10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the quarterly period ended March 31, 2008.
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from              to

Commission file number 1-08895

HCP, INC.

(Exact name of registrant as specified in its charter)

Maryland	33-0091377
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

3760 Kilroy Airport Way, Suite 300
Long Beach, CA 90806
(Address of principal executive offices)

(562) 733-5100
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days  YES  x   NO  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer      x	Accelerated Filer o
Non-accelerated Filer o (Do not check if a smaller reporting company)	Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
YES  o  NO  x

As of April 16, 2008, there were 234,894,583 shares of the registrant’s $1.00 par value common stock outstanding.

HCP, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statement of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures

2

HCP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	March 31,			December 31,
	2008			2007
	(Unaudited)
ASSETS
Real estate:
Buildings and improvements	$	7,738,776		$	7,670,272
Development costs and construction in progress	330,730			372,947
Land	1,593,350			1,598,244
Less accumulated depreciation and amortization	722,224			661,795
Net real estate	8,940,632			8,979,668
Net investment in direct financing leases	642,572			640,052
Loans receivable, net	1,068,093			1,065,485
Investments in and advances to unconsolidated joint ventures	281,102			248,894
Accounts receivable, net of allowance of $17,489 and $23,109, respectively	32,849			44,892
Cash and cash equivalents	154,000			96,269
Restricted cash	29,664			36,427
Intangible assets, net	598,167			623,271
Real estate held for sale, net	248,093			270,681
Other assets, net	504,892			516,133
Total assets	$	12,500,064		$	12,521,772
LIABILITIES AND STOCKHOLDERS’ EQUITY
Bank line of credit	$	1,018,600		$	951,700
Bridge loan	1,350,000			1,350,000
Senior unsecured notes	3,820,868			3,819,950
Mortgage debt	1,274,795			1,280,761
Other debt	106,677			108,496
Intangible liabilities, net	269,638			278,553
Accounts payable and accrued liabilities	249,714			233,342
Deferred revenue	68,387			55,990
Total liabilities	8,158,679			8,078,792
Minority interests:
Joint venture partners	32,009			33,436
Non-managing member unitholders	281,729			305,835
Total minority interests	313,738			339,271
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $1.00 par value: 50,000,000 shares authorized; 11,820,000 shares issued and outstanding, liquidation preference of $25 per share	285,173			285,173
Common stock, $1.00 par value: 750,000,000 shares authorized; 217,816,021 and 216,818,780 shares issued and outstanding, respectively	217,816			216,819
Additional paid-in capital	3,755,433			3,724,739
Cumulative dividends in excess of earnings	(174,878		)	(120,920		)
Accumulated other comprehensive loss	(55,897		)	(2,102		)
Total stockholders’ equity	4,027,647			4,103,709
Total liabilities and stockholders’ equity	$	12,500,064		$	12,521,772

See accompanying Notes to Condensed Consolidated Financial Statements.

3

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	March 31,
	2008			2007
Revenues:
Rental and related revenues	$	213,287		$	177,933
Tenant recoveries	22,449			14,483
Income from direct financing leases	14,974			14,990
Investment management fee income	1,467			6,238
	252,177			213,644
Costs and expenses:
Interest	96,370			78,744
Depreciation and amortization	79,276			58,323
Operating	51,428			42,218
General and administrative	20,538			20,107
	247,612			199,392
Income before equity income from unconsolidated joint ventures, interest and other income, net, minority interests’ share of earnings, income taxes and discontinued operations	4,565			14,252
Equity income from unconsolidated joint ventures	1,288			1,214
Interest and other income, net	35,326			14,466
Minority interests’ share of earnings	(5,716		)	(5,235		)
Income taxes	(2,245		)	(467		)
Income from continuing operations	33,218			24,230
Discontinued operations:
Income before gain on sales of real estate, net of income taxes	7,056			17,013
Gain on sales of real estate	10,138			104,045
	17,194			121,058
Net income	50,412			145,288
Preferred stock dividends	(5,283		)	(5,283		)
Net income applicable to common shares	$	45,129		$	140,005
Basic earnings per common share:
Continuing operations	$	0.13		$	0.09
Discontinued operations	0.08			0.60
Net income applicable to common shares	$	0.21		$	0.69
Diluted earnings per common share:
Continuing operations	$	0.13		$	0.09
Discontinued operations	0.08			0.59
Net income applicable to common shares	$	0.21		$	0.68
Weighted average shares used to calculate earnings per common share:
Basic	216,773			204,000
Diluted	217,663			205,909
Dividends declared per common share:	$	0.455		$	0.445

See accompanying Notes to Condensed Consolidated Financial Statements.

4

HCP, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands except per share data)
(Unaudited)

	Three Months Ended March 31,
	2008
Preferred Stock, $1.00 Par Value:
Shares, beginning and ending	11,820
Amounts, beginning and ending	$	285,173
Common Stock, Shares:
Shares at beginning of year	216,819
Issuance of common stock, net	923
Exercise of stock options	74
Shares at end of period	217,816
Common Stock, $1.00 Par Value:
Balance at beginning of year	$	216,819
Issuance of common stock, net	923
Exercise of stock options	74
Balance at end of period	$	217,816
Additional Paid-In Capital:
Balance at beginning of year	$	3,724,739
Issuance of common stock, net	25,847
Exercise of stock options	1,321
Amortization of deferred compensation	3,526
Balance at end of period	$	3,755,433
Cumulative Dividends in Excess of Earnings:
Balance at beginning of year	$	(120,920	)
Net income	50,412
Preferred dividends	(5,283		)
Common dividend ($0.455 per share)	(99,087		)
Balance at end of period	$	(174,878	)
Accumulated Other Comprehensive Loss:
Balance at beginning of year	$	(2,102	)
Change in net unrealized gains on securities:
Unrealized losses	(11,295		)
Less reclassification adjustment realized in net income	113
Unrealized losses on cash flow hedges	(42,716		)
Changes in Supplemental Executive Retirement Plan obligation	25
Foreign currency translation adjustment	78
Balance at end of period	$	(55,897	)
Total Comprehensive Income (Loss):
Net income	$	50,412
Other comprehensive loss	(53,795		)
Total comprehensive loss	$	(3,383	)

See accompanying Notes to Condensed Consolidated Financial Statements.

5

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

	Three Months Ended
	March 31,
	2008			2007
Cash flows from operating activities:
Net income	$	50,412		$	145,288
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	79,276			58,323
Discontinued operations	3,082			6,050
Amortization of below market lease intangibles, net	(2,152		)	(274		)
Stock-based compensation	3,526			2,478
Amortization of debt issuance costs	3,039			3,654
Recovery of loan losses	—			(125		)
Straight-line rents	(9,782		)	(7,838		)
Interest accretion	(6,292		)	(1,943		)
Deferred rental revenue	8,605			3,627
Equity income from unconsolidated joint ventures	(1,288		)	(1,214		)
Distributions of earnings from unconsolidated joint ventures	1,191			1,011
Minority interests’ share of earnings	5,716			5,235
Gain on sales of real estate	(10,138		)	(104,045		)
Marketable securities losses (gains), net	113			(1,012		)
Changes in:
Accounts receivable	12,043			(2,934		)
Other assets	10,480			(7,308		)
Accounts payable and accrued liabilities	(16,156		)	(11,974		)
Net cash provided by operating activities	131,675			86,999
Cash flows from investing activities:
Cash used in acquisitions and development of real estate	(42,962		)	(222,006		)
Lease commissions and tenant and capital improvements	(18,107		)	(8,080		)
Proceeds from sales of real estate, net	29,590			170,102
Contributions to unconsolidated joint ventures	(472		)	—
Distributions in excess of earnings from unconsolidated joint ventures	2,316			276,209
Proceeds from the sale of marketable securities	—			4,454
Principal repayments on loans receivable	2,155			3,832
Investment in loans receivable and marketable securities	(602		)	(4,843		)
Decrease in restricted cash	6,763			7,837
Net cash provided by (used in) investing activities	(21,319		)	227,505
Cash flows from financing activities:
Net borrowings (repayments) under bank line of credit	66,900			(434,500		)
Repayments of term loan	—			(504,593		)
Repayments of mortgage debt	(12,071		)	(5,295		)
Issuance of mortgage debt	—			18,069
Repayments of senior unsecured notes	—			(10,000		)
Issuance of senior unsecured notes	—			500,000
Debt issuance costs	—			(6,952		)
Net proceeds from the issuance of common stock and exercise of options	4,243			271,460
Dividends paid on common and preferred stock	(104,370		)	(97,061		)
Distributions to minority interests	(7,327		)	(3,396		)
Net cash used in financing activities	(52,625		)	(272,268		)
Net increase in cash and cash equivalents	57,731			42,236
Cash and cash equivalents, beginning of period	96,269			60,687
Cash and cash equivalents, end of period	$	154,000		$	102,923

See accompanying Notes to Condensed Consolidated Financial Statements.

6

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)Business

HCP, Inc. is a Maryland corporation that is organized to qualify as a self-administered real estate investment trust (“REIT”) which, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States. The Company acquires, develops, leases, disposes and manages healthcare real estate and provides mortgage and specialty financing to healthcare providers.

(2)Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, 2007 included in the Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (“SEC”).

Use of Estimates

Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of HCP, its wholly-owned subsidiaries and joint ventures that it controls, through voting rights or other means. All material intercompany transactions and balances have been eliminated in consolidation.

The Company applies Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, Consolidation of Variable Interest Entities, as revised (“FIN 46R”), for arrangements with variable interest entities. FIN 46R provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise is the primary beneficiary of the VIE. A variable interest entity is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company consolidates investments in VIEs when the Company is the primary beneficiary of the VIE at either the creation of the variable interest entity or upon the occurrence of a qualifying reconsideration event.

The Company applies Emerging Issues Task Force (“EITF”) Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights (“EITF 04-5”), to investments in joint ventures. EITF 04-5 provides guidance on the type of rights held by the limited partner(s) that preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the limited partnership in accordance with GAAP. The assessment of limited partners’ rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners, (ii) the sole general partner increases or decreases its ownership of limited partnership interests, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. EITF 04-5 also applies to managing member interests in limited liability companies.

7

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Investments in Unconsolidated Joint Ventures

Investments in entities which the Company does not consolidate but for which the Company has the ability to exercise significant influence over operating and financial policies are reported under the equity method. Under the equity method of accounting, the Company’s share of the investee’s earnings or losses are included in the Company’s operating results.

The initial carrying value of investments in unconsolidated joint ventures is based on the amount paid to purchase the joint venture interest or the carrying value of the assets prior to the sale of interests in the joint venture. To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is generally amortized over the life of the related assets and liabilities and included in the Company’s share of equity in earnings of the joint venture. The Company recognizes gains on the sale of interests in joint ventures to the extent the economic substance of the transaction is a sale in accordance with the American Institute of Certified Public Accountants Statement of Position 78-9, Accounting for Investments in Real Estate Ventures and Statement of Financial Accounting Standards (“SFAS”) No. 66, Accounting for Sales of Real Estate (“SFAS No. 66”).

Revenue Recognition

Rental income from tenants is recognized in accordance with GAAP, including SEC Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). The Company begins recognizing rental revenue when collectibility is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset. For assets acquired subject to leases the Company recognizes revenue upon acquisition of the asset provided the tenant has taken possession or controls the physical use of the leased asset. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to:

·      whether the lease stipulates how and on what a tenant improvement allowance may be spent;

·      whether the tenant or landlord retains legal title to the improvements at the end of the lease term;

·      whether the tenant improvements are unique to the tenant or general purpose in nature; and

·      whether the tenant improvements are expected to have any residual value at the end of the lease.

For leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility is reasonably assured. Recognizing rental income on a straight-line basis for leases results in recognized revenue exceeding amounts contractually due from tenants. Such cumulative excess amounts are included in other assets and were $86 million and $76 million, net of allowances, at March 31, 2008 and December 31, 2007, respectively. In the event the Company determines that collectibility of straight-line rents is not reasonably assured, the Company limits future recognition to amounts contractually owed, and, where appropriate, the Company establishes an allowance for estimated losses.

The Company maintains an allowance for doubtful accounts, including an allowance for straight-line rent receivables, for estimated losses resulting from tenant defaults or the inability of tenants to make contractual rent and tenant recovery payments. The Company monitors the liquidity and creditworthiness of its tenants and operators on an ongoing basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For straight-line rent amounts, the Company’s assessment is based on amounts recoverable over the term of the lease. At March 31, 2008 and December 31, 2007, respectively, the Company had an allowance of $40.3 million and $35.8 million, included in other assets, as a result of the Company’s determination that collectibility is not reasonably assured for certain straight-line rent amounts.

8

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Certain leases provide for additional rents contingent upon a percentage of the facility’s revenue in excess of specified base amounts or other thresholds. Such revenue is recognized when actual results reported by the tenant, or estimates of tenant results, exceed the base amount or other thresholds. Such revenue is recognized in accordance with SAB No. 104, which states that income is recognized only after the contingency has been removed (when the related thresholds are achieved), which may result in the recognition of rent payments in periods subsequent to when such payments are received.

Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. The reimbursements are recognized and presented in accordance with EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent (“EITF 99-19”). EITF 99-19 requires that these reimbursements be recorded gross, as the Company is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the credit risk.

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

The Company receives management fees from its investments in joint venture entities for various services provided as the managing member of the ventures. Management fees are recorded as revenue when management services have been delivered.

The Company recognizes gains on sales of properties in accordance with SFAS No. 66 upon the closing of the transaction with the purchaser. Gains on properties sold are recognized using the full accrual method when the collectibility of the sales price is reasonably assured, the Company is not obligated to perform significant activities after the sale, the initial investment from the buyer is sufficient and other profit recognition criteria have been satisfied. Gains on sales of properties may be deferred in whole or in part until the requirements for gain recognition under SFAS No. 66 have been met.

Real Estate

Real estate, consisting of land, buildings and improvements, is recorded at cost. The Company allocates the cost of the acquisition, including the assumption of liabilities, to the acquired tangible assets and identifiable intangibles based on their estimated fair values in accordance with SFAS No. 141, Business Combinations.

The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

The Company records acquired “above and below” market leases at fair value using discount rates which reflect the risks associated with the leases acquired. The amount recorded is based on the present value of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease, and (ii) management’s estimate of fair market lease rates for each in-place lease, measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the extended term for any leases with bargain renewal options. Other intangible assets acquired include amounts for in-place lease values that are based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes estimates of lost rentals at market rates during the hypothetical expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related costs.

The Company capitalizes direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a real estate project. In accordance with SFAS No. 34, Capitalization of Interest Cost and SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, construction and development costs are capitalized while substantive activities are ongoing to prepare an asset for its intended use. The Company considers a construction project as substantially complete and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have stopped, are expensed as incurred. Costs previously capitalized related to abandoned acquisitions or developments are charged to earnings. Expenditures for repairs and maintenance are expensed as incurred.

9

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company computes depreciation on properties using the straight-line method over the assets’ estimated useful lives. Depreciation is discontinued when a property is identified as held for sale. Building and improvements are depreciated over useful lives ranging up to 45 years. Above and below market lease intangibles are amortized primarily to revenue over the remaining noncancellable lease terms and bargain renewal periods, if any. Other in-place lease intangibles are amortized to expense over the remaining noncancellable lease term and bargain renewal periods, if any.

Loans Receivable and Allowance for Loan Losses

Loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. Loans held-for-investment are carried at amortized cost reduced by a valuation allowance for estimated credit losses. The Company recognizes interest income on loans, including the amortization of discounts and premiums, using the effective interest method applied on a loan-by-loan basis. Premiums and discounts are recognized as yield adjustments over the life of the related loans. Loans are transferred from held-for-investment to held-for-sale when management’s intent is to no longer hold the loans for the foreseeable future. Loans held-for-sale are recorded at the lower of cost or fair value.

Allowances are established for loans based upon an estimate of probable losses for the individual loans deemed to be impaired. Impairment is indicated when it is deemed probable that the Company will be unable to collect all amounts due on a timely basis in accordance with the contractual terms of the loan. The allowance is based upon the borrower’s overall financial condition, resources and payment record; the prospects for support from any financially responsible guarantors; and, if appropriate, the realizable value of any collateral. These estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at the loan’s contractual effective rate, the fair value of collateral, general economic conditions and trends, historical and industry loss experience, and other relevant factors.

Impairment of Long-Lived Assets and Goodwill

The Company assesses the carrying value of its long-lived assets, including investments in unconsolidated joint ventures, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets (“SFAS No. 144”). If the sum of the expected future net undiscounted cash flows is less than the carrying amount of the long-lived asset, an impairment loss will be recognized by adjusting the asset’s carrying amount to its estimated fair value.

Goodwill is tested at least annually applying the following two-step approach in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. The first step of the test is a comparison of the fair value of the reporting unit containing goodwill to its carrying amount including goodwill. If the fair value is less than the carrying value, then the second step of the test is needed to measure the amount of potential goodwill impairment. The second step requires the fair value of the reporting unit to be allocated to all the assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination at the date of the impairment test. The excess of the fair value of the reporting unit over the fair value of assets and liabilities is the implied value of goodwill and is used to determine the amount of impairment.

Assets Held for Sale and Discontinued Operations

Certain long-lived assets are classified as held-for-sale in accordance with SFAS No. 144. Long-lived assets to be disposed of are reported at the lower of their carrying amount or their fair value less cost to sell and are no longer depreciated. Discontinued operations is defined in SFAS No. 144 as a component of an entity that has either been disposed of or is deemed to be held for sale if, (i) the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction, and (ii) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

Stock-Based Compensation

Share-based compensation expense is recognized in accordance with SFAS No. 123R, Share-Based Payments (“SFAS No. 123R”). On January 1, 2006, the Company adopted SFAS No. 123R using the modified prospective application transition method which provides for only current and future period stock-based awards to be measured and recognized at fair value.

10

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

SFAS No. 123R requires all share-based awards granted on or after January 1, 2006 to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Compensation expense for awards with graded vesting is generally recognized ratably over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional services. Prior to the adoption of SFAS 123R, the Company applied SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure for stock-based awards granted prior to January 1, 2006.

Cash and Cash Equivalents

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

Restricted Cash

Restricted cash primarily consists of amounts held by mortgage lenders to provide for future real estate tax expenditures, tenant and capital improvements, security deposits and net proceeds from property sales that were executed as tax-deferred dispositions.

Derivatives

In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging interest rate risk. To qualify for hedge accounting treatment, the derivative instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge. Hedge effectiveness criteria also require that the occurrence of the underlying transaction or transactions are, and will remain, probable of occurring.

The Company applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS No. 133”). SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires the recognition of all derivative instruments, including embedded derivatives required to be bifurcated, as assets or liabilities in the Company’s consolidated balance sheet at fair value. Changes in the fair value of derivative instruments that are not designated as hedges or that do not meet the hedge accounting criteria of SFAS No. 133 are recognized in earnings. For derivatives designated as hedging instruments in qualifying hedging relationships, the change in fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss) whereas the change in fair value of the ineffective portion is recognized in earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all derivatives that are part of a hedging relationship to specific forecasted transactions or recognized assets and liabilities in the balance sheet. The Company also assesses and documents, both at the hedging instrument’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows associated with the hedged items. When it is determined that a derivative ceases to be highly effective as a hedge or the forecasted transaction is no longer probable of occurring, the Company discontinues hedge accounting prospectively. The ineffective portion of a hedge, if any, is immediately recognized in earnings to the extent that the change in fair value of a derivative does not effectively offset the change in value of the item being hedged.

Income Taxes

In 1985, HCP, Inc. elected REIT status and believes it has always operated so as to continue to qualify as a REIT under Sections 856 to 860 of the Internal Revenue code of 1986, as amended (the “Code”). Accordingly, HCP, Inc. will not be subject to U.S. federal income tax, provided that it continues to qualify as a REIT and its distributions to its stockholders equal or exceed its taxable income. On July 27, 2007, the Company formed HCP Life Science REIT, a consolidated subsidiary, which will elect REIT status for the year ended December 31, 2007 with the filing of its 2007 U.S. federal income tax return. HCP, Inc., along with its consolidated REIT subsidiary, are each subject to the REIT qualification requirements under Sections 856 to 860 of the Code. If either REIT fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates and may be ineligible to qualify as a REIT for four subsequent tax years.

11

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

HCP, Inc. and HCP Life Science REIT are subject to state and local income taxes in some jurisdictions, and in certain circumstances each REIT may also be subject to federal excise taxes on undistributed income. In addition, certain activities the Company undertakes must be conducted by entities which elect to be treated as taxable REIT subsidiaries (“TRSs”). TRSs are subject to both federal and state income taxes.

Marketable Securities

The Company classifies its marketable equity and debt securities as available-for-sale in accordance with the provisions of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. These securities are carried at market value with unrealized gains and losses reported in stockholders’ equity as a component of accumulated other comprehensive income. Gains or losses on securities sold are based on the specific identification method. When the Company determines declines in fair value of marketable securities are other-than-temporary, a realized loss is recognized in earnings.

Capital Raising Issuance Costs

Costs incurred in connection with the issuance of both common and preferred shares are recorded as a reduction in additional paid-in capital. Debt issuance costs are deferred and included in other assets and amortized to interest expense based on effective interest method over the remaining term of the related debt.

Segment Reporting

The Company reports its consolidated financial statements in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”). The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by healthcare sector. The Company’s business includes five segments: (i) senior housing, (ii) life science, (iii) medical office, (iv) hospital and (v) skilled nursing.

Prior to the Slough Estates USA Inc. (“SEUSA”) acquisition, the Company operated through two reportable segments—triple-net leased and medical office buildings. As a result of the Company’s acquisition of SEUSA, the Company added a significant portfolio of real estate assets under different leasing and property management structures and made corresponding organizational changes. The Company believes the change to its reportable segments is appropriate and consistent with how its chief operating decision maker reviews the Company’s operating results. In addition, in accordance with SFAS No. 131, all prior period segment information has been reclassified to conform to the current presentation.

Minority Interests and Mandatorily Redeemable Financial Instruments

As of March 31, 2008, there were 7.0 million non-managing member units outstanding in seven limited liability companies of which the Company is the managing member: (i) HCPI/Tennessee, LLC; (ii) HCPI/Utah, LLC; (iii) HCPI/Utah II, LLC; (iv) HCPI/Indiana, LLC; (v) HCP DR California, LLC; (vi) HCP DR Alabama, LLC; and (vii) HCP DR MCD, LLC. The Company consolidates these entities since it exercises control and carries the minority interests at cost. The non-managing member LLC Units (“DownREIT units”) are exchangeable for an amount of cash approximating the then-current market value of shares of the Company’s common stock or, at the Company’s option, shares of the Company’s common stock (subject to certain adjustments, such as stock splits and reclassifications). Upon exchange of DownREIT units for the Company’s common stock, the carrying amount of the DownREIT units is reclassified to stockholders’ equity. At March 31, 2008, the carrying value and market value of the 7.0 million DownREIT units were $281.7 million and $321.8 million, respectively. In April 2008, as a result of the non-managing member converting their remaining HCPI/Indiana, LLC DownREIT units, HCPI/Indiana, LLC became a wholly-owned subsidiary of the Company.

Life Care Bonds Payable

Two of the Company’s continuing care retirement communities (“CCRCs”) issue non-interest bearing life care bonds payable to certain residents of the CCRCs. Generally, the bonds are refundable to the resident or to the resident’s estate upon termination or cancellation of the CCRC agreement. One of the Company’s other senior housing facilities requires that certain residents of the facility post non-interest bearing occupancy fee deposits that are refundable to the resident or the resident’s estate upon the earlier of the re-letting of the unit or after two years of vacancy. Proceeds from the issuance of new bonds are used to retire existing bonds. As the maturity of these obligations is not determinable, no interest is imputed. These amounts are included in other debt in the Company’s consolidated balance sheets.

12

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fair Value Measurement

Effective January 1, 2008, the Company implemented the requirements of SFAS No. 157, Fair Value Measurements (‘‘SFAS No. 157’’) for its financial assets and liabilities. SFAS No. 157 refines the definition of fair value, expands disclosure requirements about fair value measurements and establishes specific requirements as well as guidelines for a consistent framework to measure fair value. SFAS No. 157 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. Further, SFAS No. 157 requires the Company to maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements.

SFAS No. 157 specifies a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy:

·Level 1 – quoted prices for identical instruments in active markets;

·Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

·Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company measures fair value using a set of standardized procedures that are outlined herein for all financial assets and liabilities which are required to be measured at fair value. When available, the Company utilizes quoted market prices from an independent third party source to determine fair value and classifies such items in Level 1. In some instances where a market price is available, but in an inactive or over-the-counter market where significant fluctuations in pricing can occur, the Company consistently applies the dealer (market maker) pricing estimate and classifies the financial asset or liability in Level 2.

If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads, etc. Items valued using such internally-generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, a financial asset or liability could be classified in either Level 2 or 3 even though there may be some significant inputs that are readily observable. Internal models and techniques used by the Company include discounted cash flow interest rate swap and Black Scholes option valuation models.

Based on the guidelines of SFAS No. 157, the Company has amended the techniques used in measuring the fair value of derivative and other financial asset and liability positions. These enhancements include, for the first time, the impact of the Company’s or reporting entity’s credit risk on derivative and other liabilities measured at fair value as well as the election of the mid-market pricing expedient outlined in the standard. The implementation of these enhancements and the adoption of SFAS No. 157 did not have a material impact on the Company’s consolidated financial position or results of operations.

On February 12, 2008, the FASB amended the implementation of SFAS No. 157 related to non-financial assets and liabilities until fiscal periods beginning after November 15, 2008. As a result, the Company has not applied the above fair value procedures to its goodwill and long-lived asset impairment analyses during the current period. The Company believes that the adoption of SFAS No. 157 for non-financial assets and liabilities will not have a material impact on its consolidated financial position or results of operations upon implementation for fiscal periods beginning after November 15, 2008.

Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (‘‘SFAS No. 159’’). SFAS No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year after November 15, 2007, and subsequent reporting periods thereafter. Currently the Company has not adopted the guidelines of SFAS No. 159 and continues to evaluate whether or not it will in future periods based on industry participant elections and financial reporting consistency with its peers.

13

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In December 2007, the FASB issued SFAS No. 141 (Revised), Business Combinations (“SFAS No. 141R”). SFAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed (including intangibles), and any noncontrolling interest in the acquiree. SFAS No. 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS No. 141R on January 1, 2009 will require the Company to prospectively expense all transaction costs for business combinations for which the acquisition date is on or that date. Early adoption and retroactive application of SFAS No. 141R to fiscal years preceding the effective date is not permitted. The implementation of this standard on January 1, 2009 could materially impact the Company’s future financial results to the extent that it acquires significant amounts of real estate, as related acquisition costs will be expensed as incurred compared to the current practice of capitalizing such costs and amortizing them over the estimated useful life of the assets acquired.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51 (“SFAS No. 160”), which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for the Company beginning January 1, 2009 and applies prospectively, except for the presentation and disclosure requirements, which applies retrospectively. The Company is currently assessing the potential impact that the adoption of SFAS No. 160 would have on its financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 establishes, among other things, the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 requires entities to provide enhanced disclosures about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008.

Reclassifications

Certain amounts in the Company’s prior years’ consolidated financial statements have been reclassified to conform to the current period presentation. Properties sold or held for sale have been reclassified on the balance sheets and in discontinued operations in accordance with SFAS No. 144 (see Note 5). “Tenant recoveries” have been reclassified from “rental and related revenues.” “Income taxes” have been reclassified from “general and administrative” expenses. In addition, in accordance with SFAS No. 131, all prior period segment information has been reclassified to conform to the current presentation.

14

(3)Mergers and Acquisitions

Slough Estates USA Inc.

On August 1, 2007, the Company closed its acquisition of SEUSA for aggregate cash consideration of approximately $3.0 billion. SEUSA’s life science portfolio is concentrated in the San Francisco Bay Area and San Diego County.

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The calculation of total consideration follows (in thousands):

Payment of aggregate cash consideration	$	2,978,911
Estimated acquisition costs, net of cash acquired	3,772
Purchase price, net of assumed liabilities	2,982,683
Fair value of liabilities assumed, including debt	217,233
Purchase price	$	3,199,916

Under the purchase method of accounting, the assets and liabilities of SEUSA were recorded at their relative fair values as of the date of the acquisition. During the quarter ended March 31, 2008, the Company revised its initial purchase price allocation of its acquired interest in SEUSA, which resulted in the Company reallocating $34 million among buildings and improvements, development costs and construction in progress, land and investments in and advances to unconsolidated joint ventures from its preliminary allocation at December 31, 2007. The changes from the Company’s initial purchase price allocation did not have a significant impact on the Company’s results of operations for the three months ended March 31, 2008. As of March 31, 2008, the purchase price allocation is preliminary, and the final purchase price allocation will be determined pending the receipt of information necessary to complete the valuation of certain assets and liabilities, which may result in additional changes from the current estimate.

HCP has not identified any material unrecorded pre-acquisition contingencies where an impairment of the related asset or determination of the related liability is probable and the amount can be reasonably estimated. If information becomes available which would indicate it is probable that such events had occurred and the amounts can be reasonably estimated, such items will be included in the final purchase price allocation.

The following table summarizes the revised estimated fair values of the SEUSA assets acquired and liabilities assumed as of the acquisition date of August 1, 2007 (in thousands):

Assets acquired
Buildings and improvements	$	1,664,295
Development costs and construction in progress	254,626
Land	838,917
Investments in and advances to unconsolidated joint ventures	68,300
Intangible assets	340,200
Other assets	33,578
Total assets acquired	$	3,199,916
Liabilities assumed
Mortgages payable and other debt	$	33,553
Intangible liabilities	148,200
Other liabilities	35,480
Total liabilities assumed	217,233
Net assets acquired	$	2,982,683

In connection with the Company’s acquisition of SEUSA, the Company obtained, from a syndicate of banks, a financing commitment for a $3.0 billion bridge loan under which $2.75 billion was borrowed at closing. Using proceeds from the sales of real estate in August 2007 and capital market transactions consummated in October 2007, the Company made aggregate payments of approximately $1.4 billion, reducing the outstanding principal balance of the bridge loan to $1.35 billion.

The assets, liabilities and results of operations of SEUSA are included in the consolidated financial statements from the date of acquisition.

15

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations assume that the acquisition of SEUSA was completed on January 1 for the three months ended March 31, 2007 (in thousands, except per share amounts):

Revenues	$	224,639
Net income	111,440
Basic earnings per common share	0.55
Diluted earnings per common share	0.54

(4)Acquisitions of Real Estate Properties

During the three months ended March 31, 2008, the Company acquired a senior housing facility for $11 million and funded an aggregate of $49 million for construction, tenant and capital improvement projects primarily in the life science and medical office segments.

A summary of acquisitions during the year ended December 31, 2007, excluding SEUSA (Note 3), follows (in thousands):

	Consideration								Assets Acquired
Acquisitions(1)	Cash Paid		Real Estate		Debt Assumed		DownREIT Units(2)		Real Estate		Net Intangibles
Medical office	$	166,982	$	—	$	—	$	93,887	$	247,996	$	12,873
Hospital	120,562		35,205		—		84,719		235,084		5,402
Life science	35,777		—		12,215		2,092		48,237		1,847
Senior housing	15,956		340		5,148		—		20,772		672
	$	339,277	$	35,545	$	17,363	$	180,698	$	552,089	$	20,794

(1)	Includes transaction costs, if any.
(2)	Non-managing member LLC units.

(5)   Dispositions of Real Estate, Real Estate Interests and Discontinued Operations

Dispositions of Real Estate

During the three months ended March 31, 2008, the Company sold four properties for approximately $30 million and recognized gain on sales of real estate of approximately $10 million.

During the three months ended March 31, 2007, the Company sold 27 properties for approximately $170 million and recognized gain on sales of real estate of approximately $104 million.

In April 2008, the Company sold 17 properties for approximately $306 million.

