8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

February 15, 2011

Date of Report (Date of earliest event reported)

HCP, Inc.

(Exact name of registrant as specified in its charter)

Maryland	1-08895	33-0091377
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)

3760 Kilroy Airport Way

Suite 300

Long Beach, California 90806

(Address of principal executive offices) (Zip Code)

(562) 733-5100

(Registrant’s telephone number, including area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

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

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

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

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

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

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Item 2.02. Results of Operations and Financial Condition.

On February 15, 2011, HCP, Inc. (“HCP”) issued a press release setting forth its financial results for the three months and year ended December 31, 2010.  The press release referred to a supplemental information package that is available on HCP’s website, free of charge, at www.hcpi.com.  The text of the press release and the supplemental information package are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are specifically incorporated by reference herein.

The information in this Form 8-K and the related information in the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section and shall not be incorporated by reference into any filing of HCP under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in any such filing.

Item 9.01.	Financial Statements and Exhibits.
(d)	Exhibits.

99.1	Press Release of HCP, Inc., dated February 15, 2011.
99.2	HCP, Inc. Supplemental Information Package, dated December 31, 2010.

2

SIGNATURES

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

	HCP, Inc.
	(Registrant)
Date: February 15, 2011	By:	/s/ THOMAS M. HERZOG
	Name:	Thomas M. Herzog
	Title:	Executive Vice President - Chief Financial Officer

3

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press Release of HCP, Inc., dated February 15, 2011.
99.2	HCP, Inc. Supplemental Information Package, dated December 31, 2010.

4

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

HCP ANNOUNCES RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2010

FOURTH QUARTER AND RECENT HIGHLIGHTS

--Diluted FFO as adjusted per share was $0.64; diluted FFO per share was $0.62; diluted Funds Available for Distribution (“FAD”) per share was $0.53; and diluted earnings per share was $0.42

--Year-over-year three-month adjusted NOI Same Property Performance (“SPP”) increased by 4.7%

--Signed a definitive purchase agreement to acquire substantially all of the real estate assets of privately-owned HCR ManorCare, Inc. for $6.1 billion

--Completed the transition of 27 Sunrise-managed senior housing communities to Emeritus

--Acquisitions and capital investments of $289 million, including an additional investment in Genesis HealthCare’s debt with a par value of $185 million for $167 million. Additionally, year-to-date 2011 we made aggregate real estate acquisitions of $99 million

--Completed $2.0 billion in public offerings of common stock

--On January 14, 2011, acquired our partner’s 65% interest in a $860 million senior housing joint venture for $137 million and assumed our partner’s share of $650 million of debt

--On January 24, 2011, completed a $2.4 billion public offering of senior unsecured notes

--Declared annualized common stock dividend of $1.92 for 2011, representing a 3.2% increase over 2010

FULL YEAR HIGHLIGHTS

--Diluted FFO as adjusted per share was $2.23; diluted FFO per share was $2.02; diluted FAD per share was $1.89; and diluted earnings per share was $1.00

--Year-over-year adjusted NOI SPP increased by 4.8%

--Investments of $721 million during 2010:

--$328 million of debt investments in Genesis HealthCare purchased for $290 million

--$255 million for real estate

--$135 million for development, tenant and capital improvements

--$41 million for the right to terminate management contracts on 27 Sunrise-managed communities

--Raised over $2.6 billion during 2010:

--$2.4 billion from public common stock offerings

--$154 million from sales of our remaining HCA bond investments, recognizing gains of $13 million

--$76 million from sales of real estate and other debt securities, recognizing gains of $21 million

Page 1 of 12

LONG BEACH, CA, February 15, 2011 – HCP (the “Company” or “we”) (NYSE:HCP) announced results for the fourth quarter and year ended December 31, 2010 as follows (in thousands, except per share amounts):

Fourth Quarter Comparison

	Three Months Ended December 31, 2010						Three Months Ended December 31, 2009				Per Share
	Amount			Per Share			Amount		Per Share		Change
FFO	$	202,611		$	0.62		$	106,040	$	0.36	$	0.26
Impairments		—			—			54,485		0.19		(0.19	)
Merger-related items		4,339	(1)		0.02	(2)		—		—		0.02
FFO as adjusted	$	206,950		$	0.64		$	160,525	$	0.55	$	0.09
Net income applicable to common shares	$	136,202		$	0.42		$	26,397	$	0.09	$	0.33

(1) Direct transactions costs related to the HCR ManorCare Acquisition.

(2) Includes $0.01 per share of the direct transactions costs (discussed in footnote 1) and $0.01 per share of negative carry related to our $1.472 billion, or 46 million share, common stock offering completed on December 20, 2010, which issuance increased our weighted average shares by 6 million for the quarter ended December 31, 2010. Proceeds from this offering will be used to fund a portion of the cash consideration for our HCR ManorCare Acquisition expected to close in March 2011.

FFO as adjusted and FAD for the quarter ended December 31, 2010 include the positive impact of $0.06 per share for the following: (i) income of $0.03 per share related to gain on sales of marketable securities and (ii) income of $0.03 per share from the early repayment of a mortgage loan receivable. FFO as adjusted for the quarter ended December 31, 2009 includes the positive impact of $0.02 per diluted share for the following: (i) lease termination fees of $0.01 per share and (ii) income of $0.01 per share related to gain on sales of marketable debt securities.

Full Year Comparison

	Year Ended December 31, 2010						Year Ended December 31, 2009				Per Share
	Amount			Per Share			Amount		Per Share		Change
FFO	$	619,401		$	2.02		$	412,464	$	1.50	$	0.52
Impairments, net of recoveries		59,793			0.19			75,514		0.27		(0.08	)
Merger-related items		4,339	(1)		0.02	(2)		—		—		0.02
Litigation provision		—			—			101,973		0.37		(0.37	)
FFO as adjusted	$	683,533		$	2.23		$	589,951	$	2.14	$	0.09
Net income applicable to common shares	$	307,498		$	1.00		$	109,069	$	0.40	$	0.60

(1) Direct transactions costs related to the HCR ManorCare Acquisition.

(2) Includes $0.01 per share of the direct transactions costs (discussed in footnote 1) and $0.01 per share of negative carry related to our $1.472 billion, or 46 million share, common stock offering completed on December 20, 2010, which issuance increased our weighted average shares by 1.5 million for the year ended December 31, 2010. Proceeds from this offering will be used to fund a portion of the cash consideration for our HCR ManorCare Acquisition expected to close in March 2011.

FFO, FFO as adjusted and FAD are supplemental non-GAAP financial measures that the Company believes are helpful in evaluating the operating performance of real estate investment trusts. See page 9 of this release for additional information regarding FFO and FFO as adjusted and page 10 for additional information regarding FAD.

HCR MANORCARE ACQUISITION

On December 13, 2010, we signed a definitive agreement to acquire substantially all of the real estate assets of privately-owned HCR ManorCare, Inc., for a purchase price of $6.1 billion. We will acquire 334 post-acute, skilled nursing and assisted living facilities located in 30 states, with the highest concentrations in Ohio, Pennsylvania, Florida, Illinois and Michigan. HCR ManorCare and its affiliates will continue to operate the assets pursuant to a long-term triple-net master lease supported by a guaranty from HCR ManorCare.

Page 2 of 12

The triple-net lease with HCR ManorCare will provide for rent in the first year of $472.5 million, an amount representing a 1.5x EBITDAR coverage ratio. The rent will increase by 3.5% per year after each of the first five years and by 3% for the remaining portion of the initial lease term. The properties will be grouped into four pools, and HCR ManorCare will have a one-time extension option for each pool with rent increased for the first year of the extension option to the greater of fair market rent or a 3% increase over the rent for the prior year. The asset pools will have initial terms ranging from 13 to 17 years, and if the extension options are exercised, the total available term of the lease will range from 23 to 35 years.

In connection with our HCR ManorCare Acquisition prefunding activities, on January 31, 2011, we purchased an additional $360 million participation in the outstanding first mortgage debt of HCR ManorCare. This transaction increased our debt investments in HCR ManorCare to an aggregate par value of $2.08 billion.

HCP VENTURES II ACQUISITION

On January 14, 2011, we acquired our partner’s 65% interest in a joint venture that owns 25 senior housing assets, becoming the sole owner of the portfolio. At closing, we paid approximately $137 million in cash for the interest and assumed our partner’s share of approximately $650 million of Fannie Mae debt secured by the assets. This transaction valued the venture’s real estate assets at $860 million. The assets were originally acquired on October 5, 2006, through our acquisition of CNL Retirement Properties, Inc., and contributed to the joint venture in January 2007.

ACQUIRED DEBT INVESTMENTS IN GENESIS HEALTHCARE

In September and October 2010, we acquired debt investments in Genesis HealthCare (“Genesis”) for $290 million, representing a $38 million discount from their aggregate par value of $328 million. Our investments represent a portion of the $1.671 billion of debt incurred for the $2.0 billion acquisition of Genesis in July 2007. The $328 million investment consists of two participation interests in the senior term loan with an aggregate par value of $277.6 million that were purchased for $249.9 million and a $50 million participation interest in the secured mezzanine debt that was purchased for $40 million.

TRANSITION OF 27 SUNRISE-MANAGED COMMUNITIES

On November 1, 2010, we exercised our rights to terminate management contracts related to 27 senior housing communities previously operated by Sunrise Senior Living, Inc. (“Sunrise”). We acquired those termination rights as part of our previously announced August 2010 settlement with Sunrise. These senior housing communities are now master-leased to and operated by Emeritus Corporation (“Emeritus”). The leases with Emeritus, which have an initial term of 15 years, provide for an increased lease payment in the first year to $30.3 million, with a compound annual growth rate for the first five years of 13.9%, and the greater of CPI or 3.0% thereafter, resulting in an expected IRR in excess of 40%. Our net investment to acquire the termination rights to transition these 27 communities to Emeritus was $41 million, which was comprised of a $50 million payment to Sunrise tha t was partially offset for certain working capital acquired in conjunction with this transaction.

OTHER INVESTMENT TRANSACTIONS

During the quarter ended December 31, 2010, we made additional investments of $122 million as follows: (i) acquisition of real estate of $82 million and (ii) funding construction and other capital projects of $40 million primarily in our life science segment. During the quarter ended December 31, 2010, we sold investments of $132 million as follows: (i) $102 million of debt investments, recognizing gains of $8 million and (ii) sale of nine senior housing facilities and a medical office building for $30 million, recognizing gain on sales of real estate of $16 million.

During the year ended December 31, 2010, we made additional investments of $431 million as follows: (i) acquisition of real estate of $255 million; (ii) funding construction and other capital projects of $135 million primarily in our life science segment; and (iii) buyout of management contracts for 27 Sunrise-managed communities for $41 million. During the year ended December 31, 2010, we sold investments of $230 million as follows: (i) $154 million for our remaining HCA bond investments, recognizing gains of $13 million and (ii) sales of real estate and other debt investments for $76 million, recognizing gain on sales of real estate of $21 million.

Additionally, on November 1, 2010 we received $46 million in proceeds, including an $11 million prepayment premium, upon the early repayment of a mortgage loan receivable that was secured by a hospital. This loan had an original maturity of January 2016 and carried an interest rate of 8.5%.

Page 3 of 12

Subsequently, on January 4, 2011, we acquired four life science facilities, representing 200,000 rentable square feet, for approximately $67 million, including assumed debt of $48 million; and on February 10, 2011 we acquired a medical office building, representing 132,000 rentable square feet for approximately $32 million.

FINANCINGS

During the quarter ended December 31, 2010, we raised approximately $2.0 billion through the issuance of the following common stock transactions:

·On November 8, 2010, we completed a $486 million public offering of 13.8 million shares of common stock.

·On December 20, 2010, we completed a $1.472 billion public offering of 46 million shares of common stock.

On January 24, 2011, we issued $2.4 billion of senior unsecured notes as follows: (i) $400 million of 2.70% notes due 2014; (ii) $500 million of 3.75% notes due 2016; (iii) $1.2 billion of 5.375% notes due 2021; and (iv) $300 million of 6.75% notes due 2041. The notes have a weighted average maturity of 10.3 years and a weighted average yield of 4.83%. The net proceeds of the offering were $2.37 billion.

DIVIDEND

On January 27, 2011, we announced that our Board of Directors declared an increase to our quarterly cash dividend from $0.465 to $0.48 per common share. The dividend will be paid on February 23, 2011 to stockholders of record as of the close of business on February 10, 2011. The annualized distribution rate for 2011 is $1.92, compared to $1.86 for 2010, which represents an increase of 3.2%.

OUTLOOK

For the full year 2011, we expect FFO as adjusted applicable to common shares to range between $2.58 and $2.64 per diluted share; FFO applicable to common shares to range between $2.45 and $2.51 per diluted share; FAD applicable to common shares to range between $2.02 and $2.08 per diluted share; and net income applicable to common shares to range between $1.58 and $1.64 per diluted share.

Estimates of FFO and net income to common shares include the impact of our pending HCR ManorCare Acquisition that is expected to close in March 2011 and the corresponding merger-related items. FFO as adjusted and FAD applicable to common shares excludes the impact of merger-related items, which are as follows: (i) direct transaction costs; (ii) negative carrying costs related to prefunding the HCR ManorCare Acquisition; and, partially offset by, (iii) the estimated gain upon the reinvestment of our HCR ManorCare debt investment and other miscellaneous items. See page 12 for additional information regarding the above estimates.

COMPANY INFORMATION

HCP has scheduled a conference call and webcast for Tuesday, February 15, 2011 at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time) in order to present the Company’s performance and operating results for the quarter and year ended December 31, 2010. The conference call is accessible by dialing (800) 265-0241 (U.S.) or (617) 847-8704 (International). The participant passcode is 51041528. The webcast is accessible via the Company’s website at www.hcpi.com. This link can be found on the “Event Calendar” page, which is under the “Investor Relations” tab. Through March 1, 2011, an archive of the webcast will be available on our website and a telephonic replay can be accessed by calling (888) 286-8010 (U.S.) or (617) 801-6888 (International) and entering passcode 98332067. The Company’s supplementa l information package for the current period will also be available on the Company’s website in the “Presentations” section of the “Investor Relations” tab.

Page 4 of 12

ABOUT HCP

HCP, Inc., an S&P 500 company, is a real estate investment trust (REIT) that, together with its consolidated subsidiaries, invests primarily in real estate serving the healthcare industry in the United States. As of December 31, 2010, the Company’s portfolio of investments, including properties owned by its Investment Management Platform, consisted of: (i) interests in 672 facilities among the following segments: 251 senior housing, 102 life science, 253 medical office, 45 post-acute/skilled nursing and 21 hospital; and (ii) $2.0 billion of mezzanine and other secured loans. For more information, visit the Company’s website at www.hcpi.com.

