HEALTHPEAK PROPERTIES, INC. - FORM 8-K - EX-99.2

Attached files

file	filename
8-K - 8-K - HEALTHPEAK PROPERTIES, INC.	a11-28845_18k.htm
EX-99.1 - EX-99.1 - HEALTHPEAK PROPERTIES, INC.	a11-28845_1ex99d1.htm

Exhibit 99.2

Supplemental Information

September 30, 2011

(Unaudited)



South San Francisco, CA		Sarasota, FL



Tiverton, RI		Elk Grove, CA

Table of Contents

Company Information		1

Summary		2

Funds From Operations and Funds Available for Distribution		3

Capitalization		4

Indebtedness and Ratios		5

Investments and Dispositions		6

Development		7

Owned Portfolio

Portfolio summary		8

Portfolio concentrations		9

Same property portfolio		10

Lease expirations and debt investment maturities		11

Owned Senior Housing Portfolio

Investments and operator concentration		12

Trends		13

Owned Post-Acute/Skilled Nursing Portfolio

Investments and operator concentration		14

Trends and HCR ManorCare information		15

Owned Life Science Portfolio

Investments, tenant concentration and trends		16

Selected lease expirations and leasing activity		17

Owned Medical Office Portfolio

Investments and trends		18

Leasing activity		19

Owned Hospital Portfolio

Investments and operator concentration		20

Trends		21

Investment Management Platform

Summary and balance sheets		22

Statements of operations and funds from operations		23

Net operating income		24

Portfolio summary		25

Reporting Definitions and Reconciliations of Non-GAAP Measures		26-30

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this supplemental information which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include among other things the Company’s estimate of (i) completion dates, stabilization dates, rentable square feet and total investment for development projects in progress, and (ii) rentable square feet for land held for development. These statements are made as of the date hereof, are not guarantees of future performance and are subject to known and unknown risks, uncertainties, assumptions and other factors—many of which are out of the Company and its management’s control and difficult to forecast—that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. These risks and uncertainties include but are not limited to: national and local economic conditions; continued volatility in the capital markets, including changes in interest rates and the availability and cost of capital, which changes and volatility affect opportunities for profitable investments; the Company’s ability to access external sources of capital when desired and on reasonable terms; the Company’s ability to manage its indebtedness levels; changes in the terms of the Company’s indebtedness; the Company’s ability to maintain its credit ratings; the potential impact of existing and future litigation matters, including the possibility of larger than expected litigation costs and related developments; the Company’s ability to successfully integrate the operations of acquired companies; risks associated with the Company’s investments in joint ventures and unconsolidated entities, including its lack of sole decision-making authority and its reliance on its joint venture partners’ financial condition and continued cooperation; competition for lessees and mortgagors (including new leases and mortgages and the renewal or rollover of existing leases); the Company’s ability to reposition its properties on the same or better terms if existing leases are not renewed or the Company exercises its right to replace an existing operator or tenant upon default; continuing reimbursement uncertainty in the post-acute/skilled nursing segment; competition in the senior housing segment specifically and in the healthcare industry in general; the ability of the Company’s operators and tenants from its senior housing segment to maintain or increase their occupancy levels and revenues; the ability of the Company’s lessees and mortgagors to maintain the financial strength and liquidity necessary to satisfy their respective obligations to the Company and other third parties; the bankruptcy, insolvency or financial deterioration of the Company’s operators, lessees, borrowers or other obligors; changes in healthcare laws and regulations, including the impact of future or pending healthcare reform, and other changes in the healthcare industry which affect the operations of the Company’s lessees or obligors, including changes in the federal budget resulting in the reduction or nonpayment of Medicare or Medicaid reimbursement rates; the Company’s ability to recruit and retain key management personnel; costs of compliance with regulations and environmental laws affecting the Company’s properties; changes in tax laws and regulations; changes in the financial position or business strategies of HCR ManorCare; the Company’s ability and willingness to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations; changes in rules governing financial reporting, including new accounting pronouncements; and other risks described from time to time in the Company’s Securities and Exchange Commission filings. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law.

Company Information(1)

Board of Directors

James F. Flaherty III		Michael D. McKee
Chairman and Chief Executive Officer		Chief Executive Officer
HCP, Inc.		Bentall Kennedy U.S., L.P.

Christine N. Garvey		Peter L. Rhein
Former Global Head of Corporate		Partner, Sarlot & Rhein
Real Estate Services, Deutsche Bank AG

David B. Henry		Kenneth B. Roath
Vice Chairman, President and Chief		Chairman Emeritus, HCP, Inc.
Executive Officer, Kimco Realty Corporation

Lauralee E. Martin		Joseph P. Sullivan
Chief Operating and Financial Officer		Chairman of the Board of Advisors
Jones Lang LaSalle Incorporated		RAND Health


Senior Management

James F. Flaherty III		Thomas M. Klaritch
Chairman and		Executive Vice President
Chief Executive Officer		Medical Office Properties

Jonathan M. Bergschneider		James W. Mercer
Executive Vice President		Executive Vice President, General Counsel
Life Science Estates		and Corporate Secretary

Paul F. Gallagher		Timothy M. Schoen
Executive Vice President and		Executive Vice President and
Chief Investment Officer		Chief Financial Officer

Edward J. Henning		Susan M. Tate
Executive Vice President		Executive Vice President
		Asset Management and Senior Housing
Thomas D. Kirby
Executive Vice President		Kendall K. Young
Acquisitions and Valuations		Executive Vice President


Other Information

Corporate Headquarters		San Francisco Office
3760 Kilroy Airport Way, Suite 300		400 Oyster Point Boulevard, Suite 409
Long Beach, CA 90806-2473		South San Francisco, CA 94080
(562) 733-5100

Nashville Office
3000 Meridian Boulevard, Suite 200
Franklin, TN 37067

The information in this supplemental information package should be read in conjunction with the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other information filed with the Securities and Exchange Commission (“SEC”). The Reporting Definitions and Reconciliations of Non-GAAP Measures are an integral part of the information presented herein.

On the Company’s internet website, www.hcpi.com, you can access, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained on its website is not incorporated by reference into, and should not be considered a part of, this supplemental information package. In addition, the SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including HCP, that file electronically with the SEC at www.sec.gov.

For more information, contact Timothy M. Schoen, Executive Vice President - Chief Financial Officer at (562) 733-5309.

(1) As of October 28, 2011.

Summary

Dollars in thousands, except per share data

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010

Revenues	$	444,672	$	317,049	$	1,265,083	$	913,746

NOI	385,929		218,884		1,013,140		650,058

Adjusted EBITDA	384,828		254,435		1,086,662		741,035

FFO applicable to common shares	259,571		96,081		727,222		416,798

FFO as adjusted applicable to common shares	274,971		167,774		769,218		476,591

FAD applicable to common shares	216,325		139,332		627,832		407,140

Net income applicable to common shares	166,367		16,995		453,306		171,296

Diluted FFO per common share	$	0.63	$	0.31	$	1.83	$	1.39

Diluted FFO as adjusted per common share	0.67		0.54		2.02		1.58

Diluted FAD per common share	0.53		0.45		1.65		1.36

Diluted EPS	0.41		0.05		1.14		0.57

FFO as adjusted payout ratio	72%		86%		71%		88%

Financial Leverage	41%		41%

Adjusted fixed charge coverage	3.3x		2.9x		3.0x		2.8x

	September 30,		December 31,
Total properties:	2011		2010

Senior housing	317		251

Post-acute/skilled nursing	313		45

Life science	108		102

Medical office	254		253

Hospital	21		21

Total	1,013		672

Portfolio Income from Assets Under Management(1)		Assets Under Management: $18.7 billion(2)

(1) Represents the adjusted NOI from real estate owned by HCP, the interest income from debt investments and HCP’s pro rata share of the adjusted NOI from real estate owned by the Company’s Investment Management Platform, excluding assets under development and land held for development, for the nine months ended September 30, 2011.

(2) Represents the historical cost of real estate owned by HCP, the carrying amount of debt investments and 100% of the cost of real estate owned by the Company’s Investment Management Platform, excluding assets held for sale and under development and land held for development, at September 30, 2011.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Funds From Operations and Funds Available for Distribution

Dollars and shares in thousands, except per share data
	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net income applicable to common shares	$	166,367		$	16,995		$	453,306		$	171,296
Depreciation and amortization of real estate, in-place lease and other intangibles	88,556			78,507			270,028			235,390
DFL depreciation	2,874			—			5,879			—
Gain on sales of real estate	—			(3,987		)	—			(4,052		)
Gain upon consolidation of joint venture	—			—			(7,769		)	—
Joint venture and participating securities FFO adjustments	1,774			4,566			5,778			14,164
FFO applicable to common shares	$	259,571		$	96,081		$	727,222		$	416,798
Distributions on dilutive convertible units	3,048			—			9,066			—
Diluted FFO applicable to common shares	$	262,619		$	96,081		$	736,288		$	416,798

Weighted average shares used for diluted FFO per share	414,590			311,092			402,967			300,468

Diluted FFO per common share	$	0.63		$	0.31		$	1.83		$	1.39

Dividends declared per common share	$	0.48		$	0.465		$	1.44		$	1.395

FFO payout ratio	76.2%			150.0%			78.7%			100.4%

Impact of adjustments to FFO:
Merger-related items	$	—		$	—		$	26,596	(1)	$	—
Impairments, net of recoveries	15,400			71,693			15,400			59,793
	$	15,400		$	71,693		$	41,996		$	59,793

FFO as adjusted applicable to common shares	$	274,971		$	167,774		$	769,218		$	476,591
Distributions on dilutive convertible units and other	3,011			1,641			8,927			4,760
Diluted FFO as adjusted applicable to common shares	$	277,982		$	169,415		$	778,145		$	481,351

Weighted average shares used for diluted FFO as adjusted per share	414,590			314,778			385,693		(2)	304,002

Diluted FFO as adjusted per common share	$	0.67		$	0.54		$	2.02	(2)	$	1.58

FFO as adjusted payout ratio	71.6%			86.1%			71.3%			88.3%

FFO as adjusted applicable to common shares	$	274,971		$	167,774		$	769,218		$	476,591
Amortization of above and below market lease intangibles, net	(1,178		)	(1,629		)	(3,271		)	(5,337		)
Stock-based compensation	5,081			3,618			15,286			11,306
Amortization of debt premiums, discounts and issuance costs, net	3,716			1,934			10,065		(3)	7,238
Straight-line rents	(14,024		)	(11,174		)	(46,936		)	(32,869		)
DFL accretion(4)	(23,571		)	(2,932		)	(48,508		)	(8,340		)
DFL depreciation	(2,874		)	—			(5,879		)	—
Deferred revenues – tenant improvement related	(491		)	(928		)	(2,134		)	(2,785		)
Deferred revenues – additional rents (SAB 104)	284			705			850			540
Leasing costs and tenant and capital improvements	(10,832		)	(16,839		)	(31,772		)	(33,384		)
Joint venture and other FAD adjustments(4)(5)	(14,757		)	(1,197		)	(29,087		)	(5,820		)
FAD applicable to common shares	$	216,325		$	139,332		$	627,832		$	407,140
Distributions on convertible units	1,756			—			5,158			—
Diluted FAD applicable to common shares	$	218,081		$	139,332		$	632,990		$	407,140

Weighted average shares used for diluted FAD per share	412,305			311,092			383,397			300,468

