Acquisitions of Real Estate Property

The following summarizes our acquisition and development activity in 2013, 2012 and 2011. We make acquisitions and investments in seniors housing and healthcare properties primarily to achieve an expected yield on investment, to grow and diversify our portfolio and revenue base, and to reduce our dependence on any single tenant, operator or manager, geographic location, asset type, business model or revenue source.

2013 Acquisitions

Triple-Net Leased Properties

During the year ended December 31, 2013, we acquired 27 seniors housing communities (including one property acquired through a joint venture) for approximately $860 million. Aggregate revenues and NOI attributable to the acquired triple-net leased properties were $21.3 million for the year ended December 31, 2013.

Senior Living Operations

During the year ended December 31, 2013, we acquired 24 seniors housing communities for approximately $770 million. We were previously the tenant under a capital lease with respect to eight of the acquired properties (see “Note 10—Borrowing Arrangements”), and management of all of the acquired properties was transitioned to Atria at the time of closing. Aggregate revenues and NOI attributable to these seniors housing operating communities (excluding the eight capital lease assets) were $38.3 million and $15.4 million for the year ended December 31, 2013.

MOB Operations

During the year ended December 31, 2013, we acquired 11 MOBs (including two MOBs previously owned through a joint venture that we account for as an equity method investment; see “Note 7—Investments in Unconsolidated Entities”) for approximately $150 million. Aggregate revenues and NOI attributable to the acquired MOBs were $10.7 million and $6.8 million for the year ended December 31, 2013.

Completed Developments

During the year ended December 31, 2013, we completed the development of two seniors housing communities, one MOB, and one hospital. These completed developments represent $65.5 million of net real estate property on our Consolidated Balance Sheets as of December 31, 2013.

Estimated Fair Value

We are accounting for our 2013 acquisitions under the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”), and have completed our initial accounting, which is subject to further adjustment. We accounted for the acquisition of the eight seniors housing communities that we previously leased pursuant to a capital lease in accordance with ASC Topic 840, Leases. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which we determined using level two and level three inputs:



	Triple-Net Leased Properties		Senior Living Operations (1)		MOB Operations		Total
	(In thousands)
Land and improvements	$	51,419	$	45,566	$	3,923	$	100,908
Buildings and improvements	803,227		579,577		138,792		1,521,596
Acquired lease intangibles	8,945		16,920		10,362		36,227
Other assets	3,285		2,607		2,453		8,345
Total assets acquired	866,876		644,670		155,530		1,667,076
Notes payable and other debt	36,300		5,136		—		41,436
Other liabilities	11,423		12,285		6,510		30,218
Total liabilities assumed	47,723		17,421		6,510		71,654
Noncontrolling interest assumed	10,113		—		1,672		11,785
Net assets acquired	809,040		627,249		147,348		1,583,637
Cash acquired	753		—		1,397		2,150
Total cash used	$	808,287	$	627,249	$	145,951	$	1,581,487

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(1) Includes settlement of a $142.2 million capital lease obligation related to eight seniors housing communities.

Transaction Costs

As of December 31, 2013, we had incurred a total of $12.8 million of acquisition-related costs related to our 2013 acquisitions, all of which were expensed as incurred and included in merger-related expenses and deal costs in our Consolidated Statements of Income for the applicable periods. For the year ended December 31, 2013, we expensed $12 million of these acquisition-related costs related to our 2013 acquisitions.

2012 Acquisitions

Funds Acquisition

In December 2012, we acquired 100% of certain private equity funds (the “Funds”) previously managed by Lazard Frères Real Estate Investments LLC (“LFREI”) or its affiliates. The acquired Funds primarily owned a 34% interest in Atria, which is recorded as an investment in unconsolidated entities on our Consolidated Balance Sheets, and approximately 3.7 million shares of our common stock. In conjunction with this acquisition, we also extinguished our obligation related to the “earnout,” a contingent performance-based payment arising out of our 2011 acquisition of the real estate assets of Atria Senior Living Group, Inc. (together with its affiliates, “ASLG”), for an additional $44 million. This amount represented the discounted net present value of the potential future payment, which was previously reflected on our Consolidated Balance Sheets as a liability.

Cogdell Acquisition

In April 2012, we acquired Cogdell Spencer Inc. (together with its subsidiaries, “Cogdell”), including its 71 real estate assets (including properties owned through joint ventures) and its MOB property management business, which had existing agreements with third parties to manage 44 MOBs, in an all-cash transaction. At closing, our investment in Cogdell, including our share of debt, was approximately $760 million. In addition, our joint venture partners’ share of net debt assumed was $36.3 million at the time of the acquisition.

