10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2012.

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to

Commission file number 001-08895

HCP, INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).  YES x  NO o

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

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

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

As of October 25, 2012, there were 452,066,005 shares of the registrant’s $1.00 par value common stock outstanding.

HCP, INC.

INDEX

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
	PART II. OTHER INFORMATION
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		51

2

HCP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	September 30,			December 31,
	2012			2011
ASSETS
Real estate:
Buildings and improvements	$	9,069,420		$	8,822,653
Development costs and construction in progress	229,543			190,590
Land	1,724,563			1,723,601
Accumulated depreciation and amortization	(1,662,116		)	(1,452,688		)
Net real estate	9,361,410			9,284,156
Net investment in direct financing leases	6,843,249			6,727,777
Loans receivable, net	240,929			110,253
Investments in and advances to unconsolidated joint ventures	217,092			224,052
Accounts receivable, net of allowance of $1,498 and $1,341, respectively	31,763			26,681
Cash and cash equivalents	96,476			33,506
Restricted cash	43,428			41,553
Intangible assets, net	382,321			372,390
Assets held for sale, net	91,226			102,649
Other assets, net	771,442			485,458
Total assets	$	18,079,336		$	17,408,475
LIABILITIES AND EQUITY
Bank line of credit	$	—		$	454,000
Term loan	221,214			—
Senior unsecured notes	5,913,690			5,416,063
Mortgage debt	1,684,514			1,715,039
Liabilities related to assets held for sale, net	5,649			55,897
Other debt	84,580			87,985
Intangible liabilities, net	105,191			117,777
Accounts payable and accrued liabilities	270,843			275,478
Deferred revenue	65,802			65,614
Total liabilities	8,351,483			8,187,853
Commitments and contingencies
Preferred stock, $1.00 par value: aggregate liquidation preference of $295.5 million as of December 31, 2011	—			285,173
Common stock, $1.00 par value: 750,000,000 shares authorized; 429,980,165 and 408,629,444 shares issued and outstanding, respectively	429,980			408,629
Additional paid-in capital	10,185,982			9,383,536
Cumulative dividends in excess of earnings	(1,081,317		)	(1,024,274		)
Accumulated other comprehensive loss	(16,646		)	(19,582		)
Total stockholders’ equity	9,517,999			9,033,482
Joint venture partners	14,884			16,971
Non-managing member unitholders	194,970			170,169
Total noncontrolling interests	209,854			187,140
Total equity	9,727,853			9,220,622
Total liabilities and equity	$	18,079,336		$	17,408,475

See accompanying Notes to Condensed Consolidated Financial Statements.

3

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues:
Rental and related revenues	$	249,409		$	250,809		$	736,645		$	758,322
Tenant recoveries	23,425			23,879			69,656			69,764
Resident fees and services	36,076			11,974			107,824			15,314
Income from direct financing leases	155,834			153,496			465,345			310,553
Interest income	10,278			577			12,313			99,199
Investment management fee income	460			494			1,423			1,605
Total revenues	475,482			441,229			1,393,206			1,254,757
Costs and expenses:
Interest expense	103,513			103,459			309,875			315,695
Depreciation and amortization	88,686			86,672			259,039			265,742
Operating	72,667			57,662			210,083			151,103
General and administrative	19,443			19,647			54,356			76,471
Impairments	7,878			15,400			7,878			15,400
Total costs and expenses	292,187			282,840			841,231			824,411
Other income (expense), net	770			(772		)	2,233			17,056
Income before income taxes and equity income from unconsolidated joint ventures	184,065			157,617			554,208			447,402
Income taxes	598			(5		)	1,131			(289		)
Equity income from unconsolidated joint ventures	13,396			17,050			42,803			32,798
Income from continuing operations	198,059			174,662			598,142			479,911
Discontinued operations:
Income (loss) before gain on sales of real estate, net of income taxes	984			809			(416		)	3,796
Gain on sales of real estate, net of income taxes	—			—			2,856			—
Total discontinued operations	984			809			2,440			3,796
Net income	199,043			175,471			600,582			483,707
Noncontrolling interests’ share in earnings	(2,935		)	(3,276		)	(9,070		)	(12,660		)
Net income attributable to HCP, Inc.	196,108			172,195			591,512			471,047
Preferred stock dividends	—			(5,282		)	(17,006		)	(15,848		)
Participating securities’ share in earnings	(479		)	(546		)	(2,154		)	(1,893		)
Net income applicable to common shares	$	195,629		$	166,367		$	572,352		$	453,306
Basic earnings per common share:
Continuing operations	$	0.45		$	0.41		$	1.36		$	1.14
Discontinued operations	0.01			—			—			0.01
Net income applicable to common shares	$	0.46		$	0.41		$	1.36		$	1.15
Diluted earnings per common share:
Continuing operations	$	0.45		$	0.41		$	1.36		$	1.13
Discontinued operations	—			—			—			0.01
Net income applicable to common shares	$	0.45		$	0.41		$	1.36		$	1.14
Weighted average shares used to calculate earnings per common share:
Basic	429,557			407,081			420,049			395,258
Diluted	430,778			408,646			421,404			397,013
Dividends declared per common share	$	0.50		$	0.48		$	1.50		$	1.44

See accompanying Notes to Condensed Consolidated Financial Statements.

4

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income	$	199,043		$	175,471		$	600,582		$	483,707
Other comprehensive income (loss):
Unrealized gains (losses) on securities	5,374			(11,483		)	5,716			(10,152		)
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized losses	(2,734		)	(3,051		)	(3,513		)	(4,092		)
Reclassification adjustment realized in net income	129			96			308			(1,122		)
Change in Supplemental Executive Retirement Plan obligation	46			34			136			100
Foreign currency translation adjustment	243			(246		)	289			20
Total other comprehensive income (loss)	3,058			(14,650		)	2,936			(15,246		)
Total comprehensive income	202,101			160,821			603,518			468,461
Total comprehensive income attributable to noncontrolling interests	(2,935		)	(3,276		)	(9,070		)	(12,660		)
Total comprehensive income attributable to HCP, Inc.	$	199,166		$	157,545		$	594,448		$	455,801

See accompanying Notes to Condensed Consolidated Financial Statements.

5

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)

														Cumulative			Accumulated
											Additional			Dividends			Other			Total			Total
	Preferred Stock					Common Stock					Paid-In			In Excess			Comprehensive			Stockholders’			Noncontrolling			Total
	Shares		Amount			Shares		Amount			Capital			Of Earnings			Income (Loss)			Equity			Interests			Equity
January 1, 2012	11,820		$	285,173		408,629		$	408,629		$	9,383,536		$	(1,024,274	)	$	(19,582	)	$	9,033,482		$	187,140		$	9,220,622
Net income	—		—			—		—			—			591,512			—			591,512			9,070			600,582
Other comprehensive income	—		—			—		—			—			—			2,936			2,936			—			2,936
Preferred stock redemption	(11,820	)	(285,173		)	—		—			—			(10,327		)	—			(295,500		)	—			(295,500		)
Issuance of common stock, net	—		—			19,096		19,096			744,412			—			—			763,508			(2,438		)	761,070
Repurchase of common stock	—		—			(196	)	(196		)	(7,971		)	—			—			(8,167		)	—			(8,167		)
Exercise of stock options	—		—			2,451		2,451			49,058			—			—			51,509			—			51,509
Amortization of deferred compensation	—		—			—		—			16,947			—			—			16,947			—			16,947
Preferred dividends	—		—			—		—			—			(6,679		)	—			(6,679		)	—			(6,679		)
Common dividends ($1.50 per share)	—		—			—		—			—			(631,549		)	—			(631,549		)	—			(631,549		)
Distributions to noncontrolling interests	—		—			—		—			—			—			—			—			(11,759		)	(11,759		)
Noncontrolling interests in acquisitions	—		—			—		—			—			—			—			—			27,432			27,432
Issuance of noncontrolling interests	—		—			—		—			—			—			—			—			826			826
Purchase of noncontrolling interests	—		—			—		—			—			—			—			—			(417		)	(417		)
September 30, 2012	—		$	—		429,980		$	429,980		$	10,185,982		$	(1,081,317	)	$	(16,646	)	$	9,517,999		$	209,854		$	9,727,853

												Cumulative			Accumulated
									Additional			Dividends			Other			Total			Total
	Preferred Stock			Common Stock					Paid-In			In Excess			Comprehensive			Stockholders’			Noncontrolling			Total
	Shares	Amount		Shares		Amount			Capital			Of Earnings			Income (Loss)			Equity			Interests			Equity
January 1, 2011	11,820	$	285,173	370,925		$	370,925		$	8,089,982		$	(775,476	)	$	(13,237	)	$	7,957,367		$	188,680		$	8,146,047
Net income	—	—		—		—			—			471,047			—			471,047			12,660			483,707
Other comprehensive loss	—	—		—		—			—			—			(15,246		)	(15,246		)	—			(15,246		)
Issuance of common stock, net	—	—		36,256		36,256			1,254,609			—			—			1,290,865			(2,533		)	1,288,332
Repurchase of common stock	—	—		(135	)	(135		)	(4,805		)	—			—			(4,940		)	—			(4,940		)
Exercise of stock options	—	—		733		733			18,758			—			—			19,491			—			19,491
Amortization of deferred compensation	—	—		—		—			15,286			—			—			15,286			—			15,286
Preferred dividends	—	—		—		—			—			(15,848		)	—			(15,848		)	—			(15,848		)
Common dividends ($1.44 per share)	—	—		—		—			—			(570,200		)	—			(570,200		)	—			(570,200		)
Distributions to noncontrolling interests	—	—		—		—			—			—			—			—			(11,001		)	(11,001		)
Noncontrolling interests in acquisitions	—	—		—		—			—			—			—			—			1,500			1,500
Issuance of noncontrolling interests	—	—		—		—			—			—			—			—			14,028			14,028
Purchase of noncontrolling interests	—	—		—		—			(20,045		)	—			—			(20,045		)	(14,059		)	(34,104		)
September 30, 2011	11,820	$	285,173	407,779		$	407,779		$	9,353,785		$	(890,477	)	$	(28,483	)	$	9,127,777		$	189,275		$	9,317,052

See accompanying Notes to Condensed Consolidated Financial Statements.

6

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net income	$	600,582		$	483,707
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	259,039			265,742
Discontinued operations	7,300			4,286
Amortization of above and below market lease intangibles, net	(1,855		)	(3,271		)
Amortization of deferred compensation	16,947			15,286
Amortization of deferred financing costs, net	12,415			22,118
Straight-line rents	(33,608		)	(46,936		)
Loan and direct financing lease interest accretion	(71,923		)	(65,973		)
Deferred rental revenues	1,101			(1,284		)
Equity income from unconsolidated joint ventures	(42,803		)	(32,798		)
Distributions of earnings from unconsolidated joint ventures	2,775			2,462
Gain on sales of real estate	(2,856		)	—
Gain upon consolidation of joint venture	—			(7,769		)
Gain upon settlement of loans receivable	—			(22,812		)
Derivative (gains) losses, net	43			(1,226		)
Impairments	7,878			15,400
Changes in:
Accounts receivable, net	(5,082		)	3,206
Other assets	(7,303		)	28,631
Accounts payable and accrued liabilities	(21,697		)	(71,848		)
Net cash provided by operating activities	720,953			586,921
Cash flows from investing activities:
Cash used in the HCR ManorCare Acquisition, net of cash acquired	—			(4,026,556		)
Cash used in the HCP Ventures II purchase, net of cash acquired	—			(135,550		)
Other acquisitions of real estate	(172,380		)	(113,462		)
Development of real estate	(87,119		)	(57,167		)
Leasing costs and tenant and capital improvements	(42,817		)	(31,772		)
Proceeds from sales of real estate, net	7,238			—
Purchase of an interest in unconsolidated joint ventures	—			(95,000		)
Distributions in excess of earnings from unconsolidated joint ventures	2,051			1,936
Purchase of marketable securities	(214,859		)	(22,449		)
Principal repayments on loans receivable	4,660			303,867
Investments in loans receivable	(145,597		)	(363,337		)
Increase in restricted cash	(1,875		)	(11,532		)
Net cash used in investing activities	(650,698		)	(4,551,022		)
Cash flows from financing activities:
Net borrowings (repayments) under bank line of credit	(454,000		)	375,000
Borrowings under term loan	214,789			—
Repayments of mortgage debt	(109,569		)	(152,517		)
Issuance of senior unsecured notes	750,000			2,400,000
Repayment of senior unsecured notes	(250,000		)	(292,265		)
Deferred financing costs	(18,256		)	(43,716		)
Preferred stock redemption	(295,500		)	—
Net proceeds from the issuance of common stock and exercise of options	804,412			1,302,883
Dividends paid on common and preferred stock	(638,228		)	(586,048		)
Issuance of noncontrolling interests	826			14,028
Purchase of noncontrolling interests	—			(34,104		)
Distributions to noncontrolling interests	(11,759		)	(11,001		)
Net cash provided by (used in) financing activities	(7,285		)	2,972,260
Net increase (decrease) in cash and cash equivalents	62,970			(991,841		)
Cash and cash equivalents, beginning of period	33,506			1,036,701
Cash and cash equivalents, end of period	$	96,476		$	44,860

See accompanying Notes to Condensed Consolidated Financial Statements.

7

HCP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)Business

HCP, Inc., an S&P 500 company, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). The Company is a Maryland corporation and was organized to qualify as a self-administered real estate investment trust (“REIT”) in 1985. The Company is headquartered in Long Beach, California, with offices in Nashville, Tennessee and San Francisco, California. The Company acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. The Company’s portfolio is comprised of investments in the following five healthcare segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. The Company makes investments within the healthcare segments using the following five investment products: (i) properties under lease, (ii) debt investments, (iii) developments and redevelopments, (iv) investment management and (v) RIDEA, which represents investments in senior housing operations utilizing the structure permitted by the Housing and Economic Recovery Act of 2008.

(2)Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management’s estimates.

The condensed consolidated financial statements include the accounts of HCP, its wholly-owned subsidiaries and joint ventures or variable interest entities (“VIEs”) that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been included. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K, as amended, filed with the U.S. Securities and Exchange Commission (“SEC”).

Certain amounts in the Company’s condensed consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and the related operating results reclassified from continuing to discontinued operations on the condensed consolidated income statements (see Note 5). Facility-level revenues from 21 senior housing communities that are in a RIDEA structure are presented in resident fees and services on the condensed consolidated income statements; all facility-level resident fee and service revenue previously reported in rental and related revenues has been reclassified to resident fees and services (see Note 12 for additional information regarding the 21 RIDEA facilities).

Foreign Currency Translation and Transactions

Assets and liabilities denominated in foreign currencies that are translated into U.S. dollars use exchange rates in effect at the end of the period, and revenues and expenses denominated in foreign currencies that are translated into U.S. dollars use average rates of exchange in effect during the related period. Gains or losses resulting from translation are included in accumulated other comprehensive income, a component of stockholders’ equity on the condensed consolidated balance sheets. Gains or losses resulting from foreign currency transactions are translated into U.S. dollars at the rates of exchange prevailing at the dates of the transactions. The effects of transaction gains or losses are included in other income (expense), net in the condensed consolidated statements of income.

8

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2012-01, Continuing Care Retirement Communities—Refundable Advance Fees (“ASU 2012-01”). This update clarifies the situations in which recognition of deferred revenue for refundable advance fees is appropriate. ASU 2012-01 is effective for fiscal years beginning after December 15, 2012. The Company does not expect the adoption of ASU 2012-01 on January 1, 2013 to have a material impact on its consolidated financial position or results of operations.

In July 2012, the FASB issued Accounting Standards Update No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”). The amendments in this update provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. ASU 2012-02 is effective for fiscal years and interim periods beginning after September 15, 2012. The Company does not expect the adoption of ASU 2012-02 on January 1, 2013 to have an impact on its consolidated financial position or results of operations.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards. The amendments update the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of ASU 2011-04 on January 1, 2012 did not have an impact on the Company’s consolidated financial position or results of operations.

(3)HCR ManorCare Acquisition

On April 7, 2011, the Company completed its acquisition of substantially all of the real estate assets of HCR ManorCare, Inc. (“HCR ManorCare”), for a purchase price of $6 billion (“HCR ManorCare Acquisition”). The purchase price consisted of the following: (i) $4 billion in cash consideration; and (ii) $2 billion representing the fair value of the Company’s former HCR ManorCare debt investments that were settled as part of this acquisition. Through this transaction, the Company acquired 334 HCR ManorCare post-acute, skilled nursing and assisted living facilities. The facilities are located in 30 states, with the highest concentrations in Ohio, Pennsylvania, Florida, Illinois and Michigan. A wholly-owned subsidiary of HCR ManorCare operates the assets pursuant to a long-term triple-net master lease agreement supported by a guaranty from HCR ManorCare. Additionally, the Company exercised its option to purchase an ownership interest in HCR ManorCare for $95 million that represented a 9.9% equity interest at closing.

The total purchase price of the HCR ManorCare Acquisition follows (in thousands):

Payment of aggregate cash consideration, net of cash acquired	$	3,801,624
HCP’s loan investments in HCR ManorCare’s debt settled at fair value(1)	1,990,406
Assumed HCR ManorCare accrued liabilities at fair value(2)	224,932
Total purchase consideration	$	6,016,962
Legal, accounting and other fees and costs(3)	$	26,839

(1)At closing, the Company recognized a gain of approximately $23 million, included in interest income, which represented the fair value of the Company’s existing mezzanine and mortgage loan investments in HCR ManorCare in excess of its carrying value on the acquisition date.

(2)In August 2011, the Company paid these amounts to certain taxing authorities or the seller.

(3)Represents estimated fees and costs of $15.5 million (general and administrative) and the write-off of unamortized bridge loan fees of $11.3 million (interest expense) upon its termination that were expensed in 2010 and 2011, respectively. These charges are directly attributable to the transaction and represent non-recurring costs.

The following table summarizes the fair value of the HCR ManorCare assets acquired and liabilities assumed at the April 7, 2011 acquisition date (in thousands):

Assets acquired
Net investments in direct financing leases	$	6,002,074
Cash and cash equivalents	6,996
Intangible assets, net	14,888
Total assets acquired	6,023,958
Total liabilities assumed	224,932
Net assets acquired	$	5,799,026

9

In connection with the HCR ManorCare Acquisition, the Company entered into a credit agreement for a 365-day bridge loan facility (from funding to maturity) in an aggregate amount of up to $3.3 billion, which was terminated in accordance with its terms in March 2011.

The assets and liabilities of the Company’s investments related to HCR ManorCare and the related results of operations are included in the condensed consolidated financial statements from the April 7, 2011 acquisition date. From the acquisition date to September 30, 2011, the Company recognized revenues and earnings from its investments related to HCR ManorCare of $270.4 million and $301.5 million, respectively.

See Note 8 for additional information regarding the Company’s investment related to HCR ManorCare.

Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations assume that the HCR ManorCare Acquisition, including the Company’s equity interest in HCR ManorCare, was completed as of January 1, 2011 (in thousands, except per share amounts):

	Nine Months Ended September 30, 2011
Revenues	$	1,351,574
Net income	590,333
Net income applicable to HCP, Inc.	577,673
Basic earnings per common share	$	1.38
Diluted earnings per common share	1.38

(4)Other Real Estate Property Investments

A summary of real estate acquisitions for the nine months ended September 30, 2012 follows (in thousands):

	Consideration							Assets Acquired
Segment	Cash Paid		Debt and Other Liabilities Assumed		Noncontrolling Interest			Real Estate		Net Intangibles
Medical office	$	157,556	$	35,120	$	27,346	(1)	$	170,443	$	49,579
Life science	7,964		—		86			7,580		470
Senior housing	3,860		—		—			3,541		319
Hospital	3,000		—		—			3,000		—
	$	172,380	$	35,120	$	27,432		$	184,564	$	50,368

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

During the nine months ended September 30, 2012, the Company funded an aggregate of $126 million for construction, tenant and other capital improvement projects, primarily in its life science and medical office segments.

A summary of real estate acquisitions for the nine months ended September 30, 2011 follows (in thousands):

	Consideration						Assets Acquired
Segment	Cash Paid		Debt Assumed		Noncontrolling Interest		Real Estate		Net Intangibles
Life science	$	84,087	$	57,869	$	—	$	133,040	$	8,916
Medical office	29,743		—		1,500		26,191		5,052
	$	113,830	$	57,869	$	1,500	$	159,231	$	13,968

See discussion of the January 2011 purchase and consolidation of HCP Ventures II in Note 8.

During the nine months ended September 30, 2011, the Company funded an aggregate of $87 million for construction, tenant and other capital improvement projects, primarily in its life science and medical office segments. During the nine months ended September 30, 2011, two of the Company’s life science facilities located in South San Francisco were placed in service representing 88,000 square feet.

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(5)Dispositions of Real Estate and Discontinued Operations

During the nine months ended September 30, 2012, the Company sold a medical office building for $7 million.

At September 30, 2012, properties classified as held for sale included two senior housing facilities with an aggregate carrying value of $91.2 million. At September 30, 2011, properties classified as held for sale included five senior housing facilities and a medical office building, with a combined aggregate carrying value of $102.6 million.

The following table summarizes operating income from discontinued operations (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012			2011
Rental and related revenues	$	2,844	$	3,443	$	8,816		$	10,326
Depreciation and amortization expenses	1,453		1,884		7,300			4,286
Operating expenses	4		10		26			36
Other expense, net	403		740		1,906			2,208
Income (loss)	$	984	$	809	$	(416	)	$	3,796
Gain on sales of real estate, net of income taxes	$	—	$	—	$	2,856		$	—
Number of properties included in discontinued operations	2		6		3			6

(6)Net Investment in Direct Financing Leases

On April 7, 2011, the Company completed the acquisition of 334 HCR ManorCare properties subject to a single master lease that the Company classified as a direct financing lease (“DFL”). See discussion of the HCR ManorCare Acquisition in Note 3.

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

	September 30,			December 31,
	2012			2011
Minimum lease payments receivable(1)	$	25,350,888		$	25,744,161
Estimated residual values	4,010,514			4,010,514
Less unearned income	(22,518,153		)	(23,026,898		)
Net investment in direct financing leases	$	6,843,249		$	6,727,777
Properties subject to direct financing leases	361			361

(1)The minimum lease payments receivable are primarily attributable to HCR ManorCare ($24.2 billion and $24.5 billion at September 30, 2012 and December 31, 2011, respectively). The triple-net master lease with HCR ManorCare provides for annual rent of $489 million beginning April 1, 2012. The rent increases by 3.5% per year over the next four years and by 3% for the remaining portion of the initial lease term. The properties are grouped into four pools, and HCR ManorCare has 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. Including the extension options, which the Company determined to be bargain renewal options, the four leased pools had total initial available terms ranging from 23 to 35 years.

Certain of the non-HCR ManorCare leases contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms.

(7)Loans Receivable

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

	September 30, 2012									December 31, 2011
	Real Estate Secured			Other Secured			Total			Real Estate Secured			Other Secured			Total
Mezzanine	$	—		$	183,253		$	183,253		$	—		$	90,148		$	90,148
Other	74,413			—			74,413			35,643			—			35,643
Unamortized discounts, fees and costs	(255		)	(3,072		)	(3,327		)	(1,040		)	(1,088		)	(2,128		)
Allowance for loan losses	—			(13,410		)	(13,410		)	—			(13,410		)	(13,410		)
	$	74,158		$	166,771		$	240,929		$	34,603		$	75,650		$	110,253

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Tandem Health Care Loan

On July 31, 2012, the Company closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), an affiliate of Formation Capital, as part of the recapitalization of a post-acute/skilled nursing portfolio. The Company funded $100 million (the “First Tranche”) at closing and expects to fund an additional $105 million (the “Second Tranche”) between March 2013 and August 2013. The Second Tranche will be used to repay debt senior to the Company’s loan. The loan is subordinate to $400 million in senior mortgage debt and $137 million in senior mezzanine debt. The loan bears interest at a fixed rate of 12% and 14% per annum for the First and Second Tranche, respectively. The facility will have a total term of up to 63 months from the initial closing.

Delphis Operations, L.P. Loan

The Company holds a secured term loan made to Delphis Operations, L.P. (“Delphis” or the “Borrower”) that is collateralized by all of the assets of the Borrower, which collateral is comprised primarily of interests in partnerships operating surgical facilities, some of which are on the premises of properties owned by the Company or HCP Ventures IV, LLC, an unconsolidated joint venture of the Company. In December 2009, the Company determined that the loan was impaired and recognized a provision for loan loss (impairment) of $4.3 million. In January 2011, the Company placed the loan on cost-recovery status, whereby accrual of interest income was suspended and any payments received from the Borrower are applied to reduce the recorded investment in the loan. In September 2011, the Company determined that the fair value of the collateral assets was no longer in excess of the carrying value of the loan and therefore recognized an additional provision for losses of $15.4 million.

As part of a March 2012 agreement (the “2012 Agreement”) between Delphis, certain past and current principals of Delphis and the Cirrus Group, LLC (the “Guarantors”), and the Company, the Company agreed, among other things, to allow the distribution of $1.5 million to certain of the Guarantors from funds generated from sales of assets that were pledged as additional collateral for this loan. In consideration of this distribution, among other things, the Company received cash of $4.9 million (including funds that had been escrowed from past sales of the Guarantors’ collateral) and the assignment of certain rights to general and limited partnership interests (including the release of claims by such entities). Further, the Company, as part of the 2012 Agreement, agreed to provide financial incentives to the Borrower regarding the liquidation of the primary collateral assets for this loan.

The Company valued the cash payments and other consideration received through the 2012 Agreement (after reducing the consideration by $0.5 million for related legal expenses) at $6.9 million, which the Company applied to the carrying value of the loan, reducing the balance to $68.8 million as of September 30, 2012 from its balance of $75.7 million as of December 31, 2011. During the nine months ended September 30, 2011, the Company received cash payments from the Borrower of $2.1 million. At September 30, 2012, the Company believes that the fair value of the collateral supporting this loan is in excess of the loan’s carrying value.

Subsequent to September 30, 2012, Delphis closed on the sale of one of the primary collateral assets for the loan, and the Company received $9.7 million in sales proceeds, net of an incentive payment provided for in the 2012 Agreement, which net proceeds were applied to reduce the principal balance of the loan to $59.1 million as of October 2012.

HCR ManorCare Loans

In December 2007, the Company made a $900 million investment (at a discount of $100 million) in HCR ManorCare mezzanine loans, which paid interest at a floating rate of one-month London Interbank Offered Rate (“LIBOR”) plus 4.0%. Also, in August 2009 and January 2011, the Company purchased $720 million (at a discount of $130 million) and $360 million, respectively, in participations in HCR ManorCare first mortgage debt, which paid interest at LIBOR plus 1.25%.

On April 7, 2011, upon closing of the HCR ManorCare Acquisition, the Company’s loans to HCR ManorCare were settled, which resulted in additional interest income of $23 million, which represents the excess of the loans’ fair values above their carrying values at the acquisition date. See Note 3 for additional discussion related to the HCR ManorCare Acquisition.

Genesis HealthCare Loans

In September and October 2010, the Company purchased participations in a senior loan and mezzanine note of Genesis HealthCare (“Genesis”) with par values of $278 million (at a discount of $28 million) and $50 million (at a discount of $10 million), respectively. The Genesis senior loan paid interest at LIBOR (subject to a floor of 1.5%, increasing to 2.5% by maturity) plus a spread of 4.75%, increasing to 5.75% by maturity. The senior loan was secured by all of Genesis’ assets. The mezzanine note paid interest at LIBOR plus a spread of 7.50%. In addition to the coupon interest payments, the mezzanine note required the payment of a termination fee, of which the Company’s share prior to the early repayment of this loan was $2.3 million.

12

On April 1, 2011, the Company received $330.4 million from the early repayment of its loans to Genesis, and recognized additional interest income of $34.8 million, which represents the related unamortized discounts and termination fee.

(8)Investments in and Advances to Unconsolidated Joint Ventures

HCP Ventures II

On January 14, 2011, the Company acquired its partner’s 65% interest in HCP Ventures II, a joint venture that owned 25 senior housing facilities, becoming the sole owner of the portfolio.

The purchase consideration of HCP Ventures II follows (in thousands):

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 (expense), 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.