Dispositions of Real Estate Interests

On January 5, 2007, the Company formed a senior housing joint venture (“HCP Ventures II”), which included 25 properties valued at $1.1 billion, which were encumbered by a $686 million secured debt facility. The Company received approximately $280 million in proceeds, including a one-time acquisition fee of $5.4 million, and no gain or loss was recognized for the sale of a 65% interest in this joint venture.

Properties Held for Sale

At March 31, 2008 and December 31, 2007, the Company held for sale 33 and 37 properties with carrying amounts of $248 million and $271 million, respectively.

16

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Results from Discontinued Operations

The following table summarizes income from discontinued operations and gain on sales of real estate included in discontinued operations (dollars in thousands):

	Three Months Ended March 31,
	2008		2007
Rental and related revenues	$	10,226	$	23,701
Other revenues	53		3,027
Total revenues	10,279		26,728
Depreciation and amortization expenses	3,082		6,050
Operating expenses	47		290
Other costs and expenses	94		3,375
Income before gain on sales of real estate, net of income taxes	$	7,056	$	17,013
Gain on sales of real estate	$	10,138	$	104,045
Number of properties held for sale	33		107
Number of properties sold	4		27
Number of properties included in discontinued operations	37		134

(6)   Net Investment in Direct Financing Leases

The components of net investment in DFLs consisted of the following (dollars in thousands):

	March 31,			December 31,
	2008			2007
Minimum lease payments receivable	$	1,402,984		$	1,414,116
Estimated residual values	468,769			468,769
Less unearned income	(1,229,181		)	(1,242,833		)
Net investment in direct financing leases	$	642,572		$	640,052
Properties subject to direct financing leases	30			30

Certain leases contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms. Lease payments due to the Company relating to three land-only DFLs with a carrying value of $59.5 million at March 31, 2008, are subordinate to and serve as collateral for first mortgage construction loans entered into by the tenants to fund development costs related to the properties.

 (7)  Loans Receivable

The following table summarizes the Company’s loans receivable balance (in thousands):

	March 31, 2008								December 31, 2007
	Real Estate Secured		Other			Total			Real Estate Secured		Other			Total
Mezzanine	$	—	$	1,000,000		$	1,000,000		$	—	$	1,000,000		$	1,000,000
Joint venture partners	—		7,055			7,055			—		7,055			7,055
Other	69,004		84,775			153,779			69,126		86,285			155,411
Unamortized discounts, fees and costs	—		(92,500		)	(92,500		)	—		(96,740		)	(96,740		)
Loan loss allowance	—		(241		)	(241		)	—		(241		)	(241		)
	$	69,004	$	999,089		$	1,068,093		$	69,126	$	996,359		$	1,065,485

The Company has an agreement to provide an affiliate of the Cirrus Group, LLC with an interest only, senior secured term loan. The loan provides for a maturity date of December 31, 2008, with a one-year extension at the option of the borrower, under which $79 million was borrowed to finance the acquisition, development, syndication and operation of new

17

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

and existing surgical partnerships. Certain of these surgical partnerships are tenants in the medical office buildings (“MOBs”) owned by the Company and HCP Ventures IV. This loan accrues interest at a rate of 14.0%, of which 9.5% is payable monthly and the balance of 4.5% is deferred until maturity. The loan is subject to equity contribution requirements and borrower financial covenants and is collateralized by assets of the borrower (comprised primarily of interests in partnerships operating surgical facilities in premises leased from a Cirrus affiliate, HCP Ventures IV LLC or the Company) and is guaranteed up to $50 million through a combination of (i) a personal guarantee of up to $13 million by a principal of Cirrus, and (ii) a guarantee of the balance by other principals of Cirrus under arrangements for recourse limited only to their interests in certain entities owning real estate. At March 31, 2008, the carrying value of this loan was $84 million.

On December 21, 2007, the Company made an investment in mezzanine loans having an aggregate face value of $1.0 billion, for approximately $900 million, as part of the financing for The Carlyle Group’s $6.3 billion purchase of Manor Care, Inc. These loans bear interest on their face amounts at a floating rate of LIBOR plus 4.0%, mature in January 2013, are pre-payable at any time subject to a yield maintenance fee during the first twelve months. These loans are mandatorily pre-payable in January 2012 unless the borrower satisfies certain financial conditions. The loans are secured by an indirect pledge of the equity ownership in 339 HCR ManorCare facilities located in 30 states and are subordinate to other debt, of approximately $3.6 billion at closing. At March 31, 2008, the carrying value of this loan was $906.8 million.

(8)   Investments in and Advances to Unconsolidated Joint Ventures

The Company owns interests in the following entities which are accounted for under the equity method at March 31, 2008 (dollars in thousands):

Entity(1)	Investment(2)			Ownership %
HCP Ventures II	$	143,318		35	%
HCP Ventures III, LLC	13,118			30
HCP Ventures IV, LLC	48,115			20
Arborwood Living Center, LLC(3)	978			45
Greenleaf Living Centers, LLC(3)	466			45
Suburban Properties, LLC	4,803			67
LASDK LP	24,338			63
Britannia Biotech Gateway LP	33,382			55
Torrey Pines Science Center LP	10,731			50
Advances to unconsolidated joint ventures, net	1,853
	$	281,102
Edgewood Assisted Living Center, LLC(3)(4)	$	(344	)	45
Seminole Shores Living Center, LLC(3)(4)	(773		)	50
	$	(1,117	)

(1)	These joint ventures are not consolidated since the Company does not control, through voting rights or other means, the entities. See Note 2 regarding the Company’s policy on consolidation.
(2)	Represents the carrying value of the Company’s investment in the unconsolidated joint venture. See Note 2 regarding the Company’s policy for accounting for joint venture interests.
(3)	As of March 31, 2008, the Company has guaranteed in the aggregate $7 million of a total of $15 million of notes payable for these four joint ventures. No liability has been recorded related to these guarantees as of March 31, 2008.
(4)	Negative investment amounts are included in accounts payable and accrued liabilities.

18

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Summarized combined financial information for the Company’s unconsolidated joint ventures follows (in thousands):

	March 31,		December 31,
	2008		2007
Real estate, net	$	1,739,435	$	1,752,289
Other assets, net	193,251		195,816
Total assets	$	1,932,686	$	1,948,105
Notes payable	$	1,189,067	$	1,192,270
Accounts payable	38,761		45,427
Other partners’ capital	507,188		511,149
HCP’s capital(1)	197,670		199,259
Total liabilities and partners’ capital	$	1,932,686	$	1,948,105

	Three Months Ended March 31,
	2008(2)		2007
Total revenues	$	46,638	$	26,323
Net income	2,174		3,136
HCP’s equity income	1,288		1,214
Fees earned by HCP	1,467		6,328
Distributions received, net	3,507		277,220

(1)	Aggregate basis difference of the Company’s investments in these joint ventures of $80 million, as of March 31, 2008, is primarily attributable to real estate and lease related intangible assets.
(2)	Includes the results of operations from HCP Ventures IV, LLC, whose subsidiaries were wholly owned consolidated subsidiaries of the Company as of March 31, 2007.

(9)Intangibles

At March 31, 2008 and December 31, 2007, intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles, below market ground lease intangibles and intangible assets related to non-compete agreements, were $723 million and $725 million, respectively. At March 31, 2008 and December 31, 2007, the accumulated amortization of intangible assets was $125 million and $102 million, respectively.

At March 31, 2008 and December 31, 2007, below market lease intangibles and above market ground lease intangibles were $311 million and $312 million, respectively. At March 31, 2008 and December 31, 2007, the accumulated amortization of intangible liabilities was $41 million and $33 million, respectively.

(10)Other Assets

The Company’s other assets consisted of the following (in thousands):

	March 31,		December 31,
	2008		2007
Marketable debt securities	$	283,063	$	289,163
Marketable equity securities	8,344		13,933
Goodwill	51,746		51,746
Straight-line rent assets, net	85,874		76,188
Deferred debt issuance costs, net	15,510		16,787
Other	60,355		68,316
Total other assets	$	504,892	$	516,133

19

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The cost or amortized cost, estimated fair value and gross unrealized gains and losses on marketable securities follows (in thousands):

					Gross Unrealized
	Cost (1)		Fair Value		Gains		(Losses)
March 31, 2008
Debt securities	$	275,000	$	283,063	$	9,563	$	(1,500	)
Equity securities	13,367		8,344		79		(5,102		)
Total investments	$	288,367	$	291,407	$	9,642	$	(6,602	)
December 31, 2007
Debt securities	$	275,000	$	289,163	$	14,663	$	(500	)
Equity securities	13,874		13,933		300		(241		)
Total investments	$	288,874	$	303,096	$	14,963	$	(741	)

(1)Represents the original cost basis of the marketable securities reduced by any other-than-temporary impairments recorded through earnings.

The marketable securities with gross unrealized losses at March 31, 2008 are not considered to be other-than-temporary impaired as the Company has the intent and ability to hold these investments for a period of time sufficient to allow for the anticipated recovery in market value. The Company’s debt securities accrue interest at interest rates ranging from 9.25% to 9.625%, and mature in November 2016 and April 2017. During the three months ended March 31, 2007, the Company realized gains totaling $1.0 million, which are included in interest and other income, related to the sale of various equity securities.

(11) Debt

Bank Line of Credit and Bridge Loan

The Company’s $1.5 billion revolving line of credit facility matures on August 1, 2011 and can be increased up to $2.0 billion subject to certain conditions, including increased commitments by lenders. This revolving line of credit accrues interest at a rate per annum equal to LIBOR plus a margin ranging from 0.325% to 1.00%, depending upon the Company’s debt ratings. The Company pays a facility fee on the entire revolving commitment ranging from 0.10% to 0.25%, depending upon the Company’s debt ratings. The revolving line of credit facility contains a negotiated rate option, whereby the lenders participating in the line of credit facility bid on the interest to be charged which may result in a reduced interest rate, and is available for up to 50% of borrowings. Based on the Company’s debt ratings on March 31, 2008, the margin on the revolving line of credit facility was 0.55% and the facility fee was 0.15%. At March 31, 2008, the Company had $1.0 billion outstanding under this credit facility with a weighted average effective interest rate of 4.28% and $481 million of available, unused borrowing capacity. In April 2008, the Company made aggregate payments of $919 million, reducing the outstanding balance of the revolving line of credit facility to $100 million at April 28, 2008.

The Company’s bridge loan had an initial balance of $2.75 billion, has an initial maturity date of July 31, 2008 and an extended maturity date of July 31, 2009 upon the exercise by the Company of two optional 6-month extension options, subject to debt covenant compliance and extension fees. The bridge loan accrues interest at a rate per annum equal to LIBOR plus a margin ranging from 0.425% to 1.25%, depending upon the Company’s debt ratings (weighted average effective interest rate of 4.0% at March 31, 2008). Based on the Company’s debt ratings on March 31, 2008, the margin on the bridge loan facility is 0.70%. As of March 31, 2008, the Company had an outstanding principal balance on the bridge loan of $1.35 billion.

The revolving line of credit facility and bridge loan contain certain financial restrictions and other customary requirements. Among other things, these covenants, using terms defined in the agreement, limit the ratio of (i) Consolidated Total Indebtedness to Consolidated Total Asset Value to 70%, (ii) Secured Debt to Consolidated Total Asset Value to 30%, and (iii) Unsecured Debt to Consolidated Unencumbered Asset Value to 80%. The agreement also requires that the Company maintain (i) a Fixed Charge Coverage ratio, as defined in the agreement, of 1.50 times, and (ii) a formula-determined Minimum Consolidated Tangible Net Worth. A portion of these financial covenants become more

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(Unaudited)

restrictive through the period ending March 31, 2009 and ultimately (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 65%, and (iii) require a Fixed Charge Coverage ratio, as defined in the agreement, of 1.75 times. At March 31, 2008, the Company was in compliance with each of the restrictions and requirements of its revolving line of credit facility and bridge loan.

Senior Unsecured Notes

At March 31, 2008, the Company had $3.8 billion in aggregate principal amount of senior unsecured notes outstanding. Interest rates on the notes ranged from 4.88% to 7.07% at March 31, 2008. The weighted average effective interest rate on the senior unsecured notes at March 31, 2008 and December 31, 2007, was 5.99% and 6.18%, respectively. Discounts and premiums are amortized to interest expense over the term of the related debt.

The senior unsecured notes contain certain covenants including limitations on debt and other customary terms. At March 31, 2008, the Company was in compliance with these covenants.

Mortgage Debt

At March 31, 2008, the Company had $1.3 billion in mortgage debt secured by 197 healthcare facilities with a carrying amount of $2.5 billion. Interest rates on the mortgage notes ranged from 2.67% to 9.32% with a weighted average effective rate of 5.95% at March 31, 2008.

Secured debt generally requires monthly principal and interest payments. Some of the loans are also cross-collateralized by multiple properties. The secured debt is collateralized by deeds of trust or mortgages on certain properties and is generally non-recourse. Mortgage debt encumbering properties typically restricts title transfer of the respective properties subject to the terms of the mortgage, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the properties in good condition, requires maintenance of insurance on the properties and includes a requirement to obtain lender consent to enter into and terminate material tenant leases.

Other Debt

In connection with the CRP merger on October 5, 2006, the Company assumed non-interest bearing Life Care Bonds at its two CCRCs and non-interest bearing occupancy fee deposits at another of its senior housing facilities, all of which were payable to certain residents of the facilities (collectively “Life Care Bonds”). At March 31, 2008, $39.8 million of the Life Care Bonds were refundable to the residents upon the resident moving out or to their estate upon death, and $66.9 million of the Life Care Bonds were refundable after the unit is successfully remarketed to a new resident.

(12)Commitments and Contingencies

Legal Proceedings.  From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Company’s business. Regardless of their merits, these matters may force the Company to expend significant financial resources. Except as described below, the Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s business, prospects, financial condition or results of operations. The Company’s policy is to accrue legal expenses as they are incurred.

On May 3, 2007, Ventas, Inc. filed a complaint against the Company in the United States District Court for the Western District of Kentucky, asserting claims of tortious interference with contract and tortious interference with prospective business advantage. The complaint alleges, among other things, that the Company interfered with Ventas’ purchase agreement with Sunrise Senior Living Real Estate Investment Trust (“Sunrise REIT”); that the Company interfered with Ventas’ prospective business advantage in connection with the Sunrise REIT transaction; and that the Company’s actions caused Ventas to suffer damages, including the payment of over $100 million in additional consideration to acquire the Sunrise REIT assets. Ventas is seeking monetary relief, including compensatory and punitive damages, against the Company. On July 2, 2007, the Company filed its answer to Ventas’ complaint and a motion to dismiss the complaint in its entirety. On December 19, 2007, the court denied the motion to dismiss. The Company believes that Ventas’ claims are without merit and intends to vigorously defend against Ventas’ lawsuit. On April 8, 2008, the Company filed a motion for leave to assert counterclaims against Ventas as part of the above litigation. HCP’s proposed counterclaims allege, among other things, that Sunrise REIT fraudulently induced HCP to participate in a flawed and unfair auction process, and that absent such

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HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

misconduct, HCP would have succeeded in acquiring Sunrise REIT. HCP seeks to recover compensatory and punitive damages. The proposed counterclaims further allege that Ventas, in acquiring Sunrise REIT, assumed the liability of Sunrise REIT. HCP intends to pursue such claims vigorously; however, there can be no assurances that it will prevail on any of the claims or the amount of any recovery that may be awarded. The Company expects that defending its interests and pursuing its own claims in the foregoing matters will require it to expend significant funds. The Company is unable to estimate the ultimate aggregate amount of monetary liability, gain or financial impact with respect to these matters as of March 31, 2008.

In April 2007, the Company and Health Care Property Partners (“HCPP”), a joint venture between the Company and an affiliate of Tenet Healthcare Corporation (“Tenet”), served Tenet and certain Tenet subsidiaries with notices of default with respect to a hospital in Tarzana, California, and two other hospitals that are leased by such affiliates from the Company and HCPP. The notices of default generally relate to deferred maintenance and compliance with legal requirements, including compliance with the requirements of State of California Senate Bill 1953 (“SB 1953”) (further described below). On May 8, 2007, certain subsidiaries of Tenet filed a complaint against the Company in the Superior Court of the State of California for the County of Los Angeles with respect to the hospital owned by the Company and initiated arbitration actions with respect to the two hospitals owned by HCPP, in each case asserting various causes of action generally relating to such notices of default. Upon Tenet’s failure to fully remedy all of the items set forth in the notices of default to the Company’s satisfaction, the Company, on July 27, 2007, exercised its right to terminate the leases to Tenet of four other hospitals owned by the Company, effective December 31, 2007, invoking cross­default provisions under such leases. On September 24, 2007, Tenet amended its original complaint and added claims by the lessees under the four terminated leases substantially similar to the previously ­filed claims. Tenet’s subsidiaries are seeking declaratory, injunctive and monetary relief, including compensatory and punitive damages, against the Company and HCPP. On October 8, 2007, HCPP responded to the claims by Tenet’s subsidiaries in the arbitration action, raising its own claims against Tenet and the lessees of the two hospitals relating to the matters described in the notices of default, and on October 17, 2007, the Company similarly filed a counterclaim against Tenet and the plaintiffs in the California state court action. On October 16, 2007, Lake Health Care Facilities, Inc., another subsidiary of Tenet and the non-managing general partner of HCPP, filed a complaint against the Company in the Superior Court of the State of California for the County of Los Angeles in which it alleges that the service of the notices of default upon HCPP’s tenants was a breach of the Company’s fiduciary duties as managing partner of HCPP and that the Company has breached the HCPP partnership agreement. The Company believes that the claims by Tenet’s subsidiaries are without merit and intends to vigorously defend against those claims in the litigation and arbitration proceedings.

The parties are presently in settlement discussions, and on February 21, 2008, at the request of the parties, the Court vacated pending hearing and trial dates to accommodate such discussions. Similarly, the parties have submitted a stipulation in the arbitration action seeking to abate that matter to accommodate the settlement discussions. There are no assurances, however, that the parties will reach a settlement. In the event that a settlement among the parties is not reached, the Company will continue to vigorously defend against the claims made by Tenet’s subsidiaries and pursue its own claims against Tenet and its affiliates.

State of California Senate Bill 1953.  The hospital owned by the Company in Tarzana, California, which hospital is a subject of the litigation with Tenet described above, is affected by SB 1953, which requires certain seismic safety building standards for acute care hospital facilities. This hospital is operated by Tenet under a lease expiring in February 2009. The Company is currently reviewing the SB 1953 compliance of this hospital, multiple plans of action to cause such compliance, the estimated time for completing the same, and the cost of performing necessary retrofitting of the property. As indicated above, the Company is currently disputing with Tenet responsibility for performance of compliance activities. Rental income from the hospital for the three months ended March 31, 2008 and the year ended December 31, 2007 were $2.1 million and $10.9 million, respectively. At March 31, 2008, the carrying amount of the property was $71.1 million.

Development Commitments.  As of March 31, 2008, the Company was committed under the terms of contracts to complete the construction of properties undergoing development at a remaining aggregate cost of approximately $78 million.

Concentration of Credit Risk.  Concentration of credit risk arises when a number of operators, tenants or obligors related to the Company’s investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company does not have significant foreign operations.

On December 21, 2007, the Company made an investment in mezzanine loans to HCR ManorCare with an aggregate face value of $1.0 billion, for approximately $900 million. At March 31, 2008, these loans represented approximately 78% of our skilled nursing segment assets and 7% of our total segment assets.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

At March 31, 2008, the Company leased 81 of its senior housing facilities to nine tenants that have been identified as VIEs (“VIE Tenants”). These VIE Tenants are thinly capitalized corporations that rely on the cash flow generated from the senior housing facilities to pay operating expenses, including rent obligations under their leases. The 81 senior housing facilities leased to the VIE Tenants are operated by Sunrise Senior Living Management, Inc., a wholly owned subsidiary of Sunrise Senior Living, Inc. (“Sunrise”). Sunrise is publicly traded and is subject to the informational filing requirements of the Securities and Exchange Act of 1934, as amended, and is required to file periodic reports on Form 10-K and Form 10-Q with the SEC. However, Sunrise is the subject of a formal SEC investigation. In addition, Sunrise has not filed its periodic reports on Form 10-Q and Form 10-K subsequent to its form 10-K for the fiscal year ended December 31, 2006, which was filed on March 24, 2008.

To mitigate credit risk of certain senior housing leases, leases are combined into portfolios that contain cross-default terms, so that if a tenant of any of the properties in a portfolio defaults on its obligations under its lease, the Company may pursue its remedies under the lease with respect to any of the properties in the portfolio. Certain portfolios also contain terms whereby the net operating profits of the properties are combined for the purpose of securing the funding of rental payments due under each lease.

DownREIT Partnerships.  In connection with the formation of certain DownREIT partnerships, several partners generally contributed appreciated real estate to the DownREIT in exchange for DownREIT units. These contributions are generally tax-free, so that the pre-contribution gain related to the property is not taxed to the contributing partner. However, if the contributed property is later sold by the partnership, the unamortized pre-contribution gain that exists at the date of sale is specially allocated and taxed to the contributing partners. In many of the DownREITs, the Company has entered into indemnification agreements with those partners who contributed appreciated property into the partnership. Under these indemnification agreements, if any of the appreciated real estate contributed by the partners is sold by the partnership in a taxable transaction within a specified number of years after the property was contributed, HCP 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 (“make-whole payments”). These make-whole payments include a tax gross-up provision.

Credit Enhancement Guarantee.  Certain of the Company’s senior housing facilities serve as collateral for $139.3 million of debt (maturing May 1, 2025) that is owed by a previous owner of the facilities. The Company’s obligation under such indebtedness is guaranteed by the debtor who has an investment grade credit rating. These senior housing facilities are classified as DFLs and have a carrying value of $348.3 million at March 31, 2008.

Environmental Costs.  The Company monitors its properties for the presence of hazardous or toxic substances. The Company is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Company’s business, financial condition or results of operations. The Company carries environmental insurance and believes that the policy terms, conditions, limitations and deductibles are adequate and appropriate under the circumstances, given the relative risk of loss, the cost of such coverage and current industry practice.

General Uninsured Losses.  The Company obtains various types of insurance to mitigate the impact of property, business interruption, liability, flood, windstorm, earthquake, environmental and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. There are, however, certain types of extraordinary losses, such as those due to acts of war or other events that may be either uninsurable or not economically insurable. In addition, the Company has a large number of properties that are exposed to earthquake, flood and windstorm and the insurance for such losses carries high deductibles. Should an uninsured loss occur at a property, the Company’s assets may become impaired and the Company may not be able to operate its business at the property for an extended period of time.

(13)Stockholders’ Equity

Preferred Stock

On January 28, 2008, the Company announced that its Board declared a quarterly cash dividend of $0.45313 per share on its Series E cumulative redeemable preferred stock and $0.44375 per share on its Series F cumulative redeemable preferred stock. These dividends were paid on March 31, 2008 to stockholders of record as of the close of business on March 14, 2008.

23

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

On April 24, 2008, the Company announced that its Board declared a quarterly cash dividend of $0.45313 per share on its Series E cumulative redeemable preferred stock and $0.44375 per share on its Series F cumulative redeemable preferred stock. These dividends will be paid on June 30, 2008 to stockholders of record as of the close of business on June 16, 2008.

Common Stock

During the three months ended March 31, 2008 and 2007, the Company issued 174,000 and 304,000 shares of common stock, respectively, under its Dividend Reinvestment and Stock Purchase Plan (“DRIP”). The Company also issued 74,000 and 34,000 shares upon exercise of stock options and 577,000 and 142,000 shares of common stock upon the conversion of DownREIT units during the three months ended March 31, 2008 and 2007, respectively.

During the three months ended March 31, 2008 and 2007, the Company issued 106,000 and 102,000 shares of restricted stock, respectively, under the Company’s 2000 Stock Incentive Plan, as amended, and the Company’s 2006 Performance Incentive Plan. The Company also issued 131,000 and 111,000 shares upon the vesting of performance restricted stock units during the three months ended March 31, 2008 and 2007, respectively.

On January 28, 2008, the Company announced that its Board declared a quarterly cash dividend of $0.455 per share. The common stock cash dividend was paid on February 21, 2008 to stockholders of record as of the close of business on February 7, 2008.

On April 24, 2008, the Company announced that its Board declared a quarterly cash dividend of $0.455 per share. The common stock cash dividend will be paid on May 19, 2008 to stockholders of record as of the close of business on May 5, 2008.

Accumulated Other Comprehensive Income (Loss) (“AOCI”)

	March 31,			December 31,
	2008			2007
	(in thousands)
AOCI—unrealized gains on available-for-sale securities, net	$	3,040		$	14,222
AOCI—unrealized losses on cash flow hedges, net	(56,959		)	(14,243		)
Supplemental Executive Retirement Plan minimum liability	(2,088		)	(2,113		)
Foreign currency translation adjustment	110			32
Total Accumulated Other Comprehensive Loss	$	(55,897	)	$	(2,102	)

(14)Segment Disclosures

The Company evaluates its business and makes resource allocations based on its five business segments: (i) senior housing, (ii) life science, (iii) medical office, (iv) hospital, and (v) skilled nursing. Under the senior housing, life science, hospital and skilled nursing segments, the Company invests primarily in single operator or tenant properties through acquisition and development of real estate, secured financing and marketable debt securities of operators in these sectors. Under the medical office segment, the Company invests through acquisition and secured financing in MOBs that are primarily leased under gross or modified gross leases, generally to multiple tenants, and which generally require a greater level of property management. The acquisition of SEUSA on August 1, 2007 resulted in a change to the Company’s reportable segments. Prior to the SEUSA acquisition, the Company operated through two reportable segments—triple-net leased and medical office buildings. The senior housing, life science, hospital and skilled nursing segments were previously aggregated under the Company’s triple-net leased segment. SEUSA’s results are included in the Company’s consolidated financial statements from the date of the Company’s acquisition on August 1, 2007. The accounting policies of the segments are the same as those described under Summary of Significant Accounting Policies (see Note 2). There were no intersegment sales or transfers during the three months ended March 31, 2008 and 2007. The Company evaluates performance based upon property net operating income from continuing operations (“NOI”) of the combined properties in each segment.

Non-segment assets consist primarily of real estate held for sale and corporate assets including cash, restricted cash, accounts receivable, net and deferred financing costs. Interest expense, depreciation and amortization and non-property specific revenues and expenses are not allocated to individual segments in determining the Company’s performance measure. See Note 12 for other information regarding concentrations of credit risk.

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HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Summary information for the reportable segments follows (in thousands):

For the three months ended March 31, 2008:

Segments	Rental and Related Revenues		Tenant Recoveries		Income From DFLs		Investment Management Fees		Total Revenues		NOI(1)		Interest and Other
Senior housing	$	71,302	$	—	$	14,974	$	796	$	87,072	$	82,639	$	316
Life science	43,229		9,382		—		1		52,612		40,927		—
Medical office	68,068		12,579		—		670		81,317		45,407		—
Hospital	21,895		488		—		—		22,383		21,516		10,584
Skilled nursing	8,793		—		—		—		8,793		8,793		23,185
Total segments	213,287		22,449		14,974		1,467		252,177		199,282		34,085
Non-segment	—		—		—		—		—		—		1,241
Total	$	213,287	$	22,449	$	14,974	$	1,467	$	252,177	$	199,282	$	35,326

For the three months ended March 31, 2007:

Segments	Rental and Related Revenues		Tenant Recoveries			Income From DFLs		Investment Management Fees		Total Revenues		NOI(1)		Interest and Other
Senior housing	$	67,875	$		—	$	14,990	$	6,165	$	89,030	$	78,374	$	1,708
Life science	4,825		739			—		—		5,564		4,442		—
Medical office	76,885		13,715			—		73		90,673		54,248		—
Hospital	19,851		29			—		—		19,880		19,629		11,286
Skilled nursing	8,497		—			—		—		8,497		8,495		579
Total segments	177,933		14,483			14,990		6,238		213,644		165,188		13,573
Non-segment	—		—			—		—		—		—		893
Total	$	177,933	$	14,483		$	14,990	$	6,238	$	213,644	$	165,188	$	14,466

(1)Net Operating Income from Continuing Operations (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate properties. The Company defines NOI as rental revenues, including tenant recoveries and income from direct financing leases, less property-level operating expenses. NOI excludes investment management fee income, interest expense, depreciation and amortization, general and administrative expenses, equity income from unconsolidated joint ventures, interest and other income, net, minority interests’ share of earnings, income taxes and discontinued operations. The Company believes NOI provides investors relevant and useful information because it measures the operating performance of the Company’s real estate at the property level on an unleveraged basis. The Company uses NOI to make decisions about resource allocations and assess property-level performance. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP since it does not reflect the aforementioned excluded items. Further, the Company’s definition of NOI may not be comparable to that the definition used by other real estate investment trusts, as those companies may use different methodologies for calculating NOI.

The following is a reconciliation from NOI to reported net income, the most direct comparable financial measure calculated and presented in accordance with GAAP (in thousands):

	Three Months Ended March 31,
	2008			2007
Net operating income from continuing operations	$	199,282		$	165,188
Investment management fee income	1,467			6,238
Interest expense	(96,370		)	(78,744		)
Depreciation and amortization	(79,276		)	(58,323		)
General and administrative	(20,538		)	(20,107		)
Equity income from unconsolidated joint ventures	1,288			1,214
Interest and other income, net	35,326			14,466
Minority interests’ share of earnings	(5,716		)	(5,235		)
Income taxes	(2,245		)	(467		)
Total discontinued operations	17,194			121,058
Net income	$	50,412		$	145,288

25

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company’s total assets by segment were:

	March 31,			December 31,
Segments	2008			2007
Senior housing	$	4,456,446		$	4,440,832
Life science	3,482,042			3,461,101
Medical office	2,359,472			2,336,601
Hospital	1,212,776			1,219,767
Skilled nursing	1,167,688			1,163,157
Gross segment assets	12,678,424			12,621,458
Accumulated depreciation and amortization	(871,458		)	(730,451		)
Net segment assets	11,806,966			11,891,007
Real estate held for sale, net	248,093			270,681
Non-segment assets	445,005			360,084
Total assets	$	12,500,064		$	12,521,772

Segment assets include an allocation of the carrying value of goodwill. At March 31, 2008, goodwill is allocated as follows: (i) senior housing—$30.5 million, (ii) life science—$1.4 million, (iii) medical office—$11.4 million, (iv) hospital—$5.1 million, and (v) skilled nursing—$3.3 million.

(15)Derivative Instruments

The Company uses derivative instruments as hedges to manage risk associated with interest rate fluctuations on anticipated transactions and recognized obligations. The Company does not use derivative instruments for trading purposes.

The primary risks associated with derivative instruments are market and credit risk. Market risk is defined as the potential for loss in the value of the derivative due to adverse changes in market prices (interest rates). The use of derivative financial instruments allows the Company to manage the risk of increases in interest rates with respect to the effects these fluctuations would have on earnings and cash flows.

Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation under the contract. The Company does not obtain collateral to support derivative instruments subject to credit risk but monitors the credit standing of the counterparties, primarily global institutional banks. The Company does not anticipate non-performance by any of the counterparties to its derivative contracts. However, should a counterparty fail to perform, the Company would incur a financial loss to the extent that the derivative contract was in an asset position.

During October and November 2007, the Company entered into two forward-starting interest rate swap contracts with notional amounts aggregating $900 million. Both contracts are required to be cash settled by June 30, 2008. The interest rate swap contracts are designated in qualifying, cash flow hedging relationships, to hedge its exposure to fluctuations in the benchmark interest rate component of interest payments on forecasted unsecured, fixed-rate debt expected to be issued in 2008. At March 31, 2008, the fair value of the two contracts were $35.1 million and $16.6 million, and are included in accounts payable and accrued liabilities. All components of the forward-starting interest rate swap contracts were included in the assessment and measurement of hedge effectiveness. No amounts were reclassified from accumulated other comprehensive income during the current fiscal period.