Pursuant to the terms and subject to the conditions set forth in the agreement and plan of merger dated as of December 24, 2011, at the effective time of the merger, (a) each outstanding share of Cogdell common stock, and each outstanding unit of limited partnership interest in Cogdell’s operating partnership, Cogdell Spencer LP, that was not owned by subsidiaries of Cogdell was converted into the right to receive $4.25 in cash, and (b) each outstanding share of Cogdell’s 8.500% Series A Cumulative Redeemable Perpetual Preferred Stock was converted into the right to receive an amount in cash equal to $25.00, plus accrued and unpaid dividends through the date of closing. We financed our acquisition of Cogdell through the assumption of $203.8 million of existing Cogdell mortgage debt (inclusive of our joint venture partners’ share of $36.3 million) and borrowings under our unsecured revolving credit facility. Prior to the closing, Cogdell completed the sale of its design-build and development business to an unaffiliated third party.

As of December 31, 2012, we had incurred a total of $28.6 million of acquisition-related costs related to the Cogdell acquisition, all of which were expensed as incurred and included in merger-related expenses and deal costs in our Consolidated Statements of Income for the applicable periods.

Completed Developments

During 2012, we completed the development of three MOBs and two seniors housing communities. These completed developments represent $116.9 million of net real estate property on our Consolidated Balance Sheets as of December 31, 2012.

Other 2012 Acquisitions

In May 2012, we acquired 16 seniors housing communities managed by Sunrise in an all-cash transaction. Sunrise continues to manage the acquired assets under existing long-term management agreements. During 2012, we also invested in 21 seniors housing communities, two skilled nursing facilities and 44 MOBs, including 36 MOBs that we had previously accounted for as investments in unconsolidated entities. See “Note 7—Investments in Unconsolidated Entities.”

Estimated Fair Value

We accounted for our 2012 acquisitions under the acquisition method in accordance with ASC 805, and we have completed our accounting for these acquisitions. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which we determined using level two and level three inputs:



	Triple-Net Leased Properties		Senior Living Operations		MOB Operations (1)		Total
	(In thousands)
Land and improvements	$	21,881	$	60,662	$	112,504	$	195,047
Buildings and improvements	225,950		413,750		1,085,148		1,724,848
Construction in progress	—		—		25,579		25,579
Acquired lease intangibles	2,323		18,070		182,406		202,799
Other assets	1,519		832		43,747		46,098
Total assets acquired	251,673		493,314		1,449,384		2,194,371
Notes payable and other debt	57,219		—		355,606		412,825
Other liabilities	13,851		11,806		106,367		132,024
Total liabilities assumed	71,070		11,806		461,973		544,849
Noncontrolling interest assumed	7,292		—		30,361		37,653
Net assets acquired	173,311		481,508		957,050		1,611,869
Cash acquired	1,250		—		24,115		25,365
Total cash used	$	172,061	$	481,508	$	932,935	$	1,586,504

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(1) Includes the Cogdell acquisition.

2011 Acquisitions

ASLG Acquisition

In May 2011, we acquired substantially all of the real estate assets and working capital of privately-owned ASLG. We funded a portion of the purchase price through the issuance of 24.96 million shares of our common stock (which shares had a total value of $1.38 billion based on the acquisition date closing price of our common stock of $55.33 per share).

As a result of the ASLG transaction, we added to our senior living operating portfolio 117 private pay seniors housing communities and one development land parcel, located primarily in affluent coastal markets such as the New York metropolitan area, New England and California. Prior to the closing, ASLG spun off its management operations to a newly formed entity, Atria, which continues to operate the acquired assets under long-term management agreements with us. As discussed above, in December 2012, we acquired a 34% interest in Atria.

NHP Acquisition

In July 2011, we acquired Nationwide Health Properties, Inc. (“NHP”) in a stock-for-stock transaction. Pursuant to the terms and subject to the conditions set forth in the agreement and plan of merger dated as of February 27, 2011, at the effective time of the merger, each outstanding share of NHP common stock (other than shares owned by us or any of our subsidiaries or any wholly owned subsidiary of NHP) was converted into the right to receive 0.7866 shares of our common stock, with cash paid in lieu of fractional shares. In connection with the acquisition, we paid $105 million at closing to repay amounts then outstanding and terminated the commitments under NHP’s revolving credit facility. The NHP acquisition added 643 seniors housing and healthcare properties to our portfolio (including properties owned through joint ventures).

Other 2011 Acquisitions

During 2011, we also invested approximately $329.5 million, including the assumption of $134.9 million in debt, in 14 MOBs and five seniors housing communities.