8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): November 25, 2011

VENTAS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	1-10989	61-1055020
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

111 S. Wacker Drive, Suite 4800, Chicago, Illinois	60606
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (877) 483-6827

Not Applicable

Former Name or Former Address, if Changed Since Last Report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 9.01.Financial Statements and Exhibits.

(a)  Financial Statements of Businesses Acquired.

The unaudited condensed consolidated financial statements of Nationwide Health Properties, Inc. (“NHP”) as of and for the six months ended June 30, 2011 are filed herewith as Exhibit 99.1 and incorporated in this Item 9.01(a) by reference.

(b)  Pro Forma Financial Information.

The unaudited pro forma condensed consolidated financial statements of Ventas, Inc. (“Ventas”) for the nine months ended September 30, 2011 and for the year ended December 31, 2010, giving effect to the Atria Senior Living Group, Inc., One Lantern Senior Living Inc and NHP acquisitions, are filed herewith as Exhibit 99.2 and incorporated in this Item 9.01(b) by reference.

(c)  Shell Company Transactions.

Not applicable.

(d)Exhibits:

Exhibit Number	Description
99.1	Unaudited condensed consolidated financial statements of NHP as of and for the six months ended June 30, 2011.
99.2	Unaudited pro forma condensed consolidated financial statements of Ventas for the nine months ended September 30, 2011 and for the year ended December 31, 2010.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VENTAS, INC.
Date: November 25, 2011	By:	/s/ Kristen M. Benson
		Kristen M. Benson
		Vice President and
		Senior Securities Counsel

3

EXHIBIT INDEX

Exhibit Number	Description
99.1	Unaudited condensed consolidated financial statements of NHP as of and for the six months ended June 30, 2011.
99.2	Unaudited pro forma condensed consolidated financial statements of Ventas for the nine months ended September 30, 2011 and for the year ended December 31, 2010.

4

EX-99.1

Exhibit 99.1

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2011

TABLE OF CONTENTS

	Page
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Income Statements	3
Condensed Consolidated Statement of Equity	4
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	7

1

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2011			December 31, 2010
	(Unaudited)
	(Dollars in thousands)
ASSETS
Investments in real estate:
Land	$	376,223		$	339,534
Buildings and improvements	4,264,241			3,679,745
Development in progress	26,432			17,827
	4,666,896			4,037,106
Less accumulated depreciation	(734,370		)	(670,601		)
	3,932,526			3,366,505
Mortgage loans receivable, net	264,859			289,187
Investments in unconsolidated joint ventures	39,577			42,582
	4,236,962			3,698,274
Cash and cash equivalents	47,513			59,591
Receivables, net	9,595			8,336
Assets held for sale	3,116			5,150
Intangible assets	150,293			163,238
Other assets	157,551			158,035
	$	4,605,030		$	4,092,624
LIABILITIES AND EQUITY
Unsecured senior credit facility	$	105,000		$	175,000
Unsecured borrowings	600,000			—
Senior notes	991,633			991,633
Notes and bonds payable	410,419			362,624
Accounts payable and accrued liabilities	162,157			151,069
Total liabilities	2,269,209			1,680,326
Redeemable OP unitholder interests	91,005			79,188
Commitments and contingencies
Equity:
NHP stockholders’ equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized; none issued and outstanding	—			—
Common stock $0.10 par value; 200,000,000 shares authorized; issued and outstanding: 126,712,728 and 126,253,858 at June 30, 2011 and December 31, 2010, respectively	12,671			12,625
Capital in excess of par value	2,508,260			2,516,397
Cumulative net income	1,929,212			1,849,045
Accumulated other comprehensive income	373			8,614
Cumulative dividends	(2,236,960		)	(2,086,854		)
Total NHP stockholders’ equity	2,213,556			2,299,827
Noncontrolling interests	31,260			33,283
Total equity	2,244,816			2,333,110
	$	4,605,030		$	4,092,624

See accompanying notes.

2

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands, except per share amounts)
Revenue:
Triple-net lease rent	$	88,410	$	74,709	$	170,548	$	146,789
Medical office building operating rent	29,121		27,049		58,620		48,657
	117,531		101,758		229,168		195,446
Interest and other income	10,851		5,888		21,439		12,851
	128,382		107,646		250,607		208,297
Expenses:
Interest expense	27,792		24,443		50,562		48,024
Depreciation and amortization	41,589		33,154		80,219		64,398
General and administrative	6,784		7,380		14,151		14,361
Merger and acquisition costs	16,011		1,627		21,108		3,070
Medical office building operating expenses	10,383		10,210		20,691		18,803
	102,559		76,814		186,731		148,656
Operating income	25,823		30,832		63,876		59,641
Income from unconsolidated joint ventures	1,229		1,328		2,694		2,676
Gain on debt extinguishment	—		—		—		75
Income from continuing operations	27,052		32,160		66,570		62,392
Discontinued operations:
Gains on sale of facilities, net	1,788		3,779		12,395		3,801
Income from discontinued operations	154		1,083		343		2,068
	1,942		4,862		12,738		5,869
Net income	28,994		37,022		79,308		68,261
Net loss attributable to noncontrolling interests	622		147		859		337
Net income attributable to NHP common stockholders	$	29,616	$	37,169	$	80,167	$	68,598
Basic earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	0.21	$	0.27	$	0.53	$	0.52
Discontinued operations attributable to NHP common stockholders	0.02		0.04		0.10		0.05
Net income attributable to NHP common stockholders	$	0.23	$	0.31	$	0.63	$	0.57
Basic weighted average shares outstanding	126,659		119,883		126,567		118,473
Diluted earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	0.21	$	0.26	$	0.51	$	0.51
Discontinued operations attributable to NHP common stockholders	0.02		0.04		0.10		0.05
Net income attributable to NHP common stockholders	$	0.23	$	0.30	$	0.61	$	0.56
Diluted weighted average shares outstanding	129,173		122,599		129,077		121,039
Dividends declared per share	$	0.69626	$	0.45000	$	1.17626	$	0.89000

See accompanying notes.

3

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

(In thousands)

	NHP Stockholders’ Equity
	Preferred Stock			Common stock			Capital inexcess of			Cumulative		Accumulatedothercomprehensive			Cumulative			Noncontrolling			Total
	Shares	Amount		Shares	Amount		par value			net income		income (loss)			dividends			interests			equity
Balances at December 31, 2010	—	$	—	126,254	$	12,625	$	2,516,397		$	1,849,045	$	8,614		$	(2,086,854	)	$	33,283		$	2,333,110
Comprehensive income:
Net income	—	—		—	—		—			80,167		—			—			(859		)	79,308
Loss on interest rate swap agreements	—	—		—	—		—			—		(7,914		)	—			—			(7,914		)
Amortization of gain on Treasury lock agreements	—	—		—	—		—			—		(273		)	—			—			(273		)
Pro rata share of accumulated other comprehensive loss from unconsolidated joint venture	—	—		—	—		—			—		(54		)	—			—			(54		)
Comprehensive income																					71,067
Issuance of common stock, net	—	—		456	46		3,122			—		—			—			—			3,168
Conversion of OP unitholder interests to common stock	—	—		3	—		75			—		—			—			—			75
Amortization of stock-based compensation	—	—		—	—		3,706			—		—			—			—			3,706
Common dividends	—	—		—	—		—			—		—			(150,106		)	—			(150,106		)
Adjust redeemable OP unitholder interests to current redemption value	—	—		—	—		(12,934		)	—		—			—			—			(12,934		)
Purchase of noncontrolling interest	—	—		—	—		(2,106		)	—		—			—			(643		)	(2,749		)
Contributions from noncontrolling interests	—	—		—	—		—			—		—			—			88			88
Distributions to noncontrolling interests	—	—		—	—		—			—		—			—			(609		)	(609		)
Balances at June 30, 2011	—	$	—	126,713	$	12,671	$	2,508,260		$	1,929,212	$	373		$	(2,236,960	)	$	31,260		$	2,244,816

See accompanying notes.

4

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2011			2010
	(In thousands)
Cash flows from operating activities:
Net income	$	79,308		$	68,261
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	80,321			65,859
Stock-based compensation	3,706			3,426
Deferred gain recognition	(471		)	—
Gain on re-measurement of equity interest upon acquisition, net	—			(620		)
Gain on debt extinguishment	—			(75		)
Gains on sale of facilities, net	(12,395		)	(3,801		)
Straight-line rent expense (income)	110			(5,335		)
Amortization of above/below market lease intangibles, net	275			91
Mortgage and other loan premium amortization	(353		)	—
Amortization of deferred financing costs	1,211			1,419
Equity in earnings from unconsolidated joint ventures	(372		)	(480		)
Distributions of income from unconsolidated joint ventures	510			453
Changes in operating assets and liabilities:
Receivables	(3,326		)	(751		)
Intangible and other assets	(4,867		)	8,047
Accounts payable and accrued liabilities	(807		)	(9,312		)
Net cash provided by operating activities	142,850			127,182
Cash flows from investing activities:
Investment in real estate and related assets and liabilities	(561,383		)	(266,836		)
Purchase of noncontrolling interest	(2,749		)	—
Proceeds from sale of real estate facilities	16,745			5,464
Investment in mortgage and other loans receivable	(7,880		)	(144,008		)
Principal payments on mortgage and other loans receivable	43,877			3,406
Contributions to unconsolidated joint ventures	—			(136		)
Distributions from unconsolidated joint ventures	2,813			1,251
Net cash used in investing activities	(508,577		)	(400,859		)
Cash flows from financing activities:
Borrowings under credit facility	635,000			—
Repayment of borrowings under credit facility	(705,000		)	—
Unsecured borrowings	600,000			—
Issuance of notes and bonds payable	6,403			—
Principal payments on notes and bonds payable	(32,076		)	(7,445		)
Redemption of preferred stock	—			(92		)
Issuance of common stock, net	2,844			181,656
Dividends paid	(149,776		)	(106,379		)
Contributions from noncontrolling interests	88			—
Distributions to noncontrolling interests	(609		)	(943		)
Distributions to redeemable OP unitholders	(2,025		)	(1,348		)
Payment of deferred financing costs	(1,200		)	(1,480		)
Net cash provided by financing activities	353,649			63,969
Decrease in cash and cash equivalents	(12,078		)	(209,708		)
Cash and cash equivalents, beginning of period	59,591			382,278
Cash and cash equivalents, end of period	$	47,513		$	172,570

See accompanying notes.

5

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

	Six Months Ended June 30,
	2011		2010
	(In thousands)
Supplemental schedule of cash flow information:
Non-cash investing activities:
Assumption of debt upon acquisition of real estate	$	73,468	$	109,514
Accrual of contingent purchase price obligation	$	12,018	$	—
Issuance of redeemable OP units upon acquisition of real estate	$	983	$	18,986
Retirement of mortgage loan receivable upon acquisition of real estate	$	—	$	47,500
Capital contributions from noncontrolling interests upon acquisition of real estate	$	—	$	25,289
Issuance of mortgage loan receivables upon sale of real estate	$	—	$	6,258
Non-cash financing activities:
Adjust redeemable OP unitholder interests to current redemption value	$	12,934	$	3,881
Conversion of redeemable OP unitholder interests to common stock	$	75	$	—
Conversion of preferred stock to common stock	$	—	$	51,272

See accompanying notes.

6

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2011

1. Organization

Nationwide Health Properties, Inc., a Maryland corporation, is a real estate investment trust (“REIT”) that invests in healthcare related real estate, primarily senior housing, long-term care properties and medical office buildings. Whenever we refer herein to “NHP” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. and its subsidiaries, unless the context otherwise requires.

We primarily make our investments by acquiring an ownership interest in senior housing and long-term care facilities and leasing them to unaffiliated tenants under “triple-net” “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. We also invest in medical office buildings which are not generally subject to “triple-net” leases and generally have multiple tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). Some of the medical office buildings are subject to “triple-net” leases. In addition, but to a much lesser extent because we view the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, we extend mortgage loans and other financing to operators.

We believe we have operated in such a manner as to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and as such, we distribute at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding capital gain) to our stockholders. If we qualify for taxation as a REIT, and we distribute 100% of our taxable income to our stockholders, we will generally not be subject to U.S. federal income taxes on our income that is distributed to stockholders. Accordingly, no provision has been made for federal income taxes.

As of June 30, 2011, we had investments in 706 healthcare facilities, one land parcel, three development projects and one asset held for sale located in 42 states.

At June 30, 2011, one of our triple-net lease tenants accounted for more than 10% of our revenues, Brookdale Senior Living, Inc. (“Brookdale”), which accounted for 10.4% of our revenues.

On February 27, 2011, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ventas, Inc., a Delaware corporation (“Ventas”), and Needles Acquisition LLC, a Delaware limited liability company and wholly owned subsidiary of Ventas (“Needles” or “Merger Sub”). On July 1, 2011, the transactions contemplated by the Merger Agreement were consummated, and NHP merged with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving entity with the name “Nationwide Health Properties, LLC” (see Note 19).

2. Summary of Significant Accounting Policies

Basis of Presentation

We have prepared the condensed consolidated financial statements included herein without audit. These financial statements include all adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations for the three and six months ended June 30, 2011 and 2010. All such adjustments are of a normal recurring nature.

Certain items in prior period financial statements have been reclassified to conform to current year presentation, including those required by the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant and Equipment (“ASC 360”), which require the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest to be removed from income from continuing operations and reported as discontinued operations.

7

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

June 30, 2011

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to these rules and regulations. Although we believe that the disclosures in the financial statements included herein are adequate to make the information presented not misleading, these condensed consolidated financial statements should be read in conjunction with our financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and six months ended June 30, 2011 and 2010 are not necessarily indicative of the results for a full year.

We have evaluated events subsequent to June 30, 2011 through August 5, 2011, the date the financial statements were available to be issued, for their impact on our condensed consolidated financial statements (see Note 19).