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FORWARD-LOOKING STATEMENTS

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include among other things,  the internal rate of return of the Emeritus lease, net income applicable to common shares on a diluted basis, FFO applicable to common shares on a diluted basis, FFO as adjusted applicable to common shares on a diluted basis, FAD applicable to common shares on a diluted basis, and gain on sales of real estate, real estate depreciation and amortization, and joint venture adjustments for the full-year of 2011. These statements are made as of the date hereof and are subject to known and unknown risks, uncertainties, assumptions and other factors—many of which are out of the Company’s control and difficult to forecast—that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include but are not limited to: the satisfaction of the conditions to the closing of the HCR ManorCare Acquisition; national and local economic conditions; continued volatility in the capital markets, including changes in interest rates and the availability and cost of capital, which changes and volatility affect opportunities for profitable investment; the Company’s ability to access external sources of capital when desired and on reasonable terms; the Company’s ability to manage its indebtedness levels; changes in the terms of the Company’s indebtedness; the Company’s ability to maintain its credit ratings; the potential impact of existing and future litigation matters, including the possibility of larger than expected liti gation costs and related developments; the Company’s ability to successfully integrate the operations of acquired companies; competition for lessees and mortgagors (including new leases and mortgages and the renewal or rollover of existing leases); the Company’s ability to reposition its properties on the same or better terms if existing leases are not renewed or the Company exercises its right to replace an existing operator or tenant upon default; the further restructuring of the loan with Cirrus; continuing reimbursement uncertainty in the post-acute/skilled nursing segment; competition in the senior housing segment specifically and in the healthcare industry in general; the ability of the Company’s operators and tenants to maintain or increase occupancy levels at, and rental income from, the senior housing segment; the Company’s ability to realize the benefits of its mezzanine and other loan investments; the ability of the Company’s lessees and mortgagors to maintain the financia l strength and liquidity necessary to satisfy their respective obligations to the Company and other third parties; the bankruptcy, insolvency or financial deterioration of the Company’s operators, lessees, borrowers or other obligors; changes in healthcare laws and regulations, including the impact of future or pending healthcare reform, and other changes in the healthcare industry which affect the operations of the Company’s lessees or obligors; the Company’s ability to recruit and retain key management personnel; costs of compliance with regulations and environmental laws affecting the Company’s properties; changes in tax laws and regulations; changes in the financial position or business strategies of HCR ManorCare; the Company’s ability and willingness to maintain its qualification as a REIT; changes in rules governing financial reporting, including new accounting pronouncements; and other risks described from time to time in the Company’s Securities and Exchange Commis sion filings. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements as a result of new information or new or future developments, except as otherwise required by law.

CONTACT

HCP

Thomas M. Herzog

Executive Vice President and Chief Financial Officer

(562) 733-5309

Page 5 of 12

HCP, Inc.

Consolidated Balance Sheets

In thousands, except share and per share data

(Unaudited)

	December 31,			December 31,
	2010			2009
Assets
Real estate:
Buildings and improvements	$	8,209,806		$	7,771,225
Development costs and construction in progress	144,116			272,542
Land	1,573,984			1,542,393
Accumulated depreciation and amortization	(1,251,142		)	(1,035,474		)
Net real estate	8,676,764			8,550,686
Net investment in direct financing leases	609,661			600,077
Loans receivable, net	2,002,866			1,672,938
Investments in and advances to unconsolidated joint ventures	195,847			267,978
Accounts receivable, net of allowance of $5,150 and $10,772, respectively	34,504			43,726
Cash and cash equivalents	1,036,701			112,259
Restricted cash	36,319			33,000
Intangible assets, net	316,375			389,698
Real estate held for sale, net	—			34,659
Other assets, net	422,886			504,714
Total assets	$	13,331,923		$	12,209,735
Liabilities and equity
Bank line of credit	$	—		$	—
Term loan	—			200,000
Senior unsecured notes	3,318,379			3,521,325
Mortgage and other secured debt	1,235,779			1,834,711
Mortgage debt on assets held for sale	—			224
Other debt	92,187			99,883
Intangible liabilities, net	148,072			200,260
Accounts payable and accrued liabilities	313,806			309,596
Deferred revenue	77,653			85,127
Total liabilities	5,185,876			6,251,126
Preferred stock, $1.00 par value: 50,000,000 shares authorized; 11,820,000 shares issued and outstanding, liquidation preference of $25.00 per share	285,173			285,173
Common stock, $1.00 par value: 750,000,000 shares authorized 370,924,887 and 293,548,162 shares issued and outstanding, respectively	370,925			293,548
Additional paid-in capital	8,089,982			5,719,400
Cumulative dividends in excess of earnings	(775,476		)	(515,450		)
Accumulated other comprehensive loss	(13,237		)	(2,134		)
Total stockholders’ equity	7,957,367			5,780,537
Joint venture partners	14,935			7,529
Non-managing member unitholders	173,745			170,543
Total noncontrolling interests	188,680			178,072
Total equity	8,146,047			5,958,609
Total liabilities and equity	$	13,331,923		$	12,209,735

Page 6 of 12

HCP, Inc.

Consolidated Statements of Income

In thousands, except per share data

(Unaudited)

	Three Months Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Revenues:
Rental and related revenues	$	254,262		$	222,318		$	951,855		$	878,492
Tenant recoveries	21,856			22,423			89,012			89,457
Income from direct financing leases	12,200			12,193			49,438			51,495
Interest income	52,159			36,354			160,163			124,146
Investment management fee income	911			1,179			4,666			5,312
Total revenues	341,388			294,467			1,255,134			1,148,902
Costs and expenses:
Depreciation and amortization	78,005			76,475			311,952			316,722
Interest expense	68,354			72,840			288,650			298,869
Operating	58,347			46,036			210,276			185,704
General and administrative	18,008			16,852			83,048			78,471
Litigation provision	—			—			—			101,973
Impairments (recoveries)	—			54,485			(11,900		)	75,389
Total costs and expenses	222,714			266,688			882,026			1,057,128
Other income, net	8,667			2,661			15,819			7,768
Income before income taxes and equity income from and impairments of investments in unconsolidated joint ventures	127,341			30,440			388,927			99,542
Income taxes	1,397			(515		)	(412		)	(1,910		)
Equity income from unconsolidated joint ventures	692			1,518			4,770			3,511
Impairments of investments in unconsolidated joint ventures	—			—			(71,693		)	—
Income from continuing operations	129,430			31,443			321,592			101,143
Discontinued operations:
Income before impairments and gain on sales of real estate, net of income taxes	223			1,077			2,878			7,812
Impairments	—			—			—			(125		)
Gain on sales of real estate, net of income taxes	15,873			2,964			19,925			37,321
Total discontinued operations	16,096			4,041			22,803			45,008
Net income	145,526			35,484			344,395			146,151
Noncontrolling interests’ share in earnings	(3,609		)	(3,450		)	(13,686		)	(14,461		)
Net income attributable to HCP, Inc.	141,917			32,034			330,709			131,690
Preferred stock dividends	(5,282		)	(5,282		)	(21,130		)	(21,130		)
Participating securities’ share in earnings	(433		)	(355		)	(2,081		)	(1,491		)
Net income applicable to common shares	$	136,202		$	26,397		$	307,498		$	109,069
Basic earnings per common share:
Continuing operations	$	0.37		$	0.08		$	0.93		$	0.23
Discontinued operations	0.05			0.01			0.08			0.17
Net income applicable to common shares	$	0.42		$	0.09		$	1.01		$	0.40
Diluted earnings per common share:
Continuing operations	$	0.37		$	0.08		$	0.93		$	0.23
Discontinued operations	0.05			0.01			0.07			0.17
Net income applicable to common shares	$	0.42		$	0.09		$	1.00		$	0.40
Weighted average shares used to calculate earnings per common share:
Basic	324,361			292,748			305,574			274,216
Diluted	325,985			293,763			306,900			274,631

Page 7 of 12

HCP, Inc.

Consolidated Statements of Cash Flows

In thousands

(Unaudited)

	Year Ended December 31,
	2010			2009
Cash flows from operating activities:
Net income	$	344,395		$	146,151
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	311,952			316,722
Discontinued operations	1,495			3,403
Amortization of above and below market lease intangibles, net	(6,378		)	(14,780		)
Stock-based compensation	14,924			14,388
Amortization of debt premiums, discounts and issuance costs, net	9,856			8,328
Straight-line rents	(47,243		)	(46,688		)
Interest accretion	(69,645		)	(39,172		)
Deferred rental revenue	(3,984		)	12,804
Equity income from unconsolidated joint ventures	(4,770		)	(3,511		)
Distributions of earnings from unconsolidated joint ventures	5,373			7,273
Gain on sales of real estate	(19,925		)	(37,321		)
Marketable securities gains, net	(14,597		)	(8,876		)
Derivative losses, net	1,302			69
Impairments, net of recoveries	59,793			75,514
Changes in:
Accounts receivable, net	9,222			4,408
Other assets	(6,341		)	(6,881		)
Accrued liability for litigation provision	—			101,973
Accounts payable and other accrued liabilities	(4,931		)	(18,170		)
Net cash provided by operating activities	580,498			515,634
Cash flows from investing activities:
Acquisitions and development of real estate	(304,847		)	(96,528		)
Leasing costs and tenant and capital improvements	(97,930		)	(40,702		)
Proceeds from sales of real estate, net	32,284			72,272
Contributions to unconsolidated joint ventures	(6,565		)	(7,975		)
Distributions in excess of earnings from unconsolidated joint ventures	4,365			6,869
Proceeds from the sale of securities	179,215			157,122
Principal repayments on loans receivable and direct financing leases	63,953			10,952
Investments in loans receivable and direct financing leases	(298,085		)	(165,494		)
(Increase) decrease in restricted cash	(3,319		)	2,078
Net cash used in investing activities	(430,929		)	(61,406		)
Cash flows from financing activities:
Net repayments under bank line of credit	—			(150,000		)
Repayments of bridge and term loans	(200,000		)	(320,000		)
Repayments of mortgage debt	(636,096		)	(234,080		)
Issuance of mortgage and other secured debt	—			1,942
Repurchase and repayment of senior unsecured notes	(206,422		)	(7,735		)
Debt issuance costs	(11,850		)	(860		)
Net proceeds from the issuance of common stock and exercise of options	2,426,900			852,912
Dividends paid on common and preferred stock	(590,735		)	(517,072		)
Sale (purchase) of noncontrolling interests	8,395			(9,097		)
Distributions to noncontrolling interests	(15,319		)	(15,541		)
Net cash provided by (used in) financing activities	774,873			(399,531		)
Net increase in cash and cash equivalents	924,442			54,697
Cash and cash equivalents, beginning of period	112,259			57,562
Cash and cash equivalents, end of period	$	1,036,701		$	112,259

Page 8 of 12

HCP, Inc.

Funds From Operations (1)

In thousands, except per share data

(Unaudited)

	Three Months Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Net income applicable to common shares	$	136,202		$	26,397		$	307,498		$	109,069
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	78,005			76,475			311,952			316,722
Discontinued operations	52			1,066			1,495			3,403
Gain on sales of real estate	(15,873		)	(2,964		)	(19,925		)	(37,321		)
Equity income from unconsolidated joint ventures	(692		)	(1,518		)	(4,770		)	(3,511		)
FFO from unconsolidated joint ventures	5,579			7,019			25,288			26,023
Noncontrolling interests’ and participating securities’ share in earnings	4,042			3,805			15,767			15,952
Noncontrolling interests’ and participating securities’ share in FFO	(4,704		)	(4,240		)	(17,904		)	(17,873		)
FFO applicable to common shares	$	202,611		$	106,040		$	619,401		$	412,464
Distributions on dilutive convertible units	2,987			—			6,676			—
Diluted FFO applicable to common shares	$	205,598		$	106,040		$	626,077		$	412,464
Diluted FFO per common share	$	0.62		$	0.36		$	2.02		$	1.50
Weighted average shares used to calculate diluted FFO per share	331,960			293,763			310,465			274,631
Impact of adjustments to FFO:
Impairments, net of recoveries	$	—		$	54,485		$	59,793		$	75,514
Merger-related items	4,339		(2)	—			4,339		(2)	—
Litigation provision	—			—			—			101,973
	$	4,339		$	54,485		$	64,132		$	177,487
FFO as adjusted applicable to common shares	$	206,950		$	160,525		$	683,533		$	589,951
Distributions on dilutive convertible units and other	2,970			1,542			11,632			6,088
Diluted FFO as adjusted applicable to common shares	$	209,920		$	162,067		$	695,165		$	596,039
Per common share impact of adjustments on diluted FFO(3)	$	0.02		$	0.19		$	0.21		$	0.64
Diluted FFO as adjusted per common share	$	0.64		$	0.55		$	2.23		$	2.14
Weighted average shares used to calculate diluted FFO as adjusted per share(3)	325,960			297,246			311,285			278,134

(1)The Company believes FFO is an important supplemental measure of operating performance for a real estate investment trust. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a real estate investment trust that uses historical cost accounting for depreciation could be less informative. The term FFO was designed by the real estate investment trust industry to address this issue.

FFO is defined as net income applicable to common shares (computed in accordance with U.S. generally accepted accounting principles or “GAAP”), excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization, with adjustments for joint ventures. Adjustments for joint ventures are calculated to reflect FFO on the same basis. FFO does not represent cash generated from operating activities in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income. The Company’s computation of FFO may not be comparable to FFO reported by other real estate investment trusts that do not define the term in accordance with the current National Association of Real Estate Investment Trusts’ (“NAREIT”) definition or that have a different interpretation of the curre nt NAREIT definition from the Company.

FFO as adjusted represents FFO before the impact of impairments, recoveries, merger-related items (defined above) and litigation provision. Management believes FFO as adjusted is a useful alternative measurement. This measure is a modification of the NAREIT definition of FFO and should not be used as an alternative to net income.

(2)Direct transactions costs related to the HCR ManorCare Acquisition.

(3)Includes $0.01 per share of the direct transactions costs (discussed in footnote 2) and $0.01 per share related to our $1.472 billion, or 46 million share, common stock offering completed on December 20, 2010, which issuance increased our weighted average shares by 1.5 million and 6 million for the three months and year ended December 31, 2010, respectively. Proceeds from this offering will be used to fund a portion of the cash consideration for our HCR ManorCare Acquisition expected to close in March 2011.

Page 9 of 12

HCP, Inc.

Funds Available for Distribution (1)

In thousands, except per share data

(Unaudited)

	Three Months Ended December 31, 2010			Year Ended December 31, 2010
FFO as adjusted applicable to common shares	$	206,950		$	683,533
Amortization of above and below market lease intangibles, net	(1,041		)	(6,378		)
Stock-based compensation	3,618			14,924
Amortization of debt premiums, discounts and issuance costs, net	2,618			9,856
Straight-line rents	(14,374		)	(47,243		)
Interest accretion – direct financing leases (“DFLs”)	(2,300		)	(10,641		)
Deferred revenues – tenant improvement related	(929		)	(3,714		)
Deferred revenues – additional rents (SAB 104)	(810		)	(270		)
Leasing costs and tenant and capital improvements (2)	(20,853		)	(54,237		)
HCP’s share of unconsolidated joint ventures and other FAD adjustments	(1,587		)	(7,378		)
FAD applicable to common shares	$	171,292		$	578,452
Distributions on dilutive convertible units	1,714			6,676
Diluted FAD applicable to common shares	$	173,006		$	585,128
Diluted FAD per common share	$	0.53		$	1.89
Weighted average shares used to calculate diluted FAD per common share	323,644			308,953

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

(2)Excludes $41 million ($2 million in 4Q2010 and $39 million in 3Q2010) of deferred leasing costs related to the buyout of management contracts for 27 Sunrise-managed communities.  On November 1, 2010, we exercised our rights to terminate management contracts relating to 27 senior housing communities previously operated by Sunrise; our net investment to acquire these termination rights was $41 million, which was comprised of a $50 million payment to Sunrise that was partially offset for certain working capital acquired in conjunction with this transaction.

