(4) Other Real Estate Property Investments

Senior Housing Portfolio Acquisition

During the fourth quarter of 2012 and first quarter of 2013, the Company acquired 133 senior housing communities for $1.74 billion from a joint venture between Emeritus Corporation ("Emeritus") and Blackstone Real Estate Partners VI, an affiliate of the Blackstone Group (the "Blackstone JV"). Located in 29 states, the portfolio encompasses a diversified care mix of 61% assisted living, 25% independent living, 13% memory care and 1% skilled nursing based on units. Based on operating performance at closing, the 133 communities consisted of 99 that were stabilized and 34 that were in lease-up. The transaction closed in two stages: (i) 129 senior housing facilities during the fourth quarter of 2012 for $1.7 billion; and (ii) four senior housing facilities during the first quarter of 2013 for $38 million. The Company paid $1.73 billion in cash consideration and assumed $13 million of mortgage debt to acquire: (i) real estate with a fair value of $1.57 billion, (ii) intangible assets with a fair value of $174 million; and (iii) assumed intangible liabilities with a fair value of $4 million. The lease-up intangibles assets recognized were attributable to the value of the acquired underlying operating resident leases of the senior housing communities that were stabilized or nearly stabilized (e.g., resident occupancy above 80%).

Emeritus operates the communities pursuant to two triple-net master leases for 128 properties (the "Master Lease") and five individual leases, all guaranteed by Emeritus (together, the "Leases"). The Leases provide aggregate contractual rent in the first year of $105.8 million. The contractual rent will increase annually by the greater of the percentage increase in the Consumer Price Index ("CPI") or 3.7% on average over the initial five years, and thereafter by the greater of CPI or 3.0% for the remaining initial lease term. At the beginning of the sixth lease year, rent on the 34 lease-up properties will increase to the greater of the percentage increase in CPI or fair market, subject to a floor of 103% and a cap of 130% of the prior year's rent. From the 2012 acquisition dates to December 31, 2012, the Company recognized revenues and income of $22 million and $14 million, respectively, related to its acquisitions of the 129 senior housing communities.

The Master Lease properties are grouped into three pools that share comparable characteristics. The Leases have initial terms of 14 to 16 years. Emeritus has two extension options, which, if exercised, will provide for lease terms of 30 to 35 years.

Concurrent with the acquisition in 2012, Emeritus purchased nine communities from the Blackstone JV, for which the Company provided secured debt financing of $52 million with a four-year term. The loan is secured by the underlying real estate and is prepayable at Emeritus' option. The interest rate on the loan was initially 6.1% and will gradually increase during its four year term to 6.8%.

Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations assume that the Blackstone JV Acquisition was completed as of January 1, 2011 (in thousands, except per share amounts):

	Year Ended December 31,

	2012		2011
Revenues	$	1,966,303	$	1,798,018
Net income		870,802		584,361
Net income applicable to HCP, Inc.		856,500		568,758
Basic earnings per common share	$	1.88	$	1.30
Diluted earnings per common share		1.88		1.29

Other Real Estate Acquisitions

In addition to the Blackstone JV Acquisition (discussed above), during the year ended December 31, 2013, the Company acquired a senior housing facility for $18 million, exercised its purchase option for a senior housing facility it previously leased for $16 million and acquired 38 acres of land to be developed for use in the post-acute/skilled nursing segment for $0.4 million. During the year ended December 31, 2013, the Company incurred an aggregate of $173 million for construction, tenant and other capital improvement projects, primarily in the senior housing, life science and medical office segments.

A summary of other real estate acquisitions for the year ended December 31, 2012 follows (in thousands):

	Consideration							Assets Acquired

Acquisitions	Cash Paid		Debt and Other Liabilities Assumed		Noncontrolling Interest			Real Estate		Net Intangibles
Senior housing	$	3,860	$	—	$	—		$	3,541	$	319
Life science		7,964		—		86			7,580		470
Medical office		171,654		60,597		42,648	⁽¹⁾		207,561		67,338
Hospital		3,000		—		—			3,000		—

	$	186,478	$	60,597	$	42,734		$	221,682	$	68,127

(1): Represents non-managing member limited liability company units.

During the year ended December 31, 2012, the Company incurred an aggregate of $183 million for construction, tenant and other capital improvement projects, primarily in the senior housing, life science and medical office segments.