Principles of Consolidation

The condensed consolidated financial statements include our accounts, the accounts of our wholly owned subsidiaries and the accounts of our joint ventures that are controlled through voting rights or other means. We apply the provisions of ASC Topic 810, Consolidation (“ASC 810”), for arrangements with variable interest entities (“VIEs”) and consolidate those VIEs where we are the primary beneficiary. All material intercompany accounts and transactions have been eliminated.

Our judgment with respect to our level of influence or control of an entity and whether we are the primary beneficiary of a VIE involves the consideration of various factors including, but not limited to, the form of our ownership interest, our representation on the entity’s governing body, the size of our investment, estimates of future cash flows, our ability to participate in policy-making decisions and the rights of the other investors to participate in the decision-making process and to replace us as manager and/or liquidate the venture, if applicable. Our ability to correctly assess our influence or control over an entity or determine the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements.

As of June 30, 2011, we leased six facilities under triple-net leases with fixed price purchase options through four wholly owned, consolidated subsidiaries that have been identified as VIEs and for which we have been identified as the primary beneficiary. The carrying value of the facilities was $66.1 million as of June 30, 2011, and the purchase options are exercisable between 2012 and 2021.

We apply the provisions of ASC Topic 323, Investments — Equity Method and Joint Ventures (“ASC 323”), to investments in joint ventures. Investments in entities that we do not consolidate but for which we have the ability to exercise significant influence over operating and financial policies are reported under the equity method. Under the equity method of accounting, our share of the entity’s earnings or losses is included in our operating results.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Segment Reporting

We report our consolidated financial statements in accordance with the provisions of ASC Topic 280, Segment Reporting. We operate in two segments based on our investment and leasing activities: triple-net leases and multi-tenant leases (see Note 17).

8

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

June 30, 2011

Revenue Recognition

We derive the majority of our revenue from leases related to our real estate investments and a much smaller portion of our revenue from mortgage loans, other financing activities and other miscellaneous income. Revenue is recognized when it is realized or is realizable and earned.

Rental income from operating leases is recognized in accordance with the provisions of ASC Topic 840, Leases, and ASC Topic 605, Revenue Recognition. Our leases generally contain annual rent escalators. Many of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. Recognizing income on a straight-line basis requires us to calculate the total non-contingent rent to be paid over the life of a lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in the caption “Other assets” on our consolidated balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. Certain leases contain rent escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. Such revenue increases are recognized as the related contingencies are met.

We assess the collectability of straight-line rent in accordance with the applicable accounting standards and our reserve policy and defer recognition of straight-line rent if its collectability is not reasonably assured. Our assessment of the collectability of straight-line rent is based on several factors, including the financial strength of the tenant and any guarantors, the historical operations and operating trends of the facility, the historical payment pattern of the tenant and the type of facility, among others. If our evaluation of these factors indicates we may not receive the rent payments due in the future, we defer recognition of the straight-line rental income and, depending on the circumstances, we will provide a reserve against the previously recognized straight-line rent receivable asset for a portion, up to its full value, that we estimate may not be recoverable. If we change our assumptions or estimates regarding the collectability of future rent payments required by a lease, we may adjust our reserve to increase or reduce the rental revenue recognized, and/or to increase or reduce the reserve against the existing straight-line rent receivable balance.

We recorded $2.6 million and $0.1 million of cash received in excess of revenues during the three and six months ended June 30, 2011, respectively, and $3.6 million and $5.3 million of revenues in excess of cash received during the three and six months ended June 30, 2010, respectively. We had straight-line rent receivables, net of reserves, recorded under the caption “Other assets” on our consolidated balance sheets of $39.2 million at June 30, 2011 and $39.3 million at December 31, 2010, net of reserves of $130.5 million and $114.7 million, respectively. We evaluate the collectability of the straight-line rent receivable balances on an ongoing basis and provide reserves against receivables we believe may not be fully recoverable. During the three and six months ended June 30, 2011, we provided $4.7 million of additional reserves against previously recorded receivables that we believe may not be fully recoverable. The ultimate amount of straight-line rent we realize could vary from the amounts currently recorded.

Interest income from loans, including discounts and premiums, is recognized using the effective interest method when collectability is reasonably assured. The effective interest method is applied on a loan-by-loan basis, and discounts and premiums are recognized as yield adjustments over the term of the related loans. We recognize interest income on impaired loans to the extent our estimate of the fair value of the collateral is sufficient to support the balance of the loans, other receivables and all related accrued interest. Once the total of the loans, other receivables and all related accrued interest is equal to our estimate of the fair value of the collateral, we recognize interest income on a cash basis. We provide reserves against impaired loans to the extent our total investment exceeds our estimate of the fair value of the loan collateral.

We recognize sales of facilities upon closing. Payments received from purchasers prior to closing are recorded as deposits. Gains on facilities sold are recognized using the full accrual method upon closing when the requirements of gain recognition on sale of real estate under the provisions of ASC 360 are met, including: the

9

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

June 30, 2011

collectability of the sales price is reasonably assured; we have received adequate initial investment from the buyer; we are not obligated to perform significant activities after the sale to earn the gain; and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy these requirements. We had $15.1 million and $20.3 million of deferred gains included in the caption “Mortgage loans receivable, net” at June 30, 2011 and December 31, 2010, respectively.

Gains on facilities sold to unconsolidated joint ventures in which we maintain an ownership interest are included in income from continuing operations, and the portion of the gain representing our retained ownership interest in the joint venture is deferred and included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets. We had $15.3 million of such deferred gains at June 30, 2011 and December 31, 2010. All other gains are included in discontinued operations.

Investments in Real Estate

We record properties at cost and use the straight-line method of depreciation for buildings and improvements over their estimated remaining useful lives of up to 40 years, generally 20 to 40 years depending on factors including building type, age, quality and location. We review and adjust useful lives periodically. Depreciation expense from continuing operations was $36.9 million and $70.8 million for the three and six months ended June 30, 2011, respectively, and $28.0 million and $55.0 million for the three and six months ended June 30, 2010, respectively.

We allocate purchase prices of properties in accordance with the provisions of ASC Topic 805, Business Combinations (“ASC 805”), which require that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. ASC 805 also establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. We incurred $16.0 million and $21.1 million of merger and acquisition costs during the three and six months ended June 30, 2011, respectively, and $1.6 million and $3.1 million of merger and acquisition costs during the three and six months ended June 30, 2010, respectively, that are included on our consolidated income statements.

The allocation of the cost between land, building and, if applicable, equipment and intangible assets and liabilities, and the determination of the useful life of a property are based on management’s estimates, which are based in part on independent appraisals or other consultants’ reports. For our triple-net leased facilities, the allocation is made as if the property was vacant, and a significant portion of the cost of each property is allocated to buildings. This amount generally approximates 90% of the total property value. Historically, we have generally acquired properties and simultaneously entered into a new market rate lease for the entire property with one tenant. For our multi-tenant medical office buildings, the percentage allocated to buildings may be substantially lower as allocations are made to assets such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets (collectively, “Intangible assets”) included on our consolidated balance sheets and/or below market tenant and ground lease intangible liabilities included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets.

We calculate depreciation and amortization on equipment and lease costs using the straight-line method based on estimated useful lives of up to five years or the lease term, whichever is appropriate. We amortize intangible assets and liabilities over the remaining lease terms of the respective leases to real estate amortization expense or medical office building operating rent, as appropriate. We review and adjust useful lives periodically.

We capitalize direct costs, including interest costs, associated with the development and construction of real estate assets while substantive activities are ongoing to prepare the assets for their intended use.

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Asset Impairment

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment in accordance with the provisions of ASC 360. Indicators may include, among others, a tenant’s inability to make rent payments, operating losses or negative operating trends at the facility level, notification by a tenant that it will not renew its lease, or a decision to dispose of an asset or adverse changes in the fair value of any of our properties. For operating assets, if indicators of impairment exist, we compare the undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. The evaluation of the undiscounted cash flows from the related lease agreement and expected use of the property is highly subjective and is based in part on various factors and assumptions, including, but not limited to, historical operating results, available market information and known trends and market/economic conditions that may affect the property, as well as estimates of future operating income, occupancy, rental rates, leasing demand and competition. If the sum of the future estimated undiscounted cash flows is higher than the current net book value, we conclude no impairment exists. If the sum of the future estimated undiscounted cash flows is lower than its current net book value, we recognize an impairment loss for the difference between the net book value of the asset and its estimated fair value. To the extent we decide to sell an asset, we recognize an impairment loss if the current net book value of the asset exceeds its fair value less selling costs.

We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investment in an unconsolidated joint venture may exceed the fair value. If it is determined that a decline in the fair value of our investment in an unconsolidated joint venture is other-than-temporary, and if such reduced fair value is below its carrying value, an impairment is recorded. The determination of the fair value of investments in unconsolidated joint ventures involves significant judgment. Our estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at market rates, general economic conditions and trends and other relevant factors.

The above analyses require us to determine whether there are indicators of impairment for individual assets or investments in unconsolidated joint ventures, to estimate the most likely stream of cash flows from operating assets and to determine the fair value of assets that are impaired or held for sale. If our assumptions, projections or estimates regarding an asset change in the future, we may have to record an impairment charge to reduce or further reduce the net book value of such individual asset or investment in unconsolidated joint venture.

No impairment charges were recorded during the three and six months ended June 30, 2011 or 2010.

Collectability of Receivables

We evaluate the collectability of our rent, mortgage and other loans and other receivables on a regular basis based on factors including, among others, payment history, the financial strength of the borrower and any guarantors, the value of the underlying collateral, the operations and operating trends of the underlying collateral, if any, the asset type and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected. We had reserves included in the caption “Receivables, net” on our consolidated balance sheets of $11.2 million as of June 30, 2011 and $14.9 million as of December 31, 2010.

For our mortgage loans, the evaluation emphasizes the operations, operating trends, financial performance and value of the underlying collateral, and for our other loans, the evaluation emphasizes the financial strength of the borrower and any guarantors. Our quarter-end evaluation was performed using operating and financial information as of April 30, 2011, and based on this evaluation, our mortgage and other loans are grouped into three classes — good standing, watch list and special monitoring. For loans classified as good standing, the likelihood of loss is remote, and while borrowers may be current on all required payments for loans classified as watch list or special monitoring, there are other factors considered in our evaluation which cause the likelihood of loss to be

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reasonably possible. Our analysis did not identify any mortgage loans for which we believe we may not recover the full value of the receivable, and as such, no reserves for mortgage loans receivable have been recorded as of June 30, 2011. Our analysis identified certain other loans for which we believe we may not recover the full value of the receivable, and we have recorded $4.9 million of reserves for other loans receivable as of June 30, 2011. The balances of mortgage and other loans by class as of June 30, 2011 were as follow:

			Deferred Gains					Carrying
	Principal		and Discounts			Reserves		Amount
	(In thousands)
Mortgage loans receivable:
Good standing	$	251,378	$	(14,696	)	$	—	$	236,682
Watch list	31,211		(3,034		)	—		28,177
Special monitoring	—		—			—		—
	$	282,589	$	(17,730	)	$	—	$	264,859

						Carrying
	Principal		Reserves			Amount
	(In thousands)
Other loans receivable:
Good standing	$	63,278	$	—		$	63,278
Watch list	4,931		(1,401		)	3,530
Special monitoring	5,317		(3,496		)	1,821
	$	73,526	$	(4,897	)	$	68,629

The following table summarizes the changes in reserves for other loans receivable during the six months ended June 30, 2011:

	Reserves
	(In thousands)
Balance at January 1, 2011	$	(6,057	)
Reversal of reserves	1,160
Balance at June 30, 2011	$	(4,897	)

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments with original maturities of three months or less when purchased.

Capital Raising Costs

Deferred financing costs are included in the caption “Other assets” on our consolidated balance sheets and are amortized as a component of interest expense over the terms of the related borrowings using a method that approximates a level yield. Deferred financing cost amortization is included in the caption “Interest expense” on our consolidated income statements. Costs incurred in connection with the issuance of common stock are recorded as a reduction of capital in excess of par value.

Derivatives

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We endeavor to limit these risks by following established risk management policies,

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procedures and strategies, including, on occasion, the use of derivative instruments. We do not use derivative instruments for trading or speculative purposes.

Derivative instruments are recorded on our consolidated balance sheets as assets or liabilities based on each instrument’s fair value. Changes in the fair value of derivative instruments are recognized currently in earnings, unless the derivative instrument meets the criteria for hedge accounting contained in ASC Topic 815, Derivatives and Hedging (“ASC 815”). If the derivative instruments meet the criteria for a cash flow hedge, the gains and losses recognized upon changes in the fair value of the derivative instrument are recorded in other comprehensive income. Gains and losses on a cash flow hedge are reclassified into earnings when the forecasted transaction affects earnings. A contract that is designated as a hedge of an anticipated transaction which is no longer likely to occur is immediately recognized in earnings.

For investments in entities reported under the equity method of accounting, we record our pro rata share of the entity’s derivative instruments’ fair value, other comprehensive income or loss and gains and losses determined in accordance with ASC 323 and ASC 815 as applicable.

Redeemable Limited Partnership Unitholders

NHP/PMB L.P. (“NHP/PMB”) is a limited partnership that we formed in February 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC. We consolidate NHP/PMB consistent with the provisions of ASC 810, as our wholly owned subsidiary is the general partner and exercises control. As of June 30, 2011 and December 31, 2010, third party investors owned 2,197,091 and 2,176,700 Class A limited partnership units in NHP/PMB (“OP Units”), respectively, which represented 28.7% and 32.0% of the total units outstanding at June 30, 2011 and December 31, 2010, respectively. As of June 30, 2011 and December 31, 2010, 5,464,734 and 4,619,330 Class B limited partnership units in NHP/PMB were outstanding, respectively, all of which were held by our subsidiaries. During the six months ended June 30, 2011, 23,116 OP Units were issued by NHP/PMB in connection with an acquisition and 2,725 OP Units were converted into 2,725 shares of our common stock.