Page 10 of 12

HCP, Inc.

Net Operating Income and Same Property Performance (1) (2)

Dollars in thousands

(Unaudited)

	Three Months Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Net income	$	145,526		$	35,484		$	344,395		$	146,151
Interest income	(52,159		)	(36,354		)	(160,163		)	(124,146		)
Investment management fee income	(911		)	(1,179		)	(4,666		)	(5,312		)
Depreciation and amortization	78,005			76,475			311,952			316,722
Interest expense	68,354			72,840			288,650			298,869
General and administrative	18,008			16,852			83,048			78,471
Litigation provision	—			—			—			101,973
Impairments (recoveries)	—			54,485			(11,900		)	75,389
Other income, net	(8,667		)	(2,661		)	(15,819		)	(7,768		)
Income taxes	(1,397		)	515			412			1,910
Equity income from unconsolidated joint ventures	(692		)	(1,518		)	(4,770		)	(3,511		)
Impairments of investments in unconsolidated joint ventures	—			—			71,693			—
Total discontinued operations, net of income taxes	(16,096		)	(4,041		)	(22,803		)	(45,008		)
NOI(1)	$	229,971		$	210,898		$	880,029		$	833,740
Straight-line rents	(14,374		)	(7,937		)	(47,243		)	(46,688		)
Interest accretion – direct financing leases	(2,300		)	(2,074		)	(10,641		)	(8,057		)
Amortization of above and below market lease intangibles, net	(1,041		)	(2,123		)	(6,378		)	(14,780		)
Lease termination fees	(2,500		)	(3,079		)	(7,665		)	(4,905		)
NOI adjustments related to discontinued operations	—			4			27			393
Adjusted NOI(1)	$	209,756		$	195,689		$	808,129		$	759,703
Non-SPP adjusted NOI (1) (2)	(13,567		)	(8,279		)	(49,597		)	(35,795		)
Same property portfolio adjusted NOI(1) (2)	$	196,189		$	187,410		$	758,532		$	723,908
Adjusted NOI % change – SPP	4.7%						4.8%

(1) The Company believes Net Operating Income from Continuing Operations (“NOI”) provides investors relevant and useful information because it measures the operating performance of the Company’s real estate at the property level on an unleveraged basis. NOI is used to evaluate the operating performance of real estate properties and SPP. The Company uses NOI and NOI, as adjusted, to make decisions about resource allocations, to assess and compare property level performance, and evaluate SPP. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP since it does not reflect the aforementioned excluded items. Further, NOI may not be compa rable to that of other real estate investment trusts, as they may use different methodologies for calculating NOI.

NOI is defined as rental revenues, including tenant reimbursements and income from direct financing leases, less property level operating expenses. NOI excludes interest income, investment management fee income, depreciation and amortization, interest expense, general and administrative expenses, litigation provision, impairments, impairment recoveries, other income, net, income tax expenses, equity income from unconsolidated joint ventures and discontinued operations. NOI, as adjusted, is calculated as NOI eliminating the effects of straight-line rents, DFL interest accretion, amortization of above and below market lease intangibles, and lease termination fees. NOI, as adjusted, is sometimes referred to as “adjusted NOI” or “cash basis NOI.”

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

Page 11 of 12

HCP, Inc.

Projected Future Operations (1)

(Unaudited)

	Full Year 2011
	Low		High
Diluted earnings per common share	$  1.58		$  1.64
Real estate depreciation and amortization	0.85		0.85
DFL depreciation	0.02		0.02
Gain upon consolidation of joint venture	(0.02	)	(0.02	)
Joint venture adjustments	0.02		0.02
Diluted FFO per common share	$  2.45		$  2.51
Merger-related items(2)	0.13		0.13
Diluted FFO as adjusted per common share	$  2.58		$  2.64
Amortization of above and below market lease intangibles, net	(0.01	)	(0.01	)
Stock-based compensation	0.05		0.05
Amortization of debt premiums, discounts and issuance costs, net	0.03		0.03
Straight-line rents	(0.13	)	(0.13	)
DFL Interest accretion	(0.30	)	(0.30	)
DFL depreciation	(0.02	)	(0.02	)
Deferred revenues	(0.01	)	(0.01	)
Leasing costs and tenant and capital improvements	(0.16	)	(0.16	)
HCP’s share of unconsolidated joint ventures and other FAD adjustments	(0.01	)	(0.01	)
Diluted FAD per common share	$  2.02		$  2.08

(1) Except as otherwise noted above, the foregoing projections reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, development items, property dispositions and the earnings impact of the events referenced in this release. Except as otherwise noted, these estimates do not reflect the potential impact of future acquisitions, impairments, impairment recoveries, the future bankruptcy or insolvency of the Company’s operators, lessees, borrowers or other obligors, the effect of any future restructuring of the Company’s contractual relationships with such entities, ineffectiveness related to our cash flow hedges, offerings of debt or existing and future litigation matters including the possibility of larger than expected litigation costs and related developments. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth above. The aforementioned ranges represent management’s best estimate of results based upon the underlying assumptions as of the date of this press release. Except as otherwise required by law, management assumes no, and hereby disclaims any, obligation to update any of the foregoing projections as a result of new information or new or future developments.

(2) Merger-related items of $0.13 per share related to the HCR ManorCare Acquisition include the following:

(i)  $0.06 per share of direct transaction costs, which consists of: (a) $0.03 per share of professional fees and (b) $0.03 per share of amortization of costs associated with the bridge loan commitment;

(ii)  $0.13 per share of negative carry related to prefunding the transaction, which includes the impact of: (a) the $1.472 billion, or 46 million shares, common stock offering completed on December 20, 2010 on the calculation of weighted average shares and (b) the additional interest expense and amortization of fees associated with the $2.4 billion senior unsecured notes offering completed on January 24, 2011. Proceeds from these offerings will be used to fund the cash consideration of the HCR ManorCare Acquisition; which are partially offset by

(iii) ($0.06) per share of income related to gains upon the reinvestment of the Company’s debt investment in HCR ManorCare debt and other miscellaneous items.

Page 12 of 12

EX-99.2

Exhibit 99.2

Supplemental Information

December 31, 2010

(Unaudited)

Orland Park, IL	South San Francisco, CA
Parker, CO	Dallas, TX

Table of Contents

Company Information	1
Summary	2
Consolidated Funds From Operations and Supplemental Cash Flow Information	3
Capitalization	4
Indebtedness and Ratios	5
Investments and Dispositions	6
Development	7
Owned Portfolio
Portfolio summary	8
Portfolio concentrations	9
Same property operating lease portfolio	10
Lease expirations and debt investment maturities	11
Owned Senior Housing Portfolio
Investments and operator concentration	12
Trends	13
Owned Life Science Portfolio
Investments, tenant concentration and trends	14
Selected lease expirations and leasing activity	15
Owned Medical Office Portfolio
Investments and trends	16
Leasing activity	17
Owned Post-Acute/Skilled Nursing Portfolio
Investments and operator concentration	18
Trends and HCR ManorCare information	19
Owned Hospital Portfolio
Investments and operator concentration	20
Trends	21
Investment Management Platform
Summary and balance sheets	22
Statements of operations and funds from operations	23
Net operating income	24
Portfolio summary	25
Reporting Definitions and Reconciliations of Non-GAAP Measures	26-30

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

Company Information(1)

Board of Directors
James F. Flaherty III	Harold M. Messmer, Jr.
Chairman and Chief Executive Officer	Chairman and Chief Executive Officer
HCP, Inc.	Robert Half International, Inc.
Christine N. Garvey	Peter L. Rhein
Former Global Head of Corporate	Partner, Sarlot & Rhein
Real Estate Services, Deutsche Bank AG
David B. Henry	Kenneth B. Roath
Vice Chairman, President and Chief	Chairman Emeritus, HCP, Inc.
Executive Officer, Kimco Realty Corporation
Lauralee E. Martin	Richard M. Rosenberg
Chief Operating and Financial Officer	Chairman and Chief Executive Officer
Jones Lang LaSalle Incorporated	(Retired), BankAmerica Corporation
Michael D. McKee	Joseph P. Sullivan
Chief Executive Officer	Chairman of the Board of Advisors
Bentall Kennedy U.S., L.P.	RAND Health
Senior Management
James F. Flaherty III	Thomas D. Kirby
Chairman and	Executive Vice President
Chief Executive Officer	Acquisitions and Valuations
Paul F. Gallagher	Thomas M. Klaritch
Executive Vice President and	Executive Vice President
Chief Investment Officer	Medical Office Properties
J. Alberto Gonzalez-Pita	Timothy M. Schoen
Executive Vice President, General Counsel	Executive Vice President
and Corporate Secretary	Life Science and Investment Management
Edward J. Henning	Susan M. Tate
Executive Vice President	Executive Vice President
	Asset Management and Senior Housing
Thomas M. Herzog
Executive Vice President and	Kendall K. Young
Chief Financial Officer	Executive Vice President
Other Information
Corporate Headquarters	San Francisco Office
3760 Kilroy Airport Way, Suite 300	400 Oyster Point Boulevard, Suite 409
Long Beach, CA  90806-2473	South San Francisco, CA  94080
(562) 733-5100
Nashville Office
3000 Meridian Boulevard, Suite 200
Franklin, TN  37067

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

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

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

(1)As of February 11, 2011.

1

Summary

Dollars in thousands, except per share data

	Three Months Ended December 31,				Year Ended December 31,
	2010		2009		2010		2009
Revenues	$	341,388	$	294,467	$	1,255,134	$	1,148,902
NOI	229,971		210,898		880,029		833,740
Adjusted EBITDA	283,495		247,674		1,024,530		948,820
FFO applicable to common shares	202,611		106,040		619,401		412,464
FFO as adjusted applicable to common shares	206,950		160,525		683,533		589,951
Net income applicable to common shares	136,202		26,397		307,498		109,069
Diluted FFO per common share	$	0.62	$	0.36	$	2.02	$	1.50
Diluted FFO as adjusted per common share	0.64		0.55		2.23		2.14
Diluted EPS	0.42		0.09		1.00		0.40
FFO as adjusted payout ratio	73%		84%		83%		86%
Financial Leverage(1)	33%		43%
Adjusted fixed charge coverage	3.3x		2.7x		2.9x		2.6x
	December 31,		December 31,
Operating properties:	2010		2009
Senior housing	251		256
Life science	102		98
Medical office	253		251
Post-acute/skilled nursing	45		48
Hospital	21		22
Total	672		675

Portfolio Income from Assets Under Management(2)	Assets Under Management:  $14.5 billion(3)

(1)  Excluding the temporary benefit resulting from prefunding the pending HCR ManorCare Acquisition, the Company’s Financial Leverage would have been 38%.

(2)  Represents the NOI from real estate owned by HCP, the interest income from debt investments and HCP’s pro rata share of the NOI from real estate owned by the Company’s Investment Management Platform, excluding assets under development and land held for development, for the year ended December 31, 2010.

(3)  Represents the historical cost of real estate owned by HCP, the carrying amount of debt investments and 100% of the cost of real estate owned by the Company’s Investment Management Platform, excluding assets held for sale and under development and land held for development, at December 31, 2010.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

2

Consolidated Funds From Operations and Supplemental Cash Flow Information

Dollars and shares in thousands, except per share data

	Three Months Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Net income applicable to common shares	$	136,202		$	26,397		$	307,498		$	109,069
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	78,005			76,475			311,952			316,722
Discontinued operations	52			1,066			1,495			3,403
Gain on sales of real estate	(15,873		)	(2,964		)	(19,925		)	(37,321		)
Equity income from unconsolidated joint ventures	(692		)	(1,518		)	(4,770		)	(3,511		)
FFO from unconsolidated joint ventures	5,579			7,019			25,288			26,023
Noncontrolling interests’ and participating securities’ share in earnings	4,042			3,805			15,767			15,952
Noncontrolling interests’ and participating securities’ share in FFO	(4,704		)	(4,240		)	(17,904		)	(17,873		)
FFO applicable to common shares	$	202,611		$	106,040		$	619,401		$	412,464
Distributions on dilutive convertible units	2,987			—			6,676			—
Diluted FFO applicable to common shares	$	205,598		$	106,040		$	626,077		$	412,264
Weighted average shares used to calculate diluted FFO per share	331,960			293,763			310,465			274,631
Diluted FFO per common share	$	0.62		$	0.36		$	2.02		$	1.50
Impact of adjustments to FFO:
Impairments, net of recoveries	$	—		$	54,485		$	59,793		$	75,514
Merger-related items(1)	4,339			—			4,339			—
Litigation provision	—			—			—			101,973
	$	4,339		$	54,485		$	64,132		$	177,487
FFO as adjusted applicable to common shares	$	206,950		$	160,525		$	683,533		$	589,951
Distributions on dilutive convertible units and other	2,970			1,542			11,632			6,088
Diluted FFO as adjusted applicable to common shares	$	209,920		$	162,067		$	695,165		$	596,039
Weighted average shares used to calculate diluted FFO as adjusted per share(2)	325,960			297,246			311,285			278,134
Diluted FFO as adjusted per common share	$	0.64		$	0.55		$	2.23		$	2.14
Dividends declared per common share	$	0.465		$	0.460		$	1.86		$	1.84
FFO as adjusted payout ratio	72.7%			84.4%			83.4%			85.9%
Consolidated selected supplemental cash flow information:
Amortization of above and below market lease intangibles, net(3)	(1,041		)	(2,123		)	(6,378		)	(14,780		)
Stock-based compensation	3,618			3,320			14,924			14,388
Amortization of debt premiums, discounts and issuance costs, net	2,618			2,141			9,856			8,328
Straight-line rents	(14,374		)	(7,937		)	(47,243		)	(46,688		)
Interest accretion – DFLs	(2,300		)	(2,074		)	(10,641		)	(8,057		)
Deferred revenues – tenant improvement related	(929		)	3,137			(3,714		)	13,315
Deferred revenues – additional rents (SAB 104)	(810		)	(840		)	(270		)	(511		)
Leasing costs and tenant and capital improvements(4)	(20,853		)	(13,381		)	(54,237		)	(40,702		)
Other supplemental cash flow adjustments	(778		)	(17		)	(778		)	(57		)
HCP’s share of selected supplemental cash flow information from unconsolidated joint ventures(5):
Amortization of above and below market lease intangibles, net	$	(260	)	$	30		$	(112	)	$	1,424
Amortization of debt premiums, discounts and issuance costs, net	178			105			495			405
Straight-line rents	1			(2,159		)	(3,758		)	(5,553		)
Leasing costs and tenant and capital improvements	(825		)	(830		)	(3,351		)	(2,474		)

(1)  Merger-related items of $4.3 million primarily consist of professional fees that are attributable to the Company’s pending HCR ManorCare Acquisition (per share impact of $0.01 for both periods ended December 31, 2010).

