. and JPMorgan Chase Bank, N.A., as co-syndication agents, Deutsche Bank Securities,
Inc., as documentation agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities LLC, KeyBanc Capital Markets Inc. and Deutsche Bank Securities Inc., as joint lead
arrangers, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as
joint book managers (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed
January 11, 2013 (File No. 001-08923), and incorporated herein by reference thereto).
10.2
10.1
4.4
4.5
10.3
10.4
Term Loan Agreement, dated as of May 24, 2012, by and among the Company, the banks signatory
thereto, KeyBank National Association, as administrative agent, JPMorgan Chase Bank, N.A., Bank of
America, N.A. and Royal Bank of Canada, as co-syndication agents, Citibank, N.A., Compass Bank,
Fifth Third Bank, PNC Bank, National Association, The Bank of New York Mellon and Wells Fargo
Bank, National Association, as co-documentation agents, and J.P. Morgan Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and RBC Capital Markets, as joint lead arrangers and joint
bookrunners (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed May 30,
2012 (File No. 001-08923), and incorporated herein by reference thereto).
Equity Purchase Agreement, dated as of February 28, 2011, by and among the Company, FC-GEN
Investment, LLC and FC-GEN Operations Investment, LLC (filed with the Commission as Exhibit 10.1
to the Company’s Form 8-K filed February 28, 2011 (File No. 001-08923), and incorporated herein by
reference thereto).
10.5(a) The 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Appendix II to
the Company’s Proxy Statement for the 1995 Annual Meeting of Stockholders, filed September 29,
1995 (File No. 001-08923), and incorporated herein by reference thereto).*
10.5(b) First Amendment
to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the
Commission as Exhibit 4.2 to the Company’s Form S-8 (File No. 333-40771) filed November 21, 1997,
and incorporated herein by reference thereto).*
10.5(c) Second Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the
Commission as Exhibit 4.3 to the Company’s Form S-8 (File No. 333-73916) filed November 21, 2001,
and incorporated herein by reference thereto).*
10.5(d) Third Amendment
to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the
Commission as Exhibit 10.15 to the Company’s Form 10-K filed March 12, 2004 (File No. 001-08923),
and incorporated herein by reference thereto).*
10.5(e) Form of Stock Option Agreement for Executive Officers under the 1995 Stock Incentive Plan (filed
with the Commission as Exhibit 10.17 to the Company’s Form 10-K filed March 16, 2005
(File No. 001-08923), and incorporated herein by reference thereto).*
10.6(a) Stock Plan for Non-Employee Directors of Health Care REIT, Inc. (filed with the Commission as
Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2004 (File No. 001-08923), and incorporated
herein by reference thereto).*
10.6(b) First Amendment to the Stock Plan for Non-Employee Directors of Health Care REIT, Inc. effective
April 21, 1998 (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed May 10,
2004 (File No. 001-08923), and incorporated herein by reference thereto).*
10.6(c) Form of Stock Option Agreement under the Stock Plan for Non-Employee Directors (filed with the
Commission as Exhibit 10.3 to the Company’s Form 10-Q/A filed October 27, 2004
(File No. 001-08923), and incorporated herein by reference thereto).*
10.7(a) Amended and Restated Health Care REIT, Inc. 2005 Long-Term Incentive Plan (filed with the
Commission as Appendix A to the Company’s Proxy Statement for the 2009 Annual Meeting of
Stockholders, filed March 25, 2009 (File No. 001-08923), and incorporated herein by reference
thereto).*
10.7(b) Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer
under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.18 to the
Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by
reference thereto).*
10.7(c) Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for the Chief
Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.6
to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by
reference thereto).*
10.7(d) Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer
under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.8 to the Company’s
Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(e) Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the
2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.19 to the Company’s
Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(f) Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for Executive
Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.7 to the
Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference
thereto).*
10.7(g) Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the
2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.9 to the Company’s
Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(h) Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer
under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.20 to the
Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by
reference thereto).*
10.7(i) Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer
under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as
Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated
herein by reference thereto).*
10.7(j) Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under
the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.21 to the Company’s
Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(k) Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under