In accordance with the accounting guidance applicable to acquisitions of the partner’s ownership interests that result in consolidation of previously unconsolidated entities, the Company recorded all of the assets and liabilities of HCP Ventures II at fair value as of the acquisition date. The Company utilized relevant market data and valuation techniques to determine the acquisition date fair value for HCP Ventures II. Relevant market data and valuation techniques included, but were not limited to, market data comparables for capitalization and discount rates, credit spreads, property specific building cost information and cash flow assumptions. The market data comparables utilized in the Company’s valuation model were based on information that it believes to be within a reasonable range of the then current market transactions.

The following table summarizes the fair values of the HCP Ventures II assets acquired and liabilities assumed at the January 14, 2011 acquisition date (in thousands):

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

The related assets, liabilities and results of operations of HCP Ventures II are included in the condensed consolidated financial statements from the January 14, 2011 acquisition date.

13

Summary of Unconsolidated Joint Venture Information

The Company owns interests in the following entities that are accounted for under the equity method at September 30, 2012 (dollars in thousands):

Entity(1)	Properties/Segment	Investment(2)			Ownership%
HCR ManorCare	post-acute/skilled nursing operations	$	94,358		9.4(3)
HCP Ventures III, LLC	13 medical office	7,774			30
HCP Ventures IV, LLC	54 medical office and 4 hospital	33,071			20
HCP Life Science(4)	4 life science	67,263			50-63
Horizon Bay Hyde Park, LLC	1 senior housing	6,927			72
Suburban Properties, LLC	1 medical office	7,508			67
Advances to unconsolidated joint ventures, net		191
		$	217,092
Edgewood Assisted Living Center, LLC	1 senior housing	$	(449	)	45
Seminole Shores Living Center, LLC	1 senior housing	(737		)	50
		$	(1,186	)

(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, as amended, 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, as amended, 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 the Company’s unconsolidated joint ventures follows (in thousands):

	September 30,		December 31,
	2012		2011
Real estate, net	$	3,751,592	$	3,806,187
Goodwill	2,736,400		2,736,400
Other assets, net	3,019,757		3,061,290
Total assets	$	9,507,749	$	9,603,877
Capital lease obligations and other debt	$	6,014,200	$	5,976,500
Mortgage debt	887,956		895,243
Accounts payable	954,622		1,083,581
Other partners’ capital	1,467,292		1,465,536
HCP’s capital(1)	183,679		183,017
Total liabilities and partners’ capital	$	9,507,749	$	9,603,877

(1)The combined basis difference of the Company’s investments in these joint ventures of $32 million, as of September 30, 2012, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

	Three Months Ended September 30,					Nine Months Ended September 30,(1)
	2012			2011		2012		2011(2)
Total revenues	$	1,057,567		$	1,123,742	$	3,196,086	$	2,174,711
Net income (loss)	(8,851		)	31,076		8,416		9,198
HCP’s share in earnings(3)	13,396			17,050		42,803		32,798
Fees earned by HCP	460			494		1,423		1,605
Distributions received by HCP	1,419			1,271		4,826		4,398

(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 $14.9 million and $44.4 million for the three and nine months ended September 30, 2012, respectively, and a reduction of $14.4 million and $27.7 million for the three and nine months ended September 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.

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(9)Intangibles

At September 30, 2012 and December 31, 2011, intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles, were $607.6 million and $571.5 million, respectively. At September 30, 2012 and December 31, 2011, the accumulated amortization of intangible assets was $225.3 million and $199.1 million, respectively.

At September 30, 2012 and December 31, 2011, intangible lease liabilities, comprised of below market lease intangibles and above market ground lease intangible liabilities were $194.0 million and $208.2 million, respectively. At September 30, 2012 and December 31, 2011, the accumulated amortization of intangible liabilities was $88.8 million and $90.4 million, respectively.

(10) Other Assets

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

	September 30,		December 31,
	2012		2011
Straight-line rent assets, net of allowance of $32,940 and $34,457, respectively	$	299,754	$	266,620
Marketable debt securities(1)	221,018		—
Leasing costs, net	93,619		92,288
Deferred financing costs, net	40,782		35,649
Goodwill	50,346		50,346
Marketable equity securities	22,769		17,053
Other(2)	43,154		23,502
Total other assets	$	771,442	$	485,458

(1)Represents £136.8 million of Four Seasons senior unsecured notes translated into U.S. dollars as of September 30, 2012 (see below for additional information).

(2)Includes a $5.4 million allowance for losses related to accrued interest receivable on the Delphis loan, which accrued interest is included in other assets. At both September 30, 2012 and December 31, 2011, the carrying value of interest accrued related to the Delphis loan was zero. See Note 7 for additional information about the Delphis loan and the related impairment.

The marketable equity securities are classified as available-for-sale and had a fair value and adjusted cost basis of $22.8 million and $17.1 million, respectively, at September 30, 2012. At December 31, 2011, the fair value and adjusted cost basis of the marketable equity securities were both $17.1 million.

Four Seasons Health Care Senior Unsecured Notes

On June 28, 2012, the Company purchased senior unsecured notes with an aggregate par value of £138.5 million at a discount for £136.8 million ($214.9 million). The notes are issued by Elli Investments Limited, a subsidiary of Terra Firma, a European private equity firm, as part of its financing for the acquisition of Four Seasons Health Care, an elderly and specialist care provider in the United Kingdom. The notes mature in June 2020 and are non-callable through June 2016. The notes bear interest on their par value at a fixed rate of 12.25% per annum, with an original issue discount resulting in a yield to maturity of 12.5%. This investment is financed by a GBP denominated unsecured term loan that is discussed in Note 11. These senior unsecured notes are accounted for as marketable debt securities and classified as held-to-maturity.

(11) Debt

Bank Line of Credit and Term Loan

On March 27, 2012, the Company executed an amendment to its existing $1.5 billion unsecured revolving line of credit facility (the “Facility”). This amendment reduces the cost to the Company of the Facility (lower borrowing rate and facility fee) and extends the Facility’s maturity by one additional year to March 2016. The Facility contains a one-year extension option. Borrowings under this Facility accrue interest at LIBOR plus a margin that depends on the Company’s debt ratings. The Company pays a facility fee on the entire revolving commitment that depends upon its debt ratings. Based on the Company’s debt ratings at September 30, 2012, the margin on the Facility was 1.075%, and the facility fee was 0.175%. The Company has the right to increase the commitments under the Facility by an aggregate amount of up to $500 million, subject to customary conditions. At September 30, 2012, the Company had had no balance outstanding under this Facility.

15

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 million ($221 million at September 30, 2012) four-year unsecured term loan (the “Term Loan”) that accrues interest at a rate of GBP LIBOR plus 1.20%, based on the Company’s current debt ratings. Concurrent with the closing of the Term Loan, the Company entered into a four-year interest rate swap contract that fixes the interest rate of the Term Loan at 1.81%, subject to adjustments based on the Company’s debt ratings. The Term Loan contains a one-year committed extension option and covenants similar to those in the Facility.

The Facility and Term Loan contain certain financial restrictions and other customary requirements, including cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreements (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Secured Debt to Consolidated Total Asset Value to 30%, (iii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 60%, (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times and (v) require a formula-determined Minimum Consolidated Tangible Net Worth of $8.3 billion at September 30, 2012. At September 30, 2012, the Company was in compliance with each of these restrictions and requirements of the Facility and Term Loan.

Senior Unsecured Notes

At September 30, 2012, the Company had senior unsecured notes outstanding with an aggregate principal balance of $5.9 billion. At September 30, 2012, interest rates on the notes ranged from 1.29% to 7.07% with a weighted average effective interest rate of 5.40% and a weighted average maturity of 6.11 years. Discounts and premiums are amortized to interest expense over the term of the related senior unsecured notes. The senior unsecured notes contain certain covenants including limitations on debt, cross-acceleration provisions and other customary terms. The Company believes it was in compliance with these covenants at September 30, 2012.

On July 23, 2012, the Company issued $300 million of 3.15% senior unsecured notes due in 2022. The notes were priced at 98.888% of the principal amount with an effective yield to maturity of 3.28%; net proceeds from the offering were $294 million.

On June 25, 2012, the Company repaid $250 million of maturing senior unsecured notes, which accrued interest at a rate of 6.45%. The senior unsecured notes were repaid with proceeds from the Company’s June 2012 common stock offering.

On January 23, 2012, the Company issued $450 million of 3.75% senior unsecured notes due in 2019. The notes were priced at 99.523% of the principal amount with an effective yield to maturity of 3.83%; net proceeds from the offering were $444 million.

On September 15, 2011, the Company repaid $292 million of maturing senior unsecured notes, which accrued interest at a rate of 4.82%. The senior unsecured notes were repaid with funds available under the Facility.

On January 24, 2011, the Company 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 had an initial weighted average maturity of 10.3 years and a weighted average yield of 4.83%; net proceeds from the offering were $2.37 billion.

Mortgage Debt

At September 30, 2012, the Company had $1.7 billion in aggregate principal amount of mortgage debt outstanding that is secured by 137 healthcare facilities (including redevelopment properties) with a carrying value of $2.1 billion. At September 30, 2012, interest rates on the mortgage debt ranged from 1.54% to 8.69% with a weighted average effective interest rate of 6.14% and a weighted average maturity of 3.80 years.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into and terminate material leases. Some of the mortgage debt is also cross-collateralized by multiple assets and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

16

Other Debt

At September 30, 2012, the Company had $85 million of non-interest bearing life care bonds at two of its continuing care retirement communities and non-interest bearing occupancy fee deposits at two of its senior housing facilities, all of which were payable to certain residents of the facilities (collectively, “Life Care Bonds”). At September 30, 2012, $28 million of the Life Care Bonds were refundable to the residents upon the resident moving out or to their estate upon death, and $57 million of the Life Care Bonds were refundable after the unit is successfully remarketed to a new resident.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at September 30, 2012 (in thousands):

Year	Term Loan(1)		Senior Unsecured Notes			Mortgage Debt			Total(2)
2012 (Three months)	$	—	$	—		$	8,715		$	8,715
2013	—		550,000			320,207			870,207
2014	—		487,000			184,495			671,495
2015	—		400,000			304,761			704,761
2016	221,214		900,000			293,175			1,414,389
Thereafter	—		3,600,000			584,762			4,184,762
	221,214		5,937,000			1,696,115			7,854,329
(Discounts) and premiums, net	—		(23,310		)	(11,601		)	(34,911		)
	$	221,214	$	5,913,690		$	1,684,514		$	7,819,418

(1)Represents £137 million translated into U.S. dollars as of September 30, 2012.

(2)Excludes $85 million of other debt that represents the Life Care Bonds that have no scheduled maturities.

(12) Commitments and Contingencies

Legal Proceedings

From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Company’s business. The Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s business, prospects, financial condition or results of operations. The Company’s policy is to accrue legal expenses as they are incurred.

Concentration of Credit Risk

Concentrations of credit risks arise when a number of operators, tenants or obligors related to the Company’s investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors various segments of its portfolio to assess potential concentrations of risks. Management believes the current portfolio is reasonably diversified across healthcare related real estate and does not contain any other significant concentration of credit risks, except as disclosed herein. The Company does not have significant foreign operations.

The following table provides information regarding the Company’s concentration with respect to certain operators; the information provided is presented for the gross assets and revenues that are associated with certain operators as percentages of the respective segment’s and total Company’s gross assets and revenues:

Segment Concentrations:

	Percentage of Senior Housing Gross Assets				Percentage of Senior Housing Revenues				Percentage of Senior Housing Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	14	%	14	%	12	%	13	%	12	%	9	%
Brookdale Senior Living(2)	14		14		14		16		14		17
Emeritus Corporation	18		19		20		23		21		25
Sunrise Senior Living(3)	22		22		16		18		16		21

	Percentage of Post-Acute/ Skilled Nursing Gross Assets				Percentage of Post-Acute/ Skilled Nursing Revenues				Percentage of Post-Acute/ Skilled Nursing Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	89	%	94	%	87	%	93	%	91	%	80	%

17

Total Company Concentrations:

	Percentage of Total Company Gross Assets				Percentage of Total Company Revenues				Percentage of Total Company Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	34	%	35	%	30	%	32	%	31	%	22	%
Brookdale Senior Living(2)	4		5		5		5		5		5
Emeritus Corporation	6		6		7		7		7		7
Sunrise Senior Living(3)	7		7		5		6		5		6

(1)On April 7, 2011, the Company completed the acquisition of HCR ManorCare’s real estate assets, which included the settlement of the Company’s HCR ManorCare debt investments, see Notes 3 and 7 for additional information.

(2)As of September 30, 2012 and December 31, 2011, Brookdale Senior Living (“Brookdale”) percentages exclude $685.4 and $682.7 million, respectively, of senior housing assets related to 21 senior housing facilities that Brookdale operates (beginning September 1, 2011) on the Company’s behalf under a RIDEA structure. Assuming that these assets were attributable to Brookdale, the percentage of segment and total assets for Brookdale would be 25% and 8%, respectively, as of September 30, 2012. Assuming that these assets were attributable to Brookdale, the percentage of segment and total assets for Brookdale would be 26% and 9%, respectively, as of December 31, 2011. For the three and nine months ended September 30, 2012, Brookdale percentages exclude $36.1 million and $106.8 million, respectively, of senior housing revenues related to these facilities. Assuming that these revenues were attributable to Brookdale, the percentage of segment and total revenues for Brookdale would be 38% and 12% respectively, for both the three months and nine months ended September 30, 2012.

(3)Certain of the Company’s properties are leased to tenants who have entered into management contracts with Sunrise to operate the respective property on their behalf. The Company’s concentration of gross assets includes properties directly leased to Sunrise and properties that are managed by Sunrise on behalf of third party tenants.

On September 1, 2011, the Company completed a strategic venture with Brookdale that includes the operation of 37 HCP-owned senior living communities previously leased to or operated by Horizon Bay Retirement Living (“Horizon Bay”). As part of this transaction, Brookdale acquired Horizon Bay and: (i) assumed an existing triple-net lease for nine HCP communities; (ii) entered into a new triple-net lease related to four HCP communities; (iii) assumed Horizon Bay’s management of three HCP communities, one of which was developed by HCP; and (iv) entered into management contracts and a joint venture agreement for a 10% interest in the real estate and operations for 21 of the Company’s communities that are in a RIDEA structure. Concurrent with these transactions, the Company purchased $22.4 million of Brookdale’s common stock in June 2011 (see Note 10 for additional information regarding these marketable equity securities).

Under the provisions of RIDEA, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a taxable REIT subsidiary if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” The three months ended September 30, 2012 include $36.1 million and $24.1 million in revenues and operating expenses, respectively, and the nine months ended September 30, 2012 include $106.8 million and $67.5 million in revenues and operating expenses, respectively, as a result of reflecting the facility-level results for the 21 RIDEA facilities operated by Brookdale beginning September 1, 2011.

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

Credit Enhancement Guarantee

Certain of the Company’s senior housing facilities serve as collateral for $119 million of debt (maturing May 1, 2025) that is owed by a previous owner of the facilities. This indebtedness is guaranteed by the previous owner who has an investment grade credit rating. These senior housing facilities, which are classified as DFLs, had a carrying value of $374 million as of September 30, 2012.

18

(13) Equity

Preferred Stock

On April 23, 2012, the Company redeemed all of its outstanding preferred stock consisting of 4,000,000 shares of its 7.25% Series E preferred stock and the 7,820,000 shares of its 7.10% Series F preferred stock. The shares of Series E and Series F preferred stock were redeemed at a price of $25.00 per share, or $295.5 million in aggregate, plus all accrued and unpaid dividends to the redemption date. As a result of the redemption, which was announced on March 22, 2012, the Company incurred a charge of $10.4 million related to the original issuance costs of the preferred stock (this charge is presented as an additional preferred stock dividend in the Company’s consolidated income statements).

On January 26, 2012, the Company announced that its Board declared a quarterly cash dividend of $0.45313 per share on its Series E cumulative redeemable preferred stock and $0.44375 per share on its Series F cumulative redeemable preferred stock. These dividends were paid on March 30, 2012 to stockholders of record as of the close of business on March 15, 2012.

Common Stock

The following table lists the common stock cash dividends declared by the Company in 2012:

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
January 26	February 6	$	0.50	February 22
April 26	May 7	0.50		May 22
July 26	August 6	0.50		August 21
October 25	November 5	0.50		November 20

In June 2012, the Company completed a $376 million offering of 8.97 million shares of common stock at a price of $41.88 per share, which proceeds were primarily used to repay $250 million of maturing senior unsecured notes, which accrued interest at a rate of 6.45%.

In March 2012, the Company completed a $359 million offering of 9.0 million shares of common stock at a price of $39.93 per share, which proceeds were primarily used to redeem all outstanding shares of the Company’s preferred stock.

In March 2011, the Company completed a $1.273 billion public offering of 34.5 million shares of common stock at a price of $36.90 per share. The Company received total net proceeds of $1.235 billion, which proceeds were used to fund the HCR ManorCare Acquisition. See Note 3 for additional information on the HCR ManorCare Acquisition.

The following is a summary of the Company’s other common stock issuances (shares in thousands):

	Nine Months Ended September 30,
	2012	2011
Dividend Reinvestment and Stock Purchase Plan	675	1,533
Conversion of DownREIT units(1)	72	30
Exercise of stock options	2,451	733
Vesting of restricted stock units(2)	385	228

(1)Non-managing member LLC units.

(2)Issued under the Company’s 2006 Performance Incentive Plan.

Accumulated Other Comprehensive Loss

The following is a summary of the Company’s accumulated other comprehensive loss (in thousands):

	September 30,			December 31,
	2012			2011
Unrealized gains on available for sale securities	$	5,716		$	—
Unrealized losses on cash flow hedges, net	(18,917		)	(15,712		)
Supplemental Executive Retirement Plan minimum liability	(2,658		)	(2,794		)
Cumulative foreign currency translation adjustment	(787		)	(1,076		)
Total accumulated other comprehensive loss	$	(16,646	)	$	(19,582	)

19

Noncontrolling Interests

At September 30, 2012, there were 4.4 million DownREIT units outstanding in five LLCs, for which the Company is the managing member. At September 30, 2012, the carrying and fair values of these DownREIT units were $195 million and $285 million, respectively.

(14) Segment Disclosures

The Company evaluates its business and makes resource allocations based on its five business segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. Under the senior housing, post-acute/skilled nursing, life science and hospital segments, the Company invests or co-invests primarily in single operator or tenant properties, through the acquisition and development of real estate, management of operations and by debt issued by operators in these sectors. Under the medical office segment, the Company invests or co-invests through the acquisition and development of medical office buildings (“MOBs”) that are leased under gross, modified gross or triple-net leases, generally to multiple tenants, and which generally require a greater level of property management. The accounting policies of the segments are the same as those described in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2011 in the Company’s Annual Report on Form 10-K, as amended, filed with the SEC. There were no intersegment sales or transfers during the nine months ended September 30, 2012 and 2011. The Company evaluates performance based upon property net operating income from continuing operations (“NOI”), adjusted NOI and interest income of the combined investments in each segment.

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

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

For the three months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	114,856	$	36,076	$	876	$	—	$	151,808	$	126,060	$	113,592
Post-acute/skilled		135,508		—		9,135		—		144,643		135,354		116,898
Life science		71,194		—		—		1		71,195		59,403		56,341
Medical office		85,800		—		—		459		86,259		50,852		49,669
Hospital		21,310		—		267		—		21,577		20,408		19,950
Total	$	428,668	$	36,076	$	10,278	$	460	$	475,482	$	392,077	$	356,450

For the three months ended September 30, 2011:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	122,849	$	11,974	$	42	$	—	$	134,865	$	125,209	$	112,755
Post-acute/skilled	132,392		—		287		—		132,679		132,148		112,881
Life science	71,093		—		—		1		71,094		57,860		52,785
Medical office	80,996		—		—		493		81,489		47,650		46,514
Hospital	20,854		—		248		—		21,102		19,629		19,065
Total	$	428,184	$	11,974	$	577	$	494	$	441,229	$	382,496	$	344,000

20

For the nine months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	341,936	$	107,824	$	1,686	$	—	$	451,446	$	379,834	$	342,368
Post-acute/skilled	404,180		—		9,842		—		414,022		403,654		346,900
Life science	215,569		—		—		3		215,572		177,339		171,179
Medical office	246,661		—		—		1,420		248,081		148,030		144,272
Hospital	63,300		—		785		—		64,085		60,530		58,996
Total	$	1,271,646	$	107,824	$	12,313	$	1,423	$	1,393,206	$	1,169,387	$	1,063,715

For the nine months ended September 30, 2011:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	355,496	$	15,314	$	49	$	70	$	370,929	$	359,460	$	319,393
Post-acute/skilled	265,377		—		98,167		—		363,544		265,059		228,034
Life science	215,045		—		—		3		215,048		176,384		159,544
Medical office	240,603		—		—		1,532		242,135		143,243		138,469
Hospital	62,118		—		983		—		63,101		58,704		56,863
Total	$	1,138,639	$	15,314	$	99,199	$	1,605	$	1,254,757	$	1,002,850	$	902,303

(1)Represents rental and related revenues, tenant recoveries, and income from DFLs.

(2)NOI is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate. The Company defines NOI as rental and related revenues, including tenant recoveries, resident fees and services, and income from direct financing leases, less property level operating expenses. NOI excludes interest income, investment management fee income, interest expense, depreciation and amortization, general and administrative expenses, litigation settlement, impairments, impairment recoveries, other income (expense), net, income taxes, equity income from and impairments of investments in unconsolidated joint ventures, and discontinued operations. The Company believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL accretion, amortization of above and below market lease intangibles, and lease termination fees. Adjusted NOI is sometimes referred to as “cash NOI.” The Company uses NOI and adjusted NOI to make decisions about resource allocations and to assess and compare property level performance. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP because it does not reflect the aforementioned excluded items. Further, the Company’s definition of NOI may not be comparable to the definition used by other REITs, as those companies may use different methodologies for calculating NOI.

The following is a reconciliation from reported net income to NOI and adjusted NOI (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income	$	199,043		$	175,471		$	600,582		$	483,707
Interest income	(10,278		)	(577		)	(12,313		)	(99,199		)
Investment management fee income	(460		)	(494		)	(1,423		)	(1,605		)
Interest expense	103,513			103,459			309,875			315,695
Depreciation and amortization	88,686			86,672			259,039			265,742
General and administrative	19,443			19,647			54,356			76,471
Impairments	7,878			15,400			7,878			15,400
Other (income) expense, net	(770		)	772			(2,233		)	(17,056		)
Income taxes	(598		)	5			(1,131		)	289
Equity income from unconsolidated joint ventures	(13,396		)	(17,050		)	(42,803		)	(32,798		)
Total discontinued operations, net of income taxes	(984		)	(809		)	(2,440		)	(3,796		)
NOI	392,077			382,496			1,169,387			1,002,850
Straight-line rents	(11,821		)	(14,024		)	(33,608		)	(46,936		)
DFL accretion	(23,433		)	(23,571		)	(71,072		)	(48,508		)
Amortization of above and below market lease intangibles, net	(533		)	(1,178		)	(1,855		)	(3,271		)
Lease termination fees	(175		)	(239		)	(574		)	(3,417		)
NOI adjustments related to discontinued operations	335			516			1,437			1,585
Adjusted NOI	$	356,450		$	344,000		$	1,063,715		$	902,303

21

The Company’s total assets by segment were (in thousands):

	September 30,			December 31,
Segments	2012			2011
Senior housing	$	5,867,914		$	5,792,196
Post-acute/skilled nursing	6,057,501			5,644,472
Life science	3,928,661			3,886,851
Medical office	2,586,231			2,336,302
Hospital	760,222			757,618
Gross segment assets	19,200,529			18,417,439
Accumulated depreciation and amortization	(1,885,172		)	(1,649,845		)
Net segment assets	17,315,357			16,767,594
Real estate held for sale, net	91,226			102,649
Other non-segment assets	672,753			538,232
Total assets	$	18,079,336		$	17,408,475

On October 5, 2006, simultaneous with the closing of the Company’s merger with CNL Retirement Properties, Inc. (“CRP”), the Company also merged with CNL Retirement Corp. (“CRC”). CRP was a REIT that invested primarily in senior housing facilities and MOBs. Under the purchase method of accounting, the assets and liabilities of CRC were recorded at their estimated relative fair values, with $51.7 million paid in excess of the estimated fair value of CRC’s assets and liabilities recorded as goodwill. The CRC goodwill amount was allocated in proportion to the assets of the Company’s reporting units (property sectors) subsequent to the CRP acquisition.

At September 30, 2012, goodwill of $50 million was allocated to segment assets as follows: (i) senior housing—$31 million, (ii) post-acute/skilled nursing—$3 million, (iii) medical office—$11 million, and (iv) hospital—$5 million.

(15) Earnings Per Common Share

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Numerator
Income from continuing operations	$	198,059		$	174,662		$	598,142		$	479,911
Noncontrolling interests’ share in continuing operations	(2,935		)	(3,276		)	(9,070		)	(12,660		)
Income from continuing operations applicable to HCP, Inc.	195,124			171,386			589,072			467,251
Preferred stock dividends	—			(5,282		)	(17,006		)	(15,848		)
Participating securities’ share in continuing operations	(479		)	(546		)	(2,154		)	(1,893		)
Income from continuing operations applicable to common shares	194,645			165,558			569,912			449,510
Discontinued operations	984			809			2,440			3,796
Net income applicable to common shares	$	195,629		$	166,367		$	572,352		$	453,306
Denominator
Basic weighted average common shares	429,557			407,081			420,049			395,258
Dilutive potential common shares	1,221			1,565			1,355			1,755
Diluted weighted average common shares	430,778			408,646			421,404			397,013
Basic earnings per common share
Income from continuing operations	$	0.45		$	0.41		$	1.36		$	1.14
Discontinued operations	0.01			—			—			0.01
Net income applicable to common shares	$	0.46		$	0.41		$	1.36		$	1.15
Diluted earnings per common share
Income from continuing operations	$	0.45		$	0.41		$	1.36		$	1.13
Discontinued operations	—			—			—			0.01
Net income applicable to common shares	$	0.45		$	0.41		$	1.36		$	1.14

22

Restricted stock and certain of the Company’s performance restricted stock units are considered participating securities, because dividend payments are not forfeited even if the underlying award does not vest, which require the use of the two-class method when computing basic and diluted earnings per share.

Options to purchase approximately 0.5 million and 1.1 million shares of common stock that had an exercise price (including deferred compensation expense) in excess of the average market price of the Company’s common stock during the three months ended September 30, 2012 and 2011, respectively, were not included in the Company’s earnings per share calculations because they are anti-dilutive. Restricted stock and performance restricted stock units representing 15,000 shares of common stock during the three months ended September 30, 2011 were not included because they are anti-dilutive. Additionally, 6.4 million shares issuable upon conversion of 4.4 million DownREIT units during the three months ended September 30, 2012 were not included because they are anti-dilutive. During the three months ended September 30, 2011, 5.9 million shares issuable upon conversion of 4.2 million DownREIT units were not included because they are anti-dilutive.

(16) Supplemental Cash Flow Information

The following table provides supplemental cash flow information (in thousands):

	Nine Months Ended September 30,
	2012		2011
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	339,190	$	290,738
Income taxes paid	1,645		583
Capitalized interest	18,517		19,395
Supplemental schedule of non-cash investing activities:
Accrued construction costs	18,024		11,353
Settlement of loans receivable as consideration for the HCR ManorCare Acquisition	—		1,990,406
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units	385		228
Cancellation of restricted stock	6		(35		)
Conversion of non-managing member units into common stock	2,398		2,533
Mortgages included in the consolidation of HCP Ventures II	—		635,182
Noncontrolling interests issued in connection with acquisitions	27,432		1,500
Mortgages and other liabilities assumed with other real estate acquisitions	35,120		57,869
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	2,203		(14,244		)

See additional information regarding supplemental non-cash financing activities related to the HCR ManorCare transaction in Notes 3 and 7, the HCP Ventures II purchase in Note 8 and preferred stock redemption in Note 13.

(17)Variable Interest Entities

At September 30, 2012, the Company leased 48 properties to a total of seven VIE tenants and had an additional investment in a loan to a VIE borrower. The Company has determined that it is not the primary beneficiary of these VIEs. The carrying value and classification of the related assets, liabilities and maximum exposure to loss as a result of the Company’s involvement with these VIEs are presented below at September 30, 2012 (in thousands):

VIE Type	Maximum Loss Exposure(1)		Asset/Liability Type	Carrying Amount
VIE tenants—operating leases	$	308,905	Lease intangibles, net and straight-line rent receivables	$	15,122
VIE tenants—DFLs	1,132,359		Net investment in DFLs	597,792
Loan—senior secured	68,755		Loans receivable, net	68,755

(1)The Company’s maximum loss exposure related to the VIE tenants represents the future minimum lease payments over the remaining term of the respective leases, which may be mitigated by re-leasing the properties to new tenants. The Company’s maximum loss exposure related to its loan to the VIE represents its current aggregate carrying amount.