Diluted FAD per common share	$	0.53		$	0.45		$	1.65		$	1.36

(1)	$26.6 million of merger-related items attributable to the HCR ManorCare Acquisition (incurred from January 1st through April 6th 2011) include the following: (i) $26.8 million of direct transaction costs, (ii) $23.9 million of interest expense associated with the $2.4 billion senior unsecured notes issued on January 24, 2011, proceeds from which were used to prefund the HCR ManorCare Acquisition, partially offset by (iii) $24.1 million of income related to gains upon the reinvestment of the Company’s debt investment in HCR ManorCare and other miscellaneous items.
(2)	Includes $0.04 per share of impairments and $0.15 per share of merger-related items; merger-related items are attributable to the HCR ManorCare Acquisition and include the following:
	(i)	$0.07 per share of direct transaction costs that are discussed in footnote 1(i) above;
	(ii)	($0.07) per share of income related to gains upon the reinvestment of the Company’s debt investment in HCR ManorCare and other miscellaneous items that are discussed in footnote 1(iii) above; and
	(iii)	$0.15 per share of negative carry related to prefunding activities consisting of: (a) 76 million shares from the Company’s December 2010 and March 2011 common stock offerings (excludes 4.5 million shares in March 2011 related to the underwriters’ overallotment option), which issuances increased our weighted average shares by 17 million shares for the nine months ended September 30, 2011; and (b) $0.06 per share for the interest expense related to the $2.4 billion senior notes discussed in footnote 1(ii) above. Proceeds from these offerings were used to prefund a portion of the cash consideration for the HCR ManorCare Acquisition.
(3)	Excludes $11.3 million related to the write-off of unamortized loan fees for the Company’s bridge loan commitment and $0.8 million related to the amortization of deferred issuance costs of the senior notes discussed above, which costs are included in merger-related items for the nine months ended September 30, 2011.
(4)	For the three and nine months ended September 30, 2011, DFL accretion includes a reduction of $14.4 million and $27.7 million, respectively, and Joint venture and other FAD adjustments include a contribution of $17.6 million and $32.0 million, respectively, as a result of HCP’s equity interest in the operations of HCR ManorCare, Inc. (“HCR ManorCare OpCo”). The Company’s joint venture interest in HCR ManorCare OpCo is accounted for using the equity method and results in an ongoing reduction of DFL income, proportional to HCP’s ownership in HCR ManorCare OpCo. Further, the Company’s share of earnings from HCR ManorCare OpCo (equity income) increases for the corresponding reduction of related lease expense recognized at the HCR ManorCare OpCo level.
(5)	Includes Investment Management Platform, HCP’s equity interest in HCR ManorCare OpCo and four other unconsolidated joint ventures.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Capitalization

Dollars and shares in thousands, except price data
*Total Debt*
	September 30, 2011		December 31, 2010		September 30, 2010
Bank line of credit	$	375,000	$	—	$	318,000
Senior unsecured notes		5,415,097		3,318,379		3,324,975
Mortgage and other secured debt	1,780,040		1,235,779		1,682,740
Other debt	89,325		92,187		93,990
Consolidated debt	7,659,462		4,646,345		5,419,705
HCP’s share of unconsolidated debt(1)	143,916		335,966		337,371
Total debt	$	7,803,378	$	4,982,311	$	5,757,076

*Total Market Capitalization*
	September 30, 2011
	Shares/Units	Value/Units		Total Value
Common stock	407,779	$	35.06	$	14,296,732
Convertible partnership units
2 for 1(2)	1,732	70.12		121,448
1 for 1(3)	2,480	35.06		86,949
	4,212			208,397
Preferred stock:
7.25% Series E (Callable at par)	4,000	25.20		100,800
7.10% Series F (Callable at par)	7,820	25.27		197,611
	11,820			298,411

Consolidated market equity				$	14,803,540

Consolidated debt				7,659,462

Consolidated market capitalization				$	22,463,002

HCP’s share of unconsolidated debt(1)				143,916

Total market capitalization				$	22,606,918

*Common Stock and Equivalents*
		Weighted Average Shares		Weighted Average Shares
	Shares	Three Months Ended		Nine Months Ended
	Outstanding	September 30, 2011		September 30, 2011
	September 30, 2011	Diluted EPS	Diluted FFO	Diluted EPS	Diluted FFO
Common stock	407,779	407,081	407,081	395,258	395,258
Common equivalent securities:
Restricted stock and units	1,817	250	250	237	237
Dilutive impact of options	1,315	1,315	1,315	1,518	1,518
Convertible partnership units	5,944	—	5,944	—	5,954
Total common and equivalents	416,855	408,646	414,590	397,013	402,967

*Other Information*
Trading Symbol		Senior Unsecured Debt Ratings
HCP	Common Stock	Moody’s	Baa2 (stable outlook)
HCP_pe	Series E Preferred Stock	Standard & Poor’s	BBB (stable outlook)
HCP_pf	Series F Preferred Stock	Fitch	BBB+ (stable outlook)

Stock Exchange Listing
NYSE

(1) Reflects the Company’s pro rata share of amounts in the Investment Management Platform and HCR ManorCare OpCo.

(2) Each convertible partnership unit is exchangeable for an amount of cash approximating the then-current market value of two shares of the Company’s common stock at the time of conversion or, at the Company’s election, two shares of the Company’s common stock.

(3) Each convertible partnership unit is exchangeable for an amount of cash approximating the then-current market value of one share of the Company’s common stock at the time of conversion or, at the Company’s election, one share of the Company’s common stock.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Indebtedness and Ratios

Dollars in thousands

*Debt Maturities and Scheduled Principal Repayments (Amortization)* *September 30, 2011*
	Bank Line of Credit(1)		Senior Unsecured Notes			Rates(2)		Mortgage Debt(3)			Rates(2)		Consolidated Debt			HCP’s Share of Unconsolidated Debt(4)			Rates(2)		Total Debt
2011 (3 months)	$	—	$	—		—	%	$	8,734		N/A	%	$	8,734		$	649		N/A	%	$	9,383
2012	—		250,000			6.67		73,953			5.09		323,953			9,621			5.31		333,574
2013	—		550,000			5.81		367,374			6.04		917,374			3,165			7.04		920,539
2014	—		487,000			3.27		183,758			5.74		670,758			738			N/A		671,496
2015	375,000		400,000			6.64		302,102			6.01		1,077,102			11,231			5.82		1,088,333
2016	—		900,000			5.07		285,586			6.92		1,185,586			46,936			6.05		1,232,522
2017	—		750,000			6.04		512,460			6.10		1,262,460			34,780			5.91		1,297,240
2018	—		600,000			6.83		5,747			5.90		605,747			37,014			5.00		642,761
2019	—		—					1,184			N/A		1,184			—					1,184
2020	—		—					1,276			N/A		1,276			—					1,276
Thereafter	—		1,500,000			5.75		52,020			5.24		1,552,020			—					1,552,020
Subtotal	375,000		5,437,000					1,794,194					7,606,194			144,134					7,750,328
Other debt(5)	—		—					—					89,325			—					89,325
(Discounts) and premiums, net	—		(21,903		)			(14,154		)			(36,057		)	(218		)			(36,275		)
Total debt	$	375,000	$	5,415,097				$	1,780,040				$	7,659,462		$	143,916				$	7,803,378

Weighted average interest rate	2.21%		5.67%					6.12%					5.61%			5.83%					5.61%

Weighted average maturity in years	3.50		6.60					4.61					5.98			5.04					5.96

*Ratios*			*Covenants*
	September 30,	December 31,	The following is a summary of the financial covenants under the revolving line of credit facility at September 30, 2011.
	2011	2010
Consolidated Debt/Consolidated Gross Assets	40.6%	31.9%
Financial Leverage (Total Debt/Total Gross Assets)	40.7%	32.8%		Bank Line of Credit
			Financial Covenants(7)	Requirement	Actual Compliance
Consolidated Secured Debt/Consolidated Gross Assets	9.4%	8.5%	Leverage Ratio	No greater than 60%	42%
Total Secured Debt/Total Gross Assets	10.0%	10.4%	Secured Debt Ratio	No greater than 30%	11%
			Unsecured Leverage Ratio	No greater than 60%	39%
Fixed and variable rate ratios(6):			Fixed Charge Coverage Ratio (12 months)	No less than 1.50x	3.0x
Fixed rate Total Debt	94.1%	93.8%
Variable rate Total Debt	5.9%	6.2%
	100.0%	100.0%

(1) At September 30, 2011, the Company had $12.3 million of aggregate letters of credit pledged against the revolving line of credit facility.

(2) Senior unsecured notes and mortgage and other secured debt weighted-average effective rates relate to maturing amounts.

(3) Mortgage debt attributable to non-controlling interests at September 30, 2011was $67 million.

(4) Includes pro-rata share of mortgage and other debt in the Company’s Investment Management Platform and HCR ManorCare OpCo. At September 30, 2011, 100% of the Company’s Investment Management Platform’s mortgage debt accrues interest at fixed rates. HCR ManorCare OpCo’s debt accrues interest at LIBOR (subject to a floor of 150bps) plus 350bps.

(5) Represents non-interest bearing life care bonds and occupancy fee deposits at certain of the Company’s senior housing facilities that have no scheduled maturities.

(6) $88 million of variable-rate mortgages are presented as fixed-rate debt as the interest payments under such debt have been swapped (pay fixed and receive float).

(7) Financial covenants for the revolving line of credit facility are calculated based on the definitions contained within the agreement and may be different than similar terms in the Company’s Consolidated Financial Statements as provided in its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Compliance with certain of these financial covenants requires the inclusion of the Company’s consolidated amounts and its proportionate share of unconsolidated investees.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Investments and Dispositions

Dollars and square feet in thousands
*Investments*
	September 30, 2011
Description	Three Months Ended		Nine Months Ended
HCR ManorCare real estate acquisition(1)	$	—	$	6,016,962
HCR ManorCare OpCo investment(1)	—		95,000
HCP Ventures II acquisition(2)	—		546,979
Acquisitions of other real estate(3)	9,656		173,198
Total fundings for development, tenant and capital improvements(4)	33,375		87,208
Total investments	$	43,031	$	6,919,347

Acquisitions of other real estate for the three months ended September 30, 2011

Location

Date

Capacity

Segment

Investment

Durham, North Carolina

August 17, 2011

53 sq. ft.

Life science

9,656

(3)

*Dispositions for the nine months ended September 30, 2011*
Description		Segment	Payoff/ Settlement Value, Net of Costs
Mezzanine and Mortgage Participations	Date
Genesis	April 1, 2011	Post-acute/skilled	$	330,396
HCR ManorCare(5)	April 7, 2011	Post-acute/skilled	1,630,720
Total			$	1,961,116

(1) On April 7, 2011, the Company acquired the real estate assets of privately-owned HCR ManorCare, Inc. for $6.1 billion. After reducing the purchase price by $88 million, which represents the difference between the fair value and the par value of our HCR ManorCare debt investments (at closing) that were settled as part of this acquisition, the adjusted purchase price is $6.0 billion. The adjusted purchase price of the HCR ManorCare real estate acquisition is comprised of the following: (i) $4.0 billion of cash consideration; and (ii) $2.0 billion representing the fair value of our HCR ManorCare debt investments. In conjunction with the acquisition of the real estate assets of HCR ManorCare, the Company exercised its option to purchase an equity interest in the operations of HCR ManorCare for $95 million that represented a 9.9% equity interest at closing.

(2) Represents 65% of the acquired investments from HCP Ventures II. On January 14, 2011, the Company acquired its partner’s 65% interest in a joint venture that owns 25 senior housing facilities with 5,621 units, becoming the sole owner of the portfolio. At closing, the Company paid approximately $136 million for the interest and assumed its partner’s share of $650 million (fair value of $635 million) of Fannie Mae secured debt with a weighted average fixed-rate of 5.66% and weighted average term to maturity of 5.3 years. At closing, the Company valued the HCP Ventures II investment at approximately $842 million.

(3) Represents acquisition of a life science development project for approximately $10 million during the quarter ended September 30, 2011.

(4) The three months ended September 30, 2011, includes the following: (i) $15.5 million of development, (ii) $10.3 million of first generation tenant and capital improvements, and (iii) $7.7 million of second generation tenant and capital improvements (excludes $3.1 million of leasing costs). The nine months ended September 30, 2011, includes the following: (i) $42.6 million of development, (ii) $22.4 million of first generation tenant and capital improvements, and (iii) $22.3 million of second generation tenant and capital improvements (excludes $9.5 million of leasing costs). Investments for development include capitalized interest for the three and nine months ended September 30, 2011 of $6.9 million and $19.4 million, respectively.

(5) Settlement value of the debt investments in HCR ManorCare presented excludes the $360 million participation in the first mortgage debt that the Company purchased on January 31, 2011 as this purchase was for the sole purpose of prefunding the HCR ManorCare Acquisition.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Development

As of September 30, 2011, dollars and square feet in thousands

Redevelopment Projects in Process

Estimated/

Estimated

Actual

Rentable

Estimated

Completion

Square

Investment

Total

Name of Project

Location

Segment

Date

Feet

to Date(1)(3)

Investment

Modular Labs IV

So. San Francisco, CA

Life science

4Q 2010

55,349

57,069

Soledad(4)

San Diego, CA

Life science

3Q 2011

12,315

14,932

1030 Massachusetts Avenue

Cambridge, MA

Life science

1Q 2012

23,949

39,992

Durham Research Lab

Durham, NC

Life science

2Q 2012

9,824

12,573

Knoxville

Knoxville, TN

Medical office

4Q 2011

7,382

8,740

Westpark Plaza

Plano, TX

Medical office

1Q 2012

11,624

17,159

Folsom

Sacramento, CA

Medical office

4Q 2012

29,842

39,251

Innovation Drive

San Diego, CA

Medical office

3Q 2012

24,378

37,100

Fresno(5)

Fresno, CA

Hospital

4Q 2012

N/A

4,411

20,554

Total

179,074

247,370

*Land Held for Development*

				Estimated
			Gross	Rentable
			Site	Square
	Location	Segment	Acreage	Feet
	So. San Francisco, CA	Life science	50	1,666
	Carlsbad, CA	Life science	41	690
	Poway, CA	Life science	72	1,204
	Torrey Pines, CA	Life science	6	93
			169	3,653

	Investment-to-date(2)(3)			$	366,795

Projects Placed in Service

Date

Rentable

Placed in

Square

Percentage

Name of Project

Location

Segment

Service

Feet

Investment(6)

Leased

500/600 Saginaw

Redwood City, CA

Life science

March 2011

43,030

—

(1) Investment-to-date of $179 million includes the following: (i) $56 million in development costs and construction in progress, (ii) $78 million of buildings and (iii) $45 million of land.