After a one year holding period, the OP Units are exchangeable for cash or, at our option, shares of our common stock equal to the “REIT Shares Amount” per OP Unit. As of June 30, 2011, the REIT Shares Amount was 1.000. We have entered into a registration rights agreement with the holders of the OP Units which, subject to the terms and conditions set forth therein, obligates us to register the shares of common stock that we may issue in exchange for such OP Units. As registration rights are outside of our control, the redeemable OP unitholder interests are classified outside of permanent equity on our consolidated balance sheets. As of June 30, 2011, the OP Units had been outstanding for one year or longer and were exchangeable for cash of $90.1 million.

We applied the provisions of ASC Topic 480, Distinguishing Liabilities from Equity, to reflect the redeemable OP unitholder interests at the greater of cost or fair value. As of June 30, 2011, the fair value of the OP Units exceeded the cost basis by $29.7 million, and on a cumulative basis, the adjustment has been recorded through capital in excess of par value. The value of the OP Units held by redeemable OP unitholder interests was $91.0 million and $79.2 million at June 30, 2011 and December 31, 2010, respectively.

Noncontrolling Interests

We have three consolidated joint ventures in which we have equity interests, ranging from 71% to 89.1%, in two multi-tenant medical office buildings and one development project.

NHP/PMB has equity interests, ranging from 50% to 69%, in three joint ventures which each own one multi-tenant medical office building. The joint ventures are consolidated by NHP/PMB, and we consolidate NHP/PMB in our consolidated financial statements.

We also have six partnerships in which we have equity interests, ranging from 51% to 96%, in 18 triple-net leased facilities. We consolidate the partnerships in our consolidated financial statements.

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Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation, which require stock-based compensation awards to be valued at the fair value on the date of grant and amortized as an expense over the vesting period and require any dividend equivalents earned to be treated as dividends for financial reporting purposes. Net income reflects stock-based compensation expense of $1.9 million and $3.7 million for the three and six months ended June 30, 2011, respectively, and $1.8 million and $3.4 million for the three and six months ended June 30, 2010, respectively.

Income Taxes

We believe we have qualified as a REIT under Sections 856 through 860 of the Code, and accordingly, no provision has been made for federal income taxes. However, we are subject to certain state and local taxes on our income and/or property, and these amounts are included in the expense caption “General and administrative” on our consolidated income statements.

As part of the process of preparing our consolidated financial statements, significant management judgment is required to estimate our compliance with REIT requirements. Our determinations are based on interpretation of tax laws, and our conclusions may have an impact on the income tax expense recognized. Adjustments to income tax expense may be required as a result of i) audits conducted by federal and state tax authorities; ii) our ability to qualify as a REIT; iii) the potential for built-in-gain recognized related to prior-tax-free acquisitions of C corporations; and iv) changes in tax laws. Adjustments required in any given period are included in income, other than adjustments to income tax liabilities acquired in business combinations, which would be adjusted through goodwill.

Earnings per Share (EPS)

Basic EPS is computed by dividing income from continuing operations available to common stockholders by the weighted average common shares outstanding. Income from continuing operations available to common stockholders is calculated by deducting amounts attributable to noncontrolling interests, amounts attributable to participating securities and dividends declared on preferred stock from income from continuing operations.

We apply the provisions of ASC Topic 260, Earnings per Share, which require that the two-class method of computing basic earnings per share be applied when there are unvested share-based payment awards that contain rights to nonforfeitable dividends outstanding during a reporting period. These participating securities share in undistributed earnings with common stockholders for purposes of calculating basic earnings per share.

Diluted EPS includes the effect of any potential shares outstanding, which for us is comprised of dilutive stock options, other dilutive share-settled compensation plans and, if the effect is dilutive, our 7.75% Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”), which was redeemed on January 18, 2010, and/or OP Units. The dilutive effect of stock options and other share-settled compensation plans that do not contain rights to nonforfeitable dividends is calculated using the treasury stock method with an offset from expected proceeds upon exercise of the stock options and unrecognized compensation expense.

Fair Value

We apply the provisions of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) to our financial assets and liabilities measured at fair value on a recurring basis and to our nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also specifies a three-level hierarchy of valuation techniques based upon whether the inputs reflect assumptions other market participants would use based upon

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market data obtained from independent sources (observable inputs) or reflect our own assumptions of market participant valuation (unobservable inputs) and requires the use of observable inputs if such data is available without undue cost and effort. The hierarchy is as follows:

·Level 1 — quoted prices for identical instruments in active markets.

·Level 2 — observable inputs other than Level 1 inputs, including quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and other derived valuations with significant inputs or value drivers that are observable or can be corroborated by observable inputs in active markets.

·Level 3 — unobservable inputs or derived valuations with significant inputs or value drivers that are unobservable.

Fair value measurements at June 30, 2011 are as follows:

	Fair Value			Level 1			Level 2		Level 3
	(In thousands)
Financial assets	$	5,503		$	5,503		$	—	$	—
Financial liabilities	(5,503		)	(5,503		)	—		—
Interest rate swaps	3,242			—			3,242		—
Redeemable OP unitholder interests	91,005			—			91,005		—
	$	94,247		$	—		$	94,247	$	—

Amounts related to our deferred compensation plan are invested in various financial assets, and the fair value of the corresponding assets and liabilities is based on market quotes. Interest rate swaps are valued using standard derivative pricing models that consider forward yield curves and discount rates. OP Units are exchangeable for cash or, at our option, shares of our common stock equal to the REIT Shares Amount. As such, the fair value of OP Units outstanding at June 30, 2011 is based on the closing price of our common stock on June 30, 2011, which was $41.41 per share.

The provisions of ASC Topic 825, Financial Instruments, provide companies with an option to report selected financial assets and liabilities at fair value and establish presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. We have not elected to apply the fair value option to any specific financial assets or liabilities.

The carrying amount of cash and cash equivalents approximates fair value because of the short maturities of these instruments. The fair value of mortgage and other loans receivable are based upon the estimates of management and on rates currently prevailing for comparable loans. The fair value of long-term debt is estimated based on discounting future cash flows utilizing current rates offered to us for debt of a similar type and remaining maturity.

The table below details the book value and fair value for mortgage and other loans receivable and the components of long-term debt at June 30, 2011. These fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of these financial instruments.

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	Book Value			Fair Value
	(In thousands)
Mortgage loans receivable	$	282,589		$	283,716
Other loans receivable	$	73,526		$	65,451
Unsecured senior credit facility	$	(105,000	)	$	(105,000	)
Unsecured borrowings	$	(600,000	)	$	(593,931	)
Senior notes	$	(991,633	)	$	(1,099,347	)
Notes and bonds payable	$	(410,419	)	$	(413,263	)

During the six months ended June 30, 2011, we assumed secured debt as part of certain acquisitions (see Note 10). The valuations were determined using Level 2 inputs of rates prevailing for comparable loans at the time of acquisition.

Impact of New Accounting Standards Updates

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures About Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 adds new requirements for disclosures of significant transfers into and out of Levels 1, 2 and 3 of the fair value hierarchy, the reasons for the transfers and the policy for determining when transfers are recognized. ASU 2010-06 also adds new requirements for disclosures about purchases, sales, issuances and settlements on a gross rather than net basis relating to the reconciliation of the beginning and ending balances of Level 3 recurring fair value measurements. It also clarifies the level of disaggregation to require disclosures by “class” rather than by “major category of assets and liabilities” and clarifies that a description of inputs and valuation techniques used to measure fair value is required for both recurring and nonrecurring fair value measurements classified as Level 2 or 3. ASU 2010-06 became effective January 1, 2010 except for the requirements to provide the Level 3 activity of purchases, sales, issuances and settlements on a gross basis which became effective January 1, 2011. The adoption of ASU 2010-06 did not have a material impact on our results of operations or financial position.

In July 2010, the FASB issued ASU 2010-20, Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”). ASU 2010-20 amends ASC Topic 310, Receivables, to require additional disclosures regarding credit quality and the allowance for credit losses related to financing receivables, including credit quality indicators and past due and modification information. Disclosures must be disaggregated by segment and class. The disclosures as of the end of a reporting period became effective December 31, 2010, and the disclosures about activity that occurs during a reporting period became effective January 1, 2011. The adoption of ASU 2010-20 did not have a material impact on our results of operations or financial position.

3. Real Estate Properties

As of June 30, 2011, we had investments in the following consolidated facilities:

Assisted and independent living facilities	295
Skilled nursing facilities	197
Continuing care retirement communities	13
Specialty hospitals	7
Triple-net medical office buildings, including one owned by a consolidated joint venture (see Note 5)	25
Multi-tenant medical office buildings, including 14 owned by consolidated joint ventures (see Note 5)	82
Development projects, including one owned by a consolidated joint venture (see Note 5)	3
	622

We lease our owned senior housing and long-term care facilities and certain medical office buildings to single tenants under “triple-net,” and in most cases, “master” leases that are accounted for as operating leases. These leases generally have an initial term of up to 20 years and generally have two or more multiple-year renewal options.

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As of June 30, 2011, approximately 88% of these facilities were leased under master leases. In addition, the majority of these leases contain cross-collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and grouped purchase options. As of June 30, 2011, leases covering 444 triple-net leased facilities were backed by security deposits consisting of irrevocable letters of credit or cash totaling $96.7 million. Under the terms of the leases, the tenant is responsible for all maintenance, repairs, taxes, insurance and capital expenditures on the leased properties. As of June 30, 2011, leases covering 426 facilities contained provisions for property tax impounds, and leases covering 305 facilities contained provisions for capital expenditure impounds. We generally lease medical office buildings to multiple tenants under separate non-triple-net leases, where we are responsible for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). However, some of the medical office buildings are subject to triple-net leases, where the lessees are responsible for the associated operating expenses.

During the six months ended June 30, 2011, we acquired 28 assisted and independent living facilities, 22 skilled nursing facilities and three continuing care retirement communities subject to triple-net leases and one multi-tenant medical office building in six separate transactions for an aggregate investment of $579.2 million, including a $12.0 million contingent purchase price obligation which is included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets as of June 30, 2011.

As of June 30, 2011, we had entered into agreements to develop two assisted and independent living facilities. Costs of $4.5 million were incurred during the six months ended June 30, 2011 and are included in the caption “Development in progress” on our consolidated balance sheets.

During the six months ended June 30, 2011, we funded $7.5 million in expansions, construction and capital improvements at certain facilities in our triple-net leases segment in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project. As of June 30, 2011, we had committed to fund additional expansions, construction and capital improvements of $55.9 million. During the six months ended June 30, 2011, we also funded $1.4 million in capital and tenant improvements at certain multi-tenant medical office buildings.

During the six months ended June 30, 2011, we sold two multi-tenant medical office buildings and one skilled nursing facility not previously transferred to assets held for sale for net cash proceeds of $9.4 million that resulted in a gain of $5.7 million which is included the caption “Gain on sale of facilities, net” in “Discontinued operations” on our consolidated income statements.

During the six months ended June 30, 2011, we transferred one skilled nursing facility to assets held for sale (see Note 7).

No impairment charges were recorded on our real estate properties during six months ended June 30, 2011 or 2010.

Hearthstone Senior Living

In February 2011, our tenant, Hearthstone Senior Services, L.P. (“Hearthstone”), notified us that it would be unable to pay the rent then due under its leases with us, and asked us to amend certain terms of the leases to make rents achievable. In order to substantially increase the ability of Hearthstone to meet its future obligations, and thereby protecting our interest, we agreed to certain modifications of the terms of our leases with Hearthstone that include, among other things, a reduction in the aggregate rent payable by $7.4 million for the lease year ending February 2012, and by $6.4 million for subsequent lease years through 2021. After giving effect to these reductions, the aggregate rent payable by Hearthstone is $31.7 million for the first lease year, $33.7 million for the second lease year and increases by 3% each year thereafter. In connection with the lease modifications, we also obtained the right to terminate any and all of our leases with Hearthstone at any time without cause. Other terms of our modified arrangements with Hearthstone include:

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·We have eliminated supplemental rent obligations, except for supplemental rent accrued prior to February 1, 2011, which totaled $6.0 million and is to become payable (i) in full upon an event of default by Hearthstone for which NHP chooses to exercise its remedies, (ii) in full upon a sale of Hearthstone and (iii) in part, if we exercise our right to terminate the leases with Hearthstone without cause.

·We will be entitled to receive revenue participation rent, payable monthly and calculated as 20% of incremental gross revenue over the base month of February 2011, commencing February 1, 2012 and capped in any one year at $6.4 million (subject to annual increases of 3%).

·Upon exercise of our right to terminate the leases without cause, Hearthstone must enter into an operations transfer agreement with a successor operator to allow for an efficient transfer of operations to our designee.

·If we exercise the right to terminate the Hearthstone leases without cause, upon transition of the facilities to a licensed replacement operator we must release to Hearthstone a portion of the letters of credit we hold as security for their payment obligations to us.

·The Chief Executive Officer of Hearthstone has executed a personal guaranty in our favor that would obligate him to reimburse us the amount of any (i) distributions in excess of permitted amounts, (ii) compensation paid to him in excess of permitted amounts, and (iii) losses arising from customary “bad boy” acts such as fraud, or misappropriation of funds, rents or insurance proceeds.

In June 2011, we were notified by Hearthstone that it would be unable to pay the full amount of rent owed to us under the terms of their existing leases and asked that we further amend our leases and other agreements. In connection with this request, and with Hearthstone’s consent, we drew on the master lease letter of credit in its full face amount of $5.4 million and applied the proceeds to part of the accrued and owing supplemental rent, leaving letters of credit totaling $0.6 million in place at June 30, 2011. However, it is possible that the letters of credit may not be sufficient to compensate us for any future losses or expenses that may arise if Hearthstone defaults under its leases with us. We also agreed to extend to Hearthstone a revolving working capital loan in an amount not to exceed $3.0 million, of which $1.4 million was funded and remained outstanding at June 30, 2011. Other terms of our modified arrangements with Hearthstone include:

·As security for the working capital loan, we were granted a security interest in substantially all of the personal property owned by Hearthstone Senior Living, L.P. (the guarantor of our leases with Hearthstone) and by the tenants under our leases.