23

As of September 30, 2012, the Company has not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash shortfalls).

The Company holds an interest-only, senior secured term loan made to a borrower that has been identified as a VIE. The Company does not consolidate the VIE because it does not have the ability to control the activities that most significantly impact the VIE’s economic performance. The loan is collateralized by all of the assets of the borrower (comprised primarily of interests in partnerships that operate surgical facilities, some of which are on the premises of properties owned by the Company or HCP Ventures IV, LLC) and is supported in part by limited guarantees made by certain former and current principals of the borrower. Recourse under certain of these guarantees is limited to the guarantors’ respective ownership interests in certain entities owning real estate that are pledged to secure such guarantees.

See Notes 6, 7 and 12 for additional description of the nature, purpose and activities of the Company’s VIEs and interests therein.

(18)Fair Value Measurements

The following table presents the Company’s fair value measurements of its financial assets and liabilities measured at fair value in the condensed consolidated balance sheets. Recognized gains and losses are recorded in other income (expense), net in the condensed consolidated income statements. During the nine months ended September 30, 2012, there were no transfers of financial assets or liabilities within the fair value hierarchy.

The financial assets and liabilities carried at fair value on a recurring basis at September 30, 2012 follow (in thousands):

Financial Instrument	Fair Value			Level 1		Level 2			Level 3
Marketable equity securities	$	22,769		$	22,769	$	—		$	—
Interest-rate swap liabilities(1)	(13,319		)	—		(13,319		)	—
Currency swap liabilities(1)	(2,317		)	—		(2,317		)	—
Warrants(1)	1,290			—		—			1,290
	$	8,423		$	22,769	$	(15,636	)	$	1,290

(1)Interest rate and currency swaps as well as common stock warrant fair values are determined based on observable and unobservable market assumptions utilizing standardized derivative pricing models.

(19)Disclosures About Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value because of the short-term maturities of these instruments. Fair value of loans receivable, bank line of credit, term loan, mortgage debt and other debt are based on rates currently prevailing for similar instruments with similar maturities. The fair value of the marketable debt securities, interest-rate and currency swap contracts as well as common stock warrants were determined based on observable and unobservable market assumptions using standardized pricing models. The fair values of the senior unsecured notes and marketable equity securities were determined utilizing market quotes.

The table below summarizes the carrying amounts and fair values of the Company’s financial instruments (in thousands):

	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	240,929	$	252,032	$	110,253	$	111,073
Marketable debt securities(3)	221,018		221,018		—		—
Marketable equity securities(1)	22,769		22,769		17,053		17,053
Warrants(3)	1,290		1,290		1,334		1,334
Bank line of credit(2)	—		—		454,000		454,000
Term loan(2)	221,214		221,214		—		—
Senior unsecured notes(1)	5,913,690		6,623,609		5,416,063		5,819,304
Mortgage debt(2)	1,684,514		1,786,940		1,764,571		1,870,070
Other debt(2)	84,580		84,580		87,985		87,985
Interest-rate swap liabilities(2)	13,319		13,319		12,123		12,123
Currency swap liabilities(2)	2,317		2,317		—		—

(1)Level 1: Fair value calculated based on quoted prices in active markets.

(2)Level 2: Fair value based on quoted prices for similar or identical instruments in active or inactive markets, respectively, or calculated utilizing model-derived valuations in which significant inputs or value drivers are observable in active markets.

(3)Level 3: Fair value determined based on significant unobservable market inputs using standardized derivative pricing models.

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(20) Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of September 30, 2012 (dollars in thousands):

Date Entered	Maturity Date	Hedge Designation	Fixed Rate/Buy Amount			Floating/Exchange Rate Index	Notional/  Sell Amount		Fair Value(1)
July 2005(2)	July 2020	Cash Flow	3.82		%	BMA Swap Index	$	45,600	$	(8,868	)
November 2008(3)	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	27,200		(4,142		)
July 2009(4)	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	13,700		(234		)
July 2012(4)	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	(75		)
July 2012(5)	June 2016	Cash Flow	$	11,400		Buy USD/Sell GBP	£	7,200	(2,317		)

(1)Interest-rate and foreign currency swap assets are recorded in other assets, net and interest-rate and foreign currency swap liabilities are recorded in accounts payable and accrued liabilities on the condensed consolidated balance sheets.

(2)Represents three interest-rate swap contracts with an aggregate notional amount of $45.6 million which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(3)Acquired in conjunction with mortgage debt assumed related to real estate acquired on December 28, 2010. Hedges fluctuations in interest payments on variable-rate secured debt due to fluctuations in the underlying benchmark interest rate.

(4)Hedges fluctuations in interest payments on variable-rate secured and unsecured debt due to fluctuations in the underlying benchmark interest rate.

(5)Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to a portion of the Company’s forecasted interest receipts on GBP denominated senior unsecured notes.

The Company uses derivative instruments to mitigate the effects of interest rate fluctuations on specific forecasted transactions as well as recognized financial obligations or assets. The Company does not use derivative instruments for speculative or trading purposes.

The primary risks associated with derivative instruments are market and credit risk. Market risk is defined as the potential for loss in value of a derivative instrument due to adverse changes in market prices. Utilizing derivative instruments allows the Company to effectively manage the risk of fluctuations in interest and foreign currency rates related to the potential effects these changes could have on future earnings, forecasted cash flows and the fair value of recognized obligations.

Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation. The Company does not obtain collateral associated with its derivative contracts, but monitors the credit standing of its counterparties on a regular basis. Should a counterparty fail to perform, the Company would incur a financial loss to the extent that the associated derivative contract was in an asset position. At September 30, 2012, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

On July 27, 2012, the Company entered into a foreign currency swap contract to hedge the foreign currency exchange risk related to a portion of the forecasted interest receipts from its GBP denominated senior unsecured notes (see additional discussion of the Four Seasons Health Care Senior Unsecured Notes in Note 10). The cash flow hedge has a fixed USD/GBP exchange rate of 1.5695 (buy $11.4 million and sell £7.2 million) for a portion of its forecasted semi-annual cash receipts denominated in GBP. The foreign currency swap contract matures in June 2016 (the end of the non-call period of the senior unsecured notes). The fair value of the contract at September 30, 2012 was a liability of $2.3 million and is included in accounts payable and accrued liabilities. During the nine months ended September 30, 2012, there was no ineffective portion related to this hedge.

On July 27, 2012, the Company entered into an interest-rate swap contract that is designated as hedging the interest payments on its GBP denominated Term Loan due to fluctuations in the underlying benchmark interest rate (see additional discussions of the Term Loan in Note 11). The cash flow hedge has a notional amount of £137 million and expires in June 2016 (the maturity of the Term Loan). The fair value of the contract at September 30, 2012 was a liability of $75,000 and is included in accounts payable and accrued liabilities. During the nine months ended September 30, 2012, there was no ineffective portion related to this hedge.

In August 2009, the Company entered into an interest-rate swap contract (pay float and receive fixed), that was designated as hedging fluctuations in interest receipts related to its participation in the variable-rate first mortgage debt of HCR ManorCare. At March 31, 2011 the Company determined, based on the anticipated closing of the HCR ManorCare Acquisition during April 2011, that the underlying hedged transactions (underlying mortgage debt interest receipts) were not probable of occurring. As a result, the Company reclassified $1 million of unrealized gains related to this interest-rate swap contract into other income (expense), net. Concurrent with closing the HCR ManorCare Acquisition (for additional details see Note 3), the Company settled the interest-rate swap contract for proceeds of $1 million.

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At September 30, 2012, the Company expects that the hedged forecasted transactions for each of the outstanding qualifying cash flow hedging relationships remain probable of occurring and as a result no gains or losses recorded to accumulated other comprehensive loss are expected to be reclassified to earnings.

To illustrate the effect of movements in the interest rate and foreign currency markets, the Company performed a market sensitivity analysis on its outstanding hedging instruments. The Company applied various basis point spreads to the underlying interest rate curves and foreign currency exchange rates of the derivative portfolio in order to determine the instruments’ change in fair value. The following table summarizes the results of the analysis performed (dollars in thousands):

		Effects of Change in Interest and Foreign Currency Rates
Date Entered	Maturity Date	+50 Basis Points			-50 Basis Points			+100 Basis Points			-100 Basis Points
July 2005	July 2020	$	1,605		$	(1,760	)	$	3,287		$	(3,443	)
November 2008	October 2016	528			(526		)	1,055			(1,052		)
July 2009	July 2013	49			(55		)	102			(107		)
July 2012	June 2016	4,238			(3,872		)	8,293			(7,926		)
July 2012	June 2016	(699		)	232			(1,164		)	697

(21)Impairments

During the three months ended September 30, 2012, the Company executed an expansion of its tenant relationship with General Atomics in Poway, CA, to a total of 396,000 square feet, consisting of the following: (i) a lease extension of 281,000 square feet through June 2024, (ii) a new 10–year lease for a 115,000 square feet building to be developed and (iii) the purchase of a 19 acre land parcel from the Company for $19 million. As a result of the pending land sale the Company recognized an impairment charge of $7.9 million, which reduced the carrying value of the Company’s investment from $27 million to the expected sales price of $19 million. The fair value of the Company’s land parcel was based on the sales price from its anticipated disposition in conjunction with this transaction. The contractual sales price of the land parcel is considered to be a Level 2 measurement within the fair value hierarchy.

During the three months ended September 30, 2011, the Company recognized additional provisions for losses (impairment) of $15.4 million related to its Cirrus loan investment that reduced the carrying value of its loan and related receivables from $91.1 million to $75.7 million, which was the fair value of the collateral supporting this loan. See Note 7 for additional information on this loan and related impairment. The fair value of the collateral supporting the Company’s loan investment was based on a discounted cash flow valuation model and inputs considered to be a Level 3 measurement within the fair value hierarchy. Inputs to this valuation model include discount rates, earnings multiples, market comparables, industry growth rates and operating margins, some of which influence the fair value of the collateral supporting this loan.

(22) Subsequent Events

On October 16, 2012, the Company entered into a definitive agreement to acquire 133 senior housing communities for $1.73 billion, from a joint venture between Emeritus Corporation (“Emeritus”) and Blackstone Real Estate Partners VI, an affiliate of Blackstone (the “Blackstone JV”). Located in 29 states, the portfolio encompasses 10,350 units representing a diversified care mix of 61% assisted living, 25% independent living, 13% memory care and 1% skilled nursing. Based on current operating performance, the 133 communities consist of 99 that are stabilized and 34 that are currently in lease–up.

Emeritus will continue to operate the communities pursuant to long-term triple-net leases. To the extent any of the communities are leased to a subsidiary of Emeritus, the leases will be guaranteed by Emeritus. The leases provide total contractual rent in the first year of $105.5 million. The contractual rent will increase annually by the greater of the percentage increase in the Consumer Price Index (“CPI”) or 3.7% on average over the initial five years, and thereafter by the greater of CPI or 3.0% for the remaining portion of the initial lease term. At the beginning of the sixth lease year, rent on the 34 lease-up properties will be increased to the greater of the percentage increase in CPI or fair market, subject to a floor of 103% and a cap of 130% of the prior year’s rent.

The properties will be grouped into three comparable pools with initial terms of 14 to 16 years. Emeritus has two extension options, which, if exercised, bring total available lease terms to 30 to 35 years.

Concurrent with the acquisition, Emeritus will purchase nine communities from the Blackstone JV, for which the Company has agreed to provide secured debt financing of $52 million with a four-year term. The loan is secured by the underlying real estate and is prepayable at Emeritus’ option. The interest rate on the loan will initially be 6.1% and will gradually increase during its four year term to 7.05%.

On October 19, 2012, the Company completed a public offering of 22 million shares of common stock and received net proceeds of $979 million.

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

Cautionary Language Regarding Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q that are not historical factual statements are “forward-looking statements.” We intend to have our forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with those provisions. Forward-looking statements include, among other things, statements regarding our and our officers’ intent, belief or expectations as identified by the use of words such as “may,” “will,” “project,” “expect,” “believe,” “intend,” “anticipate,” “seek,” “forecast,” “plan,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof. In addition, we, through our officers, from time to time, make forward-looking oral and written public statements concerning our expected future operations, strategies, securities offerings, growth and investment opportunities, dispositions, capital structure changes, budgets and other developments. Readers are cautioned that, while forward-looking statements reflect our good faith belief and reasonable assumptions based upon current information, we can give no assurance that our expectations or forecasts will be attained. Therefore, readers should be mindful that forward-looking statements are not guarantees of future performance and that they are subject to known and unknown risks and uncertainties that are difficult to predict. As more fully set forth under “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2011, factors that may cause our actual results to differ materially from the expectations contained in the forward-looking statements include:

(a)Changes in global, national and local economic conditions, including a prolonged period of weak economic growth;

(b)Continued volatility in the capital markets, including changes in interest rates and the availability and cost of capital;

(c)Our ability to manage our indebtedness level and changes in the terms of such indebtedness;

(d)Changes in federal, state or local laws and regulations, including those affecting the healthcare industry that affect our costs of compliance or increase the costs, or otherwise affect the operations of our operators, tenants and borrowers;

(e)The potential impact of future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments;

(f)Competition for tenants and borrowers, including with respect to new leases and mortgages and the renewal or rollover of existing leases;

(g)Our ability to negotiate the same or better terms with new tenants or operators if existing leases are not renewed or we exercise our right to replace an existing operator or tenant upon default;

(h)Availability of suitable properties to acquire at favorable prices and the competition for the acquisition and financing of those properties;

(i)The financial, legal, regulatory and reputational difficulties of significant operators of our properties;

(j)The risk that we may not be able to achieve the benefits of investments within expected time-frames or at all, or within expected cost projections;

(k)The ability to obtain financing necessary to consummate acquisitions on favorable terms;

(l)Changes in the reimbursement available to our operators, tenants and borrowers by governmental or private payors (including the July 2011 Centers for Medicare & Medicaid Services final rule reducing Medicare skilled nursing facility Prospective Payment System payments in FY 2012 by 11.1% compared to FY 2011) and other potential changes in Medicare and Medicaid payment levels, which, among other effects, could negatively impact the value of our approximate 10% equity interest in the operations of HCR ManorCare, Inc.;

(m)The risks associated with our investments in joint ventures and unconsolidated entities, including our lack of sole decision making authority and our reliance on our joint venture partners’ financial condition and continued cooperation;

(n)The ability of our operators, tenants and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and to generate sufficient income to make rent and loan payments to us and our ability to recover investments made, if applicable, in their operations; and

(o)The financial weakness of some operators and tenants, including potential bankruptcies and downturns in their businesses, which results in uncertainties regarding our ability to continue to realize the full benefit of such operators’ and/or tenants’ leases.

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

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

·Executive Summary

·2012 Transaction Overview

·Dividends

·Critical Accounting Policies

·Results of Operations

·Liquidity and Capital Resources

·Funds from Operations

·Off-Balance Sheet Arrangements

·Contractual Obligations

·Inflation

·Recent Accounting Pronouncements

Executive Summary

We are a Maryland corporation and were organized to qualify as a self-administered real estate investment trust (“REIT”) that, together with our unconsolidated joint ventures, invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). We acquire, develop, lease, manage and dispose of healthcare real estate, and provide financing to healthcare providers. At September 30, 2012, our portfolio of investments, including properties in our Investment Management Platform, consisted of interests in 1,029 facilities. Our Investment Management Platform represents the following joint ventures: (i) HCP Ventures III, LLC, (ii) HCP Ventures IV, LLC and (iii) the HCP Life Science ventures.

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

Our strategy contemplates acquiring and developing properties on terms that are favorable to us. Generally, we prefer larger, more complex private transactions that leverage our management team’s experience and our infrastructure. We follow a disciplined approach to enhancing the value of our existing portfolio, including ongoing evaluation of the potential disposition of properties that no longer fit our strategy.

We primarily generate revenue by leasing healthcare properties under long-term leases with fixed or inflation indexed escalators. Most of our rents and other earned income from leases are received under triple-net leases or leases that provide for substantial recovery of operating expenses; however, some of our medical office and life science leases are structured as gross or modified gross leases. Accordingly, for such medical office buildings (“MOBs”) and life science facilities, we incur certain property operating expenses, such as real estate taxes, repairs and maintenance, property management fees, utilities and insurance. Our growth for these assets depends, in part, on our ability to (i) increase rental income and other earned income from leases by increasing rental rates and occupancy levels; (ii) maximize tenant recoveries given underlying lease structures; and (iii) control operating and other expenses. Our operations are impacted by property specific, market specific, general economic and other conditions. At September 30, 2012, the contractual maturities in our portfolio of leased assets were 10% through 2014 (measured in dollars of expiring rents).

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Access to capital markets impacts our cost of capital and ability to refinance maturing indebtedness, as well as to fund future acquisitions and development through the issuance of additional securities or secured debt. Access to external capital on favorable terms is critical to the success of our strategy.

2012 Transaction Overview

Announced $1.73 Billion Senior Housing Portfolio Acquisition and $52 Million Secured Financing

On October 16, 2012, we entered into a definitive agreement to acquire 133 senior housing communities for $1.73 billion, from a joint venture between Emeritus Corporation (“Emeritus”) and Blackstone Real Estate Partners VI, an affiliate of Blackstone (the “Blackstone JV”). Located in 29 states, the portfolio encompasses 10,350 units representing a diversified care mix of 61% assisted living, 25% independent living, 13% memory care and 1% skilled nursing. Based on current operating performance, the 133 communities consist of 99 that are stabilized and 34 currently in lease–up.

Emeritus will continue to operate the communities pursuant to long-term triple-net leases. To the extent any of the communities are leased to a subsidiary of Emeritus, the leases will be guaranteed by Emeritus. The leases provide total contractual rent in the first year of $105.5 million. The contractual rent will increase annually by the greater of the percentage increase in the Consumer Price Index (“CPI”) or 3.7% on average over the initial five years, and thereafter by the greater of CPI or 3.0% for the remaining portion of the initial lease term. At the beginning of the sixth lease year, rent on the 34 lease-up properties will be increased to the greater of the percentage increase in CPI or fair market, subject to a floor of 103% and a cap of 130% of the prior year’s rent, allowing HCP to capture potential upside from these non-stabilized assets.

The properties will be grouped into three comparable pools with initial terms of 14 to 16 years. Emeritus has two extension options, which, if exercised, bring total available lease terms to 30 to 35 years.

Concurrent with the acquisition, Emeritus will purchase nine communities from the Blackstone JV, for which we have agreed to provide secured debt financing of $52 million with a four-year term. The loan is secured by the underlying real estate and is prepayable at Emeritus’ option. The interest rate on the loan will mirror the 6.1% lease yield, including the annual increases through maturity.

We expect to close the real estate acquisition in phases beginning early November 2012.

Additional Investment Transactions

On August 7, 2012, we completed the acquisition of eight on-campus medical office buildings (“MOBs”) for $81 million from Scottsdale Healthcare. Located in Scottsdale, Arizona, the portfolio represents 398,000 square feet with a current occupancy of 89%.

Between July and October 2012, we acquired 12 MOBs from The Boyer Company valued at $186 million, including non-managing member LLC units (“DownREIT units”) and debt valued at $41 million and $59 million, respectively; the MOBs are primarily located on the campuses of HCA, Iasis Healthcare and Community Health Systems and comprise 758,000 square feet with a current occupancy of 88%. The transaction closed in three stages: (i) six MOBs on July 31, 2012 for $78 million representing 327,000 square feet; (ii) four MOBs on August 15, 2012 for $49 million representing 199,000 square feet and; (iii) two MOBs on October 19, 2012 for $59 million representing 232,000 square feet.

On July 31, 2012, we closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), an affiliate of Formation Capital, as part of the recapitalization of a post-acute/skilled nursing portfolio. We funded $100 million (the “First Tranche”) at closing and expect to fund an additional $105 million (the “Second Tranche”) between March 2013 and August 2013. The Second Tranche will be used to repay debt senior to our loan. The loan is subordinate to $400 million in senior mortgage debt and $137 million in senior mezzanine debt. The loan bears interest at a fixed rate of 12% and 14% per annum for the First and Second Tranche, respectively. Including fees received at closing, the loan has a blended yield to maturity of approximately 13%. The facility will have a total term of up to 63 months from the initial closing.

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On June 28, 2012, we made an investment in senior unsecured notes with an aggregate par value of £138.5 million at a discount for £136.8 million, as part of the financing for Terra Firma’s £825 million acquisition of Four Seasons Health Care (“Four Seasons”), the largest elderly and specialist care provider in the United Kingdom with 445 care homes and 61 specialist care centers. The notes mature in June 2020 and are non-callable until June 2016. The notes bear interest on their par value at a fixed rate of 12.25% per annum, with an original discount resulting in a yield to maturity of 12.5%. Terra Firma, a leading European private equity firm, provided £345 million in equity financing, resulting in a loan-to-capitalization of 62% for the Four Seasons notes. The £136.8 million for this investment is match funded by an equivalent GBP denominated unsecured term loan discussed below.

During the third quarter, we expanded our tenant relationship with General Atomics in Poway, CA to a total of 396,000 square feet, consisting of the following: (i) a lease extension of 281,000 square feet through June 2024, and (ii) a new 10—year lease (expected to commence mid—2014) for a 115,000 square feet build—to—suit development. As part of this transaction, General Atomics agreed to purchase a 19—acre land parcel from HCP for $19 million, resulting in a $7.9 million impairment charge.

During the nine months ended September 30, 2012, we made other investments of $192 million as follows: (i) acquisition of a MOB for $14 million; (ii) acquisition of a life science facility for $8 million; (iii) acquisition of a senior housing facility for $4 million; (iv) acquisition of a parcel of land adjacent to one of our hospitals for $3 million; and (v) funding of development and other capital projects of $163 million, primarily in our life science, senior housing and medical office segments.

Financing Activities

On October 19, 2012, we completed a public offering of 22 million shares of common stock and received net proceeds of $979 million.

On July 30, 2012, we entered into a credit agreement with a syndicate of banks for a £137 million four-year unsecured term loan (the “Term Loan”) that accrues interest at a rate of GBP London Interbank Offered Rate (“LIBOR”) plus 1.20%, based on our current debt ratings. Concurrent with the closing of the Term Loan, we entered into a four-year interest rate swap agreement that fixes the rate of the Term Loan at 1.81%, subject to adjustments based on our credit ratings. The Term Loan contains a one-year committed extension option and similar covenants to those in our unsecured revolving line of credit facility.

On July 23, 2012, we issued $300 million of 3.15% senior unsecured notes due in 2022. The notes were priced at 98.888% of the principal amount with an effective yield to maturity of 3.28%. Net proceeds from this offering were $294 million.

In June 2012, we completed a $376 million offering of 8.97 million shares of common stock at $41.88 per share with the proceeds used primarily to repay $250 million of 6.45% senior unsecured notes at maturity on June 25, 2012.

On March 27, 2012, we completed an amendment to our existing $1.5 billion unsecured revolving line of credit facility. We improved the pricing and extended the maturity of the facility one additional year to March 2016. Based on our current credit ratings, the amended facility bears interest annually at one-month LIBOR plus 1.075% and has a facility fee of 0.175%, which in the aggregate represent a 55 basis point reduction to our funded interest cost.

On March 22, 2012, we announced the redemption of the 4.0 million shares of 7.25% Series E and 7.82 million shares of 7.10% Series F preferred stock at a price of $25.00 per share, or $295.5 million in aggregate, plus all accrued and unpaid dividends to April 23, 2012 (the redemption date). As a result of the redemption, we incurred a charge of $10.4 million related to the original issuance costs of the preferred stock (this charge is presented as an additional preferred stock dividend in our consolidated income statements).

On March 22, 2012, we priced a $359 million offering of 9.0 million shares of common stock at $39.93 per share with the proceeds used primarily to redeem all outstanding shares of our preferred stock.

On January 23, 2012, we issued $450 million of 3.75% senior unsecured notes due in 2019; net proceeds from the offering were $444 million.

Dividends

On October 25, 2012, we announced that our Board declared a quarterly common stock cash dividend of $0.50 per share. The common stock dividend will be paid on November 20, 2012 to stockholders of record as of the close of business on November 5, 2012. Quarterly common stock cash dividends paid or declared have aggregated to $2.00 per share in 2012.

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Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our condensed consolidated financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A summary of our critical accounting policies is included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2011 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”; our critical accounting policies have not changed during 2012.

Results of Operations

We evaluate our business and allocate resources among our five business segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. Under the senior housing, life science, post-acute/skilled nursing and hospital segments, we invest or co-invest primarily in single operator or tenant properties, through the acquisition and development of real estate, management of operations and by debt issued by operators in these sectors. Under the medical office segment, we invest or co-invest through the acquisition and development of MOBs that are leased under gross, modified gross or triple-net leases, generally to multiple tenants, and which generally require a greater level of property management.

We use net operating income (“NOI”) and adjusted NOI to assess and compare property level performance, including our same property portfolio (“SPP”), and to make decisions about resource allocations. We believe these measures provide investors relevant and useful information because they reflect only income and operating expense items that are incurred at the property level and present them on an unleveraged basis. We believe 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 NOI excludes certain components from net income. Further, NOI may not be comparable to that of other REITs, as they may use different methodologies for calculating NOI. See Note 14 to the Condensed Consolidated Financial Statements for additional segment information and the relevant reconciliations from net income to NOI and adjusted NOI.

Operating expenses are generally related to MOB and life science leased properties and senior housing properties managed on our behalf (“RIDEA properties”). We generally recover all or a portion of MOB and life science expenses from the tenants (tenant recoveries). The presentation of expenses as operating or general and administrative is based on the underlying nature of the expense. Periodically, we review the classification of expenses between categories and make revisions based on changes in the underlying nature of the expenses.

Our evaluation of results of operations by each business segment includes an analysis of our SPP and our total property portfolio. SPP information allows us to evaluate the performance of our leased property portfolio under a consistent population by eliminating changes in the composition of our portfolio of properties. We identify our SPP as stabilized properties that remained in operations and were consistently reported as leased properties or RIDEA properties for the duration of the year-over-year comparison periods presented. Accordingly, it takes a stabilized property a minimum of 12 months in operations under a consistent reporting structure to be included in our SPP. Newly acquired operating assets are generally considered stabilized at the earlier of lease-up (typically when the tenant(s) controls the physical use of at least 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. SPP NOI excludes certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis.

Comparison of the Three Months Ended September 30, 2012 to the Three Months Ended September 30, 2011

Segment NOI and Adjusted NOI

The tables below provide selected operating information for our SPP and total property portfolio for each of our five business segments. Our consolidated SPP consists of 905 properties representing properties acquired or placed in service and stabilized on or prior to July 1, 2011 and that remained in operations under a consistent reporting structure through September 30, 2012. Our consolidated total property portfolio represents 955 and 933 properties at September 30, 2012 and 2011, respectively, and excludes properties classified as discontinued operations.

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Senior Housing

Results are as of and for the three months ended September 30, 2012 and 2011 (dollars in thousands except per unit data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental revenues(1)	$	114,759		$	113,940		$	819		$	114,856		$	122,849		$	(7,993	)
Resident fees and services	1			76			(75		)	36,076			11,974			24,102
Total revenues	$	114,760		$	114,016		$	744		$	150,932		$	134,823		$	16,109
Operating expenses	(151		)	(179		)	28			(24,872		)	(9,614		)	(15,258		)
NOI	$	114,609		$	113,837		$	772		$	126,060		$	125,209		$	851
Straight-line rents	(6,976		)	(8,948		)	1,972			(6,989		)	(8,948		)	1,959
DFL accretion	(5,121		)	(4,498		)	(623		)	(5,121		)	(4,498		)	(623		)
Amortization of above and below market lease intangibles, net	(358		)	(358		)	—			(358		)	(358		)	—
Lease termination fees	—			—			—			—			1,350			(1,350		)
Adjusted NOI	$	102,154		$	100,033		$	2,121		$	113,592		$	112,755		$	837
Adjusted NOI % change							2.1		%
Property count(2)	291			291						312			312
Average capacity (units)(3)	30,386			30,196						35,393			35,232
Average annual revenue per unit(4)	$	13,463		$	13,270					$	12,922		$	12,891

(1)Represents rental and related revenues and income from DFLs.