(2)  HCP’s weighted average shares used to calculate diluted FFO as adjusted, among other things, eliminate the impact of the negative carry of its $1.472 billion, or 46 million shares, common stock offering completed on December 20, 2010, which issuance increased its weighted average shares by 6 million and 1.5 million for the three months and year ended December 31, 2010, respectively (per share impact of $0.01 for both periods ended December 31, 2010). Proceeds from this offering will be used to fund a portion of the cash consideration of HCP’s HCR ManorCare Acquisition that is expected to close in March 2011.

(3)  The three months ended December 31, 2010 amortization of $1.0 million includes the net effect of the following: (i) income of $1.4 million related to net below market lease intangibles; (ii) operating expense of $0.1 million related to net below market ground lease intangibles; and (iii) a charge to revenues of $0.3 million related to lease incentives. The year ended December 31, 2010 amortization of $6.4 million includes the net effect of the following: (i) income of $8.2 million related to net below market lease intangibles; (ii) operating expense of $0.4 million related to net below market ground lease intangibles; and (iii) a charge to revenues of $1.4 million related to lease incentives. The year ended December 31, 2009 includes a $6 million reduction in the amortization of above-market rent intangibles resulting from adjustments to the cost allocation of certain assets acquired in 2006.

(4)  Excludes $41 million ($2 million in 4Q2010 and $39 million in 3Q2010) of deferred leasing costs related to the buyout of management contracts for 27 Sunrise-managed communities. On November 1, 2010, the Company exercised its rights to terminate management contracts relating to 27 senior housing communities previously operated by Sunrise; the Company’s net investment to acquire these termination rights was $41 million, which was comprised of a $50 million payment to Sunrise that was partially offset for certain working capital acquired in conjunction with this transaction.

(5)  Includes Investment Management Platform and three other unconsolidated joint ventures.

                                                                                                                                                             ;                                                                                                                                                                          &# 160;                                                                                           

See Reporting Definitions and Reconciliations of Non-GAAP Measures

3

Capitalization

Dollars and shares in thousands, except price data

Total Debt
	December 31, 2010		December 31, 2009
Bank line of credit	$	—	$	—
Term loan	—		200,000
Senior unsecured notes	3,318,379		3,521,325
Mortgage and other secured debt	1,235,779		1,834,935
Other debt	92,187		99,883
Consolidated debt	4,646,345		5,656,143
HCP’s share of unconsolidated debt(1)	335,966		341,389
Total debt	$	4,982,311	$	5,997,532

Total Market Capitalization
	December 31, 2010
	Shares/Units	Value/Units		Total Value
Common stock	370,925	$	36.79	$	13,646,331
Convertible partnership units
2 for 1(2)	1,732	73.58		127,441
1 for 1(3)	2,510	36.79		92,343
	4,242			219,784
Preferred stock:
7.25% Series E (Callable at par)	4,000	24.73		98,920
7.10% Series F (Callable at par)	7,820	24.58		192,216
	11,820			291,136
Consolidated market equity				$	14,157,251
Consolidated debt				4,646,345
Consolidated market capitalization				$	18,803,596
HCP’s share of unconsolidated debt(1)				335,966
Total market capitalization				$	19,139,562

Common Stock and Equivalents
		Weighted Average Shares
	Shares	Three Months Ended		Year Ended
	Outstanding	December 31, 2010		December 31, 2010
	December 31, 2010	Diluted EPS	Diluted FFO	Diluted EPS	Diluted FFO
Common stock	370,925	324,361	324,361	305,574	305,574
Common equivalent securities:
Restricted stock and units	1,562	298	298	241	241
Dilutive impact of options	1,326	1,326	1,326	1,085	1,085
Convertible partnership units	5,975	—	5,975	—	3,565
Total common and equivalents	379,788	325,985	331,960	306,900	310,465

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

(1)  Reflects the Company’s pro rata share of amounts from the Investment Management Platform. Excludes unconsolidated joint ventures outside of the Investment Management Platform.

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

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

4

Indebtedness and Ratios

Dollars in thousands

Debt Maturities and Scheduled Principal Repayments (Amortization)

December 31, 2010

			Senior					Mortgage and								HCP’s Share of
	Bank Line		Unsecured					Other Secured					Consolidated			Unconsolidated
	of Credit(1)		Notes			Rates(2)		Debt(3)			Rates(2)		Debt			Mortgage Debt(4)			Rates(2)		Total Debt
2011	$	—	$	292,265		4.85	%	$	57,571		6.01	%	$	349,836		$	6,224		—	%	$	356,060
2012	—		250,000			6.67		64,103			5.09		314,103			13,560			5.44		327,663
2013	—		550,000			5.82		250,741			6.00		800,741			44,508			6.08		845,249
2014	—		87,000			4.90		177,809			5.74		264,809			4,364			—		269,173
2015	—		400,000			6.64		355,080			6.24		755,080			15,070			5.84		770,150
2016	—		400,000			6.42		273,316			6.74		673,316			50,975			6.05		724,291
2017	—		750,000			6.04		1,093			—		751,093			201,648			5.83		952,741
2018	—		600,000			6.83		5,688			5.90		605,688			—			—		605,688
2019	—		—			—		578			5.70		578			—			—		578
2020	—		—			—		510			—		510			—			—		510
Thereafter	—		—			—		50,563			5.26		50,563			—			—		50,563
Subtotal			3,329,265					1,237,052					4,566,317			336,349					4,902,666
Other debt(5)	—		—										92,187								92,187
(Discounts) and premiums, net	—		(10,886		)			(1,273		)			(12,159		)	(383		)			(12,542		)
Total debt	$	—	$	3,318,379				$	1,235,779				$	4,646,345		$	335,966				$	4,982,311
Weighted average interest rate	N/A		6.19%					6.14%					6.19%			5.92%					6.16%
Weighted average maturity in years	0.59		4.58					4.74					4.63			5.91					4.71

Ratios			Covenants
	December 31,	December 31,	The following is a summary of the financial covenants under the revolving line of credit facility at December 31, 2010.
	2010	2009
Consolidated Debt/Consolidated Gross Assets	31.9%	42.8%
Financial Leverage (Total Debt/Total Gross Assets)(6)	32.8%	43.4%		Line of Credit
			Financial Covenants(8)	Requirement	Actual Compliance
Consolidated Secured Debt/Consolidated Gross Assets	8.5%	13.9%	Leverage Ratio	No greater than 60%	35%
Total Secured Debt/Total Gross Assets	10.4%	15.8%	Secured Debt Ratio	No greater than 30%	11%
			Unsecured Leverage Ratio	No greater than 65%	31%
Fixed and variable rate ratios(7):			Fixed Charge Coverage Ratio (12 months)	No less than 1.75x	2.68x
Fixed rate Total Debt	93.8%	83.8%
Variable rate Total Debt	6.2%	16.2%
	100.0%	100.0%

(1)At December 31, 2010, the Company had $113 million of aggregate letters of credit pledged against the revolving line of credit facility, including a $103 million letter of credit as a result of the Ventas, Inc. (“Ventas”) litigation. For further information regarding the Ventas litigation see Note 11 to the Consolidated Financial Statements for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SEC.

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

(3)Mortgage debt attributable to non-controlling interests at December 31, 2010 was $6.9 million.

(4)Includes pro-rata share of other debt that represents the Company’s Investment Management Platform. At December 31, 2010, 100% of the Company’s Investment Management Platform’s mortgage debt accrues interest at fixed rates.

(5)$92 million of other debt that represents non-interest bearing life care bonds and occupancy fee deposits at three of the Company’s senior housing facilities have no scheduled maturities.

(6)Excluding the temporary benefit resulting from prefunding the pending HCR ManorCare Acquisition, the Company’s Financial Leverage would have been 38%.

(7)$250 million of fixed-rate senior unsecured notes are presented as variable-rate debt as the interest payments under such debt has been swapped (pay float and receive fixed) and $60 million of variable-rate mortgages are presented as fixed-rate debt as the interest payments under such debt has been swapped (pay fixed and receive float).

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

5

Investments and Dispositions

Dollars and square feet in thousands

Investments
	December 31, 2010
Description	Three Months Ended		Year Ended
Purchase of participation in Genesis HealthCare’s senior term loan and mezzanine debt	$	166,572	$	289,858
Acquisitions of real estate properties	82,233		255,647
Total fundings for development, tenant and capital improvements(1)	37,972		135,305
Sunrise lease termination rights payments	1,894		40,650
Total investments	$	288,671	$	721,460

Acquisitions of real estate properties for the three months ended December 31, 2010

			Property
Description		Capacity	Count	Segment	Investment
Location	Date
Cambridge, Massachusetts	November 22, 2010	N/A(2)	N/A(2)	Life science	$	18,910
Various, Kentucky	December 29, 2010	154 Sq. Ft.	3	Medical office	44,332
Vero Beach, Florida	December 30, 2010	85 Units	1	Senior housing	18,991
Total					$	82,233

Dispositions
			Property		Sales Price,
Description		Capacity	Count	Segment	Net of Costs
Location	Date
Three Months Ended December 31, 2010:
Various, NJ	November 1, 2010	78 Units	2	Senior housing	$	22,324
Various, TX	November 1, 2010	287 Units	7	Senior housing	5,042
Layton, UT	November 1, 2010	19 Sq. Ft.	1	Medical office	2,862
Fourth quarter dispositions of real estate properties					30,228
Marketable debt securities sold	Various			Hospital	101,729
Total					$	131,957
Year Ended December 31, 2010:
Dispositions of real estate properties	Various		14	Various	$	55,700
Marketable debt securities sold	Various			Hospital	174,236
Total					$	229,936

(1)The three months ended December 31, 2010, includes the following: (i) $12.5 million of development, (ii) $9.5 million of first generation tenant and capital improvements, and (iii) $16.0 million of second generation tenant and capital improvements (excludes $4.9 million of leasing costs). The year ended December 31, 2010, includes the following: (i) $55.9 million of development, (ii) $37.2 million of first generation tenant and capital improvements, and (iii) $42.2 million of second generation tenant and capital improvements (excludes $12.0 million of leasing costs). Investments for development include capitalized interest for the quarter and year ended December 31, 2010 of $6.1 milli on and $21.2 million respectively. Capitalized interest for the quarter and year ended December 31, 2010 includes $0.1million and $0.5million, respectively, related to investments in unconsolidated joint ventures.

(2)Represents a property placed in redevelopment upon acquisition. For additional details, see the “Redevelopment Projects in Process” section on page 7 in this report.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

6

Development

As of December 31, 2010, dollars and square feet in thousands

Redevelopment Projects in Process

			Estimated/	Estimated
			Actual	Rentable			Estimated
			Completion	Square	Investment		Total
Name of Project	Location	Segment	Date	Feet	to Date(1)(3)		Investment
500/600 Saginaw	Redwood City, CA	Life science	1Q 2010	89	$	39,761	$	52,029
Modular Labs IV(4)	So. San Francisco, CA	Life science	4Q 2010	110	49,985		55,948
Soledad (Westridge)	San Diego, CA	Life science	2Q 2011	28	9,807		14,582
1030 Massachusetts Avenue	Cambridge, MA	Life science	1Q 2012	66	19,296		39,172
Knoxville	Knoxville, TN	Medical office	3Q 2011	38	5,729		8,740
Westpark Plaza	Plano, TX	Medical office	1Q 2012	70	9,497		16,022
Folsom	Sacramento, CA	Medical office	1Q 2012	92	27,875		36,800
Innovation Drive	San Diego, CA	Medical office	1Q 2012	84	23,482		37,100
	Total			577	$	185,432	$	260,393

Land Held for Development

			Estimated
		Gross	Rentable
		Site	Square
Location	Segment	Acreage	Feet
So. San Francisco, CA	Life science	30	866
Carlsbad, CA	Life science	41	697
Poway, CA	Life science	72	1,261
Torrey Pines, CA	Life science	6	93
		149	2,917
Investment-to-date(2)(3)			$	281,546

Projects Placed in Service

			Date	Rentable
			Placed in	Square			Percentage
Name of Project	Location	Segment	Service	Feet	Investment(6)		Leased
Oyster Point II (A)	So. San Francisco, CA	Life science	January 2010	122	$	94,835	100%
Oyster Point II (B)	So. San Francisco, CA	Life science	January 2010	129	99,957		100%
Oyster Point II (C)	So. San Francisco, CA	Life science	January 2010	78	51,167		—
Soledad (Westridge)(5)	San Diego, CA	Life science	September 2010	25	7,683		100%
				354	$	253,642

(1)Investment-to-date of $185 million includes the following: (i) $46 million in development costs and construction in progress, (ii) $90 million of buildings and (iii) $49 million of land.

(2)Investment-to-date of $282 million includes the following: (i) $221 million in land and (ii) $61 million in development costs and construction in progress.

(3)Development costs and construction in progress of $144 million presented on the Company’s consolidated balance sheet at December 31, 2010, includes the following: (i) $46 million of costs for development projects in process; (ii) $60 million of costs for land held for development; and (iii) $38 million for tenant and other facility related improvement projects in process.

(4)Represents three facilities, one of which was placed in redevelopment (out of service) during the quarter ended March 31, 2010.

(5)Represents approximately half (or 25,000 sq. ft.) of the Soledad project that was placed in service during the quarter ended September 30, 2010.

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

7

Owned Portfolio Summary

As of and for the year ended December 31, 2010, dollars and square feet in thousands, unless otherwise indicated

Portfolio Summary by Investment Product

Leased	Property					Age			Occupancy	EBITDAR			EBITDARM
Properties	Count	Investment(1)		NOI		(Years)	Capacity		%(2)	Amount		CFC	Amount		CFC
Senior housing	226	$	4,231,788	$	354,075	14	25,822	Units	85.6	$	364,399	1.16 x	$	438,593	1.40 x
Life science	98	3,135,271		228,270		16	6,508	Sq. Ft.	90.3	N/A		N/A	N/A		N/A
Medical office	187	2,226,076		181,981		19	12,965	Sq. Ft.	91.0	N/A		N/A	N/A		N/A
Post-acute/skilled	45	244,738		37,042		26	5,331	Beds	85.4	54,461		1.52 x	74,106		2.06 x
Hospital	17	648,346		78,661		24	2,368	Beds	57.7	313,998		4.71 x	347,823		5.22 x
	573	$	10,486,219	$	880,029	17
Secured				Interest
Loans		Investment		Income
Senior housing(3)		$	—	$	364
Post-acute/skilled (4)		901,471		57,752
Hospital		21,434		14,712
		$	922,905	$	72,828
Mezzanine				Interest
Loans		Investment		Income
Post-acute/skilled (4)		$	994,067	$	63,951
Hospital		85,894		23,384
		$	1,079,961	$	87,335
Total		$	12,489,085	$	1,040,192

Portfolio NOI, Adjusted NOI and Interest Income

	Three Months Ended December 31, 2010
	Rental								NOI and
	Revenues		Operating				Interest		Interest		Adjusted
Segment	& DFL Income		Expenses		NOI(6)		Income(7)		Income		NOI
Senior housing(5)	$	110,142	$	13,861	$	96,281	$	12	$	96,293	$	85,184
Life science	70,121		12,447		57,674		—		57,674		51,046
Medical office	77,897		30,989		46,908		—		46,908		45,338
Post-acute/skilled	9,400		25		9,375		37,067		46,442		9,062
Hospital	20,758		1,025		19,733		15,080		34,813		19,126
	$	288,318	$	58,347	$	229,971	$	52,159	$	282,130	$	209,756
	Year Ended December 31, 2010
	Rental								NOI and
	Revenues		Operating				Interest		Interest		Adjusted
Segment	& DFL Income		Expenses		NOI(6)		Income(7)		Income		NOI
Senior housing(5)	$	382,946	$	28,871	$	354,075	$	364	$	354,439	$	317,429
Life science	276,762		48,492		228,270		—		228,270		204,939
Medical office	309,864		127,883		181,981		—		181,981		176,240
Post-acute/skilled	37,242		200		37,042		121,703		158,745		35,881
Hospital	83,491		4,830		78,661		38,096		116,757		73,640
	$	1,090,305	$	210,276	$	880,029	$	160,163	$	1,040,192	$	808,129

(1)Represents (i) the carrying amount of real estate assets, including intangibles, after adding back accumulated depreciation and amortization and (ii) the carrying amount of DFLs and debt investments.