26

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table summarizes the Company’s outstanding interest rate swap contracts as of March 31, 2008 (dollars in thousands):

Date Entered	Effective Date	Swap End Date(2)	Pay Fixed Rate		Receive Floating Rate Index	Notional Amount		Fair Value
July 13, 2005	July 19, 2005	July 15, 2020	3.820	%	BMA Swap Index	$	45,600	$	(1,640	)
October 24, 2007	June 30, 2008(1)	June 30, 2018	4.999		3 Month LIBOR	500,000		(35,139		)
November 29, 2007	June 30, 2008(1)	June 30, 2018	4.648		3 Month LIBOR	400,000		(16,565		)
Total						$	945,600	$	(53,344	)

(1)At the effective date, the Company is mandatorily required to cash settle the forward-starting interest rate swap at fair value.

(2)Swap end date represents the outside date of the interest rate swap for the purpose of establishing its fair value.

(16)Supplemental Cash Flow Information

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Supplemental cash flow information:
Interest paid, net of capitalized interest and other	$	123,715		$	81,005
Taxes paid	51			—
Supplemental schedule of non-cash investing activities:
Capitalized interest	9,362			95
Accrued construction costs	(1,248		)	—
Real estate exchanged in real estate acquisitions	—			35,205
Supplemental schedule of non-cash financing activities:
Mortgages assumed with real estate acquisitions	4,892			—
Restricted stock issued	106			102
Vesting of restricted stock units	131			111
Cancellation of restricted stock	(2		)	(23		)
Conversion of non-managing member units into common stock	23,922			3,315
Non-managing member units issued in connection with acquisitions	—			180,698
Unrealized gains (losses) on available for sale securities and derivatives designated as cash flow hedges	(54,141		)	1,279

See also discussions of the SEUSA acquisition and HCP Ventures II, in Notes 3 and 8, respectively.

(17)Earnings Per Common Share

The Company computes earnings per share in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per common share is computed by dividing net income applicable to common shares by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated by including the effect of dilutive securities. Options to purchase approximately 1.9 million shares of common stock that had an exercise price in excess of the average market price of the common stock during the three months ended March 31, 2008 were not included because they are not dilutive. Additionally, 9.5 million shares issuable upon conversion of 7.0 million DownREIT units during the three months ended March 31, 2008, were not included since they are anti-dilutive.

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HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table illustrates the computation of basic and diluted earnings per share for the three months ended (dollars in thousands, except per share and share amounts):

	March 31,
	2008			2007
Numerator
Income from continuing operations	$	33,218		$	24,230
Preferred stock dividends	(5,283		)	(5,283		)
Income from continuing operations applicable to common shares	27,935			18,947
Discontinued operations	17,194			121,058
Net income applicable to common shares	$	45,129		$	140,005
Denominator
Basic weighted average common shares	216,773			204,000
Dilutive stock options and restricted stock	890			1,909
Diluted weighted average common shares	217,663			205,909
Basic earnings per common share
Income from continuing operations	$	0.13		$	0.09
Discontinued operations	0.08			0.60
Net income applicable to common stockholders	$	0.21		$	0.69
Diluted earnings per common share
Income from continuing operations	$	0.13		$	0.09
Discontinued operations	0.08			0.59
Net income applicable to common shares	$	0.21		$	0.68

(18) Fair Value Measurements

The following table illustrates the Company’s fair value measurements of its financial assets and liabilities as classified in the fair value hierarchy, associated unrealized and realized gains and losses, as well as purchases, sales, issuances, settlements (net) or transfers out of a Level 3 classification. Realized gains and losses are recorded in interest and other income, net on the Company’s consolidated statement of income.

	Fair Value						Change in Unrealized			Realized
Fair Value Hierarchy	March 31, 2008			December 31, 2007			Gain/(Loss)(1)			Gain/(Loss)(1)
Level 1
Equity securities	$	8,344		$	13,933		$	(5,082	)	$	(113	)
Debt securities	264,563			269,663			(5,100		)	—
Level 2
Debt securities	18,500			19,500			(1,000		)	—
Interest rate swaps(2)	(53,344		)	(10,497		)	(42,847		)	—
Level 3
Warrants(2)	1,785			2,560			—			(775		)

(1)	There were no purchases, sales, issuances, settlements (net) or transfers out of Level III during the three months ended March 31, 2008.
(2)	Interest rate swaps and common stock warrants are valued using observable and unobservable market assumptions, as well as standardized derivative pricing models.

(19) Subsequent Events

In connection with HCP’s addition to the S&P 500 Index on March 28, 2008, to partially satisfy the anticipated demand for shares of the Company’s common stock by index funds, the Company issued 12.5 million shares of its common stock on April 2, 2008. In a separate transaction, the Company issued 4.5 million shares to an active REIT-dedicated institutional investor on April 2, 2008. The net proceeds received from these two offerings in the aggregate were approximately $560 million, which were used to repay a portion of the outstanding indebtedness under the Company’s revolving line of credit facility.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Language Regarding Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q that are not historical factual statements are “forward-looking statements.” We intend to have our forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with those provisions. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectations as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “forecast,” “plan,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof. In addition, we, through our officers, from time to time, make forward-looking oral and written public statements concerning our expected future operations, strategies, securities offerings, growth and investment opportunities, dispositions, capital structure changes, budgets and other developments. Readers are cautioned that, while forward-looking statements reflect our good faith belief and reasonable assumptions based upon current information, we can give no assurance that our expectations or forecasts will be attained. Therefore, readers should be mindful that forward-looking statements are not guarantees of future performance and that they are subject to known and unknown risks and uncertainties that are difficult to predict. As more fully set forth under “Part I, Item 1A. Risk Factors” in the Company’s Annual report on Form 10-K, as amended, for the fiscal year ended December 31, 2007, factors that may cause our actual results to differ materially from the expectations contained in the forward-looking statements include:

(a)	Changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations of our operators, tenants and borrowers;
(b)	Changes in the reimbursement available to our tenants and borrowers by governmental or private payors, including changes in Medicare and Medicaid payment levels and the availability and cost of third party insurance coverage;
(c)	Competition for tenants and borrowers, including with respect to new leases and mortgages and the renewal or rollover of existing leases;
(d)	Availability of suitable properties to acquire at favorable prices and the competition for the acquisition and financing of those properties;
(e)	The ability of our operators, tenants and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan payments to us;
(f)	The financial weakness of some operators and tenants, including potential bankruptcies and downturns in their businesses, which results in uncertainties regarding our ability to continue to realize the full benefit of such operators’ and/or tenants’ leases;
(g)	Changes in national, regional and local economic conditions, including changes in interest rates and the availability and cost of capital;
(h)	The risk that we will not be able to sell or lease properties that are currently vacant, at all or at competitive rates;
(i)	The financial, legal and regulatory difficulties of significant operators of our properties, including Sunrise Senior Living, Inc. and Tenet Healthcare Corporation;
(j)	The risk that we may not be able to integrate acquired businesses successfully or achieve the operating efficiencies and other benefits of acquisitions within expected time-frames or at all, or within expected cost projections;
(k)	The ability to obtain financing necessary to consummate acquisitions or on favorable terms; and
(l)	The potential impact of existing and future litigation matters, including related developments.

Except as required by law, we undertake no, and hereby disclaim any, obligation to update any forward-looking statements, whether as a result of new information, changed circumstances or otherwise.

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The information set forth in this Item 2 is intended to provide readers with an understanding of our financial condition, changes in financial condition and results of operations. We will discuss and provide our analysis in the following order:

·Executive Summary

·2008 Transaction Overview

·Dividends

·Critical Accounting Policies

·Results of Operations

·Liquidity and Capital Resources

·Off-Balance Sheet Arrangements

·Contractual Obligations

·Inflation

·Recent Accounting Pronouncements

Executive Summary

We are a self-administered Maryland corporation organized to qualify as a REIT that, together with our consolidated subsidiaries, invests primarily in real estate serving the healthcare industry in the United States. We acquire, develop, lease, dispose and manage healthcare real estate and provide mortgage and specialty financing to healthcare providers. At March 31, 2008, our real estate portfolio, excluding assets held for sale but including mortgage loans and properties owned by joint ventures, consisted of interests in 721 facilities.

Investment Strategy

Our business strategy is based on three principles: (i) opportunistic investing; (ii) portfolio diversification; and (iii) conservative financing. We actively redeploy capital from investments with lower return potential into assets with higher return potential and recycle capital from shorter-term to longer-term investments. We make investments where the expected risk-adjusted return exceeds our cost of capital and strive to leverage our operator, tenant and other business relationships.

Our strategy contemplates acquiring and developing properties on terms that are favorable to us. We attempt to structure transactions that are tax-advantaged and mitigate risks in our underwriting process. Generally, we prefer larger, more complex private transactions that leverage our management team’s experience and our infrastructure.

We follow a disciplined approach to enhancing the value of our existing portfolio, including ongoing evaluation of potential disposition of properties that no longer fit our strategy. During the three months ended March 31, 2008, we sold four properties for $30 million. At March 31, 2008, we had 33 properties with a carrying amount of $248 million classified as held for sale.

We primarily generate revenue by leasing healthcare properties under long-term leases. Most of our rents and other earned income from leases are received under triple-net leases or leases that provide for substantial recovery of operating expenses; however, some of our MOB and life science leases are structured as gross or modified gross leases. Accordingly, for such MOBs and life science facilities we incur certain property operating expenses, such as real estate taxes, repairs and maintenance, property management fees, utilities and insurance. Our growth depends, in part, on our ability to (i) increase rental income and other earned income from leases by increasing rental rates and occupancy levels; (ii) maximize tenant recoveries given underlying lease structures; and (iii) control operating and other expenses. Our operations are impacted by property specific, market specific, general economic and other conditions.

Access to external capital on favorable terms is critical to the success of our strategy. Generally, we attempt to match the long-term duration of most of our investments with long-term fixed-rate financing. At March 31, 2008, 38% of our consolidated debt is at variable interest rates, which includes $1.35 billion for the outstanding balance of the bridge loan that was used to finance our acquisition of Slough Estates USA Inc. (“SEUSA”). We intend to maintain an investment grade rating on our senior debt securities and manage various capital ratios and amounts within appropriate parameters. As of March 31, 2008, we had a credit rating of Baa3 (stable) from Moody’s, BBB (negative outlook) from S&P and BBB (stable) from Fitch on our senior unsecured debt securities, and Ba1 (stable) from Moody’s, BBB- (negative outlook) from S&P and BBB- (stable) from Fitch on our preferred securities.

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Access to capital markets impacts our ability to refinance existing indebtedness as it matures and fund future acquisitions and development through the issuance of additional securities. Our ability to access capital on favorable terms is dependent on various factors, including general market conditions, interest rates, credit ratings on our securities, perception of our potential future earnings and cash distributions, and the market price of our capital stock.

2008 Transaction Overview

Investment Transactions

During the three months ended March 31, 2008, we sold four properties for approximately $30 million. These sales were made from the following segments: (i) 90% skilled nursing, and (ii) 10% senior housing.

In April 2008, we sold 17 properties for approximately $306 million. These sales were made from the following segments: (i) 95% hospital, and (ii) 5% senior housing.

During the three months ended March 31, 2008, we acquired a senior housing facility for $11 million and funded construction and other capital projects aggregating to $49 million, primarily in our life science segment.

Financing Transactions

In connection with HCP’s addition to the S&P 500 Index on March 28, 2008, to partially satisfy the anticipated demand for shares of our common stock by index funds, we issued 12.5 million shares of our common stock on April 2, 2008. In a separate transaction, we issued 4.5 million shares to an active REIT-dedicated institutional investor on April 2, 2008. The net proceeds we received from these two offerings in the aggregate were approximately $560 million, which were used to repay a portion of our outstanding indebtedness under our revolving line of credit facility.

Dividends

On April 24, 2008, we announced that our Board declared a quarterly common stock cash dividend of $0.455 per share. The common stock dividend will be paid on May 19, 2008 to stockholders of record as of the close of business on May 5, 2008.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, 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. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our financial statements. For a description of the risks associated with our critical accounting policies, see “Risk Factors—Risks Related to Our Business” as included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2007. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain.

Results of Operations

We evaluate our business and allocate resources among our five business segments: (i) senior housing, (ii) life science, (iii) medical office, (iv) hospital, and (v) skilled nursing. Under the senior housing, life science, hospital and skilled nursing segments, we invest primarily in single operator or tenant properties through the acquisition and development of real estate, secured financing, mezzanine financing and investment in marketable debt securities of operators in these sectors. Under the medical office segment, we invest through acquisition and secured financing in MOBs that are leased under gross or modified gross leases, generally to multiple tenants, and which generally require a greater level of property management. The acquisition of SEUSA on August 1, 2007 resulted in a change to our reportable segments. Prior to the SEUSA acquisition, we operated through two reportable segments—triple-net leased and medical office buildings. The senior housing, life science, hospital and skilled nursing segments were previously aggregated under our triple-net leased segment. SEUSA’s results are included in our consolidated financial statements from the date of acquisition of August 1, 2007. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 to the Condensed Consolidated Financial Statements).

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We completed our acquisition of SEUSA on August 1, 2007 and SEUSA’s results of operations are reflected in our consolidated financial statements from that date. We expect increases in revenues, expenses and interest income from a full year of results from our SEUSA acquisition and mezzanine loan investments for the remaining periods of 2008 relative to the comparable periods prior to the date that the investments were made in 2007. In addition, we expect that the 17 million common shares we issued on April 2, 2008 will have a dilutive effect on per share amounts in future periods.

Our financial results for the three months ended March 31, 2008 and 2007 are summarized as follows:

Comparison of the Three Months Ended March 31, 2008 to the Three Months Ended March 31, 2007

Rental and related revenues.

	Three Months Ended March 31,				Change
Segments	2008		2007		$			%
	(dollars in thousands)
Senior housing	$	71,302	$	67,875	$	3,427		5	%
Life science	43,229		4,825		38,404			NM	(1)
Medical office	68,068		76,885		(8,817		)	(11	)
Hospital	21,895		19,851		2,044			10
Skilled nursing	8,793		8,497		296			3
Total	$	213,287	$	177,933	$	35,354		20	%

(1)		Percentage change not meaningful.
	·	Senior housing. Approximately $0.7 million of the increase in senior housing rental and related revenues relates to the additive effect of our acquisitions during 2007 and 2008. The remaining increase in senior housing rental and related revenues primarily relates to rent escalations and resets.
		Included in senior housing rental and related revenues were facility-level operating revenues for five senior housing properties that were previously leased on a triple-net basis. From time to time, tenants default on their leases, which causes us to take possession of the operations of the facility. We contract with third-party managers to manage these properties until a replacement tenant can be identified or the property can be sold. The operating revenues and expenses for these properties are included in senior housing rental and related revenues and operating expenses, respectively. The increase in reported revenues for these facilities of $0.4 million, to $3.1 million for the three months ended March 31, 2008, was primarily due to an increase in overall occupancy of such properties.
	·	Life science. Life science rental and related revenues increased primarily as a result of our acquisition of SEUSA on August 1, 2007.
	·	Medical office. Medical office rental and related revenues for the three months ended March 31, 2007 includes $13.3 million from assets that are no longer consolidated and are now in our HCP Ventures IV, LLC joint venture (“HCP Ventures IV”). On April 30, 2007, we sold an 80% interest in Ventures IV and began accounting for our retained interest as an equity method investment. However, due to our continued interest in Ventures IV, 2007 results of operations have not been reclassified to discontinued operations. The decrease in medical office rental and related revenues resulting from Ventures IV was primarily offset by the additive effect of our Medical City Dallas campus acquisition on February 9, 2007.
	·	Hospital. The increase in hospital rental and related revenues primarily relates to the additive effect of our Medical City Dallas campus acquisition on February 9, 2007.

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Tenant recoveries.

	Three Months Ended March 31,					Change
Segments	2008			2007		$			%
			(dollars in thousands)
Life science	$	9,382		$	739	$	8,643		NM	(1)
Medical office	12,579			13,715		(1,136		)	(8	)%
Hospital	488			29		459			NM	(1)
Total	$	22,449		$	14,483	$	7,966		55	%

(1) Percentage change not meaningful.

· Life science. Life science tenant recoveries increased primarily as a result of our acquisition of SEUSA on August 1, 2007.

· Medical office. Medical office tenant recoveries for the three months ended March 31, 2007 includes $2.8 million from assets that are no longer consolidated and are now in HCP Ventures IV, which have not been reclassified to discontinued operations. The decrease in medical office tenant recoveries resulting from Ventures IV was partially offset by the additive effect of our Medical City Dallas campus acquisition on February 9, 2007.

· Hospital. The increase in hospital tenant recoveries primarily relates to the additive effect of our Medical City Dallas campus acquisition on February 9, 2007.

Investment management fee income.  Investment management fee income decreased by $4.8 million to $1.5 million for the three months ended March 31, 2008. The decrease in investment management fee income was primarily due to the one-time acquisition fees of $5.4 million earned from our HCP Ventures II unconsolidated joint venture on January 5, 2007. The decrease was partially offset by the increase in management fees related to HCP Ventures IV.

Interest expense.  Interest expense increased $17.6 million to $96.4 million for the three months ended March 31, 2008. The increase was primarily due to (i) $12 million of interest expense from the issuance of $1.1 billion of senior unsecured notes during 2007, and (ii) $19 million from the increase in outstanding indebtedness under our bridge loan and line of credit facilities, and the related amortization of debt issuance costs. The increase in interest expense was partially offset by (i) a $9 million increase in the amount of capitalized interest relating to the increase in assets under development primarily from our acquisition of SEUSA, and (ii) $5 million related to a decrease in our outstanding mortgage debt resulting primarily form the deconsolidation of HCP Ventures IV and scheduled maturities.

The table below sets forth information with respect to our debt, excluding premiums and discounts (dollars in thousands):

	As of March 31,
	2008			2007
Balance:
Fixed rate	$	4,697,503		$	4,315,568
Variable rate	2,889,247			772,088
Total	$	7,586,750		$	5,087,656
Percent of total debt:
Fixed rate	62		%	85		%
Variable rate	38		%	15		%
Total	100		%	100		%
Weighted average interest rate at end of period:
Fixed rate	6.22		%	6.10		%
Variable rate	4.06		%	6.16		%
Total weighted average rate	5.39		%	6.11		%

Depreciation and amortization expense.  Depreciation and amortization expense increased $21.0 million to $79.3 million for the three months ended March 31, 2008. Approximately $18.6 million of the increase relates to the SEUSA acquisition. The remaining increase in depreciation and amortization primarily relates to the additive effect of our other acquisitions in 2007.

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Operating expenses.

	Three Months Ended March 31,					Change
Segments	2008			2007		$			%
			(dollars in thousands)
Senior housing	$	3,637		$	4,491	$	(854	)	(19	)%
Life science	11,684			1,122		10,562			NM	(1)
Medical office	35,240			36,352		(1,112		)	(3	)
Hospital	867			251		616			NM	(1)
Skilled nursing	—			2		(2		)	(100	)
Total	$	51,428		$	42,218	$	9,210		22	%

(1)Percentage change not meaningful.

Operating expenses are predominantly related to MOB and life science properties where we incur the expenses and recover a portion of those expenses from the tenants. The presentation of expenses as operating or general and administrative is based on the underlying nature of the expense. Periodically, we review the classification of expenses between categories and make revisions based on changes in the underlying nature of the expense.

·Senior housing.  Included in operating expenses for the three months ended March 31, 2007 is $1.3 million related to a vacant property located in Florida, which was leased as of March 31, 2008 on a triple-net basis. During 2008, we did not incur operating expenses on this property.

Included in operating expenses are facility-level operating expenses for five senior housing properties that were previously leased on a triple-net basis. From time to time, tenants default on their leases, which causes us to take possession of the operations of the facility. We contract with third-party managers to manage these properties until a replacement tenant can be identified or the property can be sold. The operating revenues and expenses for these properties are included in healthcare rental revenues and operating expenses, respectively. The increase in reported operating expenses for these facilities of $0.2 million, to $3.4 million for the three months ended March 31, 2008, was primarily due to an increase in the overall occupancy of such properties.

·Life science.  Life science operating expenses increased primarily as a result of our acquisition of SEUSA on August 1, 2007.

·Medical office.  Medical office operating expenses for the three months ended March 31, 2007 includes $5.3 million from assets that are no longer consolidated and are now in HCP Ventures IV, which have not been reclassified to discontinued operations. The decrease in medical office tenant recoveries resulting from Ventures IV was partially offset by the additive effect of our Medical City Dallas campus acquisition on February 9, 2007.

General and administrative expenses.  General and administrative expenses increased $0.4 million to $20.5 million for the three months ended March 31, 2008. Included in general and administrative expenses are merger and integration-related expenses associated with the SEUSA acquisition of $84,000 for the three months ended March 31, 2008 compared to $5.7 million associated with the CNL Retirement Properties, Inc. merger for the three months ended March 31, 2007. Excluding the merger and integration-related expenses, the increase in general and administrative expenses was primarily due to various items, including increased compensation related expenses, and professional and legal fees.

The information set forth under the heading “Legal Proceedings” of Note 12 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, is incorporated herein by reference.

Interest and other income, net.  For the three months ended March 31, 2008, interest and other income, net increased $20.9 million, to $35.3 million. This increase was primarily related to $22.7 million of interest income from our HCR ManorCare mezzanine loan investment made in December 2007 and was partially offset by a decrease in gains from the sale of marketable equity securities. For a more detailed description of our mezzanine loan investment and marketable securities, see Note 7 and Note 10, respectively, of the Condensed Consolidated Financial Statements and Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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Discontinued operations.  The decrease of $103.9 million in income from discontinued operations to $17.2 million for the three months ended March 31, 2008 compared to $121.1 million for the comparable period in the prior year is primarily due to a decrease in gains on real estate dispositions of $93.9 million. During the three months ended March 31, 2008, we sold four properties for $29.7 million, as compared to 27 properties for $170.0 million in the year ago period. Discontinued operations for the three months ended March 31, 2008 included 37 properties compared to 134 properties for the three months ended March 31, 2007.

Liquidity and Capital Resources

Our principal liquidity needs are to: (i) fund normal operating expenses, (ii) repay the remaining $1.35 billion of SEUSA acquisition-related borrowings, (iii) meet debt service requirements, including $300 million of our senior unsecured notes maturing in 2008 and outstanding borrowings on our line of credit, (iv) fund capital expenditures, including tenant improvements and leasing costs, (v) fund acquisition and development activities, and (vi) make minimum distributions required to maintain our REIT qualification under the Code. We believe these needs will be satisfied using cash flows generated by operations, provided by financing activities, sales of assets and/or contributions of assets to joint ventures during the next twelve months.

Access to capital markets impacts our cost of capital and our ability to refinance maturing indebtedness, as well as to fund future acquisitions and development through the issuance of additional securities or secured debt. Our ability to access capital on favorable terms is dependent on various factors, including general market conditions, interest rates, credit ratings on our securities, perception of our potential future earnings and cash distributions and the market price of our capital stock. As of March 31, 2008, we had a credit rating of Baa3 (stable) from Moody’s, BBB (negative outlook) from S&P and BBB (stable) from Fitch on our senior unsecured debt securities, and Ba1(stable) from Moody’s, BBB- (negative outlook) from S&P and BBB- (stable) from Fitch on our preferred securities.

We strive to maintain investment grade credit ratings on our senior debt securities. From time to time, we have financed significant entity level acquisitions such as CRP and SEUSA using shorter term bridge and term loan facilities with the intent to repay or refinance these borrowings with cash flows generated by our operations and the proceeds from future asset sales, joint venture contributions, and future debt and equity capital market transactions. This results in increased leverage ratios until such financing is repaid or refinanced. Our outstanding bridge loan which funded our acquisition of SEUSA, as well as our revolving line of credit facility, have financial covenants that become more restrictive over their terms. We are required to manage our leverage and capital structure to maintain compliance with such covenants.

Net cash provided by operating activities was $132 million and $87 million for the three months ended March 31, 2008 and 2007, respectively. Cash flows from operations reflect increased revenues partially offset by higher costs and expenses, and fluctuations in receivables, payables, accruals and deferred revenue. Our cash flows from operations are dependent upon the occupancy level of multi-tenant buildings, rental rates on leases, our tenants’ performance on their lease obligations, the level of operating expenses and other factors.

Net cash used in investing activities was $21 million during the three months ended March 31, 2008 and principally reflects the net effect of: (i) $43 million used to fund acquisitions and development of real estate, and (ii) $30 million received from the sales of facilities. During the three months ended March 31, 2008 and 2007, we used $18 million and $8 million, respectively, to fund lease commissions and tenant and capital improvements.

Net cash used in financing activities was $53 million for the three months ended March 31, 2008 and included: (i) payments of common and preferred dividends aggregating $104 million, (ii) repayment of our mortgage debt aggregating $12 million, and (iii) distributions to minority interest holders of $7 million. The amount of cash used in financing activities was partially offset by proceeds of $67 million of net borrowings under our line of credit facility. In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income to our stockholders. Accordingly, we intend to continue to make regular quarterly distributions to holders of our common and preferred stock.

On April 2, 2008, we raised approximately $560 million in capital through the issuance of 17 million shares of our common stock. The net proceeds from the issuances of common stock were used to partially repay outstanding indebtedness under our revolving line of credit facility.

At March 31, 2008, we held approximately $26 million in deposits and $38 million in irrevocable letters of credit from commercial banks securing tenants’ lease obligations and borrowers’ loan obligations. We may draw upon the letters of credit or depository accounts if there are defaults under the related leases or loans. Amounts available under letters of credit could change based upon facility operating conditions and other factors, and such changes may be material.

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Debt

Bank line of credit and bridge loan.  Our revolving line of credit facility has a $1.5 billion capacity, matures on August 1, 2011 and can be increased to $2.0 billion subject to certain conditions, including increased commitments by lenders. This revolving line of credit facility accrues interest at a rate per annum equal to LIBOR plus a margin ranging from 0.325% to 1.00%, depending upon our debt ratings. We pay a facility fee on the entire revolving commitment ranging from 0.10% to 0.25%, depending upon our debt ratings. The revolving line of credit facility contains a negotiated rate option, whereby the lenders participating in the line of credit facility bid on the interest to be charged, which may result in a reduced interest rate, and is available for up to 50% of borrowings. Based on our debt ratings on March 31, 2008, the margin on the revolving line of credit facility was 0.55% and the facility fee was 0.15%. At March 31, 2008, we had $1.0 billion outstanding under this credit facility with a weighted average effective interest rate of 4.28% and $481 million of available, unused borrowing capacity. In April 2008, we made aggregate payments of $919 million, reducing the outstanding balance of the revolving line of credit facility to $100 million at April 28, 2008.

At March 31, 2008, the outstanding balance of our bridge loan was $1.35 billion. Our bridge loan has an initial maturity date of July 31, 2008, and an extended maturity date of July 31, 2009 upon the exercise by us of two optional 6-month extension options, subject to debt covenant compliance, and extension fees. This bridge loan accrues interest at a rate per annum equal to LIBOR plus a margin ranging from 0.425% to 1.25%, depending upon our debt ratings (weighted average effective interest rate of 4.0% at March 31, 2008). Based on our debt ratings on March 31, 2008, the margin on the bridge loan facility was 0.70%

Our revolving line of credit facility and bridge loan contain certain financial restrictions and other customary requirements. Among other things, these covenants, using terms defined in the agreement, limit the ratio of (i) Consolidated Total Indebtedness to Consolidated Total Asset Value to 70%, (ii) Secured Debt to Consolidated Total Asset Value to 30%, and (iii) Unsecured Debt to Consolidated Unencumbered Asset Value to 80%. The agreement also requires that we maintain (i) a Fixed Charge Coverage ratio, as defined in the agreement, of 1.50 times, and (ii) a formula-determined Minimum Consolidated Tangible Net Worth. A portion of these financial covenants become more restrictive through the period ending March 31, 2009 and ultimately (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 65%, and (iii) require a Fixed Charge Coverage ratio, as defined in the agreement, of 1.75 times. At March 31, 2008, we were in compliance with each of these restrictions and requirements of our credit revolving credit facility and bridge loan.

Senior unsecured notes.  At March 31, 2008, we had $3.8 billion in aggregate principal amount of senior unsecured notes outstanding. Interest rates on the notes ranged from 4.88% to 7.07% with a weighted average rate of 5.99% at March 31, 2008. Discounts and premiums are amortized to interest expense over the term of the related debt.

Mortgage debt.  At March 31, 2008, we had $1.3 billion in mortgage debt secured by 197 healthcare facilities with a carrying amount of $2.5 billion. Interest rates on the mortgage notes ranged from 2.67% to 9.32% with a weighted average rate of 5.95% at March 31, 2008.

Other debt.  At March 31, 2008, we had $106.7 million of non-interest bearing Life Care Bonds at two of our CCRCs and non-interest bearing occupancy fee deposits at another of our senior housing facilities, all of which were payable to certain residents of the facilities (collectively “Life Care Bonds”). At March 31, 2008, $39.8 million of the Life Care Bonds were refundable to the residents upon the resident moving out or to their estate upon death, and $66.9 million of the Life Care Bonds were refundable after the unit is successfully remarketed to a new resident.

Derivative Instruments.  During October and November 2007, we entered into two forward-starting interest rate swap contracts with notional amounts aggregating $900 million to hedge the benchmark interest rate component of anticipated interest payments resulting from forecasted issuances of unsecured, fixed rate debt. The derivative instruments have a mandatory cash settlement date of June 30, 2008. We expect to settle the forward-starting interest rate swap contracts in cash at the earlier of our fixed rate financing or June 30, 2008. If the fixed rate of the derivative instrument is greater than the current swap rate at the time we settle each contract, we would be required to make a payment to the contract counterparty. However, if the fixed rate of the derivative instrument is less than the current swap rate at the time we cash settle each contract, we would receive a payment from the contract counterparty. For a more detailed description of our derivative financial instruments, see Note 15 of the Condensed. Consolidated Financial Statements and Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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Debt Maturities

The following table summarizes our stated debt maturities and scheduled principal repayments, excluding debt premiums and discounts, at March 31, 2008 (in thousands):

Year	Amount
2008 (Nine months)	$	491,489
2009	1,621,323
2010	500,204
2011	1,448,564
2012	352,277
Thereafter	3,172,893
	$	7,586,750

Equity

During the three months ended March 31, 2008, we issued approximately 174,000 shares of our common stock under our Dividend Reinvestment and Stock Purchase Plan, at an average price per share of $29.09, for aggregate proceeds of $5.1 million. We also received $1.3 million in proceeds from stock option exercises. At March 31, 2008, stockholders’ equity totaled $4.0 billion and our equity securities had a market value of $7.6 billion.

On April 2, 2008, we issued 17 million shares of our common stock and used the net proceeds received of approximately $560 million to repay a portion of our outstanding indebtedness under our revolving line of credit facility.

At March 31, 2008, there were a total of 7.0 million non-managing member LLC Units (“DownREIT units”) outstanding in seven limited liability companies in which we are the managing member: (i) HCPI/Tennessee, LLC; (ii) HCPI/Utah, LLC; (iii) HCPI/Utah II, LLC; (iv) HCPI/Indiana, LLC; (v) HCP DR California, LLC; (vi) HCP DR Alabama, LLC; and (vii) HCP DR MCD, LLC. The DownREIT units are redeemable for an amount of cash approximating the then-existing market value of shares of our common stock or, at our option, shares of our common stock (subject to certain adjustments, such as stock splits and reclassifications). In April 2008, as a result of the non-managing member converting its remaining HCPI/Indiana, LLC DownREIT units, HCPI/Indiana, LLC became a wholly-owned subsidiary.