the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.2
to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by
reference thereto).*
10.7(l) Form of Restricted Stock Agreement for the Chief Executive Officer under the 2005 Long-Term
Incentive Plan (filed with the Commission as Exhibit 10.22 to the Company’s Form 10-K filed March
10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(m) Form of Restricted Stock Agreement for Executive Officers under the 2005 Long-Term Incentive Plan
(filed with the Commission as Exhibit 10.23 to the Company’s Form 10-K filed March 10, 2006
(File No. 001-08923), and incorporated herein by reference thereto).*
10.7(n) Form of Restricted Stock Agreement for the Chief Executive Officer under the Amended and Restated
2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.3 to the Company’s
Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(o) Form of Restricted Stock Agreement for Executive Officers under the Amended and Restated 2005
Long-Term Incentive Plan (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q
filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(p) Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term
Incentive Plan (filed with the Commission as Exhibit 10.24 to the Company’s Form 10-K filed
March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(q) Form of Amendment to Deferred Stock Unit Grant Agreements for Non-Employee Directors under the
2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.10 to the Company’s
Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(r) Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term
Incentive Plan (filed with the Commission as Exhibit 10.11 to the Company’s Form 8-K filed January 5,
2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7(s) Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the Amended and
Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.5 to the Company’s
Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.8(a) Fifth Amended and Restated Employment Agreement, dated December 2, 2010, by and between the
Company and George L. Chapman (filed with the Commission as Exhibit 10.1 to the Company’s
Form 8-K filed December 8, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.8(b)
10.9
10.10
10.11
Letter Agreement, dated February 4, 2013, by and between the Company and George L. Chapman.*
Second Amended and Restated Employment Agreement, dated December 29, 2008, between the
Company and Scott A. Estes (filed with the Commission as Exhibit 10.4 to the Company’s Form 8-K
filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
Second Amended and Restated Employment Agreement, dated December 29, 2008, between the
Company and Charles J. Herman, Jr. (filed with the Commission as Exhibit 10.3 to the Company’s
Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and
Jeffrey H. Miller (filed with the Commission as Exhibit 10.8 to the Company’s Form 10-K filed
March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.12(a) Employment Agreement, dated January 19, 2009, between the Company and John T. Thomas (filed
with the Commission as Exhibit 10.10 to the Company’s Form 10-K filed March 2, 2009
(File No. 001-08923), and incorporated herein by reference thereto).*
10.15
10.13
10.18
10.17
10.14
10.16
10.12(b) Separation Agreement and General Release, dated July 25, 2012, between the Company and John T.
Thomas (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed August 6, 2012
(File No. 001-08923), and incorporated herein by reference thereto).*
Third Amended and Restated Employment Agreement, dated December 29, 2008, between the
Company and Erin C. Ibele (filed with the Commission as Exhibit 10.11 to the Company’s Form 10-K
filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
Second Amended and Restated Employment Agreement, dated December 29, 2008, between the
Company and Daniel R. Loftus (filed with the Commission as Exhibit 10.12 to the Company’s
Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
Amended and Restated Consulting Agreement, dated December 29, 2008, between the Company and
Frederick L. Farrar (filed with the Commission as Exhibit 10.14 to the Company’s Form 10-K filed
March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
Amended and Restated Health Care REIT, Inc. Supplemental Executive Retirement Plan, dated
December 29, 2008 (filed with the Commission as Exhibit 10.12 to the Company’s Form 8-K filed
January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
Form of Indemnification Agreement between the Company and each director, executive officer and
officer of the Company (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed
February 18, 2005 (File No. 001-08923), and incorporated herein by reference thereto).*
Summary of Director Compensation (filed with the Commission as Exhibit 10.1 to the Company’s
Form 10-Q filed November 7, 2012 (File No. 001-08923), and incorporated herein by reference
thereto).*
Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends (Unaudited).
Code of Business Conduct and Ethics (filed with the Commission as Exhibit 14 to the Company’s
Form 10-K filed March 12, 2004 (File No. 001-08923), and incorporated herein by reference thereto).
Subsidiaries of the Company.
Consent of Ernst & Young LLP, independent registered public accounting firm.
Power of Attorney executed by William C. Ballard, Jr. (Director).
Power of Attorney executed by Judith C. Pelham (Director).
Power of Attorney executed by R. Scott Trumbull (Director).