(2) Investment-to-date of $367 million includes the following: (i) $286 million in land and (ii) $81 million in development costs and construction in progress.

(3) Development costs and construction in progress of $169 million presented on the Company’s consolidated balance sheet at September 30, 2011, includes the following: (i) $56 million of costs for development projects in process; (ii) $81 million of costs for land held for development; and (iii) $32 million for tenant and other facility related improvement projects in process.

(4) Represents approximately half of the Soledad project remaining in redevelopment. The balance of the project was placed in service during the quarter ended September 30, 2010.

(5) Represents approximately 25% of the Fresno hospital placed in redevelopment in March 2011. The balance of the hospital remains in operations.

(6) Represents the investment as of the date the respective property was placed in service.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Portfolio Summary

As of and for the nine months ended September 30, 2011, dollars and square feet in thousands, unless otherwise indicated

*Portfolio Summary by Investment Product*
Leased	Property					Age			Occupancy	EBITDAR(1)			EBITDARM(1)
Properties	Count	Investment		NOI		(Years)	Capacity		%	Amount		CFC	Amount		CFC
Senior housing	296	$	5,158,542	$	364,854	15	31,338	Units	85.5	$	402,972	1.18 x	$	481,409	1.41 x
Post-acute/skilled	313	5,512,400		265,058		32	41,773	Beds	87.4	64,805		1.78 x	84,856		2.32 x
Life science	104	3,263,062		176,386		17	6,798	Sq. Ft.	90.0	N/A		N/A	N/A		N/A
Medical office	188	2,285,159		143,688		19	13,104	Sq. Ft.	91.0	N/A		N/A	N/A		N/A
Hospital	17	648,386		58,702		25	2,379	Beds	52.6	321,040		4.05 x	355,405		4.48 x
	918	$	16,867,549	$	1,008,688	22

Operating Properties (RIDEA)	Property Count	Investment		NOI		Age (Years)	Capacity		Occupancy %
Senior housing(2)	21	$	749,402	$	4,452	21	5,080	Units	90.2

Debt Investments		Investment		Interest Income
Senior housing		$	3,655	$	49
Post-acute/skilled(3)		9,820		98,167
Hospital(4)		89,998		983
		$	103,473	$	99,199
Total	939	$	17,720,424	$	1,112,339

*Portfolio NOI, Adjusted NOI and Interest Income*
	Three Months Ended September 30, 2011
	Rental and										Adjusted NOI
	RIDEA		Operating				Adjusted		Interest		and Interest
Segment	Revenues		Expenses		NOI(5)		NOI		Income(6)		Income
Senior housing(2)	$	138,117	$	9,623	$	128,494	$	115,525	$	42	$	115,567
Post-acute/skilled	132,392		245		132,147		112,878		287		113,165
Life science	71,093		13,231		57,862		52,786		—		52,786
Medical office	81,145		33,346		47,799		46,662		—		46,662
Hospital	20,854		1,227		19,627		19,066		248		19,314
	$	443,601	$	57,672	$	385,929	$	346,917	$	577	$	347,494

	Nine Months Ended September 30, 2011
	Rental and										Adjusted NOI
	RIDEA		Operating				Adjusted		Interest		and Interest
Segment	Revenues		Expenses		NOI(5)		NOI		Income(6)		Income
Senior housing(2)	$	380,694	$	11,388	$	369,306	$	327,656	$	49	$	327,705
Post-acute/skilled	265,377		319		265,058		228,031		98,167		326,198
Life science	215,045		38,659		176,386		159,545		—		159,545
Medical office	241,045		97,357		143,688		138,913		—		138,913
Hospital	62,118		3,416		58,702		56,863		983		57,846
	$	1,164,279	$	151,139	$	1,013,140	$	911,008	$	99,199	$	1,010,207

(1) EBITDAR, EBITDARM and their respective CFC are not presented for the disaggregated HCR ManorCare senior housing and post-acute/skilled nursing portfolios as the combined portfolio is cross-collaterized under a single master lease. See HCR ManorCare Leased Portfolio Summary on page 15 of this report.

(2) On September 1, 2011, the Company entered into an agreement with Brookdale Senior Living to manage 21 assets under a RIDEA structure. Revenues and operating expenses were $11.9 million and $7.4 million, respectively for the three and nine months ended September 30, 2011.

(3) On April 7, 2011, the Company completed the acquisition of HCR ManorCare’s real estate assets. At closing of the HCR ManorCare Acquisition, the Company’s debt investments in HCR ManorCare were extinguished. For additional information regarding the HCR ManorCare Acquisition see Note 3 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC. Includes $43 million of interest income related to debt investments in Genesis HealthCare that were prepaid on April 1, 2011. For additional information regarding the Genesis HealthCare debt investments see Note 7 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

(4) Includes a senior secured loan to Cirrus Health (“Cirrus”) that was placed on non-accrual status effective January 1, 2011 with a carrying value of $76 million at September 30, 2011. For additional information regarding the senior secured loan to Cirrus see Note 7 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

(5) NOI attributable to non-controlling interests for the three and nine months ended September 30, 2011 was $1.3 million and $3.4 million, respectively.

(6) Includes loan accretion for the three and nine months ended September 30, 2011 of $0.3 million and $18.7 million, respectively.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Portfolio Concentrations

As of and for the nine months ended September 30, 2011, dollars in thousands

Geographic Diversification of Leased Properties

	Total	Senior		Post-Acute/		Life		Medical								% of
Investment by State	Properties	Housing		Skilled		Science		Office			Hospital		Total			Total

CA	149	$	623,881	$	263,616	$	3,143,527	$		212,671	$	128,545	$		4,372,240	25

TX	97	701,832		101,971		—		690,828			227,242		1,721,873			10

FL	95	824,237		527,164		—		152,864			62,450		1,566,715			9

PA	54	257,230		1,171,031		—		—			—		1,428,261			8

IL	51	500,224		679,690		—		13,481			—		1,193,395			7

OH	72	212,064		663,607		—		9,179			—		884,850			5

MI	38	175,096		560,602		—		—			—		735,698			4

MD	34	296,435		224,120		—		29,451			—		550,006			3

VA	29	318,785		172,126		—		41,348			—		532,259			3

NJ	21	374,041		96,534		—		—			—		470,575			3

Other	299	1,624,119		1,051,939		119,535		1,135,337			230,149		4,161,079			23

Total	939	$	5,907,944	$	5,512,400	$	3,263,062	$	2,285,159		$	648,386	$	17,616,951		100


	Total	Senior		Post-Acute/		Life		Medical								% of
NOI by State	Properties	Housing		Skilled		Science		Office			Hospital		Total			Total

CA	149	$	47,428	$	12,706	$	166,694	$		10,019	$	12,522	$		249,369	25

TX	97	42,897		4,158		—		39,103			18,584		104,742			10

FL	95	51,118		23,815		—		10,359			5,900		91,192			9

PA	54	12,709		54,094		—		—			—		66,803			7

IL	51	28,735		30,308		—		962			—		60,005			6

OH	72	11,603		33,799		—		424			—		45,826			5

MI	38	11,149		24,619		—		—			—		35,768			4

VA	29	17,473		10,078		—		2,678			—		30,229			3

MD	34	17,265		10,250		—		2,194			—		29,709			3

CO	26	12,437		4,079		—		11,350			1,043		28,909			3

Other	294	116,492		57,152		9,692		66,599			20,653		270,588			25

Total	939	$	369,306	$	265,058	$	176,386	$		143,688	$	58,702	$		1,013,140	100

Operator/Tenant Diversification

	Primary	Annualized Revenues(1)
Company	Segment	Amount			%

HCR ManorCare	Post-acute/skilled	$		472,500	33

Brookdale Senior Living(2)	Senior housing	140,471			10

Emeritus Corporation	Senior housing	94,117			6

Sunrise Senior Living	Senior housing	84,170			6

HCA	Hospital	47,851			3

Amgen	Life science	40,936			3

Genentech	Life science	37,345			3

Kindred	Post-acute/skilled	16,732			1

Tenet Healthcare	Hospital	16,018			1

Capital Senior Living	Senior housing	15,615			1

Other		485,688			33

		$	1,451,443		100

(1) The most recent monthly base rent (including additional rent floors), income from direct financing leases and/or interest income annualized for 12 months. Annualized revenues for properties managed under a RIDEA structure are based on the most recent month’s NOI annualized for 12 months. For additional details regarding “annualized revenues,” see reporting definitions.

(2) Brookdale Senior Living annualized revenues include $53.4 million of annualized NOI related to 21 senior housing facilities operated under a RIDEA structure that were formerly operated by Horizon Bay Retirement Living.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Same Property Portfolio

As of September 30, 2011, dollars and square feet in thousands

				Senior			Post-Acute/		Life			Medical
	Total			Housing(1)			Skilled		Science			Office			Hospital

Property count	562			224			45		95			182			16

Investment	$	10,309,189		$	4,210,886		$	244,738	$	3,058,483		$	2,186,441		$	608,641

Percent of property portfolio (by investment)	58.5%			71.3%			4.4%		93.7%			95.7%			93.9%

Capacity				25,639 Units			5,286 Beds		6,320 Sq. Ft.			12,708 Sq. Ft			2,379 Beds


Year-Over-Year Three-Month SPP

Occupancy:

September 30, 2011				85.3%			85.5%		92.8%			90.7%			53.1%

September 30, 2010				85.5%			85.1%		89.8%			90.7%			57.1%

% change				(0.2%		)	0.4%		3.0%			—%			(4.0%		)

NOI % change	4.5%			9.8%			3.3%		(0.1%		)	3.2%			(1.9%		)

Adjusted NOI:

September 30, 2011	$	211,696		$	85,820		$	9,314	$	51,882		$	46,200		$	18,480

September 30, 2010	$	202,504		$	79,633		$	8,991	$	50,395		$	44,727		$	18,758

Adjusted NOI % change	4.5%			7.8%			3.6%		3.0%			3.3%			(1.5%		)


Sequential Three-Month SPP

Occupancy:

September 30, 2011				85.3%			85.5%		92.8%			90.7%			53.1%

June 30, 2011				85.7%			85.5%		92.0%			90.8%			56.1%

% change				(0.4%		)	—%		0.8%			(0.1%		)	(3.0%		)

NOI % change	(1.7%		)	(0.9%		)	0.4%		(2.0%		)	(1.1%		)	(7.1%		)

Adjusted NOI:

September 30, 2011	$	211,696		$	85,820		$	9,314	$	51,882		$	46,200		$	18,480

June 30, 2011	$	213,124		$	85,385		$	9,219	$	52,348		$	46,315		$	19,857

Adjusted NOI % change	(0.7%		)	0.5%			1.0%		(0.9%		)	(0.2%		)	(6.9%		)


Year-Over-Year Nine-Month SPP

NOI % change	5.6%			11.5%			2.6%		0.8%			3.3%			(0.0%		)

Adjusted NOI:

September 30, 2011	$	626,214		$	249,063		$	27,635	$	156,712		$	137,789		$	55,015

September 30, 2010	$	598,636		$	230,636		$	26,847	$	155,040		$	133,779		$	52,334

Adjusted NOI % change	4.6%			8.0%			2.9%		1.1%			3.0%			5.1%

(1) Senior housing three-month SPP includes five facilities acquired in the six months ended June 30, 2010 with a combined investment value of $110.9 million, 636 units and three month occupancy as of September 30, 2011 of 77% (one quarter in arrears). These facilities are excluded from the nine-month senior housing SPP metrics as their results of operations are not included for the full comparable period.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Portfolio Lease Expirations and Debt Investment Maturities