·In lieu of releasing of a portion of the letters of credit to Hearthstone upon transition of the facilities to a licensed replacement operator as contemplated in the lease amendment entered into in June 2011, certain members of Hearthstone’s senior management have agreed to cooperate with and facilitate an orderly transition of the leased facilities to another licensed operator upon our election to do so.

·We agreed to forbear from exercising certain remedies against Hearthstone for the partial payment of rent due in June 2011, provided that certain future defaults under the leases do not occur.

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4. Mortgage Loans Receivable

As of June 30, 2011, we held 20 mortgage loans receivable secured by:

Multi-tenant medical office buildings	27
Skilled nursing facilities	17
Assisted and independent living facilities	8
Continuing care retirement communities	1
Land parcel	1
	54

As of June 30, 2011, the mortgage loans receivable had an aggregate principal balance of $264.9 million and are reflected in our consolidated balance sheets net of aggregate deferred gains and discounts totaling $17.7 million, with individual outstanding principal balances ranging from $0.7 million to $83.1 million at rates ranging from 6.00% to 15.00% and maturities ranging from 2011 to 2031.

During the six months ended June 30, 2011, we agreed to fund up to $16.0 million to develop an assisted and independent living facility and funded $1.1 million under the agreement.

In connection with the funding of a mortgage loan secured by a skilled nursing facility during 2010, we agreed to fund up to $10.9 million to expand the facility. During the six months ended June 30, 2011, we funded $3.3 million under the agreement.

During the six months ended June 30, 2011, we also funded $0.1 million on other existing loans.

During the six months ended June 30, 2011, one mortgage loan to Brookdale secured by five assisted and independent living facilities with a carrying value of $28.3 million (net of a deferred gain of $4.7 million) was prepaid. The deferred gain was recognized and included in the caption “Gain on sale of facilities, net” in “Discontinued operations” on our consolidated income statements. Additionally, during the six months ended June 30, 2011, a $6.6 million mortgage loan which matured during 2010 was repaid in full.

During the six months ended June 30, 2011, we also recognized a deferred gain on sale of $0.5 million under the installment method for facilities previously sold to the tenants for which we provided a mortgage loan that matures in 2013. The gain is included in the caption “Interest and other income” on our consolidated income statements.

5. Medical Office Building Joint Ventures

During the six months ended June 30, 2011, NHP/PMB acquired one medical office building subject to a triple-net lease for $36.8 million, which was paid in a combination of cash and the issuance of 23,116 OP Units with a fair value at the date of issuance of $1.0 million. As of June 30, 2011, NHP/PMB owned 13 multi-tenant medical office buildings, three of which are owned through consolidated joint ventures. During the six months ended June 30, 2011, NHP/PMB made cash distributions of $2.0 million and $3.7 million to Class A and Class B unitholders, respectively.

On April 28, 2011, we acquired for $2.7 million the 5% noncontrolling interest held by McShane Medical Office Properties, Inc. in McShane/NHP JV, LLC (“McShane/NHP”). As a result of this acquisition, we now have complete ownership of the seven multi-tenant medical office buildings previously owned by McShane/NHP. Activity subsequent to April 28, 2011 related to these facilities is included in our consolidated activity for wholly owned real estate properties (see Note 3). Prior to our acquisition of McShane’s interest, we consolidated McShane/NHP in our consolidated financial statements in accordance with ASC 810. During the period from January 1, 2011 through April 28, 2011, McShane/NHP funded $0.1 million in capital and tenant improvements at certain facilities. No cash distributions were made during the period from January 1, 2011 through April 28, 2011.

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(Unaudited)

June 30, 2011

As of June 30, 2011, we owned two multi-tenant medical office buildings through consolidated joint ventures. During the six months ended June 30, 2011, the joint ventures funded $0.8 million in capital and tenant improvements at certain facilities. During the six months ended June 30, 2011, operating cash distributions from the joint ventures of $0.3 million were made to us.

As of June 30, 2011, we owned one development project through a consolidated joint venture. During the six months ended June 30, 2011, the joint venture incurred costs of $4.1 million which are included in the caption “Development in progress” on our consolidated balance sheets. During the six months ended June 30, 2011, the joint venture obtained a $36.5 million construction loan under which $6.4 million has been drawn and remains outstanding at June 30, 2011. No cash distributions were made during the six months ended June 30, 2011.

All intercompany balances with our consolidated joint ventures have been eliminated for purposes of our consolidated financial statements.

6. Investment in Unconsolidated Joint Ventures

The following table sets forth the amounts from our unconsolidated joint ventures included in the caption “Income from unconsolidated joint ventures” on our consolidated income statements for the periods presented:

	Three months ended						Six months ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In thousands)
Management fees:
State pension fund investor	$	1,120		$	1,134		$	2,322		$	2,196
NHP share of net income (loss):
State pension fund investor	198			195			509			441
PMB Real Estate Services LLC	(89		)	(1		)	(137		)	27
PMB SB 399-401 East Highland LLC	—			—			—			12
	$	1,229		$	1,328		$	2,694		$	2,676

State Pension Fund Investor

As of June 30, 2011, we owned interests in 34 triple-net leased facilities through a joint venture with a state pension fund investor. During the six months ended June 30, 2011, we received distributions of $2.8 million from the joint venture.

PMB Real Estate Services LLC

In 2008, we entered into an agreement with Pacific Medical Buildings LLC to acquire a 50% interest in PMB Real Estate Services LLC (“PMBRES”), a full service property management company. An additional payment equal to six times the Normalized Net Operating Profit, as defined, of PMBRES for 2010 was to be made on or before March 31, 2011. During 2010, PMBRES had a net operating loss, and as such, no additional payment was made on or before March 31, 2011. PMBRES provides property management services for 34 multi-tenant medical office buildings that we own or in which we have an ownership interest.

PMB SB 399-401 East Highland LLC

In 2008, we acquired a noncontrolling interest in PMB SB 399-401 East Highland LLC (“PMB SB”), an entity that owned two multi-tenant medical office buildings, and as of March 1, 2010, we acquired the remaining interest in PMB SB. In connection with the acquisition, we re-measured our previously held equity interest at the acquisition date fair value based on an independent consultant’s report and recognized a net gain on the

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(Unaudited)

June 30, 2011

remeasurement of $0.6 million which is included in the caption “Interest and other income” on our consolidated income statements.

7. Assets Held for Sale

During the six months ended June 30, 2011, we transferred one skilled nursing facility to assets held for sale.

During 2010, we transferred one skilled nursing facility and one medical office building to assets held for sale. During the six months ended June 30, 2011, we sold the skilled nursing facility and medical office building for net cash proceeds of $7.2 million that resulted in a total gain of $2.0 million which is included in the caption “Gain on sale of facilities, net” in “Discontinued operations” on our consolidated income statements.

8. Intangible Assets and Liabilities

Intangible assets include items such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets. Intangible liabilities include below market tenant and ground lease intangible liabilities and are included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets. As of June 30, 2011 and December 31, 2010, intangible assets and liabilities consisted of:

	June 30,			December 31,
	2011			2010
	(In thousands)
Gross intangible assets	$	202,297		$	211,134
Accumulated amortization	(52,004		)	(47,896		)
	$	150,293		$	163,238
Gross intangible liabilities	$	18,227		$	18,643
Accumulated amortization	(5,925		)	(5,398		)
	$	12,302		$	13,245

The amortization of above/below market lease intangibles is included in the caption “Medical office building operating rent” on our consolidated income statements. The amortization of other intangible assets and liabilities is included in the caption “Depreciation and amortization” on our consolidated income statements. The following table sets forth amounts included on our consolidated income statements related to the amortization of intangible assets and liabilities for the periods presented:

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Amortization:
Above/below market lease intangibles	$	141	$	153	$	275	$	91
Other intangible assets and liabilities	4,195		5,071		8,724		9,079
	$	4,336	$	5,224	$	8,999	$	9,170

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(Unaudited)

June 30, 2011

9. Other Assets

As of June 30, 2011 and December 31, 2010, other assets consisted of: 

	June 30,		December 31,
	2011		2010
	(In thousands)
Other receivables, net of reserves of $4.9 million and $6.1 million at June 30, 2011 and December 31, 2010, respectively	$	68,629	$	68,200
Straight-line rent receivables, net of reserves of $130.5 million and $114.7 million at June 30, 2011 and December 31, 2010, respectively	39,208		39,331
Investments and restricted funds	14,282		12,567
Prepaid ground leases	12,678		12,804
Deferred financing costs	8,683		8,566
Capitalized lease and loan origination costs	7,283		1,910
Interest rate swaps	3,242		11,157
Other	3,546		3,500
	$	157,551	$	158,035

Included in other receivables at both June 30, 2011 and December 31, 2010, are two unsecured loans to Emeritus Corporation in the amount of $21.4 million and $30.0 million. The loans mature in March 2017.

10. Debt

Unsecured Senior Credit Facility

As of June 30, 2011 and December 31, 2010, we had $105.0 million and $175.0 million, respectively, outstanding on our $700.0 million revolving unsecured senior credit facility. At our option, borrowings under the credit facility bear interest at the prime rate (3.25% at June 30, 2011) or applicable LIBOR plus 0.70% (0.95% at June 30, 2011). We pay a facility fee of 0.15% per annum on the total commitment under the agreement. The credit facility matures on December 15, 2011. As of June 30, 2011, we were in compliance with all covenants under the credit facility.

Term Loan

During June 2011, we entered into an agreement which provides for commitments for up to $800.0 million senior unsecured term loans available from time to time on a non-revolving basis. At our option, borrowings under the term loan bear interest at applicable LIBOR plus 1.50% (1.69% at June 30, 2011) or the “Alternate Base Rate” plus 0.50% (3.75% at June 30, 2011). We pay a facility fee of 0.10% per annum on the unused commitments under the agreement. The term loan matures on June 1, 2012. As of June 30, 2011, there was no balance outstanding under the term loan, and we were in compliance with all covenants under the term loan.

Unsecured Borrowings

During May 2011, we entered into an agreement with Ventas Realty, Limited Partnership (“Ventas Realty”), a wholly owned subsidiary of Ventas, under which Ventas Realty made a $600.0 million unsecured loan to us which remained outstanding at June 30, 2011. The loan bears interest at 5.00% and matures on May 17, 2021.

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(Unaudited)

June 30, 2011

Senior Notes

The aggregate principal amount of notes outstanding at each of June 30, 2011 and December 31, 2010 was $991.6 million, and the weighted average interest rate on the notes was 6.47%. The weighted average maturity was 3.5 years and 4.0 years as of June 30, 2011 and December 31, 2010, respectively.

Notes and Bonds Payable

The aggregate principal amount of notes and bonds payable at June 30, 2011 was $410.4 million. Notes and bonds payable are due through the year 2036, at interest rates ranging from 0.65% to 8.63% and are secured by real estate properties with an aggregate net book value as of June 30, 2011 of $607.8 million. As of June 30, 2011, the weighted average interest rate on the notes and bonds payable was 5.56% and the weighted average maturity was 6.9 years. As of December 31, 2010, the aggregate amount of notes and bonds payable was $362.6 million, and the notes and bonds payable had a weighted average interest rate of 5.59% and a weighted average maturity of 7.2 years.

During the six months ended June 30, 2011, we assumed mortgages as part of certain acquisitions totaling $73.5 million.

During the six months ended June 30, 2011, our consolidated joint venture which owns a development project obtained a $36.5 million construction loan under which $6.4 million has been drawn and remains outstanding at June 30, 2011.

During the six months ended June 30, 2011, we prepaid $28.5 million of secured debt with a weighted average interest rate of 6.92%.

Debt Maturities

The principal balances of our debt as of June 30, 2011 mature as follows:

Year	Credit Facility		Term Loan		Unsecured Borrowings		Senior Notes		Notes and Bonds Payable		Total
	(In thousands)
2011	$	105,000	$	—	$	—	$	339,040	$	—	$	444,040
2012	—		—		—		72,950		9,386		82,336
2013	—		—		—		269,850		43,882		313,732
2014	—		—		—		—		37,168		37,168
2015	—		—		—		234,420		34,911		269,331
Thereafter (1)	—		—		600,000		75,373		285,072		960,445
	$	105,000	$	—	$	600,000	$	991,633	$	410,419	$	2,107,052

(1) There are $52.4 million of senior notes due in 2037 which may be put back to us at their face amount at the option of the holder on October 1 of any of the following years: 2012, 2017 or 2027. There are $23.0 million of senior notes due in 2038 which may be put back to us at their face amount at the option of the holder on July 7 of any of the following years: 2013, 2018, 2023 or 2028.

11.Stockholders’ Equity

Common Stock

We have entered into sales agreements from time to time with agents to sell shares of our common stock through an at-the-market equity offering program. As of June 30, 2011, approximately 1,322,000 shares of common stock were available to be sold pursuant to our at-the-market equity offering program. However, under the terms of

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(Unaudited)

June 30, 2011

the February 27, 2011 merger agreement with Ventas (see Note 19), we were allowed to issue any shares of common stock, including any shares sold through our at-the-market equity offering program, during the pendency of the merger. No shares were issued through our at-the-market equity offering program during the six months ended June 30, 2011.

Prior to March 31, 2011, we sponsored a dividend reinvestment plan that enabled existing stockholders to purchase additional shares of common stock by automatically reinvesting all or part of the cash dividends paid on their shares of common stock at a discount ranging from 0% to 5%, determined by us from time to time in accordance with the plan. During the period from January 1, 2011 to March 31, 2011, we issued approximately 153,000 shares of common stock, at an average price of $39.89 per share, resulting in proceeds of approximately $6.1 million. Effective as of March 31, 2011, the dividend reinvestment plan was suspended in accordance with its terms.

During the six months ended June 30, 2011, 2,725 OP Units issued by NHP/PMB were exchanged for 2,725 shares of common stock.

12. Earnings Per Share (EPS)

Certain of our share-based payment awards are considered participating securities which requires the use of the two-class method for the computation of basic and diluted EPS.