(2)From our past presentation of SPP for the three months ended September 30, 2011, we removed five senior housing properties from SPP that were sold or classified as held for sale; the property-level results of these properties are classified in discontinued operations.

(3)Represents average capacity as reported by the respective tenants or operators for the three months period and a quarter in arrears from the periods presented.

(4)Average annual revenue per unit for operating properties under a RIDEA structure is based on NOI.

SPP NOI and Adjusted NOI. SPP NOI increased primarily as a result of rent escalations related to new leases or leases not subject to straight-line rents. SPP adjusted NOI improved primarily as a result of annual rent escalations and an increase in rental revenues from properties that were previously transitioned from Sunrise to other operators. The increases in SPP NOI and Adjusted NOI were partially offset by additional rents earned in 2011 that did not reoccur in 2012.

Total Portfolio NOI and Adjusted NOI. The increases in adjusted NOI SPP discussed above were partially offset by a decline of $1.4 million from 21 senior housing communities. This decline was primarily the result of the transition of operations on September 1, 2011 for these 21 communities from Horizon Bay (leased on triple-net basis) to Brookdale Senior Living (“Brookdale”) under a RIDEA Structure and a decline in occupancy. The adjusted NOI earned from these 21 properties for the three months ended September 30, 2012 represent resident level fee and service income and facility operating expenses; the NOI earned for the comparable period in 2011 represents a combination of two months of triple-net lease income and one month of resident level fee and service income.

32

Post-Acute/Skilled Nursing

Results are as of and for the three months ended September 30, 2012 and 2011 (dollars in thousands, except per bed data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental revenues(1)	$	135,508		$	132,392		$	3,116		$	135,508		$	132,392		$	3,116
Operating expenses	(154		)	(239		)	85			(154		)	(244		)	90
NOI	$	135,354		$	132,153		$	3,201		$	135,354		$	132,148		$	3,206
Straight-line rents	(155		)	(206		)	51			(155		)	(206		)	51
DFL accretion	(18,312		)	(19,073		)	761			(18,312		)	(19,073		)	761
Amortization of above and below market lease intangibles, net	11			11			—			11			12			(1		)
Adjusted NOI	$	116,898		$	112,885		$	4,013		$	116,898		$	112,881		$	4,017
Adjusted NOI % change							3.6		%
Property count	313			313						313			313
Average capacity (beds)(2)	40,040			39,984						40,040			39,984
Average annual revenue per bed	$	11,692		$	11,316					$	11,692		$	11,316

(1)Represents rental and related revenues and income from DFLs.

(2)Represents average capacity as reported by the respective tenants or operators for the three months period and a quarter in arrears from the periods presented.

NOI and Adjusted NOI.  SPP and total portfolio NOI and adjusted NOI for the three months ended September 30, 2012 primarily increased as a result of annual rent escalations from 268 post-acute/skilled nursing leased properties classified as DFLs from HCR ManorCare, Inc. (see Notes 3 and 6 to the Condensed Consolidated Financial Statements for additional information regarding the HCR ManorCare Acquisition and Net Investments in DFLs, respectively).

Life Science

Results are as of and for the three months ended September 30, 2012 and 2011 (dollars and square feet in thousands, except per sq. ft. data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental and related revenues	$	60,940		$	60,282		$	658		$	61,797		$	60,586		$	1,211
Tenant recoveries	9,344			10,431			(1,087		)	9,397			10,507			(1,110		)
Total revenues	$	70,284		$	70,713		$	(429	)	$	71,194		$	71,093		$	101
Operating expenses	(10,422		)	(12,358		)	1,936			(11,791		)	(13,233		)	1,442
NOI	$	59,862		$	58,355		$	1,507		$	59,403		$	57,860		$	1,543
Straight-line rents	(2,790		)	(3,101		)	311			(3,010		)	(3,132		)	122
Amortization of above and below market lease intangibles, net	135			(341		)	476			123			(354		)	477
Lease termination fees	(175		)	(1,589		)	1,414			(175		)	(1,589		)	1,414
Adjusted NOI	$	57,032		$	53,324		$	3,708		$	56,341		$	52,785		$	3,556
Adjusted NOI % change							7.0		%
Property count	101			101						109			104
Occupancy	91.4		%	91.1		%				90.0		%	90.0		%
Average occupied sq. ft.	6,099			6,082						6,268			6,114
Average annual revenue per occupied sq. ft.	$	44		$	43					$	43		$	43

33

NOI and Adjusted NOI.  NOI increased primarily as a result of new leases, lease expansions and extensions and a decline in non-reimbursable operating expenses, partially offset by a decline in lease termination fees.  Adjusted NOI primarily increased as a result of transactions impacting NOI (discussed above) and annual rent escalations on existing leases.

During the three months ended September 30, 2012, 405,000 square feet of new and renewal leases commenced at an average annual base rent of $19.57 per square foot compared to 379,000 square feet of expiring and terminated leases with an average annual base rent of $22.16 per square foot.

Medical Office

Results are as of and for the three months ended September 30, 2012 and 2011 (dollars and square feet in thousands, except per sq. ft. data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental and related revenues	$	68,496		$	67,179		$	1,317		$	72,344		$	68,180		$	4,164
Tenant recoveries	12,931			12,713			218			13,456			12,816			640
Total revenues	$	81,427		$	79,892		$	1,535		$	85,800		$	80,996		$	4,804
Operating expenses	(31,752		)	(31,409		)	(343		)	(34,948		)	(33,346		)	(1,602		)
NOI	$	49,675		$	48,483		$	1,192		$	50,852		$	47,650		$	3,202
Straight-line rents	(980		)	(1,095		)	115			(1,331		)	(1,115		)	(216		)
Amortization of above and below market lease intangibles, net	101			91			10			148			(21		)	169
Adjusted NOI	$	48,796		$	47,479		$	1,317		$	49,669		$	46,514		$	3,155
Adjusted NOI % change							2.8		%
Property count(1)	184			184						204			187
Occupancy	91.8		%	90.9		%				91.5		%	91.0		%
Average occupied sq. ft.	11,787			11,671						12,494			11,861
Average annual revenue per occupied sq. ft.	$	27		$	27					$	27		$	27

(1)From our past presentation of SPP for the three months ended September 30, 2011, we removed (i) a MOB that was sold or classified as held for sale; the property-level results of this property are classified in discontinued operations; and (ii) three MOBs that were placed into redevelopment in 2012, which no longer meet our criteria for SPP as of the date they were placed into redevelopment.

SPP Portfolio NOI and Adjusted NOI.  SPP NOI and adjusted NOI increased year-over-year primarily as a result of rent escalations and an increase in medical office occupancy.

Total Portfolio NOI and Adjusted NOI.  In addition to the impact from SPP, NOI and adjusted NOI increased year-over-year as a result of the additive effect of our MOB acquisitions during 2011 and 2012.

During the three months ended September 30, 2012, 1.6 million square feet of new and renewal leases (includes 968,000 square feet related to properties that were acquired during the period with an average annual base rent of $22.01 per square foot) commenced at an average annual base rent of $22.26 per square foot compared to 594,000 square feet of expiring and terminated leases with an average annual base rent of $23.69 per square foot.

34

Hospital

Results are as of and for the three months ended September 30, 2012 and 2011 (dollars in thousands, except per bed data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental and related revenues	$	19,974		$	19,534		$	440		$	20,738		$	20,298		$	440
Tenant recoveries	573			557			16			572			556			16
Total revenues	$	20,547		$	20,091		$	456		$	21,310		$	20,854		$	456
Operating expenses	(900		)	(1,226		)	326			(902		)	(1,225		)	323
NOI	$	19,647		$	18,865		$	782		$	20,408		$	19,629		$	779
Straight-line rents	(99		)	(192		)	93			(241		)	(346		)	105
Amortization of above and below market lease intangibles, net	(193		)	(193		)	—			(217		)	(218		)	1
Adjusted NOI	$	19,355		$	18,480		$	875		$	19,950		$	19,065		$	885
Adjusted NOI % change							4.7		%
Property count	16			16						17			17
Capacity (beds)(1)	2,379			2,379						2,410			2,379
Average annual revenue per bed	$	34,056		$	33,133					$	34,609		$	34,115

(1)Represents capacity as reported by the respective tenants or operators for the three months period and a quarter in arrears from the periods presented. Certain operators in our hospital portfolio are not required under their respective leases to provide operational data.

NOI and Adjusted NOI.  NOI and adjusted NOI increased for the three months ended September 30, 2012 primarily as a result of new leases on two of our hospitals.

Other Income and Expense Items

Interest income

Interest income increased $9.7 million to $10.3 million for the three months ended September 30, 2012. The increase was primarily the result interest income from our mezzanine loan facility and senior unsecured notes investments in 2012 (see Notes 7 and 10, respectively, to the Condensed Consolidated Financial Statements for additional information).

Interest expense

Interest expense increased $54,000 to $103.5 million for the three months ended September 30, 2012. The increase was primarily from our senior unsecured notes offerings, net of related maturities of certain senior unsecured notes during 2011 and 2012.

Depreciation and amortization expense

Depreciation and amortization expense increased $2.0 million to $88.7 million for the three months ended September 30, 2012. The increase was primarily the result of the additive effects of our MOB acquisitions during 2011 and 2012.

General and administrative expenses

General and administrative expenses decreased $0.2 million to $19.4 million for the three months ended September 30, 2012. The decrease was primarily due to a decrease in legal fees associated with litigation matters, which decrease was partially offset by increases in acquisition pursuit costs and compensation related expenses.

35

Impairments

During the three months ended September 30, 2012, we recognized an impairment of $7.9 million as a result of the decline in fair value of a life science land parcel based on the contract sales price from the anticipated disposition (see Note 21 to the Condensed Consolidated Financial Statements for additional information). During the three months ended September 30, 2011, we recognized an impairment of $15.4 million related to a senior secured term loan as a result of concluding that the carrying value of the loan was in excess of the fair value of the related collateral supporting the loan (see Note 7 to the Condensed Consolidated Financial Statements for additional information).

Equity income from unconsolidated joint ventures

Equity income from unconsolidated joint ventures decreased $3.7 million to $13.4 million for the three months ended September 30, 2012. The decrease was primarily the result of a decrease in our share of earnings from our approximate 10% interest in HCR ManorCare, Inc. (see Notes 3 and 8 to the Condensed Consolidated Financial Statements for additional information).

Comparison of the Nine Months Ended September 30, 2012 to the Nine Months Ended September 30, 2011

Segment NOI and Adjusted NOI

The tables below provide selected operating information for our SPP and total property portfolio for each of our five business segments. Our consolidated SPP consists of 566 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 2011 and that remained in operations under a consistent reporting structure through September 30, 2012. Our consolidated total property portfolio represents 955 and 933 properties at September 30, 2012 and 2011, respectively, and excludes properties classified as discontinued operations.

Senior Housing

Results are as of and for the nine months ended September 30, 2012 and 2011 (dollars in thousands except per unit data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental revenues(1)	$	282,430		$	283,089		$	(659	)	$	341,936		$	355,496		$	(13,560	)
Resident fees and services	1,050			3,416			(2,366		)	107,824			15,314			92,510
Total revenues	$	283,480		$	286,505		$	(3,025	)	$	449,760		$	370,810		$	78,950
Operating expenses	(367		)	(724		)	357			(69,926		)	(11,350		)	(58,576		)
NOI	$	283,113		$	285,781		$	(2,668	)	$	379,834		$	359,460		$	20,374
Straight-line rents	(20,941		)	(27,974		)	7,033			(21,686		)	(28,058		)	6,372
DFL accretion	(5,774		)	(6,506		)	732			(14,706		)	(12,251		)	(2,455		)
Amortization of above and below market lease intangibles, net	(1,177		)	(1,177		)	—			(1,074		)	(1,108		)	34
Lease termination fees	—			—			—			—			1,350			(1,350		)
Adjusted NOI	$	255,221		$	250,124		$	5,097		$	342,368		$	319,393		$	22,975
Adjusted NOI % change							2.0		%
Property count(2)	221			221						312			312
Average capacity (units)(3)	25,069			24,877						35,393			33,229
Average annual revenue per unit(4)	$	13,594		$	13,445					$	12,985		$	12,916

(1)Represents rental and related revenues and income from DFLs.

(2)From our past presentation of SPP for the nine months ended September 30, 2011, we removed five senior housing properties from SPP that were sold or classified as held for sale; the property-level results of these properties are classified in discontinued operations.

(3)Represents average capacity as reported by the respective tenants or operators for the three months period and a quarter in arrears from the periods presented.

(4)Average annual revenue per unit for operating properties under a RIDEA structure is based on NOI.

36

SPP NOI and Adjusted NOI. SPP NOI declined primarily as a result of a decrease in additional rents earned in 2011 that did not reoccur in 2012 and a decline in resident fees and services revenue, which relates to certain working capital adjustments from properties that were previously transitioned from Sunrise to other operators, partially offset by rent escalations related to new leases or leases not subject to straight-line rents.

SPP adjusted NOI improved primarily as a result of annual rent escalations and an increase in rental revenues from properties that were previously transitioned from Sunrise to another operator, partially offset by a decrease in additional rents and a decline related to the working capital adjustments discussed above.

Total Portfolio NOI and Adjusted NOI. Including the impact of our SPP, our total portfolio NOI and adjusted NOI for the nine months ended September 30, 2012 primarily increased as a result of 66 senior housing leased properties classified as DFLs that were acquired on April 7, 2011 from HCR ManorCare, Inc. (see Notes 3 and 6 to the Condensed Consolidated Financial Statements for additional information regarding the HCR ManorCare Acquisition and Net Investments in DFLs, respectively).

Additionally, HCP Ventures II was consolidated on January 14, 2011 (see Note 8 to the Condensed Consolidated Financial Statements for additional information), resulting in us recognizing rental and related revenues for the 25 leased properties commencing on that date. On September 1, 2011, for 21 of these 25 properties, we entered into management contracts in a structure permitted by RIDEA (see Note 12 to the Condensed Consolidated Financial Statements for additional information), resulting in the termination of the properties’ leases. For these 21 properties that are now in a RIDEA structure, the resident-level revenues and related operating expenses are reported in our condensed consolidated financial statements beginning on that date.

Post-Acute/Skilled Nursing

Results are as of and for the nine months ended September 30, 2012 and 2011 (dollars in thousands, except per bed data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental revenues(1)	$	28,835		$	28,495		$	340		$	404,180		$	265,377		$	138,803
Operating expenses	(103		)	(69		)	(34		)	(526		)	(318		)	(208		)
NOI	$	28,732		$	28,426		$	306		$	403,654		$	265,059		$	138,595
Straight-line rents	(422		)	(792		)	370			(422		)	(791		)	369
DFL accretion	—			—			—			(56,366		)	(36,257		)	(20,109		)
Amortization of above and below market lease intangibles, net	—			—			—			34			23			11
Adjusted NOI	$	28,310		$	27,634		$	676		$	346,900		$	228,034		$	118,866
Adjusted NOI % change							2.4		%
Property count	45			45						313			313
Average capacity (beds)(2)	5,226			5,219						40,040			27,494
Average annual revenue per bed	$	7,249		$	7,078					$	11,568		$	11,073

(1)Represents rental and related revenues and income from DFLs.

(2)Represents average capacity as reported by the respective tenants or operators for the three months period and a quarter in arrears from the periods presented.

Total Portfolio NOI and Adjusted NOI.  Total portfolio NOI and adjusted NOI for the nine months ended September 30, 2012 primarily increased as a result of 268 post-acute/skilled nursing leased properties classified as DFLs that were acquired on April 7, 2011 from HCR ManorCare, Inc. (see Notes 3 and 6 to the Condensed Consolidated Financial Statements for additional information regarding the HCR ManorCare Acquisition and Net Investments in DFLs, respectively).

37

Life Science

Results are as of and for the nine months ended September 30, 2012 and 2011 (dollars and square feet in thousands, except per sq. ft. data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental and related revenues	$	182,467		$	182,602		$	(135	)	$	184,600		$	183,834		$	766
Tenant recoveries	30,639			30,979			(340		)	30,969			31,211			(242		)
Total revenues	$	213,106		$	213,581		$	(475	)	$	215,569		$	215,045		$	524
Operating expenses	(34,460		)	(35,980		)	1,520			(38,230		)	(38,661		)	431
NOI	$	178,646		$	177,601		$	1,045		$	177,339		$	176,384		$	955
Straight-line rents	(5,530		)	(11,024		)	5,494			(6,300		)	(11,308		)	5,008
Amortization of above and below market lease intangibles, net	352			(722		)	1,074			315			(765		)	1,080
Lease termination fees	(175		)	(4,767		)	4,592			(175		)	(4,767		)	4,592
Adjusted NOI	$	173,293		$	161,088		$	12,205		$	171,179		$	159,544		$	11,635
Adjusted NOI % change							7.6		%
Property count	101			101						109			104
Occupancy	91.4		%	91.1		%				90.0		%	90.0		%
Average occupied sq. ft.	6,090			6,048						6,212			6,090
Average annual revenue per occupied sq. ft.	$	45		$	43					$	45		$	43

NOI and Adjusted NOI.  NOI increased primarily as a result of lease expansions and extensions and decline in non-reimbursable operating expenses, partially offset by a decline in lease termination fees. Adjusted NOI increased primarily as a result of a $4 million rent payment in connection with a February 2012 amendment to a lease, annual rent escalations, lease expansions and extensions, and a decline in non-reimbursable operating expenses.

During the nine months ended September 30, 2012, 884,000 square feet of new and renewal leases (includes 77,000 square feet acquired during the period with an average annual base rent of $9.79 per square foot) commenced at an average annual base rent of $21.55 per square foot compared to 697,000 square feet of expiring and terminated leases with an average annual base rent of $25.31 per square foot.

38

Medical Office

Results are as of and for the nine months ended September 30, 2012 and 2011 (dollars and square feet in thousands, except per sq. ft. data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental and related revenues	$	202,937		$	199,242		$	3,695		$	209,714		$	203,807		$	5,907
Tenant recoveries	35,175			35,658			(483		)	36,947			36,796			151
Total revenues	$	238,112		$	234,900		$	3,212		$	246,661		$	240,603		$	6,058
Operating expenses	(90,927		)	(90,801		)	(126		)	(98,631		)	(97,360		)	(1,271		)
NOI	$	147,185		$	144,099		$	3,086		$	148,030		$	143,243		$	4,787
Straight-line rents	(3,236		)	(4,581		)	1,345			(3,747		)	(4,723		)	976
Amortization of above and below market lease intangibles, net	258			274			(16		)	240			(51		)	291
Lease termination fees	(251		)	—			(251		)	(251		)	—			(251		)
Adjusted NOI	$	143,956		$	139,792		$	4,164		$	144,272		$	138,469		$	5,803
Adjusted NOI % change							3.0		%
Property count(1)	183			183						204			187
Occupancy	91.8		%	90.8		%				91.5		%	91.0		%
Average occupied sq. ft.	11,621			11,548						12,048			11,852
Average annual revenue per occupied sq. ft.	$	27		$	27					$	27		$	26

(1)From our past presentation of SPP for the nine months ended September 30, 2011, we removed (i) a MOB that was sold or classified as held for sale; the property-level results of this property are classified in discontinued operations; and (ii) three MOBs that were placed into redevelopment in 2012, which no longer meet our criteria for SPP as of the date they were placed into redevelopment.

NOI and Adjusted NOI.  NOI and adjusted NOI increased year-over-year primarily as a result of rent escalations and an increase in medical office occupancy.

During the nine months ended September 30, 2012, 2.6 million square feet of new and renewal leases (includes 968,000 square feet related to properties acquired during the period with an average annual base rent of $22.01 per square foot) commenced at an average annual base rent of $22.03 per square foot compared to 1.7 million square feet of expiring and terminated leases with an average annual base rent of $22.23 per square foot (includes 180,000 square feet related to properties that were sold or placed into redevelopment with an average annual base rent of $15.98 per square foot).

Hospital

Results are as of and for the nine months ended September 30, 2012 and 2011 (dollars in thousands, except per bed data):

	SPP									Total Portfolio
	2012			2011			Change			2012			2011			Change
Rental and related revenues	$	59,267		$	57,969		$	1,298		$	61,560		$	60,361		$	1,199
Tenant recoveries	1,741			1,757			(16		)	1,740			1,757			(17		)
Total revenues	$	61,008		$	59,726		$	1,282		$	63,300		$	62,118		$	1,182
Operating expenses	(2,764		)	(3,412		)	648			(2,770		)	(3,414		)	644
NOI	$	58,244		$	56,314		$	1,930		$	60,530		$	58,704		$	1,826
Straight-line rents	(444		)	(720		)	276			(881		)	(1,188		)	307
Amortization of above and below market lease intangibles, net	(578		)	(578		)	—			(653		)	(653		)	—
Adjusted NOI	$	57,222		$	55,016		$	2,206		$	58,996		$	56,863		$	2,133
Adjusted NOI % change							4.0		%
Property count	16			16						17			17
Capacity (beds)(1)	2,379			2,379						2,410			2,379
Average annual revenue per bed	$	33,620		$	32,747					$	34,171		$	33,783

(1)Represents capacity as reported by the respective tenants or operators for the three months period and a quarter in arrears from the periods presented. Certain operators in our hospital portfolio are not required under their respective leases to provide operational data.

NOI and Adjusted NOI.  NOI and adjusted NOI increased for the nine months ended September 30, 2012 primarily as a result of new leases on two of our hospitals.

39

Other Income and Expense Items

Interest income

Interest income decreased $86.9 million to $12.3 million for the nine months ended September 30, 2012. The decrease was primarily the result of the following: (i) a decrease of $54.3 million as a result of the early settlement of our HCR ManorCare debt investments in 2011 and (ii) a decrease of $43.0 million as a result of the early repayment of our loans to Genesis in 2011. The decreases in interest income were partially offset by increases of $9 million from our mezzanine loan facility and our senior unsecured notes investments in 2012 (see Notes 7 and 10, respectively, to the Condensed Consolidated Financial Statements for additional information).

Interest expense

Interest expense decreased $5.8 million to $309.9 million for the nine months ended September 30, 2012. The decrease was primarily due to the $11.3 million write-off of unamortized loan fees related to a terminated bridge loan commitment during the nine months ended September 30, 2011, a decrease of $3.4 million resulting from the payoff of certain mortgage debt during 2011 and more favorable borrowing rates on recently issued debt, partially offset by an increase of $7.2 million resulting from our senior unsecured notes offerings, net of related maturities of certain senior unsecured notes during 2011 and 2012.

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

	As of September 30,(1)
	2012			2011
Balance:
Fixed rate	$	7,813,925		$	7,182,192
Variable rate	40,404			424,002
Total	$	7,854,329		$	7,606,194
Percent of total debt:
Fixed rate	99		%	94		%
Variable rate	1			6
Total	100		%	100		%
Weighted average interest rate at end of period:
Fixed rate	5.49		%	5.81		%
Variable rate	1.53		%	2.65		%
Total weighted average rate	5.47		%	5.64		%

(1)Excludes $85 million and $89 million of other debt at September 30, 2012 and 2011, respectively, that represent non-interest bearing life care bonds and occupancy fee deposits at certain of our senior housing facilities, which have no scheduled maturities.

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Depreciation and amortization expense

Depreciation and amortization expense decreased $6.7 million to $259.0 million for the nine months ended September 30, 2012. The decrease was primarily the result of assets becoming fully depreciated during 2011 and 2012, partially offset by the additive effects of our acquisitions during 2011 and 2012.

General and administrative expenses

General and administrative expenses decreased $22.1 million to $54.4 million for the nine months ended September 30, 2012. The decrease was primarily due to an insurance recovery of $7.2 million during 2012 for previously incurred legal expenses and $15.6 million of acquisition costs incurred during 2011 related to our HCR ManorCare Acquisition.

Impairments

During the nine months ended September 30, 2012, we recognized an impairment of $7.9 million as a result of the decline in fair value of a life science land parcel based on the contract sales price from the anticipated disposition (see Note 21 to the Condensed Consolidated Financial Statements for additional information). During the nine months ended September 30, 2011, we recognized an impairment of $15.4 million related to a senior secured term loan as a result of concluding that the carrying value of the loan was in excess of the fair value of the related collateral supporting the loan (see Note 7 to the Condensed Consolidated Financial Statements for additional information).

Other income (expense), net

Other income (expense), net, decreased $14.8 million to $2.2 million for the nine months ended September 30, 2012. The decrease was primarily the result of a gain of $7.8 million resulting from our acquisition of our partner’s 65% interest in and consolidation of HCP Ventures II in January 2011 (see Note 8 to the Condensed Consolidated Financial Statements for additional information) and $5.7 million received in connection with a litigation settlement in June 2011 that represents proceeds owed to us from a prior sale of assets. No similar gain upon consolidation was recognized or settlements were received during the nine months ended September 30, 2012.

Equity income from unconsolidated joint ventures

Equity income from unconsolidated joint ventures increased $10 million to $42.8 million for the nine months ended September 30, 2012. The increase was primarily the result of an increase in our share of earnings from our approximate 10% interest in HCR ManorCare, Inc. which interest was acquired in April 2011 (see Notes 3 and 8 to the Condensed Consolidated Financial Statements for additional information).

Discontinued operations

During the nine months ended September 30, 2012, we sold one property for $7 million, realizing a gain of $2.9 million. There were no sales of properties during the nine months ended September 30, 2011.

Preferred stock dividends

On March 22, 2012, we announced the redemption of all outstanding shares of preferred stock. On April 23, 2012, the shares of our preferred stock were redeemed, plus all accrued and unpaid dividends to the redemption date. During the nine months ended September 30, 2012, we incurred a redemption charge of $10.4 million related to the original issuance costs of the preferred stock (this charge is presented as an additional preferred stock dividend in our consolidated income statements).

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Liquidity and Capital Resources

Our principal liquidity needs are to: (i) fund recurring operating expenses, (ii) meet debt service requirements including principal payments and maturities in the last nine months of 2012, (iii) fund capital expenditures, including tenant improvements and leasing costs, (iv) fund acquisition and development activities, and (v) make dividend distributions. We believe these needs will be satisfied using cash flows generated by operations and from our various financing activities during the next twelve months.

We anticipate making future investments dependent on the availability of cost-effective sources of capital. We intend to use our revolving line of credit facility and the public capital markets as our principal sources of financing. As of October 25, 2012, we had credit ratings of Baa2 (stable) from Moody’s, BBB (positive) from S&P and BBB+ (stable) from Fitch on our senior unsecured debt securities.

Net cash provided by operating activities was $721 million and $587 million for the nine months ended September 30, 2012 and 2011, respectively. The increase in operating cash flows is primarily the result of the following: (i) the additive impact of our investments in 2011 and 2012, (ii) assets placed in service during 2011 and 2012 and (iii) rent escalations and resets in 2011 and 2012, which increases were partially offset by increased debt interest payments. Our cash flows from operations are dependent upon the occupancy level of multi-tenant buildings, rental rates on leases, our tenants’ performance on their lease obligations, the level of operating expenses and other factors.

Net cash used in investing activities was $651 million and $4.6 billion for the nine months ended September 30, 2012 and 2011, respectively. The cash used in investing activities for the nine months ended September 30, 2012 primarily reflects the net effect of: (i) $215 million used for the purchase of marketable securities, (ii) $172 million for the acquisitions of real estate, (iii) $146 million used for investments in loans receivable, (iv) $87 million used for development of real estate and (v) $43 million used for leasing costs and tenant and capital improvements, which were partially offset by (i) $7 million of proceeds from the sale of real estate and (ii) $5 million received from the repayments from our investments in loans receivable.

Net cash used in financing activities was $7.3 million for the nine months ended September 30, 2012, and net cash provided by financing activities was $3.0 billion for the nine months ended September 30, 2011. The cash used in financing activities for the nine months ended September 30, 2012 consisted primarily of: (i) payments of common and preferred dividends aggregating $638 million, (ii) net repayments under our revolving line of credit facility of $454 million, (iii) redemption of our preferred stock for $296 million, (iv) repayment of senior unsecured notes of $250 million, (v) repayment of mortgage debt of $110 million and (vi) debt issuance and origination costs (deferred financing costs) of $18 million. The amount of cash used in financing activities was partially offset by: (i) net proceeds of $804 million from the issuances of common stock and exercise of stock options, (ii) the issuance of $750 million of senior unsecured notes and (iii) borrowings under the Term Loan of $215 million.

