Investments in and Advances to Unconsolidated Joint Ventures (Tables)

6 Months Ended

Jun. 30, 2012

Investments in and Advances to Unconsolidated Joint Ventures

HCP Ventures II purchase consideration

Cash paid for HCP Ventures II’s partnership interest	$	135,550
Fair value of HCP’s 35% interest in HCP Ventures II (carrying value of $65,223 at closing)(1)	72,992
Total consideration	$	208,542
Estimated fees and costs
Legal, accounting and other fees and costs(2)	$	150
Debt assumption fees(3)	500
Total	$	650

(1)In January 2011, the Company recognized a gain of approximately $8 million, included in other income, net, which represents the fair value of the Company’s 35% interest in HCP Ventures II in excess of its carrying value on the acquisition date.

(2)Represents estimated fees and costs that were expensed and included in general and administrative expenses. These charges are directly attributable to the transaction and represent non-recurring costs.

(3)Represents debt assumption fees that were capitalized as deferred financing costs.

Summary of fair values of the HCP Ventures II assets acquired and liabilities assumed

Assets acquired
Buildings and improvements	$	683,633
Land	79,580
Cash	2,585
Restricted cash	1,861
Intangible assets	78,293
Total assets acquired	$	845,952
Liabilities assumed
Mortgage debt	$	635,182
Other liabilities	2,228
Total liabilities assumed	637,410
Net assets acquired	$	208,542

Company owned interests in entities, accounted under equity method:

Entity(1)	Properties/Segment	Investment(2)			Ownership%
HCR ManorCare	post-acute/skilled nursing operations	$	96,370		9.4(3)
HCP Ventures III, LLC	13 medical office	8,012			30
HCP Ventures IV, LLC	54 medical office and 4 hospital	33,964			20
HCP Life Science(4)	4 life science	66,883			50-63
Horizon Bay Hyde Park, LLC	1 senior housing	6,964			72
Suburban Properties, LLC	1 medical office	7,485			67
Advances to unconsolidated joint ventures, net		199
		$	219,877
Edgewood Assisted Living Center, LLC	1 senior housing	$	(406	)	45
Seminole Shores Living Center, LLC	1 senior housing	(649		)	50
		$	(1,055	)

(1)	These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures. See Note 2 to the Consolidated Financial Statements for the year ended December 31, 2011 in the Company’s Annual Report on Form 10-K filed with the SEC regarding the Company’s policy on consolidation.
(2)	Represents the carrying value of the Company’s investment in the unconsolidated joint venture. See Note 2 to the Consolidated Financial Statements for the year ended December 31, 2011 in the Company’s Annual Report on Form 10-K filed with the SEC regarding the Company’s policy for accounting for joint venture interests.
(3)	Presented after adjusting the Company’s 9.9% ownership rate for the dilution of certain of HCR ManorCare’s employee equity awards. See HCR ManorCare Acquisition discussion in Note 3.
(4)	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%).

Summarized combined financial information for unconsolidated joint ventures:

	June 30,		December 31,
	2012		2011
Real estate, net	$	3,769,676	$	3,806,187
Goodwill	2,736,400		2,736,400
Other assets, net	3,029,772		3,061,290
Total assets	$	9,535,848	$	9,603,877
Capital lease obligations and other debt	$	6,037,500	$	5,976,500
Mortgage debt	890,488		895,243
Accounts payable	946,177		1,083,581
Other partners’ capital	1,476,857		1,465,536
HCP’s capital(1)	184,826		183,017
Total liabilities and partners’ capital	$	9,535,848	$	9,603,877

(1)The combined basis difference of the Company’s investments in these joint ventures of $34 million, as of June 30, 2012, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

	Three Months Ended June 30,(1)					Six Months Ended June 30,(1)
	2012		2011(2)			2012		2011(2)
Total revenues	$	1,093,873	$	1,032,420		$	2,138,519	$	1,059,309
Net income (loss)	16,124		(26,439		)	17,267		(26,062		)
HCP’s share in earnings(3)	15,732		14,950			29,407		15,748
Fees earned by HCP	470		504			963		1,111
Distributions received by HCP	1,278		2,158			3,407		3,127

(1)Beginning April 7, 2011, includes the financial information of HCR ManorCare, in which the Company acquired an interest for $95 million that represented a 9.9% equity interest at closing.

(2)Includes the financial information of HCP Ventures II, which was consolidated on January 14, 2011.

(3)The Company’s joint venture interest in HCR ManorCare is accounted for using the equity method and results in an ongoing reduction of DFL income, proportional to HCP’s ownership in HCR ManorCare. The Company recorded a reduction of $14.8 million and $29.5 million for the three and six months ended June 30, 2012, respectively, and a reduction of $13.3 million for both the three and six months ended June 30, 2011. Further, the Company’s share of earnings from HCR ManorCare (equity income) increases for the corresponding reduction of related lease expense recognized at the HCR ManorCare level.