Diluted EPS also includes the effect of any potential shares outstanding, which for us is comprised of dilutive stock options, other dilutive share-settled compensation plans and, if the effect is dilutive, Series B Preferred Stock, which was redeemed on January 18, 2010, and/or OP Units. The Series B Preferred Stock was not dilutive for the three and six months ended June 30, 2010. There were 150,700 stock options that would not be dilutive for the three and six months ended June 30, 2011 and 270,100 stock options that would not be dilutive for the three and six months ended June 30, 2010. The calculation below excludes 28,350 restricted stock units that would not be dilutive for the three and six months ended June 30, 2011. The calculation below excludes 147,600 performance shares that would not be dilutive for the three months ended June 30, 2010 and 6,997 stock appreciation rights that would not be dilutive for the three and six months ended June 30, 2010. The following table sets forth the components of the basic and diluted EPS calculations:

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(Unaudited)

June 30, 2011

	Three months ended						Six months ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In thousands, except per share amounts)
Numerator:
Income from continuing operations	$	27,052		$	32,160		$	66,570		$	62,392
Net loss attributable to noncontrolling interests	622			147			859			337
Net income attributable to participating securities	(429		)	(324		)	(871		)	(650		)
Numerator for Basic and Diluted EPS from continuing operations	$	27,245		$	31,983		$	66,558		$	62,079
Numerator for Basic and Diluted EPS from discontinued operations	$	1,942		$	4,862		$	12,738		$	5,869
Denominator:
Basic weighted average shares outstanding	126,659			119,883			126,567			118,473
Effect of dilutive securities:
Stock options	—			53			—			60
Other share-settled compensation plans	324			457			327			441
OP Units	2,190			2,206			2,183			2,065
Diluted weighted average shares outstanding	129,173			122,599			129,077			121,039
Basic earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	0.21		$	0.27		$	0.53		$	0.52
Discontinued operations attributable to NHP common stockholders	0.02			0.04			0.10			0.05
Net income attributable to NHP common stockholders	$	0.23		$	0.31		$	0.63		$	0.57
Diluted earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	0.21		$	0.26		$	0.51		$	0.51
Discontinued operations attributable to NHP common stockholders	0.02			0.04			0.10			0.05
Net income attributable to NHP common stockholders	$	0.23		$	0.30		$	0.61		$	0.56

13. Discontinued Operations

ASC 360 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. If we have a continuing involvement, as in the sales to our unconsolidated joint venture, the operating results remain in continuing operations. The following table details the operating results reclassified to discontinued operations for the periods presented:

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(Unaudited)

June 30, 2011

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Rental income	$	222	$	1,892	$	528	$	3,669
Interest and other income	—		—		2		—
	222		1,892		530		3,669
Expenses:
Interest expense	—		9		—		18
Depreciation and amortization	33		736		102		1,461
General and administrative	2		4		2		8
Medical office building operating expenses	33		60		83		114
	68		809		187		1,601
Income from discontinued operations	$	154	$	1,083	$	343	$	2,068

14. Derivatives

During August 2010, we entered into six 12-month forward-starting interest rate swap agreements for an aggregate notional amount of $250.0 million at a weighted average rate of 3.16%. We entered into these swap agreements in order to hedge the expected interest payments associated with fixed rate debt forecasted to be issued in 2011. The swap agreements each have an effective date of August 1, 2011 and a termination date of August 1, 2021. We expect to settle the swap agreements when the forecasted debt is issued. We assessed the effectiveness of these swap agreements as hedges at inception and through June 30, 2011 and considered these swap agreements to be highly effective cash flow hedges. The swap agreements are recorded under the caption “Other assets” on our consolidated balance sheets at their aggregate estimated fair value of $3.2 million and $11.2 million at June 30, 2011 and December 31, 2010, respectively. Due to our merger with Ventas that closed on July 1, 2011, we do not expect the cash flow hedges to remain probable of occurring, and hedge accounting will cease prospectively commencing July 1, 2011.

During 2006 and 2007, we entered into and settled Treasury lock agreements to hedge the expected interest payments associated with a portion of our senior notes. The settlement amounts were recorded as other comprehensive income and are being amortized over the life of the debt as a yield reduction. We expect to record $0.3 million of amortization during the next 12 months.

The following table sets forth amounts included on our consolidated income statements related to the amortization of the Treasury lock agreements for the periods presented:

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Amortization:
2007 Treasury lock agreements	$	69	$	65	$	138	$	129
2006 Treasury lock agreements	68		64		135		126
	$	137	$	129	$	273	$	255

During 2008, the unconsolidated joint venture we have with a state pension fund investor entered into an interest rate swap contract. The fair value of this contract at June 30, 2011 and December 31, 2010 was $13.0 million and $12.8 million, respectively, which is included as a liability on the joint venture’s balance sheets. As of June 30, 2011, we had recorded our pro rata share of the unconsolidated joint venture’s accumulated other comprehensive loss related to this contract of $3.3 million.

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(Unaudited)

June 30, 2011

15. Comprehensive Income

The following table sets forth the computation of comprehensive income for the periods presented:

	Three months ended						Six months ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In thousands)
Net income	$	28,994		$	37,022		$	79,308		$	68,261
Other comprehensive income:
Loss on interest rate swap agreements	(8,918		)	—			(7,914		)	—
Amortization of gains on Treasury lock agreements	(137		)	(129		)	(273		)	(255		)
Pro rata share of accumulated other comprehensive loss from unconsolidated joint venture	(411		)	(963		)	(54		)	(1,399		)
Comprehensive income	19,528			35,930			71,067			66,607
Comprehensive loss attributable to noncontrolling interests	622			147			859			337
	$	20,150		$	36,077		$	71,926		$	66,944

16. Income Taxes

The provisions of ASC Topic 740, Income Taxes, which clarify the accounting for uncertainty in income taxes recognized in financial statements and prescribe a recognition threshold and measurement attribute of tax positions taken or expected to be taken on a tax return became effective January 1, 2007. No amounts have been recorded for unrecognized tax benefits or related interest expense and penalties. The taxable periods ending December 31, 2007 through December 31, 2010 remain open to examination by the Internal Revenue Service and the tax authorities of the significant jurisdictions in which we do business.

Hearthstone Acquisition

On June 1, 2006, we acquired the stock of Hearthstone Assisted Living, Inc. (“HAL”), causing HAL to become a qualified REIT subsidiary. As a result of the acquisition, we succeeded to HAL’s tax attributes, including HAL’s tax basis in its net assets. Prior to the acquisition, HAL was a corporation subject to federal and state income taxes. In connection with the acquisition of HAL, NHP acquired approximately $82.5 million of federal net operating losses (“NOLs”) which we can carry forward to future periods and the use of which is subject to annual limitations imposed by IRC Section 382. While we believe that these NOLs are accurate, any adjustments to HAL’s tax returns for periods prior to June 1, 2006 by the Internal Revenue Service could change the amount of the NOLs that we can utilize. We have used a portion of this amount in 2007 and 2008 and anticipate using additional amounts in future years. There were $38.7 million of NOLs remaining at June 30, 2011 which are set to expire between 2017 and 2025.

In addition, we may be subject to a corporate-level tax on any taxable disposition of HAL’s pre-acquisition assets that occurs within ten years after the June 1, 2006 acquisition. The corporate-level tax would be assessed only to the extent of the built-in gain that existed on the date of acquisition, based on the fair market value of the asset on June 1, 2006. We do not expect to dispose of any asset included in the HAL acquisition if such a disposition would result in the imposition of a material tax liability, and no such sales have taken place through June 30, 2011. Accordingly, we have not recorded a deferred tax liability associated with this corporate-level tax. Gains from asset dispositions occurring more than 10 years after the acquisition will not be subject to this corporate-level tax. However, we may dispose of HAL assets before the 10-year period if we are able to complete a tax-deferred exchange.

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(Unaudited)

June 30, 2011

17. Segment Information

Our operations are organized into two segments — triple-net leases and multi-tenant leases. In the triple-net leases segment, we invest in healthcare related properties and lease the facilities to unaffiliated tenants under “triple-net” and generally “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, we invest in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). During 2010 and the six months ended June 30, 2011, the multi-tenant leases segment was comprised exclusively of medical office buildings.

Non-segment revenues primarily consist of interest income on mortgages and unsecured loans and other income. Interest expense, depreciation and amortization and other expenses not attributable to individual facilities are not allocated to individual segments for purposes of assessing segment performance. Non-segment assets primarily consist of corporate assets including mortgages and unsecured loans, investment in unconsolidated joint ventures, cash, deferred financing costs and other assets not attributable to individual facilities.

Certain items in prior period financial statements have been reclassified to conform to current period presentation, including those required by ASC 360 which require the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest to be removed from income from continuing operations and reported as discontinued operations. Summary information related to our reportable segments is as follows:

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In thousands)
Revenue:
Triple-net leases	$	88,410	$	74,709	$	170,548	$	146,789
Multi-tenant leases	29,121		27,049		58,620		48,657
Non-segment	10,851		5,888		21,439		12,851
	$	128,382	$	107,646	$	250,607	$	208,297
Net operating income (1):
Triple-net leases	$	88,410	$	74,709	$	170,548	$	146,789
Multi-tenant leases	18,738		16,839		37,929		29,854
	$	107,148	$	91,548	$	208,477	$	176,643

	June 30,		December 31,
	2011		2010
	(In thousands)
Assets:
Triple-net leases	$	3,211,578	$	2,635,064
Multi-tenant leases	918,929		935,967
Non-segment	474,523		521,593
	$	4,605,030	$	4,092,624

(1)Net operating income (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of our facilities. We define NOI for our triple-net leases segment as rent revenue. For our multi-tenant leases segment, we define NOI as revenue minus medical office building operating expenses. In some cases, revenue for medical office buildings includes expense reimbursements for common area maintenance charges. NOI excludes interest expense, depreciation and amortization expense, general and administrative

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(Unaudited)

June 30, 2011

expense and discontinued operations. We present NOI as it effectively presents our portfolio on a “net” rent basis and provides relevant and useful information as it measures the operating performance at the facility level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. Furthermore, we believe that NOI provides investors relevant and useful information because it measures the operating performance of our real estate at the property level on an unleveraged basis. We believe that net income is the GAAP measure that is most directly comparable to NOI. However, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as presented above may not be comparable to other REITs or companies as their definitions of NOI may differ from ours.

A reconciliation of net income, a GAAP measure, to NOI, a non-conforming GAAP measure, is as follows:

	Three months ended						Six months ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In thousands)
Net income	$	28,994		$	37,022		$	79,308		$	68,261
Interest and other income	(10,851		)	(5,888		)	(21,439		)	(12,851		)
Interest expense	27,792			24,443			50,562			48,024
Depreciation and amortization expense	41,589			33,154			80,219			64,398
General and administrative expense	6,784			7,380			14,151			14,361
Merger and acquisition costs	16,011			1,627			21,108			3,070
Income from unconsolidated joint ventures	(1,229		)	(1,328		)	(2,694		)	(2,676		)
Gain on debt extinguishment	—			—			—			(75		)
Gain on sale of facilities, net	(1,788		)	(3,779		)	(12,395		)	(3,801		)
Income from discontinued operations	(154		)	(1,083		)	(343		)	(2,068		)
Net operating income from reportable segments	$	107,148		$	91,548		$	208,477		$	176,643

18. Commitments and Contingencies

Litigation

From time to time, we are a party to various legal proceedings, lawsuits and other claims (as to some of which we may not be insured) that arise in the normal course of our business. Regardless of their merits, these matters may require us to expend significant financial resources. Except as described herein and in our Annual Report on Form 10-K for the year ended December 31, 2010, we are not aware of any other legal proceedings or claims that we believe may have, individually or taken together, a material adverse effect on our business, results of operations or financial position. However, we are unable to predict the ultimate outcome, or reasonably predict the possible range of loss, of pending litigation and claims, and if our assessment of our liability with respect to these actions and claims is incorrect, such actions and claims could have a material adverse effect on our business, results of operations or financial position.

Stockholder Litigation

In the weeks following the announcement on February 28, 2011 that we had entered into a merger agreement with Ventas, certain of our purported stockholders filed seven lawsuits against us and our directors.  Six of these lawsuits also named Ventas as a defendant and five named Needles as a defendant.  The purported stockholder plaintiffs commenced these actions in two jurisdictions: the Superior Court of the State of California, Orange County, which is referred to as the California State Court; and the Circuit Court for Baltimore City, Maryland, which is referred to as the Maryland State Court.  All of these actions were brought as putative class actions, and two purported to assert derivative claims on our behalf.  All of these stockholder complaints allege that our directors breached certain alleged duties to our stockholders by approving the merger agreement, and certain suits allege that

29

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

June 30, 2011

we aided and abetted those breaches.  Those suits that name Ventas and Needles allege that Ventas and Needles also aided and abetted the breaches of certain alleged duties by our directors.  All of the complaints request an injunction of the merger.  Certain of the complaints also seek damages.

In the California State Court, the following actions were filed purportedly on behalf of our stockholders: on February 28, 2011, a putative class action entitled Palma v. Nationwide Health Properties, Inc., et al.; on March 3, 2011, a putative class action entitled Barker v. Nationwide Health Properties, Inc., et al.; and on March 3, 2011, a putative class action entitled Davis v. Nationwide Health Properties, Inc., et al, which was subsequently amended on March 11, 2011 under the caption Davids v. Nationwide Health Properties, Inc., et al.  Each action names the Company and members of our board of directors as defendants.  The Barker and Davids actions also name Ventas as a defendant, and the Davids action names Needles as a defendant.  Each complaint alleges, among other things, that our directors breached certain alleged duties by approving the merger agreement between the Company and Ventas because the proposed transaction purportedly fails to maximize stockholder value and provides the directors personal benefits not shared by our stockholders.  The Palma and Davids actions allege that the Company aided and abetted those purported breaches; the Barker and Davids actions allege that Ventas aided and abetted those purported breaches; and the Davids action alleges that Needles aided and abetted those purported breaches.  Along with other relief, the complaints seek an injunction against the closing of the proposed merger.  On April 4, 2011, the Company moved to stay and/or dismiss each of the actions.  On April 27, 2011, all three actions were consolidated pursuant to a Stipulation and Proposed Order on Consolidation of Related Actions signed by the parties on March 22, 2011. On May 12, 2011, the California State Court granted the defendants’ motion to stay.