Off-Balance Sheet Arrangements

We own interests in certain unconsolidated joint ventures, including HCP Ventures II, HCP Ventures III, LLC and HCP Ventures IV, as described under Note 8 to the Condensed Consolidated Financial Statements. Except in limited circumstances, our risk of loss is limited to our investment in the joint venture and any outstanding loans receivable. In addition, we have certain properties which serve as collateral for debt that is owed by a previous owner of certain of our facilities, as described under Note 12 to the Condensed Consolidated Financial Statements. Our risk of loss for these certain properties is limited to the outstanding debt balance plus penalties, if any. We have no other material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources except those described below under “Contractual Obligations.”

Contractual Obligations

The following table summarizes our material contractual payment obligations and commitments at March 31, 2008 (in thousands):

	Total		Less than One Year		2009-2010		2011-2012		More than Five Years
Senior unsecured notes and mortgage debt	$	5,111,473	$	384,812	$	771,527	$	782,241	$	3,172,893
Development commitments(1)	77,556		77,556		—		—		—
Revolving line of credit	1,018,600		—		—		1,018,600		—
Bridge loan	1,350,000		—		1,350,000		—		—
Ground and other operating leases	208,074		3,472		9,683		9,800		185,119
Other debt	106,677		106,677		—		—		—
Interest	1,914,389		267,191		569,631		437,950		639,617
Total	$	9,786,769	$	839,708	$	2,700,841	$	2,248,591	$	3,997,629

(1)Represents construction and other commitments for developments in progress.

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Inflation

Our leases often provide for either fixed increases in base rents or indexed escalators, based on the Consumer Price Index or other measures, and/or additional rent based on increases in the tenants’ operating revenues. Substantially all of our MOB leases require the tenant to pay a share of property operating costs such as real estate taxes, insurance and utilities. Substantially all of our senior housing, life science, skilled nursing and hospital leases require the operator or tenant to pay all of the property operating costs or reimburse us for all such costs. We believe that inflationary increases in expenses will be offset, in part, by the operator or tenant expense reimbursements and contractual rent increases described above.

Recent Accounting Pronouncements

See Note 2 to the Condensed Consolidated Financial Statements for the impact of recent accounting pronouncements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk.  At March 31, 2008, we were exposed to market risks related to fluctuations in interest rates on approximately: (i) $1.0 billion of variable rate line of credit borrowings, (ii) $1.35 billion of variable rate bridge financing, (iii) $196 million of variable rate mortgage notes payable, (iv) $325 million of variable rate senior unsecured notes, and (v) $1.0 billion of variable rate mezzanine loans receivable. Of the $196 million of variable rate mortgage notes payable outstanding, $46 million has been hedged through interest rate swap contracts. Of our consolidated debt of $7.6 billion at March 31, 2008, excluding the $46 million of variable rate debt where the rates have been swapped to a fixed rate, approximately 38% is at variable interest rates. In April 2008, we made aggregate payments of $919 million, reducing the outstanding balance of our revolving line of credit facility to $100 million at April 28, 2008.

Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt, loans receivable or debt securities unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. Conversely, changes in interest rates on variable rate debt and loans receivable would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. Assuming a one percentage point increase in the interest rate related to the variable-rate debt and variable-rate loans, and assuming no change in the outstanding balances as of March 31, 2008, interest expense, net of interest income, for 2008 would increase by approximately $29 million, or $0.13 per common share on a diluted basis.

We use derivative financial instruments in the normal course of business to manage or hedge interest rate risk. We do not use derivative financial instruments for speculative purposes. Derivatives are recorded on the balance sheet at fair value in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. See Note 15 to the Condensed Consolidated Financial Statements for further information in this regard.

The following table summarizes our interest rate swap contracts outstanding as of March 31, 2008 (dollars in thousands):

Date Entered	Effective Date	Swap End Date(2)	Pay Fixed Rate		Receive Floating Rate Index	Notional Amount		Fair Value
July 13, 2005	July 19, 2005	July 15, 2020	3.820	%	BMA Swap Index	$	45,600	$	(1,640	)
October 24, 2007	June 30, 2008(1)	June 30, 2018	4.999		3 Month LIBOR	500,000		(35,139		)
November 29, 2007	June 30, 2008(1)	June 30, 2018	4.648		3 Month LIBOR	400,000		(16,565		)
Total						$	945,600	$	(53,344	)

(1)At the effective date we are mandatorily required to cash settle the forward-starting interest rate swap at fair value.

(2)Swap end date represents the outside date of the interest rate swap for the purpose of establishing its fair value.

To illustrate the effect of movements in the interest rate markets, we performed a market sensitivity analysis on the noted hedging instruments. To do so, we applied various basis point spreads to the underlying interest rates of the derivative portfolio in order to determine the instruments’ change in fair value. The following table summarizes the analysis performed (dollars in thousands):

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		Effects of Change in Interest Rates
Date Entered	Swap End Date(1)	50 Basis Points		–50 Basis Points			100 Basis Points		–100 Basis Points
July 13, 2005	July 15, 2020	$	1,737	$	(2,886	)	$	4,048	$	(5,197	)
October 24, 2007	June 30, 2018	19,738		(21,065		)	40,139		(41,466		)
November 29, 2007	June 30, 2018	15,847		(16,795		)	32,169		(33,116		)

(1)Swap end date represents the outside date of the interest rate swap for the purpose of establishing its fair value.

We assess the hedged instruments on an ongoing basis to determine whether the derivatives are highly effective in offsetting changes in cash flows associated with the hedged items. If we determine that a portion of these instruments are no longer effective or change the estimated timing of forecasted transactions, we may recognize portions of the fair value of the derivatives in earnings, which could be significant to our results of operations.

Market Risk.  We are directly and indirectly affected by changes in equity and bond markets. We have investments in marketable debt and equity securities classified as available for sale. Gains and losses on these securities are recognized in income when realized and other-than-temporary impairment may be periodically recorded when identified. The initial indicator of impairment for marketable equity securities is a sustained decline in market price below the cost basis recorded for that investment. We consider a variety of factors, such as: the length of time and the extent to which the market value has been less than cost; the issuer’s financial condition, capital strength and near-term prospects; any recent events specific to that issuer and economic conditions of its industry; and our investment horizon in relation to an anticipated near-term recovery in the stock or bond price, if any. At March 31, 2008, the fair value of marketable equity securities was $8.3 million and cost basis, or the new basis for those securities where a realized loss was recorded as a result of an other-than-temporary impairment, was $13.9 million. At March 31, 2008, the fair value of marketable debt securities was $283.1 million, with a cost basis of $275 million. We believe that we have the intent and ability to hold our marketable equity securities that have unrealized losses for a period of time sufficient to allow the anticipated recovery in market value. However, we may determine in future periods, based on the market price of the investments or other factors, that such unrealized losses are other-than-temporary and realize the losses in earnings, which could be significant to our results of operations.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures.  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Also, we have investments in certain unconsolidated entities. Our disclosure controls and procedures with respect to such entities are substantially more limited than those we maintain with respect to our consolidated subsidiaries.

As required by Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2008. Based upon that evaluation, our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting.  There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter to which this report relates that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

The information set forth under the heading “Legal Proceedings” of Note 12 to the Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, is incorporated herein by reference.

Item 1A.  Risk Factors

There are no material changes to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2007. Please refer to those filings for disclosures regarding the risks and uncertainties related to our business.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None.

(b)

None.

(c)

The table below sets forth information with respect to purchases of our common stock made by us or on our behalf or by any “affiliated purchaser,” as such term is defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, during the quarter ended March 31, 2008.

Period Covered	Total Number  Of Shares Purchased(1)	Average Price  Paid Per Share		Total Number Of Shares (Or Units) Purchased As Part Of Publicly Announced Plans Or Programs	Maximum Number (Or Approximate Dollar Value) Of Shares (Or Units) That May Yet Be Purchased Under The Plans Or Programs
January 1-31, 2008	45,678	$	32.26	—	—
February 1-29, 2008	10,174	30.11		—	—
March 1-31, 2008	8,051	31.45		—	—
Total	63,903	$	31.82	—	—

(1)Represents restricted shares withheld under our Amended and Restated 2000 Stock Incentive Plan, as amended, and our 2006 Performance Incentive Plan (collectively, the “Incentive Plans”), to offset tax withholding obligations that occur upon vesting of restricted shares. Our Incentive Plans provide that the value of the shares withheld shall be the closing price of our common stock on the date the relevant transaction occurs.

Item 5.  Other Information

On April 28, 2008, the Company announced the promotion of Thomas M. Klaritch to Executive Vice President—Medical Office Properties, effective May 1, 2008.  Mr. Klaritch joined HCP as Senior Vice President—Medical Office Properties in connection with the Company’s acquisition of MedCap Properties, LLC in October 2003.  Mr. Klaritch replaces Charles A. Elcan who, effective April 30, 2008, is resigning as the Company’s Executive Vice President—Medical Office Properties to pursue entrepreneurial opportunities.  As consideration for his services during 2008, the Company awarded Mr. Elcan a discretionary partial year bonus of $125,000.

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Item 6.  Exhibits

2.1	Agreement and Plan of Merger, dated as of May 1, 2006, by and among HCP, Ocean Acquisition 1, Inc. and CNL Retirement Properties, Inc. (incorporated herein by reference to HCP’s Current Report on Form 8-K (File No. 1-08895), filed May 4, 2006.)
2.2	Share Purchase Agreement, dated as of June 3, 2007, by and between HCP and SEGRO plc (incorporated herein by reference to Exhibit 2.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed June 6, 2007).
3.1	Articles of Restatement of HCP (incorporated by reference herein to Exhibit 3.1 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895), filed October 30, 2007).
3.2	Fourth Amended and Restated Bylaws of HCP (incorporated herein by reference to Exhibit 3.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed September 25, 2006).
3.2.1	Amendment No. 1 to Fourth Amended and Restated Bylaws of HCP (incorporated by reference herein to Exhibit 3.2.1 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895), filed October 30, 2007).
4.1	Indenture, dated as of September 1, 1993, between HCP and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.2 to HCP’s Registration Statement on Form S-3/A (Registration No. 333-86654), filed May 21, 2002).
4.2	Form of Fixed Rate Note (incorporated herein by reference to Exhibit 4.2 to HCP’s Registration Statement on Form S-3 (Registration No. 33-27671), filed March 20, 1989).
4.3	Form of Floating Rate Note (incorporated herein by reference to Exhibit 4.3 to HCP’s Registration Statement on Form S-3 (Registration No. 33-27671), filed March 20, 1989).
4.4	Registration Rights Agreement, dated as of November 20, 1998, by and between HCP and James D. Bremner (incorporated herein by reference to Exhibit 4.8 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 1998). This Exhibit is identical in all material respects to two other documents except the parties thereto. The parties to these other documents, other than HCP, were James P. Revel and Michael F. Wiley.
4.5	Registration Rights Agreement, dated as of January 20, 1999, by and between HCP and Boyer Castle Dale Medical Clinic, L.L.C. (incorporated herein by reference to Exhibit 4.9 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 1998). This Exhibit is identical in all material respects to 13 other documents except the parties thereto. The parties to these other documents, other than HCP, were Boyer Centerville Clinic Company, L.C., Boyer Elko, L.C., Boyer Desert Springs, L.C., Boyer Grantsville Medical, L.C., Boyer-Ogden Medical Associates, LTD., Boyer Ogden Medical Associates No. 2, LTD., Boyer Salt Lake Industrial Clinic Associates, LTD., Boyer-St. Mark’s Medical Associates, LTD., Boyer McKay-Dee Associates, LTD., Boyer St. Mark’s Medical Associates #2, LTD., Boyer Iomega, L.C., Boyer Springville, L.C., and Boyer Primary Care Clinic Associates, LTD. #2.
4.6	Indenture, dated as of January 15, 1997, by and between American Health Properties, Inc. (a company that merged with and into HCP) and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.1 to American Health Properties, Inc.’s Current Report on Form 8-K (File No. 1-08895), filed January 21, 1997).
4.7	First Supplemental Indenture, dated as of November 4, 1999, by and between HCP and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.4 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 1999).
4.8	Registration Rights Agreement, dated as of August 17, 2001, by and among HCP, Boyer Old Mill II, L.C., Boyer- Research Park Associates, LTD., Boyer Research Park Associates VII, L.C., Chimney Ridge, L.C., Boyer-Foothill Associates, LTD., Boyer Research Park Associates VI, L.C., Boyer Stansbury II, L.C., Boyer Rancho Vistoso, L.C., Boyer-Alta View Associates, LTD., Boyer Kaysville Associates, L.C., Boyer Tatum Highlands Dental Clinic, L.C., Amarillo Bell Associates, Boyer Evanston, L.C., Boyer Denver Medical, L.C., Boyer Northwest Medical Center Two, L.C., and Boyer Caldwell Medical, L.C. (incorporated herein by reference to Exhibit 4.12 to HCP’s Annual Report on Form 10-K405 (File No. 1-08895) for the year ended December 31, 2001).

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4.9	Officers’ Certificate pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as Trustee, establishing a series of securities entitled “6.5% Senior Notes due February 15, 2006” (incorporated herein by reference to Exhibit 4.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed February 21, 1996).
4.10	Officers’ Certificate pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as Trustee, establishing a series of securities entitled “67/8% Mandatory Par Put Remarketed Securities due June 8, 2015” (incorporated herein by reference to Exhibit 4.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed July 21, 1998).
4.11	Officers’ Certificate pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as Trustee, establishing a series of securities entitled “6.45% Senior Notes due June 25, 2012” (incorporated herein by reference to Exhibit 4.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed June 25, 2002).
4.12	Officers’ Certificate pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as Trustee, establishing a series of securities entitled “6.00% Senior Notes due March 1, 2015” (incorporated herein by reference to Exhibit 3.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed February 28, 2003).
4.13	Officers’ Certificate pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as Trustee, establishing a series of securities entitled “55/8% Senior Notes due May 1, 2017” (incorporated herein by reference to Exhibit 4.2 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed April 27, 2005).
4.14	Registration Rights Agreement, dated as of October 1, 2003, by and among HCP, Charles Crews, Charles A. Elcan, Thomas W. Hulme, Thomas M. Klaritch, R. Wayne Price, Glenn T. Preston, Janet Reynolds, Angela M. Playle, James A. Croy, John Klaritch as Trustee of the 2002 Trust F/B/O Erica Ann Klaritch, John Klaritch as Trustee of the 2002 Trust F/B/O Adam Joseph Klaritch, John Klaritch as Trustee of the 2002 Trust F/B/O Thomas Michael Klaritch, Jr. and John Klaritch as Trustee of the 2002 Trust F/B/O Nicholas James Klaritch (incorporated herein by reference to Exhibit 4.16 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 2003).
4.15	Amended and Restated Dividend Reinvestment and Stock Purchase Plan, dated as of October 23, 2003 (incorporated herein by reference to HCP’s Registration Statement on Form S-3 (Registration No. 333-10939), dated December 5, 2003).
4.16	Specimen of Stock Certificate representing the 7.25% Series E Cumulative Redeemable Preferred Stock, par value $1.00 per share (incorporated herein by reference to Exhibit 4.1 of HCP’s Registration Statement on Form 8-A12B (File No. 1-08895), filed on September 12, 2003).
4.17	Specimen of Stock Certificate representing the 7.1% Series F Cumulative Redeemable Preferred Stock, par value $1.00 per share (incorporated herein by reference to Exhibit 4.1 of HCP’s Registration Statement on Form 8-A12B (File No. 1-08895), filed on December 2, 2003).
4.18	Form of Fixed Rate Global Medium-Term Note (incorporated herein by reference to Exhibit 4.3 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed November 20, 2003).
4.19	Form of Floating Rate Global Medium-Term Note (incorporated herein by reference to Exhibit 4.4 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed November 20, 2003).
4.20	Registration Rights Agreement, dated as of July 22, 2005, by and among HCP, William P. Gallaher, Trustee for the William P. & Cynthia J. Gallaher Trust, Dwayne J. Clark, Patrick R. Gallaher, Trustee for the Patrick R. & Cynthia M. Gallaher Trust, Jeffrey D. Civian, Trustee for the Jeffrey D. Civian Trust dated August 8, 1986, Jeffrey Meyer, Steven L. Gallaher, Richard Coombs, Larry L. Wasem, Joseph H. Ward, Jr., Trustee for the Joseph H. Ward, Jr. and Pamela K. Ward Trust, Borue H. O’Brien, William R. Mabry, Charles N. Elsbree, Trustee for the Charles N. Elsbree Jr. Living Trust dated February 14, 2002, Gary A. Robinson, Thomas H. Persons, Trustee for the Persons Family Revocable Trust under trust dated February 15, 2005, Glen Hammel, Marilyn E. Montero, Joseph G. Lin, Trustee for the Lin Revocable Living Trust, Ned B. Stein, John Gladstein, Trustee for the John & Andrea Gladstein Family Trust dated February 11, 2003, John Gladstein, Trustee for the John & Andrea Gladstein Family Trust dated February 11, 2003, Francis Connelly, Trustee for the The Francis J & Shannon A Connelly Trust, Al Coppin, Trustee for the Al Coppin Trust, Stephen B. McCullagh, Trustee for the Stephen B. & Pamela McCullagh Trust dated October 22, 2001, and Larry L. Wasem—SEP IRA (incorporated herein by reference to Exhibit 4.24 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended June 30, 2005).

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4.21	Officers’ Certificate pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York, as trustee, setting forth the terms of HCP’s Fixed Rate Medium-Term Notes and Floating Rate Medium-Term Notes (incorporated herein by reference to Exhibit 4.2 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed February 17, 2006).
4.22	Form of Fixed Rate Global Medium-Term Note (incorporated herein by reference to Exhibit 4.3 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed February 17, 2006).
4.23	Form of Floating Rate Global Medium-Term Note (incorporated herein by reference to Exhibit 4.4 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed February 17, 2006).
4.24	Form of Floating Rate Notes Due 2008 (incorporated herein by reference to Exhibit 4.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed September 19, 2006).
4.25	Form of 5.95% Notes Due 2011 (incorporated herein by reference to Exhibit 4.2 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed September 19, 2006).
4.26	Form of 6.30% Notes Due 2016 (incorporated herein by reference to Exhibit 4.3 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed September 19, 2006).
4.27	Form of 5.65% Senior Notes Due 2013 (incorporated herein by reference to Exhibit 4.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed December 4, 2006).
4.28	Form of 6.00% Senior Notes Due 2017 (incorporated herein by reference to Exhibit 4.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed January 22, 2007).
4.29	Officers’ Certificate (including Form of 6.70% Senior Notes Due 2018 as Annex A thereto), dated October 15, 2007, pursuant to Section 301 of the Indenture, dated as of September 1, 1993, by and between HCP and The Bank of New York Trust Company, N.A., as successor trustee to The Bank of New York, establishing a series of securities entitled “6.70% Senior Notes due 2018” (incorporated by reference herein to Exhibit 4.29 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895), filed October 30, 2007).
4.30	Acknowledgment and Consent, dated as of May 11, 2007, by and among Zions First National Bank, KC Gardner Company, L.C., HCPI/Utah, LLC, Gardner Property Holdings, L.C. and HCP (incorporated herein by reference to Exhibit 4.29 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended June 30, 2007).
4.31	Acknowledgment and Consent, dated as of May 11, 2007, by and among Zions First National Bank, KC Gardner Company, L.C., HCPI/Utah II, LLC, Gardner Property Holdings, L.C. and HCP (incorporated herein by reference to Exhibit 4.30 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended June 30, 2007).
10.1	Amendment No. 1, dated as of May 30, 1985, to Partnership Agreement of Health Care Property Partners, a California general partnership, the general partners of which consist of HCP and certain affiliates of Tenet (incorporated herein by reference to Exhibit 10.1 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 1985).
10.2	Second Amended and Restated Directors Stock Incentive Plan (incorporated herein by reference to Appendix A to HCP’s Proxy Statement filed March 21, 1997).*
10.2.1	First Amendment to Second Amended and Restated Directors Stock Incentive Plan, effective as of November 3, 1999 (incorporated herein by reference to Exhibit 10.1 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 1999).*
10.2.2	Second Amendment to Second Amended and Restated Directors Stock Incentive Plan, effective as of January 4, 2000 (incorporated herein by reference to Exhibit 10.17 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 1999).*
10.3	Second Amended and Restated Stock Incentive Plan (incorporated herein by reference to Appendix B to HCP’s Proxy Statement filed March 21, 1997).*
10.3.1	First Amendment to Second Amended and Restated Stock Incentive Plan, effective as of November 3, 1999 (incorporated herein by reference to Exhibit 10.3 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 1999).*
10.4	2000 Stock Incentive Plan, amended and restated effective as of May 7, 2003 (incorporated herein by reference to Annex A to HCP’s Proxy Statement (File No. 1-08895) for the Annual Meeting of Stockholders held on May 7, 2003).*

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10.4.1	First Amendment to Amended and Restated 2000 Stock Incentive Plan (effective as of May 7, 2003) (incorporated herein by reference to Exhibit 10.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed February 3, 2005).*
10.5	Second Amended and Restated Director Deferred Compensation Plan (effective as of October 25, 2007) (incorporated herein by reference to Exhibit 10.5 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).*
10.6	Amended and Restated Limited Liability Company Agreement of HCPI/Indiana, LLC, dated as of November 20, 1998 (incorporated herein by reference to Exhibit 10.15 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 1998).
10.7	Amended and Restated Limited Liability Company Agreement of HCPI/Utah, LLC, dated as of January 20, 1999 (incorporated herein by reference to Exhibit 10.16 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 1998).
10.8	Cross-Collateralization, Cross-Contribution and Cross-Default Agreement, dated as of July 20, 2000, by and between HCP Medical Office Buildings II, LLC and Texas HCP Medical Office Buildings, L.P., for the benefit of First Union National Bank (incorporated herein by reference to Exhibit 10.21 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 2000).
10.9	Cross-Collateralization, Cross-Contribution and Cross-Default Agreement, dated as of August 31, 2000, by and between HCP Medical Office Buildings I, LLC and Meadowdome, LLC, for the benefit of First Union National Bank (incorporated herein by reference to Exhibit 10.22 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 2000).
10.10	Amended and Restated Limited Liability Company Agreement of HCPI/Utah II, LLC, dated as of August 17, 2001 (incorporated herein by reference to Exhibit 10.21 to HCP’s Annual Report on Form 10-K405 (File No. 1-08895) for the year ended December 31, 2001).
10.10.1	Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of HCPI/Utah II, LLC, dated as of October 30, 2001 (incorporated herein by reference to Exhibit 10.22 to HCP’s Annual Report on Form 10-K405 (File No. 1-08895) for the year ended December 31, 2001).
10.11	Amended and Restated Employment Agreement, dated as of April 24, 2008, by and between HCP and James F. Flaherty III.*
10.12	Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, dated as of October 2, 2003 (incorporated herein by reference to Exhibit 10.28 to HCP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
10.12.1	Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, dated as of September 29, 2004 (incorporated herein by reference to Exhibit 10.37 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 2004).
10.12.2	Amendment No. 2 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, dated as of October 29, 2004 (incorporated herein by reference to Exhibit 10.43 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 2004).
10.12.3	Amendment No. 3 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC and New Member Joinder Agreement, dated as of October 19, 2005, by and among HCP, HCPI/Tennessee, LLC and A. Daniel Weyland (incorporated herein by reference to Exhibit 10.14.3 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 2005).
10.12.4	Amendment No. 4 to Amended and Restated Limited Liability Company Agreement of HCPI/Tennessee, LLC, effective as of January 1, 2007 (incorporated herein by reference to Exhibit 10.12.4 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.13	Intentionally omitted.
10.14	Form of Restricted Stock Agreement for employees and consultants, effective as of May 7, 2003, relating to HCP’s Amended and Restated 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.30 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 2003).*

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10.15	Form of Restricted Stock Agreement for directors, effective as of May 7, 2003, relating to HCP’s Amended and Restated 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.31 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 2003).*
10.16	Amended and Restated Executive Retirement Plan, effective as of May 7, 2003 (incorporated herein by reference to Exhibit 10.34 to HCP’s Annual Report on Form 10-K (File No. 1-08895) for the year ended December 31, 2003).*
10.17	Form of CEO Performance Restricted Stock Unit Agreement with five-year installment vesting.*
10.18	Form of CEO Performance Restricted Stock Unit Agreement with three-year cliff vesting.*
10.19	Form of employee Performance Restricted Stock Unit Agreement with five-year installment vesting (incorporated herein by reference to Exhibit 10.19 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).*
10.20	CEO Restricted Stock Unit Agreement, relating to HCP’s Amended and Restated 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.29 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended September 30, 2005).*
10.21	Form of directors and officers Indemnification Agreement (incorporated herein by reference to Exhibit 10.21 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).*
10.22	Form of employee Nonqualified Stock Option Agreement with five-year installment vesting (incorporated herein by reference to Exhibit 10.37 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended June 30, 2006).*
10.23	Form of non-employee director Restricted Stock Award Agreement with five-year installment vesting, (incorporated herein by reference to Exhibit 10.38 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895) for the quarter ended June 30, 2006).*
10.24	Form of Non-Employee Directors Stock-For-Fees Program (incorporated herein by reference to Exhibit 10.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed August 2, 2006).*
10.25	Amended and Restated Stock Unit Award Agreement, dated April 24, 2008, by and between HCP and James F. Flaherty III.*
10.26	$2,750,000,000 Credit Agreement, dated as of August 1, 2007, by and among HCP, the lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed August 6, 2007).
10.27	$1,500,000,000 Credit Agreement, dated as of August 1, 2007, by and among HCP, the lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.2 to HCP’s Current Report on Form 8-K (File No. 1-08895), filed August 6, 2007).
10.28	Change in Control Severance Plan (incorporated herein by reference to Exhibit 10.41 to HCP’s Quarterly Report on Form 10-Q (File No. 1-08895), filed October 30, 2007).*
10.29	2006 Performance Incentive Plan (incorporated herein by reference to Exhibit A to HCP’s Proxy Statement (File No. 1-08895) for the Annual Meeting of Stockholders held on May 11, 2006).*
10.30	Form of Mezzanine Loan Agreement defining HCP’s rights and obligations in connection with its Manor Care investment (incorporated herein by reference to Exhibit 10.30 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.31	Form of Intercreditor Agreement defining HCP’s rights and obligations in connection with its Manor Care investment (incorporated herein by reference to Exhibit 10.31 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.32	Form of Cash Management Agreement defining HCP’s rights and obligations in connection with its Manor Care investment (incorporated herein by reference to Exhibit 10.32 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.33	Form of Pledge and Security Agreement defining HCP’s rights and obligations in connection with its Manor Care investment (incorporated herein by reference to Exhibit 10.33 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).

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10.34	Form of Promissory Note defining HCP’s rights and obligations in connection with its Manor Care investment (incorporated herein by reference to Exhibit 10.34 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.35	Form of Guaranty Agreement defining HCP’s rights and obligations in connection with its Manor Care investment (incorporated herein by reference to Exhibit 10.35 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.36	Form of Assignment and Assumption Agreement entered into in connection with HCP’s Manor Care investment (incorporated herein by reference to Exhibit 10.36 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.37	Form of Omnibus Assignment entered into in connection with HCP’s Manor Care investment (incorporated herein by reference to Exhibit 10.37 to HCP’s Annual Report on Form 10-K, as amended (filed No. 1-08895) for the year ended December 31, 2007).
10.38	Executive Bonus Program (incorporated herein by reference to HCP’s Current Report on Form 8-K (File No. 1-08895), filed January 31, 2008.
31.1	Certification by James F. Flaherty III, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(a).
31.2	Certification by Mark A. Wallace, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(a).
32.1	Certification by James F. Flaherty III, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.
32.2	Certification by Mark A. Wallace, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350.

*     Management Contract or Compensatory Plan or Arrangement.

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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.

Date: April 29, 2008	HCP, INC.
	(Registrant)
	/s/ Mark A. Wallace
	Mark A. Wallace
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)
	/s/ George P. Doyle
	George P. Doyle
	Senior Vice President and Chief Accounting Officer
	(Principal Accounting Officer)

EX-10.11

Exhibit 10.11

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of April 24, 2008 by and between HCP, Inc. (formerly known as Health Care Property Investors, Inc.), a Maryland corporation (together with its successors and assigns, “Corporation”), and JAMES F. FLAHERTY III (“Officer”).

RECITALS

WHEREAS, Corporation and Officer entered into that certain Employment Agreement dated as of October 26, 2005 (the “Prior Employment Agreement”);

 WHEREAS, Corporation and Officer desire to amend and restate the Prior Employment Agreement upon the terms set forth in this Agreement; and

WHEREAS, Corporation desires to continue to employ Officer as its Chief Executive Officer and President, and Officer is willing to accept such employment by Corporation, on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:

AGREEMENT

THE PARTIES AGREE AS FOLLOWS:

1.Duties.  During the Employment Period (as defined below), Officer agrees to be employed by and to serve Corporation as its Chief Executive Officer and President.  Corporation agrees to employ and retain Officer in such capacities.  Officer shall report to Corporation’s Board of Directors (the “Board”) and at all times during the Employment Period shall have powers and duties commensurate with the positions of Chief Executive Officer and President of a company the size and nature of the Corporation.  Officer shall devote substantially all of Officer’s business time, energy, and skill to the performance of Officer’s duties for Corporation and shall hold no other employment.  Nothing herein shall preclude Officer from serving on (and receiving compensation for) boards of directors of other for-profit business entities as the Board approves in writing, which approval shall not be unreasonably withheld or engaging in a reasonable level of charitable activities and community affairs, including serving on charitable, community or educational boards or from managing his personal and family investments provided that such activities do not materially interfere with the effective discharge of his duties and responsibilities to Corporation.  For purposes of clarity, on May 4, 2007, the Board approved Officer’s service on the University of Notre Dame Board of Trustees.

2.Term of Employment.

(a)Definitions.  For purposes of this Agreement the following terms shall have the following meanings:

(i)“Termination For Cause” shall mean termination by the Board of Officer’s employment with Corporation by reason of Officer’s: (A) willful and continued failure to substantially perform his duties with Corporation after a written demand for substantial performance is delivered to Officer by the Board, which demand, based on a good faith determination of the Board after reasonable inquiry, specifically identifies the manner in which the Board believes that Officer has not substantially performed his duties (except for any such failure resulting from his incapacity due to physical or mental illness or any such actual or anticipated failure after Officer’s issuance of a Notice of Termination (as defined in Section 2(a)(viii)) either (1) for Good Reason (as defined in Section 2(a)(iii), or (2) in connection with a Covered Resignation (as defined in Section 2(a)(iv)), (B) willful and continued failure to substantially follow and comply with the specific and lawful directives of the Board, as reasonably determined by the Board after a written demand for substantial performance is delivered to Officer by the Board, which demand, based on a good faith determination of the Board after reasonable inquiry, specifically identifies the manner in which the Board believes that Officer has not substantially performed his duties (except for any such failure resulting from Officer’s incapacity due to physical or mental illness or any such actual or anticipated failure after his issuance of a Notice of Termination for Good Reason or in connection with a Covered Resignation), (C) willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to Corporation, or (D) willful engagement in illegal conduct or gross misconduct, in each case which is materially and demonstrably injurious to Corporation; provided, however, that Officer’s employment shall not be deemed to have been terminated in a Termination For Cause if such termination took place as a result of any act or omission believed by Officer in good faith to have been in the best interests of Corporation.  Notwithstanding the foregoing, Officer shall not be deemed to have been terminated in a Termination for Cause unless and until there shall have been delivered to Officer a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board (after reasonable notice to Officer and an opportunity for Officer, together with Officer’s counsel, to be heard before the Board, and after the reasonable opportunity to cure contemplated by clause (A) or (B) above in the case of a termination pursuant to either such clause), finding that in the Board’s good faith opinion Officer had engaged in conduct set forth above in this Section 2(a)(i) and specifying the particulars thereof in reasonable detail.

(ii)“Termination Other Than For Cause” shall mean termination by Corporation of Officer’s employment hereunder other than (A) a Termination For Cause, (B) a termination due to Officer’s Disability, or (C) in circumstances where a Termination Upon a Change in Control is applicable.