(2)For life science facilities and MOBs, occupancy percentages are presented as of the end of the period reported. For senior housing facilities, post-acute/skilled nursing (“post-acute/skilled’) facilities and hospitals, occupancy represents the facilities’ average operating occupancy for the trailing twelve months and one quarter in arrears from the period reported.

(3)Interest Income associated with secured loans that matured or paid off during the year ended December 31, 2010.

(4)Primarily consists of HCR ManorCare. See HCR Properties, LLC (HCR ManorCare “PropCo”) Information on page 19 in this report.

(5)The quarter and year ended December 31, 2010 includes increases to revenues of $15.7 million and $29.4 million, respectively, and operating expenses of $13.2 million and $25.9 million, respectively, as a result of consolidating the operations for 27 Sunrise-managed properties from August 31, 2010 (the date that HCP controlled the four variable interest entities (“VIEs”) that leased these 27 properties) to November 1, 2010 (the date these 27 properties were leased to Emeritus); for additional information regarding these VIEs see Notes 11 and 17 to the Consolidated Financial Statements for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SE C.

(6)NOI attributable to non-controlling interests for the three months and year ended December 31, 2010 was $1.4 million and $5.6 million, respectively.

(7)Includes loan accretion for the three months and year ended December 31, 2010 of $17.6 million and $59.0 million, respectively.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

8

Owned Portfolio Concentrations

As of and for the year ended December 31, 2010, dollars in thousands

Geographic Diversification of Leased Properties

	Total	Senior		Life		Medical		Post–Acute/						% of
Investment by State	Properties	Housing		Science		Office		Skilled		Hospital		Total		Total
CA	134	$	579,750	$	3,015,795	$	211,350	$	14,347	$	128,505	$	3,949,747	38
TX	75	383,894		—		649,169		2,818		227,242		1,263,123		12
FL	51	502,913		—		149,394		—		62,450		714,757		7
CO	24	169,395		—		196,890		15,067		9,028		390,380		4
VA	21	279,828		—		40,346		63,100		—		383,274		4
WA	14	131,605		—		173,771		—		—		305,376		3
NJ	12	296,539		—		—		—		—		296,539		3
UT	34	24,728		119,476		141,019		4,935		—		290,158		2
IL	14	247,032		—		13,481		—		—		260,513		2
MD	12	195,651		—		29,378		—		—		225,029		2
Other	182	1,420,453		—		621,278		144,471		221,121		2,407,323		23
Total	573	$	4,231,788	$	3,135,271	$	2,226,076	$	244,738	$	648,346	$	10,486,219	100
	Total	Senior		Life		Medical		Post–Acute/						% of
NOI by State	Properties	Housing		Science		Office		Skilled		Hospital		Total		Total
CA	134	$	54,575	$	216,912	$	12,530	$	2,189	$	16,835	$	303,041	34
TX	75	38,211		—		50,586		417		24,367		113,581		13
FL	51	44,762		—		13,337		—		7,767		65,866		7
VA	21	20,908		—		3,688		6,852		—		31,448		4
CO	24	11,664		—		14,823		1,587		1,362		29,436		4
UT	34	1,600		11,358		12,160		652		—		25,770		3
WA	14	7,960		—		17,105		—		—		25,065		3
TN	23	2,864		—		14,946		3,337		—		21,147		2
NJ	12	20,533		—		—		—		—		20,533		2
MD	12	16,152		—		2,873		—		—		19,025		2
Other	173	134,846		—		39,933		22,008		28,330		225,117		26
Total	573	$	354,075	$	228,270	$	181,981	$	37,042	$	78,661	$	880,029	100

Operator/Tenant Diversification

	Primary	Annualized Revenues(1)
Company	Segment	Amount		%
Emeritus Corporation	Senior housing	$	92,683	9
Sunrise Senior Living	Senior housing	82,418		8
Brookdale	Senior housing	65,533		7
HCR ManorCare	Post-acute/skilled	55,191		6
HCA	Hospital	46,199		5
Amgen	Life science	40,035		4
Genentech	Life science	36,256		4
Genesis	Post-acute/skilled	21,938		2
Aegis Senior Living	Senior housing	21,197		2
Takeda	Life science	16,562		2
Other		507,684		51
		$	985,696	100

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

9

Owned Same Property Operating Lease Portfolio

As of December 31, 2010, dollars and square feet in thousands

			Senior		Life			Medical			Post-Acute/
	Total		Housing(1)		Science			Office			Skilled		Hospital
Property count	529		192		93			182			45		17
Investment	$	9,385,563	$	3,478,202	$	2,851,939		$	2,162,338		$	244,738	$	648,346
Percent of operating lease portfolio (by investment)	95.0%		96.0%		91.0%			97.1%			100%		100%
Capacity			21,849 Units		6,070 Sq. Ft.			12,707 Sq. Ft.			5,331 Beds		2,368 Beds
Year-Over-Year Three-Month SPP
Occupancy(2):
December 31, 2010			86.2%		90.9%			90.8%			85.7%		52.6%
December 31, 2009			85.9%		89.8%			90.9%			85.0%		56.2%
% change			0.3%		1.1%			(0.1%		)	0.7%		(3.6%		)
NOI % change	5.8%		10.6%		0.1%			7.4%			2.1%		1.5%
Adjusted NOI:
December 31, 2010	$	196,189	$	73,299	$	48,088		$	46,598		$	9,078	$	19,126
December 31, 2009	$	187,410	$	67,023	$	50,526		$	43,708		$	8,866	$	17,287
Adjusted NOI % change	4.7%		9.4%		(4.8%		)	6.6%			2.4%		10.6%
Sequential Three-Month SPP
Occupancy(2):
December 31, 2010			86.2%		90.9%			90.8%			85.7%		52.6%
September 30, 2010			85.6%		89.4%			90.7%			85.1%		57.7%
% change			0.6%		1.5%			0.1%			0.6%		(5.1%		)
NOI % change	6.0%		12.4%		1.5%			5.3%			1.9%		(1.8%		)
Adjusted NOI:
December 31, 2010	$	196,189	$	73,299	$	48,088		$	46,598		$	9,078	$	19,126
September 30, 2010	$	187,627	$	67,221	$	47,198		$	44,727		$	8,991	$	19,490
Adjusted NOI % change	4.6%		9.0%		1.9%			4.2%			1.0%		(1.9%		)
Year-Over-Year SPP
NOI % change	3.0%		5.3%		1.7%			2.0%			1.7%		1.5%
Adjusted NOI:
December 31, 2010	$	758,532	$	275,058	$	193,531		$	180,378		$	35,925	$	73,640
December 31, 2009	$	723,908	$	253,296	$	192,605		$	175,590		$	35,426	$	66,991
Adjusted NOI % change	4.8%		8.6%		0.5%			2.7%			1.4%		9.9%

(1)Excludes 27 properties which are classified as direct financing leases.

(2)Occupancy percentages for senior housing, hospital and post-acute/skilled nursing are calculated based on the average three-month occupancy one quarter in arrears from the period presented. Occupancy percentages for life science and medical office are as of the end of the period presented.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

10

Owned Portfolio Lease Expirations and Debt Investment Maturities

At December 31, 2010, dollars and square feet in thousands

			Expiration Year(1)
Segment	Total		2011(2)		2012		2013		2014		2015		2016		2017		2018		2019		2020		Thereafter
Lease Expirations
Senior housing:
Properties	226		—		1		4		5		1		19		12		49		12		33		90
Annualized revenues	$	333,127	$	—	$	324	$	18,781	$	4,908	$	197	$	30,562	$	19,329	$	90,229	$	15,021	$	48,769	$	105,007
Life science:
Square feet	5,876		358		144		184		595		892		139		667		635		—		922		1,340
Annualized revenues	$	212,714	$	10,754	$	4,362	$	5,995	$	15,250	$	25,858	$	3,881	$	24,684	$	27,258	$	—	$	40,077	$	54,595
Medical office:
Square feet	11,798		1,621		1,471		1,708		1,364		1,322		691		696		797		670		829		629
Annualized revenues	$	247,928	$	37,153	$	32,364	$	31,333	$	30,272	$	29,048	$	12,973	$	14,769	$	15,730	$	13,556	$	18,779	$	11,951
Post-acute/skilled:
Properties	45		—		—		—		9		1		6		9		3		12		4		1
Annualized revenues	$	36,379	$	—	$	—	$	—	$	6,930	$	429	$	5,346	$	8,193	$	1,650	$	9,693	$	2,915	$	1,223
Hospital:
Properties	17		—		—		1		3		—		—		2		—		4		—		7
Annualized revenues	$	65,749	$	—	$	—	$	2,478	$	16,018	$	—	$	—	$	4,547	$	—	$	6,273	$	—	$	36,433

Total annualized revenues	$	895,897	$	47,907	$	37,050	$	58,587	$	73,378	$	55,532	$	52,762	$	71,522	$	134,867	$	44,543	$	110,540	$	209,209
Debt Investment Maturities
Post-acute/skilled:

Annualized revenues	$	78,304	$	—	$	—		$	56,194	$	22,110	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Hospital:
Annualized revenues	$	11,495	$	—	$	10,830	(3)	$	—	$	—	$	665	$	—	$	—	$	—	$	—	$	—	$	—
Total annualized revenues	$	89,799	$	—	$	10,830		$	56,194	$	22,110	$	665	$	—	$	—	$	—	$	—	$	—	$	—

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

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

(3)Reflects extension of loan maturity to 2012 as a result of proposed terms of restructuring the loan to Cirrus Group, LLC; for additional information regarding the Cirrus Group, LLC loan restructure see Note 6 to the Consolidated Financial Statements for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SEC.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

11

Owned Senior Housing Portfolio

As of and for the year ended December 31, 2010, dollars in thousands

Investments

Operating	Property					Average			EBITDAR			EBITDARM
Leases	Count	Investment		NOI		Age (Years)	Units	Occupancy %(1)	Amount		CFC	Amount		CFC
Assisted living	163	$	2,398,330	$	194,536	12	14,547	85.5	$	197,071	1.16 x	$	239,477	1.41 x
Independent living	28	712,980		64,380		20	4,912	84.0	61,707		1.03 x	70,672		1.18 x
CCRCs	8	510,817		45,813		22	3,222	88.7	61,336		1.40 x	72,832		1.66 x
	199	$	3,622,127	$	304,729	14	22,681	85.6	$	320,114	1.17 x	$	382,981	1.40 x
Direct Financing	Property					Average			EBITDAR			EBITDARM
Leases	Count	Investment		NOI		Age (Years)	Units	Occupancy %(1)	Amount		CFC	Amount		CFC
Assisted living	27	$	609,661	$	49,346	13	3,141	85.2	$	44,285	1.12 x	$	55,612	1.40 x
Leased Properties	226	$	4,231,788	$	354,075	14	25,822	85.6	$	364,399	1.16 x	$	438,593	1.40 x
				Interest
Secured Loans(2)		Investment		Income
Assisted living		$	—	$	164
Independent living		—		200
		$	—	$	364
Total		$	4,231,788	$	354,439

Operator Concentration

						NOI and
	Properties		Investment			Interest Income				Occupancy	EBITDA(R)	EBITDA(R)M
Operator	Count	% Pooled	Amount		%	Amount		%	Units	%(1)	CFC/DSC	CFC/DSC
Sunrise Senior Living(3)(4)	48	98	$	1,306,194	31	$	94,456	27	5,567	87.7	1.21 x	1.46 x
Emeritus Corporation(3)	69	96	1,133,830		27	98,144		28	7,726	87.8	1.21 x	1.41 x
Brookdale	24	92	675,804		16	67,861		19	4,813	87.4	1.31 x	1.54 x
Aegis Senior Living	12	83	258,008		6	22,620		6	963	84.5	0.88 x	1.03 x
Harbor Retirement Associates	14	100	210,718		5	14,380		4	1,345	82.2	1.08 x	1.37 x
Capital Senior Living	15	100	178,508		4	14,943		4	1,530	80.5	1.04 x	1.19 x
Horizon Bay Senior Communities	11	91	158,304		4	16,394		5	1,273	88.8	1.12 x	1.32 x
Other(3)	33	91	310,422		7	25,641		7	2,605	82.0	1.05 x	1.36 x
	226	95	$	4,231,788	100	$	354,439	100	25,822	85.6	1.16 x	1.40 x

(1)Occupancy percentages are calculated based on the trailing twelve months and one quarter in arrears from the period presented.

(2)Interest Income associated with secured loans that matured or paid off during the year ended December 31, 2010.

(3)On November 1, 2010, the Company transitioned 27 assets formerly operated by Sunrise Senior Living to Emeritus Corporation. For these transitioned assets, occupancy and CFC are disclosed under “other.”