Power of Attorney executed by Thomas J. DeRosa (Director).
Power of Attorney executed by Jeffrey H. Donahue (Director).
Power of Attorney executed by Peter J. Grua (Director).
Power of Attorney executed by Fred S. Klipsch (Director).
Power of Attorney executed by Sharon M. Oster (Director).
Power of Attorney executed by Jeffrey R. Otten (Director).
Power of Attorney executed by George L. Chapman (Director, Chairman of the Board, Chief
Executive Officer and President and Principal Executive Officer).
Power of Attorney executed by Scott A. Estes (Executive Vice President and Chief Financial Officer
and Principal Financial Officer).
21
23
24.1
24.2
24.3
24.4
24.5
24.6
24.7
24.8
24.9
24.10
24.11
14
12
24.12
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
Power of Attorney executed by Paul D. Nungester, Jr. (Senior Vice President and Controller and
Principal Accounting Officer).
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer.
Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer.
XBRL Instance Document**
XBRL Taxonomy Extension Schema Document**
XBRL Taxonomy Extension Calculation Linkbase Document**
XBRL Taxonomy Extension Label Linkbase Document**
XBRL Taxonomy Extension Presentation Linkbase Document**
XBRL Taxonomy Extension Definition Linkbase Document**
* Management Contract or Compensatory Plan or Arrangement.
** Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in XBRL (eXtensible Business
Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2012 and 2011, (ii) the Consolidated Statements of
Comprehensive Income for the years ended December 31, 2012, 2011 and 2010, (iii) the Consolidated Statements of Equity for the years
ended December 31, 2012, 2011 and 2010, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011
and 2010, (v) the Notes to Consolidated Financial Statements, (vi) Schedule III — Real Estate and Accumulated Depreciation and
(vii) Schedule IV — Mortgage Loans on Real Estate.
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, George L. Chapman, certify that:
1. I have reviewed this annual report on Form 10-K of Health Care REIT, Inc.;
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.
Date: February 26, 2013
/s/ GEORGE L. CHAPMAN
George L. Chapman,
Chief Executive Officer
EXHIBIT 31.2
I, Scott A. Estes, certify that:
CERTIFICATION OF CHIEF FINANCIAL OFFICER
1. I have reviewed this annual report on Form 10-K of Health Care REIT, Inc.;
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.
Date: February 26, 2013
/s/
SCOTT A. ESTES
Scott A. Estes,
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
I, George L. Chapman, the Chief Executive Officer of Health Care REIT, Inc. (the “Company”), certify,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that (i) the Annual Report
on Form 10-K for the Company for the year ended December 31, 2012 (the “Report”), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ GEORGE L. CHAPMAN
George L. Chapman,
Chief Executive Officer
Date: February 26, 2013
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.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
I, Scott A. Estes, the Chief Financial Officer of Health Care REIT, Inc. (the “Company”), certify, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that (i) the Annual Report on
Form 10-K for the Company for the year ended December 31, 2012 (the “Report”), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/
SCOTT A. ESTES
Scott A. Estes,
Chief Financial Officer
Date: February 26, 2013
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.
B o a r d o f d i r e c t o r s
William C. Ballard, Jr.
Age 72
Former Of Counsel
Greenebaum Doll & McDonald PLLC
Louisville, Kentucky
c o m m i t t e e s o f t h e B o a r d
Audit Committee
DeRosa (Chair), Otten, Trumbull
Compensation Committee
Ballard, Donahue (Chair), Oster, Pelham
George L. Chapman
Age 65
Chairman, Chief Executive Officer & President
Health Care REIT, Inc.
Toledo, Ohio
Thomas J. DeRosa
Age 55
Former Vice Chairman & Chief Financial Officer
The Rouse Company
Columbia, Maryland
Jeffrey H. Donahue
Age 66
Former President & Chief Executive Officer
Enterprise Community Investment, Inc.
Columbia, Maryland
Peter J. Grua
Age 59
Partner
HLM Venture Partners
Boston, Massachusetts
Fred S. Klipsch
Age 71
Chairman
Klipsch Group, Inc.