At September 30, 2011, dollars and square feet in thousands

			**Expiration Year(1)**
Segment	Total		2011(2)		2012		2013		2014		2015		2016		2017		2018		2019		2020		Thereafter

*Lease Expirations*

Senior housing(3):
Properties	296		—		1		2		5		1		17		12		49		12		33		164

Annualized revenues	$	404,558	$	—	$	331	$	11,257	$	4,970	$	204	$	24,606	$	19,700	$	91,537	$	15,110	$	50,595	$	186,248

Post-acute/skilled:
Properties	313		—		—		—		9		1		6		9		3		12		4		269

Annualized revenues	$	453,380	$	—	$	—	$	—	$	7,062	$	439	$	5,440	$	8,480	$	2,733	$	9,885	$	2,996	$	416,345

Life science:
Square feet	6,117		148		111		418		424		1,027		308		765		554		68		881		1,413

Annualized revenues	$	219,387	$	2,727	$	3,047	$	10,799	$	11,021	$	30,187	$	8,882	$	25,807	$	25,925	$	2,844	$	40,433	$	57,715

Medical office:
Square feet	11,918		661		1,496		1,737		1,537		1,343		1,048		700		906		666		829		995

Annualized revenues	$	253,845	$	14,567	$	33,352	$	32,647	$	34,514	$	30,151	$	20,727	$	15,063	$	18,391	$	13,571	$	19,033	$	21,829

Hospital:
Properties	17		—		—		1		3		—		—		2		—		4		—		7

Annualized revenues	$	65,507	$	—	$	—	$	2,553	$	16,018	$	—	$	—	$	4,706	$	—	$	6,454	$	—	$	35,776

Total annualized revenues	$	1,396,677	$	17,294	$	36,730	$	57,256	$	73,585	$	60,981	$	59,655	$	73,756	$	138,586	$	47,864	$	113,057	$	717,913


*Debt Investment Maturities*

Senior housing:

Annualized revenues	$	216	$	—	$	—	$	—	$	—	$	—	$	216	$	—	$	—	$	—	$	—	$	—

Post-acute/skilled:

Annualized revenues	$	1,121	$	—	$	—	$	952	$	169	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Hospital(4):

Annualized revenues	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total annualized revenues	$	1,337	$	—	$	—	$	952	$	169	$	—	$	216	$	—	$	—	$	—	$	—	$	—

(1) The most recent monthly base rent (including additional rent floors), income from direct financing leases and/or interest income annualized for 12 months. For additional details regarding “annualized revenues,” see reporting definitions.

(2) Includes month-to-month and holdover leases.

(3) Excludes 21 facilities with annualized NOI of $53.4 million operated under a RIDEA structure by Brookdale Senior Living.

(4) Effective January 1, 2011, a senior secured loan to Cirrus was placed on non-accrual status. During the three and nine months ended September 30, 2011, no revenues were recognized for this loan; consequently, no annualized revenue amounts for this loan are presented. For additional information regarding the senior secured loan to Cirrus see Note 7 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Senior Housing Portfolio

As of and for the nine months ended September 30, 2011, dollars in thousands

Investments
Operating	Property					Average		Occupancy	EBITDAR			EBITDARM
Leases	Count	Investment		NOI		Age (Years)	Units	%	Amount		CFC	Amount		CFC
Assisted living	163	$	2,401,852	$	168,902	13	14,564	85.6	$	220,952	1.20 x	$	264,676	1.44 x
Independent living	28		715,153		80,690	21	4,910	85.0		63,069	1.04 x		72,232	1.19 x
CCRCs	12		606,499		41,712	21	3,770	88.9		70,470	1.28 x		83,720	1.52 x
	203	$	3,723,504	$	291,304	15	23,244	86.0	$	354,491	1.18 x	$	420,628	1.40 x

Direct Financing	Property					Average		Occupancy	EBITDAR(1)			EBITDARM(1)
Leases	Count	Investment		NOI		Age (Years)	Units	%	Amount		CFC	Amount		CFC
Assisted living	27	$	616,012	$	40,135	14	3,141	85.9	$	48,481	1.20 x	$	60,781	1.50 x
HCR ManorCare(1)	66		819,026		33,415	15	4,953	82.6		N/A	N/A		N/A	N/A
	93		1,435,038		73,550	15	8,094	83.9

Leased Properties	296	$	5,158,542	$	364,854	15	31,338	85.5	$	402,972	1.18 x	$	481,409	1.41 x

Operating	Property					Average		Occupancy
Properties (RIDEA)	Count	Investment		NOI		Age (Years)	Units	%
Assisted living	4	$	55,551	$	262	22	399	92.6
Independent living	17		693,851		4,190	21	4,681	90.0
	21		749,402		4,452	21	5,080	90.2

Secured				Interest
Loans		Investment		Income
Assisted living		$	3,655	$	49

Total	317	$	5,911,599	$	369,355		36,418	86.1


*Operator Concentration(2)***
						NOI and
	Properties		Investment			Interest Income				Occupancy	EBITDAR	EBITDARM
Operator	Count	% Pooled	Amount		%	Amount		%	Units	%	CFC(1)	CFC(1)
Brookdale Senior Living(3)	60	60	$	1,700,339	29	$	108,232	29	11,715	87.2	1.32 x	1.56 x
Sunrise Senior Living(4)(5)	48	98		1,313,966	22		72,871	20	5,568	87.5	1.24 x	1.51 x
Emeritus Corporation(4)	69	96		1,135,181	19		95,345	26	7,739	86.7	1.14 x	1.34 x
HCR ManorCare(1)	66	100		819,026	14		33,415	9	4,953	82.6	N/A	N/A
Harbor Retirement Associates	14	100		210,916	4		11,739	3	1,346	85.6	1.15 x	1.45 x
Aegis Senior Living	10	80		182,152	3		11,795	3	701	86.3	1.00 x	1.17 x
Other(3)	50	94		550,019	9		35,958	10	4,396	86.3	1.10 x	1.32 x
	317	90	$	5,911,599	100	$	369,355	100	36,418	86.1	1.18 x	1.41 x

(2) Property count, units, occupancy and CFCs are presented for leased and operating properties, if applicable, and exclude secured loans.

(3) On September 1, 2011, the Company transitioned 36 assets formerly operated by Horizon Bay Retirement Living to Brookdale. Occupancy for the 36 assets and CFC for 15 of the 36 assets subject to an operating lease will be reported in “other” until the requisite periods have elapsed to allow us to report such measures completely under the new operator. CFC for the remaining 21 assets operated under a RIDEA structure is excluded as CFC is not applicable.

(4) On November 1, 2010, the Company transitioned 27 assets formerly operated by Sunrise Senior Living to Emeritus Corporation. For these transitioned assets, occupancy and CFC are disclosed under “other” until the requisite periods have elapsed to allow us to report such measures completely under the new operator.

(5) Sunrise Senior Living’s percentage pooled consists of 47 assets under 6 separate pools.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Senior Housing Portfolio

Dollars in thousands

Portfolio Trends

	Same Property Leased Portfolio															Total Property Portfolio
										As of and for the
	As of and for the Quarter Ended									YTD Period Ended						As of and for the Twelve Months Ended
	09/30/11			06/30/11(1)			09/30/10(1)			09/30/11			09/30/10			09/30/11(2)(3)		06/30/11(2)(4)		09/30/10(4)

Property count	224			224			224			219			219			317		317		225
Investment	$	4,210,886		$	4,207,488		$	4,193,225		$	4,099,817		$	4,083,040		$	5,907,944	$	5,899,283	$	4,207,976
Units	25,639			25,647			24,960			25,003			24,960			36,418		36,424		25,707
3-Month Occupancy %	85.3			85.7			85.5			85.5			85.5			85.5		85.9		85.5
12-Month Occupancy %	85.8			86.1			85.5			86.0			85.5			86.1		86.3		85.5
EBITDAR	$	393,008		$	380,533		357,142			$	384,913		$	357,142		$	402,972	$	449,890	$	358,180
EBITDAR CFC	1.19 x			1.20 x			1.16 x			1.20 x			1.16 x			1.18 x		1.11 x		1.16 x
EBITDARM	$	469,799		$	455,427		429,655			$	459,787		$	429,655		$	481,409	$	534,985	$	430,906
EBITDARM CFC	1.43 x			1.43 x			1.39 x			1.44 x			1.39 x			1.41 x		1.32 x		1.39 x

NOI:
Rental and related revenues(5)	$	83,877		$	84,502		$	88,151		$	245,331		$	231,497
DFL income	13,282			13,499			13,028			40,175			37,238
Operating expenses(5)(6)	(138		)	(100		)	(12,798		)	(750		)	(13,294		)
	$	97,021		$	97,901		$	88,381		$	284,756		$	255,441
Adjusted NOI:
Straight-line rents	(9,088		)	(9,537		)	(5,079		)	(27,294		)	(14,157		)
Below market lease intangibles, net	(631 )			(631		)	(737		)	(1,893		)	(2,308		)
DFL accretion	(1,482		)	(2,348		)	(2,932		)	(6,506		)	(8,340		)
	$	85,820		$	85,385		$	79,633		$	249,063		$	230,636

(1) Occupancy, EBITDAR and EBITDARM exclude four facilities acquired in the quarter ended June 30, 2010 and one facility acquired in the quarter ended March 31, 2010 as those metrics are reported one quarter in arrears, and therefore are not applicable for these facilities.

(2) EBITDAR, EBITDARM and their respective CFCs are not presented for the disaggregated HCR ManorCare senior housing and post-acute/skilled nursing portfolios as the combined portfolio is cross-collaterized under a single master lease. See HCR ManorCare Leased Portfolio Summary on page 15 of this report.

(3) EBITDAR, EBITDARM and the related CFCs do not apply to the 21 properties operated under a RIDEA structure.

(4) Amounts are presented as originally reported, without giving effect to discontinued operations.

(5) The quarter and year to date ended September 30, 2010 includes increases to revenues and operating expenses of $13.7 million and $12.7 million, respectively, as a result of consolidating the operations for 27 Sunrise managed properties beginning August 31, 2010 (the date that HCP controlled the four VIEs that lease these 27 properties); for additional information regarding these VIEs see Note 12 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

(6) Excludes certain non-property specific operating expenses allocated to certain segments.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Post-Acute/Skilled Nursing Portfolio

As of and for the nine months ended September 30, 2011, dollars in thousands, unless otherwise indicated

Investments

Leased	Property					Average Age		Occupancy	EBITDAR			EBITDARM
Properties	Count	Investment		NOI		(Years)	Beds	%	Amount		CFC	Amount		CFC
Operating leases	45	$	244,738	$	28,408	27	5,286	85.4	$	64,805	1.78 x	$	84,856	2.32 x
HCR ManorCare DFLs(1)	268		5,267,662		236,650	33	36,487	87.7		N/A	N/A		N/A	N/A
Leased properties	313	$	5,512,400	$	265,058	32	41,773	87.4

Debt				Interest
Investments		Investment		Income
HCR ManorCare(2)		$	—	$	54,303
Genesis HealthCare(3)		—		43,007
Other		9,820		857
		$	9,820	$	98,167
Total		$	5,522,220	$	363,225

Operator Concentration(4)

						NOI and
	Properties		Investment			Interest Income				Occupancy	EBITDAR	EBITDARM
Operator	Count	% Pooled	Amount		%	Amount		%	Beds	%	CFC(1)	CFC(1)
HCR ManorCare(1)(2)	268	100	$	5,267,662	95	$	290,953	80	36,487	87.7	N/A	N/A
Formation Capital	9	100	63,100		1	5,140		1	934	94.5	2.26 x	2.78 x
Covenant Care	12	100	62,318		1	7,966		2	1,328	83.6	1.84 x	2.41 x
Kindred Healthcare	9	100	38,117		1	6,202		2	1,288	85.8	1.46 x	2.09 x
Trilogy Health Services	5	100	33,351		1	4,135		1	546	90.4	1.77 x	2.20 x
Other(5)	10	60	57,672		1	48,829		14	1,190	77.5	1.56 x	2.10 x
	313	99	$	5,522,220	100	$	363,225	100	41,773	87.4	1.78 x	2.32 x

(2) On April 7, 2011, the Company completed the acquisition of HCR ManorCare’s real estate assets. At closing of the HCR ManorCare Acquisition, the Company’s debt investments in HCR ManorCare were extinguished. For additional information regarding the HCR ManorCare Acquisition see Note 3 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

(3) On April 1, 2011, the Company’s debt investments in Genesis HealthCare were prepaid.

(4) Property count, beds, occupancy and CFCs are presented for leased properties and exclude debt investments.