(4)Sunrise Senior Living percentage pooled consists of 48 assets under 6 separate pools.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

12

Owned Senior Housing Portfolio

Dollars in thousands

Portfolio Trends

	Same Property Operating Lease Portfolio															Leased Portfolio
										As of and for the
	As of and for the Quarter Ended									YTD Period Ended						As of and for the Twelve Months Ended
	12/31/10			09/30/10			12/31/09			12/31/10			12/31/09			12/31/10		09/30/10(1)		12/31/09(1)
Property count	192			192			192			192			192			226		225		231
Investment	$	3,478,202		$	3,475,648		$	3,460,637		$	3,478,202		$	3,460,637		$	4,231,788	$	4,207,976	$	4,081,157
Units	21,849			21,819			21,830			21,849			21,830			25,822		25,707		25,335
3-Month Occupancy %(2)	86.2			85.6			85.9			86.2			85.9			86.0		85.5		85.5
12-Month Occupancy %(2)	85.7			85.6			86.8			85.7			86.8			85.6		85.5		86.4
EBITDAR(3)	$	317,165		$	313,288		$	303,994		$	317,165		$	303,994		$	364,399	$	358,180	$	348,224
EBITDAR CFC/DSC(3)	1.17 x			1.16 x			1.14 x			1.17 x			1.14 x			1.16 x		1.16 x		1.13 x
EBITDARM(3)	$	379,336		$	374,572		$	364,843		$	379,336		$	364,843		$	438,593	$	430,906	$	421,024
EBITDARM CFC/DSC(3)	1.40 x			1.39 x			1.37 x			1.40 x			1.37 x			1.40 x		1.39 x		1.36 x
NOI:
Rental revenues(4)	$	94,718		$	85,294		$	73,568		$	326,214		$	288,163
Operating expenses(4)(5)	(13,209		)	(12,792		)	138			(26,481		)	(3,438		)
	$	81,509		$	72,502		$	73,706		$	299,733		$	284,725
Adjusted NOI:
Straight-line rents	(7,589		)	(4,544		)	(5,891		)	(21,746		)	(23,202		)
Below market lease intangibles, net(6)	(621		)	(737		)	(792		)	(2,929		)	(8,227		)
	$	73,299		$	67,221		$	67,023		$	275,058		$	253,296

(1)Amounts reflected conform to current presentation, without giving effect to discontinued operations.

(2)Occupancy percentages are calculated based on the trailing twelve months and one quarter in arrears from the period presented. Total portfolio occupancy percentages are presented in the aggregate for leased properties and secured loans.

(3)EBITDAR and EBITDARM amounts and coverages are based on the trailing twelve-month period presented and are one quarter in arrears from the period presented.

(4)The quarter and year ended December 31, 2010 includes increases to revenues of $15.7 million and $29.4 million, respectively, and operating expenses of $13.2 million and $25.9 million, respectively, as a result of consolidating the operations for 27 Sunrise-managed properties from August 31, 2010 (the date that HCP controlled the four variable interest entities (“VIEs”) that leased these 27 properties) to November 1, 2010 (the date these 27 properties were leased to Emeritus); for additional information regarding these VIEs see Notes 11 and 17 to the Consolidated Financial Statements for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SEC.

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

(6)The year ended December 31, 2009 includes a $6 million reduction in the amortization of above-market rent intangibles resulting from adjustments to the cost allocation of certain assets acquired in 2006.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

13

Owned Life Science Portfolio

As of and for the year ended December 31, 2010, unless otherwise indicated, dollars and square feet in thousands

Investments	Property					Average	Square
Leased Properties	Count	Investment		NOI		Age (Years)	Feet	Occupancy %(1)
San Francisco	72	$	2,512,024	$	176,830	16	4,486	90.1
San Diego	16	503,771		40,082		18	1,352	88.8
Utah	10	119,476		11,358		10	670	94.6
	98	$	3,135,271	$	228,270	16	6,508	90.3

Tenant Concentration	Annualized Revenues			Square Feet
Tenant	Amount		%	Amount	%
Amgen	$	40,035	19	684	12
Genentech	36,256		17	794	13
Takeda	16,562		8	324	5
Exelixis, Inc.	12,905		6	295	5
Rigel Pharmaceuticals	12,302		6	147	3
Myriad Genetics	7,082		3	310	5
ARUP	5,418		3	324	6
Alexza Pharmaceuticals, Inc.	5,036		2	107	2
Sequenom	4,848		2	83	1
NuVasive, Inc.	4,493		2	145	3
Other	67,777		32	2,663	45
	$	212,714	100	5,876	100

Portfolio Trends

	Same Property Operating Lease Portfolio															Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						At the Period Ended
	12/31/10			09/30/10			12/31/09			12/31/10			12/31/09			12/31/10		09/30/10(2)		12/31/09(2)
Property count	93			93			93			93			93			98		98		94
Investment	$	2,851,939		$	2,845,374		$	2,815,506		$	2,851,939		$	2,815,506		$	3,135,271	$	3,128,513	$	2,822,709
Square feet	6,070			6,070			6,070			6,070			6,070			6,508		6,508		6,083
Occupancy %(1)	90.9			89.4			89.8			90.9			89.8			90.3		88.9		89.8
NOI:
Rental and related revenues(3)	$	54,795		$	54,067		$	54,948		$	217,385		$	212,755
Tenant recoveries(3)	9,675			10,433			10,503			39,344			40,526
Operating expenses(3)	(10,980		)	(11,801		)	(12,011		)	(44,364		)	(44,412		)
	$	53,490		$	52,699		$	53,440		$	212,365		$	208,869
Adjusted NOI:
Straight-line rents	(3,222		)	(3,804		)	450			(11,366		)	(10,838		)
Above (below) market lease intangibles, net	320			(108		)	(336		)	(201		)	(2,398		)
Lease termination fees	(2,500		)	(1,589		)	(3,028		)	(7,267		)	(3,028		)
	$	48,088		$	47,198		$	50,526		$	193,531		$	192,605

(1)Occupancy percentages are presented as of the end of the period reported.

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

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

14

Owned Life Science Portfolio

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

Selected Lease Expirations Data (next 3 years):

	Total					San Francisco			San Diego			Utah
	Square Feet		Annualized Revenues			Square	Annualized		Square	Annualized		Square	Annualized
Year	Amount	%	Amount		%	Feet	Revenues		Feet	Revenues		Feet	Revenues
2011(1)	358	6	$	10,754	5	332	$	9,890	26	$	864	—	$	—
2012	144	2	4,362		2	40	1,011		104	3,351		—	—
2013	184	3	5,995		3	162	5,496		22	499		—	—
Thereafter	5,190	89	191,603		90	3,507	147,036		1,049	32,066		634	12,501
	5,876	100	$	212,714	100	4,041	$	163,433	1,201	$	36,780	634	$	12,501

Leasing Activity	Leased		Annualized		%		HCP Tenant		Leasing		Average	Retention
	Square		Base Rent Per		Change		Improvements		Costs Per		Lease Term	Rate
	Feet		Square Foot(2)		In Rents		Per Square Foot		Square Foot		(Months)	YTD
Leased Square Feet as of December 31, 2009	5,464		$	34.99
Developments placed in service	250		52.42
Redevelopments	(13	)	30.00
Expirations	(130	)	25.99
Renewals, amendments and extensions	108		20.56		(28.7	)	$	8.36	$	6.62	46	82.9
New leases and expansions	54		20.61				5.99		7.18		53
Terminations	(54	)	23.60
Leased Square Feet as of March 31, 2010	5,679		$	36.05
Expirations	(99	)	30.59
Renewals, amendments and extensions	67		25.02		(31.1	)	42.35		6.35		44	76.2
New leases and expansions	27		16.56				0.13		2.12		22
Leased Square Feet as of June 30, 2010	5,674		$	36.40
Acquisitions	85		28.92
Redevelopments	25		28.56
Expirations	(154	)	28.00
Renewals, amendments and extensions	87		23.58		(5.1	)	6.86		5.67		50	68.3
New leases and expansions	68		19.25				84.81		12.66		88
Leased Square Feet as of September 30, 2010	5,785		$	36.26
Expirations	(146	)	35.13
Renewals, amendments and extensions	141		31.54		(9.7	)	19.60		8.29		63	76.0
New leases and expansions	158		22.00				24.02		10.64		75
Terminations	(62	)	30.08
Leased Square Feet as of December 31, 2010	5,876		$	36.20

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

(2)Represents actual base rents.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

15

Owned Medical Office Portfolio

As of and for the year ended December 31, 2010, dollars and square feet in thousands

Investments

	Property					Average
Leased Properties	Count	Investment		NOI		Age (Years)	Square Feet	Occupancy %(1)
On-Campus	142	$	1,774,120	$	146,842	19	10,709	91.1
Off-Campus	45	451,956		35,139		18	2,256	90.5
	187	$	2,226,076	$	181,981	19	12,965	91.0

Portfolio Trends

	Same Property Operating Lease Portfolio															Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						At the Period Ended
	12/31/10			09/30/10			12/31/09			12/31/10			12/31/09			12/31/10		09/30/10(2)		12/31/09(2)
Property count	182			182			182			182			182			187		186		184
Investment	$	2,162,338		$	2,146,560		$	2,123,838		$	2,162,338		$	2,123,838		$	2,226,076	$	2,178,765	$	2,137,140
Square feet	12,707			12,707			12,721			12,707			12,721			12,965		12,900		12,812
Occupancy %(1)	90.8			90.7			90.9			90.8			90.9			91.0		90.8		90.9
NOI:
Rental and related revenues(3)	$	66,003		$	65,288		$	63,857		$	260,661		$	258,899
Tenant recoveries(3)	11,171			11,977			11,398			46,632			46,549
Operating expenses(3)	(29,033		)	(31,540		)	(30,450		)	(121,574		)	(123,361		)
	$	48,141		$	45,725		$	44,805		$	185,719		$	182,087
Adjusted NOI:
Straight-line rents	(1,072		)	(479		)	(262		)	(3,159		)	(2,315		)
Below market lease intangibles, net	(471		)	(516		)	(785		)	(2,179		)	(3,193		)
Lease termination fees	—			(3		)	(50		)	(3		)	(989		)
	$	46,598		$	44,727		$	43,708		$	180,378		$	175,590

(1)Occupancy percentages are presented as of the end of the period reported.

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

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

16

Owned Medical Office Portfolio

Square feet in thousands

Leasing Activity

	Leased		Annualized		%	HCP Tenant		Leasing		Average	Retention
	Square		Base Rent Per		Change	Improvements		Costs Per		Lease Term	Rate
	Feet		Square Foot(1)		In Rents(2)	Per Square Foot		Square Foot		(Months)	YTD
Leased Square Feet as of December 31, 2009	11,651		$	21.32
Expirations	(421	)	21.87
Renewals, amendments and extensions	332		21.82		1.1	$	7.25	$	2.04	44	78.9
New leases	65		20.14			21.34		6.20		53
Terminations	(28	)	17.13
Leased Square Feet as of March 31, 2010	11,599		$	21.48
Expirations	(1,004	)	20.67
Renewals, amendments and extensions	900		21.08		5.9	7.57		1.84		63	86.4
New leases	131		17.94			21.00		4.09		54
Terminations	(15	)	22.90
Leased Square Feet as of June 30, 2010	11,611		$	21.54
Acquisitions	98		15.53
Expirations	(799	)	23.16
Renewals, amendments and extensions	665		22.41		2.9	8.26		2.31		50	85.3
New leases	138		20.38			30.29		4.69		68
Terminations	(4	)	23.64
Leased Square Feet as of September 30, 2010	11,709		$	21.62
Acquisitions	154		23.08
Dispositions and redevelopments	(89	)	18.45
Expirations	(619	)	22.18
Renewals, amendments and extensions	486		22.37		2.9	6.34		2.21		49	83.8
New leases	173		21.59			19.66		5.08		57
Terminations	(16	)	25.68
Leased Square Feet as of December 31, 2010	11,798		$	21.82

(1)Represents actual base rents.

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

17

Owned Post-Acute/Skilled Nursing Portfolio

As of and for the year ended December 31, 2010, dollars in thousands, unless otherwise indicated

Investments

Leased

Property

Average

EBITDAR

EBITDARM

Properties(1)

Count

Investment

NOI

Age (Years)

Beds

Occupancy %(2)

Amount

CFC

Amount

CFC

Post-acute/skilled

45

$

244,738

$

37,042

26

5,331

85.4

$

54,461

1.52 x

$

74,106

2.06 x

Secured			Interest		EBITDA	EBITDAM
Loans	Investment		Income		DSC	DSC
HCR ManorCare(3)(4)	$	639,467	$	50,347	24.45 x	29.99 x
Genesis HealthCare(5)	251,994		6,314		2.76 x	4.16 x
Other	10,010		1,091		1.47 x	2.26 x
	$	901,471	$	57,752

Mezzanine			Interest		EBITDA	EBITDAM
Loans	Investment		Income		DSC	DSC
HCR ManorCare(3)(6)	$	953,355	$	62,258	4.67 x	5.73 x
Genesis HealthCare(7)	40,712		1,693		2.06 x	3.10 x
	$	994,067	$	63,951
Total	$	2,140,276	$	158,745

Operator Concentration(8)

						NOI and
	Properties		Investment			Interest Income					EBITDA(R)	EBITDA(R)M
Operator	Count	% Pooled	Amount		%	Amount		%	Beds	Occupancy %(2)	CFC/DSC	CFC/DSC
HCR ManorCare(3)	—	—	$	1,592,822	73	$	112,605	71	—	—	4.67 x	5.73 x
Genesis HealthCare	—	—	292,706		14	8,007		5	—	—	2.06 x	3.10 x
Formation Capital	9	100	63,100		3	6,852		4	934	95.1	2.07 x	2.61 x
Covenant Care	12	100	62,318		3	10,194		6	1,373	83.3	1.64 x	2.20 x
Kindred	9	100	38,117		2	8,077		5	1,288	86.0	1.02 x	1.66 x
Trilogy Health Services	5	100	33,351		2	5,503		4	546	88.8	1.30 x	1.69 x
Sun Healthcare	4	100	25,512		1	3,538		2	479	72.0	1.81 x	2.30 x
Other	6	33	32,350		2	3,969		3	711	81.3	1.36 x	2.00 x
	45	91	$	2,140,276	100	$	158,745	100	5,331

(1)   The Company’s post-acute/skilled nursing leased properties have the following revenue mix: Private-pay 27%, Medicare 36% and Medicaid 37%.

(2)   Occupancy percentages are calculated based on the trailing twelve months and one quarter in arrears from the period presented.

(3)   See HCR Properties, LLC (HCR ManorCare “PropCo”) Information on page 19 in this report. On December 13, 2010, the Company signed a definitive agreement to acquire substantially all of the real estate assets of privately-owned HCR ManorCare, Inc.; for additional information regarding the HCR ManorCare Acquisition see Note 5 to the Consolidated Financial Statements for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SEC.

(4)   Represents a $720 million participation in first mortgage debt of HCR ManorCare with a carrying value of $639 million. This interest-only participation bears interest on the face amount at LIBOR plus 1.25% and represents 45% of the $1.6 billion most senior tranche of HCR ManorCare’s mortgage debt. The mortgage debt matures in January 2013 if the borrower meets certain performance conditions and exercises a one-year extension option. At December 31, 2010, the mortgage loan was secured by a first lien on 334 HCR ManorCare facilities located in 30 states.

(5)   Represents a $277.6 million participation in senior loan of Genesis HealthCare with a carrying value of $252 million. The senior loan bears interest on the face amount at LIBOR (subject to a current floor of 1.5% increasing to 2.5% by maturity) plus a spread of 4.75% increasing to 5.75% by maturity. The senior note is prepayable anytime without penalty, matures in September 2014 and is secured by all of Genesis HealthCare’s assets.