Debt

Bank Line of Credit and Term Loan

On March 27, 2012, we executed an amendment to our existing $1.5 billion unsecured revolving line of credit facility (the “Facility”). This amendment reduces the cost to us of the Facility (lower borrowing rate and facility fee) and extends the Facility’s maturity by one additional year to March 2016. The Facility contains a one-year extension option. Borrowings under this Facility accrue interest at LIBOR plus a margin that depends upon our debt ratings. We pay a facility fee on the entire revolving commitment that depends on our debt ratings. Based on our debt ratings at October 25, 2012, the margin on the Facility was 1.075%, and the facility fee was 0.175%. We have the right to increase the commitments under the Facility by an aggregate amount of up to $500 million, subject to customary conditions. At September 30, 2012, we had no balance outstanding under this Facility.

On July 30, 2012, we entered into a credit agreement with a syndicate of banks for a £137 million ($221 million at September 30, 2012) four-year unsecured Term Loan that accrues interest at a rate of GBP LIBOR plus 1.20%, based on our current debt ratings. Concurrent with the closing of the Term Loan, we entered into a four-year interest rate swap agreement that fixes the rate of the Term Loan at 1.81%, subject to adjustments based on our credit ratings. The Term Loan contains a one-year committed extension option and covenants similar to those in the Facility.

Our Facility and Term Loan contain certain financial restrictions and other customary requirements. Among other things, these covenants, using terms defined in the agreements (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Secured Debt to Consolidated Total Asset Value to 30%, (iii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 60%, (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times and (v) require a formula-determined Minimum Consolidated Tangible Net Worth of $8.3 billion at September 30, 2012. At September 30, 2012, we were in compliance with each of these restrictions and requirements of the Facility and Term Loan.

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Our Facility also contains cross-default provisions to other indebtedness of ours, including in some instances, certain mortgages on our properties. Certain mortgages contain default provisions relating to defaults under the leases or operating agreements on the applicable properties by our operators or tenants, including default provisions relating to the bankruptcy filings of such operator or tenant. Although we believe that we would be able to secure amendments under the applicable agreements if a default as described above occurs, such a default may result in significantly less favorable borrowing terms than currently available, material delays in the availability of funding or other material adverse consequences.

Senior Unsecured Notes

At September 30, 2012, we had senior unsecured notes outstanding with an aggregate principal balance of $5.9 billion. Interest rates on the notes ranged from 1.29% to 7.07% with a weighted average effective interest rate of 5.40% and a weighted average maturity of 6.11 years at September 30, 2012. The senior unsecured notes contain certain covenants including limitations on debt, maintenance of unencumbered assets, cross-acceleration provisions and other customary terms. We believe we were in compliance with these covenants at September 30, 2012.

Mortgage Debt

At September 30, 2012, we had $1.7 billion in aggregate principal amount of mortgage debt outstanding that is secured by 137 healthcare facilities (including redevelopment properties) with a carrying value of $2.1 billion. Interest rates on the mortgage debt ranged from 1.54% to 8.69% with a weighted average effective interest rate of 6.14% and a weighted average maturity of 3.80 years at September 30, 2012.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by certain properties and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered properties, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into and terminate material leases. Some of the mortgage debt is also cross-collateralized by multiple properties and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

Other Debt

At September 30, 2012, we had $85 million of non-interest bearing life care bonds at two of our continuing care retirement communities and non-interest bearing occupancy fee deposits at two of our senior housing facilities, all of which were payable to certain residents of the facilities (collectively, “Life Care Bonds”). At September 30, 2012, $28 million of the Life Care Bonds were refundable to the residents upon the resident moving out or to their estate upon death, and $57 million of the Life Care Bonds were refundable after the unit is successfully remarketed to a new resident.

Debt Maturities

The following table summarizes our stated debt maturities and scheduled principal repayments at September 30, 2012 (in thousands):

Year	Amount(1)
2012 (Three months)	$	8,715
2013	870,207
2014	671,495
2015	704,761
2016	1,414,389
Thereafter	4,184,762
	7,854,329
(Discounts) and premiums, net	(34,911		)
	$	7,819,418

(1)Excludes $85 million of other debt that represents Life Care Bonds that have no scheduled maturities.

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Derivative Instruments

We use derivative instruments to mitigate the effects of interest rate and foreign exchange fluctuations on specific forecasted transactions as well as recognized financial obligations or assets. We do not use derivative instruments for speculative or trading purposes.

The following table summarizes our outstanding interest rate and foreign exchange swap contracts as of September 30, 2012 (dollars in thousands):

Date Entered	Maturity Date	Hedge Designation	Fixed Rate/Buy Amount			Floating/Exchange Rate Index	Notional/ Sell Amount		Fair Value
July 2005(1)	July 2020	Cash Flow	3.82		%	BMA Swap Index	$	45,600	$	(8,868	)
November 2008	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	27,200		(4,142		)
July 2009	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	13,700		(234		)
July 2012	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	(75		)
July 2012	June 2016	Cash Flow	$	11,400		Buy USD/Sell GBP	£	7,200	(2,317		)

(1)Represents three interest-rate swap contracts with an aggregate notional amount of $45.6 million.

For a more detailed description of our derivative instruments, see Note 20 to the Condensed Consolidated Financial Statements and Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Equity

At September 30, 2012, we had 430 million shares of common stock outstanding. At September 30, 2012, equity totaled $9.7 billion, and our equity securities had a market value of $19 billion.

At September 30, 2012, there were a total of 4.4 million DownREIT units outstanding in five limited liability companies in which we are the managing member. The DownREIT units are exchangeable for an amount of cash approximating the then-current market value of shares of our common stock or, at our option, shares of our common stock (subject to certain adjustments, such as stock splits and reclassifications).

Shelf Registration

We have a prospectus that we filed with the U.S. Securities and Exchange Commission (“SEC”) as part of a registration statement on Form S-3ASR, using a shelf registration process which expires in July 2015. Under the “shelf” process, we may sell any combination of the securities in one or more offerings. The securities described in the prospectus include common stock, preferred stock, depositary shares, debt securities and warrants.

The prospectus only provides a general description of the securities we may offer. The prospectus may not be used to sell securities unless accompanied by a prospectus supplement or a free writing prospectus. Each time we sell securities under the shelf registration, we will provide a prospectus supplement that will contain specific information about the terms of the securities being offered and of the offering. The prospectus supplement may also add, update or change information contained in the prospectus.

We may offer and sell the securities pursuant to the prospectus through underwriters, dealers or agents or directly to purchasers, on a continuous or delayed basis.  The securities may also be resold by selling security holders. The prospectus supplement for each offering will describe in detail the plan of distribution for that offering and will set forth the names of any underwriters, dealers or agents involved in the offering and any applicable fees, commissions or discount arrangements. We intend to use the net proceeds from the sales of the securities as set forth in the applicable prospectus supplement, and unless otherwise set forth in a therein, we will not receive any proceeds if the securities are sold by a selling security holder.

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Funds From Operations (“FFO”)

We believe FFO applicable to common shares, diluted FFO applicable to common shares, and basic and diluted FFO per common share are important supplemental non-GAAP measures of operating performance for a REIT. 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 REIT that uses historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.

FFO is defined as net income applicable to common shares (computed in accordance with GAAP), excluding gains or losses from acquisition and dispositions of depreciable real estate or related interests, impairments of, or related to, depreciable real estate, plus real estate and DFL 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. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts’ (“NAREIT”) definition; however, other REITs may report FFO differently or have a different interpretation of the current NAREIT definition from us. In addition, we present FFO before the impact of litigation settlement charges, preferred stock redemption charges, impairments (recoveries) of non-depreciable assets and merger-related items (defined below) (“FFO as adjusted”). 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 (determined in accordance with GAAP).

Details of certain items that affect comparability are discussed under Results of Operations above. The following is a reconciliation from net income applicable to common shares, the most direct comparable financial measure calculated and presented in accordance with GAAP, to FFO and FFO as adjusted (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income applicable to common shares	$	195,629		$	166,367		$	572,352		$	453,306
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	88,686			86,672			259,039			265,742
Discontinued operations	1,453			1,884			7,300			4,286
DFL depreciation	3,234			2,874			9,426			5,879
Gain on sales of real estate	—			—			(2,856		)	—
Gain upon consolidation of joint venture	—			—			—			(7,769		)
Equity income from unconsolidated joint ventures	(13,396		)	(17,050		)	(42,803		)	(32,798		)
FFO from unconsolidated joint ventures	16,043			19,574			50,495			40,408
Noncontrolling interests’ and participating securities’ share in earnings	3,414			3,822			11,224			14,553
Noncontrolling interests’ and participating securities’ share in FFO	(4,821		)	(4,572		)	(15,512		)	(16,385		)
FFO applicable to common shares	290,242			259,571			848,665			727,222
Distributions on dilutive convertible units	3,148			3,048			9,397			9,066
Diluted FFO applicable to common shares	$	293,390		$	262,619		$	858,062		$	736,288
Diluted FFO per common share	$	0.67		$	0.63		$	2.01		$	1.83
Weighted average shares used to calculate diluted FFO per common share	437,043			414,590			427,388			402,967
Impact of adjustments to FFO:
Preferred stock redemption charge(1)	$	—		$	—		$	10,432		$	—
Merger-related items(2)	—			—			—			26,596
Impairments(3)	7,878			15,400			7,878			15,400
	$	7,878		$	15,400		$	18,310		$	41,996
FFO as adjusted applicable to common shares	$	298,120		$	274,971		$	866,975		$	769,218
Distributions on dilutive convertible units and other	3,127			3,011			9,345			8,927
Diluted FFO as adjusted	$	301,247		$	277,982		$	876,320		$	778,145
Diluted FFO as adjusted per common share	$	0.69		$	0.67		$	2.05		$	2.02
Weighted average shares used to calculate diluted FFO as adjusted per common share(4)	437,043			414,590			427,388			385,693

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(1)In connection with the redemption of our preferred stock, during the nine months ended September 30, 2012, we incurred a redemption charge of $10.4 million related to the original issuance costs.

(2)Merger-related items for the nine months ended September 30, 2011 are attributable to the HCR ManorCare Acquisition (incurred from January 1st through April 6th 2011), which include the following: (i) $26.8 million of direct transaction costs, (ii) $23.9 million of interest expense associated with the $2.4 billion senior unsecured notes issued on January 24, 2011, proceeds from which were obtained to prefund the HCR ManorCare Acquisition, partially offset by (iii) $24.1 million of income related to gains upon the reinvestment of the Company’s debt investment in HCR ManorCare and other miscellaneous items.

(3)The third quarter 2012 impairment charge of $7.9 million relates to the pending sale of a land parcel in our life science segment. The third quarter 2011 impairment charge of $15.4 million relates to our senior secured loan to Cirrus Health.

(4)Our weighted average shares used to calculate diluted FFO as adjusted eliminate the impact of our December 2010 46 million shares common stock offering and 30 million shares from our March 2011 common stock offering (excludes 4.5 million shares sold to the underwriters upon exercise of their option to purchase additional shares), which issuances increased our weighted average shares by 17 million for the nine months ended September 30, 2011. Proceeds from these offerings were used to fund a portion of the cash consideration for the HCR ManorCare Acquisition.

Off-Balance Sheet Arrangements

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

Contractual Obligations

The following table summarizes our material contractual payment obligations and commitments at September 30, 2012 (in thousands):

	Total(1)		Less than One Year		2013-2014		2015-2016		More than Five Years
Term loan(2)	$	221,214	$	—	$	—	$	221,214	$	—
Senior unsecured notes	5,937,000		—		1,037,000		1,300,000		3,600,000
Mortgage debt	1,696,115		8,715		504,702		597,936		584,762
Construction loan commitments(3)	71, 598		23,178		48,420		—		—
Development commitments(4)	19,422		10,010		9,412		—		—
Ground and other operating leases	203,288		1,415		10,699		8,515		182,659
Interest(5)	2,449,362		54,538		760,326		598,570		1,035,928
Total	$	10,597,999	$	97,856	$	2,370,559	$	2,726,235	$	5,403,349

(1)Excludes $85 million of other debt that represents Life Care Bonds that have no scheduled maturities.

(2)Represents £137 million translated into U.S. dollars as of September 30, 2012.

(3)Represents commitments to finance development projects and related working capital financings.

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

(5)Interest on variable-rate debt is calculated using rates in effect at September 30, 2012.

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Inflation

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

Recent Accounting Pronouncements

There are no accounting pronouncements that have been issued, but not yet adopted by us, that we believe will materially impact our condensed consolidated financial statements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We use derivative financial instruments in the normal course of business to mitigate interest rate and foreign currency risk. We do not use derivative financial instruments for speculative or trading purposes. Derivatives are recorded on the condensed consolidated balance sheets at their fair value. See Note 20 to the Condensed Consolidated Financial Statements for additional information.

To illustrate the effect of movements in the interest rate and foreign currency markets, we performed a market sensitivity analysis on our hedging instruments. We applied various basis point spreads to the underlying interest rate curves and foreign currency exchange rates of the derivative portfolio in order to determine the instruments’ change in fair value. Assuming a one percentage point change in the underlying interest rate curve and foreign currency exchange rates, the estimated change in fair value of each of the underlying derivative instruments would not exceed $8.3 million. See Note 20 to the Condensed Consolidated Financial Statements for additional analysis details.

Interest Rate Risk.  At September 30, 2012, we were exposed to market risks related to fluctuations in interest rates on properties with a gross value of $83 million that are subject to leases where the payments fluctuate with changes in LIBOR (excludes $221 million of variable-rate senior unsecured notes that have been hedged through interest-rate swap contracts). Our exposure to income fluctuations related to our variable-rate investments is partially offset by: (i) $25 million of variable-rate senior unsecured notes and (ii) $15 million of variable-rate mortgage debt payable (excludes $87 million of variable-rate mortgage notes that have been hedged through interest-rate swap contracts). Additionally, our exposure to market risks related to fluctuations in interest rates excludes our GBP denominated $221 million (£137 million) variable-rate Term Loan that has been hedged through interest-rate swap contracts.

Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and assets unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. Conversely, changes in interest rates on variable rate debt and investments would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. Assuming a one percentage point increase in the interest rate related to the variable-rate investments and variable-rate debt, and assuming no other changes in the outstanding balance as of September 30, 2012, our annual interest expense would increase by approximately $0.4 million, or less than $0.01 per common share on a diluted basis.

Foreign Currency Risk.  At September 30, 2012, our exposure to foreign currency exchange rates relates to forecasted interest receipts from our GBP denominated senior unsecured notes (see additional discussion of the Four Seasons Health Care Senior Unsecured Notes in Note 10 of the Condensed Consolidated Financial Statements). To mitigate our foreign currency exchange exposure, we entered into a foreign currency swap contract for approximately 85% of the forecasted interest receipts from our senior unsecured notes, which represents our remaining foreign currency exposure after we consider the forecasted interest payments for our GBP denominated unsecured Term Loan interest and principal payments (see Note 11 to the Condensed Consolidated Financial Statements for additional information).

Market Risk.  We have investments in marketable equity securities classified as available-for-sale. Gains and losses on these securities are recognized in income when realized, and losses are recognized when an other-than-temporary decline in value is identified. An initial indicator of an other-than-temporary decline in value for marketable equity securities is based on the severity of the decline in market value below the cost basis for an extended period of time. We consider a variety of factors in evaluating an other-than-temporary decline in value, such as: the length of time and the extent to which the market value has been less than our current cost basis; the issuer’s financial condition, capital strength and near-term prospects; any recent events specific to that issuer and economic conditions of its industry; and our investment horizon in relationship to an anticipated near-term recovery in the market value, if any. At September 30, 2012, the fair value and current cost basis of marketable equity securities were $22.8 million and $17.1 million, respectively.

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Item 4.  Controls and Procedures

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

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

As required by Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2012. Based upon that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

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

PART II. OTHER INFORMATION

Item 1A.  Risk Factors

There are no material changes to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2011.

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

(a)

On July 6, 2012, we issued 4,800 shares of our common stock upon the redemption of 2,400 non-managing member units of our subsidiary, HCPI/Tennessee, LLC (“HCPI/TN”), to a non-managing member of HCPI/TN. The shares of our common stock were issued in a private placement to an accredited investor pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. We did not receive any cash proceeds from the issuance of shares of our common stock to the non-managing member upon redemption of the units, although we did acquire non-managing member units of HCPI/TN in exchange for the shares of common stock we issued to the non-managing member.

(b)

None.

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(c)

The table below sets forth information with respect to purchases of our common stock made by us or on our behalf or by any “affiliated purchaser,” as such term is defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, during the three months ended September 30, 2012.

Period Covered	Total Number Of Shares Purchased(1)	Average Price Paid Per Share		Total Number Of Shares (Or Units) Purchased As Part Of Publicly Announced Plans Or Programs	Maximum Number (Or Approximate Dollar Value) Of Shares (Or Units) That May Yet Be Purchased Under The Plans Or Programs
July 1-31, 2012	4,037	$	44.41	—	—
August 1-31, 2012	934	46.94		—	—
September 1-30, 2012	1,652	46.86		—	—
Total	6,623	45.38		—	—

(1)Represents restricted shares withheld under our 2006 Performance Incentive Plan (the “2006 Incentive Plan”), to offset tax withholding obligations that occur upon vesting of restricted shares. Our 2006 Incentive Plan provides that the value of the shares withheld shall be the closing price of our common stock on the date the relevant transaction occurs.

Item 5.  Other Information.

(a)   On October 25, 2012, the Company entered into a new Employment Agreement (the “Employment Agreement”) with James W. Mercer, the Company’s Executive Vice President, General Counsel and Corporate Secretary.

The Employment Agreement provides that Mr. Mercer will continue to receive a base salary of $500,000 annually, which may subsequently be increased by the Company but not reduced, and an annual incentive bonus based on Company and individual performance criteria as determined by the Compensation Committee. Mr. Mercer is also entitled to participate in the Company’s benefit plans made available generally to the Company’s senior executives. The Employment Agreement provides for a three-year term, which will be automatically extended for additional one-year periods unless either party gives prior written notice that the term will not be extended.

If Mr. Mercer’s employment with the Company is terminated by the Company without cause or by Mr. Mercer for good reason (as such terms are defined in the Employment Agreement), Mr. Mercer will be entitled to a severance benefit, to be paid in a lump sum, equal to the sum of (i) his base salary at the annualized rate in effect on his termination date, and (ii) the greater of his annual incentive bonus for the last fiscal year of the Company for which the Compensation Committee of the Company’s Board of Directors has determined bonuses for the Company’s executives generally prior to the termination date (the “last bonus year”) or the average of his annual incentive bonuses for the last three fiscal years of the Company ending with the last bonus year. In addition, any portion of Mr. Mercer’s then-outstanding equity awards granted by the Company that are scheduled to vest within two years following the termination date will immediately vest (or, in the case of awards subject to performance-based vesting requirements, the award will be held open until the end of the relevant performance period and, as to any portion of the award eligible to vest based on the level of performance achieved, the executive will be credited with two additional years of service after the termination date for purposes of applying any time-based vesting requirements applicable to the award). Mr. Mercer’s right to receive the severance benefits described above is contingent on the executive providing a general release of claims in favor of the Company and complying with certain non-solicitation and other restrictive covenants set forth in the Employment Agreement. In addition, in the event of termination of the executive’s employment as described above, the executive would generally be entitled to reimbursement for his COBRA premiums for continued health coverage for up to 12 months following his termination date.

In the event the executive becomes entitled to severance benefits under the Company’s Change in Control Severance Plan (the “CIC Plan”), he would be entitled to receive the benefits provided under the CIC Plan and not the benefits provided under his Employment Agreement.

The foregoing description of certain provisions of the Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Employment Agreement filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 and incorporated herein by reference.

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Item 6. Exhibits

3.1	Articles of Restatement of HCP (incorporated by reference to Exhibit 3.1 to HCP’s Registration Statement on Form S-3 (Registration No. 333-182824), filed on July 24, 2012).
10.1	Employment Agreement, dated October 25, 2012, by and between HCP, Inc. and James W. Mercer. *†
10.2	Change in Control Severance Plan. *†
31.1	Certification by James F. Flaherty III, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(a). *
31.2	Certification by Timothy M. Schoen, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(a). *
32.1	Certification by James F. Flaherty III, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350. **
32.2	Certification by Timothy M. Schoen, HCP’s Principal Financial Officer, Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350. **
101.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema Document.*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.*

*	Filed herewith.
**	Furnished herewith.
†	Management Contract or Compensatory Plan or Arrangement.

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SIGNATURES

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

Date: October 30, 2012	HCP, Inc.
	(Registrant)
	/s/ JAMES F. FLAHERTY III
	James F. Flaherty III
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
	/s/ TIMOTHY M. SCHOEN
	Timothy M. Schoen
	Executive Vice President-
	Chief Financial Officer
	(Principal Financial Officer)
	/s/ SCOTT A. ANDERSON
	Scott A. Anderson
	Senior Vice President-
	Chief Accounting Officer
	(Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

HCP, INC.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into on October 25, 2012 (the “Effective Date”), by and between HCP, Inc. (the “Company”) and James W. Mercer (“Executive”).  Where the context permits, references to “the Company” shall include the Company and any successor of the Company.

W I T N E S S E T H:

WHEREAS, the Company and Executive mutually desire to set forth herein the terms and conditions pursuant to which Executive will continue to serve as the Executive Vice President, General Counsel and Corporate Secretary of the Company, effective as of the Effective Date.

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

1.SERVICES AND DUTIES.  Subject to Section 2 hereof, from and after the Effective Date, Executive shall, pursuant to the terms of this Agreement, be employed by the Company as the Executive Vice President, General Counsel and Corporate Secretary of the Company.  The principal location of Executive’s employment with the Company shall be at the Company’s headquarters in Long Beach, California, although Executive understands and agrees that Executive may be required to travel from time to time for business reasons.  During the Term (as defined in Section 2), Executive shall be a full-time employee of the Company, shall dedicate substantially all of Executive’s working time to the Company, and shall have no other employment or other business ventures which are undisclosed to the Company or which conflict with Executive’s duties under this Agreement.  Executive shall have such authorities, duties and responsibilities as the Company’s chief executive officer (or his delegate) may from time to time assign to him and reasonably consistent with those customarily performed by an officer holding the position set forth above with a company having a similar size and nature of the Company. Notwithstanding the foregoing, nothing herein shall prohibit Executive from participating in trade associations or industry organizations which are related to the business of the Company or engaging in charitable, civic or political activities, so long as such interests do not materially interfere, individually or in the aggregate, with the performance of Executive’s duties hereunder.  Executive agrees that he shall comply with the corporate policies of the Company as they are in effect from time to time throughout the Term (including, without limitation, the Company’s business conduct and ethics policies, as they may change from time to time).

2.TERM.  Executive’s employment under the terms and conditions of this Agreement shall commence on the Effective Date.  Such employment shall continue for an initial term of three (3) years following the Effective Date (the “Initial Term”), which will be automatically extended on the last day of the Initial Term for an additional one (1)-year term and on each anniversary of the last day of the Initial Term thereafter, unless either Executive or the Company has given written notice to the other no less than sixty (60) days prior to the expiration of the Term then in effect that the Term shall not be so extended.  As used herein, the “Term”

shall refer to the Initial Term and any extension thereof pursuant to the preceding sentence.  Provision of notice that the Term shall not be extended or further extended, as the case may be, shall not constitute a breach of this Agreement and shall not constitute “Good Reason” for purposes of this Agreement.  Notwithstanding the above, the Term shall earlier expire immediately upon the termination of Executive’s employment pursuant to Section 5 hereof.

3.COMPENSATION.

a)Base Compensation.  The Company shall pay to Executive an initial base salary in the amount of $500,000 per annum in accordance with the regular payroll practices of the Company (the base salary as in effect from time to time, the “Base Compensation”).  Payment of the Base Compensation is subject to customary employee contributions to any benefit programs in which Executive is enrolled.  The Base Compensation may be increased from time to time at the Company’s sole discretion, but in no event shall the Base Compensation be reduced without Executive’s approval.

b)Annual Cash Bonus.  For each calendar year during the Term, Executive shall be eligible to receive an annual cash incentive award (an “Annual Bonus”), the actual amount of such bonus will be determined based on the achievement of performance criteria relating to both Executive and the Company, as determined each year in good faith by the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of the Company (or any successor thereto).  The Annual Bonus, if any, shall be paid to Executive by no later than March 15 of the year following the year to which such Annual Bonus relates, so long as Executive is actively employed by the Company and has not provided a notice of resignation to the Company or received a notice of termination from the Company as of the date of payment.

c)Tax Withholding.  All taxable compensation payable to Executive pursuant to this Agreement shall be subject to any applicable withholding taxes and such other taxes as are required under Federal law or the law of any state or governmental body to be collected with respect to compensation paid by the Company to Executive.

4.BENEFITS AND PERQUISITES.

a)Retirement and Welfare Benefits.  During the Term, Executive shall be eligible to participate in all fringe benefits, perquisites, and such other benefit plans and arrangements as are made available generally to the Company’s senior executives.  The benefits described herein shall be subject to the applicable terms of the applicable plans and shall be governed in all respects in accordance with the terms of such plans as from time to time in effect.  Nothing in this Section 4, however, shall require the Company to maintain any benefit plan or provide any type or level of benefits to its current or former employees, including Executive.

b)Paid Time Off.  During the Term, Executive shall be entitled to accrue vacation (at a rate of not less than 24 days per full calendar year), in accordance with and subject to the Company’s vacation policies applicable to its executives generally as such policies are in effect from time to time.

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c)Reimbursement of Expenses.  The Company shall reimburse Executive for any and all expenses reasonably incurred by Executive during the Term in performing Executive’s duties hereunder, including travel, meals and accommodations, upon submission by Executive of vouchers or receipts and in compliance with such rules and policies relating thereto as the Company may from time to time adopt.  Executive agrees to promptly submit and document any reimbursable expenses in accordance with the Company’s expense reimbursement policies to facilitate the timely reimbursement of such expenses.

5.TERMINATION.  The Term and Executive’s employment hereunder may be terminated (1) by the Company for “Cause” (as defined and determined below), effective on the date on which a written notice to such effect (a “Cause Termination Notice”) is delivered to Executive; (2) by the Company at any time without Cause (which includes pursuant to an election by the Company not to renew the Term, the written notice (pursuant to Section 2) of which shall be deemed a notice of termination of Executive’s employment hereunder), effective sixty (60) days following the date on which a written notice to such effect is delivered to Executive; (3) by Executive for “Good Reason” (as defined and determined below), in accordance with the notice, cure and termination periods set forth in the definition of such term below; or (4) by Executive at any time other than for Good Reason, effective sixty (60) days following the date on which a written notice to such effect is delivered to the Company (or its successors).  In the event that the Company provides Executive notice of termination without Cause pursuant to clause (2) or Executive provides the Company notice of termination pursuant to clause (3) or clause (4), the Company will have the option to place the Executive on paid administrative leave during the notice period.  Upon any termination of Executive’s employment hereunder, Executive shall be entitled to receive the following:  (i) any accrued but unpaid Base Compensation (to be paid as provided in Section 3(a)); (ii) reimbursement for expenses incurred by Executive prior to the date of termination in accordance with Section 4(c) hereof; (iii) vested benefits, if any, to which Executive may be entitled under the Company’s employee benefit plans as of the date of termination; and (iv) any additional amounts or benefits due under any applicable plan, program, agreement or arrangement of the Company or its Affiliates (the amounts and benefits described in clauses (i) through (iv) above, collectively, the “Accrued Benefits”).  Accrued Benefits under this Section 5 shall in all events be paid in accordance with the Company’s payroll procedures, expense reimbursement procedures or plan terms, as applicable, or in accordance with applicable law.

a)Termination by the Company for Cause or by Executive without Good Reason.  If Executive’s employment hereunder is terminated during the Term by the Company for Cause or by Executive without Good Reason, Executive shall not be entitled to any further compensation or benefits other than the Accrued Benefits.

b)Termination by the Company without Cause or by Executive With Good Reason.  Subject to Section 5(e) below, if Executive’s employment hereunder is terminated during the Term (I) by the Company other than for Cause (and other than due to Executive’s death or “Disability” (as defined below) or a decision by the Company not to extend the Term as provided in Section 2), or (II) by Executive with Good Reason, then Executive shall be entitled to (1) the Accrued Benefits and (2) subject to Executive’s execution of a general release of claims in the form attached hereto as Exhibit A (with such changes as may be reasonably required to such form to help ensure its enforceability in light of any changes in applicable law)

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(the “Release”) within twenty-one (21) days following such termination of employment, and the expiration of any revocation period with respect to such Release provided by applicable law, and provided that Executive does not materially breach the restrictive covenants set forth in Section 6 hereof or in any other agreement between Executive and the Company or to which Executive is a party (collectively, “Restrictive Covenants”) or any other ongoing obligation to which Executive is subject as of the date of termination:

(i)an amount equal to one (1) times the sum of (x) Executive’s Base Compensation, at the rate in effect on the date of Executive’s termination of employment and (y) the greater of (I) Executive’s annual incentive bonus paid or payable for the last fiscal year of the Company for which the Compensation Committee has determined bonuses for the Company’s executives generally prior to the date of such termination or (II) the average of the Executive’s annual incentive bonuses for the three consecutive fiscal years of the Company ending with the last fiscal year of the Company for which the Compensation Committee has determined bonuses for the Company’s executives generally prior to the date of such termination (or, if less, the average of Executive’s annual incentive bonuses for the entire period of his employment with the Company), such amount to be paid in a lump sum in the month following the month in which Executive’s Separation from Service (as defined below) occurs; and

(ii)each equity-based award granted by the Company to Executive that is outstanding on the date of termination will immediately vest as to any portion of the award that is scheduled to vest with two (2) years following the termination date; provided, however, that as to any such award that is subject to performance-based vesting requirements for which the applicable performance period is in progress on the termination date, such award shall remain open until the end of such performance period and, upon a determination thereafter by the Compensation Committee as to the relevant level of performance achieved and the portion of the award eligible to vest based on such determination, Executive will be credited with two (2) years of continued service, as measured from the date of Executive’s termination of employment, for purposes of applying any time-based vesting requirements applicable to the award.  Any portion of any equity-based award granted by the Company to Executive that is not vested after giving effect to the foregoing acceleration provisions shall terminate as of Executive’s date of termination (or, in the case of a performance-based award, as of the date of the Compensation Committee’s determination of the relevant level of performance achieved).

c)Termination Due to Death or Disability.  The Term and Executive’s employment hereunder shall automatically terminate upon Executive’s death or Disability.  If Executive’s employment hereunder terminates due to death or Disability, then Executive shall not be entitled to any further compensation or benefits other than the Accrued Benefits.

d)Welfare Benefit Continuation.  Subject to Section 5(e) below, in the event that Executive’s employment hereunder is terminated other than (i) by the Company for Cause or (ii) by Executive without Good Reason, the Company shall reimburse Executive for the full amount of the COBRA premiums incurred by Executive during the 12 month period following the date of such termination, provided that (A) such reimbursement does not result in adverse tax consequences to the Company under Section 105(h) of the Code or otherwise and (B) such reimbursement shall immediately cease in the event that Executive becomes eligible to participate in the health insurance plan of a subsequent employer or other service recipient (or at such time as the Company ceases to offer group medical coverage to its active executive employees or the Company is otherwise under no obligation to offer COBRA continuation coverage to Executive).