(5) Other includes $43 million in interest income related to debt investments in Genesis HealthCare that were prepaid April 1, 2011. For additional information regarding Genesis HealthCare see Note 7 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

See Reporting Definitions and Reconciliations of Non-GAAP Measures


	14

Owned Post-Acute/Skilled Nursing Portfolio

Dollars in thousands, except HCR ManorCare information

Portfolio Trends

	Same Property Leased Portfolio															Total Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						As of and for the Twelve Months Ended
	09/30/11			06/30/11			09/30/10			09/30/11			09/30/10			09/30/11(1)		06/30/11(1)(2)		09/30/10(2)

Property count	45			45			45			45			45			313		313		45
Investment	$	244,738		$	244,738		$	244,738		$	244,738		$	244,738		$	5,512,400	$	5,480,734	$	244,738
Beds	5,286			5,286			5,331			5,286			5,331			41,773		41,773		5,331
3-Month Occupancy %	85.5			85.5			85.1			85.5			85.1			87.1		88.2		85.1
12-Month Occupancy %	85.4			85.3			85.2			85.4			85.2			87.4		87.5		85.3
EBITDAR	$	64,805		$	61,545		$	53,084		$	64,805		$	53,084		64,805		61,545		53,081
EBITDAR CFC	1.78 x			1.69 x			1.48 x			1.78 x			1.48 x			1.78 x		1.69 x		1.48 x
EBITDARM	$	84,856		$	81,209		$	72,690		$	84,856		$	72,690		84,856		81,209		72,687
EBITDARM CFC	2.32 x			2.24 x			2.02 x			2.32 x			2.02 x			2.32 x		2.24 x		2.02 x
Quality Mix	65.4%			63.8%			60.8%			65.4%			60.8%			68.3%		68.1%		60.8%
NOI:

Rental revenues	$	9,548		$	9,507		$	9,274		$	28,495		$	27,843
Operating expenses(3)	(28		)	(26		)	(57		)	(69		)	(149		)
	9,520			9,481			9,217			28,426			27,694

Adjusted NOI:
Straight-line rents	(206		)	(262		)	(226		)	(791		)	(847		)
	$	9,314		$	9,219		$	8,991		$	27,635		$	26,847


*HCR ManorCare Leased Portfolio Summary*
As of and for the nine months ended September 30, 2011, dollars in thousands

Investment	Property						Adjusted			EBITDAR			EBITDARM
Summary	Count		Investment(4)		NOI(5)		NOI		Occupancy	Amount		CFC	Amount		CFC
Assisted living	66		$	819,026	$	33,415	$	27,739	82.6%	N/A		N/A	N/A		N/A
Post-acute/skilled	268		5,267,662		236,650		200,415		87.7%	N/A		N/A	N/A		N/A
Total	334		$	6,086,688	$	270,065	$	228,154	87.1%	$	634,284	1.34 x	$	813,479	1.72 x

	09/30/11		06/30/11		09/30/10
Quality mix	70.8%	(6)	70.8%		71.7%

HCR ManorCare OpCo (guarantor) fixed charge coverage(7)							1.60 x

(1) EBITDAR, EBITDARM, their respective CFC and quality mix are not presented for the disaggregated HCR ManorCare senior housing and post-acute/skilled nursing portfolios as the combined portfolio is cross-collaterized under a single master lease. For additional information see HCR ManorCare Leased Portfolio Summary.

(2) Amounts are presented as originally reported, without giving effect to discontinued operations.

(3) Excludes certain non-property specific operating expenses allocated to certain segments.

(4) The Company’s total investment in HCR ManorCare includes aggregated accumulated DFL accretion of $69.7 million as of September 30, 2011.

(5) Assisted living and post-acute/skilled NOI includes reductions of $3.4 million and $24.3 million, respectively, related to HCP’s equity interest in HCR ManorCare OpCo.

(6) Private-pay and Medicare revenues as a percentage of total revenues are 31.0% and 39.8%, respectively.

(7) HCR ManorCare OpCo (guarantor) fixed charge coverage is based on EBITDAR for the trailing 12 months, is one quarter in arrears from the date presented and includes home health and hospice EBITDAR and corporate general and administrative expenses, excluding HCR ManorCare’s non-recurring expenses associated with the sale of its real estate to HCP. The fixed charges include the most recent monthly cash rent annualized and cash interest expense based on the trailing 12 months and are one quarter in arrears from the date presented.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Life Science Portfolio

As of and for the nine months ended September 30, 2011, unless otherwise indicated, dollars and square feet in thousands

Investments

	Property					Average	Square
Leased Properties	Count	Investment		NOI		Age (Years)	Feet	Occupancy %
San Francisco	74	$	2,569,520	$	133,474	17	4,576	89.6
San Diego	20	574,007		33,220		18	1,553	86.8
Utah	10	119,535		9,692		11	669	100.0
	104	$	3,263,062	$	176,386	17	6,798	90.0

Tenant Concentration

	Annualized Revenues			Square Feet
Tenant	Amount		%	Amount	%
Amgen	$	40,936	19	684	11
Genentech	37,345		17	794	13
Rigel Pharmaceuticals	12,799		6	147	2
Exelixis, Inc.	12,766		6	295	5
Takeda	9,926		5	188	3
Google	7,271		3	248	4
Myriad Genetics	7,119		3	310	5
General Atomics	5,593		3	281	5
ARUP	5,418		2	324	5
Alexza Pharmaceuticals, Inc.	5,159		2	107	2
Other	75,055		34	2,739	45
	$	219,387	100	6,117	100

Portfolio Trends

	Same Property Leased Portfolio															Total Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						At the Period Ended
	09/30/11			06/30/11			09/30/10			09/30/11			09/30/10			09/30/11		06/30/11(1)		09/30/10(1)
Property count	95			95			95			95			95			104		104		98
Investment	$	3,058,483		$	3,052,205		$	3,040,180		$	3,058,483		$	3,040,180		$	3,263,062	$	3,251,372	$	3,128,513
Square feet	6,320			6,320			6,319			6,320			6,319			6,798		6,798		6,508
Occupancy %	92.8			92.0			89.8			92.8			89.8			90.0		89.2		88.9
NOI:
Rental and related revenues	$	58,432		$	59,421		$	58,639		$	177,044		$	176,307
Tenant recoveries	9,934			9,320			10,433			29,303			29,669
Operating expenses(2)	(11,489		)	(10,728		)	(12,117		)	(33,240		)	(34,326		)
	$	56,877		$	58,013		$	56,955		$	173,107		$	171,650
Adjusted NOI:

Straight-line rents	(3,068		)	(3,740		)	(4,815		)	(10,917		)	(11,177		)
Below market lease intangibles, net	(338		)	(336		)	(156		)	(711		)	(666		)
Lease termination fees	(1,589		)	(1,589		)	(1,589		)	(4,767		)	(4,767		)
	$	51,882		$	52,348		$	50,395		$	156,712		$	155,040

(1) Amounts are presented as originally reported, without giving effect to discontinued operations.

(2) Excludes certain non-property specific operating expenses allocated to certain segments and activities of assets that have been placed in redevelopment.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Life Science Portfolio

Dollars and square feet in thousands, except dollars per square foot

Selected Lease Expirations Data (next 3 years):

	Total					San Francisco			San Diego			Utah
	Square Feet		Annualized Revenues			Square	Annualized		Square	Annualized		Square	Annualized
Year	Amount	%	Amount		%	Feet	Revenues		Feet	Revenues		Feet	Revenues
2011(1)	148	2	$	2,727	1	117	$	1,471	31	$	1,256	—	$	—
2012	111	2	3,047		1	47	1,113		64	1,934		—	—
2013	418	7	10,799		5	352	9,458		66	1,341		—	—
Thereafter	5,440	89	202,814		93	3,584	152,392		1,186	37,400		670	13,022
	6,117	100	$	219,387	100	4,100	$	164,434	1,347	$	41,931	670	$	13,022

*Leasing Activity*	Leased		Annualized		%		HCP Tenant		Leasing		Average	Retention
	Square		Base Rent Per		Change		Improvements		Costs Per		Lease Term	Rate
	Feet		Square Foot		In Rents		Per Square Foot		Square Foot		(Months)	YTD

Leased Square Feet as of December 31, 2010	5,876		$	36.20

Acquisitions	140		33.30
Expirations	(197	)	19.60
Renewals, amendments and extensions	112		18.83		(1.5	)	$	6.70	$	3.14	28	57.0
New leases and expansions	120		19.62				12.86		10.29		74

Leased Square Feet as of March 31, 2011	6,051		$	36.23

Expirations	(4	)	24.00
Renewals, amendments and extensions	4		24.00		—		$	—	$	—	12	57.8
New leases and expansions	15		12.93				25.47		7.17		59

Leased Square Feet as of June 30, 2011	6,066		$	36.39

Expirations	(198	)	42.20
Renewals, amendments and extensions	70		24.07		(10.7	)	$	14.23	$	4.57	55	46.5
New leases and expansions	179		20.14				8.18		7.40		54
Leased Square Feet as of September 30, 2011	6,117		$	35.86

(1) Includes month-to-month and holdover leases.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Medical Office Portfolio

As of and for the nine months ended September 30, 2011, dollars and square feet in thousands

Investments

	Property					Average
Leased Properties	Count	Investment		NOI		Age (Years)	Square Feet	Occupancy %
On-Campus	143	$	1,825,184	$	115,503	19	10,842	91.1
Off-Campus	45	459,975		28,185		19	2,262	90.1
	188	$	2,285,159	$	143,688	19	13,104	91.0

Portfolio Trends

	Same Property Leased Portfolio															Total Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						At the Period Ended
	09/30/11			06/30/11			09/30/10			09/30/11			09/30/10			09/30/11		06/30/11(1)		09/30/10(1)

Property count	182			182			182			182			182			188		188		186
Investment	$	2,186,441		$	2,177,498		$	2,146,560		$	2,186,441		$	2,146,560		$	2,285,159	$	2,272,818	$	2,178,765
Square feet	12,708			12,708			12,707			12,708			12,707			13,104		13,097		12,900
Occupancy %	90.7			90.8			90.7			90.7			90.7			91.0		91.1		90.8
NOI:
Rental and related revenues	$	66,107		$	66,108		$	65,288		$	198,039		$	194,658
Tenant recoveries	12,073			11,300			11,978			34,885			35,461
Operating expenses(2)	(31,006		)	(29,717		)	(31,541		)	(90,814		)	(92,541		)
	$	47,174		$	47,691		$	45,725		$	142,110		$	137,578

Adjusted NOI:
Straight-line rents	(952		)	(1,343		)	(479		)	(4,270		)	(2,088		)
Above (below) market lease intangibles, net	(22		)	(33		)	(516		)	(51		)	(1,708		)

Lease termination fees	—			—			(3		)	—			(3		)
	$	46,200		$	46,315		$	44,727		$	137,789		$	133,779

(1) Amounts are presented as originally reported, without giving effect to discontinued operations.

(2) Excludes certain non-property specific operating expenses allocated to certain segments and activities of assets that have been placed in redevelopment.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Medical Office Portfolio

Square feet in thousands

Leasing Activity

	Leased		Annualized		%	HCP Tenant		Leasing		Average	Retention
	Square		Base Rent Per		Change	Improvements		Costs Per		Lease Term	Rate
	Feet		Square Foot		In Rents(1)	Per Square Foot		Square Foot		(Months)	YTD

Leased Square Feet as of December 31, 2010	11,798		$	21.82

Acquisitions	132		18.74
Expirations	(569	)	24.57
Renewals, amendments and extensions	462		23.43		1.0	$	6.16	$	4.46	85	81.2
New leases	111		21.44			18.94		5.09		84
Terminations	(16	)	13.91

Leased Square Feet as of March 31, 2011	11,918		$	21.86

Expirations	(321	)	21.97
Renewals, amendments and extensions	254		22.06		1.1	$	5.91	$	2.32	50	80.4
New leases	82		20.68			20.36		4.12		59
Terminations	(6	)	16.81

Leased Square Feet as of June 30, 2011	11,927		$	21.94

Expirations	(381	)	22.28
Renewals, amendments and extensions	277		22.80		0.7	$	8.61	$	2.70	56	78.1
New leases	104		20.04			22.50		5.35		64
Terminations	(9	)	22.77

Leased Square Feet as of September 30, 2011	11,918		$	22.07

(1) For comparative purposes, the calculation reflects adjustments for leases that converted to a different lease type upon renewal, amendment or extension of the original lease.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Hospital Portfolio

As of and for the nine months ended September 30, 2011, dollars in thousands, unless otherwise indicated

Investments

Leased	Property					Average		Occupancy	EBITDAR(1)			EBITDARM(1)
Properties	Count	Investment		NOI		Age (Years)	Beds	%(1)	Amount		CFC	Amount		CFC
Acute care	5	$	452,672	$	42,990	35	1,578	53.1	$	268,344	4.61 x	$	293,416	5.04 x
Rehab	7	96,784		5,862		21	520	57.8	28,150		3.24 x	32,113		3.69 x
Specialty	2	63,725		3,796		28	37	—	19,738		3.67 x	21,974		4.08 x
LTACH	3	35,205		6,054		17	244	42.5	4,808		0.68 x	7,902		1.12 x
	17	$	648,386	$	58,702	25	2,379	52.6	$	321,040	4.05 x	$	355,405	4.48 x



Debt Investments		Investment		Interest Income
Acute care		$	14,348	$	983
Specialty(2)		75,650		—
		$	89,998	$	983
Total		$	738,384	$	59,685

Operator Concentration(3)

						NOI and
	Properties		Investment			Interest Income
Operator(1)	Count	% Pooled	Amount		%	Amount		%	Beds
Tenet Healthcare	3	—	$	196,709	27	$	17,327	29	756
HCA	1	—	167,164		23	15,534		26	668
Cirrus Health	2	—	153,723		21	3,797		6	37
Hoag Memorial Hospital Presbyterian	1	—	88,800		12	10,132		17	154
Other	10	70	131,988		17	12,895		22	764
	17	41	$	738,384	100	$	59,685	100	2,379

(1) Certain operators in HCP’s hospital portfolio are not required under their respective leases to provide operational data.