(6)   Represents mezzanine loans having an aggregate face value of $1.0 billion and a carrying value of $953 million. These interest-only loans bear interest on their face amounts at LIBOR plus 4.0%. These loans mature in January 2013 and are mandatorily pre-payable in January 2012, unless the borrower satisfies certain performance conditions. At December 31, 2010, the loans were secured by an indirect pledge of equity ownership in 334 HCR ManorCare facilities located in 30 states and are subordinate to other debt of approximately $3.6 billion.

(7)   Represents mezzanine loan of Genesis HealthCare having an aggregate face value of $50 million and a carrying value of $41 million. The mezzanine note bears interest on the face amount at LIBOR plus a spread of 7.50% and matures in September 2014. In addition to the coupon interest payments, the mezzanine note requires payment of a termination fee, of which the Company’s share is currently $2 million, increasing to a maximum of $5 million if the debt is repaid in full at maturity. The mezzanine note is subordinate to the senior loan and secured by the indirect pledge of equity ownership in Genesis HealthCare’s assets.

(8)   Property count, beds and occupancy are presented for leased properties and excludes secured and mezzanine loans.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

18

Owned Post-Acute/Skilled Nursing Portfolio

Dollars in thousands, except HCR ManorCare information

Portfolio Trends

	Same Property Operating Lease Portfolio															Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						As of and for the Twelve Months Ended
	12/31/10			09/30/10			12/31/09			12/31/10			12/31/09			12/31/10		09/30/10(1)		12/31/09(1)
Property count	45			45			45			45			45			45		45		48
Investment	$	244,738		$	244,738		$	244,738		$	244,738		$	244,738		$	244,738	$	244,738	$	255,084
Beds	5,331			5,331			5,331			5,331			5,331			5,331		5,331		5,628
3-Month Occupancy %(2)	85.7			85.1			85.0			85.7			85.0			85.7		85.1		85.2
12-Month Occupancy %(2)	85.4			85.3			85.3			85.4			85.3			85.4		85.3		85.4
EBITDAR(3)	$	54,461		$	53,081		$	55,198		$	54,461		$	55,198		$	54,461	$	53,081	$	57,122
EBITAR CFC(3)	1.52 x			1.48 x			1.56 x			1.52 x			1.56 x			1.52 x		1.48 x		1.56 x
EBITDARM(3)	$	74,106		$	72,687		$	74,130		$	74,106		$	74,130		$	74,106	$	72,687	$	77,111
EBITDARM CFC(3)	2.06 x			2.02 x			2.10 x			2.06 x			2.10 x			2.06 x		2.02 x		2.11 x
NOI:
Rental and related revenues	$	9,400		$	9,274		$	9,219		$	37,242		$	36,585
Operating expenses(4)	(7		)	(57		)	(20		)	(155		)	(116		)
	9,393			9,217			9,199			37,087			36,469
Adjusted NOI:
Straight-line rents	(315		)	(226		)	(333		)	(1,162		)	(1,043		)
	$	9,078		$	8,991		$	8,866		$	35,925		$	35,426

HCR Properties, LLC (HCR ManorCare “PropCo”) Information(5)

Portfolio Summary (dollars in thousands)(6)

Non-

Occupancy

Medicaid

Twelve Month

Property Count

Beds

%

Revenue(7)

EBITDA(3)

EBITDAM(3)

334

41,536

87.6

71%

$

602,603

$

738,975

Debt Capital Structure (dollars in billions)

12-Month

12-Month

12-Month

3-Month

EBITDA DSC

HCP

EBITDA

EBITDAM

EBITDA

at Interest-

Total

Interest(8)

DSC

DSC

DSC

Rate Cap

First mortgage

$

1.6

$

0.7

24.45 x

29.99 x

24.55 x

7.04 x

Other mortgage

1.4

—

Mezzanine securities

1.6

1.0

4.67 x

5.73 x

4.73 x

1.98 x

$

4.6

$

1.7

4.67 x

5.73 x

4.73 x

1.98 x

Interest-Rate Caps (dollars in billions)

Maturity

Description

Notional

Strike Rate

Date

Index

Interest-rate cap

$

2.5

3.00%

January 2012

1-month LIBOR

Interest-rate cap

2.1

5.25%

January 2012

1-month LIBOR

(1)   Amounts reflected conform to current presentation, without giving effect to discontinued operations.

(2)   Occupancy percentages are calculated based on the trailing twelve months and one quarter in arrears from the period presented. Total portfolio occupancy percentages are presented in the aggregate for leased properties, excluding secured and mezzanine loans.

(3)   EBITDAR and EBITDARM amounts and coverages are based on the trailing twelve-month period one quarter in arrears from the period presented.

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

(5)   On December 13, 2010, the Company signed a definitive agreement to acquire substantially all of the real estate assets of privately-owned HCR ManorCare, Inc.; for additional information regarding the HCR ManorCare Acquisition see Note 5 to the Consolidated Financial Statements for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K filed with the SEC.

(6)   PropCo leases its properties to HCR III HealthCare, LLC (“OpCo”) under a 12-year triple-net lease, which commenced in December 2007 and includes one 10-year extension option. Initial year base rent to OpCo is $379.5 million and escalates at 3% per annum.

(7)   Private-pay and Medicare revenues as a percentage of total revenues are 32% and 39%, respectively.

(8)   HCP’s participation interest in first mortgage is pari passu with the remaining first mortgage. HCP’s investments in mezzanine securities are junior to the remaining mezzanine securities.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

19

Owned Hospital Portfolio

As of and for the year ended December 31, 2010, dollars in thousands, unless otherwise indicated

Investments

Leased	Property					Average			EBITDAR(1)			EBITDARM(1)
Properties	Count	Investment		NOI		Age (Years)	Beds	Occupancy % (1)(2)	Amount		CFC	Amount		CFC
Acute care	5	$	452,671	$	57,085	34	1,600	57.2	$	252,488	5.50 x	$	276,202	6.02 x
Rehab	7	96,784		7,914		20	487	63.9	29,473		3.39 x	33,304		3.83 x
Specialty	2	63,686		5,703		27	37	—	25,031		4.90 x	27,580		5.40 x
LTACH	3	35,205		7,959		17	244	49.7	7,006		1.00 x	10,737		1.53 x
	17	$	648,346	$	78,661	24	2,368	57.7	$	313,998	4.71 x	$	347,823	5.22 x

Secured			Interest
Loans	Investment		Income
Acute care	$	21,434	$	14,712

Mezzanine				Interest
Loans	Investment			Income
Acute care(3)		$	—	$	10,321
Specialty			85,894		13,063
		$	85,894	$	23,384
Total		$	755,674	$	116,757

Operator Concentration(4)

	Properties		Investment			NOI and Interest Income
Operator(1)	Count	% Pooled	Amount		%	Amount		%	Beds
Tenet Healthcare Corp	3	—	$	196,709	26	$	23,052	20	756
HCA	1	—	167,164		22	30,994		27	668
Cirrus Health	2	—	149,580		20	17,354		15	37
HealthSouth	5	80	55,981		7	8,803		8	372
Other	6	50	186,240		25	36,554		30	535
	17	41	$	755,674	100	$	116,757	100	2,368

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

(2)Occupancy percentages are calculated based on the trailing twelve months and one quarter in arrears from the period presented.

(3)Interest Income associated with marketable debt securities that were sold during the year ended December 31, 2010.

(4)Property count and beds are presented for leased properties, and excludes secured and mezzanine loans.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

20

Owned Hospital Portfolio

Dollars in thousands

Portfolio Trends

	Same Property Operating Lease Portfolio															Leased Portfolio
	As of and for the Quarter Ended									As of and for the YTD Period Ended						As of and for the Twelve Months Ended
	12/31/10			09/30/10			12/31/09			12/31/10			12/31/09			12/31/10		09/30/10(1)		12/31/09(1)
Property count	17			17			17			17			17			17		17		18
Investment	$	648,346		$	647,890		$	646,323		$	648,346		$	646,323		$	648,346	$	647,890	$	673,248
Beds	2,368			2,357			2,345			2,368			2,345			2,368		2,377		2,510
3-Month Occupancy %(2)	52.6			57.7			56.2			52.6			56.2			52.6		57.7		54.6
12-Month Occupancy %(2)	57.7			58.6			58.6			57.7			58.6			57.7		58.6		57.0
EBITDAR(3)	$	313,998		$	311,872		$	309,911		$	313,998		$	309,911		$	313,998	$	311,872	$	306,883
EBITDAR CFC(3)	4.71 x			4.75 x			4.76 x			4.71 x			4.76 x			4.71 x		4.75 x		4.44 x
EBITDARM(3)	$	347,823		$	345,707		$	342,522		$	347,823		$	342,522		$	347,823	$	345,707	$	340,872
EBITDARM CFC(3)	5.22 x			5.26 x			5.26 x			5.22 x			5.26 x			5.22 x		5.26 x		4.93 x
NOI:
Rental and related revenues	$	20,758		$	21,123		$	20,783		$	83,491		$	81,361
Operating expenses	(1,025		)	(1,019		)	(1,336		)	(4,830		)	(3,874		)
	$	19,733		$	20,104		$	19,447		$	78,661		$	77,487
Adjusted NOI:
Straight-line rents	(389		)	(396		)	(1,942		)	(4,150		)	(9,625		)
Below market lease intangibles, net	(218		)	(218		)	(218		)	(871		)	(871		)
	$	19,126		$	19,490		$	17,287		$	73,640		$	66,991

(1)Amounts reflected conform to current presentation, without giving effect to discontinued operations.

(2)Occupancy percentages are calculated based on the average three-month occupancy one quarter in arrears from the period presented. Total portfolio occupancy percentages are presented in the aggregate for leased properties and secured loans.

(3)EBITDAR and EBITDARM amounts and coverages are based on the trailing twelve-month period one quarter in arrears from the period presented.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

21

Investment Management Platform

As of and for the year ended December 31, 2010, dollars in thousands

								HCP’s
Unconsolidated		Date	HCP’s	Joint		HCP’s Net		Investment		Initial
Institutional	Primary	Established/	Ownership	Venture’s		Equity		Management		Term
Joint Ventures	Segment	Acquired	Percentage	Investment		Investment(2)		Fee Income		(in years)
HCP Ventures II(1)	Senior housing	January-07	35%	$	1,101,270	$	64,973	$	2,300	Indefinite
HCP Ventures III	Medical office	October-06	30%(3)	142,214		10,024		405		10
HCP Ventures IV	Medical office	April-07	20%	644,705		37,919		1,957		10
HCP Life Science	Life science	August-07	50%-63%	143,378		65,252		4		97-98
				$	2,031,567	$	178,168	$	4,666

Balance Sheets(4)

	December 31, 2010									December 31, 2009
	Senior Housing			Medical Office			Life Science			Senior Housing			Medical Office			Life Science
ASSETS
Real estate:
Buildings and improvements	$	936,074		$	665,925		$	37,329		$	935,902		$	661,663		$	35,560
Land	108,907			67,897			8,271			108,907			67,820			8,271
Accumulated depreciation and amortization	(109,830		)	(94,901		)	(23,428		)	(85,370		)	(75,673		)	(20,955		)
Net real estate	935,151			638,921			22,172			959,439			653,810			22,876
Cash and cash equivalents and restricted cash	5,738			15,275			1,876			7,215			11,505			1,427
Intangible assets, net	35,458			42,805			—			39,745			50,948			—
Other assets, net	6,999			20,112			1,684			51,872			18,801			2,045
Total assets	$	983,346		$	717,113		$	25,732		$	1,058,271		$	735,064		26,348
LIABILITIES AND MEMBERS’ CAPITAL
Mortgage debt	$	649,450		$	469,061		$	9,882		$	659,476		$	469,675		$	12,968
Intangible liabilities, net	962			12,523			—			1,069			14,326			—
Accounts payable, accrued liabilities and deferred revenue	3,160			12,458			856			5,920			14,739			903
Total liabilities	653,572			494,042			10,738			666,465			498,740			13,871
HCP’s capital	112,700			36,158			7,918			134,375			39,075			6,352
Partners’ capital	217,074			186,913			7,076			257,431			197,249			6,125
Total liabilities and members’ capital	$	983,346		$	717,113		$	25,732		$	1,058,271		$	735,064		$	26,348

(1)On January 14, 2011, the Company acquired its partner’s 65% interest in a joint venture that owns 25 senior housing assets, becoming the sole owner of the portfolio. At closing, the Company paid approximately $137 million in cash for the interest and assumed its partner’s share of approximately $652 million of Fannie Mae debt secured by the assets. This transaction values the venture’s assets at $860 million. The assets were originally acquired on October 5, 2006, through the Company’s acquisition of CNL Retirement Properties, Inc., and were contributed to the joint venture in January 2007.

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

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

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

22

Investment Management Platform

In thousands

Statements of Operations and Funds From Operations(1)
	Three Months Ended December 31, 2010									Three Months Ended December 31, 2009
	Senior Housing			Medical Office			Life Science			Senior Housing			Medical Office			Life Science
Revenues:
Rental and related revenues	$	15,190		$	16,248		$	2,683		$	20,959		$	17,311		$	1,802
Tenant recoveries	—			3,931			354			—			3,733			355
Total revenues	15,190			20,179			3,037			20,959			21,044			2,157
Costs and expenses:
Depreciation and amortization	6,815			7,130			734			6,946			9,463			546
Operating	—			7,838			374			—			7,529			365
General and administrative	578			921			82			923			1,024			23
Total costs and expenses	7,393			15,889			1,190			7,869			18,016			934
Other income (expense):
Other income, net	—			2			—			—			31			—
Interest expense	(9,597		)	(6,837		)	(186		)	(9,720		)	(6,990		)	(240		)
Net income (loss)	$	(1,800	)	$	(2,545	)	$	1,661		$	3,370		$	(3,931	)	$	983
Depreciation and amortization	6,815			7,130			734			6,946			9,463			546
FFO	$	5,015		$	4,585		$	2,395		$	10,316		$	5,532		$	1,529
HCP’s pro rata share of FFO(2)	$	1,755		$	1,042		$	1,397		$	3,611		$	1,247		$	858
Selected supplemental cash flow information:
Amortization of above and below market lease intangibles, net	$	774		$	(137	)	$	—		$	728		$	57		$	—
Amortization of debt issuance costs, net	192			189			8			171			189			8
Straight-line rents	—			(172		)	116			(5,672		)	(407		)	(8		)
Leasing costs and tenant and capital improvements	(839		)	(2,372		)	(68		)	(557		)	(2,432		)	(237		)