Indianapolis, Indiana
Sharon M. Oster
Age 64
Frederic D. Wolfe Professor of
Management & Entrepreneurship,
Professor of Economics
Yale University School of Management
New Haven, Connecticut
Jeffrey R. Otten
Age 62
President
JRO Ventures Inc.
Oak Bluffs, Massachusetts
Judith C. Pelham
Age 67
President Emeritus
Trinity Health
Livonia, Michigan
R. Scott Trumbull
Age 64
Chairman & Chief Executive Officer
Franklin Electric Co., Inc.
Bluffton, Indiana
Nominating/Corporate
Governance Committee
DeRosa, Grua (Chair), Otten
Executive Committee
Chapman, DeRosa, Donahue, Grua
Investment Committee
Ballard, Chapman, DeRosa, Donahue, Grua,
Klipsch, Oster, Otten, Pelham, Trumbull
Planning Committee
Ballard, Chapman, DeRosa, Donahue, Grua,
Klipsch, Oster, Otten, Pelham, Trumbull
e x e c u t i v e o f f i c e r s
George L. Chapman
Chairman, Chief Executive Officer & President
Scott M. Brinker
Executive Vice President – Investments
Scott A. Estes
Executive Vice President &
Chief Financial Officer
Charles J. Herman, Jr.
Executive Vice President &
Chief Investment Officer
Jeffrey H. Miller
Executive Vice President – Operations &
General Counsel
Michael A. Crabtree
Senior Vice President & Treasurer
Erin C. Ibele
Senior Vice President – Administration &
Corporate Secretary
c o r p o r a t e o f f i c e s
Health Care REIT, Inc.
4500 Dorr Street
Toledo, Ohio 43615-4040
877/670-0070
419/247-2800
419/247-2826 Fax
www.hcreit.com
376 employees as of 12/31/12
4,896 registered shareholders
as of 12/31/12
L e g aL c o u n s eL
Shumaker, Loop & Kendrick, LLP
Toledo, Ohio
i n d e p e n d e n t a u d i t o r s
Ernst & Young LLP
Toledo, Ohio
transfer agent, registrar,
dividend disB ursing agent
and pLan administrator
Computershare
P.O. Box 43006
Providence, Rhode Island 02940-3006
888/216-7206
www.computershare.com/investor
s h a r e h oL d e r s e r v i c e s
Computershare provides shareholder services
to registered shareholders via telephone and
online. Computershare representatives can
assist you in change of name or address,
consolidation of accounts, duplicate mailings,
dividend reinvestment enrollment, lost share
certificates, transfer of shares to another
person and additional administrative
services. For more information, go to
www.computershare.com/investor or call toll
free 888/216-7206.
i n v e s t o r i n f o r m a t i o n
Current and prospective investors can
access the Annual Report, Proxy Statement,
SEC filings, earnings announcements and
other press releases on our website at
www.hcreit.com, or by e-mail request
to info@hcreit.com.
a n n u aL m e e t i n g
The Annual Meeting of Shareholders will
be held on May 2, 2013 in the Bruce G.
Thompson Auditorium at 4500 Dorr Street,
Toledo, Ohio.
e x c h a n g e L i s t i n g
New York Stock Exchange
Trading Symbol: HCN
m e mB e r
National Association of Real Estate
Investment Trusts, Inc.
This Annual Report and the Letter to
Shareholders contain “forward-looking
statements” as that term is defined in the
Private Securities Litigation Reform Act of
1995. For example, when we use words
such as “may,” “will,” “intend,” “should,”
“believe,” “expect,” “anticipate,” “project,”
“estimate” or similar expressions, we
are making forward-looking statements.
Forward-looking statements are not
guarantees of future performance and
involve risks and uncertainties. Our
expected results may not be achieved,
and actual results may differ materially
from our expectations. Important factors
that could cause our actual results to be
materially different from the forward-looking
statements are discussed in our Form
10-K under the heading “Risk Factors.”
We assume no obligation to update or
revise any forward-looking statements or
to update the reasons why actual results
could differ from those projected in any
forward-looking statements.
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A w e a l t h o f a c c o m p l i s h m e n t s .
4500 Dorr Street, Toledo, Ohio 43615-4040
www.hcreit.com
©2013 Health Care REIT, Inc.
2 0 1 2 A n n u a l R e p o r t