(2) Represents a senior secured loan to Cirrus that was placed on non-accrual status effective January 1, 2011. For additional information regarding the senior secured loan to Cirrus see Note 7 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

(3) Property count and beds are presented for leased properties and exclude debt investments.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Owned Hospital Portfolio

Dollars in thousands

*Portfolio Trends*
	Same Property Leased Portfolio															Total Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						As of and for the Twelve Months Ended
	09/30/11			06/30/11			09/30/10			09/30/11			09/30/10			09/30/11		06/30/11(1)		09/30/10(1)

Property count	16			16			16			16			16			17		17		17
Investment	$	608,641		$	608,641		$	608,184		$	608,641		$	608,184		$	648,386	$	648,386	$	647,890
Beds	2,379			2,361			2,350			2,379			2,350			2,379		2,361		2,377
3-Month Occupancy %	53.1			56.1			57.1			53.1			57.1			53.1		56.2		57.7
12-Month Occupancy %	52.6			54.5			58.2			52.6			58.2			52.6		54.5		58.6
EBITDAR	$	311,906		$	297,504		$	300,474		$	311,906		$	300,474		$	321,040	$	305,868	$	308,931
EBITDAR CFC	4.08 x			4.68 x			4.78 x			4.08 x			4.78 x			4.05 x		4.62 x		4.70 x
EBITDARM	$	344,912		$	329,424		$	332,843		$	344,912		$	332,843		$	355,405	$	338,984	$	342,766
EBITDARM CFC	4.51 x			5.18 x			5.30 x			4.51 x			5.30 x			4.48 x		5.12 x		5.22 x
NOI:
Rental and related revenues	$	20,091		$	21,524		$	20,254		$	59,726		$	60,124
Operating expenses	(1,226		)	(1,221		)	(1,019		)	(3,412		)	(3,805		)
	$	18,865		$	20,303		$	19,235		$	56,314		$	56,319

Adjusted NOI:
Straight-line rents	(192		)	(254		)	(284		)	(721		)	(3,407		)
Below market lease intangibles, net	(193		)	(192		)	(193		)	(578		)	(578		)
	$	18,480		$	19,857		$	18,758		$	55,015		$	52,334

(1) Amounts are presented as originally reported, without giving effect to discontinued operations.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Investment Management Platform

As of and for the nine months ended September 30, 2011, dollars in thousands

									HCP’s
Unconsolidated		Date	HCP’s		Joint		HCP’s Net		Investment		Initial
Institutional	Primary	Established/	Ownership		Venture’s		Equity		Management		Term
Joint Ventures	Segment	Acquired	Percentage		Investment		Investment(1)		Fee Income(2)		(in years)

HCP Ventures III	Medical office	October-06		30%(3)	$	142,595	$	9,245	$	299	10
HCP Ventures IV	Medical office	April-07		20%	651,501		36,065		1,233		10
HCP Life Science	Life science	August-07	50%-63%		144,173		66,335		3		97-98
					$	938,269	$	111,645	$	1,535

*Balance Sheets(4)***
	September 30, 2011						December 31, 2010
	Medical Office			Life Science			Medical Office			Life Science
ASSETS
Real estate:
Buildings and improvements	$	674,402		$	28,456		$	665,925		$	37,489
Land	67,973			8,271			67,897			8,271
Accumulated depreciation and amortization	(109,719		)	(14,968		)	(94,901		)	(23,428		)
Net real estate	632,656			21,759			638,921			22,332
Cash and cash equivalents and restricted cash	14,585			2,999			15,275			1,876
Intangible assets, net	37,983			—			42,805			—
Other assets, net	21,664			1,461			20,112			1,684
Total assets	$	706,888		$	26,219		$	717,113		$	25,892
LIABILITIES AND MEMBERS’ CAPITAL
Mortgage debt	$	467,421		$	7,423		$	469,061		$	9,882
Intangible liabilities, net	11,330			—			12,523			—
Accounts payable, accrued liabilities and deferred revenue	16,933			1,664			12,458			1,016
Total liabilities	495,684			9,087			494,042			10,898
HCP’s capital	33,525			9,284			36,158			7,918
Partners’ capital	177,679			7,848			186,913			7,076
Total liabilities and members’ capital	$	706,888		$	26,219		$	717,113		$	25,892

(1) The carrying value of investments in unconsolidated joint ventures is based on the amount we paid to purchase the joint venture interest, which is different from the Company’s capital balance as reflected at the joint venture level as the records of the unconsolidated joint venture are reflected at their historical cost. These differences in basis are generally amortized over the lives of the related assets and liabilities and included in the Company’s share of equity in earnings of the respective joint venture.

(2) Investment management fee income presented on the Company’s consolidated income statement for the nine months ended September 30, 2011 of $1.6 million includes $70,000 from HCP Ventures II, an unconsolidated senior housing joint venture. On January 14, 2011, the Company acquired its partner’s 65% interest, becoming the sole owner of the portfolio. For additional information see Note 8 to the Condensed Consolidated Financial Statements for the quarter ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC.

(3) The Company owns an 85% interest in HCP Birmingham Portfolio LLC, which owns a 30% interest in HCP Ventures III.

(4) Financial information is combined by primary segment of each joint venture (i.e., HCP Ventures III and HCP Ventures IV are combined under the medical office columns).

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Investment Management Platform

In thousands

**Statement of Operations and Funds From Operations(1)**
	Three Months Ended September 30, 2011						Three Months Ended September 30, 2010
	Medical Office			Life Science			Medical Office			Life Science
Revenues:
Rental and related revenues	$	15,507		$	2,697		$	16,743		$	2,586
Tenant recoveries	3,735			273			4,204			359
Total revenues	19,242			2,970			20,947			2,945

Costs and expenses:
Depreciation and amortization	6,909			376			6,895			616
Operating	8,483			408			8,465			373
General and administrative	727			8			900			4
Total costs and expenses	16,119			792			16,260			993

Other income (expense):
Other income, net	1			—			2			—
Interest expense	(6,788		)	(144		)	(6,826		)	(200		)
Net income (loss)	$	(3,664	)	$	2,034		$	(2,137	)	$	1,752

Depreciation and amortization	6,909			376			6,895			616
FFO	$	3,245		$	2,410		$	4,758		$	2,368

HCP’s pro rata share of FFO	$	770		$	1,411		$	1,070		$	1,379

Selected supplemental cash flow information:
Amortization of above and below market lease intangibles, net	$	(184	)	$	—		$	(122	)	$	—
Amortization of debt issuance costs, net	190			7			190			7
Straight-line rents	(229		)	46			(855		)	91
Leasing costs and tenant and capital improvements	(1,607		)	(409		)	(1,809		)	(1,350		)


	Nine Months Ended September 30, 2011						Nine Months Ended September 30, 2010
	Medical Office			Life Science			Medical Office			Life Science
Revenues:
Rental and related revenues	$	47,232		$	8,090		$	51,139		$	7,418
Tenant recoveries	11,758			911			12,955			1,087
Total revenues	58,990			9,001			64,094			8,505

Costs and expenses:
Depreciation and amortization	21,047			1,278			23,772			1,839
Operating	24,814			1,125			25,062			1,151
General and administrative	2,304			47			2,891			46
Total costs and expenses	48,165			2,450			51,725			3,036

Other income (expense):
Other income, net	3			—			10			—
Interest expense	(20,214		)	(470		)	(20,534		)	(641		)
Net income (loss)	$	(9,386	)	$	6,081		$	(8,155	)	$	4,828

Depreciation and amortization	21,047			1,278			23,772			1,839
FFO	$	11,661		$	7,359		$	15,617		$	6,667

HCP’s pro rata share of FFO	$	2,698		$	4,294		$	3,503		$	3,866

Selected supplemental cash flow information:
Amortization of above and below market lease intangibles, net	$	(450	)	$	—		$	(173	)	$	—
Amortization of debt issuance costs, net	569			24			569			24
Straight-line rents	(785		)	50			(1,554		)	242
Leasing costs and tenant and capital improvements	(5,642		)	(884		)	(4,924		)	(2,013		)

(1) Financial information is combined by primary segment of each joint venture (i.e., HCP Ventures III and HCP Ventures IV are combined under the medical office columns).

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Investment Management Platform

In thousands

**Net Operating Income(1)**
	Three Months Ended September 30, 2011					Three Months Ended September 30, 2010
	Medical Office			Life Science		Medical Office			Life Science

Net income (loss)	$	(3,664	)	$	2,034	$	(2,137	)	$	1,752
Depreciation and amortization	6,909			376		6,895			616
General and administrative	727			8		900			4
Other income, net	(1		)	—		(2		)	—
Interest expense	6,788			144		6,826			200

NOI	$	10,759		$	2,562	$	12,482		$	2,572
Straight-line rents	(229		)	46		(855		)	91
Amortization of above (below) market lease intangibles, net	(184		)	—		(122		)	—

Adjusted NOI	$	10,346		$	2,608	$	11,505		$	2,663

HCP’s pro rata share of NOI	$	2,433		$	1,498	$	2,778		$	1,496

HCP’s pro rata share of adjusted NOI	$	2,343		$	1,524	$	2,568		$	1,543



	Nine Months Ended September 30, 2011					Nine Months Ended September 30, 2010
	Medical Office			Life Science		Medical Office			Life Science

Net income (loss)	$	(9,386	)	$	6,081	$	(8,155	)	$	4,828
Depreciation and amortization	21,047			1,278		23,772			1,839
General and administrative	2,304			47		2,891			46
Other income, net	(3		)	—		(10		)	—
Interest expense	20,214			470		20,534			641

NOI	$	34,176		$	7,876	$	39,032		$	7,354
Straight-line rents	(785		)	50		(1,554		)	242
Amortization of above (below) market lease intangibles, net	(450		)	—		(173		)	—
Lease termination fees	(31		)	—		(429		)	—

Adjusted NOI	$	32,910		$	7,926	$	36,876		$	7,596

HCP’s pro rata share of NOI	$	7,679		$	4,592	$	8,673		$	4,262

HCP’s pro rata share of adjusted NOI	$	7,395		$	4,624	$	8,186		$	4,385

(1) Financial information is combined by primary segment of each joint venture (i.e., HCP Ventures III and HCP Ventures IV are combined under the medical office columns).