(iii)“Termination For Good Reason” shall mean termination by Officer of his employment hereunder for Good Reason, other than in circumstances where a Termination Upon a Change in Control is applicable.  “Good Reason” shall mean, without Officer’s express written consent (except in the case of Section 2(a)(iii)(G)), the occurrence of any of the following circumstances unless, in the case of Sections 2(a)(iii)(A), (B), (D), (E), (F), (G), (H) or (I), such circumstances are fully corrected (provided such circumstances are capable of correction) within 30 days after a written demand for substantial performance is delivered to Corporation by Officer:

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(A)the assignment to Officer of any duties inconsistent with Officer’s duties pursuant to Section 1, the failure to elect or reelect Officer as Chief Executive Officer and President of Corporation and as a member of the Board, or the removal by Corporation or the Board of Officer from any such position, or any other action by Corporation that results in a material diminution in Officer’s position, authority, duties or responsibilities as Chief Executive Officer and President of Corporation;

(B)a change in the reporting structure such that Officer reports to someone other than the Board;

(C)Corporation’s reduction of Officer’s rate of Base Salary or Target Bonus as in effect on the Effective Date or as the same may be increased from time to time;

(D)the relocation of Corporation’s offices at which Officer is principally employed as of the Effective Date (“Officer’s Principal Location”) to a location more than thirty (30) miles from such location, or Corporation’s requiring Officer to be based anywhere other than Officer’s Principal Location, except for required travel on Corporation’s business to an extent substantially consistent with Officer’s business travel obligations prior to the Effective Date;

(E)Corporation’s failure to pay to Officer any portion of Officer’s current compensation or to pay to Officer any portion of an installment of deferred compensation due under any deferred compensation program of Corporation, including any deferred performance award, within seven (7) days of the date such compensation is due;

(F)a material reduction in Officer’s level of participation in any of Corporation’s short and/or long-term incentive compensation plans, employee benefit or retirement plans, or policies, practices or arrangements in which Officer participated in during the Employment Period; provided, however, except as set forth in clause (C) above, that reductions in the levels of participation in any such plan, policy, practice or arrangement shall not be deemed to be “Good Reason” if Officer’s reduced level of participation in each such plan, policy, practice or arrangement remains substantially consistent (both in terms of the amount of benefits provided and the level of Officer’s participation relative to other participants as existed prior to the reduction) with the level of participation of Corporation’s other senior executive officers in each such plan, policy, practice or arrangement;

(G)Corporation’s failure to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the business assets of Corporation within 15 days after a merger, consolidation, sale or similar transaction (without regard to whether or not Officer consented to such transaction); or

(H)any purported termination of Officer’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2(a)(viii) hereof (and, if applicable, the requirements of Section 2(a)(i) hereof), which purported termination shall not be effective for purposes of this Agreement.

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Officer’s right to terminate Officer’s employment pursuant to this Section 2(a)(iii) shall not be affected by Officer’s incapacity due to physical or mental illness.  Officer’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.  After a Change in Control, any good faith determination by Officer that Good Reason exists as to circumstances arising upon, after or in connection with such Change in Control shall be presumed correct and shall be binding upon Corporation.

(iv)“Covered Resignation” shall mean a termination by Officer of Officer’s employment with Corporation by Officer providing a Notice of Termination within the thirty (30) day period following the first anniversary of the occurrence of a Change in Control.

(v)“Voluntary Termination” shall mean termination by Officer of Officer’s employment by Corporation other than (i) a Termination For Good Reason, (ii) a termination pursuant to a Covered Resignation, or (iii) a termination by reason of Officer’s death or Disability.

(vi)“Termination Upon a Change in Control” shall mean (A) a termination by Officer of Officer’s employment with Corporation (1) pursuant to a Covered Resignation, or (2) for Good Reason at any time by delivering upon or within the two-year period following a Change in Control a Notice of Termination to Corporation, or (B) a termination by Corporation of Officer’s employment, other than a Termination For Cause or upon Disability, at any time by delivering upon or within the two-year period following a Change in Control a Notice of Termination to Officer; in each case other than a termination by reason of Officer’s death.

(vii)“Change in Control” shall be deemed to occur if:

(A)any Person (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) is or becomes the Beneficial Owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Corporation representing 25% or more of the combined voting power of Corporation’s then outstanding securities entitled to vote generally in the election of directors (“Outstanding Corporation Voting Securities”); provided, however, that for purposes of this subsection (A), the following shall not constitute a Change in Control: (1) any acquisition by Corporation or any corporation controlled by Corporation, (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Corporation or any corporation controlled by Corporation, or (3) any acquisition by a Person of 25% of the Outstanding Corporation Voting Securities as a result of an acquisition of common stock of Corporation by Corporation which, by reducing the number of shares of common stock of Corporation outstanding, increases the proportionate number of shares beneficially owned by such Person to 25% or more of the Outstanding Corporation Voting Securities; provided, however, that if a Person shall become the beneficial owner of 25% or more of the Outstanding Corporation Voting Securities by reason of a share acquisition by Corporation as described above and shall, after such share acquisition by Corporation, become the beneficial owner of any additional shares of common stock of Corporation, then such acquisition of additional shares shall constitute a Change in Control;

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(B)during any period of not more than two consecutive years commencing after the Effective Date, individuals who at the beginning of such period constitute the Board, together with any new director(s) whose election by the Board or nomination for election by Corporation’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved in the manner set forth in this clause (B) (which shall not include any director designated by a person who has entered into an agreement with Corporation to effect a transaction described in Sections 2(a)(vii)(A), (C) or (D)), cease for any reason to constitute at least a majority of the Board;

(C)the consummation by Corporation of a merger or consolidation, or a sale or other disposition of all or substantially all of the assets of Corporation (“Business Combination”), except for a merger or consolidation which would result in the beneficial owners of the Outstanding Corporation Voting Securities immediately prior thereto continuing to beneficially own (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66-2/3% of the combined voting power of the then-outstanding voting securities of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns Corporation or all or substantially all of Corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportion as their ownership immediately prior to such Business Combination; provided, however, that a merger or consolidation effected to implement a recapitalization of Corporation (or similar transaction) in which no Person acquires beneficial ownership of more than 25% of the Outstanding Corporation Voting Securities shall not constitute a Change in Control except as otherwise provided above in clause (A); or

(D)the stockholders of Corporation approve a plan of complete liquidation of Corporation or an agreement for the sale or disposition by Corporation of all or substantially all of Corporation’s business assets.

(viii)“Notice of Termination” shall mean a notice that indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Officer’s employment under the provision so indicated.  The Notice of Termination shall also set forth the applicable Date of Termination (which date shall be consistent with Section 2(ix) hereof).

(ix)“Date of Termination” shall mean (A) if Officer’s employment is terminated due to Officer’s death, the date of Officer’s death; (B) if Officer’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that Officer shall not have returned to the full-time performance of Officer’s duties during such thirty (30)-day period), and (C) if Officer’s employment is terminated pursuant to Section 2(a)(i), Section 2(a)(ii), Section 2(a)(iii) or Section 2(a)(iv) or for any other reason (other than death or Disability (as defined in Section 2(c)), the date specified in the Notice of Termination (which shall not be less than thirty (30) days from the date such Notice of Termination is given, except that in the case of a Termination for Cause the Date of Termination

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may be as early as the date such Notice of Termination is given, and in the case of a termination for Good Reason or in connection with a Covered Resignation the Date of Termination shall not be less than sixty (60) days from the date such Notice of Termination is given, and in all cases the Date of Termination shall not be more than ninety (90) days from the date such Notice of Termination is given).

(x)“Accrued and Other Obligations” shall mean:

(A)any Base Salary that had accrued, but had not been paid (including accrued and unpaid vacation time), as of the Date of Termination, which will be paid not later than the next regularly scheduled payroll date following the Date of Termination; and

(B)any bonus payable pursuant to Section 3(b) with respect to any fiscal year (if Officer was employed by Corporation on the last day of that fiscal year) that had not previously been paid, which will be paid in accordance with Section 3(b) or if the Date of Termination is later than such date, within sixty (60) days following the Date of Termination with such payment date within such time period within Corporation’s sole discretion; and

(C)any reimbursement due to Officer pursuant to the terms of Section 3(c)(iv) for expenses incurred under that subsection by Officer prior to the Date of Termination, which will be paid upon or promptly following the Date of Termination or, if later, promptly following Officer’s request for reimbursement of such expenses and submission of receipts and other appropriate documentation thereof in accordance with Corporation’s usual policies subject to the time limitations of Section 3(c)(iv); and

(D)any vested deferred compensation, including, without limitation, any deferred and vested performance award, any stock units or other equity-based awards that were vested and subject to a deferral election by Officer as of the Date of Termination, and any pension plan, profit sharing plan, and supplemental retirement plan benefits of Officer that were accrued and vested as of the Date of Termination; which, in each case, will be paid in accordance with the terms and conditions of the applicable plan, program, award or agreement; and

(E)any rights, payments or benefits under any other applicable plans, programs, policies or arrangements of Corporation in which Officer participated as of the Date of Termination (or if the basis for Good Reason is pursuant to Section 2(a)(iii)(F), the plan, program, policy or arrangement in which Officer participated in immediately prior to the action giving rise to Good Reason), including, without limitation, any equity or long-term incentive plan or pursuant to any then-outstanding equity awards granted by Corporation to Officer, to the full extent of Officer’s rights under any such plans, policies, arrangements or agreements.

(xi)“Effective Date” shall mean October 26, 2005, the date that Corporation and Officer entered in to the Prior Employment Agreement.

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(xii)“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time.

(b)Basic Term.  The term of employment hereunder shall commence on the Effective Date and continue for a continuous period of three (3) years, subject to earlier termination as provided in this Section 2 (the “Employment Period”).  Thereafter, unless either party provides written notice to the other of its intent not to extend the Employment Period at least sixty (60) days prior to each anniversary of the Effective Date, the Employment Period shall be extended for an additional year, so that at all times the Employment Period shall be for a period of at least three (3) years, unless earlier terminated as provided in this Agreement; provided, further, that if a Change in Control occurs during the Employment Period, the term of this Agreement shall continue in effect for a period of not less than thirty-six (36) months beyond the month in which such Change in Control occurred.  A determination by either party not to renew the Employment Period in accordance herewith and delivery of a notice of such non-renewal shall not be deemed a breach of this Agreement.  The Employment Period shall terminate at Corporation’s regular close of business on the Date of Termination (or, if the Date of Termination is not a regular business day, at 6:00 p.m. Pacific Time on the Date of Termination).

(c)Termination by Corporation.  Corporation may terminate Officer’s employment hereunder (i) for Cause (but only in accordance with Section 2(a)(i) and only after the requisite Board vote has been obtained), or (ii) without Cause, or (iii) in the event of Officer’s Disability.  For purposes of this Agreement, the term “Disability” shall mean a physical or mental impairment which renders Officer unable to perform the essential functions of his position, even with reasonable accommodation which does not impose an undue hardship on Corporation, for a period of at least six (6) months.  Except as provided below, the determination of whether a Disability exists shall be made by a medical doctor selected by Corporation and Officer.  If the parties cannot agree on a medical doctor, each party shall select a medical doctor and the two doctors shall select a third medical doctor who shall be the approved medical doctor for this purpose.

(d)Termination by Officer.  Officer may terminate his employment hereunder at any time (i) for Good Reason (subject to Corporation’s opportunity to cure, if applicable, the circumstance(s) giving rise to Good Reason in the time period set forth in Section 2(a)(iii)), or (ii) pursuant to a Covered Resignation, or (iii) pursuant to a Voluntary Termination or upon thirty (30) days’ written Notice of Termination to Corporation, in the event of Officer’s Disability.

(e)Termination by Death.  Officer’s employment hereunder shall terminate upon Officer’s death.

(f)Terminations in General.  Any termination of Officer’s employment pursuant to Section 2(c), 2(d) or 2(e) shall not be deemed to be a breach of this Agreement.  Any termination of Officer’s employment pursuant to Section 2(c), 2(d) or due to Officer’s Disability shall be communicated by the terminating party by a Notice of Termination.

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3.Salary, Benefits and Bonus Compensation.

(a)Base Salary.  During the Employment Period, Corporation agrees to pay to Officer a base salary at an annualized rate of $575,000.00 from the Effective Date through January 25, 2007, and a base salary at an annualized rate of $600,000.00 from January 26, 2007 through the end of the Employment Period (“Base Salary”), payable in accordance with Corporation’s regular payroll practices in effect from time to time, but not less frequently than monthly installments.  Officer’s Base Salary and other incentives shall be reviewed annually by the Compensation Committee of the Board (the “Compensation Committee”), which may increase (but not decrease) Officer’s Base Salary and grant such other incentives as it, in its sole discretion, determines appropriate.  After any such increase in Base Salary, the term “Base Salary” shall refer to the increased amount.

(b)Bonuses.  Officer shall be eligible to receive a bonus for each year (or portion thereof) during the Employment Period and any extensions thereof, provided that, except as otherwise provided herein, Officer has remained employed by Corporation for the entire year.  Officer’s target bonus opportunity for any particular year (“Target Bonus”) shall equal two hundred percent (200%) of Officer’s Base Salary in effect for that year.  The amount of bonus payable to Officer for any particular year will be determined by the Compensation Committee, in its sole discretion, taking into account the performance of the Corporation and Officer for that particular year.  All such bonuses shall be payable within 45 days after the end of the year to which such bonus relates.

(c)Additional Benefits.  During the Employment Period, Officer shall be entitled to the following employee and fringe benefits:

(i)Officer Benefits.  Officer shall be eligible to participate in such of Corporation’s benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of Corporation on a basis no less favorable than provided to such other executive officers, including, without limitation, profit sharing plans, annual physical examination, dental and medical plans, personal catastrophe and disability insurance, and retirement plans.  Officer shall be eligible to participate in Corporation’s 2000 Stock Incentive Plan, 2006 Performance Incentive Plan and any successor plan or any other equity or long-term incentive plan of Corporation.  Notwithstanding anything else contained herein to the contrary, during the Employment Period in no event shall Officer be eligible to participate in or receive benefits under any severance plan, program, policy, arrangement or agreement of Corporation other than this Agreement.  Section 4(b)(viii) of this Agreement shall apply in the event that any payment, entitlement, benefit or distribution to Officer or for Officer’s benefit during the Employment Period (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise and whether pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, restricted stock, restricted stock unit, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing) would be subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by federal, state or local law or any interest or penalties imposed with respect to such excise or other similar tax.  The provision of the annual physical exam to or for Officer pursuant to this Section 3(c)(i) in one taxable year shall not affect the provision of such

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annual physical exam to or for Officer in any other taxable year.  Any reimbursement to Officer of the cost of any annual physical exam under this Section 3(c)(i) shall be paid to Officer on or before the last day of Officer’s taxable year following the taxable year in which the expense was incurred.  The right to the annual physical exams under this Section 3(c)(i) may not be liquidated or exchanged for any other benefit.

(ii)Vacation.  Officer shall be entitled to five (5) weeks of vacation during each year during the Employment Period, prorated for partial years.  Upon Officer’s completion of fifteen (15) years of service to Corporation, Officer’s vacation accrual rate shall increase to six (6) weeks per year effective on and after such date.

(iii)Life Insurance.  During the Employment Period, Corporation shall at its expense procure and keep in effect term life insurance on the life of Officer, payable to such beneficiaries as Officer may from time to time designate, in the aggregate amount of $2,000,000.  Such policy shall be owned by Officer or by a member of his immediate family.

(iv)Reimbursement for Expenses.  During the Employment Period, Corporation shall reimburse Officer for reasonable and properly documented (in accordance with the Corporation’s policies as in effect from time to time) out-of-pocket business and/or entertainment expenses incurred by Officer in connection with his duties under this Agreement.  In addition, Corporation shall promptly pay Officer’s legal fees and other expenses incurred in the negotiation and preparation of this Agreement (including any amendments or modifications thereto) and the Indemnification Agreement entered into by and between Corporation and Officer on or about the Effective Date, including any amendments or modifications thereto (the “Indemnification Agreement”) promptly upon receiving copies of the invoices for such fees and expenses.  The payment of the legal fees and other expenses provided to or for Officer pursuant to this Section 3(c)(iv) in one taxable year shall not affect the amount of the payment of such legal fees and other expenses provided to or for Officer in any other taxable year.  Any reimbursement to Officer of legal fees or expenses under this Section 3(c)(iv) shall be paid to Officer on or before the last day of Officer’s taxable year following the taxable year in which the expense was incurred.  The right to payment of legal fees and expenses under this Section 3(c)(iv) may not be liquidated or exchanged for any other benefit.

4.Severance Compensation.  If Officer’s employment by Corporation is terminated during the Employment Period for any reason by Corporation or Officer, or upon or following the Employment Period in the absence of a successor employment agreement by and between Officer and Corporation to the contrary, Corporation shall have no further obligation to provide to Officer, and Officer shall have no further right to receive or obtain from Corporation, any severance payments or benefits except:

(a)Accrued and Other Obligations.  Corporation shall pay Officer (or, in the event of his death, Officer’s estate) the Accrued and Other Obligations, subject to tax withholding and other authorized deductions.  Officer shall also be entitled to any amounts or advances required by Section 6(h)(iii) or pursuant to the Indemnification Agreement or any similar successor indemnification agreement by and between Officer and Corporation.  If Officer’s employment by Corporation terminates after (but not during) the Employment Period,

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Officer shall be eligible for participation in any severance program, plan or policy then in effect on the same terms and conditions generally applicable to Corporation’s senior executives (other than as provided in individual employment agreements) or, if the program, plan or policy is of general applicability, to Corporation’s employees generally.  For purposes of clarity, this Section 4(a) does not require a duplication of any Accrued or Other Obligation, reimbursement or other payment or benefit, otherwise payable in the circumstances pursuant to any other applicable plan, program, policy, arrangement or award.

(b)Termination Upon a Change in Control.  If, during the Employment Period (but not following the expiration of the Employment Period), Officer’s employment is terminated in a Termination Upon a Change in Control, Corporation shall pay or provide Officer (in addition to the payments and entitlements in Section 4(a)) the following benefits, subject to tax withholding and other authorized deductions:

(i)Corporation shall pay Officer, at the time specified in Section 4(e), a lump sum cash amount equal to Officer’s Target Bonus for the year in which the Date of Termination occurs, pro-rated based on the number of days in such year that had elapsed as of the Date of Termination.

(ii)Corporation shall pay to Officer, at the time specified in Section 4(e), a lump sum cash severance payment equal to the sum of (x) three (3) times Officer’s Base Salary (at the greater of the highest annualized rate in effect in the year preceding the Date of Termination or the year in which the Date of Termination occurs), plus (y) three (3) times the greater of Officer’s Target Bonus for the year in which the Date of Termination occurs or the highest annual bonus received by Officer in the three (3) years immediately prior to the Change in Control (for purposes of the foregoing clause, Corporation and Officer hereby agree that Officer’s annual bonus for the year 2004 was $1 million).

(iii)For a period of three (3) years following the Date of Termination, Corporation shall continue to provide Officer and Officer’s eligible family members, based on the cost sharing arrangement between Officer and Corporation on the date of the Change in Control, with medical and dental health benefits at least equal in the aggregate to those which would have been provided to Officer and Officer’s eligible family members if Officer’s employment had not been terminated or, if more favorable to Officer, as in effect generally at any time thereafter; provided, however, that if Officer becomes re-employed with another employer and he and his dependents are eligible to receive medical and dental health benefits under another employer’s plans, Corporation’s obligations under this Section 4(b)(iii) shall be reduced to the extent comparable benefits with respect to Officer and his dependents are actually received by Officer following Officer’s termination, and any such benefits actually received by Officer shall be reported by Officer to Corporation.  In the event Officer and his dependents are or become ineligible under the terms of such benefit plans or programs to continue to be so covered through the end of the three-year period following the Date of Termination, in such event, Corporation shall provide Officer and his dependents with substantially equivalent coverage through other sources or shall provide Officer with a lump sum payment in such amount that, after all taxes on that amount, shall be equal to the cost to Officer of providing Officer such benefit coverage until the end of such period.  The lump sum payment shall be determined on a present value basis using the interest rate provided in Section 

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1274(b)(2)(B) of the Internal Revenue Code of 1986, as amended (the “Code”) on the Date of Termination (the “Interest Rate”).  In addition, during the three-year period following the Date of Termination, Corporation shall continue to pay the premiums for the term life insurance policy described in Section 3(c)(iii) above.  At the end of the three-year period following the Date of Termination, Officer, Officer’s spouse and Officer’s dependents shall be entitled to continuation coverage pursuant to Section 4980B of the Code, Sections 601-608 of the Employee Retirement Income Security Act of 1974, as amended, and under any other applicable law, to the extent required by such laws, as if Officer had then terminated employment with Corporation. To the extent that the foregoing medical and dental benefits are taxable to Officer, any medical or dental reimbursement payments shall be paid to Officer on or before the last day of Officer’s taxable year following the taxable year in which the expense was incurred and the payment of any tax-gross up payments shall be paid to Officer on or before the last day of the end of Officer’s taxable year following the taxable year in which Officer (or the Corporation) pays or remits the related taxes.  The medical and dental benefits and payment of term life insurance premiums described herein are not subject to liquidation or exchange for another benefit.  The amount of the foregoing benefits that the Officer receives in one taxable year shall not affect the amount of the foregoing benefits that the Officer receives in any other taxable year.

(iv)Officer shall be fully vested in Officer’s accrued benefits under any qualified or nonqualified pension, profit sharing, deferred compensation or supplemental plans maintained by Corporation for Officer’s benefit, except to the extent the acceleration of vesting of such benefits would violate any applicable law or require Corporation to accelerate the vesting of the accrued benefits of all participants in such plan or plans, in which case Corporation shall pay Officer a payment at the time such benefit would have otherwise been paid pursuant to the applicable plan in an amount equal to the value of such accrued benefits that would have become vested but for the application of the preceding clause, plus Corporation shall pay Officer at the time specified in Section 4(e) an amount equal to the present value (calculated using the Interest Rate) of the amounts Corporation would have contributed to Officer’s account under Corporation’s 401(k) plan as a matching contribution had Officer remained employed by Corporation for three (3) years after Officer’s Date of Termination and had Officer made the maximum elected deferral contributions (based on the 401(k) contribution formula and plan limits in effect on the Date of Termination).

(v)Officer shall be entitled to accelerated vesting as of the Date of Termination of any then-outstanding awards granted to Officer under Corporation’s stock and other equity and long-term incentive plans (to the extent such awards have not previously become vested).  Any stock options that are then vested (including any that become vested pursuant to the preceding sentence) and that are granted to Officer on or after the Effective Date shall, notwithstanding any provision of any applicable plan or award agreement, remain exercisable until the later of (x) three (3) years after the Date of Termination or (y) the date specified in the applicable plan or award agreement; provided in no event shall any stock option be exercisable beyond its original expiration date.  Notwithstanding the foregoing two sentences, any equity-based awards that are subject to forfeiture and/or vesting requirements based on the satisfaction of performance-based criteria, to the extent that such awards are outstanding as of the Date of Termination, shall continue to be governed by the provisions of the applicable award agreement in the circumstances; provided, however, that to the extent that any such then-outstanding equity-based awards are subject to forfeiture and/or vesting requirements based on the passage of time, such awards shall be fully accelerated with respect to such time-based forfeiture and/or vesting provisions.

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(vi)Corporation shall furnish Officer for six (6) years following the Date of Termination (without reference to whether the Employment Period continues in effect) with directors’ and officers’ liability insurance insuring Officer against insurable events which occur or have occurred while Officer was a director or officer of Corporation, such insurance to have policy limits aggregating not less than the amount in effect immediately prior to the Change in Control, and otherwise to be in substantially the same form and to contain substantially the same terms, conditions and exceptions as the liability issuance policies provided for officers and directors of Corporation in force from time to time, provided, however, that such terms, conditions and exceptions shall not be, in the aggregate, materially less favorable to Officer than those in effect on the Effective Date; provided, further, that if the aggregate annual premiums for such insurance at any time during such period exceed one hundred and fifty percent (150%) of the per annum rate of premium currently paid by Corporation for such insurance, then Corporation shall provide the maximum coverage that will then be available at an annual premium equal to one hundred and fifty percent (150%) of such rate.

(vii)In any situation where under applicable law Corporation has the power to indemnify (or advance expenses to) Officer in respect of any judgments, fines, settlements, loss, cost or expense (including attorneys’ fees) of any nature related to or arising out of Officer’s activities as an agent, employee, officer or director of Corporation or in any other capacity on behalf of or at the request of Corporation, Corporation shall promptly on written request, indemnify (and advance expenses to) Officer to the fullest extent permitted by applicable law, including but not limited to making such findings and determinations and taking any and all such actions as Corporation may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification or advancement.  Such agreement by Corporation shall not be deemed to impair any other obligation of Corporation respecting Officer’s indemnification (or advancement of expenses) otherwise arising out of this or any other agreement or promise of Corporation or under any corporate governance document of Corporation or under statute or applicable law.

(viii)(A)  Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, entitlement, benefit or distribution to Officer or for Officer’s benefit (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise and whether pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, restricted stock, restricted stock unit, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing) (the “Payments”) would be subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by federal, state or local law or any interest or penalties imposed with respect to such excise or other similar tax (such tax or taxes, together with any such interest or penalties, are collectively referred to as the “Excise Tax”), then Officer shall, be entitled to receive from Corporation an additional payment (the “Gross-Up Payment”) in an amount such that the net amount of the Payments and the Gross-Up Payment retained by Officer after the calculation and deduction of all Excise Taxes (including any interest or penalties imposed with respect to such taxes) on the Payment and all federal, state and local income tax, employment tax and Excise Tax (including any interest or penalties imposed with respect to such taxes) on the Gross-Up Payment provided for in this Section 4(b)(viii), and taking into account any lost or reduced tax deductions on account of the Gross-Up Payment, shall be equal to the Payments;

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(B)All determinations required to be made under this Section 4(b)(viii), including whether and when the Gross-Up Payment is required and the amount of such Gross-Up Payment, and the assumptions to be utilized in arriving at such determinations shall be made by the Accountants (as defined below) which shall provide Officer and Corporation with detailed supporting calculations with respect to such Gross-Up Payment within fifteen (15) business days of the receipt of notice from Officer or Corporation that Officer has received or will receive a Payment.  For purposes of making the determinations and calculations required herein; the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code, provided that the Accountant’s determinations must be made on the basis of “substantial authority” (within the meaning of Section 6662 of the Code).  For the purposes of this Section 4(b)(viii), the “Accountants” shall mean Corporation’s independent certified public accountants serving immediately prior to the Change in Control to the extent they may lawfully perform such services.  In the event that the Accountants are prohibited from providing such services or are also serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Officer shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accountants hereunder).  All fees and expenses of the Accountants shall be borne solely by Corporation;

(C)For the purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, such Payments will be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that in the opinion of the Accountants such Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax.  For purposes of determining the amount of the Gross-Up Payment, Officer shall be deemed to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Gross-Up Payment is to be made and to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Officer’s adjusted gross income); and to have otherwise allowable deductions for Federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-Up Payment in Officer’s adjusted gross income.  To the extent practicable, any Gross-Up Payment with respect to any Payment shall be paid by Corporation at the time Officer is entitled to receive the Payments and in no event will any Gross-Up Payment be paid later than five days after the receipt by Officer of the Accountant’s determination.  Any determination by the Accountants shall be binding upon Corporation and Officer;

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(D)As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that the Gross-Up Payment made will have been an amount less than Corporation should have paid pursuant to this Section 4(b)(viii) (the “Underpayment”).  In the event that Corporation exhausts its remedies pursuant to Section 4(b)(viii)(F) and Officer is required to make a payment of any Excise Tax, the Underpayment shall be promptly paid by Corporation to or for Officer’s benefit but in all events within thirty (30) days of Corporation exhausting such remedies;

(E)Officer and Corporation shall each provide the Accountants access to and copies of any books, records and documents in the possession of Corporation or Officer, as the case may be, reasonably requested by the Accountants, and otherwise cooperate with the Accountants in connection with the preparation and issuance of the determination contemplated by this Section 4(b)(viii); and

(F)Officer shall notify Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Corporation of the Gross-Up Payment.  Such notification shall be given as soon as practicable after Officer is informed in writing of such claim and shall apprise Corporation of the nature of such claim and the date on which such claim is requested to be paid.  Officer shall not pay such claim prior to the expiration of the 30-day period following the date on which Officer gives such notice to Corporation (or such shorter period ending on the date that any payment of taxes, interest and/or penalties with respect to such claim is due).  If Corporation notifies Officer in writing prior to the expiration of such period that it desires to contest such claim, Officer shall:

·give Corporation any information reasonably requested by Corporation relating to such claim;

·take such action in connection with contesting such claim as Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Corporation;

·cooperate with Corporation in good faith in order to effectively contest such claim; and

·permit Corporation to participate in any proceedings relating to such claims; provided, however, that Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify Officer for and hold Officer harmless from, on an after-tax basis, any Excise Tax or income tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of all related costs and expenses.  Without limiting the foregoing provisions of this Section 4(b)(viii), Corporation shall control all proceedings

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taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Officer to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Officer agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Corporation shall determine; provided, however, that if Corporation directs Officer to pay such claim and sue for a refund, Corporation shall make such payment on behalf of Officer, and shall indemnify Officer for and hold Officer harmless from, on an after-tax basis, any Excise Tax or income or other tax (including interest or penalties with respect thereto) imposed with respect to such payment or with respect to any imputed income in connection with such payment, but shall be entitled to any refund received by or on behalf of Officer because of the claim Corporation has directed him to pay; provided, further, that any extension of the statute of limitations relating to the payment of taxes for the taxable year of Officer with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, Corporation’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Officer shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority;

(G)Notwithstanding anything to the contrary in this Section 4(b)(viii), any payment under this Section 4(b)(viii) shall be paid to Officer promptly but in no event later than the last day of the end of Officer’s taxable year following the taxable year in which Officer (or the Corporation) pays or remits the related taxes.  Additionally, to the extent Officer is entitled to the reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability, such reimbursement shall be made to Officer on or before the last day of Officer’s taxable year following the taxable year in which the taxes that are the subject of the audit or litigation are paid or, if no such taxes are paid, on or before the last day of the taxable year following the taxable year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation.

(c)Termination Other Than For Cause or Termination For Good Reason.  If, during the Employment Period (but not following the expiration of the Employment Period), Officer’s employment is terminated by Corporation in a Termination Other Than For Cause or by Officer in a Termination For Good Reason, Officer shall be entitled to the benefits provided below (in addition to the payments and entitlements in Section 4(a)), subject to tax withholding and other authorized deductions:

(i)Corporation shall pay Officer, at the time specified in Section 4(e), a lump sum cash amount equal to Officer’s Target Bonus for the year in which the Date of Termination occurs, pro-rated based on the number of days in such year that had elapsed as of the Date of Termination.

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(ii)Corporation shall pay to Officer, at the time specified in Section 4(e), a lump sum cash severance payment equal to the sum of (x) two (2) times Officer’s Base Salary (at the greater of the highest annualized rate in effect in the year preceding the Date of Termination or the year in which the Date of Termination occurs), plus (y) two (2) times the greater of Officer’s Target Bonus for the year in which the Date of Termination occurs or the highest annual bonus received by Officer in the three (3) years immediately prior to the year in which the Date of Termination occurs (for purposes of the foregoing clause, the amount set forth in Section 4(b)(ii) above shall be used to determine Officer’s annual bonus for the year 2004).