In the Maryland State Court, the following actions were filed purportedly on behalf of our stockholders: on March 7, 2011, a putative class action entitled Crowley v. Nationwide Health Properties, Inc., et al.; on March 10, 2011, a putative class action entitled Taylor v. Nationwide Health Properties, Inc., et. al.; on March 17, 2011, a putative class action entitled Haughey Family Trust v. Pasquale, et al.; and on March 31, 2011, a putative class action entitled Rappoport v. Pasquale, et al.  All four actions name the Company, its directors, Ventas and Needles as defendants.  All four actions allege, among other things, that our directors breached certain alleged duties by approving the merger agreement between the Company and Ventas because the proposed transaction purportedly fails to maximize stockholder value and provides certain directors personal benefits not shared by our stockholders.  The Haughey and Rappoport actions allege that the Company, Ventas and Needles aided and abetted those breaches; the Crowley action alleges that the Company and Ventas aided and abetted those purported breaches, and the Taylor action alleges that Ventas and Needles aided and abetted those purported breaches.  In addition to asserting direct claims on behalf of a putative class of our shareholders, the Haughey and Rappoport actions purport to bring derivative claims on our behalf, asserting breaches of certain alleged duties by our directors in connection with their approval of the proposed transaction.  All four actions seek to enjoin the proposed merger, and the Taylor action seeks damages.

On March 30, 2011, pursuant to stipulation of the parties, the Maryland State Court entered an order consolidating the Crowley, Taylor and Haughey actions. The Rappoport action was consolidated with the other actions (the “Maryland Action”) on April 15, 2011. On April 1, 2011, pursuant to stipulation of the parties, the Maryland State Court entered an order: (i) certifying a class of our shareholders; and (ii) providing for the plaintiffs to file a consolidated amended complaint. The plaintiffs filed a consolidated amended complaint on April 19, 2011, which the defendants moved to dismiss on April 29, 2011. Plaintiffs opposed that motion on May 9, 2011. Plaintiffs moved for expedited discovery on April 19, 2011, and the defendants simultaneously opposed that motion and moved for a protective order staying discovery on April 26, 2011. The court denied plaintiffs’ motion for expedited discovery and granted defendants’ motion for a protective order on May 3, 2011. On May 6, 2011, plaintiffs moved for reconsideration of the court’s grant of the protective order. The Maryland Court denied the plaintiffs’ motion for reconsideration on May 11, 2011.  On May 16, 2011, the Maryland Court held a hearing on defendants’ motion to dismiss.  On May 27, 2011, the Maryland Court issued an order granting defendants’ motion to dismiss with prejudice.  Plaintiffs moved for reconsideration of that order on June 6, 2011.

On June 9, 2011 the parties reached an agreement in principle to settle the Maryland Action which provides for a full release of the claims against the defendants and requires NHP to make certain supplemental disclosures to

30

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

June 30, 2011

shareholders concerning the merger. The supplemental disclosures were made on June 10, 2011 by filing Definitive Additional Proxy Materials with the SEC. The parties are documenting the settlement, the final terms of which must be approved by the Maryland Court.

Development Agreements

As of June 30, 2011, we had entered into a joint venture to develop a medical office building (see Note 5) and entered into other agreements to develop three assisted and independent living facilities (see Notes 3 and 4) and to fund the expansion of a skilled nursing facility securing a mortgage loan (see Note 4). As of June 30, 2011, we had committed to fund an additional $58.4 million under these agreements, of which $30.1 million will be funded through a third party construction loan obtained during the six months ended June 30, 2011 (see Note 10).

Lines of Credit

Under the terms of an agreement with PMB LLC, we agreed to extend to PMB LLC a $10.0 million line of credit to fund certain costs of PMB LLC with respect to the proposed development of multi-tenant medical office buildings. During the six months ended June 30, 2011, we funded $1.9 million and received payments of $2.6 million under the line of credit. As of June 30, 2011, $4.3 million was outstanding and is included in the caption “Other assets” on our consolidated balance sheet.

During 2010, we agreed to loan two of our consolidated joint ventures up to $65.3 million as project financing, including $56.6 million that was disbursed initially and $0.2 million funded during the six months ended June 30, 2011, the total of which remained outstanding at June 30, 2011.

Indemnities

We have entered into indemnification agreements with those partners who contributed appreciated property into NHP/PMB. Generally, under these indemnification agreements, if any of the appreciated real estate contributed by the partners is sold by NHP/PMB in a taxable transaction within a specified number of years after the property was contributed, we will reimburse the affected partners for the federal and state income taxes associated with the pre-contribution gain that is specially allocated to the affected partner under the Code. We have no current plans to sell any of these properties.

19. Subsequent Events

On July 1, 2011, the transactions contemplated by the Merger Agreement with Ventas were consummated, and Ventas thereby acquired our portfolio of properties, including mortgage loans and properties owned by our unconsolidated joint ventures. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of common stock, other than shares held by any wholly owned subsidiary of NHP, by Ventas or by any subsidiary of Ventas, was cancelled and converted into the right to receive 0.7866 shares (the “Exchange Ratio”) of common stock of Ventas (“Ventas Common Stock”), with cash paid in lieu of fractional shares. Effective July 1, 2011, NHP common stock ceased trading on the New York Stock Exchange.

Upon completion of the Merger, (i) each outstanding stock option became fully vested and was cashed out based on the option spread, or in the case of stock options granted to certain senior executives in February 2011, were assumed by Ventas on the same terms and conditions (subject to adjustment for the Exchange Ratio); (ii) each restricted stock unit vested in full and was cashed out based on the Exchange Ratio, or in the case of (a) restricted stock units granted to certain senior executives in February 2011, were assumed by Ventas on the same terms and conditions (subject to adjustment for the Exchange Ratio) and (b) certain restricted stock units granted to certain senior executives, vested and were settled in accordance with their terms; (iii) each share of restricted stock vested in full and was converted into Ventas Common Stock, based on the Exchange Ratio; (iv) performance shares vested under the relevant agreements and were converted into Ventas Common Stock based on the Exchange Ratio; and (v) dividend equivalent rights granted in connection with any award became fully vested and were paid out.

31

EX-99.2

Exhibit 99.2

VENTAS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2011 and For the Year Ended December 31, 2010

On May 12, 2011, Ventas, Inc. (“Ventas” or the “Company”) acquired substantially all of the real estate assets and working capital of privately-owned Atria Senior Living Group, Inc. (“Atria”) (including assets owned by Atria’s affiliate, One Lantern Senior Living Inc (“One Lantern”)).  The Company funded a portion of the purchase price through the issuance of 24.9 million shares of Ventas common stock (which shares had a total value of $1.38 billion based on the May 12, 2011 closing price of Ventas common stock of $55.33 per share). As a result of the transaction, Ventas added to its senior living operating portfolio 117 private pay seniors housing communities and one development land parcel.

On July 1, 2011, Ventas 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 Ventas or any of its subsidiaries or any wholly owned subsidiary of NHP) was converted into the right to receive 0.7866 shares of Ventas common stock, with cash paid in lieu of fractional shares.  The Company issued 99.8 million shares of Ventas common stock (which shares had a total value of $5.37 billion based on the July 1, 2011 closing price of Ventas common stock of $53.74 per share).  In connection with the acquisition, Ventas 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 the Company’s portfolio (including properties that are owned through joint ventures).

The following unaudited pro forma condensed consolidated financial information sets forth:

·Ventas’s historical consolidated statements of income for the nine months ended September 30, 2011 (which includes actual results for the acquired Atria and One Lantern assets for the period from May 12, 2011 through September 30, 2011 and actual results for the acquired NHP assets for the period from July 1, 2011 through September 30, 2011), derived from the Company’s unaudited consolidated financial statements, and for the year ended December 31, 2010, derived from the Company’s audited consolidated financial statements;

·Pro forma adjustments to give effect to Ventas’s 2011 and 2010 acquisitions and other investments (excluding the Atria, One Lantern and NHP acquisitions), receipt of mortgage loans receivable repayments, dispositions, significant debt activity and February 2011 equity issuance on Ventas’s consolidated statements of income for the nine months ended September 30, 2011 and for the year ended December 31, 2010, as if these transactions occurred on January 1, 2010;

·The historical consolidated statements of operations of Atria and One Lantern for the three months ended March 31, 2011, derived from Atria’s and One Lantern’s unaudited condensed consolidated financial statements, respectively, and for the year ended December 31, 2010, derived from Atria’s and One Lantern’s audited consolidated financial statements, respectively;

·Pro forma adjustments to give effect to Ventas’s acquisition of Atria and One Lantern on Ventas’s consolidated statements of income for the nine months ended September 30, 2011 and for the year ended December 31, 2010, as if the acquisition closed on January 1, 2010;

·The historical consolidated statements of income of NHP for the six months ended June 30, 2011, derived from NHP’s unaudited condensed consolidated financial statements, and for the year ended December 31, 2010, derived from NHP’s audited consolidated financial statements;

·Pro forma adjustments to give effect to NHP’s 2011 and 2010 acquisitions and other investments, dispositions, significant debt activity and equity issuances on NHP’s consolidated statements of income for the six months ended June 30, 2011 and for the year ended December 31, 2010, as if these transactions occurred on January 1, 2010; and

·Pro forma adjustments to give effect to Ventas’s acquisition of NHP on Ventas’s consolidated statements of income for the nine months ended September 30, 2011 and for the year ended December 31, 2010, as if the acquisition closed on January 1, 2010.

Certain assets and liabilities of Atria and One Lantern included in the historical consolidated financial information (consisting primarily of certain working capital, property leases, insurance items and property management services) were not acquired by Ventas and have been so reflected in the pro forma adjustments.  Also, certain intercompany activity between Atria, One Lantern and NHP has been eliminated in the pro forma adjustments.

These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only and are based on assumptions and estimates considered appropriate by Ventas’s management; however, they are not necessarily indicative of Ventas’s actual consolidated financial condition or results of operations had the transactions been consummated as of the dates indicated, nor do they purport to represent Ventas’s future consolidated financial position or results of operations. These unaudited pro forma condensed consolidated financial statements do not include the impact of any synergies or lower borrowing costs that may be achieved as a result of the acquisitions or any strategies that management may consider in order to continue to efficiently manage Ventas’s operations.  This pro forma condensed consolidated financial information should be read in conjunction with:

·Ventas’s unaudited consolidated financial statements and the related notes thereto as of and for the nine months ended September 30, 2011 included in the Company’s Quarterly Report on Form 10-Q for the quarter then ended, filed with the Securities and Exchange Commission (“SEC”) on November 7, 2011;

·Ventas’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K for the year then ended, filed with the SEC on February 18, 2011;

·Atria’s and One Lantern’s unaudited condensed consolidated financial statements and the related notes thereto as of and for the three months ended March 31, 2011 included in the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2011;

·Atria’s and One Lantern’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2010 included in the Company’s Current Report on Form 8-K, filed with the SEC on April 11, 2011; and

·NHP’s unaudited condensed consolidated financial statements and the related notes thereto as of and for the six months ended June 30, 2011 included in this Current Report on Form 8-K; and

·NHP’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2010 included in the Company’s Current Report on Form 8-K, filed with the SEC on April 11, 2011.

The Company is accounting for the Atria, One Lantern and NHP acquisitions under the acquisition method of accounting.  The total purchase prices have been allocated to the assets acquired and liabilities assumed based upon their respective fair values.  The allocation of the purchase prices reflected in these unaudited pro forma condensed consolidated financial statements is subject to further adjustment. Amounts initially allocated to identifiable tangible and intangible assets and liabilities could change from those used in the unaudited pro forma condensed consolidated financial statements and could result in a change in depreciation and amortization of tangible and intangible assets and liabilities.

VENTAS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the nine months ended September 30, 2011

(In thousands, except per share amounts)