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e)Change in Control Plan.  Notwithstanding the foregoing provisions, in the event that Executive would be entitled to severance benefits under the Company’s Change in Control Severance Plan, or any successor plan thereto (the “CIC Plan”), in connection with a termination of his employment described in Section 5(b) or Section 5(d) above, Executive will be entitled to receive the benefits provided under the CIC Plan.  In no event will Executive be entitled to receive severance benefits under both the CIC Plan and this Agreement.

f)Definitions.  For purposes of this Agreement:

“Affiliate” means an affiliate of the Company (or other referenced entity, as the case may be) as defined in Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended.

“Cause” means the occurrence of any of the following: (i) Executive’s willful and continued failure to perform his duties with the Corporation (other than any such failure resulting from his or her incapacity due to physical or mental illness) after a written demand for performance is delivered to Executive by the Company, which demand specifically identifies the manner in which the Company believes that Executive has not performed his duties; (ii) Executive’s willful and continued failure to follow and comply with the policies of the Company as in effect from time to time (other than any such failure resulting from Executive’s incapacity due to physical or mental illness) after a written demand for performance is delivered to Executive by the Company, which demand specifically identifies the manner in which the Company believes that Executive has not followed or complied with such Company policies; (iii) Executive’s willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to the Company; (iv) Executive’s willful engagement in illegal conduct or gross misconduct, in each case which is materially and demonstrably injurious to the Company; (v) Executive’s breach of any provision of Section 6 of this Agreement; or (vi) Executive’s indictment for, conviction of, or a plea of guilty or nolo contendere to any felony.

For purposes of clarification, if the definition of “Cause” set forth above, and the process associated with it, differs from the definition of cause (or similar term) in any stock incentive plan or agreement of the Company or any of its Affiliates, including the Company’s incentive stock award plan or any other such plan or agreement under which a grant of restricted stock shall be made, the definition set forth above shall control.

“Disability” means that Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan, or disability plan, covering employees of the company or an Affiliate of the Company.

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“Good Reason” means the occurrence, without the express prior written consent of Executive, of any of the following events: (i) the failure by the Company to pay the Executive any portion of Executive’s Base Compensation within ten (10) days of the date such compensation is due, (ii) the relocation of Executive’s principal location of employment, to a location outside a fifty (50) mile radius from Long Beach, California, (iii) any material diminution of Executive’s duties, responsibilities or authorities hereunder, (iv) any material breach by the Company of any of its material obligations to Executive, or (v) any failure of the Company to obtain the assumption in writing of its obligations under this Agreement by any successor to all or substantially all of its business or assets within 30 days after any reconstruction, amalgamation, combination, merger, consolidation, sale, liquidation, dissolution or similar transaction, unless such assumption occurs by operation of law.  Notwithstanding the foregoing, “Good Reason” to terminate Executive’s employment shall not exist unless (a) a written notice has first been delivered to the Board by Executive (the “Good Reason Notice”), which Good Reason Notice (1) specifically identifies the event(s) Executive believes constitutes Good Reason and (2) provides 30 days from the date of such Good Reason Notice for the Company to cure such circumstances (the “Good Reason Period”) and (b) the Company has failed to timely cure such circumstances.  If the Company fails to timely cure such circumstances in accordance with the foregoing, Executive may send a notice to the Board that he is terminating his employment for Good Reason (“Good Reason Termination Notice”), in which case his employment hereunder shall thereupon be terminated for Good Reason.  If any Good Reason Notice to the Board shall not have been delivered by Executive within ninety (90) days following the date Executive becomes aware of the purported existence of a Good Reason event, or any Good Reason Termination Notice to the Board shall not have been delivered by Executive within thirty (30) days following the end of the Good Reason Period, then any purported termination of Executive’s employment relating to the applicable event shall not be a termination for Good Reason under this Agreement.

As used herein, a “Separation from Service” occurs when Executive dies, retires, or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder.

g)Resignation as Officer or Director.  Upon a termination of Executive’s employment hereunder, unless requested otherwise by the Company, Executive shall resign each position (if any) that Executive then holds as an officer of the Company or as an officer or director of any of their Affiliates.

h)Section 409A.  The intent of the parties is that payments and benefits under this Agreement shall not result in the imputation of any tax, penalty or interest pursuant to Section 409A of the Code, and accordingly, to the maximum extent permitted, this Agreement shall be construed and interpreted consistent with that intent.  Notwithstanding anything contained herein to the contrary, Executive shall not be considered to have terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A of the Code until the Executive has incurred a “separation from service” from the Company within the meaning of Section 409A of the Code.  Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code.  Without limiting the foregoing and notwithstanding

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anything contained herein to the contrary, to the extent required in order to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following an Executive’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s separation from service (or, if earlier, the Executive’s date of death).  To the extent required in order to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code, amounts reimbursable to Executive under this Agreement shall be paid to Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in kind benefits provided to Executive) during one year may not affect amounts reimbursable or provided in any subsequent year.  The Company makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment.

6.COVENANTS.  Executive acknowledges that during the period of his employment with the Company or any Affiliate, he shall have access to the Company’s “Confidential Information” (as defined below) and will meet and develop relationships with the Company’s potential and existing suppliers, financing sources, clients, customers and employees. Accordingly, Executive agrees to the following provisions of this Section 6 (in addition to Executive’s confidentiality obligations to the Company and its subsidiaries pursuant to the Company’s policies as in effect from time to time).

a)Noncompetition.

(i)Executive agrees that during the period of his employment with the Company, Executive shall not:  (A) directly or indirectly, engage in, manage, operate, control, supervise, or participate in the management, operation, control or supervision of any business or entity which competes with (any such action individually and in the aggregate, to compete with) the Company or any of its subsidiaries (collectively, the “Company Group”) or serve as an employee, consultant or in any other capacity for such business or entity; (B) have any ownership or financial interest, directly, or indirectly, in any competitor including, without limitation, as an individual, partner, shareholder (other than as a shareholder of a publicly-owned corporation in which the Executive owns less than five percent (5%) of the outstanding shares of such corporation), officer, director, employee, principal, agent or consultant, or (C) serve as a representative of any business organization; any or all of which, without first obtaining written approval of the chief executive officer of the Company.  Executive also agrees that as long as he is employed by the Company, he will not undertake the planning or organization of any business activity competitive with the Company Group.

b)Solicitation of Employees, Etc.  Executive agrees that during the period of his employment with the Company and for twelve (12) months thereafter, Executive shall not, directly or indirectly, other than in connection with carrying out his duties during the period of his employment with the Company, solicit or induce any of the employees or consultants of the Company Group (or individuals who served as employees or consultants of the Company Group at any time during the preceding nine (9) month period):  (i) to terminate their employment or relationship with the Company Group, and/or (ii) to work for the Executive or any competitor of the Company Group.

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c)Solicitation of Clients, Etc.  Executive agrees that during the period of his employment with the Company and for twelve (12) months thereafter, he will not use Confidential Information (as defined below) to, directly or indirectly, solicit, take away, divert or attempt to divert, the business or patronage of any clients or customers of the Company for the purpose of providing services that materially compete with the products provided by the Company at the time of Executive’s termination.  For purposes of this Agreement, “products provided by the Company” includes not only products and services which the Company then provides and/or markets or sells, but also those which it is in the process of researching and/or developing, at the time of Executive’s termination, and/or as to which, at the time of Executive’s termination, the Company has a strategic business plan in place to research, develop and/or market at some time in the future.  The restrictions on soliciting or providing services to customers of the Company apply to:  (i) any customer or customer contact of the Company with whom Executive has had any business relations during his employment (whether before or after the Effective Date) with the Company; and (ii) any customer or customer contact who was a customer or customer contact of the Company on the date of Executive’s termination from the Company or during the twelve-month period prior to such termination, or who was a prospective customer or customer contact of the Company with whom the Company had actually met with, or had written or telephonic communications with, during said period(s).

d)Disparaging Comments.  Executive agrees not to make critical, negative or disparaging remarks about the Company or any of its Affiliates, including, but not limited to, comments about any of its assets, services, management, business or employment practices, and not to voluntarily aid or voluntarily assist any person in any way with respect to any third party claims pursued against the Company Group.  Nothing in this Section 6(d) will prevent Executive or the Company from responding fully and accurately to any question, inquiry or request for information when required by applicable law or legal process.

e)Confidentiality.  The Company and the Executive acknowledge that:

(i)The Company’s business is highly competitive;

(ii)The essence of that portion of the Company’s business in which the Executive will be involved consists, in large degree, of trade secrets, proprietary or confidential business or financial affairs information, materials, know-how (whether or not in writing), technology, product information, personnel information regarding its employees, and intellectual property belonging to the Company and confidential and proprietary business and client relationships (all of the foregoing will be referred to collectively as “Trade Secrets”), which have been developed at great investment of time and resources by the Company Group so as to engender substantial good will of the Company, all of which are and will be the exclusive property of the Company, protected and kept secret by the Company; and

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(iii)Without limiting Executive’s obligations under the foregoing, the Executive agrees that during the period of his employment with the Company and at all times thereafter, Executive shall keep secret and retain in strictest confidence and shall not use for his benefit or the benefit of others, except in connection with the business and affairs of the Company, all confidential information of and confidential matters (whether available in written, electronic form or orally) relating to (A) the Company Group’s pricing and business (including, without limitation, the strategies employed by and the actual investments of any member of the Company Group and the contemplated business strategies and/or investments of any member of the Company Group), (B) all corporations or other business organizations in which the Company Group has or has had an investment and (C) third parties learned by Executive heretofore or hereafter directly or indirectly in connection with Executive’s employment with the Company or from the Company Group (the “Confidential Information”).  In consideration of, and as a condition to, continued access to Confidential Information and without prejudice to or limitation on any other confidentiality obligation imposed by agreement or law, Executive hereby agrees to undertake to use and protect Confidential Information in accordance with restriction placed on its use or disclosure.  Without limiting the foregoing, Executive shall not disclose such Confidential Information to any director, officer, partner, employee or agent of the Company Group unless in Executive’s reasonable good faith judgment, such person has a need to know such Confidential Information in furtherance of the Company Group’s business, and (except in connection with the business and affairs of the Company) Executive shall not disclose Confidential Information to anyone outside of the Company Group except with the Company’s express written consent.

(iv)Executive acknowledges that the Company’s rights in its Trade Secrets and Confidential Information would be misappropriated should the Executive use or disclose to others the Trade Secrets and/or Confidential Information outside the scope of his employment pursuant to this Agreement.

(v)Executive agrees that during the period of his employment with the Company, Executive shall not directly or indirectly, use, disseminate, or disclose, in whole or in part, any of the Company Group’s Trade Secrets to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever, other than (A) in the regular and proper scope and course of Executive’s employment with Company, or (B) as required by law, provided, however, that Executive will give Company reasonable advance notice of any such disclosure or use that is required by law.

(vi)As used in this Agreement, each of the terms “Trade Secrets” and “Confidential Information” will not include any information that becomes generally known to the public or within the relevant trade or industry unless it becomes known due to Executive’s violation of this Agreement.

f)Cooperation.  Executive agrees that at all times following the termination of his employment, Executive will cooperate in all reasonable respects with the Company and its Affiliates in connection with (i) any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory or otherwise) brought by or against the Company or any of its Affiliates, or (ii) any audit of the financial statements of the Company or any Affiliate with respect to the period of time when Executive was employed by the Company or any Affiliate, in each case to the extent the Company reasonably deems Executive’s cooperation necessary.  Executive shall be reimbursed for all reasonable out-of-pocket expenses incurred by Executive as a result of such cooperation.  With respect to any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory or otherwise) brought against Executive in connection with his employment by the Company, the Company will honor, and proceed in accordance with, its bylaws as in effect from time to time.

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g)No Limitation.  Nothing contained in this Section 6 shall limit any common law or statutory obligation that Executive may have to the Company or any of its Affiliates.  For purposes of all provisions of this Section 6, the “Company” refers to the Company and any incorporated or unincorporated Affiliates of the Company, including any entity which becomes Executive’s employer as a result of any reorganization or restructuring of the Company for any reason.

h)Acknowledgement.  Executive agrees and acknowledges that each restrictive covenant in this Section 6 is reasonable as to duration, terms and geographical area and that the same protects the legitimate interests of the Company and its Affiliates, imposes no undue hardship on Executive, is not injurious to the public, and that, notwithstanding any provision in this Agreement to the contrary, any violation of this restrictive covenant shall be specifically enforceable in any court of competent jurisdiction.  Executive agrees and acknowledges that a portion of the compensation paid to Executive under this Agreement will be paid in consideration of the covenants contained in this Section 6, the sufficiency of which consideration is hereby acknowledged.  If any provision of this Section 6 as applied to Executive or to any circumstance is adjudged by a court with jurisdiction upon short notice to be invalid or unenforceable, the same shall in no way affect any other circumstance or the validity or enforceability of any other provisions of this Section 6.  If the scope of any such provision, or any part thereof, is too broad to permit enforcement of such provision to its full extent, Executive agrees that the court making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced.  Executive agrees and acknowledges that the breach of this Section 6 will cause irreparable injury to the Company and upon breach of any provision of this Section 6, the Company shall be entitled to seek injunctive relief, specific performance or other equitable relief by any court with jurisdiction upon short notice; provided, however, that this shall in no way limit any other remedies which the Company may have (including, without limitation, the right to seek monetary damages).  Each of the covenants in this Section 6 shall be construed as an agreement independent of any other provisions in this Agreement.

i)Permitted Statements.  Nothing in this Agreement shall restrict either party from making truthful statements (i) when required by law, subpoena, court order or the like; (ii) when requested by a governmental, regulatory, or similar body or entity; or (iii) in confidence to a professional advisor for the purpose of securing professional advice.

7.ASSIGNMENT.  This Agreement, and all of the terms and conditions hereof, shall bind the Company and its successors and assigns and shall bind Executive and Executive’s heirs, executors and administrators.  Neither this Agreement, nor any of the Company’s rights or obligations hereunder, may be assigned or otherwise subject to hypothecation by Executive, and any such attempted assignment or hypothecation shall be null and void.  The Company may assign the rights and obligations of the Company hereunder, in whole or in part, to any of the Company’s Affiliates or parent corporations, or to any other successor or assign in connection with the sale of all or substantially all of the Company’s assets or stock or in connection with any merger, acquisition and/or reorganization, provided the assignee assumes the obligations of the Company hereunder.

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8.GENERAL.

a)Notices.  Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of one (1) business day following personal delivery (including personal delivery by telecopy or telex), or the third (3rd) business day after mailing by first class mail to the recipient at the address indicated below:

To the Company:

Chief Executive Officer

HCP, Inc.

3760 Kilroy Airport Way, Suite 300

Long Beach, CA 90806

To Executive:

At the address shown in the Company’s personnel records

or to such other address or to the attention of such other person as the recipient party will have specified by prior written notice to the sending party.

b)Severability.  Any provision of this Agreement which is deemed by a court of competent jurisdiction to be invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.  If any covenant should be deemed invalid, illegal or unenforceable by a court of competent jurisdiction because its scope is considered excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable.

c)Entire Agreement.  This document, together with the CIC Plan and the other documents referred to herein and all restrictive covenants in any and all agreements between Executive and the Company or to which Executive is a party (the “Integrated Document”), constitutes the final, complete, and exclusive embodiment of the entire agreement and understanding between the parties related to the subject matter hereof and except as otherwise explicitly set forth in the Integrated Document, supersedes and preempts any prior or contemporaneous understandings, agreements, or representations by or between the parties, written or oral.  Without limiting the generality of the foregoing, the Integrated Document supersedes in its entirety Executive’s previous Employment Agreement, dated May 31, 2011, with the Company.

d)Counterparts.  This Agreement may be executed on separate counterparts, any one (1) of which need not contain signatures of more than one (1) party, but all of which taken together will constitute one and the same agreement.  Signatures delivered by facsimile or “pdf” shall be effective for all purposes.

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e)Amendments.  No amendments or other modifications to this Agreement may be made except by a writing signed by all parties.  No amendment or waiver of this Agreement requires the consent of any individual, partnership, corporation or other entity not a party to this Agreement.  Nothing in this Agreement, express or implied, is intended to confer upon any third person any rights or remedies under or by reason of this Agreement.

f)Choice of Law.  All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the laws of the State of California without giving effect to principles of conflicts of law of such state.

g)Survivorship.  The provisions of this Agreement necessary to carry out the intention of the parties as expressed herein shall survive the termination or expiration of this Agreement.

h)Waiver.  The waiver by either party of the other party’s prompt and complete performance, or breach or violation, of any provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation, and the failure by any party hereto to exercise any right or remedy which it may possess hereunder shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.  No waiver shall be deemed to have occurred unless set forth in a writing executed by or on behalf of the waiving party.  No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

i)Headings.  The subject heading of this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision hereof.

j)Construction.  The parties acknowledge that this Agreement is the result of arm’s-length negotiations between sophisticated parties, each afforded representation by legal counsel.  Each and every provision of this Agreement shall be construed as though both parties participated equally in the drafting of the same, and any rule of construction that a document shall be construed against the drafting party shall not be applicable to this Agreement.

9.ARBITRATION.

a)If any legally actionable dispute arises which cannot be resolved by mutual discussion between the parties, each of Executive and the Company agree to resolve that dispute by arbitration before an arbitrator experienced in employment law.  Said arbitration will be conducted pursuant to the JAMS Employment Arbitration Rules and Procedures and applicable California law.  The parties agree that this arbitration agreement includes any such disputes that the Company and its related entities may have against Executive, or Executive may have against the Company and/or its related entities and/or employees, arising out of or relating to Executive’s employment or its termination including any claims of discrimination or harassment in violation of applicable law and any other aspect of Executive’s compensation, training, employment, or its termination.

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b)The parties further agree that this arbitration provision is the exclusive and binding remedy for any such dispute and will be used instead of any court action, which is hereby expressly waived, except for any request by either party for temporary or preliminary injunctive relief pending arbitration in accordance with applicable law or an administrative claim with an administrative agency.  THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JUDGE OR JURY.

c)The parties agree that the arbitration shall be conducted in Los Angeles County, California, unless otherwise mutually agreed.

d)The provisions of Section 1281.8 of the California Code of Civil Procedure with respect to provisional remedies will apply to any such arbitration.  In any such arbitration proceeding, any hearing must be transcribed by a certified court reporter and the arbitrator’s decision must be set forth in writing, consistent with the law of California and supported by essential findings of fact and conclusion of law.  The arbitrator may issue any remedy or award available under applicable law but may not add to, modify, change or disregard any lawful terms of this Agreement or issue an award or remedy that is contrary to the law of California.  The parties further agree that each party shall pay its own costs and attorneys’ fees, if any; provided, however, the Company shall pay any costs and expenses that Employee would not otherwise have incurred if the dispute had been adjudicated in a court of law, rather than through arbitration, including the arbitrator’s fee, any administrative fee, and any filing fee in excess of the maximum court filing fee in the jurisdiction in which the arbitration is commenced.  If either party prevails on a statutory claim that affords the prevailing party an award of attorneys’ fees, then the arbitrator may award reasonable attorneys’ fees to the prevailing party, consistent with applicable law.

10.REPRESENTATIONS.  Each party represents and warrants that (a) such party is not subject to any contract, arrangement, agreement, policy or understanding, or to any statute, governmental rule or regulation, that in any way limits such party’s ability to enter into and fully perform such party’s obligations under this Agreement; (b) such party is not otherwise unable to enter into and fully perform such party’s obligations under this Agreement; and (c) upon the execution and delivery of this Agreement by both parties, this Agreement shall be such party’s valid and binding obligation, enforceable against such party in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

11.INCONSISTENCIES.  In the event of any inconsistency between any provision of this Agreement and any provision of any other Company arrangement, the provisions of this Agreement shall control to the extent more favorable to Executive unless Executive otherwise agrees in a writing that expressly refers to the provision of this Agreement whose control he is waiving.

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12.BENEFICIARIES/REFERENCES.  Executive shall be entitled, to the extent permitted under applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit hereunder following Executive’s death by giving written notice thereof.  In the event of Executive’s death or a judicial determination of his incompetence, references in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

[Remainder of page is left blank intentionally]

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IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND THEREBY, the parties hereto have executed and delivered this Agreement as of the year and date first above written.

THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION WHEREBY EACH PARTY AGREED TO SUBMIT DISPUTES TO BINDING ARBITRATION.

HCP, INC.
/s/ James F. Flaherty III
By:	James F. Flaherty III
	Chairman and Chief Executive Officer
EXECUTIVE
/s/ James W. Mercer
James W. Mercer

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Exhibit A

FORM OF RELEASE AGREEMENT1

This Release Agreement (this “Release Agreement”) is entered into this        day of                    20    , by and between James W. Mercer, an individual (“Executive”), and HCP, Inc., a Maryland corporation (the “Company”).

WHEREAS, Executive has been employed by the Company; and

WHEREAS, Executive’s employment by the Company has terminated and, in connection with the Employment Agreement between the Company and Executive dated   January 26, 2012 (the “Employment Agreement”), the Company and Executive desire to enter into this Release Agreement upon the terms set forth herein;

NOW, THEREFORE, in consideration of the covenants undertaken and the releases contained in this Release Agreement, and in consideration of the obligations of the Company (or one of its subsidiaries) to pay severance benefits (conditioned upon this Release Agreement) under and pursuant to the Employment Agreement, Executive and the Company agree as follows:

1.Release.  Executive, on behalf of himself or herself, his or her descendants, dependents, heirs, executors, administrators, assigns, and successors, and each of them, hereby acknowledges full and complete satisfaction of and covenants not to sue and fully releases and discharges the Company and each of its parents, subsidiaries and affiliates, past and present, as well as its and their trustees, directors, officers, members, managers, partners, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, hereinafter together and collectively referred to as the “Releasees,” with respect to and from any and all claims, wages, demands, rights, liens, agreements or contracts (written or oral), covenants, actions, suits, causes of action, obligations, debts, costs, expenses, attorneys’ fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden (each, a “Claim”), which he or she now owns or holds or he or she has at any time heretofore owned or held or may in the future hold as against any of said Releasees (including, without limitation, any Claim arising out of or in any way connected with Executive’s service as an officer, director, employee, member or manager of any Releasee, Executive’s separation from his or her position as an officer, director, employee, manager and/or member, as applicable, of any Releasee, or any other transactions, occurrences, acts or omissions or any loss, damage or injury whatever), whether known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of said Releasees, or any of them, committed or omitted prior to the date of this Release Agreement including, without limiting the generality of the foregoing, any Claim under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, the California Fair Employment and Housing Act, the California Family Rights Act, or any other federal, state or local law, regulation, or ordinance, or any Claim

1The Company may modify this form as to any individual employed outside of California.

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for severance pay, bonus, sick leave, holiday pay, vacation pay, life insurance, health or medical insurance or any other fringe benefit, workers’ compensation or disability; provided however, that the foregoing release shall not apply to any obligation of the Company to Executive pursuant to any of the forgoing:  (1) any obligation created by or arising out of the Section 5 of the Employment Agreement for which receipt or satisfaction has not been acknowledged, (2) any equity-based awards previously granted by the Company to Executive, to the extent that such awards continue after the termination of Executive’s employment with the Company in accordance with the applicable terms of such awards; (3) any right to indemnification that Executive may have pursuant to the Fourth Amended and Restated Bylaws of the Company, its corporate charter or under any written indemnification agreement with the Company (or any corresponding provision of any subsidiary or affiliate of the Company) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) that Executive may in the future incur with respect to his service as an employee, officer or director of the Company or any of its subsidiaries or affiliates; (4) with respect to any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Company (or subsidiary or affiliate) directors and officers liability insurance policy; (5) any rights to continued medical or dental coverage that Executive may have under COBRA; (6) any rights to payment of benefits that Executive may have under a retirement plan sponsored or maintained by the Company that is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended, or (7) any deferred compensation or supplemental retirement benefits that Executive may be entitled to under a nonqualified deferred compensation or supplemental retirement plan of the Company.  In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law.  Executive acknowledges and agrees that he or she has received any and all leave and other benefits that he or she has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

2.Acknowledgment of Payment of Wages.  Except for accrued vacation (which the parties agree totals approximately [        ] days of pay) and salary for the current pay period, Executive acknowledges that he/she has received all amounts owed for his or her regular and usual salary (including, but not limited to, any bonus, severance, or other wages), and usual benefits through the date of this Agreement.

3.1542 Waiver.  It is the intention of Executive in executing this Release Agreement that the same shall be effective as a bar to each and every Claim hereinabove specified.  In furtherance of this intention, Executive hereby expressly waives any and all rights and benefits conferred upon him or her by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and expressly consents that this Release Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those related to unknown and unsuspected Claims, if any, as well as those relating to any other Claims hereinabove specified. SECTION 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

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Executive acknowledges that he may hereafter discover Claims or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Release Agreement and which, if known or suspected at the time of executing this Release Agreement, may have materially affected this settlement.  Nevertheless, Executive hereby waives any right, Claim or cause of action that might arise as a result of such different or additional Claims or facts.  Executive acknowledges that he or she understands the significance and consequences of such release and such specific waiver of SECTION 1542.