(iii)Officer shall be entitled to accelerated vesting as of the Date of Termination of any then-outstanding awards granted to Officer under Corporation’s stock and other equity and long-term incentive plans (to the extent such awards have not previously become vested).  Any stock options that are then vested (including any that become vested pursuant to the preceding sentence) and that are granted to Officer on or after the Effective Date shall, notwithstanding any provision of any applicable plan or award agreement, remain exercisable until the later of (x) three (3) years after the Date of Termination or (y) the date specified in the applicable plan or award agreement; provided in no event shall any stock option be exercisable beyond its original expiration date.  Notwithstanding the foregoing two sentences, any equity-based awards that are subject to forfeiture and/or vesting requirements based on the satisfaction of performance-based criteria, to the extent that such awards are outstanding as of the Date of Termination, shall continue to be governed by the provisions of the applicable award agreement in the circumstances; provided, however, that to the extent that any such then-outstanding equity-based awards are subject to forfeiture and/or vesting requirements based on the passage of time, such awards shall be fully accelerated with respect to such time-based forfeiture and/or vesting provisions.

(iv)Officer and his family members shall be entitled to continuation of medical and dental benefits on the same basis as provided in Section 4(b)(iii), except the maximum time period for such coverage shall be two years following the Date of Termination.  In addition, during the two-year period following the Date of Termination, Corporation shall continue to pay the premiums for the term life insurance policy described in Section 3(c) above.  To the extent that the foregoing medical and dental benefits are taxable to Officer, any medical or dental reimbursement payments shall be paid to Officer on or before the last day of Officer’s taxable year following the taxable year in which the expense was incurred and the payment of any tax gross-up payments shall be paid to Officer on or before the last day of the end of Officer’s taxable year following the taxable year in which Officer pays the related taxes.  The medical and dental benefits and payment of term life insurance premiums described herein are not subject to liquidation or exchange for another benefit.  The amount of the foregoing benefits that the Officer receives in one taxable year shall not affect the amount of the foregoing benefits that the Officer receives in any other taxable year.

(v)Section 4(b)(viii) of this Agreement shall apply in the event that any payment, entitlement, benefit or distribution to Officer or for Officer’s benefit (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise and whether pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, restricted stock, restricted stock unit, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing) would be subject to the excise tax imposed by Section 4999 of the Code or to any similar tax imposed by federal, state or local law or any interest or penalties imposed with respect to such excise or other similar tax.

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(d)Termination Upon Death or Disability.  If, during the Employment Period (but not following the expiration of the Employment Period), Officer’s employment is terminated due to his death or Disability, Officer (or Officer’s estate) shall be entitled to the benefits provided below (in addition to the payments and entitlements in Section 4(a)), subject to tax withholding and other authorized deductions:

(i)Corporation shall pay Officer (or Officer’s estate), at the time specified in Section 4(e), a lump sum cash amount equal to Officer’s Target Bonus for the year in which the Date of Termination occurs, pro-rated based on the number of days in such year that had elapsed as of the Date of Termination.

(ii)Officer (or Officer’s estate) shall be entitled to accelerated vesting as of the Date of Termination of any then-outstanding awards granted to Officer under Corporation’s stock and other equity and long-term incentive plans (to the extent such awards have not previously become vested).  Any stock options that are then vested (including any that become vested pursuant to the preceding sentence) and that are granted to Officer on or after the Effective Date shall, notwithstanding any provision of any applicable plan or award agreement, remain exercisable until the later of (x) three (3) years after the Date of Termination or (y) the date specified in the applicable plan or award agreement; provided in no event shall any stock option be exercisable beyond its original expiration date.  Notwithstanding the foregoing two sentences, any equity-based awards that are subject to forfeiture and/or vesting requirements based on the satisfaction of performance-based criteria, to the extent that such awards are outstanding as of the Date of Termination, shall continue to be governed by the provisions of the applicable award agreement in the circumstances; provided, however, that to the extent that any such then-outstanding equity-based awards are subject to forfeiture and/or vesting requirements based on the passage of time, such awards shall be fully accelerated with respect to such time-based forfeiture and/or vesting provisions.

(iii)Officer and his family members shall be entitled to continuation of medical and dental benefits on the same basis as provided in Section 4(b)(iii), except the maximum time period for such coverage shall be one year following the Date of Termination.

(e)Timing of Payments.  Subject to Section 6(n), the payments provided for, as applicable, in Sections 4(b)(i), (ii) and (iv) (to the extent provided therein) or Sections 4(c)(i) and (ii) or Section 4(d)(i) shall be made not later than the fifth (5^th) day following the Date of Termination, with the payment date within such time period within Corporation’s sole discretion, provided that the Date of Termination occurs on the same date as Officer’s “separation from service” (within the meaning of Section 409A of the Code) from Corporation and its subsidiaries, otherwise such amounts shall be paid upon or within five (5) days following the date that Officer incurs such a separation from service, with the payment date within such time period within Corporation’s sole discretion.

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(f)No Mitigation.  Officer shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise nor, except as provided in Section 4(b)(iii) or Section 4(c)(iv), shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by Officer as the result of employment by another employer or self-employment, by retirement benefits or by offset against any claim or amount claimed to be owed by Officer to Corporation, or otherwise.

(g)Exclusive Remedy.  Officer agrees that the payments, benefits and entitlements contemplated by this Section 4 (and any applicable acceleration of vesting of an equity-based award in accordance with the terms of such award) shall, if such payments, benefits or entitlements are actually made or provided and such accelerated vesting and any other equity provision is actually effected (including with respect to delivery of shares and the post-termination exercise period for options) as contemplated by the applicable provisions of this Section 4 depending upon the circumstances in which the termination occurs, constitute the sole and exclusive remedy for such termination of his employment, and, provided such payments, benefits or entitlements are actually made as set forth herein, Officer covenants not to assert or pursue any other remedies, at law or in equity, with respect to such termination of employment.  This Section 4(g) does not in any way limit any right of either party to contest the characterization of a termination of employment (for example, and without limitation, the right of Officer to contest whether Corporation had Cause to terminate Officer’s employment in a purported Termination For Cause) and, if successful, to receive the payments, benefits or entitlements due for such a termination in accordance with the terms hereof.

5.Covenants.

(a)Confidentiality.  Officer hereby agrees that Officer shall not at any time (whether during or after Officer’s employment with Corporation), directly or indirectly, other than in the course of Officer’s duties hereunder, disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below); provided, however, that this Section 5(a) shall not apply when (i) disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with actual or apparent jurisdiction to order Officer to disclose or make available such information (provided, however, that Officer shall promptly notify Corporation in writing upon receiving a request for such information), or (ii) with respect to any other litigation, arbitration or mediation involving this Agreement or any other agreement between Officer and Corporation, including but not limited to enforcement of such agreements.  Officer agrees that, upon termination of Officer’s employment with Corporation, all Confidential Information in Officer’s possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to Corporation and shall not be retained by Officer or furnished to any third party, in any form except as provided herein; provided, however, that Officer shall not be obligated to treat as confidential, or return to Corporation copies of any Confidential Information that (a) was publicly known at the time of disclosure to Officer, (b) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to Corporation by Officer, or (c) is lawfully disclosed to Officer by a third party.  As used in this Agreement, the term “Confidential Information” means: information disclosed to Officer or known by Officer as a consequence of or through Officer’s relationship with Corporation, about

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the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of Corporation and its affiliates.  Anything elsewhere to the contrary notwithstanding, Officer shall be entitled to retain (i) papers and other materials of a personal nature, including, but not limited to, photographs, correspondence, personal diaries, calendars and Rolodexes, personal files and phone books, (ii) information showing his compensation or relating to reimbursement of expenses, (iii) information that Officer reasonably believes may be needed for tax purposes, (iv) copies of plans, programs and agreements relating to his compensation, or employment or termination thereof, with Corporation and (v) minutes, presentation materials and personal notes from any meeting of the Board, or any committee thereof, while Officer was a member of the Board or such committee.

(b)Noncompetition.  Officer acknowledges and agrees that Officer’s services pursuant to this Agreement are unique and extraordinary, and that Officer will have access to and control of Confidential Information of Corporation which is vital to the success of Corporation’s business.  Officer further acknowledges that because of Officer’s knowledge of Corporation’s Confidential Information it is unlikely that Officer could work for a competitor of Corporation without divulging such Confidential Information.  Officer further acknowledges that the business of Corporation is national in scope and cannot be confined to any particular geographic area of the United States.  For the foregoing reasons, and in consideration for the benefits offered by Corporation under this Agreement, Officer hereby agrees that during the Employment Period, Officer shall not accept employment nor engage as a consultant with a competitor of Corporation in the real estate investment trust industry.

(c)Non-Solicitation.

(i)Officer promises and agrees that during the Employment Period and for a period of one (1) year thereafter, Officer will not, directly or indirectly, individually or as a consultant to, or as an employee, officer, stockholder, director or other owner or participant in any business, influence or attempt to influence customers, vendors, suppliers, joint venturers, associates, consultants, agents, or partners of any entity within the Company Group (as defined below), either directly or indirectly, to divert their business away from the Company Group, to any individual, partnership, firm, corporation or other entity then in competition with the business of any entity within the Company Group, and he will not otherwise materially interfere with any business relationship of any entity within the Company Group.  For purposes of this Agreement, “Company Group” means Corporation and its subsidiaries.

(ii)Officer promises and agrees that during the Employment Period and for a period of one (1) year thereafter, Officer will not, directly or indirectly, individually or as a consultant to, or as an employee, officer, stockholder, director or other owner of or participant in any business, solicit (or assist in soliciting) any person who is then, or at any time within six (6) months prior thereto was, an employee of an entity within the Company Group who earned annually $25,000 or more as an employee of such entity during the last six (6) months of his or her own employment to work for (as an employee, consultant or otherwise) any business, individual, partnership, firm, corporation, or other entity whether or not engaged in competitive business with any entity in the Company Group.

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6.Miscellaneous.

(a)Payment Obligations.  Corporation’s obligation to pay Officer the compensation and to make the arrangements provided herein shall be unconditional, and Officer shall have no obligation whatsoever to mitigate damages hereunder.

(b)Business Clubs.  Officer may designate up to two dining clubs, country clubs, athletic clubs, or similar organizations in which Officer has membership interests (in addition to his membership in Virginia Country Club in Long Beach, California), and for the Employment Period, Corporation shall reimburse Officer for the monthly dues and for all charges for use of such clubs or organizations for business purposes on behalf of Corporation.  The “Agreement Concerning Club Membership” by and between Officer and Corporation effective as of July 22, 2004 (the “VCC Agreement”) continues in effect in accordance with its terms.  Any reimbursement to Officer of monthly club dues and other charges under this Section 6(b) shall be paid to Officer promptly but in no event later than the last day of Officer’s taxable year following the taxable year in which the expense was incurred.  The right to reimbursement of monthly club dues and other charges under this Section 6(b) may not be liquidated or exchanged for any other benefit.  The reimbursement of monthly club dues and other charges provided to Officer pursuant to this Section 6(b) in one year shall not affect the amount of monthly club dues and other charges that may be reimbursed for Officer in any other taxable year.

(c)Waiver.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.  Any waiver to be effective must be in writing, specifically referring to the provision being waived and signed by the party against whom the waiver is being enforced.

(d)Entire Agreement; Modifications.  Except as otherwise provided herein, this Agreement, together with the Non-Integrated Agreements, represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement and the Non-Integrated Agreements supersede any and all prior understandings, agreements, plans and negotiations, whether written or oral, with respect to the subject matter hereof, including without limitation, any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to Officer from Corporation (provided that in no event does this Agreement or any of the Non-Integrated Agreements supersede Officer’s outstanding equity award agreements).  All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.  The “Non-Integrated Agreements” are the following: (i) the VCC Agreement, (ii) Corporation’s Insider Trading Policy in effect as of the Effective Date which has been acknowledged by Officer, and (iii) the Indemnification Agreement.

(e)Notices.  All notices and other communications under this Agreement shall be in writing and shall be given (i) when personally delivered to the recipient (provided a written acknowledgement of receipt is obtained), (ii) three days after mailing by first class mail, postage pre-paid, certified or registered with return receipt requested or (iii) one day after being sent by a nationally recognized overnight courier (provided that a written

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acknowledgement of receipt is obtained by the overnight courier), to the party concerned at the address indicated below:

If to Corporation:	HCP, Inc.
	3760 Kilroy Airport Way, Suite 300
	Long Beach, California 90806
	Attention: Chairman of the Board
copy to:	HCP, Inc.
	3760 Kilroy Airport Way, Suite 300
	Long Beach, California 90806
	Attention: General Counsel
If to Officer:	To most recent home address in Corporation’s records.

Any party may change such party’s address for notices by notice duly given pursuant to this Section 6(e).

(f)Headings.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.

(g)Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents, without reference to principles of conflicts of law.

(h)Arbitration; Dispute Resolution, etc.

(i)Arbitration Procedure.  Any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation of this Agreement or any arrangements relating to this Agreement or contemplated in this Agreement or the breach, termination or invalidity thereof, or any other dispute between Officer and Corporation arising out of or related to Officer’s employment by Corporation (each of the foregoing, a “Dispute”), shall be settled by final and binding arbitration administered by the JAMS/Endispute in Los Angeles, California in accordance with its then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes.  In the event of such an arbitration proceeding, Officer and Corporation shall select a mutually acceptable neutral arbitrator from among the JAMS/Endispute panel of arbitrators.  In the event Officer and Corporation cannot agree on an arbitrator, the Administrator of JAMS/Endispute will appoint an arbitrator.  Neither Officer nor Corporation nor the arbitrator shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties.  Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings under this Section 6(h)(i).  The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable and the arbitrator is without jurisdiction to apply any different substantive law.  The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure.  The arbitrator shall render an award and a written, reasoned

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opinion in support thereof.  Judgment upon the award may be entered in any court having jurisdiction thereof.  Corporation shall pay all fees and expenses of the Arbitrator regardless of the result and shall provide all witnesses and evidence reasonably required by Officer to present Officer’s case.  For purposes of this Section 6(h), references to “this Agreement” shall include its Exhibits.

(ii)Advance of Payment.  In the event the Corporation fails to pay to Officer amounts Officer reasonably determines in good faith are due to him under Section 4(b) or 4(c) and an arbitration is brought in good faith which involves a determination as to whether Officer is entitled to the benefits contemplated by Section 4(b) or 4(c), Corporation shall advance the Advancement Amount to Officer within thirty (30) days after Corporation receives from Officer a written agreement (in a form reasonably acceptable to Corporation) pursuant to which Officer agrees that if the arbitration is not resolved in Officer’s favor, Officer shall promptly repay to Corporation the entire Advancement Amount plus interest at the Interest Rate, compounded quarterly (but subject to offset for any amounts and/or entitlements that the arbitrator deems Officer is entitled to under this Agreement) and in all cases provided that, in the opinion of counsel to Corporation, such arrangement will not violate any provision of law applicable to Corporation; provided, however, that in all events the Corporation shall not advance the Advancement Amount to Officer prior to the date specified in Section 4(e) (after application of Section 6(n), if applicable).  In the event that the arbitrator determines that Officer is entitled to the benefits contemplated by Section 4(b) or 4(c), then the Corporation shall promptly pay to Officer the net additional amount due (the total payment contemplated by Section 4(b) or 4(c), as applicable, less the Advancement Amount) together with interest at the Interest Rate, compounded quarterly from the commencement of the arbitration to the date of such payment; provided that no such payment shall result in an acceleration of any payment or benefits received unless Officer agrees in writing and such acceleration complies with Final Treasury Regulation 1.409A-3(j)(4)(xiv).  In no event shall Officer be entitled to the benefits contemplated by Section 4(b) and the benefits contemplated by Section 4(c).  In the event there is a dispute as to whether Officer is entitled to the benefits provided by Section 4(b), the “Advancement Amount” is equal to fifty percent (50%) of the amount of Corporation’s obligations pursuant to Section 4(b)(i) and Section 4(b)(ii) (calculated assuming that Officer was entitled to the benefits set forth therein).  In the event there is a dispute as to whether Officer is entitled to the benefits provided by Section 4(c), and assuming Section 4(b) reasonably does not apply, the “Advancement Amount” is equal to fifty percent (50%) of the amount of Corporation’s obligations pursuant to Section 4(c)(i) and Section 4(c)(ii) (calculated assuming that Officer was entitled to the benefits set forth therein).  Corporation and Officer agree that it would not be in good faith for Corporation to dispute any good-faith determination by Officer that Good Reason exists as to circumstances arising upon, after or in connection with a Change in Control.

(iii)Legal Fees.  In addition to all other amounts payable to Officer under this Agreement, Corporation shall pay to Officer all reasonable legal fees and expenses incurred by Officer in connection with any Dispute arising out of or relating to this Agreement or the interpretation thereof (including, without limitation, all such fees and expenses, if any, incurred in contesting or disputing any termination of Officer’s employment or in seeking to obtain or enforce any right or benefit provided by this Agreement, or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of

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the Code to any payment or benefit provided hereunder), regardless of the outcome of such proceeding; provided, however, that in the event Officer commences such action, Officer shall not be entitled to recover such fees and costs if the arbitrator determines that Officer brought the claim in bad faith or the claim was frivolous.  Any attorney’s fees incurred by Officer shall be paid by Corporation in advance of the final disposition of such action or challenge, as such fees and expenses are incurred; provided, however, that any award against Officer shall require him to repay such amounts, net of any income taxes paid or payable by Officer with respect to such amounts, if such amounts are incurred in connection with an action commenced by Officer if it is ultimately determined by the court that Officer brought, such action in bad faith or the claim was frivolous.  Notwithstanding the foregoing, any payment pursuant to this Section 6(h)(iii) is subject to compliance with Section 2-418 of the Maryland General Corporation Law.  If such legal fees are not reimbursed in connection with a bona fide legal claim exempt Section 409A pursuant to Final Treasury Regulation 1.409-1(b)(11) then (i) the legal fees provided or advanced to or for Officer pursuant to this Section 6(h) in one taxable year shall not affect the amount of legal fees provided or advanced to or for Officer in any other taxable year, (ii) any reimbursement to Officer of legal fees under this Section 6(h) shall be paid to Officer on or before the last day of Officer’s taxable year following the taxable year in which the expense was incurred and (iii) the right to advancement, reimbursement or payment of legal fees under this Section 6(h) may not be liquidated or exchanged for any other benefit.

(i)Severability.  Should a court or other body of competent jurisdiction, or an arbitrator selected pursuant to Section 6(h), determine that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted (but in no event beyond the scope and/or time period contemplated by this Agreement) rather than voided, if possible, taking into account the intent of the parties when they entered into this Agreement and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

(j)Survival of Corporation’s Obligations.  Corporation’s obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to Corporation.  This Agreement shall not be terminated by any merger or consolidation or other reorganization of Corporation, including a sale, transfer or other disposition of all or substantially all of Corporation’s assets.  In the event any merger, consolidation or reorganization of Corporation, or a sale of all or substantially all of the business assets of Corporation, this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person or the successor to all or substantially all of the business assets of Corporation, as applicable.  This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by Corporation (except to an affiliate of Corporation in which event Corporation shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by Officer.  Officer shall be entitled, to the extent permitted under any applicable law or any Corporation plan, policy, program, arrangement or agreement, to select or change a beneficiary or beneficiaries to receive any compensation or benefit payable or provided to Officer pursuant to this Agreement following Officer’s death by giving Corporation written notice thereof.  In the event of Officer’s death or a judicial determination of his incompetence, references in this Agreement to Officer shall be deemed, where appropriate, to refer to his

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beneficiary, estate or legal representative, as the case may be and, in all events, in the case of Officer’s death any payments or benefits due to Officer that remain unpaid or outstanding hereunder shall be paid or provided to his designated beneficiary or, in the absence of such designation, his estate.

(k)Survivorship.  The terms of this Agreement to the extent necessary to carry out the intentions of the parties underlying their respective rights and obligations shall survive any termination of the Employment Period.  For this purpose, the parties intend that the following provisions of this Agreement shall survive any termination or expiration of the Employment Period to the extent necessary to carry out the intentions of the parties as embodied in this Agreement:  Sections 2(a), 4, 5, and this Section 6.  This Agreement shall continue in effect until there are no further rights or obligations of the parties outstanding hereunder and shall not be terminated by either party without the express written consent of both parties.

(l)Representations and Warranties.  Corporation represents and warrants to Officer that (i) execution, delivery and performance of this Agreement by Corporation has been fully and validly authorized by all necessary corporate action, (ii) the officer signing this Agreement on behalf of Corporation is duly authorized to do so, (iii) the execution, delivery and performance of this Agreement does not violate any applicable law, regulation, order, judgment or decree or any agreement, plan or corporate governance document to which Corporation is a party or by which it is bound and (iv) upon execution and delivery of this Agreement by the parties, it shall be a valid and binding obligation of Corporation, enforceable against it in accordance with its terms.  Officer hereby represents to Corporation that execution, delivery and performance of this Agreement by Officer and the performance by Officer of Officer’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement to which Officer is a party or otherwise bound (other than any agreement with Corporation).

(m)Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent or limit Officer’s continuing or future participation in, or entitlements under, any benefit, bonus, incentive or other plan or program of Corporation or any of its subsidiaries or affiliates and for which Officer may qualify, nor shall anything herein limit or reduce such rights as Officer may have under any other agreement with Corporation or its subsidiaries or affiliates, provided that in no event shall Officer be entitled to duplication of payments or benefits.

(n)Code Section 409A.  To the extent that this Agreement or any plan, program or award of Corporation in which Officer participates or which has been or is granted by Corporation to Officer, as applicable, is subject to Section 409A of the Code, Corporation and Officer agree to cooperate and work together in good faith to timely amend each such plan, program or award to comply with Section 409A of the Code.  In the event that Officer and Corporation do not agree as to the necessity, timing or nature of a particular amendment intended to satisfy Section 409A of the Code, reasonable deference will be given to Officer’s reasonable interpretation of such provisions.  If Officer is a “specified employee” as determined pursuant to Section 409A of the Code as of the date of Officer’s “separation from service” (within the meaning of Section 409A of the Code) and if any payment or benefit provided for in this Agreement or otherwise both (x) constitutes a “deferral of compensation” within the meaning of Section 409A and (y) cannot be paid or provided in the manner otherwise provided without

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subjecting Officer to “additional tax”, interest or penalties under Section 409A, then any such payment or benefit that is payable during the first six months following Officer’s “separation from service” shall be paid or provided to Officer in a cash lump-sum, with interest at LIBOR, on the first business day of the seventh calendar month following the month in which Officer’s “separation from service” occurs.  In addition, references to payments to be paid “promptly following the Date of Termination” shall mean as soon as practicable but in all events no later than two and one-half months after the Date of Termination with the payment date within such time period with Corporation’s sole discretion.

(o)Counterparts.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.

(p)Withholdings.  All compensation and benefits to Officer hereunder shall be reduced by all federal, state, local and other withholdings and similar taxes and withholdings required by applicable law.

(q)Undertakings.  Corporation agrees that with respect to any undertaking required by Officer in connection with any advancement of expenses or other amounts, whether pursuant to the Bylaws of Corporation, the Indemnification Agreement (or any successor agreement), applicable law or otherwise, and whether or not Officer is employed by Corporation on such date, such undertaking shall condition repayment upon its being ultimately determined by a court having jurisdiction in the matter in a final adjudication from which there is no further right of appeal that Officer is not entitled to be indemnified against such expenses or other amounts by Corporation.  To the extent any such undertaking does not condition repayment in this manner, such undertaking shall be interpreted consistent with this paragraph.

(r)Inconsistencies.  In the event of any inconsistency between any provision of this Agreement and any provision of any equity award granted by Corporation or the Indemnification Agreement, the provision most favorable to Officer shall govern.

(s)Legal Counsel; Mutual Drafting.  Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice.  Each party has cooperated in the drafting, negotiation and preparation of this Agreement.  Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language.  Officer agrees and acknowledges that he has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

HCP, INC.
By:	/s/ EDWARD J. HENNING
	Edward J. Henning
	Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary
	/s/ JAMES F. FLAHERTY III
	James F. Flaherty III

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EX-10.17

Exhibit 10.17

[CEO FIVE YEAR INSTALLMENT VESTING]

HEALTH CARE PROPERTY INVESTORS, INC.

2006 PERFORMANCE INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT

James F. Flaherty III[                            ], Grantee:

As of the [            ] day of [               2007] (the “Grant Date”), HCP, Inc. (formerly known as Health Care Property Investors, Inc.), a Maryland corporation (the “Company”), pursuant to the Health Care Property Investors, Inc. 2006 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), has granted to you, the Grantee named above, [              ] performance restricted stock units (the “Units”) with respect to [            ] shares of Common Stock on the terms and conditions set forth in this Performance Restricted Stock Unit Agreement (this “Agreement”) and the Plan.  The Units are subject to adjustment as provided in Section 7.1 of the Plan.  Capitalized terms not defined herein shall have the meanings assigned to such terms in the Plan.  The Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) is the administrator of the Plan for purposes of your Units.

I.Forfeiture of Units.

(a)Forfeiture Based Upon Company Performance.  Your Units will be paid only to the extent your Units are not forfeited pursuant to this Section I and only to the extent such non-forfeited Units vest pursuant to this Section I or Section II below.  Your Units are subject to forfeiture if the Company’s Funds From Operations Per Share for the 2007 calendar year (the “Performance Period”) is less than [$      ].  If the Company’s Funds From Operations Per Share for the Performance Period is less than [$      ], the aggregate percentage of Units that you will forfeit will be determined in accordance with Exhibit A hereto.  For purposes of this Agreement, “Funds From Operations Per Share” means the Company’s funds from operations per share during the Performance Period, as prescribed by the National Association of Real Estate Investment Trusts (“NAREIT”) as in effect on the first day of the Performance Period, and shall be calculated on a fully diluted basis using the weighted average of diluted shares of Common Stock outstanding during the Performance Period.  Funds From Operations Per Share shall be calculated before taking into account any non-recurring charges incurred by the Company with respect to the Performance Period for (i) material strategic or financing transactions approved by the Board of Directors and (ii) impairments.  The determination as to whether the Company has attained the performance goals with respect to the Performance Period shall be made by the Committee acting in good faith.  The Committee’s determination regarding whether the Company has attained the performance goals (the “Committee Determination”) shall be made no later than the March 15 following the end of the Performance Period.  Your Units shall not be deemed vested pursuant to any other provision of this Agreement earlier than the date that the Committee makes such determination, as required by Section 162(m) of the Code and the regulations promulgated thereunder.  Any Units forfeited pursuant to this Section I(a) shall be deemed to have been forfeited as of the last day of the Performance Period.

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(b)Forfeiture of Units Upon Termination of Employment.  Except as provided in Section I(c), if at any time during the Performance Period your employment with the Company is terminated, all of your Units shall be automatically forfeited and cancelled in full effective as of such termination of employment and this Agreement shall be null and void and of no further force and effect.

(c)Certain Terminations during the Performance Period.  This Section I(c) applies in the event your employment with the Company is terminated as a result of (i) your death, Disability or Retirement, (ii) a Termination Other Than For Cause, (iii) a Termination For Good Reason, or (iv) a Termination Upon a Change in Control (including a Covered Resignation).  In the event of any such termination during the Performance Period, your Units will remain outstanding during the remainder of the Performance Period and will be subject to forfeiture in the manner set forth in subsection (a) upon completion of the Performance Period.  In such a case, any Units not so forfeited pursuant to subsection (a) shall fully vest as of the date of the Committee Determination.  For purposes of this Agreement, the terms “Covered Resignation,” “Disability,” “Termination Other Than For Cause,” “Termination For Good Reason,” and “Termination Upon a Change in Control” shall have the meanings ascribed to such terms in your Employment Agreement with the Company dated October 26, 2005 (the “Employment Agreement”).  Such meanings shall continue to apply for purposes of this Agreement notwithstanding any termination of the “Employment Period” (as such term is defined in the Employment Agreement) in accordance with the Employment Agreement.

II.Vesting.

(a)Vesting of Non-Forfeited Units.  You will have no further rights with respect to any Units that are forfeited in accordance with Section I.  Subject to the terms and conditions of this Agreement, your Units that (i) are not forfeited in accordance with Section I and (ii) do not otherwise vest in accordance with Section I, if any, shall vest in accordance with the following schedule, subject to your continuous service to the Company until the applicable vesting date.  (Vesting amounts pursuant to the following schedule are cumulative.)

Tranche	Percentage of Non Forfeited Units that Vest	Vesting Date
1	20%	1st Anniversary of Grant Date
2	20%	2nd Anniversary of Grant Date
3	20%	3rd Anniversary of Grant Date
4	20%	4th Anniversary of Grant Date
5	20%	5th Anniversary of Grant Date

The vesting schedule requires continued employment through each applicable Vesting Date as a condition to vesting of the applicable Tranche and the corresponding rights and benefits under this Agreement.  Unless otherwise expressly provided herein with respect to accelerated vesting of the Units under certain circumstances, employment for only a portion of a

2

vesting period, even if a substantial portion, will not entitle you to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment as provided in this Agreement.

(b)Acceleration on Certain Terminations Following Performance Period.  If at any time following the completion of the Performance Period and prior to the date your Units become fully vested in accordance with Section II(a), your employment with the Company is terminated as a result of (i) your death, Disability or Retirement, (ii) a Termination Other Than For Cause (iii) a Termination For Good Reason, or (iv) a Termination Upon a Change in Control (including a Covered Resignation), your then outstanding Units (to the extent not previously forfeited and otherwise unvested) shall fully vest immediately upon such termination of employment.

(c)No Acceleration or Vesting Upon Other Terminations.  Except as otherwise provided in the Plan, if at any time your employment with the Company is terminated (i) by the Company, or (ii) by you, under any circumstances (other than as a result of your death, Disability, Retirement, a Termination Other Than For Cause, a Termination For Good Reason, or a Termination Upon a Change in Control, including a Covered Resignation), any of your Units that remain outstanding and otherwise unvested at the time of such termination of employment shall be automatically forfeited and cancelled in full, effective as of such termination of employment.

(d)Employment Termination Date.  If the Employment Period is in effect, the date of your termination of employment for purposes of this Agreement shall be no earlier than the “Date of Termination,” as such term is defined in the Employment Agreement.  If the Employment Period is not then in effect, the date of termination of your termination of employment for purposes of this Agreement shall be your actual date of termination of employment.

III.Timing and Form of Payment.

(a)Distribution Date.  Unless you elect otherwise on or before the Grant Date, the distribution date (the “Distribution Date”) for your Units that become vested pursuant to this Agreement will be the date that such Units vest; provided that in no event shall the Distribution Date occur earlier than the date of the Committee Determination.  Distribution of your vested Units will be made by the Company in shares of Common Stock (on a one-to-one basis) on or as soon as practicable after the Distribution Date with respect to such vested Units, but in no event later than two and one-half (2 ½) months after the year in which such Units became vested.  You will only receive distributions in respect of your vested Units and will have no right to distribution of your unvested Units unless and until such Units vest (and are not otherwise forfeited pursuant to Section I(a)).  Once a vested Unit has been paid pursuant to this Agreement, you will have no further rights with respect to that Unit.  You may, however, elect (a “Distribution Election”) to (A) defer your Distribution Date with respect to some or all of your vested Units and/or (B) have your vested Units distributed to you in annual installments as provided in Section IV(b), provided that such election complies with this Section IV.  You may change your Distribution Election with respect to each Tranche (set forth in Section II(a) above) up to three times without the approval of the Committee, provided such Distribution Election is

3

made in a timely manner.  Any Distribution Elections with respect to a Tranche in addition to the three provided in the preceding sentence may only be made with the approval of the Committee, in its sole discretion.  In order for a Distribution Election to be valid, it must be made at least one year prior to the then-existing Distribution Date with respect to the Units subject to such Distribution Election, the new Distribution Date must be at least five years after the then-existing Distribution Date with respect to such Units, and the election must otherwise be consistent with the “subsequent election” rules of Section 409A(a)(4)(C) of the Code so as to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code.  Your Distribution Date with respect to any portion of your Units may not be prior to the earlier of the Vesting Date for such vested Units or the date of the Committee Determination.  Distribution Elections may only be made by delivering a written election to the Company care of its General Counsel in the form attached as Exhibit B hereto.