	Ventas Historical			Ventas 2011 Transactions Adjustments (A)			Pro Forma for Ventas 2011 Transactions			Atria Historical (B)			One Lantern Historical (C)			Atria and One Lantern Acquisition Adjustments (D)			NHP Historical (E)			NHP 2011 Transactions Adjustments (A)			Pro Forma for NHP 2011 Transactions			NHP Acquisition Adjustments (F)			Total Pro Forma
Revenues:
Rental income:
Triple-net leased	$	450,211		$	—		$	450,211		$	—		$	—		$	—		$	170,548		$	3,704		$	174,252		$	2,953	(N)	$	627,416
Medical office buildings	106,392			—			106,392			—			—			—			58,620			14			58,634			(1,232		)(O)	163,794
	556,603			—			556,603			—			—			—			229,168			3,718			232,886			1,721			791,210
Resident fees and services	593,348			—			593,348			121,703			43,147			62,442		(G)	—			—			—			—			820,640
Medical office building and other services revenue	26,050			—			26,050			—			—			—			2,321			—			2,321			—			28,371
Income from loans and investments	24,548			(11,597		)	12,951			—			—			—			19,621			(123		)	19,498			(8		)(P)	32,441
Interest and other income	529			—			529			19,681			207			(19,805		)(G)	1,786			(8		)	1,778			—			2,390
Total revenues	1,201,078			(11,597		)	1,189,481			141,384			43,354			42,637			252,896			3,587			256,483			1,713			1,675,052
Expenses:
Interest	170,046			8,182			178,228			17,774			12,065			(3,104		)(H)	51,456			(4,448		)	47,008			(25,663		)(Q)	226,308
Depreciation and amortization	293,541			—			293,541			13,497			6,004			22,131		(I)	80,187			1,704			81,891			42,741		(R)	459,805
Property-level operating expenses:
Senior living	403,706			—			403,706			101,668			28,729			37,194		(J)	—			—			—			(1,491		)(S)	569,806
Medical office buildings	37,259			—			37,259			—			—			—			19,739			8			19,747			—			57,006
	440,965			—			440,965			101,668			28,729			37,194			19,739			8			19,747			(1,491		)	626,812
Medical office building services costs	19,837			—			19,837			—			—			—			—			—			—			—			19,837
General, administrative and professional fees	51,010			—			51,010			11,788			179			(12,015		)(G)	14,209			—			14,209			—			65,171
Loss on extinguishment of debt	25,211			—			25,211			—			—			(16,520		)(W)	—			—			—			—			8,691
Litigation proceeds, net	(85,327		)	—			(85,327		)	—			—			—			—			—			—			—			(85,327		)
Merger related expenses and deal costs	131,606			—			131,606			—			—			—			21,108			—			21,108			—			152,714
Other	6,664			—			6,664			1,487			2,519			1,026		(G)	—			—			—			—			11,696
Total expenses	1,053,553			8,182			1,061,735			146,214			49,496			28,712			186,699			(2,736		)	183,963			15,587			1,485,707
Income (loss) before (loss) income from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest	147,525			(19,779		)	127,746			(4,830		)	(6,142		)	13,925			66,197			6,323			72,520			(13,874		)	189,345
(Loss) income from unconsolidated entities	(71		)	—			(71		)	—			77			(77		)(K)	373			—			373			(368		)(T)	(66		)
Income tax benefit	23,310			—			23,310			667			—			13,963		(L)	—			—			—			—			37,940
Income (loss) from continuing operations	170,764			(19,779		)	150,985			(4,163		)	(6,065		)	27,811			66,570			6,323			72,893			(14,242		)	227,219
Net loss attributable to noncontrolling interest	(781		)	—			(781		)	—			(543		)	543		(K)	(859		)	—			(859		)	(1,994		)(T)	(3,634		)
Income (loss) from continuing operations attributable to common stockholders	$	171,545		$	(19,779	)	$	151,766		$	(4,163	)	$	(5,522	)	$	27,268		$	67,429		$	6,323		$	73,752		$	(12,248	)	$	230,853
Income from continuing operations attributable to common stockholders per common share:
Basic	$	0.82		n/a			$	0.73		n/a			n/a			n/a			$	0.53		n/a			$	0.58		n/a			$	0.80
Diluted	$	0.81		n/a			$	0.72		n/a			n/a			n/a			$	0.51		n/a			$	0.57		n/a			$	0.80
Shares used in computing earnings per common share:
Basic	208,470			n/a			208,470			n/a			n/a			12,587		(M)	126,567			n/a			126,567			66,200		(U)	287,257
Diluted	210,850			n/a			210,850			n/a			n/a			12,587		(M)	129,077			n/a			129,077			66,200		(U)	289,637

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

VENTAS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the year ended December 31, 2010

(In thousands, except per share amounts)

	Ventas Historical			Ventas 2010 and 2011 Transactions Adjustments (A)			Pro Forma for Ventas 2010 and 2011 Transactions			Atria Historical (B)			One Lantern Historical (C)			Atria and One Lantern Acquisition Adjustments (D)			Ventas Pro Forma for the Atria and One Lantern Acquisition			NHP Historical (E)			NHP 2010 and 2011 Transactions Adjustments (A)			Pro Forma for NHP 2010 and 2011 Transactions			NHP Acquisition Adjustments (F)			Total Pro Forma
Revenues:
Rental income:
Triple-net leased	$	469,825		$	260		$	470,085		$	—		$	—		$	—		$	470,085		$	307,567		$	72,047		$	379,614		$	10,840	(N)	$	860,539
Medical office buildings	69,747			25,949			95,696			—			—			—			95,696			102,287			12,783			115,070			(2,633		)(O)	208,133
	539,572			26,209			565,781			—			—			—			565,781			409,854			84,830			494,684			8,207			1,068,672
Resident fees and services	446,301			1,619			447,920			466,773			165,463			(31,476		)(G)	1,048,680			—			—			—			—			1,048,680
Medical office building and other services revenue	14,098			14,098			28,196			—			—			—			28,196			4,477			—			4,477			—			32,673
Income from loans and investments	16,412			(7,096		)	9,316			—			—			—			9,316			26,402			7,438			33,840			(100		)(P)	43,056
Interest and other income	484			19			503			77,789			820			(78,318		)(G)	794			2,977			(1		)	2,976			—			3,770
Total revenues	1,016,867			34,849			1,051,716			544,562			166,283			(109,794		)	1,652,767			443,710			92,267			535,977			8,107			2,196,851
Expenses:
Interest	178,863			32,572			211,435			71,604			47,236			(48,929		)(H)	281,346			97,329			4,852			102,181			(69,176		)(Q)	314,351
Depreciation and amortization	205,600			14,845			220,445			52,138			22,663			102,589		(I)	397,835			134,522			42,857			177,379			76,379		(R)	651,593
Property-level operating expenses:
Senior living	291,831			1,443			293,274			395,796			109,277			(74,448		)(J)	723,899			—			—			—			(3,039		)(S)	720,860
Medical office buildings	24,122			9,783			33,905			—			—			—			33,905			39,536			2,655			42,191			—			76,096
	315,953			11,226			327,179			395,796			109,277			(74,448		)	757,804			39,536			2,655			42,191			(3,039		)	796,956
Medical office building services costs	9,518			9,518			19,036			—			—			—			19,036			—			—			—			—			19,036
General, administrative and professional fees	49,830			7,981			57,811			47,558			749			(48,307		)(G)	57,811			31,057			—			31,057			—			88,868
Loss (gain) on extinguishment of debt	9,791			—			9,791			2			—			16,518		(X)	26,311			(75		)	—			(75		)	75		(V)	26,311
Other	272			—			272			6,009			19,607			(880		)(G)	25,008			—			—			—			—			25,008
Merger related expenses and deal costs	19,243			—			19,243			—			—			—			19,243			5,118			—			5,118			—			24,361
Total expenses	789,070			76,142			865,212			573,107			199,532			(53,457		)	1,584,394			307,487			50,364			357,851			4,239			1,946,484
Income (loss) before (loss) income from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest	227,797			(41,293		)	186,504			(28,545		)	(33,249		)	(56,337		)	68,373			136,223			41,903			178,126			3,868			250,367
(Loss) income from unconsolidated entities	(664		)	(664		)	(1,328		)	—			130			(130		)(K)	(1,328		)	1,001			(12		)	989			(892		)(T)	(1,231		)
Income tax (expense) benefit	(5,201		)	(39		)	(5,240		)	7,560			—			21,699		(L)	24,019			—			—			—			—			24,019
Income (loss) from continuing operations	221,932			(41,996		)	179,936			(20,985		)	(33,119		)	(34,768		)	91,064			137,224			41,891			179,115			2,976			273,155
Net income (loss) attributable to noncontrolling interest	3,562			(3,616		)	(54		)	—			(5,907		)	5,907		(K)	(54		)	(1,643		)	(317		)	(1,960		)	(2,171		)(T)	(4,185		)
Income (loss) from continuing operations attributable to common stockholders	$	218,370		$	(38,380	)	$	179,990		$	(20,985	)	$	(27,212	)	$	(40,675	)	$	91,118		$	138,867		$	42,208		$	181,075		$	5,147		$	277,340
Income from continuing operations attributable to common stockholders per common share:
Basic	$	1.39		n/a			$	1.15		n/a			n/a			n/a			$	0.49		$	1.14		n/a			$	1.49		n/a			$	0.97
Diluted	$	1.38		n/a			$	1.14		n/a			n/a			n/a			$	0.48		$	1.12		n/a			$	1.46		n/a			$	0.96
Shares used in computing earnings per common share:
Basic	156,608			n/a			156,608			n/a			n/a			30,439		(M)	187,047			121,687			n/a			121,687			99,849		(U)	286,896
Diluted	157,657			n/a			157,657			n/a			n/a			30,439		(M)	188,096			124,339			n/a			124,339			99,849		(U)	287,945

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

VENTAS, INC.

NOTES AND MANAGEMENT’S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — BASIS OF PRO FORMA PRESENTATION

Ventas, Inc. (“Ventas” or the “Company”) is a real estate investment trust (“REIT”) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada.  The historical consolidated financial statements of Ventas include the accounts of the Company and its wholly owned subsidiaries and joint venture entities over which it exercises control.

On May 12, 2011, Ventas acquired substantially all of the real estate assets and working capital of privately-owned Atria Senior Living Group, Inc. (“Atria”) (including assets owned by Atria’s affiliate, One Lantern Senior Living Inc (“One Lantern”)).  The Company funded a portion of the purchase price through the issuance of 24.9 million shares of Ventas common stock (which shares had a total value of $1.38 billion based on the May 12, 2011 closing price of Ventas common stock of $55.33 per share). As a result of the transaction, Ventas added to its senior living operating portfolio 117 private pay seniors housing communities and one development land parcel.

On July 1, 2011, Ventas 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 Ventas or any of its subsidiaries or any wholly owned subsidiary of NHP) was converted into the right to receive 0.7866 shares of Ventas common stock, with cash paid in lieu of fractional shares.  The Company issued 99.8 million shares of Ventas common stock (which shares had a total value of $5.37 billion based on the July 1, 2011 closing price of Ventas common stock of $53.74 per share).  In connection with the acquisition, Ventas 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 the Company’s portfolio (including properties that are owned through joint ventures).

NOTE 2 — VENTAS AND NHP 2011 AND 2010 TRANSACTIONS ADJUSTMENTS

(A)  Adjustments reflect the effect on Ventas’s and NHP’s historical consolidated statements of income as if Ventas or NHP had consummated its significant 2011 and 2010 transactions on January 1, 2010.  With respect to Ventas, these adjustments primarily relate to: recording of income statement activity specific to the 2010 acquisition of Lillibridge Healthcare Services, Inc. and the 2010 acquisition of Sunrise Senior Living, Inc.’s noncontrolling interests in certain consolidated entities; decreasing interest income for mortgage loans receivable that were fully repaid to Ventas in 2011; increasing interest expense for a $200 million unsecured term loan entered into during 2010, a $400 million 3.125% senior notes issuance in 2010, and a $700 million 4.750% senior notes issuance in 2011; and decreasing interest expense for the redemption of $200 million 6½% senior notes in 2011.  With respect to NHP, these adjustments primarily relate to: recording of income statement activity for 2011 and 2010 acquisitions (59 properties subject to triple-net leases and 21 multi-tenant medical office buildings); increasing income from loans and other investments for the funding or acquisition of eight new mortgage loans; decreasing interest expense for the prepayment of $118.3 million of secured debt; increasing interest expense for $175 million of credit facility borrowings; and adjusting shares used in computing earnings per share for equity issuances.

NOTE 3 — ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(B)Reflects historical results of operations of Atria for the three months ended March 31, 2011 or for the year ended December 31, 2010, as applicable.  Certain amounts have been reclassified to conform to Ventas’s presentation.

(C)Reflects historical results of operations of One Lantern for the three months ended March 31, 2011 or for the year ended December 31, 2010, as applicable.  Certain amounts have been reclassified to conform to Ventas’s presentation.

(D)Represents adjustments to record the acquisition of Atria and One Lantern by Ventas.  The calculation of the allocated purchase price is as follows (in millions, except per share amounts):

Equity issued (24.9 million shares at $55.33 per share) (1)	$	1,376
Cash paid (primarily funded with borrowings under Ventas’s unsecured revolving credit facilities)	264
Assumption of net debt, including capital lease obligations	1,629
Purchase price	$	3,269

(1)Equity issued based on the May 12, 2011 closing price of Ventas common stock consistent with the requirements of Accounting Standards Codification (“ASC”) 805, Business Combinations.

(E)Reflects historical results of operations of NHP for the six months ended June 30, 2011 or for the year ended December 31, 2010, as applicable.  Certain amounts have been reclassified to conform to Ventas’s presentation.

(F)Represents adjustments to record the acquisition of NHP by Ventas.  Additionally, certain intercompany activity between Atria, One Lantern and NHP has been eliminated. The calculation of the allocated purchase price is as follows (in millions, except per share amounts):

Equity issued (99.8 million shares at $53.74 per share) (1)	$	5,366
Cash paid	105
Assumption of debt (2)	1,963
Purchase price	$	7,434

(1)Equity issued based on the July 1, 2011 closing price of Ventas common stock consistent with the requirements of ASC 805, Business Combinations.

(2)Includes NHP’s portion of debt related to its investments in unconsolidated entities.

(G)Reflects adjustments to eliminate historical revenues and expenses of Atria and One Lantern attributable to assets or liabilities that Ventas did not acquire or assume as part of the acquisition.  Additionally, reflects adjustments to record revenues and expenses for the period from April 1, 2011 through May 11, 2011.

(H)Represents the following adjustments (in millions):

	For the Nine  Months Ended September 30, 2011			For the Year Ended December 31, 2010
Elimination of historical interest expense on debt not assumed as part of the acquisition	$	(1	)	$	(5	)
Fair market value of debt adjustment allocated for the acquisition	(6		)	(21		)
Elimination of historical interest related to Atria and/or One Lantern deferred financing fees	(1		)	(4		)
Elimination of Atria’s and/or One Lantern’s historical interest expense on debt repaid at closing	(4		)	(13		)
Additional interest expense on borrowings on unsecured revolving credit facilities	9			13
Ventas debt repaid with proceeds from its February 2011 equity issuance	(3		)	(19		)
Pro forma adjustment for the period from April 1, 2011 through May 11, 2011	3			—
Pro forma adjustment to interest	$	(3	)	$	(49	)

(I)Based on the purchase price allocation, Ventas allocated $342 million to land and improvements and $2.9 billion to buildings and improvements. Depreciation expense is calculated on a straight-line basis based on Ventas’s purchase price allocation and using a 35-year life for buildings and permanent structural improvements, a five-year life for furniture and equipment and a 10-year life for land improvements. Additionally, Ventas’s purchase price allocation includes $102 million of acquired in-place lease intangibles, which will be amortized over the average remaining life of these leases (approximately eighteen months).  Further, the adjustment reflects the elimination of historical depreciation expense related to assets Ventas did not acquire and the recording of depreciation and amortization for the period from April 1, 2011 through May 11, 2011.