4.ADEA Waiver.  Executive expressly acknowledges and agrees that by entering into this Release Agreement, Executive is waiving any and all rights or Claims that he or she may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), which have arisen on or before the date of execution of this Release Agreement.  Executive further expressly acknowledges and agrees that:

A.In return for this Release Agreement, the Executive will receive consideration beyond that which the Executive was already entitled to receive before entering into this Release Agreement;

B.Executive is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

C.Executive has voluntarily chosen to enter into this Release Agreement and has not been forced or pressured in any way to sign it;

D.Executive was given a copy of this Release Agreement on [                                  , 20    ] and informed that he or she had [twenty one (21)/forty five (45)] days within which to consider this Release Agreement and that if he or she wished to execute this Release Agreement prior to expiration of such [21-day/45-day] period, he or she should execute the Endorsement attached hereto;

E.Executive was informed that he or she had seven (7) days following the date of execution of this Release Agreement in which to revoke this Release Agreement, and this Release Agreement will become null and void if Executive elects revocation during that time.  Any revocation must be in writing and must be received by the Company during the seven-day revocation period.  In the event that Executive exercises his or her right of revocation, neither the Company nor Executive will have any obligations under this Release Agreement;

F.Nothing in this Release Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law.2

2  Whether the Executive has 21 days, 45 days, or some other period in which to consider the Release Agreement will be determined with reference to the requirements of the ADEA in order for such waiver to be valid in the circumstances.  The determination referred to in the preceding sentence shall be made by the Company in its sole discretion.  In any event, the Release Agreement will include the Executive’s acknowledgements and agreements set forth in clauses 4.A, 4.B, and 4.C.

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5.No Transferred Claims.  Executive warrants and represents that the Executive has not heretofore assigned or transferred to any person not a party to this Release Agreement any released matter or any part or portion thereof and he or she shall defend, indemnify and hold the Company and each of its affiliates harmless from and against any claim (including the payment of attorneys’ fees and costs actually incurred whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer made, purported or claimed.

6.Compliance With Employment Agreement.  Executive warrants and represents that Executive has complied fully with his or her obligations pursuant to the Employment Agreement.  Executive covenants that he or she will continue to abide by the applicable provisions of such Employment Agreement.

7.Severability.  It is the desire and intent of the parties hereto that the provisions of this Release Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Release Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Release Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

8.Counterparts.  This Release Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

9.Governing Law.  THIS RELEASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH UNITED STATES FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY UNITED STATES FEDERAL LAW, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN UNITED STATES FEDERAL LAW AND THE LAW OF THE STATE OF CALIFORNIA TO BE APPLIED.  IN FURTHERANCE OF THE FOREGOING, APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL LAW, THE INTERNAL LAW OF THE STATE OF CALIFORNIA, WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS RELEASE AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

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10.Amendment and Waiver.  The provisions of this Release Agreement may be amended and waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Release Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Release Agreement or any provision hereof.

11.Descriptive Headings.  The descriptive headings of this Release Agreement are inserted for convenience only and do not constitute a part of this Release Agreement.

12.Construction.  Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.  The language used in this Release Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.

13.Arbitration.  Any claim or controversy arising out of or relating to this Agreement shall be submitted to arbitration in accordance with the arbitration provision set forth in the Employment Agreement.

14.Nouns and Pronouns.  Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa.

15.Legal Counsel.  Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice.  Executive acknowledges and agrees that he has read and understands this Release Agreement completely, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Release Agreement and he has had ample opportunity to do so.

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The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it.  The undersigned declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

EXECUTED this                  day of                  20    , at                       , California.

“Executive”

James W. Mercer

HCP, INC.,

a Maryland corporation,

By:

Name:

Title:

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ENDORSEMENT

I, James W. Mercer, hereby acknowledge that I was given [21/45] days to consider the foregoing Release Agreement and voluntarily chose to sign the Release Agreement prior to the expiration of the [21-day/45-day] period.

I declare under penalty of perjury under the laws of the United States and the State of California that the foregoing is true and correct.

EXECUTED this  [        ] day of [                           20        ], at                           , California.

James W. Mercer

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EX-10.2

Exhibit 10.2

HCP, INC.
CHANGE IN CONTROL SEVERANCE PLAN

1.Establishment and Purpose.  HCP, Inc. (formerly Health Care Property Investors, Inc. and referred to as the “Corporation”) considers it essential to the best interests of its shareholders to foster the continuous employment of key management personnel.  In connection with this, the Corporation’s Board of Directors (the “Board”) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of the Corporation may exist and that the uncertainty and questions that it may raise among management could result in the departure or distraction of management personnel to the detriment of the Corporation and its shareholders.  The Board has decided to reinforce and encourage the continued attention and dedication of selected members of the Corporation’s management to their assigned duties without the distraction arising from the possibility of a change in control of the Corporation.  In order to induce such members of management to remain in its employ, the Corporation hereby agrees that on and after the Effective Date (as defined in Section 2), subject to the terms and conditions of this plan (the “Plan”), Participants (as defined in Section 3) shall be eligible to receive the severance benefits set forth in Section 6 of this Plan in the event that the Participants’ employment with the Corporation is terminated under the circumstances described in Section 5 of this Plan subsequent to a Change in Control (as defined in Section 4).  Upon the Effective Date, any prior severance agreement or letter between each participant and the Corporation shall terminate and be of no further effect.

2.Term of Plan.  This Plan shall commence on the date of its approval by the Compensation Committee of the Board (the “Effective Date”) and shall continue in effect through December 31, 2008 (the “Term”); provided, however, commencing on January 1, 2008 and on each January 1 thereafter, the Term shall automatically be extended for one additional year as to each Participant then in the Plan unless, not later than November 30 of the preceding year, the Corporation shall have given notice to the Participant that it does not wish to extend the Term, and if such notice is timely given, the Plan will terminate at the end of the Term then in effect as to each Participant who is timely given such notice (with no extension or further notice, as the case may be); provided, further, that if a Change in Control, occurs during the Term (or the extended Term, as the case may be), the Term shall continue in effect as to each Participant in the Plan at the time of the Change in Control for a period of not less than twenty-four (24) months beyond the month in which such Change in Control occurred.  For purposes of clarity, the Corporation may give notice of termination of the Term to all or only certain Participants. If such notice is given to only certain Participants, the Term shall continue as set forth above as to all other Participants (subject to the Corporation’s rights to similarly terminate the Term in accordance with the foregoing on some future date(s) as to any such Participants).  A Participant shall cease to be eligible for benefits under this Plan (and shall cease to be a Participant) at midnight Pacific Time on the last day of the Term applicable to that Participant.  The termination or expiration of the Term as to a Participant shall not affect the Participant’s obligations under Section 10 or affect the Participant’s right to benefits (if any) pursuant to Section 6 as to any termination of employment that occurred during such Term.

3.Participation.

(a)Participation.  The Compensation Committee of the Board (the “Committee”) shall from time to time designate in writing those employees of the Corporation (each, an “Eligible Person”) who are, subject to Section 3(b), eligible to participate in the Plan (each, a “Participant”).  Notwithstanding anything else contained herein to the contrary, the Committee shall limit the class of persons selected to participate in this Plan to a select group of management or highly compensated employees, as set forth in Sections 201, 301 and 401 of ERISA.

(b)Participation Agreement.  To the extent the Committee has designated an Eligible Person as being eligible to participate in this Plan, the Eligible Person shall become a Participant only by promptly completing, fully executing, and returning to the Corporation a participation agreement in substantially the form attached hereto as Exhibit A (or such other form as the Committee may require and provide for at the time it designates the Eligible Person as being eligible to participate in this Plan).  The Participation Agreement shall set forth the Participant’s applicable “Severance Multiplier” for the purposes of calculating the Participant’s benefits under Section 6.

(c)Termination of Employment.  Notwithstanding anything else contained in the Plan to the contrary, a Participant shall not be deemed to have terminated employment with the Corporation if his or her employment by the Corporation terminates but he or she otherwise continues, immediately after such termination of employment, as an employee of a subsidiary of the Corporation (a “Subsidiary”); provided that whether the Participant has Good Reason to terminate employment shall be determined by comparing the Participant’s authority, duties, responsibilities and other terms of employment after giving effect to such change to the Participant’s authority, duties, responsibilities and other terms of employment before giving effect to such change (in each case relative to the Corporation and its Subsidiaries on a consolidated basis, not simply with reference to the Participant’s employer).

(d)Benefit Offset.  Notwithstanding anything else contained in the Plan to the contrary, any severance benefits otherwise payable under the Plan to a Participant shall be offset or reduced by the amount of severance benefits payable or deliverable to the Participant under any other plan, program, or agreement of or with the Corporation or any of its Subsidiaries.

4.Change in Control.  No benefits shall be payable under Section 6 of this Plan unless there has been a Change in Control.  For purposes of this Plan, a Change in Control shall be deemed to occur if any of the following take place on or after the Effective Date:

(a)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”) (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (1) the then-outstanding shares of common stock of the Corporation (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this clause (a), the following acquisitions shall not constitute a Change in Control:

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(A) any acquisition directly from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any affiliate of the Corporation or a successor, (D) any acquisition by any entity pursuant to a transaction that complies with clauses (c)(1), (2) and (3) below, and (E) any acquisition by a Person who owned at least 25% of either the Outstanding Company Common Stock or the Outstanding Company Voting Securities as of the Effective Date or an affiliate of any such Person;

(b)A change in the Board or its members such that individuals who, as of the later of the Effective Date or the date that is two years prior to such change (the later of such two dates is referred to as the “Measurement Date”), constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Measurement Date whose election, or nomination for election by the Corporation’s stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination was so approved, without counting the member and his predecessor twice) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(c)Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Corporation or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Corporation, or the acquisition of assets or stock of another entity by the Corporation or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66-2/3% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Corporation or all or substantially all of the Corporation’s assets directly or through one or more subsidiaries (a “Parent”)) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent or any employee benefit plan (or related trust) of the Corporation or such entity resulting from such Business Combination or Parent) beneficially owns, directly or indirectly, more than 25% of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of 25% existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or trustees of the entity resulting from such Business Combination or a Parent were members of the Incumbent Board (determined pursuant to clause (b) above using the date that is the later of the Effective Date or the date that is two years prior to the Business Combination as the Measurement Date) at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

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(d)Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation other than in the context of a transaction that does not constitute a Change in Control under clause (c) above.

5.Termination Following Change in Control.

(a)General.  During the Term, if any of the events described in Section 4 constituting a Change in Control shall have occurred, each Participant shall be entitled to the benefits provided in Section 6(b) upon the subsequent termination of his or her employment, provided that such termination occurs during the Term and within the two (2) year period immediately following the date of such Change in Control, unless such termination is (i) because of the Participant’s death or Disability (as defined in Section 5(b)), (ii) by the Corporation for Cause (as defined in Section 5(c)), or (iii) by the Participant other than for Good Reason (including a voluntary retirement when the Participant otherwise does not have Good Reason to terminate employment).  In the event that the Participant is entitled to such benefits, such benefits shall be paid notwithstanding the subsequent expiration of the Term.  For purposes of clarity, no Participant shall be entitled to any benefits under this Plan if his or her employment with the Corporation terminates for any reason before a Change in Control occurs or more than two (2) years after a Change in Control occurs.

(b)Disability.  As to any particular Participant, “Disability” means the Participant’s inability, because of physical or mental illness or injury, to perform the essential functions of his or her customary duties to the Corporation, even with a reasonable accommodation, and the continuation of such disabled condition for a period of one hundred eighty (180) continuous days, or for not less than two hundred ten (210) days during any continuous twenty four (24) month period.

(c)Cause.  Termination by the Corporation of a Participant’s employment for “Cause” shall mean termination (i) upon the Participant’s willful and continued failure to perform his or her duties with the Corporation (other than any such failure resulting from his or her incapacity due to physical or mental illness or any such actual or anticipated failure after the Participant’s issuance of a Notice of Termination (as defined in Section 5(f)) for Good Reason, after a written demand for performance is delivered to the Participant by the Committee, which demand specifically identifies the manner in which the Committee believes that the Participant has not performed his or her duties, (ii) upon the Participant’s willful and continued failure to follow and comply with the specific and lawful directives of the Committee, as reasonably determined by the Committee (other than any such failure resulting from the Participant’s incapacity due to physical or mental illness or any such actual or anticipated failure after the Participant’s issuance of a Notice of Termination for Good Reason), after a written demand for performance is delivered to the Participant by the Committee, which demand specifically identifies the manner in which the Committee believes that the Participant has not performed his or her duties, (iii) upon the Participant’s willful and continued failure to follow and comply with the policies of the Corporation as in effect from time to time (other than any such failure

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resulting from the Participant’s incapacity due to physical or mental illness or any such actual or anticipated failure after the Participant’s issuance of a Notice of Termination (as defined in Section 5(f)) for Good Reason, after a written demand for performance is delivered to the Participant by the Committee, which demand specifically identifies the manner in which the Committee believes that the Participant has not followed or complied with such Corporation policies; (iv) upon the Participant’s willful commission of an act of fraud or dishonesty resulting in material economic or financial injury to the Corporation; (v) upon the Participant’s willful engagement in illegal conduct or gross misconduct, in each case which is materially and demonstrably injurious to the Corporation; or (vi) upon the Participant’s indictment for, conviction of, or a plea of guilty or nolo contendere to any felony.

(d)Good Reason.  A Participant shall be entitled to terminate his or her employment for Good Reason. For purposes of this Plan, “Good Reason” shall mean, without the Participant’s express written consent, the occurrence after a Change in Control and during the Term of any of the following:

(i)the assignment to the Participant of any duties inconsistent with the position in the Corporation that the Participant held immediately prior to the Change in Control, a significant adverse alteration in the nature or status of the Participant’s responsibilities or the conditions of the Participant’s employment from those in effect immediately prior to such Change in Control, or any other action by the Corporation that results in a material diminution in the Participant’s position, authority, duties or responsibilities;

(ii)the Corporation’s reduction of the Participant’s annual base salary as in effect on the Effective Date or as the same may be increased from time to time;

(iii)the relocation of the Corporation’s offices at which the Participant is principally employed immediately prior to the date of the Change in Control (the Participant’s “Principal Location”) to a location more than thirty (30) miles from such location, or the Corporation’s requiring the Participant, without the Participant’s written consent, to be based anywhere other than his or her Principal Location, provided that such relocation results in a longer commute (measured by actual mileage) for the Participant from the Participant’s primary residence to such new location and except for required travel on the Corporation’s business to an extent substantially consistent with the Participant’s current business travel obligations;

(iv)the Corporation’s failure to pay to the Participant any portion of his or her current compensation or to pay to the Participant any portion of an installment of deferred compensation under any deferred compensation program of the Corporation reasonably promptly after the date such compensation is due;

(v)the Corporation’s failure to continue in effect any material compensation or benefit plan in which the Participant participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the Corporation’s failure to continue the Participant’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Participant’s participation relative to other participants, as existed at the time of the Change in Control;

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(vi)the Corporation’s failure to obtain a satisfactory agreement from any successor to assume and agree to perform this Plan, as contemplated in Section 8 hereof; or

(vii)any purported termination of the Participant’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 5(f) hereof (and, if applicable, the requirements of Section 5(c) hereof), which purported termination shall not be effective for purposes of this Agreement.

Notwithstanding the foregoing, no such condition shall constitute “Good Reason” unless the Participant provides written notice of such condition to the Corporation and the Corporation fails to remedy the condition claimed to constitute Good Reason within thirty (30) days of receiving written notice thereof; and provided, further, that in all events the termination of the Participant’s employment with the Corporation shall not be treated as a termination for “Good Reason” unless such termination occurs not more than six (6) months following the initial existence of the condition claimed to constitute Good Reason.  A Participant’s right to terminate his or her employment pursuant to this Section 5(d) shall not be affected by his or her incapacity due to physical or mental illness.  A Participant’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

(e)Termination Generally.  For purposes of clarity, a Participant or the Corporation shall be entitled to terminate the Participant’s employment for any reason or no reason at any time after a Change in Control effective as of the applicable date set forth in Section 5(a).

(f)Notice of Termination.  Any purported termination of a Participant’s employment by the Corporation or by the Participant (other than termination due to death which shall terminate the Participant’s employment automatically) shall be communicated by written Notice of Termination to the Participant or the Corporation, respectively, other party hereto in accordance with Section 14. “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in this Plan relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment under the provision so indicated.

(g)Date of Termination, Etc.  “Date of Termination” shall mean (a) if a Participant’s employment is terminated due to the Participant’s death, the date of the Participant’s death; (b) if a Participant’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Participant shall not have returned to the full-time performance of his or her duties during such thirty (30)-day period), and (c) if a Participant’s employment is terminated for any other reason, the date specified in the Notice of Termination.

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6.Compensation Upon Termination Following A Change in Control.  If a Participant’s employment is terminated following a Change in Control during the Term and during the two (2) year period immediately following the date of the Change in Control, the Participant shall be entitled to the benefits described below, subject to the other terms and conditions of this Plan:

(a)If the Participant’s employment is terminated in such circumstances by the Corporation for Cause or Disability or by the Participant other than for Good Reason or due to the Participant’s death, the Corporation shall pay the Participant (i) the Participant’s accrued and unpaid base salary and vacation (if any) through the Date of Termination, and (ii) all other amounts to which the Participant is entitled under any compensation plan of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to the Participant under this Agreement.

(b)If the Participant’s employment by the Corporation shall be terminated by the Participant for Good Reason or by the Corporation other than for Cause or Disability and in all cases other than due to the Participant’s death, then, subject to the provisions of Section 7, the Participant shall be entitled to the benefits provided below.  For purposes of this Section 6(b), a Participant’s “Annual Bonus Amount” shall mean the greater of (i) one-third (1/3) of the Participant’s annual base salary as in effect as of the Date of Termination or (ii) the average annual bonus received by the Participant in the three (3) years immediately prior to the Change in Control for each full year of employment with the Corporation, which shall be determined without regard to the payment of any special bonuses (e.g. transaction bonuses).  For purposes of this Section 6(b), a Participant’s “Annual Base Salary” shall mean the greater of (x) the Participant’s annual base salary as in effect as of the Date of Termination or (y) the Participant’s annual base salary as in effect immediately prior to the Change in Control.

(i)The Corporation shall pay to the Participant (1) the Participant’s accrued and unpaid base salary and vacation (if any) through the Date of Termination, (2) the unpaid portion, if any, of any annual bonus, plus an amount equal to the Participant’s applicable Annual Bonus Amount multiplied by a fraction, the numerator of which is the number of calendar days that the Participant was employed by the Corporation during the year of termination and the denominator of which is 365, and (3) all other amounts to which the Participant is entitled under any compensation plan of the Corporation at the time such payments are due;

(ii)A lump sum severance payment equal to the sum of: (A) the Participant’s Severance Multiplier times the Participant’s Annual Base Salary; plus (B) the Participant’s Severance Multiplier times the Participant’s Annual Bonus Amount;

(iii)A cash payment equal to the expected aggregate cost of the premiums that would be charged to the Participant to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for the Participant (and, if applicable, the Participant’s eligible dependents) as in effect immediately prior to the Participant’s Date of Termination, for a period of months after the Participant’s Date of Termination equal to twelve (12) multiplied by the Participant’s Severance Multiplier.

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(iv)(A) Any stock options or equity or equity-related compensation or grants that vest based on the passage of time and continued performance of services (to the extent outstanding and not otherwise vested as of the Date of Termination, and exclusive of any grants that include performance-based vesting criteria) shall become fully vested immediately prior to such termination; (B) any stock options or equity or equity-related compensation or grants that vest based on the satisfaction of performance-based criteria (to the extent outstanding and not otherwise vested as of the Severance Date) shall continue to be governed by the provisions of the applicable award agreement in the circumstances; provided, however, that to the extent that any such then-outstanding equity-based awards are subject to forfeiture and/or vesting requirements based on the passage of time, such awards shall be fully accelerated with respect to such time-based forfeiture and/or vesting provisions; and (C) the Participant shall have until the date that is twelve (12) months after his or her Date of Termination to exercise any stock option to the extent that it has become vested on the Date of Termination, subject to earlier termination of the stock option upon the stock option’s original expiration date or the occurrence of a change in control event or certain similar reorganization event under the terms of the applicable award agreement.  Except as provided in this Section 6(b)(iv), the effect of a termination of employment on a Participant’s equity-based awards shall be determined under the terms of the applicable award agreement.

(v)The Participant shall be fully vested in his or her accrued benefits under any nonqualified pension, profit sharing, deferred compensation or supplemental plans maintained by the Corporation and the Corporation shall pay the Participant a cash lump sum amount equal to the portion of the Participant’s account under the Corporation’s 401(k) plan (including, without limitation, any 401(k) matching contributions), if any, that has not become vested under the terms of such plan as of the Date of Termination.

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

(vii)In any situation where under applicable law the Corporation has the power to indemnify (or advance expenses to) the Participant in respect of any judgments, fines, settlements, loss, cost or expense (including attorneys’ fees) of any nature related to or arising out of the Participant’s activities as an agent, employee, officer or director of the

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Corporation or in any other capacity on behalf of or at the request of the Corporation, the Corporation shall promptly on written request, indemnify (and advance expenses to) the Participant to the fullest extent permitted by applicable law, including but not limited to making such findings and determinations and taking any and all such actions as the Corporation may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification or advancement.  Such agreement by the Corporation shall not be deemed to impair any other obligation of the Corporation respecting the Participant’s indemnification otherwise arising out of this or any other agreement or promise of the Corporation or under any statute.

(c)Subject to Section 7 and Section 22, the payments described in Sections 6(a)(i), 6(b)(i)(1), 6(b)(i)(2), 6(b)(ii), 6(b)(iii) and 6(b)(iv), as applicable, shall be paid in cash to the Participant in a single lump sum as soon as practicable following the Date of Termination, but in no event beyond seventy four (74) days from such date (or, if earlier, the (10) business days after the Participant’s release contemplated by Section 7(a) becomes irrevocable by the Participant in accordance with applicable law.  However, if the maximum period for the Participant to consider and revoke the release contemplated by Section 7(a) spans two calendar years, payment shall always be made in the second of those two years (but otherwise within the prescribed payment period).

(d)The foregoing provisions of this Section 6 shall not affect: (i) a Participant’s receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Corporation welfare benefit plan; (ii) a Participant’s rights under COBRA to continue participation in medical, dental, hospitalization and life insurance coverage; or (iii) a Participant’s receipt of benefits otherwise due in accordance with the terms of the Corporation’s 401(k) plan (if any).

7.Release; Exclusive Remedy.

(a)This Section 7 shall apply notwithstanding anything else contained in this Plan or any other stock option, restricted stock or other equity-based award agreement to the contrary.  Notwithstanding anything to the contrary contained in this Plan, the Corporation’s obligation to make any payment of benefits with respect to a Participant pursuant to Section 6(b) of this Plan (if the Participant is otherwise entitles to such benefits) is subject to the condition precedent that (i) the Participant has fully executed a valid and effective release (in the form attached hereto as Exhibit B or such other form as the Committee may reasonably require in the circumstances, which other form shall be substantially similar to that attached hereto as Exhibit B but with such changes as the Committee may determine to be required or reasonably advisable in order to make the release enforceable and otherwise compliant with applicable laws), (ii) such executed release is delivered by the Participant to the Corporation so that it is received by the Corporation in the time period specified below, and (iii) such release is not revoked by the Participant (pursuant to any revocation rights afforded by applicable law).  In order to satisfy the requirements of this Section 7(a), a Participant’s release referred to in the preceding sentence must be delivered by the Participant to the Corporation so that it is received by the Corporation no later than twenty five (25) calendar days after the Participant’s Date of Termination (or such later date as may be required for an enforceable release of the Participant’s claims under the United States Age Discrimination in Employment Act of 1967, as amended (“ADEA”), to the

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extent the ADEA is applicable in the circumstances, in which case the Participant will be provided with either twenty one (21) or forty five (45) days, depending on the circumstances of the termination, to consider the release).  In addition, the Corporation may require that the Participant’s release be executed no earlier than the date that the Participant’s employment with the Corporation terminates.

(b)Each Participant agrees that the general release agreement described in Section 7(a) will require that the Participant acknowledge, as a condition to the payment of any benefits under Section 6(b), that the payments contemplated by Section 6(b) shall constitute the exclusive and sole remedy for any termination of the Participant’s employment, and each Participant will be required to covenant, as a condition to receiving any such payment, not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment.  No Participant shall be required to mitigate the amount of any payment provided for in Section 6 by seeking other employment or otherwise nor shall the amount of any payment or benefit provided for in Section 6 be reduced by any compensation earned by the Participant as the result of employment by another employer or self-employment, by retirement benefits, by offset against any amount claimed to be owed by the Participant to the Corporation, or otherwise.

8.Section 280G.  Each Participant shall be covered by the provisions set forth in Exhibit C hereto, incorporated herein by this reference.

9.Successors; Assigns.

(a)The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree to perform the obligations under this Plan in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place.  Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be deemed a material breach of this Plan by the Corporation and shall entitle each Participant to terminate his or her employment and receive compensation from the Corporation in the same amount and on the same terms to which the Participant would be entitled hereunder if the Participant terminates his or her employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.  Unless expressly provided otherwise, “Corporation” as used herein shall mean the Corporation as defined in this Plan and any successor to its business and/or assets as aforesaid.

(b)None of the benefits, payments, proceeds or claims of any Eligible Person or Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Eligible Person or Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds which he or she may expect to receive, contingently or otherwise, under the Plan.  Notwithstanding the foregoing, benefits which are in pay status may be subject to a court-ordered garnishment or wage assignment, or similar order, or a tax levy.  The Plan shall inure to the benefit of and be enforceable by each Participant’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.  If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant’s estate in accordance with the terms of the Plan.

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10.Confidentiality, Noncompetition and Non-Solicitation Covenants.  Each Participant by accepting participation in the Plan expressly agrees to each of the foregoing provisions of this Section 10:

(a)Confidentiality.  Each Participant shall not at any time (whether during or after the Participant’s employment with the Corporation and whether or not the Participant subsequently ceases to participate in this Plan or is ever entitled to the benefits provided in Section 6) directly or indirectly, other than in the course of the Participant’s duties hereunder, disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below); provided, however, that this Section 10(a) shall not apply when (i) disclosure is required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction to order the Participant to disclose or make available such information (provided, however, that the Participant shall promptly notify the Corporation in writing upon receiving a request for such information), or (ii) with respect to any other litigation, arbitration or mediation involving this Plan, including but not limited to enforcement of this Plan.  Upon termination of a Participant’s employment with the Corporation, all Confidential Information in the Participant’s possession that is in written, digital or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Corporation and shall not be retained by the Participant or furnished to any third party, in any form except as provided herein; provided, however, that the Participant shall not be obligated to treat as confidential, or return to the Corporation copies of any Confidential Information that (x) was publicly known at the time it was disclosed to the Participant, (y) becomes publicly known or available thereafter other than by any means in violation of this Plan or any other duty owed to the Corporation by any person or entity, or (z) is lawfully disclosed to the Participant by a third party.  As used in this Plan, the term “Confidential Information” means: information disclosed to a Participant or known by a Participant as a consequence of or through the Participant’s relationship with the Corporation, about the suppliers, customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to supplier lists or customer lists, of the Corporation and its affiliates (collectively, the “Company Group”).

(b)Noncompetition.  Each Participant acknowledges that the nature of the Company Group’s business and the Participant’s position with the Corporation is such that if the Participant were to become employed by, or substantially involved in, the business of a competitor of the Company Group during the twelve (12) months following the termination of the Participant’s employment with the Corporation, it would be very difficult for the Participant not to rely on or use the Company Group’s trade secrets and Confidential Information.  Thus, to avoid the inevitable disclosure of the Company Group’s trade secrets and Confidential Information, and to protect such trade secrets and Confidential Information and the Company Group’s relationships and goodwill with customers, during the Participant’s employment with the Corporation and for a period of twelve (12) months after the Date of Termination for any reason (the “Restricted Period”), the Participant will not directly or indirectly engage in (whether

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as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), nor have any ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business anywhere in the United States and Mexico (the “Restricted Area”) that competes with any member of the Company Group in the healthcare real estate acquisition, development, management, investment or financing industry (a “Competing Business”); provided, that the Participant may purchase and hold only for investment purposes less than 2% of the shares of any corporation in competition with the Company Group whose shares are regularly traded on a national securities exchange.  Notwithstanding the preceding sentence, in the event a Participant accepts employment with or provides services to a business (the “Service Recipient”) that is affiliated with another business that engages in a Competing Business or which derives a de minimis portion of its gross revenues from Competing Businesses, the Participant’s employment by or service to the Service Recipient shall not constitute a breach by that Participant of his or her obligations pursuant to this Section 10(b) so long as each of the following conditions is satisfied at all times during the Restricted Period and while the Participant is employed by or providing service to the Service Recipient: (i) no more than 10% of the gross revenues of the Service Recipient are derived from Competing Businesses; (ii) no more than 10% of the gross revenues of the Service Recipient and those entities that (directly or through one or more intermediaries) are controlled by, control, or are under common control with such Service Recipient, together on a consolidated basis, are derived from Competing Businesses; and (iii) in the course of the Participant’s services for the Service Recipient, a material portion of the Participant’s services are not directly involved in or responsible for any Competing Business.  The foregoing covenants in this Section 10(b) shall continue in effect through the entire Restricted Period regardless of whether the Participant is then entitled to receive any severance payments from the Corporation.