(b)Form of Distribution.  Unless you elect otherwise on or before the Grant Date, distribution of your vested Units with respect to any Tranche will be made in a lump sum on or as soon as administratively practicable after your Distribution Date, but in no event later than two and one-half (2 ½) months after the year in which such Units became vested.  You may, however, elect to have vested Units with respect to any Tranche distributed in the form of two or more annual installments over a fixed number of years, provided that each installment payment must be for a minimum of 1,000 shares of Common Stock.  If you elect to have some or all of your vested Units underlying a Tranche distributed in annual installments, the first installment will be paid on or within 90 days after the Distribution Date with respect to such Tranche and subsequent installments will be paid on or within 90 days after each of the anniversaries of the Distribution Date with respect to such Tranche during your elected installment period, with each such payment date during such time period within the Company’s sole discretion.  You may change an election you make pursuant to this Section IV(b) (or you may make an initial election in the event that you did not elect a form of payment at the time of your award and, accordingly, your Units were subject to the lump sum default payment rule) by filing a new written election with the Committee; provided that you must also elect a later Distribution Date pursuant to Section IV(a) as to any Units that are subject to such election and in no event may such an election result in an acceleration of distributions within the meaning of Section 409A of the Code so as to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code.  Distribution Elections may only be made by delivering a written election to the Company care of its General Counsel in the form attached as Exhibit B hereto.

(c)Hardship Distribution.  If you experience an Unforeseeable Emergency (as defined below) you may elect to receive immediate distribution of some or all or your vested Units upon such Unforeseeable Emergency.  Distribution upon an Unforeseeable Emergency shall be made no later than thirty (30) days following written notice to the Company care of its General Counsel of the Unforeseeable Emergency.  For purposes of this Agreement, an “Unforeseeable Emergency” shall mean a severe financial hardship resulting from (i) an illness or accident of you, your spouse, or your dependent (as defined in Section 152(a) of the Code without regard to Section 152(b)(1), (b)(2) and (d)(1)(B)), (ii) loss of your property due to casualty, or (iii) any other similar extraordinary and unforeseeable circumstances arising as a result of events beyond your control, all as reasonably determined by the Committee in good faith.  No distribution shall be made in respect of an Unforeseeable Emergency to the extent that such Unforeseeable Emergency is or may be relieved through reimbursement or compensation

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by insurance or otherwise or by liquidation of your assets (to the extent such liquidation would not itself cause a severe financial hardship).  Any distribution of your vested Units as a result of an Unforeseeable Emergency shall be limited to the amount reasonably necessary to relieve the Unforeseeable Emergency (which may include amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution).

IV.Dividend Equivalent Rights.  During such time as each Unit remains outstanding and prior to the distribution of such Unit in accordance with Section IV, you will have the right to receive, in cash, with respect to such Unit, the amount of any cash dividend paid on a share of Common Stock (a “Dividend Equivalent Right”).  You will have a Dividend Equivalent Right with respect to each Unit that is outstanding on the record date of such dividend.  Dividend Equivalent Rights will be paid to you at the same time or within 30 days after dividends are paid to stockholders of the Company.  Dividend Equivalent Rights will not be paid to you with respect to any Units that are forfeited pursuant to Sections I and II, effective as of the date such Units are forfeited.  You will have no Dividend Equivalent Rights as of the record date of any such cash dividend in respect of any Units that have been paid in Common Stock; provided that you are the record holder of such Common Stock on or before such record date.

V.Transferability.  No benefit payable under, or interest in, the Units or this Agreement shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such benefit or interest shall be, in any manner, liable for, or subject to, your or your beneficiary’s debts, contracts, liabilities or torts; provided, however, nothing in this Section VI shall prevent transfer of your Units by will or by applicable laws of descent and distribution.  You may designate a beneficiary to receive distribution of your vested Units upon your death by submitting a written beneficiary designation to the Committee in the form attached hereto as Exhibit B.  You may revoke a beneficiary designation by submitting a new beneficiary designation.

VI.Withholding.  Subject to Section 8.1 of the Plan and such rules and procedures as the Committee may impose, upon any distribution of shares of Common Stock in respect of your Units, the Company shall automatically reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value (with the “fair market value” of such shares determined in accordance with the applicable provisions of the Plan), to satisfy any withholding obligations of the Company or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates; provided, however, that the foregoing provision shall not apply in the event that you have made other provision in advance of the date of such distribution for the satisfaction of such withholding obligations.  In the event that the Company cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of your Units, the Company (or a Subsidiary) shall be entitled to require a cash payment by you or on your behalf and/or to deduct from other compensation payable to you any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

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VII.No Contract for Employment.  This Agreement is not an employment or service contract and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ or service of the Company, or of the Company to continue your employment or service with the Company.

VIII.Notices.  Any notices provided for in this Agreement or the Plan, including a Distribution Election, shall be given in writing and shall be deemed effectively given upon receipt if delivered by hand or, in the case of notices delivered by United States mail, five (5) days after deposit in the United States mail, postage prepaid, addressed, as applicable, to the Company or if to you, at such address as is currently maintained in the Company’s records or at such other address as you hereafter designate by written notice to the Company.

IX.Plan.  The provisions of the Plan are hereby made a part of this Agreement.  In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of this Agreement shall control.

X.Entire Agreement.  This Agreement, together with the Employment Agreement, contains the entire understanding of the parties in respect of the Units and supersedes upon its effectiveness all other prior agreements and understandings between the parties with respect to the Units.  In the event of any discrepancy between this Agreement and the Employment Agreement, the Employment Agreement shall control, except the definition of “Distribution Date” in this Agreement shall always control.

XI.Amendment.  This Agreement may be amended by the Committee; provided, however that no such amendment shall, without your prior written consent, alter, terminate, impair or adversely affect your rights under this Agreement.

XII.Governing Law.  This Agreement shall be construed and interpreted, and the rights of the parties shall be determined, in accordance with the laws of the State of Maryland, without regard to conflicts of law provisions thereof.

XIII.Tax Consequences.  You may be subject to adverse tax consequences as a result of the issuance, vesting and/or distribution of your Units.  YOU ARE ENCOURAGED TO CONSULT A TAX ADVISOR AS TO THE TAX CONSEQUENCES OF YOUR UNITS AND SUBSEQUENT DISTRIBUTION OF COMMON STOCK.

XIV.Construction.  To the extent that this Agreement is subject to Section 409A of the Code, you and the Company agree to cooperate and work together in good faith to timely amend this Agreement to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code.  In the event that you and the Company do not agree as to the necessity, timing or nature of a particular amendment intended to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code, reasonable deference will be given to your reasonable interpretation of such provisions.  Notwithstanding anything to the contrary contained in this Agreement or the Plan, in the event that you are to receive a payment hereunder in connection with your termination of employment (other than due to your death) which constitutes a “deferral of compensation” pursuant to Section 409A of the Code at a time when you are a “specified employee” (within the meaning of Section 409A of the Code), the Company shall delay the making of such payment to a date that is not earlier than the first to occur of six months and one day after your “separation from service” (within the meaning of Section 409A of the Code) or the date of your death.

[Remainder of page intentionally left blank]

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Very truly yours,
	HCP, INC.
	By:
	Name:
	Title:
	By:
	Name:
	Title:
Accepted and Agreed,
effective as of the date first written above.
By:
Name: James F. Flaherty III

7

[CEO FIVE YEAR INSTALLMENT VESTING]

EXHIBIT A

PERFORMANCE GOALS

Funds From Operations Per Share	Aggregate Percentage Forfeited
[$     ] or greater	0	%
Equal to or greater than [$     ] but less than [$     ]	2	%
Equal to or greater than [$     ] but less than [$     ]	4	%
Equal to or greater than [$     ] but less than [$     ]	6	%
Equal to or greater than [$     ] but less than [$     ]	8	%
Equal to or greater than [$     ] but less than [$     ]	10	%
Equal to or greater than [$     ] but less than [$     ]	12	%
Equal to or greater than [$     ] but less than [$     ]	14	%
Equal to or greater than [$     ] but less than [$     ]	16	%
Equal to or greater than [$     ] but less than [$     ]	18	%
Equal to or greater than [$     ] but less than [$     ]	20	%
Equal to or greater than [$     ] but less than [$     ]	22	%
Equal to or greater than [$     ] but less than [$     ]	24	%
Equal to or greater than [$     ] but less than [$     ]	26	%
Equal to or greater than [$     ] but less than [$     ]	28	%
Equal to or greater than [$     ] but less than [$     ]	30	%
Equal to or greater than [$     ] but less than [$     ]	32	%
Equal to or greater than [$     ] but less than [$     ]	34	%
Equal to or greater than [$     ] but less than [$     ]	36	%
Equal to or greater than [$     ] but less than [$     ]	38	%
Equal to or greater than [$     ] but less than [$     ]	40	%
Equal to or greater than [$     ] but less than [$     ]	50	%
Equal to or greater than [$     ] but less than [$     ]	60	%
Equal to or greater than [$     ] but less than [$     ]	70	%
Equal to or greater than [$     ] but less than [$     ]	80	%
Equal to or greater than [$     ] but less than [$     ]	90	%
Equal to or greater than [$     ] but less than [$     ]	100	%

A-1

[CEO FIVE YEAR INSTALLMENT VESTING]

EXHIBIT B

HEALTH CARE PROPERTY INVESTORS, INC.

2006 PERFORMANCE INCENTIVE PLAN

RESTRICTED STOCK UNITS

DISTRIBUTION ELECTION AND BENEFICIARY DESIGNATION FORM

Name:  James F. Flaherty III Social Security No.:

In connection with your award of Performance Restricted Stock Units on [                , 2007] under the Health Care Property Investors, Inc. 2006 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), you have the option of selecting the timing and form of payment of the shares of Common Stock underlying your vested Units.

Please complete this election form and return it to Edward J. Henning, the Company’s General Counsel and Corporate Secretary.

Deferral of Distribution Date

Unless you elect otherwise, the Distribution Date for your Units that vest will be the vesting date of such Units; provided that in no event shall the Distribution Date occur earlier than the date of the Committee Determination with respect to such Units.  You may elect a new Distribution Date with respect to some or all of the Tranches by completing the information request below.  Please note that, subject to the restrictions set forth below and in the Agreement, your new Distribution Date with respect to a Tranche can take any of the following forms:

·You may elect a date certain for your Distribution Date (e.g., January 1, 2011),

·You may elect that your Distribution Date will be the date of your death or termination of employment, or

·You may elect a Distribution Date that is the earlier of two dates/events (e.g., the earlier of January 1, 2011, or termination of your employment).

If you do not elect a Distribution Date on or before the Grant Date, you will be deemed to have elected distribution of your vested Units on or as soon as administratively practical after the applicable vesting date of your Units, but in no event later

than two and one-half (2 ½) months after the year in which such Units became vested.  If, after the Grant Date, you want to change the Distribution Date with respect to any of your vested Units, your new election must be made at least one year prior to the then-existing Distribution Date, the new Distribution Date you elect must be at least five years after the then-existing Distribution Date, and the change must otherwise satisfy the “subsequent election” rules of Section 409A(a)(4)(C) of the Code.  If your election to defer your Distribution Date is not timely, it will not be valid.

B-1

You acknowledge and understand that by electing a new Distribution Date with respect to one or more of the Tranches, you are hereby revoking the then-existing Distribution Date with respect to such Tranche(s).  You further acknowledge and agree that the distribution of the shares of Common Stock underlying your Units may coincide with a period during which you are prohibited from selling, disposing or otherwise transferring such shares pursuant to the Company’s Insider Trading Policy, or by law, and therefore, you may not be able to sell, dispose or otherwise transfer such shares to pay any sums required by federal, state or local tax law to be withheld with respect to the issuance of such shares.

Tranche	Vesting Date	Distribution Date*
1	1st Anniversary of Grant Date
2	2nd Anniversary of Grant Date
3	3rd Anniversary of Grant Date
4	4th Anniversary of Grant Date
5	5th Anniversary of Grant Date

*  Specify “Vesting Date” if you desire payment of the vested Units on or as soon as administratively practical after the vesting date of the Units.  Otherwise, indicate the Distribution Date you elect.  In all events your election is subject to the rules stated above (including, without limitation, the 5-year deferral requirement set forth above if you are electing a change after the Grant Date).

Form of Payment

Distribution of all of your vested Units underlying a Tranche will be made in shares of Common Stock in a lump sum on or as soon as practicable after the Distribution Date with respect to such Units, but in no event later than two and one-half (2 ½) months after the year in which such Units became vested.  For example, all of your vested Units under Tranche 1 will be distributed to you on or as soon as practicable after the Vesting Date with respect to Tranche 1 (unless you elect a later Distribution Date as provided above).  You may, however, elect at the time of your award to have vested Units with respect to any Tranche distributed in the form of two or more annual installments over a fixed number of years.  For example, if you elect to have your vested Units underlying Tranche 1 distributed in five installments, your vested Units will be distributed to you in five equal payments on or as soon as practicable after the Distribution Date with respect to Tranche 1 and each of the first four anniversaries of the Distribution Date for Tranche 1.

If you elect to have any or all of your vested Units underlying a Tranche distributed in installments, you must elect a number of equal annual installments which will result in a distribution of at least 1,000 shares of Common Stock per installment with respect to such Tranche (otherwise, the number of installments you elected will be reduced by the Company to produce a distribution of at least 1,000 shares of Common Stock per installment).  If you would like to change a form of distribution election you have made

B-2

(or if you would like to make an initial form of distribution election in the event that you did not make such an election at the time of the award), your election must be made at least one year prior to the then-existing Distribution Date, and you must elect a new Distribution Date that is at least five years after the then-existing Distribution Date.  If your election to defer your Distribution Date is not timely, it will not be valid.  Furthermore, if you are changing an existing form of distribution election, your election change cannot result in an acceleration (within the meaning of Section 409A of the Code) of payments, and the change must otherwise satisfy the “subsequent election” rules of Section 409A(a)(4)(C) of the Code.

Tranche	Vesting Date	Number of Installments (Shares of Common Stock per Installment)
1	1st Anniversary of Grant Date	(    )
2	2nd Anniversary of Grant Date	(    )
3	3rd Anniversary of Grant Date	(    )
4	4th Anniversary of Grant Date	(    )
5	5th Anniversary of Grant Date	(    )

B-3

Beneficiary Designation

I hereby designate the following individual as beneficiary to receive distribution of my vested Units, if any, in the event of my death.  Distribution of such vested Units will be in the form, and on the Distribution Date(s), in effect with respect to such vested Units as of the date of my death.

Beneficiary  Information
Name:
(Please print)		Last	First			Middle Initial
Sex:	Relationship to Participant:
Social Security No.:				Date of Birth:
Address:
City:			State:		Zip Code:

Please retain a copy of this Distribution Election Form for your records.

Signature:  James F. Flaherty III Date Signed

B-4

EX-10.18

Exhibit 10.18

[CEO THREE YEAR CLIFF VESTING]

HEALTH CARE PROPERTY INVESTORS, INC.

2006 PERFORMANCE INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT

James F. Flaherty III[                            ], Grantee:

As of the [            ] day of [               2007] (the “Grant Date”), HCP, Inc. (formerly known as Health Care Property Investors, Inc.), a Maryland corporation (the “Company”), pursuant to the Health Care Property Investors, Inc. 2006 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), has granted to you, the Grantee named above, [              ] performance restricted stock units (the “Units”) with respect to [            ] shares of Common Stock on the terms and conditions set forth in this Performance Restricted Stock Unit Agreement (this “Agreement”) and the Plan.  The Units are subject to adjustment as provided in Section 7.1 of the Plan.  Capitalized terms not defined herein shall have the meanings assigned to such terms in the Plan.  The Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) is the administrator of the Plan for purposes of your Units.

I.Forfeiture of Units.

(a)Forfeiture Based Upon Company Performance.  Your Units will be paid only to the extent your Units are not forfeited pursuant to this Section I and only to the extent such non-forfeited Units vest pursuant to this Section I or Section II below.  Your Units are subject to forfeiture if the Company’s Funds From Operations Per Share for the 2007 calendar year (the “Performance Period”) is less than [$      ].  If the Company’s Funds From Operations Per Share for the Performance Period is less than [$      ], the aggregate percentage of Units that you will forfeit will be determined in accordance with Exhibit A hereto.  For purposes of this Agreement, “Funds From Operations Per Share” means the Company’s funds from operations per share during the Performance Period, as prescribed by the National Association of Real Estate Investment Trusts (“NAREIT”) as in effect on the first day of the Performance Period, and shall be calculated on a fully diluted basis using the weighted average of diluted shares of Common Stock outstanding during the Performance Period.  Funds From Operations Per Share shall be calculated before taking into account any non-recurring charges incurred by the Company with respect to the Performance Period for (i) material strategic or financing transactions approved by the Board of Directors and (ii) impairments.  The determination as to whether the Company has attained the performance goals with respect to the Performance Period shall be made by the Committee acting in good faith.  The Committee’s determination regarding whether the Company has attained the performance goals (the “Committee Determination”) shall be made no later than the March 15 following the end of the Performance Period.  Your Units shall not be deemed vested pursuant to any other provision of this Agreement earlier than the date that the Committee makes such determination, as required by Section 162(m) of the Code and the regulations promulgated thereunder.  Any Units forfeited pursuant to this Section I(a) shall be deemed to have been forfeited as of the last day of the Performance Period.

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(b)Forfeiture of Units Upon Termination of Employment.  Except as provided in Section I(c), if at any time during the Performance Period your employment with the Company is terminated, all of your Units shall be automatically forfeited and cancelled in full effective as of such termination of employment and this Agreement shall be null and void and of no further force and effect.

(c)Certain Terminations during the Performance Period.  This Section I(c) applies in the event your employment with the Company is terminated as a result of (i) your death, Disability or Retirement, (ii) a Termination Other Than For Cause, (iii) a Termination For Good Reason, or (iv) a Termination Upon a Change in Control (including a Covered Resignation).  In the event of any such termination during the Performance Period, your Units will remain outstanding during the remainder of the Performance Period and will be subject to forfeiture in the manner set forth in subsection (a) upon completion of the Performance Period.  In such a case, any Units not so forfeited pursuant to subsection (a) shall fully vest as of the date of the Committee Determination.  For purposes of this Agreement, the terms “Covered Resignation,” “Disability,” “Termination Other Than For Cause,” “Termination For Good Reason,” and “Termination Upon a Change in Control” shall have the meanings ascribed to such terms in your Employment Agreement with the Company dated October 26, 2005 (the “Employment Agreement”).  Such meanings shall continue to apply for purposes of this Agreement notwithstanding any termination of the “Employment Period” (as such term is defined in the Employment Agreement) in accordance with the Employment Agreement.

II.Vesting.

(a)Vesting of Non-Forfeited Units.  You will have no further rights with respect to any Units that are forfeited in accordance with Section I.  Subject to the terms and conditions of this Agreement, your Units that (i) are not forfeited in accordance with Section I and (ii) do not otherwise vest in accordance with Section I, if any, shall vest upon the third anniversary of the Grant Date (the “Vesting Date”), subject to your continuous service to the Company until the Vesting Date.

The vesting schedule requires continued employment through the Vesting Date as a condition to vesting of the Units and the rights and benefits under this Agreement.  Unless otherwise expressly provided herein with respect to accelerated vesting of the Units under certain circumstances, employment for only a portion of the vesting period, even if a substantial portion, will not entitle you to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment as provided in this Agreement.

(b)Acceleration on Certain Terminations Following Performance Period.  If at any time following the completion of the Performance Period and prior to the Vesting Date, your employment with the Company is terminated as a result of (i) your death, Disability or Retirement, (ii) a Termination Other Than For Cause (iii) a Termination For Good Reason, or (iv) a Termination Upon a Change in Control (including a Covered Resignation), your then outstanding Units (to the extent not previously forfeited and otherwise unvested) shall fully vest immediately upon such termination of employment.

(c)No Acceleration or Vesting Upon Other Terminations.  Except as otherwise provided in the Plan, if at any time your employment with the Company is terminated (i) by the Company, or (ii) by you, under any circumstances (other than as a result of your death,

2

Disability or Retirement, a Termination Other Than For Cause, a Termination For Good Reason, or a Termination Upon a Change in Control, including a Covered Resignation), any of your Units that remain outstanding and otherwise unvested at the time of such termination of employment shall be automatically forfeited and cancelled in full, effective as of such termination of employment.

(d)Employment Termination Date.  If the Employment Period is in effect, the date of your termination of employment for purposes of this Agreement shall be no earlier than the “Date of Termination,” as such term is defined in the Employment Agreement.  If the Employment Period is not then in effect, the date of termination of your termination of employment for purposes of this Agreement shall be your actual date of termination of employment.

III.Timing and Form of Payment.

(a)Distribution Date.  Unless you elect otherwise on or before the Grant Date, the distribution date (the “Distribution Date”) for your Units that become vested pursuant to this Agreement will be the date that such Units vest; provided that in no event shall the Distribution Date occur earlier than the date of the Committee Determination.  Distribution of your vested Units will be made by the Company in shares of Common Stock (on a one-to-one basis) on or as soon as practicable after the Distribution Date with respect to such vested Units, but in no event later than two and one-half (2 ½) months after the year in which such Units became vested.  You will only receive distributions in respect of your vested Units and will have no right to distribution of your unvested Units unless and until such Units vest (and are not otherwise forfeited pursuant to Section I(a)).  Once a vested Unit has been paid pursuant to this Agreement, you will have no further rights with respect to that Unit.  You may, however, elect (a “Distribution Election”) to (A) defer your Distribution Date with respect to some or all of your vested Units and/or (B) have your vested Units distributed to you in annual installments as provided in Section IV(b), provided that such election complies with this Section IV.  You may change your Distribution Election up to three times without the approval of the Committee, provided such Distribution Election is made in a timely manner.  Any Distribution Elections with respect to your vested Units in addition to the three provided in the preceding sentence may only be made with the approval of the Committee, in its sole discretion.  In order for a Distribution Election to be valid, it must be made at least one year prior to the then-existing Distribution Date, the new Distribution Date must be at least five years after the then-existing Distribution Date, and the election must otherwise be consistent with the “subsequent election” rules of Section 409A(a)(4)(C) of the Code so as to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code.  Your Distribution Date with respect to any portion of your Units may not be prior to the earlier of the Vesting Date for such vested Units or the date of the Committee Determination.  Distribution Elections may only be made by delivering a written election to the Company care of its General Counsel in the form attached as Exhibit B hereto.

(b)Form of Distribution.  Unless you elect otherwise on or before the Grant Date, distribution of your vested Unitswill be made in a lump sum on or as soon as practicable after your Distribution Date, but in no event later than two and one-half (2 ½) months after the year in which such Units became vested.  You may, however, elect to have vested Units

3

distributed in the form of two or more annual installments over a fixed number of years, provided that each installment payment must be for a minimum of 1,000 shares of Common Stock.  If you elect to have your vested Units distributed in annual installments, the first installment will be paid on or within 90 days after the Distribution Date and subsequent installments will be paid on or within 90 days after each of the anniversaries of the Distribution Date during your elected installment period, with each such payment date during such time period within the Company’s sole discretion.  You may change an election you make pursuant to this Section IV(b) (or you may make an initial election in the event that you did not elect a form of payment at the time of your award and, accordingly, your Units were subject to the lump sum default payment rule) by filing a new written election with the Committee; provided that you must also elect a later Distribution Date pursuant to Section IV(a) as to any Units that are subject to such election and in no event may such an election result in an acceleration of distributions within the meaning of Section 409A of the Code so as to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code.  Distribution Elections may only be made by delivering a written election to the Company care of its General Counsel in the form attached as Exhibit B hereto.

(c)Hardship Distribution.  If you experience an Unforeseeable Emergency (as defined below) you may elect to receive immediate distribution of some or all or your vested Units upon such Unforeseeable Emergency.  Distribution upon an Unforeseeable Emergency shall be made no later than thirty (30) days following written notice to the Company care of its General Counsel of the Unforeseeable Emergency.  For purposes of this Agreement, an “Unforeseeable Emergency” shall mean a severe financial hardship resulting from (i) an illness or accident of you, your spouse, or your dependent (as defined in Section 152(a) of the Code without regard to Section 152(b)(1), (b)(2) and (d)(1)(B)), (ii) loss of your property due to casualty, or (iii) any other similar extraordinary and unforeseeable circumstances arising as a result of events beyond your control, all as reasonably determined by the Committee in good faith.  No distribution shall be made in respect of an Unforeseeable Emergency to the extent that such Unforeseeable Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of your assets (to the extent such liquidation would not itself cause a severe financial hardship).  Any distribution of your vested Units as a result of an Unforeseeable Emergency shall be limited to the amount reasonably necessary to relieve the Unforeseeable Emergency (which may include amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution).

IV.Dividend Equivalent Rights.  During such time as each Unit remains outstanding and prior to the distribution of such Unit in accordance with Section IV, you will have the right to receive, in cash, with respect to such Unit, the amount of any cash dividend paid on a share of Common Stock (a “Dividend Equivalent Right”).  You will have a Dividend Equivalent Right with respect to each Unit that is outstanding on the record date of such dividend.  Dividend Equivalent Rights will be paid to you at the same time or within 30 days after dividends are paid to stockholders of the Company.  Dividend Equivalent Rights will not be paid to you with respect to any Units that are forfeited pursuant to Sections I and II, effective as of the date such  Units are forfeited.  You will have no Dividend Equivalent Rights as of the record date of any such cash dividend in respect of any Units that have been paid in Common Stock; provided that you are the record holder of such Common Stock on or before such record date.

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V.Transferability.  No benefit payable under, or interest in, the Units or this Agreement shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such benefit or interest shall be, in any manner, liable for, or subject to, your or your beneficiary’s debts, contracts, liabilities or torts; provided, however, nothing in this Section VI shall prevent transfer of your Units by will or by applicable laws of descent and distribution.  You may designate a beneficiary to receive distribution of your vested Units upon your death by submitting a written beneficiary designation to the Committee in the form attached hereto as Exhibit B.  You may revoke a beneficiary designation by submitting a new beneficiary designation.

VI.Withholding.  Subject to Section 8.1 of the Plan and such rules and procedures as the Committee may impose, upon any distribution of shares of Common Stock in respect of your Units, the Company shall automatically reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value (with the “fair market value” of such shares determined in accordance with the applicable provisions of the Plan), to satisfy any withholding obligations of the Company or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates; provided, however, that the foregoing provision shall not apply in the event that you have made other provision in advance of the date of such distribution for the satisfaction of such withholding obligations.  In the event that the Company cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of your Units, the Company (or a Subsidiary) shall be entitled to require a cash payment by you or on your behalf and/or to deduct from other compensation payable to you any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

VII.No Contract for Employment.  This Agreement is not an employment or service contract and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ or service of the Company, or of the Company to continue your employment or service with the Company.

VIII.Notices.  Any notices provided for in this Agreement or the Plan, including a Distribution Election, shall be given in writing and shall be deemed effectively given upon receipt if delivered by hand or, in the case of notices delivered by United States mail, five (5) days after deposit in the United States mail, postage prepaid, addressed, as applicable, to the Company or if to you, at such address as is currently maintained in the Company’s records or at such other address as you hereafter designate by written notice to the Company.

IX.Plan.  The provisions of the Plan are hereby made a part of this Agreement.  In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of this Agreement shall control.

X.Entire Agreement.  This Agreement, together with the Employment Agreement, contains the entire understanding of the parties in respect of the Units and supersedes upon its effectiveness all other prior agreements and understandings between the parties with respect to the Units.  In the event of any discrepancy between this Agreement and the Employment Agreement, the Employment Agreement shall control, except the definition of “Distribution Date” in this Agreement shall always control.

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XI.Amendment.  This Agreement may be amended by the Committee; provided, however that no such amendment shall, without your prior written consent, alter, terminate, impair or adversely affect your rights under this Agreement.

XII.Governing Law.  This Agreement shall be construed and interpreted, and the rights of the parties shall be determined, in accordance with the laws of the State of Maryland, without regard to conflicts of law provisions thereof.

XIII.Tax Consequences.  You may be subject to adverse tax consequences as a result of the issuance, vesting and/or distribution of your Units.  YOU ARE ENCOURAGED TO CONSULT A TAX ADVISOR AS TO THE TAX CONSEQUENCES OF YOUR UNITS AND SUBSEQUENT DISTRIBUTION OF COMMON STOCK.

XIV.Construction.  To the extent that this Agreement is subject to Section 409A of the Code, you and the Company agree to cooperate and work together in good faith to timely amend this Agreement to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code.  In the event that you and the Company do not agree as to the necessity, timing or nature of a particular amendment intended to prevent application of the penalty and interest provisions of Section 409A(a)(1)(B) of the Code, reasonable deference will be given to your reasonable interpretation of such provisions.  Notwithstanding anything to the contrary contained in this Agreement or the Plan, in the event that you are to receive a payment hereunder in connection with your termination of employment (other than due to your death) which constitutes a “deferral of compensation” pursuant to Section 409A of the Code at a time when you are a “specified employee” (within the meaning of Section 409A of the Code), the Company shall delay the making of such payment to a date that is not earlier than the first to occur of six months and one day after your “separation from service” (within the meaning of Section 409A of the Code) or the date of your death.

[Remainder of page intentionally left blank]

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Very truly yours,

HCP, INC.

By:

Name:

Title:

By:

Name:

Title:

Accepted and Agreed,

effective as of the date first written above.

By:

Name: James F. Flaherty III

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[CEO THREE YEAR CLIFF VESTING]

EXHIBIT A

PERFORMANCE GOALS

Funds From Operations Per Share	Aggregate Percentage Forfeited
[$    ] or greater	0	%
Equal to or greater than [$     ] but less than [$     ]	2	%
Equal to or greater than [$     ] but less than [$     ]	4	%
Equal to or greater than [$     ] but less than [$     ]	6	%
Equal to or greater than [$     ] but less than [$     ]	8	%
Equal to or greater than [$     ] but less than [$     ]	10	%
Equal to or greater than [$     ] but less than [$     ]	12	%
Equal to or greater than [$     ] but less than [$     ]	14	%
Equal to or greater than [$     ] but less than [$     ]	16	%
Equal to or greater than [$     ] but less than [$     ]	18	%
Equal to or greater than [$     ] but less than [$     ]	20	%
Equal to or greater than [$     ] but less than [$     ]	22	%
Equal to or greater than [$     ] but less than [$     ]	24	%
Equal to or greater than [$     ] but less than [$     ]	26	%
Equal to or greater than [$     ] but less than [$     ]	28	%
Equal to or greater than [$     ] but less than [$     ]	30	%
Equal to or greater than [$     ] but less than [$     ]	32	%
Equal to or greater than [$     ] but less than [$     ]	34	%
Equal to or greater than [$     ] but less than [$     ]	36	%
Equal to or greater than [$     ] but less than [$     ]	38	%
Equal to or greater than [$     ] but less than [$     ]	40	%
Equal to or greater than [$     ] but less than [$     ]	50	%
Equal to or greater than [$     ] but less than [$     ]	60	%
Equal to or greater than [$     ] but less than [$     ]	70	%
Equal to or greater than [$     ] but less than [$     ]	80	%
Equal to or greater than [$     ] but less than [$     ]	90	%
Equal to or greater than [$     ] but less than [$     ]	100	%

A-1

EXHIBIT B

HEALTH CARE PROPERTY INVESTORS, INC.

2006 PERFORMANCE INCENTIVE PLAN

RESTRICTED STOCK UNITS

DISTRIBUTION ELECTION AND BENEFICIARY DESIGNATION FORM

Name: James F. Flaherty III Social Security No.:

In connection with your award of Performance Restricted Stock Units on [                , 2007] under the Health Care Property Investors, Inc. 2006 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), you have the option of selecting the timing and form of payment of the shares of Common Stock underlying your vested Units.