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Investment Management Platform

As of and for the nine months ended September 30, 2011, dollars and square feet in thousands

	Property					Adjusted		Average	Square

HCP Ventures III	Count	Investment		NOI		NOI		Age (Years)	Feet	Occupancy %
Medical office:
On-Campus	9	$	109,448	$	6,796	$	6,535	11	619	98.7
Off-Campus	4	33,147		1,642		1,603		10	183	82.4
	13	$	142,595	$	8,438	$	8,138	11	802	95.0

	Property					Adjusted		Average	Square

HCP Ventures IV	Count	Investment		NOI		NOI		Age (Years)	Feet	Occupancy %(1)
Medical office:
On-Campus	22	$	212,981	$	7,673	$	7,690	23	1,103	73.5
Off-Campus	31	357,137		14,489		13,904		20	1,483	84.4
Hospital:
LTACH	1	12,193		144		144		5	N/A	N/A
Specialty	3	69,190		3,432		3,034		6	N/A	N/A
	57	$	651,501	$	25,738	$	24,772	20

	Property					Adjusted		Average	Square

HCP Life Science	Count	Investment		NOI		NOI		Age (Years)	Feet	Occupancy %
San Francisco	2	$	74,692	$	3,544	$	3,682	14	147	100.0
San Diego	2	69,481		4,332		4,244		16	131	90.3

	4	$	144,173	$	7,876	$	7,926	15	278	95.4


Total	74	$	938,269	$	42,052	$	40,836

(1) Certain operators in the Investment Management Platform hospital portfolio are not required under their respective leases to provide operational data.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

Reporting Definitions and Reconciliations of Non-GAAP Measures

Adjusted Fixed Charge Coverage. Adjusted EBITDA divided by Fixed Charges. The Company uses Adjusted Fixed Charge Coverage, a non-GAAP financial measure, as a measure of liquidity. The Company believes Adjusted Fixed Charge Coverage provides investors, particularly fixed income investors, relevant and useful information because it measures the Company’s ability to meet its interest payments on outstanding debt and pay dividends to its preferred stockholders. The Company’s various debt agreements contain covenants that require the Company to maintain ratios similar to Adjusted Fixed Charge Coverage and credit rating agencies utilize similar ratios in evaluating and determining the credit rating on certain debt instruments of the Company. However, since this ratio is derived from Adjusted EBITDA and Fixed Charges, its usefulness is limited by the same factors that limit the usefulness of Adjusted EBITDA and Fixed Charges. Further, the Company’s computation of Adjusted Fixed Charge Coverage may not be comparable to similar fixed charge coverage ratios reported by other companies.

The following table details the calculation of Adjusted Fixed Charge Coverage:

In thousands

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010

Adjusted EBITDA	$	384,828	$	254,435	$	1,086,662	$	741,035
Interest expense:
Continuing operations	104,198		71,598		317,903		220,295
Discontinued operations	—		2		—		8
HCP’s share of interest expense from the Investment Management Platform	1,584		4,989		4,743		14,929
Capitalized interest	6,857		5,310		19,395		15,514
Preferred stock dividends	5,282		5,282		15,848		15,848
Fixed charges	$	117,921	$	87,181	$	357,889	$	266,594

Adjusted fixed charge coverage	3.3 x		2.9 x		3.0 x		2.8 x

Annualized Debt Service. The most recent monthly interest and principal amortization due to HCP as of period end annualized for 12 months. The Company uses Annualized Debt Service for purposes of determining Debt Service Coverage.

Annualized Revenues. The most recent monthly base rent (including additional rent floors), income from direct financing leases and/or interest income annualized for 12 months. Annualized Revenues for operating properties under a RIDEA structure are calculated based on the most recent monthly NOI annualized for 12 months. Annualized Revenues do not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of above and below market lease intangibles, interest accretion and deferred revenues). The Company uses Annualized Revenues for the purpose of determining Relationship Concentrations, Lease Expirations and Debt Investment Maturities.

Assets Held for Sale. Assets of discontinued operations in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Assisted Living Facility (“ALF”). A senior housing facility that predominantly consists of assisted living units is classified by the Company as an ALF.

Beds/Units/Square Feet. Senior housing facilities are measured in units (e.g., studio, one or two bedroom units). Life science facilities and medical office buildings are measured in square feet. Post-acute/skilled nursing facilities and hospitals are measured in licensed bed count.

Cash Flow Coverage (“CFC”). Facility EBITDAR or Facility EBITDARM for the most recent 12 months of available data divided by the Same Period Rent. Cash Flow Coverage is a supplemental measure of a property’s ability to generate cash flows for the operator/tenant (not the Company) to meet the operator’s/tenant’s related rent and other obligations to the Company. However, its usefulness is limited by, among other things, the same factors that limit the usefulness of Facility EBITDAR or Facility EBITDARM. The coverages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful.

Consolidated Assets. Total assets as reported in the Company’s consolidated financial statements.

Consolidated Debt. The carrying amount of bank line of credit, bridge and term loans (if applicable), senior unsecured notes, mortgage and other secured debt, and other debt as reported in the Company’s consolidated financial statements.

Consolidated Gross Assets. The carrying amount of total assets, excluding investments in and advances to unconsolidated joint ventures, after adding back accumulated depreciation and amortization, as reported in the Company’s consolidated financial statements.

Consolidated Market Capitalization. Consolidated Debt at Book Value plus Consolidated Market Equity.

Consolidated Market Equity. The total number of outstanding shares of the Company’s common stock multiplied by the closing price per share of its common stock on the New York Stock Exchange as of period end, plus the total number of convertible partnership units multiplied by the closing price per share of its common stock on the New York Stock Exchange as of period end (adjusted for stock splits), plus the total number of outstanding shares of the Company’s preferred stock multiplied by the closing price of its preferred stock on the New York Stock Exchange as of period end.

Consolidated Secured Debt. Mortgage and other secured debt secured by real estate excluding debt on assets held for sale as reported in the Company’s consolidated financial statements.

Continuing Care Retirement Community (“CCRC”). A senior housing facility which provides at least three levels of care (i.e., independent living, assisted living and skilled nursing) is classified by the Company as a CCRC.

Debt Investments. Loans secured by a direct interest in real estate and mezzanine loans.

Debt Service. The periodic payment of interest expense and principal amortization on secured loans.

Development. Includes ground-up construction and redevelopments.

Reporting Definitions and Reconciliations of Non-GAAP Measures

Direct Financing Lease (“DFL”). The Company uses the direct finance method of accounting to record income from DFLs. For leases accounted for as DFLs, future minimum lease payments are recorded as a receivable. The difference between the future minimum lease payments and the estimated residual values less the cost of the properties is recorded as unearned income. Unearned income is deferred and amortized to income over the lease terms to provide a constant yield.

Estimated Completion Date. For development projects, management’s estimate of the date the core and shell structure improvements are expected to be or have been completed. For redevelopment projects, management’s estimate of the time in which major construction activity in relation to the scope of the project has been substantially completed.

EBITDA and Adjusted EBITDA. The real estate industry uses earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, as a measure of both operating performance and liquidity. Adjusted EBITDA is calculated as EBITDA excluding impairments and gains or losses from real estate dispositions. The Company uses EBITDA and Adjusted EBITDA to measure both its operating performance and liquidity. The Company considers Adjusted EBITDA to provide investors relevant and useful information because it permits investors to view income from its operations on an unleveraged basis before the effects of taxes, non-cash depreciation and amortization, impairments, impairment recoveries, and gains or losses from real estate dispositions. By excluding interest expense, Adjusted EBITDA allows investors to measure the Company’s operating performance independent of its capital structure and indebtedness and, therefore, allows for a more meaningful comparison of its operating performance between quarters as well as annual periods and to compare its operating performance to that of other companies, both in the real estate industry and in other industries. As a liquidity measure, the Company believes that EBITDA and Adjusted EBITDA help investors analyze the Company’s ability to meet its interest payments on outstanding debt and to make preferred dividend payments. The Company believes investors should consider EBITDA and Adjusted EBITDA, in conjunction with net income (the primary measure of the Company’s performance) and the other required GAAP measures of its performance and liquidity, to improve their understanding of the Company’s operating results and liquidity, and to make more meaningful comparisons of its performance between periods and as against other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools and should be used in conjunction with the Company’s required GAAP presentations. EBITDA and Adjusted EBITDA do not reflect the Company’s historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant and widely used measure of operating performance and liquidity, it does not represent net income or cash flow from operations as defined by GAAP and it should not be considered as an alternative to those indicators in evaluating operating performance or liquidity. Further, the Company’s computation of EBITDA and Adjusted EBITDA may not be comparable to similar measures reported by other companies.

The following table reconciles Adjusted EBITDA from net income:

In thousands

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010

Net income	$	175,471		$	26,173		$	483,707		$	198,869
Interest expense:
Continuing operations	104,198			71,598			317,903			220,295
Discontinued operations	—			2			—			8
Income taxes:
Continuing operations	5			867			290			1,809
Discontinued operations	—			7			—			29
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	88,556			78,313			270,028			233,948
Discontinued operations	—			194			—			1,442
Equity income from unconsolidated joint ventures	(17,050		)	(209		)	(32,798		)	(4,078		)
HCP’s share of EBITDA from the Investment Management Platform	3,767			9,308			11,736			31,406
Other joint venture adjustments	14,481			476			28,165			1,566
EBITDA	$	369,428		$	186,729		$	1,079,031		$	685,294

Impairments, net of recoveries	15,400			71,693			15,400			59,793
Gain on sales of real estate	—			(3,987		)	—			(4,052		)
Gain upon consolidation of joint venture	—			—			(7,769		)	—
Adjusted EBITDA	$	384,828		$	254,435		$	1,086,662		$	741,035

Facility EBITDAR (“EBITDAR”). Earnings before interest, taxes, depreciation, amortization and rent for a particular facility accruing to the operator/tenant of the property (not the Company), for the trailing 12 months and one quarter in arrears from the date presented. The Company uses Facility EBITDAR in determining Cash Flow Coverage and Debt Service Coverage. Facility EBITDAR has limitations as an analytical tool. Facility EBITDAR does not reflect historical cash expenditures or future cash requirements for facility capital expenditures or contractual commitments. In addition, Facility EBITDAR does not represent a property’s net income or cash flow from operations and should not be considered an alternative to those indicators. However, the Company receives periodic financial information from operators/tenants regarding the performance of the Company’s facilities under the operator’s/tenant’s management. The Company utilizes Facility EBITDAR as a supplemental measure of the ability of those properties to generate sufficient liquidity to meet related obligations to the Company. Facility EBITDAR includes the greater of (i) contractual management fees or (ii) an imputed management fee of 5% for senior housing facilities and post-acute/skilled nursing facilities and 2% for acute care hospitals which the Company believes represents typical management fees in their respective industries. All facility financial performance data was derived solely from information provided by operators/tenants and borrowers without independent verification by the Company.

Reporting Definitions and Reconciliations of Non-GAAP Measures

Facility EBITDARM (“EBITDARM”). Earnings before interest, taxes, depreciation, amortization, rent and management fees for a particular facility accruing to the operator/tenant of the property (not the Company), for the trailing 12 months and one quarter in arrears from the date presented. The Company uses Facility EBITDARM in determining Cash Flow Coverage and Debt Service Coverage. Facility EBITDARM has limitations as an analytical tool. Facility EBITDARM does not reflect historical cash expenditures or future cash requirements for facility capital expenditures or contractual commitments. In addition, Facility EBITDARM does not represent a property’s net income or cash flow from operations and should not be considered an alternative to those indicators. However, the Company receives periodic financial information from operators/tenants regarding the performance of the Company’s facilities under the operator’s/tenant’s management. The Company utilizes Facility EBITDARM as a supplemental measure of the ability of those properties to generate sufficient liquidity to meet related obligations to the Company. All facility financial performance data was derived solely from information provided by operators/tenants and borrowers without independent verification by the Company.

Financial Leverage. Total Debt divided by Total Gross Assets. The Company believes that its Financial Leverage is a meaningful supplemental measure of its financial position, which enables both management and investors to analyze its leverage and to compare its leverage to that of other companies. The Company believes that the ratio of consolidated debt to consolidated gross assets is the most directly comparable GAAP measure to Financial Leverage. The Company’s computation of its Financial Leverage may not be identical to the computations of financial leverage reported by other companies. The Company’s share of total debt is not intended to reflect its actual liability or ability to access assets should there be a default under any or all of such loans or a liquidation of the joint ventures.

Fixed Charges. Total interest expense plus capitalized interest plus preferred stock dividends. The Company uses Fixed Charges to measure its interest payments on outstanding debt and dividends to its preferred stockholders for purposes of presenting Fixed Charge Coverage and Adjusted Fixed Charge Coverage. However, the usefulness of Fixed Charges is limited as, among other things, it does not include all contractual obligations. The Company’s computation of Fixed Charges should not be considered an alternative to fixed charges as defined by Item 503(d) of Regulation S-K and may not be comparable to fixed charges reported by other companies.

Funds Available for Distribution (“FAD”). Funds Available for Distribution is defined as FFO as adjusted after excluding the impact of the following: (i) straight-line rents; (ii) amortization of acquired above/below market lease intangibles; (iii) amortization of debt premiums, discounts and issuance costs; (iv) amortization of stock–based compensation expense; (v) accretion and depreciation related to direct financing leases; and (vi) deferred revenues. Further, FAD is computed after deducting recurring capital expenditures, including leasing costs and second generation tenant and capital improvements and includes similar adjustments to compute the Company’s share of FAD from its unconsolidated joint ventures. Other REITs or real estate companies may use different methodologies for calculating FAD, and accordingly, HCP’s FAD may not be comparable to those reported by other REITs. Although HCP’s FAD computation may not be comparable to that of other REITs, management believes FAD provides a meaningful supplemental measure of the Company’s ability to fund its ongoing dividend payments. In addition, management believes that in order to further understand and analyze the Company’s liquidity, FAD should be compared with cash flows as determined in accordance with GAAP and presented in its consolidated financial statements. FAD does not represent cash generated from operating activities determined in accordance with GAAP, and FAD should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of the Company’s liquidity.