(J)Reflects adjustments to eliminate historical expenses of Atria and One Lantern attributable to assets or liabilities that Ventas did not acquire or assume as part of the acquisition, offset by the 5% management fee Ventas pays to Atria for management services related to the acquired communities.  Further, the adjustment reflects the recording of historical expenses for the period from April 1, 2011 through May 11, 2011.

(K)Reflects adjustments to eliminate historical income from unconsolidated entities and loss attributable to noncontrolling interest of One Lantern attributable to net assets that Ventas did not acquire as part of the acquisition.

(L)Reflects adjustments to eliminate the historical tax benefit of Atria, offset by the estimated tax benefit Ventas expects to recognize due to the acquisition.

(M)Reflects the issuance of 24.9 million shares of Ventas common stock upon consummation of the Atria and One Lantern acquisition and Ventas’s February 2011 issuance of 5.6 million shares of common stock.

(N)Reflects the net amortization of above and below market lease intangibles recorded by Ventas as a result of the NHP acquisition and the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(O)Reflects the net amortization of above and below market lease intangibles recorded by Ventas as a result of the NHP acquisition and the elimination of NHP’s historical amortization related to above and below market lease intangibles.

(P)Reflects adjustments to eliminate revenues and expenses of NHP attributable to assets or liabilities that Ventas did not acquire or assume as part of the acquisition and the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(Q)Represents the following adjustments (in millions):

	For the Nine Months Ended September 30, 2011			For the Year Ended December 31, 2010
Fair market value of debt adjustment allocated for the acquisition	$	(10	)	$	(33	)
Elimination of historical interest expense related to NHP deferred financing fees	(2		)	(4		)
Elimination of interest expense from a promissory note between Atria and NHP	(1		)	(1		)
Elimination of Atria and One Lantern capital lease obligation interest	(3		)	(13		)
Additional interest on fair value of ground lease obligations	1			2
Additional interest on borrowings on unsecured revolving credit facilities	1			2
Elimination of historical interest expense related to NHP’s revolving credit facility	(1		)	—
Elimination of historical interest expense related to NHP’s 6.50% senior notes due 2011	(12		)	(22		)
Pro forma adjustment to interest	$	(27	)	$	(69	)

(R)Based on the initial purchase price allocation, Ventas allocated $705 million to land and improvements and $6.4 billion to buildings and improvements. Depreciation expense is calculated on a straight-line basis based on Ventas’s purchase price allocation and using an average 35-year life for buildings and permanent structural improvements, a five-year life for furniture and equipment, an average ten-year life for land improvements and an average six-year life for tenant improvements. Additionally, Ventas’s purchase price allocation includes $185 million of in-place acquired lease intangibles, which will be amortized over the average remaining life of these leases (approximately ten years).  Further, the adjustment reflects the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(S)Reflects the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(T)Reflects the adjustment to NHP’s historical income related to certain joint ventures as a result of the preliminary estimated fair value for the assets and liabilities acquired that will be depreciated and amortized over the estimated remaining useful life.

(U)Adjustment required to account for the issuance of 99.8 million shares of Ventas common stock to consummate the acquisition.

(V)Reflects adjustment to eliminate gains and expenses of NHP attributable to transactions that would not have occurred had the acquisition closed on January 1, 2010.

(W)Reflects adjustment to eliminate the historical loss on extinguishment of debt related to the Ventas debt repaid with proceeds from the February 2011 equity issuance, as this loss was recognized in the unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2010.

(X)Reflects adjustment to eliminate historical expense of Atria and recognize loss related to the Ventas debt repaid with proceeds from the February 2011 equity issuance.

NOTE 5 — FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS

Ventas’s historical and pro forma funds from operations (“FFO”) and normalized FFO for the nine months ended September 30, 2011 and the year ended December 31, 2010 are summarized as follows (in thousands):

VENTAS, INC.

UNAUDITED PRO FORMA FFO AND NORMALIZED FFO

For the nine months ended September 30, 2011

(In thousands, except per share amounts)

	Ventas Historical			Ventas 2011 Transactions Adjustments (A)			Pro Forma for Ventas 2011 Transactions			Atria Historical (B)			One Lantern Historical (C)			Atria and One Lantern Acquisition Adjustments (D)			NHP Historical (E)			NHP 2011 Transactions Adjustments (A)		Pro Forma for NHP 2011 Transactions			NHP Acquisition Adjustments (F)			Total Pro Forma
Income (loss) from continuing operations attributable to common stockholders	$	171,545		$	(19,779	)	$	151,766		$	(4,163	)	$	(5,522	)	$	27,268		$	67,429		$	6,323	$	73,752		$	(12,248	)	$	230,853
Discontinued operations	—			—			—			—			—			—			12,738			—		12,738			(12,738		)	—
Net income (loss) attributable to common stockholders	171,545			(19,779		)	151,766			(4,163		)	(5,522		)	27,268			80,167			6,323		86,490			(24,986		)	230,853
Adjustments:
Real estate depreciation and amortization	291,748			—			291,748			13,497			6,004			22,131			80,052			1,704		81,756			42,741			457,877
Real estate depreciation and amortization related to noncontrolling interest	(1,727		)	—			(1,727		)	—			—			—			(632		)	—		(632		)	(1,994		)	(4,353		)
Real estate depreciation and amortization related to unconsolidated entities	4,213			—			4,213			—			—			—			2,475			—		2,475			368			7,056
Gain on sale of real estate assets	—			—			—			—			—			—			(12,866		)	—		(12,866		)	12,866			—
FFO	465,779			(19,779		)	446,000			9,334			482			49,399			149,196			8,027		157,223			28,995			691,433
Adjustments:
Income tax benefit	(23,310		)	—			(23,310		)	(667		)	—			(13,963		)	—			—		—			—			(37,940		)
Loss on extinguishment of debt	25,211			—			25,211			—			—			(16,520		)	—			—		—			—			8,691
Litigation proceeds, net	(85,327		)	—			(85,327		)	—			—			—			—			—		—			—			(85,327		)
Merger-related expenses and deal costs	131,606			—			131,606			—			—			—			21,108			—		21,108			—			152,714
Change in fair value of financial instruments	2,898			—			2,898			—			2,040			—			—			—		—			—			4,938
Settlement of delinquent tenant obligations, net	—			—			—			—			—			—			(668		)	—		(668		)	—			(668		)
Amortization of other intangibles	767			—			767			—			—			—			—			—		—			—			767
Normalized FFO	$	517,624		$	(19,779	)	$	497,845		$	8,667		$	2,522		$	18,916		$	169,636		$	8,027	$	177,663		$	28,995		$	734,608

Ventas’s historical and pro forma FFO and normalized FFO per diluted share outstanding for the nine months ended September 30, 2011 follows (in thousands, except per share amounts)(1):

	Ventas Historical			Total Pro Forma
Income from continuing operations attributable to common stockholders	$	0.81		$	0.80
Discontinued operations	—			—
Net income attributable to common stockholders	0.81			0.80
Adjustments:
Real estate depreciation and amortization	1.38			1.58
Real estate depreciation related to noncontrolling interest	(0.01		)	(0.02		)
Real estate depreciation and amortization related to unconsolidated entities	0.02			0.02
Gain on sale of real estate assets	—			—
FFO	2.21			2.39
Adjustments:
Income tax benefit	(0.11		)	(0.13		)
Loss on extinguishment of debt	0.12			0.03
Litigation proceeds, net	(0.40		)	(0.29		)
Merger-related expenses and deal costs	0.62			0.53
Change in fair value of financial instruments	0.01			0.02
Settlement of delinquent tenant obligations, net	—			—
Amortization of other intangibles	—			—
Normalized FFO	$	2.45		$	2.54
Diluted shares outstanding used in computing FFO and normalized FFO per common share	210,850			289,637

(1) Per share amounts may not add due to rounding.

VENTAS, INC.

UNAUDITED PRO FORMA FFO AND NORMALIZED FFO

For the year ended December 31, 2010

(In thousands, except per share amounts)

	Ventas Historical			Ventas 2010 and 2011 Transactions Adjustments (A)			Pro Forma for Ventas 2010 and 2011 Transactions			Atria Historical (B)			One Lantern Historical (C)			Atria and One Lantern Acquisition Adjustments (D)			Ventas Pro Forma for the Atria and One Lantern Acquisition			NHP Historical (E)			NHP 2010 and 2011 Transactions Adjustments (A)			Pro Forma for NHP 2010 and 2011 Transactions			NHP Acquisition Adjustments (F)			Total Pro Forma
Income (loss) from continuing operations attributable to common stockholders	$	218,370		$	(38,380	)	$	179,990		$	(20,985	)	$	(27,212	)	$	(40,675	)	$	91,118		$	138,867		$	42,208		$	181,075		$	5,147		$	277,340
Discontinued operations	27,797			(2,556		)	25,241			—			—			—			25,241			4,899			(3,836		)	1,063			—			26,304
Net income (loss) attributable to common stockholders	246,167			(40,936		)	205,231			(20,985		)	(27,212		)	(40,675		)	116,359			143,766			38,372			182,138			5,147			303,644
Adjustments:
Real estate depreciation and amortization	203,966			14,845			218,811			52,138			22,663			102,589			396,201			133,992			42,857			176,849			76,379			649,429
Real estate depreciation and amortization related to noncontrolling interest	(6,217		)	—			(6,217		)	—			—			—			(6,217		)	(1,099		)	(2,005		)	(3,104		)	(2,171		)	(11,492		)
Real estate depreciation and amortization related to unconsolidated entities	2,367			2,367			4,734			—			—			—			4,734			4,793			—			4,793			892			10,419
Discontinued operations:
Gain on sale of real estate assets	(25,241		)	—			(25,241		)	—			—			—			(25,241		)	(16,948		)	—			(16,948		)	16,948			(25,241		)
Depreciation on real estate assets	464			(464		)	—			—			—			—			—			2,352			(1,473		)	879			—			879
FFO	421,506			(24,188		)	397,318			31,153			(4,549		)	61,914			485,836			266,856			77,751			344,607			97,195			927,638
Adjustments:
Income tax expense (benefit)	2,930			39			2,969			(7,560		)	—			(21,699		)	(26,290		)	—			—			—			—			(26,290		)
Loss (gain) on extinguishment of debt	9,791			—			9,791			2			—			16,518			26,311			(75		)	—			(75		)	75			26,311
Merger-related expenses and deal costs	19,243			—			19,243			—			—			—			19,243			5,118			—			5,118			—			24,361
Loss on interest rate swap	—			—			—			—			16,020			—			16,020			—			—			—			—			16,020
Amortization of other intangibles	511			511			1,022			—			—			—			1,022			—			—			—			—			1,022
Gain on re-measurement of equity interest upon acquisition, net	—			—			—			—			—			—			—			(620		)	—			(620		)	—			(620		)
Impairments	—			—			—			—			—			—			—			15,006			—			15,006			—			15,006
Normalized FFO	$	453,981		$	(23,638	)	$	430,343		$	23,595		$	11,471		$	56,733		$	522,142		$	286,285		$	77,751		$	364,036		$	97,270		$	983,448

Ventas’s historical and pro forma FFO and normalized FFO per diluted share outstanding for the year ended December 31, 2010 follows (in thousands, except per share amounts)(1):

	Ventas Historical			Total Pro Forma
Income from continuing operations attributable to common stockholders	$	1.39		$	0.96
Discontinued operations	0.18			0.09
Net income attributable to common stockholders	1.56			1.05
Adjustments:
Real estate depreciation and amortization	1.29			2.26
Real estate depreciation related to noncontrolling interest	(0.04		)	(0.04		)
Real estate depreciation and amortization related to unconsolidated entities	0.02			0.04
Discontinued operations:
Gain on sale of real estate assets	(0.16		)	(0.09		)
Depreciation on real estate assets	0.00			0.00
FFO	2.67			3.22
Adjustments:
Income tax expense (benefit)	0.02			(0.09		)
Loss on extinguishment of debt	0.06			0.09
Merger-related expenses and deal costs	0.12			0.08
Loss on interest rate swap	—			0.06
Amortization of other intangibles	0.00			0.00
Gain on re-measurement of equity interest upon acquisition, net	—			0.00
Impairments	—			0.05
Normalized FFO	$	2.88		$	3.42
Diluted shares outstanding used in computing FFO and normalized FFO per common share	157,657			287,945

(1) Per share amounts may not add due to rounding.

Pro forma FFO and normalized FFO are presented for information purposes only, and were based on available information and assumptions that the Company’s management believes to be reasonable; however, they are not necessarily indicative of Ventas’s actual FFO or normalized FFO had the transactions occurred as of the dates indicated.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values, instead, have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.  To overcome this problem, Ventas considers FFO and normalized FFO appropriate measures of operating performance of an equity REIT.  Further, Ventas believes that normalized FFO provides useful information because it allows investors, analysts and Ventas management to compare Ventas’s operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items.  Ventas uses the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO.  NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis.  Ventas defines “normalized FFO” as FFO excluding the following income and expense items (which may be recurring in nature): (a) gains and losses on the sales of real property assets; (b) merger-related costs and expenses, including amortization of intangibles and transition and

integration expenses, and deal costs and expenses, including expenses and recoveries relating to the Company’s lawsuit against HCP, Inc. and the issuance of preferred stock or bridge loan fees; (c) the impact of any expenses related to asset impairment and valuation allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company’s debt; (d) the non-cash effect of income tax benefits or expenses; (e) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions; (f) the reversal or incurrence of contingent consideration; (g) charitable donations made to the Ventas Charitable Foundation; and (h) gains and losses for non-operational foreign currency hedge agreements and changes in the fair value of financial instruments.

FFO and normalized FFO presented herein are not necessarily identical to FFO and normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same definitions.  FFO and normalized FFO should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of Ventas’s financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of Ventas’s liquidity, nor are FFO and normalized FFO necessarily indicative of sufficient cash flow to fund all of Ventas’s needs.  Ventas believes that in order to facilitate a clear understanding of Ventas’s consolidated historical operating results, FFO and normalized FFO should be examined in conjunction with net income as presented in the Unaudited Pro Forma Condensed Consolidated Financial Statements.