	Year Ended December 31, 2010									Year Ended December 31, 2009
	Senior Housing			Medical Office			Life Science			Senior Housing			Medical Office			Life Science
Revenues:
Rental and related revenues	$	73,193		$	67,387		$	10,101		$	83,510		$	70,663		$	7333
Tenant recoveries	—			16,886			1,441			—			17,517			1,191
Total revenues	73,193			84,273			11,542			83,510			88,180			8,524
Costs and expenses:
Depreciation and amortization	27,575			30,902			2,573			28,038			38,034			3,787
Operating	15			32,900			1,525			7			33,596			1,527
General and administrative	3,908			3,812			128			4,682			4,288			139
Impairment of straight-line rent assets(2)	54,500			—			—
Total costs and expenses	85,998			67,614			4,226			32,727			75,918			5,453
Other income (expense):
Other income, net	1			12			—			1			211			—
Interest expense	(38,234		)	(27,371		)	(827		)	(38,778		)	(27,734		)	(1,032		)
Net income (loss)	$	(51,038	)	$	(10,700	)	$	6,489		$	12,006		$	(15,261	)	$	2,039
Depreciation and amortization	27,575			30,902			2,573			28,038			38,034			3,787
FFO	$	(23,463	)	$	20,202		$	9,062		$	40,044		$	22,773		$	5,826
HCP’s pro rata share of FFO(2)	$	(8,212	)	$	4,545		$	5,263		$	14,015		$	5,114		$	3,269
Selected supplemental cash flow information:
Amortization of above and below market lease intangibles, net	$	3,097		$	(310	)	$	—		$	3,137		$	339		$	—
Amortization of debt issuance costs, net	706			758			32			685			758			32
Straight-line rents	(9,539		)	(1,726		)	358			(13,221		)	(2,172		)	(71		)
Leasing costs and tenant and capital improvements	(1,894		)	(7,296		)	(2,081		)	(1,957		)	(5,943		)	(749		)

(1)

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

(2)

Net loss for the year ended December 31, 2010, includes an impairment of $54.5 million related to straight-line rent assets of HCP Ventures II (the “Ventures”). Concurrently, during the year ended December 31, 2010 HCP recognized a $71.7 million impairment of its investment in the Ventures that was primarily attributable to a reduction in the estimated fair value of the Ventures’ real estate assets and includes the impact of the Ventures’ impairment (HCP’s pro rata share of $19.1 million) of its straight-line rent assets. Therefore, HCP’s share in FFO for the year ended December 31, 2010 did not include the impact of the Ventures’ impairment of its straight-line rent assets.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

23

Investment Management Platform

In thousands

Net Operating Income(1)
	Three Months Ended December 31, 2010								Three Months Ended December 31, 2009
	Senior Housing			Medical Office			Life Science		Senior Housing			Medical Office			Life Science
Net income (loss)	$	(1,800	)	$	(2,545	)	$	1,661	$	3,370		$	(3,931	)	$	983
Depreciation and amortization	6,815			7,130			734		6,946			9,463			546
General and administrative	578			921			82		923			1,024			23
Other income, net	—			(2		)	—		—			(31		)	—
Interest expense	9,597			6,837			186		9,720			6,990			240
NOI	$	15,190		$	12,341		$	2,663	$	20,959		$	13,515		$	1,792
Straight-line rents	—			(172		)	116		(5,672		)	(407		)	(8		)
Amortization of above (below) market lease intangibles, net	774			(137		)	—		728			57			—
Adjusted NOI	$	15,964		$	12,032		$	2,779	$	16,015		$	13,165		$	1,784
HCP’s pro rata share of NOI	$	5,317		$	2,757		$	1,549	$	7,336		$	3,011		$	1,007
HCP’s pro rata share of adjusted NOI	$	5,587		$	2,682		$	1,608	$	5,605		$	2,916		$	1,002

	Year Ended December 31, 2010								Year Ended December 31, 2009
	Senior Housing			Medical Office			Life Science		Senior Housing			Medical Office			Life Science
Net income (loss)	$	(51,038	)	$	(10,700	)	$	6,489	$	12,006		$	(15,261	)	$	2,039
Depreciation and amortization	27,575			30,902			2,573		28,038			38,034			3,787
General and administrative	3,908			3,812			128		4,682			4,288			139
Impairment of straight-line rent assets(2)	54,500			—			—		—			—			—
Other income, net	(1		)	(12		)	—		(1		)	(211		)	—
Interest expense	38,234			27,371			827		38,778			27,734			1,032
NOI	$	73,178		$	51,373		$	10,017	$	83,503		$	54,584		$	6,997
Straight-line rents	(9,539		)	(1,726		)	358		(13,221		)	(2,172		)	(71		)
Amortization of above (below) market lease intangibles, net	3,097			(310		)	—		3,137			339			—
Lease termination fees	—			(429		)	—		—			—			—
Adjusted NOI	$	66,736		$	48,908		$	10,375	$	73,419		$	52,751		$	6,926
HCP’s pro rata share of NOI	$	25,612		$	11,429		$	5,811	$	29,226		$	12,133		$	3,944
HCP’s pro rata share of adjusted NOI	$	23,358		$	10,868		$	5,993	$	25,697		$	11,681		$	3,904

(1)

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

(2)

Net loss for the year ended December 31, 2010, includes an impairment of $54.5 million related to straight-line rent assets of HCP Ventures II (the “Ventures”). Concurrently, during the year ended December 31, 2010 HCP recognized a $71.7 million impairment of its investment in the Ventures that was primarily attributable to a reduction in the estimated fair value of the Ventures’ real estate assets and includes the impact of the Ventures’ impairment (HCP’s pro rata share of $19.1 million) of its straight-line rent assets. Therefore, HCP’s share in FFO for the year ended December 31, 2010 did not include the impact of the Ventures’ impairment of its straight-line rent assets.

See Reporting Definitions and Reconciliations of Non-GAAP Measures

24

Investment Management Platform

As of and for the year ended December 31, 2010, dollars and square feet in thousands

	Property					Average			EBITDAR			EBITDARM
HCP Ventures II(1)	Count	Investment		NOI		Age (Years)	Units	Occupancy%(2)(3)	Amount		CFC	Amount		CFC
Assisted living	4	$	57,799	$	3,664	21	399	93.1	$	3,834	0.98 x	$	4,527	1.15 x
Independent living	17	904,880		60,103		20	4,673	91.3	52,453		0.81 x	59,031		0.91 x
CCRCs	4	138,591		9,411		17	549	94.9	9,211		0.91 x	10,609		1.05 x
	25	$	1,101,270	$	73,178	20	5,621	91.8	$	65,498	0.83 x	$	74,167	0.94 x
	Property					Average	Square
HCP Ventures III	Count	Investment		NOI		Age (Years)	Feet	Occupancy%(2)
Medical office:
On-Campus	9	$	109,277	$	9,255	10	619	97.8
Off-Campus	4	32,937		2,296		10	183	87.4
	13	$	142,214	$	11,551	10	802	95.4
	Property					Average	Square
HCP Ventures IV	Count(4)	Investment		NOI		Age (Years)	Feet	Occupancy%(2)(5)
Medical office:
On-Campus	22	$	209,850	$	12,402	22	1,103	75.6
Off-Campus	31	353,473		20,671		19	1,478	84.9
Hospital:
LTACH	1	12,193		284		4	N/A	N/A
Rehab	1	13,965		1,564		5	N/A	N/A
Specialty	2	55,224		4,901		6	N/A	N/A
	57	$	644,705	$	39,822	19
	Property					Average	Square
HCP Life Science	Count	Investment		NOI		Age (Years)	Feet	Occupancy%(2)
San Francisco	2	$	74,519	$	4,441	13	147	100.0
San Diego	2	68,859		5,576		14	131	96.8
	4	$	143,378	$	10,017	13	278	98.5
Total	99	$	2,031,567	$	134,568

(1)All facilities are operated by Horizon Bay Senior Communities.

(2)For MOBs and life science facilities, occupancy are presented as of the end of the period reported. For senior housing facilities, occupancy represents the facilities’ average operating occupancy for the trailing twelve months and are one quarter in arrears from the period reported.

(3)At December 31, 2010, the average three-month occupancy for senior housing facilities was 91.6%. These occupancy percentages are one quarter in arrears from the period presented.

(4)During 2010, one MOB was placed into redevelopment; its statistics are not included in the medical office information.

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

See Reporting Definitions and Reconciliations of Non-GAAP Measures

25

Reporting Definitions and Reconciliations of Non-GAAP Measures

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

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

In thousands
	Three Months Ended December 31,				Year Ended December 31,
	2010		2009		2010		2009
Adjusted EBITDA	$	283,495	$	247,674	$	1,024,530	$	948,820
Interest expense:
Continuing operations	68,354		72,840		288,650		298,869
Discontinued operations	—		5		7		29
HCP’s share of interest expense from the Investment Management Platform	4,978		5,085		19,907		20,286
Capitalized interest	6,150		6,923		21,664		25,917
Preferred stock dividends	5,282		5,282		21,130		21,130
Fixed charges	$	84,764	$	90,135	$	351,358	$	366,231
Adjusted fixed charge coverage	3.3 x		2.7 x		2.9 x		2.6 x

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

26

Reporting Definitions and Reconciliations of Non-GAAP Measures

Debt Service Coverage (“DSC”).  Facility EBITDA(R) or Facility EBITDA(R)M for the most recent twelve months of available data divided by Annualized Debt Service. Debt Service Coverage is a supplemental measure of the property’s ability to generate sufficient cash flows for the operator/tenant (not the Company) to meet the operator’s/tenant’s related obligations to the Company under loan agreements.  However, its usefulness is limited by the same factors that limit the usefulness of Facility EBITDA(R) or Facility EBITDA(R)M.  The coverages shown exclude newly completed facilities under start-up, vacant facilities and facilities for which data is not available or meaningful.

Development.  Includes ground-up construction and redevelopments.

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

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

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

The following table reconciles Adjusted EBITDA from net income:

In thousands
	Three Months Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Net income	$	145,526		$	35,484		$	344,395		$	146,151
Interest expense:
Continuing operations	68,354			72,840			288,650			298,869
Discontinued operations	—			5			7			29
Income taxes:
Continuing operations	(1,397		)	515			412			1,910
Discontinued operations	7			3			36			171
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	78,005			76,475			311,952			316,722
Discontinued operations	52			1,066			1,495			3,403
Equity income from unconsolidated joint ventures	(692		)	(1,518		)	(4,770		)	(3,511		)
HCP’s share of EBITDA from the Investment Management Platform	9,172			10,799			40,578			42,685
Other joint venture adjustments	341			484			1,907			2,225
EBITDA	$	299,368		$	196,153		$	984,662		$	808,654
Impairments, net of recoveries	—			54,485			59,793			75,514
Litigation provision	—			—			—			101,973
Gain on sales of real estate	(15,873		)	(2,964		)	(19,925		)	(37,321		)
Adjusted EBITDA	$	283,495		$	247,674		$	1,024,530		$	948,820

27

Reporting Definitions and Reconciliations of Non-GAAP Measures

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

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

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

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

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

The following table reconciles FFO as adjusted to FAD as of December 31, 2010 (in thousands):

	Three Months Ended			Year Ended
FFO as adjusted applicable to common shares	$	206,950		$	683,533
Amortization of above and below market lease intangibles, net	(1,041		)	(6,378		)
Stock-based compensation	3,618			14,924
Amortization of debt premiums, discounts and issuance costs, net	2,618			9,856
Straight-line rents	(14,374		)	(47,243		)
Interest accretion – DFLs	(2,300		)	(10,641		)
Deferred revenues – tenant improvement related	(929		)	(3,714		)
Deferred revenues – additional rents (SAB 104)	(810		)	(270		)
Leasing costs and tenant and capital improvements (2)	(20,853		)	(54,237		)
HCP’s share of unconsolidated joint ventures and other FAD adjustments	(1,587		)	(7,378		)
FAD applicable to common shares	$	171,292		$	578,452
Distributions on convertible units	1,714			6,676
Diluted FAD applicable to common shares	$	173,006		$	585,128
Diluted FAD per common share	$	0.53		$	1.89
Weighted average shares used to calculate diluted FAD per common share	323,644			308,953

28

Reporting Definitions and Reconciliations of Non-GAAP Measures

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

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

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

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

HCP Ventures II.  An unconsolidated joint venture formed on January 5, 2007 between the Company and an institutional capital partner, for which the Company is the managing member and has a 35% interest. On January 14, 2011, the Company acquired its partner’s 65% interest, becoming the sole owner of the portfolio. For additional details, see the footnote 1 on page 22 in this report.

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

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

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

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

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

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

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

29

Reporting Definitions and Reconciliations of Non-GAAP Measures

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

The following table reconciles NOI from net income:

In thousands	Three Months Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Net income	$	145,526		$	35,484		$	344,395		$	146,151
Interest income	(52,159		)	(36,354		)	(160,163		)	(124,146		)
Investment management fee income	(911		)	(1,179		)	(4,666		)	(5,312		)
Depreciation and amortization	78,005			76,475			311,952			316,722
Interest expense	68,354			72,840			288,650			298,869
General and administrative	18,008			16,852			83,048			78,471
Litigation provision	—			—			—			101,973
Impairments (recoveries)	—			54,485			(11,900		)	75,389
Other income, net	(8,667		)	(2,661		)	(15,819		)	(7,768		)
Income taxes	(1,397		)	515			412			1,910
Equity income from unconsolidated joint ventures	(692		)	(1,518		)	(4,770		)	(3,511		)
Impairments of investments in unconsolidated joint ventures	—			—			71,693			—
Total discontinued operations, net of taxes	(16,096		)	(4,041		)	(22,803		)	(45,008		)
NOI	$	229,971		$	210,898		$	880,029		$	833,740
Straight-line rents	(14,374		)	(7,937		)	(47,243		)	(46,688		)
Interest accretion – DFLs	(2,300		)	(2,074		)	(10,641		)	(8,057		)
Amortization of above and below market lease intangibles, net	(1,041		)	(2,123		)	(6,378		)	(14,780		)
Lease termination fees	(2,500		)	(3,079		)	(7,665		)	(4,905		)
NOI adjustments related to discontinued operations	—			4			27			393
Adjusted NOI	$	209,756		$	195,689		$	808,129		$	759,703

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

Owned Portfolio.  Represents owned properties subject to operating leases and DFLs and debt investments, and excludes properties under development, including redevelopment, and land held for development.

Pooled Leases.  Two or more leases to the same operator/tenant or their subsidiaries under which their obligations are combined by virtue of a master lease, or multiple master leases, a pooling agreement, or multiple pooling agreements, or cross-guaranties. Sunrise Senior Living percentage pooled consists of 48 assets under 6 separate pools.

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

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

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

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

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

30

Reporting Definitions and Reconciliations of Non-GAAP Measures

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

Senior Housing.  ALFs, ILFs and CCRCs.  For reporting purposes, the Company’s senior housing portfolio also includes a school formerly operated as an assisted living facility.

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

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

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

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

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

The following table details the calculation of Total Gross Assets:

In thousands

	December 31, 2010			December 31, 2009
Consolidated total assets	$	13,331,923		$	12,209,735
Investments in and advances to unconsolidated joint ventures	(195,847		)	(267,978		)
Accumulated depreciation and amortization	1,446,134			1,237,907
Accumulated depreciation and amortization from assets held for sale	—			25,629
Consolidated gross assets	$	14,582,210		$	13,205,293
HCP’s share of unconsolidated total assets(1)	515,102			545,539
HCP’s share of unconsolidated accumulated depreciation and amortization(1)	71,977			57,889
Total gross assets	$	15,169,289		$	13,808,721

Total Market Capitalization.  Total Debt plus Consolidated Market Equity.

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

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

(1)Reflects the Company’s pro rata share of amounts from the Investment Management Platform.

31