Please complete this election form and return it to Edward J. Henning, the Company’s General Counsel and Corporate Secretary.

Deferral of Distribution Date

Unless you elect otherwise, the Distribution Date for your Units that vest will be the vesting date of such Units; provided that in no event shall the Distribution Date occur earlier than the date of the Committee Determination with respect to such Units.  You may elect a new Distribution Date with respect to your Units that vest by completing the information request below.  Please note that, subject to the restrictions set forth below and in the Agreement, your new Distribution Date can take any of the following forms:

·You may elect a date certain for your Distribution Date (e.g., January 1, 2011),

·You may elect that your Distribution Date will be the date of your death or termination of employment, or

·You may elect a Distribution Date that is the earlier of two dates/events (e.g., the earlier of January 1, 2011, or termination of your employment).

If you do not elect a Distribution Date on or before the Grant Date, you will be deemed to have elected distribution of your vested Units on or as soon as administratively practical after the vesting date of your Units, but in no event later than two and one-half (2 ½) months after the year in which such Units became vested.  If, after the Grant Date, you want to change the Distribution Date with respect to any of your vested Units, your new election must be made at least one year prior to the then-existing Distribution Date, the new Distribution Date you elect must be at least five years after the then-existing Distribution Date, and the change must otherwise satisfy the “subsequent election” rules of Section 409A(a)(4)(C) of the Code.  If your election to defer your Distribution Date is not timely, it will not be valid.

B-1

You acknowledge and understand that by electing a new Distribution Date, you are hereby revoking the then-existing Distribution Date.  You further acknowledge and agree that the distribution of the shares of Common Stock underlying your Units may coincide with a period during which you are prohibited from selling, disposing or otherwise transferring such shares pursuant to the Company’s Insider Trading Policy, or by law, and therefore, you may not be able to sell, dispose or otherwise transfer such shares to pay any sums required by federal, state or local tax law to be withheld with respect to the issuance of such shares.

I elect the following Distribution Date with respect to the shares of Common Stock underlying my Units:  (Specify “Vesting Date” if you desire payment of the vested Units on or as soon as administratively practical after the vesting date of the Units.  Otherwise, indicate the Distribution Date you elect.  In all events your election is subject to the rules stated above (including, without limitation, the 5-year deferral requirement set forth above if you are electing a change after the Grant Date).

Form of Payment

Distribution of all of your vested Units will be made in shares of Common Stock in a lump sum on or as soon as practicable after the Distribution Date with respect to such Units, but in no event later than two and one-half (2 ½) months after the year in which such Units became vested.  You may, however, elect at the time of your award to have vested Units distributed in the form of two or more annual installments over a fixed number of years.  For example, if you elect to have your vested Units distributed in five installments, your vested Units will be distributed to you in five equal payments on or as soon as practicable after the Distribution Date and each of the first four anniversaries of the Distribution Date.

If you elect to have your vested Units distributed in installments, you must elect a number of equal annual installments which will result in a distribution of at least 1,000 shares of Common Stock per installment (otherwise, the number of installments you elected will be reduced by the Company to produce a distribution of at least 1,000 shares of Common Stock per installment).  If you would like to change a form of distribution election you have made (or if you would like to make an initial form of distribution election in the event that you did not make such an election at the time of the award), your election must be made at least one year prior to the then-existing Distribution Date, and you must elect a new Distribution Date that is at least five years after the then-existing Distribution Date.  If your election to defer your Distribution Date is not timely, it will not be valid.  Furthermore, if you are changing an existing form of distribution election, your election change cannot result in an acceleration (within the meaning of Section 409A of the Code) of payments, and the change must otherwise satisfy the “subsequent election” rules of Section 409A(a)(4)(C) of the Code.

I elect the following number of annual installments with respect to the distribution of the shares of Common Stock underlying my Units:                                       .

B-2

Beneficiary Designation

I hereby designate the following individual as beneficiary to receive distribution of my vested Units, if any, in the event of my death.  Distribution of such vested Units will be in the form, and on the Distribution Date(s), in effect with respect to such vested Units as of the date of my death.

Beneficiary Information
Name:
(Please print)		Last		First			Middle Initial
Sex:	Relationship to Participant:
Social Security No.:					Date of Birth:
Address:
City:			State:			Zip Code:

Please retain a copy of this Distribution Election Form for your records.

Signature:  James F. Flaherty III Date Signed

B-3

EX-10.25

Exhibit 10.25

HEALTH CARE PROPERTY INVESTORS, INC.

2006 PERFORMANCE INCENTIVE PLAN

AMENDED AND RESTATED STOCK UNIT AWARD AGREEMENT

THIS AMENDED AND RESTATED STOCK UNIT AWARD AGREEMENT (this “Agreement”) is dated as of April 24, 2008 by and between HCP, Inc. (formerly known as Health Care Property Investors, Inc.), a Maryland corporation (together with its successors and assigns, the “Corporation”), and James F. Flaherty III (the “Executive”).

W I T N E S S E T H

WHEREAS, pursuant to the Health Care Property Investors, Inc. 2006 Performance Incentive Plan (the “Plan”), on August 14, 2006 (the “Award Date”), the Corporation granted to the Executive restricted stock units under the Plan (the “Stock Unit Award” or “Award”), upon the terms and conditions set forth in a Stock Unit Award Agreement dated as of August 14, 2006 (the “Prior Stock Unit Award Agreement”) and in the Plan; and

WHEREAS, the Corporation and Officer desire to amend and restate the Prior Stock Unit Award Agreement upon the terms and conditions set forth in this Agreement.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Executive, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1.     Defined Terms.  As used herein, the following terms shall have the meanings ascribed to them in that certain Amended and Restated Employment Agreement by and between the Corporation and the Executive, dated as of April 24, 2008 (the “Employment Agreement”) and as in effect as of the date hereof, which definitions are incorporated in full into this Agreement:  “Cause,” “Change in Control,” “Covered Resignation,” “Date of Termination,” “Disability,” “Employment Period,” “Good Reason,”  “Termination For Good Reason,” “Termination Other Than For Cause” and “Termination Upon a Change in Control.”  Such meanings shall continue to apply for purposes of this Agreement notwithstanding any termination of the “Employment Period” of the Employment Agreement.  In addition, “Fair Market Value” for purposes of this Agreement means the closing price of a share of Common Stock as reported on the composite tape for securities listed on the New York Stock Exchange or, if the Common Stock is not then traded on the New York Stock Exchange, the closing price of a share of Common Stock on the principal public exchange on which the Corporation’s Common Stock is then traded (the New York Stock Exchange or such other exchange, as applicable, the “Exchange”) for the date in question, or, if no sales of Common Stock were made on the Exchange on that date, the average of the closing prices of a share of Common Stock for the next preceding day and the next succeeding day on which sales of Common Stock were made on the Exchange.  In the event the Common Stock is not then traded on any public exchange, the Fair Market Value of the Common Stock will be reasonably determined by the Administrator in a manner which does not impose additional taxes, interest or penalties on the Executive pursuant to Section 409A of the Internal Revenue Code of 1986, as amended from time to time (the “Code”) and its implementing regulations (“Section 409A”).  For purposes of

this Agreement, “Pro-Rata Vesting Percentage” means the vesting percentage that would apply on the Executive’s birthday that immediately follows the Separation From Service Date minus the vesting percentage that applies as of the Executive’s birthday that immediately precedes the Separation From Service Date multiplied by a fraction (not greater than one), the numerator of which is the number of days from the Executive’s birthday that immediately precedes the Separation From Service Date through (and including) the Separation From Service Date, and the denominator of which is 365; provided that the Pro Rata Vesting Percentage shall be zero if the Separation From Service Date coincides with the Executive’s birthday.  For purposes of this Agreement, the term “Additional Annual Vesting Amount” shall apply if the Severance Date is after the Separation From Service Date and, in this event, such term means as to any particular birthday of the Executive the vesting percentage that applies on that birthday minus the vesting percentage that applied on the immediately preceding birthday of the Executive; provided that with respect to the Executive’s birthday that immediately follows the Separation From Service Date, the Additional Annual Vesting Amount shall be reduced by the Pro-Rata Vesting Percentage, if any, that applied upon the Separation From Service Date.  For purposes of this Agreement, the term “Additional Pro-Rata Vesting Percentage” shall apply if the Severance Date is after the Separation From Service Date and, in this event such term means the percentage that results from (1) taking the vesting percentage that would apply on the Executive’s birthday that immediately follows the Severance Date minus the vesting percentage that applies as of the Executive’s birthday that immediately precedes the Severance Date multiplied by a fraction (not greater than one), the numerator of which is the number of days from the Executive’s birthday that immediately precedes the Severance Date through (and including) the Severance Date, and the denominator is the 365.  For purposes of this Agreement, “Separation From Service Date” means the date on which the Executive has a “separation from service” (within the meaning of Section 409A) from the Corporation and its Subsidiaries and “Severance Date” means the last day the Executive is employed by the Corporation or its Subsidiaries (regardless of the reason for such termination of the Executive’s employment), which if the Employment Period is in effect shall not be earlier than the Date of Termination. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.

2.     Grant.  Subject to the terms of this Agreement, as of the Award Date, the Corporation granted to the Executive a Stock Unit Award with respect to an aggregate of 219,000 stock units (subject to increase for any dividend equivalents to be credited pursuant to Section 5(b) hereof and to adjustment as otherwise provided in Section 7.1 of the Plan and/or Section 9 of this Agreement) (the “Stock Units”).  As used herein, the term “stock unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock (subject to adjustment as provided in Section 7.1 of the Plan and/or Section 9 hereof) solely for purposes of the Plan and this Agreement.  The Stock Units shall be used solely as a device for the determination of the payment to eventually be made to the Executive if such Stock Units vest pursuant to Section 3 or Section 8 hereof.  The Stock Units shall not be treated as property or as a trust fund of any kind.

3.     Vesting.  Subject to Section 8 and Section 9, the Award shall vest with respect to the applicable percentage of the total number of Stock Units (as increased by any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof) (with such total number subject to adjustment under Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award

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on the Executive’s attainment of each age set forth in the table below (with such percentage increased by the Pro-Rata Vesting Percentage or the Additional Pro-Rata Vesting Percentage, as applicable, in the event the Executive’s Severance Date or both Severance Date and Separation From Service Date occur after, but not before, Executive’s attainment of age 55):

Age	Percentage of Units That Vest
55	14 %
56	19 %
57	26 %
58	34 %
59	43 %
60	54 %
61	62 %
62	70 %
63	79 %
64	89 %
65	100 %

The vesting percentages set forth in the preceding table are not cumulative and are aggregate vesting percentages that take into account all prior vesting.  For the avoidance of doubt, to compute the total percentage of vested Stock Units applicable to a Separation From Service Date or a Severance Date, each percentage above shall be increased by any applicable Pro-Rata Vesting Percentage and any applicable Additional Pro-Rata Vesting Percentage.  Thus, if the Separation From Service Date and the Severance Date both occurred on the day the Executive turned 55 ½, the total percentage of vested Stock Units would be 16.5% (sum of (i) 14% (percentage that vested on his 55^th birthday) and (ii) 2.5% (Pro-Rata Vesting Percentage)).  If the Separation From Service Date occurs on the date the Executive turns 55 ½ but the Severance Date is the date he turns 57 ½, the total percentage of vested Stock Units would be 30% (sum of (i) 14% (percentage that vested on his 55^th birthday) plus (ii) 2.5% (Pro-Rata Vesting Percentage) plus (iii) 2.5% (Additional Annual Vesting Amount applicable to age 56), plus (iv) 7% (Additional Annual Vesting Percentage applicable to age 57), plus (v) 4% (Additional Pro-Rata Vesting Percentage).  Any additional Stock Units subject to the Award (other than the Stock Units vesting solely by application of any Additional Annual Vesting Amounts and the Additional Pro-Rata Vesting Percentage) which vest pursuant to this Section 3 shall be deemed vested as of the Executive’s Separation From Service Date.  Any additional Stock Units subject to the Award that vest solely by application of the Additional Annual Vesting Amount pursuant to this Section 3 shall be deemed vested as of the applicable birthday of the Executive that corresponds to such amount.  And any additional Stock Units subject to the Award that vest solely through application of the Additional Pro-Rata Vesting Percentage pursuant to this Section 3 shall be deemed vested as of the Executive’s Severance Date.  Once vested, whether pursuant to this Section 3 or Section 8 hereof, the vested Stock Units shall be non-forfeitable.  For purposes of Section 409A, the Stock Units which vest and are delivered to the Executive solely pursuant to the applicable the Additional Annual Vesting Amounts (which in the second example above would be 2.5% and 7%) and the Stock Units which vest and are delivered to the Executive solely pursuant to application of the Additional Pro-Rata Vesting Percentage (which in the

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second example above would be 4%) shall each be deemed to be a separate payment distinct from the Stock Units which vest as of the Separation From Service Date (which in the second example above would be 16.5%).  For the avoidance of doubt, if the Separation From Service Date is prior to the date the Executive reaches age 55, but the Severance Date is on or after such date, then the vested percentage under this Section 3 shall be no less than 14%.

4.     Continuance of Employment.  Except for any accelerated vesting expressly provided for in Section 8 in the circumstances referred to therein and except for application of any applicable Pro-Rata Vesting Percentage or Additional Pro-Rata Vesting Percentage, the vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement.  Except for application of any applicable Pro-Rata Vesting Percentage or Additional Pro-Rata Vesting Percentage, employment or service for only a portion of a vesting period, even if a substantial portion, will not entitle the Executive to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 8 below or under the Plan.

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation, affects the Executive’s status as an employee at will who is subject to termination without cause, confers upon the Executive any right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or services, or affects the right of the Corporation or any Subsidiary to increase or decrease the Executive’s other compensation or benefits.  Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Executive without his consent thereto.

5.     Dividend and Voting Rights.

(a)           Limitations on Rights Associated with Units.  The Executive shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 5(b) with respect to dividend equivalent rights) and no voting rights, with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Executive.  No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date the stock certificate should be issued pursuant to Section 7 hereof.

(b)           Dividend Equivalent Rights Distributions.  As of any date that the Corporation pays an ordinary cash dividend on its Common Stock, the Corporation shall credit the Executive with an additional number of Stock Units equal to (i) the per share cash dividend paid by the Corporation on its Common Stock on such date, multiplied by (ii) the total number of Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award as of the related dividend payment record date, divided by (iii) the Fair Market Value of a share of Common Stock on the date of payment of such dividend.  Any Stock Units credited pursuant to the foregoing provisions of this Section 5(b) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original Stock Units to which they relate.  No crediting of Stock Units shall be made pursuant to this Section 5(b) with respect to

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any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Section 8.  Not less frequently than once per annum, the Corporation shall provide the Executive with a statement of the total number of Stock Units which are subject to this Award.

6.     Restrictions on Transfer.  Neither the Stock Unit Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily.  The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7.     Timing and Manner of Payment of Stock Units.  The Stock Units subject to this Award (including any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof) that have vested in accordance with the terms hereof shall be distributed to Executive as follows:

(a)   Subject to Section 7(e) below, the Stock Units subject to this Award that have vested as of the Separation From Service Date (whether pursuant to Section 3, Section 8(b) or 8(c) or Section 9) shall be distributed to the Executive in the year that immediately follows the year in which the Separation From Service Date occurs, but in no event later than March 15^th of such year.

(b)   Subject to Section 7(e) below, any Stock Units subject to this Award (including any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof on or after the Separation From Service Date) that vest after the Separation From Service Date in accordance with Section 3, Section 8(b) or Section 8(c) or Section 9, shall be distributed to the Executive as soon as practicable but in no event later than March 15^th of the year following the year in which such Stock Units vest pursuant to the terms of this Award.

(c)   Payment of the vested Stock Units shall be made by delivery to the Executive of a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Stock Units being paid (provided that the Corporation shall pay any fractional share in cash).  The Executive shall have no further rights with respect to any Stock Units that are paid or that terminate pursuant to Section 8.

(d)   By making distribution of the vested Stock Units in the year immediately following the year in which the Separation From Service Date occurs, it is intended that the Corporation’s federal income tax deduction with respect to such distribution not be limited or eliminated by application of Section 162(m) of the Code.  If it should become reasonably foreseeable that the Corporation’s federal income tax deduction with respect to such distribution could be limited or eliminated by application of Section 162(m) of the Code, the parties agree to cooperate in good faith to amend this Award to mitigate, to the maximum extent reasonably possible in the circumstances, the impact to the Corporation of Section 162(m) of the Code with respect to such distribution; provided that any such amendment shall not result in the application of any tax, penalty or interest to the Executive under Section 409A of the Code and shall preserve the intended economic benefit of this Award and/or the distribution to the Executive.

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(e)   Except in the case of the Executive’s death, if at the time of the Separation From Service Date the Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i) and determined in accordance with its implementing regulation, any distribution to the Executive in connection with such separation which is deemed to be a “deferral of compensation” within the meaning of Section 409A shall not be distributed to the Executive until one day after the sixth month anniversary of the Separation From Service Date; provided that if the Executive’s “separation from service” (within the meaning of Section 409A) is due to Disability and such Disability satisfies the requirements of Section 409A(a)(2)(C), then such payment may be made promptly following the Separation From Service Date without regard to whether the Executive was a “specified employee” at such time.

8.     Effect of Termination of Employment or Change in Control.

(a)   Termination of Unvested Units.  On the Severance Date, the Executive’s Stock Units shall terminate to the extent such units have not theretofore become vested pursuant to Section 3 and do not vest in connection with the termination of the Executive’s employment pursuant to the following subsections of this Section 8.  If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.  In no event shall accelerated vesting be triggered pursuant to both Sections 8(b) and 8(c).  In the event both Sections 8(b) and 8(c) would otherwise apply, Section 8(c) shall control.  In no event shall the number of Stock Units that are vested as of the termination of the Executive’s employment be less than the number that would have theretofore vested pursuant to Section 3 had neither Section 8(b) nor Section 8(c) applied.  For purposes of clarity, no Stock Units shall vest after Executive’s Severance Date (even if the Separation From Service Date occurs after the Severance Date).

(b)   Acceleration of Vesting on Certain Terminations of Employment.  In the event that the Executive’s employment by the Corporation or one of its Subsidiaries is terminated by the Corporation without Cause (including a Termination Other Than for Cause), by the Executive for Good Reason (including a Termination For Good Reason), or due to the Executive’s death or Disability, and in each case only to the extent Section 8(c) below does not apply, the Award shall be deemed vested as of the Severance Date with respect to the applicable percentage of the total number of Stock Units (including any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof) (with such total number subject to adjustment under Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award set forth in the table below based on the Executive’s age as of the Severance Date (with such percentage increased by any applicable Pro-Rata Vesting Percentage or Additional Pro-Rata Vesting Percentage):

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Age	Percentage of Units Deemed Vested
49	8%
50	10%
51	13%
52	16%
53	20%
54	24%
55	28%
56	32%
57	37%
58	42%
59	48%
60	54%
61	62%
62	70%
63	79%
64	89%
65	100%

The vesting percentages set forth in the preceding table are not cumulative and are aggregate vesting percentages that take into account all prior vesting (i.e., the vested percentage includes, and is not in addition to, any vesting of the Stock Units that had theretofore occurred pursuant to Section 3).  For the avoidance of doubt, each percentage above shall be increased by any applicable Pro-Rata Vesting Percentage.  In addition, for avoidance of doubt, if the Severance Date occurs after the Separation From Service Date, the Award shall be deemed vested as of the Severance Date with respect to the applicable percentage of the total number of Stock Units (including any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof) (with such total number subject to adjustment under Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award set forth in the table above based on the Executive’s age as of the Severance Date (with such percentage increased by any applicable Additional Pro-Rata Vesting Percentage), with the actual percentage of Stock Units that become vested as of the Severance Date determined by subtracting from such total percentage of vested Stock Units the percentage of the total number of Stock Units (including any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof) (with such total number subject to adjustment under Section 7.1 of the Plan and/or Section 9 hereof) that had become vested pursuant to Section 3 prior to the Severance Date.

By way of example, if the Separation From Service Date and the Severance Date both occurred on the day the Executive turned 55 ½, the total percentage of vested Stock Units would be 30%.  In addition, if the Separation From Service Date occurs on the date the Executive turns 55 ½ but the Severance Date is the date he turns 56 ½, the amount vesting as of the Severance Date pursuant to this Section 8(b) shall be 15.5% (resulting in a total percentage of vested Stock Units of 34.5%; the vested Stock Units at the Separation From Service Date would have been 16.5%, the Additional Annual Vesting Amount on the Executive’s 56^th birthday would have been 2.5%

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and the additional amount vesting pursuant to this Section 8(b) based on the Executive’s age of 56½ would be 15.5%.)  Any additional Stock Units subject to the Award that vest upon the Severance Date solely through application of the Additional Pro-Rata Vesting Percentage pursuant to this Section 8(b) in connection with the termination of Executive’s employment (which in the second example above would be 15.5%) shall be deemed vested as of the Executive’s Severance Date.  For purposes of Section 409A, the Stock Units which vest and are delivered to the Executive solely pursuant to application of this Section 8(b) (which in the second example above would be 15.5%) shall be deemed to be a separate payment distinct from the Stock Units which vested as of the Separation From Service Date and the Additional Annual Vesting Amount (which in the second example above would be 16.5% and 2.5%, respectively).

(c)   Acceleration in Connection with a Termination In Connection with a Change in Control.  In the event that the Executive’s employment by the Corporation or one of its Subsidiaries is terminated pursuant to a Termination Upon a Change in Control (including a Covered Resignation) or if the Employment Period is not in effect, pursuant to a termination without Cause by the Company or a termination for Good Reason by the Executive, in both cases upon or within two years following the Change in Control, or pursuant to resignation by the Executive for any reason within the 30-day period following the first anniversary of the Change in Control, or, whether or not the Employment Period is in effect, the Executive’s employment is terminated pursuant to a Termination Other Than for Cause within the 90-day period preceding the Change in Control, the Award shall be deemed vested as of the date of such termination (i.e., the Severance Date) with respect to the applicable percentage of the total number of Stock Units (including any dividend equivalents paid pursuant to Section 5(b) hereof) (with such total number subject to adjustment under Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award set forth in the table below based on the Executive’s age as of the Severance Date (with such percentage increased by any applicable Pro-Rata Vesting Percentage or Additional Pro-Rata Vesting Percentage):

Age	Percentage of Units Deemed Vested
49	14%
50	17%
51	20%
52	24%
53	28%
54	32%
55	36%
56	41%
57	46%
58	53%
59	61%
60	69%
61	77%
62	86%
63	91%
64	95%
65	100%

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The vesting percentages set forth in the preceding table are not cumulative and are aggregate vesting percentages that take into account all prior vesting (i.e., the vested percentage includes, and is not in addition to, any vesting of the Stock Units that had theretofore occurred pursuant to Section 3).  For the avoidance of doubt, each percentage above shall be increased by any applicable Pro-Rata Vesting Percentage or Additional Pro-Rata Vesting Percentage.  In addition, for avoidance of doubt, if the Severance Date occurs after the Separation From Service Date, the Award shall be deemed vested as of the Severance Date with respect to the applicable percentage of the total number of Stock Units (including any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof) (with such total number subject to adjustment under Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award set forth in the table above based on the Executive’s age as of the Severance Date (with such percentage increased by any applicable Additional Pro-Rata Vesting Percentage), with the actual percentage of Stock Units that become vested as of the Severance Date determined by subtracting from such total percentage of vested Stock Units the percentage of the total number of Stock Units (including any dividend equivalents credited (or to be credited) pursuant to Section 5(b) hereof) (with such total number subject to adjustment under Section 7.1 of the Plan and/or Section 9 hereof) that had become vested pursuant to Section 3 prior to the Severance Date.

By way of example, if the Separation From Service Date and the Severance Date both occurred on the day the Executive turned 55 ½, the total percentage of vested Stock Units would be 38.5%.  In addition, if the Separation From Service Date occurs on the date the Executive turns 55 ½ but the Severance Date is the date he turns 56 ½, the amount vesting as of Severance Date pursuant to this Section 8(c) would be 24.5% (resulting in a total percentage of vested Stock Units of 43.5%; the vested units at the Separation From Service Date would have been 16.5% and the Additional Annual Vesting Amount at the Executive’s 56^th birthday would have been 2.5% and the additional amount vesting pursuant to this Section 8(c) based on the Executive’s age of 56½ would be 24.5%).  Any additional Stock Units subject to the Award that vest upon the Severance Date solely through application of this Section 8(c) in connection with the termination of Executive’s employment (which in the second example above would be 24.5%) shall be deemed vested as of the Executive’s Severance Date.  In addition, if a successor to all or substantially all of the business and/or assets of the Corporation fails to assume this Agreement, the Executive shall be deemed to have vested in the Stock Units subject to this Award with respect to such percentage of Stock Units that would have vested if his employment had been terminated pursuant to this Section 8(c) as of the Change in Control.   For purposes of Section 409A, the Stock Units which vest and are delivered to the Executive solely pursuant to application of this Section 8(c) (which in the second example above would be 24.5%) shall be deemed to be a separate payment distinct from the Stock Units which vested as of the Separation From Service Date and the Additional Annual Vesting Amount (which in the second example above would be 16.5% and 2.5%, respectively).

9.     Adjustments Upon Specified Events.  The Administrator may accelerate the vesting of the Stock Units in such circumstances as it, in its sole discretion, may determine.  In addition, upon the occurrence of the events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in the number of Stock Units then outstanding and the number and kind of securities or other property that may be issued in respect of the Stock Unit Award in order to keep the Executive in the same economic position.  No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are credited pursuant to Section 5(b).

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10.  Tax Issues.  Upon any distribution of shares of the Common Stock in respect of the Stock Units, the Corporation shall reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then Fair Market Value, required to satisfy any tax withholding obligations the Corporation or a Subsidiary may have with respect to such distribution at the minimum applicable withholding rates; provided, however, that in the event such reduction of shares would not be in compliance with applicable law or that any payment of the Stock Units is not made in the form of shares of the Common Stock, the Executive shall, at his option, have the right to either (a) pay or provide for payment in cash of the amount of any taxes that the Corporation or a Subsidiary may be required to withhold with respect to such payment and/or distribution, or (b) have the Corporation or Subsidiary deduct from any amount payable to the Executive the amount of any taxes which the Corporation or Subsidiary may be required to withhold with respect to such payment and/or distribution.

11.  Notices.  All notices and other communications under this Agreement shall be in writing and shall be given (i) when personally delivered to the recipient (provided a written acknowledgement of receipt is obtained), (ii) three days after mailing by first class mail, postage pre-paid, certified or registered with return receipt requested or (iii) one day after being sent by a nationally recognized overnight courier (provided that a written acknowledgement of receipt is obtained by the overnight courier), to the party concerned at the address indicated below:

If to the Corporation:

HCP, Inc.

3760 Kilroy Airport Way, Suite 300

Long Beach, California  90806

Attention:  General Counsel

If to the Executive:

To the most recent home address in the Corporation’s records.

Any party may change such party’s address for notices by notice duly given pursuant to this Section 11.

12.  Plan.  The Award and all rights of the Executive under this Agreement are subject to, and the Executive agrees to be bound by, all of the terms and conditions of the provisions of the Plan, incorporated herein by reference.  In the event of a conflict or inconsistency between the terms and conditions of this Agreement and of the Plan, the terms and conditions of this Agreement shall govern.  The Executive acknowledges having read and understood the Plan and this Agreement.  Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Administrator do not (and shall not be deemed to) create any rights in the Executive unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Administrator so conferred by appropriate action of the Administrator under the Plan after the date hereof.

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13.  Entire Agreement.  This Agreement and the Plan, together with the provisions of the Employment Agreement incorporated herein, constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof (other than the Employment Agreement).  Any and all modifications to this Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.  With respect to any provision of the Employment Agreement that is incorporated herein, any references in such provision to “Officer” and “this Agreement” shall refer to the Executive and this Agreement, respectively.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.  Any waiver to be effective must be in writing, specifically referring to the provision being waiver and signed by the party against whom the waiver is being enforced.  Should a court or other body of competent jurisdiction, including any arbitrator selected pursuant to Section 6(h)(i) of the Employment Agreement, determine that any provision of this Agreement is invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, taking into account the intent of the parties when they entered into this Agreement and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

14.  Limitation on Executive’s Rights.  Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  The Executive shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.

15.  Binding on Successors.  This Agreement shall, subject to the provisions hereof, be binding upon and inure to the benefit of the parties, including their heirs (in the case of the Executive), successors and assigns.  The rights and obligations under this Agreement shall not be assignable by any party hereto without the other party’s written consent; provided, however, that the Corporation may assign this Agreement to any successor in connection with a Change in Control.  Any successor entity to the Corporation (or, in the case of a Change in Control pursuant to a sale of the Corporation’s assets, by the buyer of such assets), shall agree in writing to discharge and perform all the promises, covenants, duties, and obligations of the Corporation hereunder.

16.  Dispute Resolution.  Any dispute regarding this Agreement shall be submitted to mandatory, binding arbitration. The arbitration shall be conducted in accordance with the provisions respecting arbitration set forth in the Employment Agreement.  Sections 6(h)(iii) and Section 6(q) of the Employment Agreement shall apply as to any fees incurred in connection with any such arbitration, provided that any reference to “Officer” in such provision shall be deemed to refer to the Executive or his beneficiary, as the case may be.

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17.  Representations. The Corporation represents and warrants to the Executive that (i) the execution, delivery and performance of this Agreement by the Corporation has been fully and validly authorized by all necessary corporate actions, (ii) the officer signing this Agreement on behalf of the Corporation is duly authorized to do so, (iii) the execution, delivery and performance of this Agreement does not violate any applicable law, regulation, order, judgment or decree or any agreement, plan or corporate governance document to which the Corporation is a party or by which it is bound, and (iv) upon execution and delivery of this Agreement by the parties, it shall be a valid and binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms.

18.  No Mitigation/No Offset.  The Executive shall not be required to mitigate the amount of any payment or benefit provided for hereunder, nor shall the amount of any such payment or benefit be reduced by any compensation earned by the Executive as the result of employment by another employer or self-employment, by retirement benefits or by offset against any claim or amount claimed to be owed by the Executive to the Corporation or any Subsidiary, or otherwise.

19.  Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

20.  Section Headings.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

21.  Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

22.  Construction.  The Corporation and the Executive agree to cooperate and work together in good faith to timely amend this Agreement to the extent necessary to avoid any additional tax, interest or penalties imposed by Section 409A on the Executive   In the event that the Executive and the Corporation do not agree as to the necessity, timing or nature of a particular amendment intended to satisfy Section 409A, reasonable deference will be given to the Executive’s reasonable interpretation of such provisions.

23.  Legal Counsel; Mutual Drafting.  Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice.  Each party has cooperated in the drafting, negotiation and preparation of this Agreement.  Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language.  The Executive agrees and acknowledges that he has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Executive has hereunto set his hand as of the date and year first above written.

HCP, INC.,		EXECUTIVE
a Maryland corporation
By:	/S/ EDWARD J. HENNING	/S/ JAMES F. FLAHERTY III
		Signature
Print Name: Edward J. Henning
		Print Name: James F. Flaherty III
Its: Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, James F. Flaherty III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCP, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 29, 2008	/s/ JAMES F. FLAHERTY III
	James F. Flaherty III
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Mark A. Wallace, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCP, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 29, 2008	/s/ MARK A. WALLACE
	Mark A. Wallace
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of HCP, Inc., a Maryland corporation (the “Company”), hereby certifies, to his knowledge, that:

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended March 31, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 29, 2008	/s/ JAMES F. FLAHERTY III
	James F. Flaherty III
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to HCP, Inc. and will be retained by HCP, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of HCP, Inc., a Maryland corporation (the “Company”), hereby certifies, to his knowledge, that:

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended March 31, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 29, 2008	/s/ MARK A. WALLACE
	Mark A. Wallace
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to HCP, Inc. and will be retained by HCP, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.