Funds From Operations (“FFO”). The Company believes that net income as defined by GAAP is the most appropriate earnings measure. The Company also believes that Funds From Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), FFO applicable to common shares, Diluted FFO applicable to common shares, and Basic and Diluted FFO per common share are important non-GAAP supplemental measures of operating performance for a real estate investment trust. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a real estate investment trust that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for real estate investment trusts that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined as net income (computed in accordance with GAAP), excluding gains or losses from real estate dispositions and upon changes in control of joint ventures, plus real estate and DFL depreciation and amortization, with adjustments to derive the Company’s pro rata share of FFO from consolidated and unconsolidated joint ventures. Adjustments for joint ventures are calculated to reflect FFO on the same basis. The Company believes that the use of FFO, combined with the required GAAP presentations, improves the understanding of operating results of real estate investment trusts among investors and makes comparisons of operating results among such companies more meaningful. The Company considers FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding gains or losses related to sales of previously depreciated operating real estate assets and real estate and DFL depreciation and amortization, FFO can help investors compare the operating performance of a real estate investment trust between periods or as compared to other companies. While FFO is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance. FFO also does not consider the costs associated with capital expenditures related to the Company’s real estate assets nor is FFO necessarily indicative of cash available to fund the Company’s future cash requirements. Further, the Company’s computation of FFO may not be comparable to FFO reported by other real estate investment trusts that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently from the Company. For a reconciliation of FFO to net income, please refer to the slide in this supplemental information package captioned “Consolidated Funds From Operations.”

FFO as adjusted represents FFO before the impact of impairments, impairment recoveries and merger-related items. Merger-related items include estimated acquisition pursuit costs that consist primarily of professional fees and the impact of common stock offering which increases the weighted average shares outstanding, when such proceeds will be used to fund a portion of the cash consideration of the Company’s pending acquisitions. Management believes FFO as adjusted is a useful alternative measurement. This measure is a modification of the NAREIT definition of FFO and should not be used as an alternative to net income.

FFO Payout Ratio. Dividends declared per common share divided by Diluted FFO per common share for a given period. The Company believes the FFO Payout Ratio per Common Share provides investors relevant and useful information because it measures the portion of FFO being declared as dividends to common stockholders. FFO Payout Ratio per Common Share is subject to the same limitations noted in the definition of FFO above.

Reporting Definitions and Reconciliations of Non-GAAP Measures

HCP Life Science. Includes three unconsolidated joint ventures between the Company and an institutional capital partner for which the Company is the managing member. HCP Life Science includes the following partnerships: (i) Torrey Pines Science Center LP (50%), (ii) Britannia Biotech Gateway LP (55%) and (iii) LASDK LP (63%). The unconsolidated joint ventures were acquired as part of the Company’s purchase of Slough Estates USA Inc. on August 1, 2007.

HCP Ventures III. An unconsolidated joint venture formed on October 27, 2006 between the Company and an institutional capital partner, for which the Company is the managing member and has an effective 25.5% interest.

HCP Ventures IV. An unconsolidated joint venture formed on April 30, 2007 between the Company and an institutional capital partner, for which the Company is the managing member and has a 20% interest.

Independent Living Facility (“ILF”). A senior housing facility that predominantly consists of independent living units.

Investment. Represents (i) the carrying amount of real estate assets, including intangibles, after adding back accumulated depreciation and amortization, excluding assets held for sale and classified as discontinued operations and (ii) the carrying amount of DFLs and debt investments.

Investment Management Platform. Includes the following unconsolidated joint ventures: (i) HCP Life Science, (ii) HCP Ventures III and (iii) HCP Ventures IV.

Life Science. Laboratory and office space primarily for biotechnology and pharmaceutical companies, scientific research institutions, government agencies and other entities involved in the life science industry.

Long-Term Acute Care Hospitals (“LTACHs”). LTACHs provide care for patients with complex medical conditions that require longer stays and more intensive care, monitoring or emergency back-up than that available in most skilled nursing-based programs.

Net Operating Income from Continuing Operations (“NOI”). A non-GAAP supplemental financial measure used to evaluate the operating performance of real estate properties and SPP. The Company defines NOI as rental revenues, including tenant reimbursements, resident fees and services, and income from direct financing leases, less property level operating expenses. NOI excludes interest income, investment management fee income, depreciation and amortization, interest expense, general and administrative expenses, impairments, impairment recoveries, other income, net, income taxes, equity income from unconsolidated joint ventures and discontinued operations. The Company believes NOI provides investors relevant and useful information because it measures the operating performance of the Company’s real estate at the property level on an unleveraged basis. NOI, as adjusted, is calculated as NOI eliminating the effects of straight-line rents, DFL accretion, amortization of above and below market lease intangibles, and lease termination fees. NOI, as adjusted, is sometimes referred to as “adjusted NOI” or “cash basis NOI.” The Company uses NOI and NOI, as adjusted, to make decisions about resource allocations, to assess and compare property level performance, and evaluate SPP. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP since it does not reflect the aforementioned excluded items. Further, NOI may not be comparable to that of other real estate investment trusts, as they may use different methodologies for calculating NOI.

The following table reconciles NOI from net income:

In thousands	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net income	$	175,471		$	26,173		$	483,707		$	198,869
Interest income	(577		)	(36,582		)	(99,199		)	(108,004		)
Investment management fee income	(494		)	(1,157		)	(1,605		)	(3,755		)
Depreciation and amortization	88,556			78,313			270,028			233,948
Interest expense	104,198			71,598			317,903			220,295
General and administrative	19,648			19,590			76,472			65,039
Impairments (recoveries)	15,400			—			15,400			(11,900		)
Other income (expense), net	772			(6,657		)	(17,058		)	(7,151		)
Income taxes	5			867			290			1,809
Equity income from unconsolidated joint ventures	(17,050		)	(209		)	(32,798		)	(4,078		)
Impairments of investments in unconsolidated joint ventures	—			71,693			—			71,693
Total discontinued operations, net of taxes	—			(4,745		)	—			(6,707		)
NOI	$	385,929		$	218,884		$	1,013,140		$	650,058

Straight-line rents	(14,024		)	(11,174		)	(46,936		)	(32,869		)
DFL accretion	(23,571		)	(2,932		)	(48,508		)	(8,340		)
Amortization of above and below market lease intangibles, net	(1,178		)	(1,629		)	(3,271		)	(5,337		)
Lease termination fees	(239		)	(1,592		)	(3,417		)	(5,165		)
NOI adjustments related to discontinued operations	—			7			—			27
Adjusted NOI	$	346,917		$	201,564		$	911,008		$	598,374

Occupancy. For life science facilities and medical office buildings, occupancy represents the percentage of total rentable square feet leased where rental payments have commenced, including month-to-month leases, as of the end of the period reported. For senior housing facilities, post-acute/skilled nursing facilities and hospitals, occupancy represents the facilities’ average operating occupancy for the trailing 12 months and one quarter in arrears from the date reported. The percentages are calculated based on licensed beds, available beds and units for senior housing facilities, post-acute/skilled nursing facilities and hospitals, respectively. The percentages shown exclude newly completed facilities under lease-up, vacant facilities and facilities for which data is not available or meaningful. All facility financial performance data were derived solely from information provided by operators/tenants and borrowers without independent verification by the Company. For the same property portfolio, occupancy for senior housing facilities, post-acute/skilled nursing facilities and hospitals are presented based on the average operating occupancy for trailing three-month period one quarter in arrears from the date reported.

Owned Portfolio. Represents owned properties subject to operating leases and DFLs, properties operated under a RIDEA structure and debt investments, and excludes properties under development, including redevelopment, land held for development and real estate owned by the Company’s unconsolidated joint ventures.

Reporting Definitions and Reconciliations of Non-GAAP Measures

Pooled Leases. Two or more leases to the same operator/tenant or their subsidiaries under which their obligations are combined by virtue of a master lease, or multiple master leases, a pooling agreement, or multiple pooling agreements, or cross-guaranties. For example, Sunrise Senior Living percentage pooled consists of 47 assets under 6 separate pools.

Quality Mix. Represents non-medicaid revenues as a percent of total revenues for the trailing 12 months and is one quarter in arrears from the period presented.

Redevelopment Projects. Properties that require significant capital expenditures (generally more than 25% of acquisition cost or existing basis) to achieve stabilization or to change the use of the properties.

Rehabilitation Hospitals (“Rehab”). Rehabilitation hospitals provide inpatient and outpatient care for patients who have sustained traumatic injuries or illnesses, such as spinal cord injuries, strokes, head injuries, orthopedic problems, work-related disabilities and neurological diseases.

Rental and RIDEA Revenues. Represents rental and related revenues, tenant recoveries, resident fees and services, and income from direct financing leases.

Retention Rate. Represents the ratio of total renewed square feet to the total square feet expiring and available for lease, excluding the square feet for tenant leases terminated for default or buy-out prior to the expiration of their lease.

RIDEA. The Housing and Economic Recovery Act of 2008 (commonly referred to as “RIDEA”).

Same Period Rent. The base rent plus additional rent due to the Company over the most recent trailing twelve-month period as of period end. The Company uses Same Period Rent for purposes of determining property-level Cash Flow Coverage.

Same Property Portfolio (“SPP”). Same property statistics allow management to evaluate the performance of the Company’s real estate portfolio under a consistent population, which eliminates the changes in the composition of the Company’s portfolio of properties. The Company identifies its same property portfolio as stabilized properties that are, and remained, in operations for the duration of the year-over-year comparison periods presented. Accordingly, it takes a stabilized property a minimum of 12 months in operations to be included in the Company’s same property portfolio. SPP NOI excludes certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis.

Senior Housing. ALFs, ILFs and CCRCs.

Specialty Hospitals. Specialty hospitals are licensed as acute care hospitals but focus on providing care in specific areas such as cardiac, orthopedic and women’s conditions, or specific procedures such as surgery and are less likely to provide emergency services.

Square Feet. The square footage for properties, excluding square footage for development or redevelopment properties prior to completion.

Stabilized. Newly acquired operating assets are generally considered stabilized at the earlier of lease up (typically when the tenant(s) controls the physical use of 80% of the space) or 12 months from the acquisition date. Newly completed developments, including redevelopments, are considered stabilized at the earlier of lease-up or 24 months from the date the property is placed in service.

Total Debt. Consolidated Debt at Book Value plus the Company’s pro rata share of debt from the Investment Management Platform.

Total Gross Assets. Consolidated Gross Assets plus the Company’s pro rata share of total assets from the Investment Management Platform, after adding back accumulated depreciation and amortization.

The following table details the calculation of Total Gross Assets:

In thousands
	September 30, 2011			December 31, 2010			September 30, 2010
Consolidated total assets	$	17,439,377		$	13,331,923		$	12,245,299
Investments in and advances to unconsolidated joint ventures	(225,979		)	(195,847		)	(197,697		)
Accumulated depreciation and amortization	1,650,685			1,446,134			1,395,720
Accumulated depreciation and amortization from assets held for sale	—			—			8,638
Consolidated gross assets	$	18,864,083		$	14,582,210		$	13,451,960
HCP’s share of unconsolidated total assets(1)	276,277			515,182			520,843
HCP’s share of unconsolidated accumulated depreciation and amortization(1)	38,636			71,977			68,792
Total gross assets	$	19,178,996		$	15,169,369		$	14,041,595

Total Market Capitalization. Total Debt plus Consolidated Market Equity.

Total Secured Debt. Consolidated secured debt plus the Company’s pro rata share of mortgage debt from the Investment Management Platform.

Yield. Yield is calculated as Net Operating Income, as adjusted, divided by total investment. For acquisitions, initial yields are calculated as projected Net Operating Income, 12 months forward, as adjusted, as of the closing date divided by total acquisition cost. The total acquisition cost basis includes the initial purchase price, the effects of adjusting assumed debt to market, lease intangible adjustments and all transaction costs.

(1) Reflects the Company’s pro rata share of amounts from the Investment Management Platform and its equity interest in HCR ManorCare OpCo.

HEALTHPEAK PROPERTIES, INC. - FORM 8-K - EX-99.2 - October 31, 2011

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HEALTHPEAK PROPERTIES, INC. Reports