(c)Non-Solicitation of Employees.  During the Restricted Period, each Participant shall not to directly or indirectly solicit, induce, attempt to hire, recruit, encourage, take away, or hire any employee or independent contractor of the Company Group whose annual rate of compensation is then $50,000 or more or cause any such Company Group employee or contractor to leave his or her employment or engagement with the Company Group either for employment with the Participant or for any other entity or person.  The foregoing covenants in this Section 10(c) shall continue in effect through the entire Restricted Period regardless of whether the Participant is then entitled to receive any severance payments from the Corporation.

(d)Non-Solicitation of Customers.  During the Restricted Period, each Participant shall not to directly or indirectly influence or attempt to influence customers, vendors, suppliers, licensors, lessors, joint venturers, associates, consultants, agents, or partners of the Company Group to divert their business away from the Company Group to any Competing Business, and each Participant agrees not to otherwise interfere with, disrupt or attempt to disrupt the business relationships, contractual or otherwise, between any member of the Company Group and any of its customers, suppliers, vendors, lessors, licensors, joint venturers, associates, officers, employees, consultants, managers, partners, members or investors.  The foregoing covenants in this Section 10(d) shall continue in effect through the entire Restricted Period regardless of whether the Participant is then entitled to receive any severance payments from the Corporation.

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(e)Understanding of Covenants.  Each Participant, by accepting participation in this Plan represents as follows: the Participant (i) is familiar with the foregoing covenants set forth in this Section 10, (ii) is fully aware of the Participant’s obligations hereunder, (iii) agrees to the reasonableness of the length of time, scope and geographic coverage of the foregoing covenants set forth in this Section 10, (iv) agrees that the Company Group currently conducts business throughout the Restricted Area, (v) agrees that such covenants are necessary to protect the Company Group’s confidential and proprietary information, good will, stable workforce, and customer relations, (vi) agrees that the Participant’s coverage by this Plan for the Term applicable to the Participant is good, valid and sufficient consideration for (among other things) the Participant’s agreement to such covenants, and (vii) agrees that such covenants shall continue in effect as to the Participant even if the Participant ceases at any time in the future to participate in the Plan (i.e., the Participant ceases to be a “Participant”) and even if the Participant is never entitled to the benefits set forth in Section 6 (and accordingly, the term “Participant” includes a former “Participant” to the extent necessary to effect such covenants).

(f)Right to Injunctive and Equitable Relief.  Each Participant’s obligations not to disclose or use Confidential Information and to refrain from the solicitations described in this Section 10 are of a special and unique character, which gives them a peculiar value.  The Corporation cannot be reasonably or adequately compensated in damages in an action at law in the event a Participant breaches such obligations, and the breach of such obligations would cause irreparable harm to the Corporation.  Therefore, the Corporation shall be entitled to injunctive and other equitable relief without bond or other security in the event of such breach in addition to any other rights or remedies which the Corporation may possess.  Furthermore, each Participant’s obligations and the rights and remedies of the Corporation under this Section 10 are cumulative and in addition to, and not in lieu of, any obligations, rights, or remedies created by applicable law relating to misappropriation or theft of trade secrets or confidential information.

(g)Cooperation.  During each Participant’s employment with the Corporation and thereafter, the Participant shall respond to all reasonable inquiries of the Corporation about any matters concerning the Corporation or its affairs that occurred or arose during the Participant’s employment by the Corporation, and each Participant shall reasonably cooperate with the Corporation in investigating, prosecuting and defending any charges, claims, demands, liabilities, causes of action, lawsuits or other proceedings by, against or involving the Corporation relating to the period during which the Participant was employed by the Corporation or relating to matters of which the Participant had or should have had knowledge or information.  Further, except as required by law, each Participant will at no time voluntarily serve as a witness or offer written or oral testimony against the Corporation in conjunction with any complaints, charges or lawsuits brought against the Corporation by or on behalf of any current or former employees, or any governmental or administrative agencies related to the Participant’s period of employment and will provide the Corporation with notice of any subpoena or other request for such information or testimony.

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11.Claims Procedures.

(a)Presentation of Claim.  Any Participant (such Participant being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the benefits payable to such Claimant pursuant to this Plan.  If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant.  All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred.  The claim must state with particularity the determination desired by the Claimant.

(b)Notification of Decision.  The Committee shall consider a Claimant’s claim within a reasonable time, but no later than ninety (90) days after receiving the claim.  If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period.  In no event shall such extension exceed a period of ninety (90) days from the end of the initial ninety (90) day period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination.  The Committee shall notify the Claimant in writing:

(i)that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or

(ii)that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

(1)the specific reason(s) for the denial of the claim, or any part of it;

(2)specific reference(s) to pertinent provisions of the Plan upon which such denial was based;

(3)a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;

(4)an explanation of the claim review procedure and the time limits applicable to such procedures set forth in Section 11(c); and

(5)a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse determination on review.

(c)Review of a Denied Claim.  On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim.  The Claimant (or the Claimant’s duly authorized representative):

(i)may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits;

(ii)may submit written comments or other documents; and/or

(iii)may request a hearing, which the Committee, in its sole discretion, may grant.

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(d)Decision on Review.  The Committee shall render its decision on review promptly, and no later than sixty (60) days after the Committee receives the Claimant’s written request for a review of the denial of the claim.  If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period.  In no event shall such extension exceed a period of sixty (60) days from the end of the initial sixty (60) day period.  The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination.  In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.  The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:

(i)specific reasons for the decision;

(ii)specific reference(s) to the pertinent Plan provisions upon which the decision was based;

(iii)a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and

(iv)a description of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

12.Arbitration; Dispute Resolution, Etc.

(a)Notwithstanding anything to the contrary contained in the Plan, the Participant, in his or her sole discretion, may elect to have any claim or controversy arising out of or in connection with the Plan and/or a Participation Agreement submitted to binding arbitration and adjudicated in accordance with this Section 12 without first having to exhaust the claims procedures set forth in Section 11.

(b)The Corporation and, by accepting participation in this Plan, each Participant hereby consent to the resolution by mandatory and binding arbitration of all claims or controversies arising out of or in connection with the Plan and/or the Participant’s Participation Agreement that the Corporation may have against the Participant, or that the Participant may have against the Corporation or against any of its officers, directors, employees or agents acting in their capacity as such, and which are not resolved under the terms of Section 11 (or which are not required to be resolved under the terms of Section 11, as the case may be).  Each party’s promise to resolve all such claims or controversies by arbitration in accordance with the Plan rather than through the courts is consideration for the other party’s like promise.  It is further agreed that the decision of an arbitrator on any issue, dispute, claim or controversy submitted for arbitration, shall be final and binding upon the Corporation and the Participant and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

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(c)Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be before a sole arbitrator (the “Arbitrator”) selected from Judicial Arbitration & Mediation Services, Inc., Los Angeles, California, or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association, and shall be conducted in accordance with the provisions of California Civil Procedure Code Sections 1280 et. seq. as the exclusive remedy of such dispute.

(d)The Arbitrator shall interpret the Plan, any applicable Corporation policy or rules and regulations, any applicable substantive law (and the law of remedies, if applicable) of the state in which the claim arose, or applicable federal law.  If arbitration is brought after the claim or controversy has been submitted for review by the Committee in accordance with Section 11, the Arbitrator shall limit his or her review to whether or not the Committee has abused its discretion in its interpretation of the Plan and such policies, rules, and regulations; provided, however, that the Arbitrator shall apply a de novo standard of review with respect to any claim for benefits hereunder in connection with a Change in Control.  In reaching his or her decision, the Arbitrator shall have no authority to change or modify any lawful Corporation policy, rule or regulation, or the Plan.  Except as provided in Section 12(e), the Arbitrator, and not any federal, state or local court or agency, shall have exclusive and broad authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of the Plan, including but not limited to, any claim that all or any part of the Plan is voidable.  The Arbitrator shall have the authority to decide dispositive motions.  Following completion of the arbitration, the arbitrator shall issue a written decision disclosing the essential findings and conclusions upon which the award is based.

(e)Notwithstanding the foregoing, provisional injunctive relief may, but need not, be sought by the Participant or the Corporation in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally resolved by the Arbitrator in accordance with the foregoing.  Final resolution of any dispute through arbitration may include any remedy or relief which would otherwise be available at law and which the Arbitrator deems just and equitable.  The Arbitrator shall have the authority to award full damages as provided by law.  Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction.

(f)The Corporation shall pay the reasonable fees and expenses of the Arbitrator and of a stenographic reporter, if employed.  Each party shall pay its own legal fees and other expenses and costs incurred with respect to the arbitration.

13.Administration of the Plan.

(a)Administration - General.  The Corporation shall be the plan administrator (within the meaning of Section 3(16)(A) of ERISA).  The Corporation delegates its duties under the Plan to the Committee.  The Committee delegates the day-to-day ministerial duties with respect to the Plan to the Corporation’s management.  The Committee and its delegates shall be named fiduciaries of the Plan to the extent required by ERISA

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(b)Powers and Duties of the Committee.  The Committee shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(i)To determine eligibility for and participation in the Plan;

(ii)To construe and interpret the terms and provisions of the Plan;

(iii)To compute and certify to the amount and kind of benefits payable to Participants and their beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Section 16;

(iv)To maintain all records that may be necessary for the administration of the Plan;

(v)To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, beneficiaries or governmental agencies as shall be required by law;

(vi)To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and

(vii)To appoint a plan manager or any other agent, and to delegate to them such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe.

(c)Committee Action.  Subject to Section 11, the Committee shall act with respect to the Plan at meetings by affirmative vote of a majority of the members of the Committee.  Any action permitted to be taken at a meeting with respect to the Plan may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee.  A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant.  The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee.

(d)Construction and Interpretation.  As to any event prior to a Change in Control, the Committee shall have full discretion to construe and interpret the terms and provisions of the Plan and any and all Participation Agreements, which interpretation or construction shall be final and binding on all parties, including but not limited to the Corporation and any Participant, beneficiary or other person.

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14.Notice.  All notices under or with respect to this Plan or any Participation Agreement shall be in writing and shall be either personally delivered or mailed postage prepaid, by certified mail, return receipt requested:

(a)if to the Corporation:

HCP, Inc.

Attention: Compensation Committee

3760 Kilroy Airport Way, Suite 300
Long Beach, California 90806

with a copy to:

HCP, Inc.

Attention: Secretary of the Corporation

3760 Kilroy Airport Way, Suite 300
Long Beach, California 90806

(b)if to a Participant, to the Participant’s address most recently on file in the payroll records of the Corporation.

Notice shall be effective when personally delivered, or five (5) business days after being so mailed.  Any party may change its address for purposes of giving future notices pursuant to the Plan and any Participation Agreement by notifying the other party in writing of such change in address, such notice to be delivered or mailed in accordance with the foregoing.

15.Governing Law.  The Plan and any Participation Agreement hereunder will be governed by and construed in accordance with ERISA and, to the extent not preempted thereby, the laws of the State of California (unless otherwise expressly provided in the Participant’s Participation Agreement, in which case the law of the state specified in the Participant’s Participation Agreement shall apply instead of the law of the State of California as to that Participant), without giving effect to any choice of law or conflicting provision or rule (whether of the State of California or any other jurisdiction) that would cause the laws of any jurisdiction other than United States federal law and the law of the State of California (or other state, as applicable) to be applied.  In furtherance of the foregoing, applicable federal law and, to the extent not preempted by applicable federal law, the internal law of the State of California (or other state, as applicable), will control the interpretation and construction of the Plan and any Participation Agreement hereunder, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.  Any statutory reference in the Plan or any Participation Agreement shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision.

16.Miscellaneous.  The Committee may from time to time amend the Plan or any Participation Agreement in any way it deems to be advisable; provided that no such amendment shall materially and adversely affect the rights of any Participant (or former Participant) under the Plan or Participation Agreement, as applicable, without that Participant’s (or former Participant’s, as the case may be) consent.  Neither the failure nor any delay on the part of a

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party to exercise any right, remedy, power or privilege under the Plan or any Participation Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by the Corporation which are not expressly set forth in this Plan. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections.  The Corporation may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Plan such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.  Any obligations of the Corporation under Sections 4 and 6 shall survive the expiration of the term of this Agreement. The section headings contained in this Agreement are for convenience only, and shall not affect the interpretation of this Agreement.

17.Unsecured General Creditor.  Participants and their heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Corporation or any Subsidiary.  No assets of the Corporation shall be held under any trust, or held in any way as collateral security, for the fulfilling of the obligations of the Corporation under this Plan.  Any and all of the Corporation’s assets shall be, and remain, the general unpledged, unrestricted assets of the Corporation (unless pledged or restricted with respect to the Corporation’s obligations other than the Plan).  The Corporation’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Corporation to pay money and benefits in the future, and the rights of the Participants and their heirs or successors as to benefits under the Plan shall be no greater than those of unsecured general creditors of the Corporation.

18.Other Benefit Plans.  All payments, benefits and amounts provided under the Plan shall be in addition to and not in substitution for any pension rights under the any tax-qualified pension or retirement plan in which the Participant participates, and any disability, workers’ compensation or other Corporation benefit plan distribution that a Participant is entitled to (other than severance benefits), under the terms of any such plan, at the time the Participant ceases to be employed by the Corporation.  Notwithstanding the foregoing, the Plan shall not create an inference that any duplicate payments shall be required.  Payments received by a person under the Plan shall not be deemed a part of the person’s compensation for purposes of the determination of benefits under any other employee pension, welfare or other benefit plans or arrangements, if any, provided by the Corporation, except where explicitly provided under the terms of such plans or arrangements.

19.Severability.  In the event any provision of the Plan or any Participation Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of the Plan or Participation Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.  Furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of the Plan or Participation Agreement, as applicable, a legal, valid and enforceable

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provision as similar in terms to such invalid or unenforceable provision as may be possible.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of the Plan or Participation Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

20.Employment Status.  Except as may be provided under any other written agreement between a Participant and the Corporation (other than the Plan and the Participation Agreement entered into with respect to this Plan), the employment of each Participant by the Corporation is “at will,” and may be terminated by either the Participant or the Corporation at any time.

21.Payments on Behalf of Persons Under Incapacity.  In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person.  Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Corporation.

22.Code Section 409A.  The provisions of this section shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Code (“Code Section 409A”).  Notwithstanding any provision of the Plan to the contrary, if a Participant is a “specified employee” as defined for purposes of Code Section 409A, the Participant shall not be entitled to any payments pursuant to the Plan upon a termination of his or her employment until the earlier of (a) the date which is six (6) months after the Participant’s separation from service (as defined for purposes of Code Section 409A) with the Corporation, or (b) the date of the Participant’s death.  In such event, any amounts otherwise payable to the Participant following a termination of the Participant’s employment that are not so paid by reason of this paragraph shall be paid as soon as practicable after the date that is six (6) months after the Participant’s separation from service (as defined for purposes of Code Section 409A) with the Corporation (or, if earlier, the date of the Participant’s death).  To the extent that the Plan is subject to Code Section 409A, the Plan shall be construed and interpreted to the maximum extent reasonably possible to avoid the imputation of any tax, penalty or interest pursuant to Code Section 409A.

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EXHIBIT A

FORM OF PARTICIPATION AGREEMENT

[Date]

Dear                             :

You have been selected to participate in the HCP, Inc. Change in Control Severance Plan (the “Plan”), subject to your execution and return of this letter agreement (this “Participation  Agreement”) to HCP, Inc. (the “Corporation”).

For purposes of calculating any severance benefits you may become entitled to under Section 6 of the Plan, the following multiplier will apply:

Severance Multiplier: [      ]

Note that the agreements you make by executing this Participation Agreement will be enforceable against you, regardless of whether or not your employment terminates in circumstances that entitle you to severance benefits under the Plan.   Nevertheless, you agree that your participation in the Plan (even if you never become entitled to severance benefits pursuant to the Plan), as well as your continued employment by the Corporation, each in and of itself and without the other constitutes good and adequate consideration for the agreements you make in this Participation Agreement.

By signing this Participation Agreement you specifically agree that you have received and read the Plan and agree to be bound by its terms.  The Plan is incorporated into (made a part of) this Participation Agreement by this reference.  You acknowledge and agree that the Corporation has not made any promises or representations to you concerning the Plan other than as set forth in the Plan and this Participation Agreement.

As to your participation in the Plan, the Plan and this Participation Agreement will be governed by and construed in accordance with ERISA and, to the extent not preempted thereby, the laws of the State of [                          ], without giving effect to any choice of law or conflicting provision or rule (whether of the State of [                            ] or any other jurisdiction) that would cause the laws of any jurisdiction other than United States federal law and the law of the State of [                              ] to be applied.  In furtherance of the foregoing, applicable federal law and, to the extent not preempted by applicable federal law, the internal law of the State of [                            ], will control the interpretation and construction of the Plan and this Participation Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.

A-1

Please note that you are not required to participate in the Plan, and may decline participation in the Plan by not returning this Participation Agreement.  If you want to accept participation in the Plan, you must execute this Participation Agreement and see that it is returned in person or via facsimile to the Corporation’s [                      ] at (      )       -        so that it is received no later than [                        ].  This Participation Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

	HCP, INC.,
	a Maryland corporation
	By:
	Name:
	Title:
ACCEPTED AND AGREED:
Print Name:

A-2

EXHIBIT B

FORM OF RELEASE AGREEMENT1

This Release Agreement (this “Release Agreement”) is entered into this        day of                    20    , by and between                                           , an individual (“Executive”), and HCP, Inc., a Maryland corporation (the “Company”).

WHEREAS, Executive has been employed by the Company; and

WHEREAS, Executive’s employment by the Company has terminated and, in connection with the Company’s Change in Control Severance Plan (the “Plan”), the Company and Executive desire to enter into this Release Agreement upon the terms set forth herein;

NOW, THEREFORE, in consideration of the covenants undertaken and the releases contained in this Release Agreement, and in consideration of the obligations of the Company (or one of its subsidiaries) to pay severance benefits (conditioned upon this Release Agreement) under and pursuant to the Plan, Executive and the Company agree as follows:

1.Release.  Executive, on behalf of himself or herself, his or her descendants, dependents, heirs, executors, administrators, assigns, and successors, and each of them, hereby acknowledges full and complete satisfaction of and covenants not to sue and fully releases and discharges the Company and each of its parents, subsidiaries and affiliates, past and present, as well as its and their trustees, directors, officers, members, managers, partners, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, hereinafter together and collectively referred to as the “Releasees,” with respect to and from any and all claims, wages, demands, rights, liens, agreements or contracts (written or oral), covenants, actions, suits, causes of action, obligations, debts, costs, expenses, attorneys’ fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden (each, a “Claim”), which he or she now owns or holds or he or she has at any time heretofore owned or held or may in the future hold as against any of said Releasees (including, without limitation, any Claim arising out of or in any way connected with Executive’s service as an officer, director, employee, member or manager of any Releasee, Executive’s separation from his or her position as an officer, director, employee, manager and/or member, as applicable, of any Releasee, or any other transactions, occurrences, acts or omissions or any loss, damage or injury whatever), whether known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of said Releasees, or any of them, committed or omitted prior to the date of this Release Agreement including, without limiting the generality of the foregoing, any Claim under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, the California Fair Employment and Housing Act, the California Family Rights Act, or any other federal, state or local law, regulation, or ordinance, or any Claim for severance pay, bonus, sick leave, holiday pay, vacation pay, life insurance, health or medical insurance or any other fringe benefit, workers’ compensation or disability; provided however,

1  The Company reserves the right to modify this form as to any Participant employed outside of California.

B-1

that the foregoing release shall not apply to any obligation of the Company to Executive pursuant to any of the forgoing:  (1) any obligation created by or arising out of the Plan for which receipt or satisfaction has not been acknowledged, (2) any equity-based awards previously granted by the Company to Executive, to the extent that such awards continue after the termination of Executive’s employment with the Company in accordance with the applicable terms of such awards; (3) any right to indemnification that Executive may have pursuant to the Fourth Amended and Restated Bylaws of the Company, its corporate charter or under any written indemnification agreement with the Company (or any corresponding provision of any subsidiary or affiliate of the Company) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) that Executive may in the future incur with respect to his service as an employee, officer or director of the Company or any of its subsidiaries or affiliates; (4) with respect to any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Company (or subsidiary or affiliate) directors and officers liability insurance policy; (5) any rights to continued medical or dental coverage that Executive may have under COBRA; (6) any rights to payment of benefits that Executive may have under a retirement plan sponsored or maintained by the Company that is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended, or (7) any deferred compensation or supplemental retirement benefits that Executive may be entitled to under a nonqualified deferred compensation or supplemental retirement plan of the Company.  In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law.  Executive acknowledges and agrees that he or she has received any and all leave and other benefits that he or she has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

2.Acknowledgment of Payment of Wages.  Except for accrued vacation (which the parties agree totals approximately [        ] days of pay) and salary for the current pay period, Executive acknowledges that he/she has received all amounts owed for his or her regular and usual salary (including, but not limited to, any bonus, severance, or other wages), and usual benefits through the date of this Agreement.

3.1542 Waiver.  It is the intention of Executive in executing this Release Agreement that the same shall be effective as a bar to each and every Claim hereinabove specified.  In furtherance of this intention, Executive hereby expressly waives any and all rights and benefits conferred upon him or her by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and expressly consents that this Release Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those related to unknown and unsuspected Claims, if any, as well as those relating to any other Claims hereinabove specified. SECTION 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

B-2

Executive acknowledges that he may hereafter discover Claims or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Release Agreement and which, if known or suspected at the time of executing this Release Agreement, may have materially affected this settlement.  Nevertheless, Executive hereby waives any right, Claim or cause of action that might arise as a result of such different or additional Claims or facts.  Executive acknowledges that he or she understands the significance and consequences of such release and such specific waiver of SECTION 1542.

4.[ADEA Waiver.  Executive expressly acknowledges and agrees that by entering into this Release Agreement, Executive is waiving any and all rights or Claims that he or she may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), which have arisen on or before the date of execution of this Release Agreement.  Executive further expressly acknowledges and agrees that:

A.In return for this Release Agreement, the Executive will receive consideration beyond that which the Executive was already entitled to receive before entering into this Release Agreement;

B.Executive is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

C.Executive has voluntarily chosen to enter into this Release Agreement and has not been forced or pressured in any way to sign it;

D.Executive was given a copy of this Release Agreement on [                                  , 20    ] and informed that he or she had [twenty one (21)/forty five (45)] days within which to consider this Release Agreement and that if he or she wished to execute this Release Agreement prior to expiration of such [21-day/45-day] period, he or she should execute the Endorsement attached hereto;

E.Executive was informed that he or she had seven (7) days following the date of execution of this Release Agreement in which to revoke this Release Agreement, and this Release Agreement will become null and void if Executive elects revocation during that time.  Any revocation must be in writing and must be received by the Company during the seven-day revocation period.  In the event that Executive exercises his or her right of revocation, neither the Company nor Executive will have any obligations under this Release Agreement;

F.Nothing in this Release Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law.]2

2  Except as noted below, Section 4 will be included if the Executive is age 40 or older as of the date that the Executive’s employment by the Company terminates or in such other circumstances (if any) as the Executive may have claims under the ADEA.  In the event Section 4 is included, whether the Executive has 21 days, 45 days, or some other period in which to consider the Release Agreement will be determined with reference to the requirements of the ADEA in order for such waiver to be valid in the circumstances.  The determinations referred to in the preceding two sentences shall be made by the Company in its sole discretion.  In any event (regardless of the applicability of the ADEA in the circumstances) the Release Agreement will include the Executive’s acknowledgements and agreements set forth in clauses 4.A, 4.B, and 4.C.

B-3

5.No Transferred Claims.  Executive warrants and represents that the Executive has not heretofore assigned or transferred to any person not a party to this Release Agreement any released matter or any part or portion thereof and he or she shall defend, indemnify and hold the Company and each of its affiliates harmless from and against any claim (including the payment of attorneys’ fees and costs actually incurred whether or not litigation is commenced) based on or in connection with or arising out of any such assignment or transfer made, purported or claimed.

6.Compliance With Participation Agreement.  Executive warrants and represents that Executive has complied fully with his or her obligations pursuant to that certain Participation Agreement entered into by Executive in connection with the Plan.  Executive covenants that he or she will continue to abide by the applicable provisions of such Participation Agreement.

7.Severability.  It is the desire and intent of the parties hereto that the provisions of this Release Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Release Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Release Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Release Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

8.Counterparts.  This Release Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

9.Governing Law.  THIS RELEASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH UNITED STATES FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY UNITED STATES FEDERAL LAW, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN UNITED STATES FEDERAL LAW AND THE LAW OF THE STATE OF CALIFORNIA TO BE APPLIED.  IN FURTHERANCE OF THE FOREGOING, APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL LAW, THE INTERNAL LAW OF THE STATE OF CALIFORNIA, WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS RELEASE AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

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10.Amendment and Waiver.  The provisions of this Release Agreement may be amended and waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Release Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Release Agreement or any provision hereof.

11.Descriptive Headings.  The descriptive headings of this Release Agreement are inserted for convenience only and do not constitute a part of this Release Agreement.

12.Construction.  Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.  The language used in this Release Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.

13.Arbitration.  Any claim or controversy arising out of or relating to this Agreement shall be submitted to arbitration in accordance with the arbitration provision set forth in the Plan.

14.Nouns and Pronouns.  Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa.

15.Legal Counsel.  Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice.  Executive acknowledges and agrees that he has read and understands this Agreement completely, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and he has had ample opportunity to do so.

B-5

The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it.  The undersigned declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

EXECUTED this                  day of                  20    , at                       , California.

“Executive”

Print Name:

HCP, INC.,

a Maryland corporation,

By:

Name:

Title:

B-6

ENDORSEMENT

I,                                               , hereby acknowledge that I was given [21/45] days to consider the foregoing Release Agreement and voluntarily chose to sign the Release Agreement prior to the expiration of the [21-day/45-day] period.

I declare under penalty of perjury under the laws of the United States and the State of California that the foregoing is true and correct.

EXECUTED this  [        ] day of [                           200        ], at                           , California.

Print Name:

B-7

EXHIBIT C

SECTION 280G PROVISIONS

The provisions of this Exhibit C shall apply to each Participant in the HCP, Inc. Change in Control Severance Plan (the “Plan”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

1.Gross-Up Payment.

(a)Subject to Section 1(b), in the event it is determined (pursuant to Section 2 below) or finally determined (as defined in Section 3(c) below) that any payment, distribution, transfer, benefit or other event with respect to the Corporation or a successor, direct or indirect subsidiary or affiliate of the Corporation (or any successor or affiliate of any of them, and including any benefit plan of any of them), and arising in connection with an event described in Section 280G(b)(2)(A)(i) of the Code, occurring after the Effective Date, to or for the benefit of a Participant or a Participant’s dependents, heirs or beneficiaries (whether such payment, distribution, transfer, benefit or other event occurs pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this Section 1 (each a “Payment” and collectively the “Payments”) is or was subject to the excise tax imposed by Section 4999 of the Code, and any successor provision or any comparable provision of state or local income tax law (collectively, “Section 4999”), or any interest, penalty or addition to tax is or was incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest, penalty, addition to tax, and costs (including professional fees) hereinafter collectively referred to as the “Excise Tax”), then, within 10 days after such determination or final determination, as the case may be, the Corporation shall pay to the Participant (or to the applicable taxing authority on the Participant’s behalf) an additional cash payment (hereinafter referred to as the “Gross-Up Payment”) equal to an amount such that after payment by the Participant of all taxes, interest, penalties, additions to tax and costs imposed or incurred with respect to the Gross-Up Payment (including, without limitation, any income and excise taxes imposed upon the Gross-Up Payment), the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Payment or Payments.  The Gross-Up Payment, if triggered pursuant to this Section 1(a), is intended to put the Participant in the same position as the Participant would have been had no Excise Tax been imposed upon or incurred as a result of any Payment.

(b)Notwithstanding anything contained in Section 1(a) or any other provision of the Plan to the contrary, if a reduction in the amount of the Payments by an amount up to but not in excess of twenty five thousand dollars ($25,000) would avoid the imputation of any Excise Tax on the remaining Payments (after such reduction), then the Payments shall be reduced (but not below zero) so that the maximum amount of the Payments (after reduction) shall be one dollar ($1.00) less than the amount which would cause the Payments to be subject to the Excise Tax.  Unless the Participant shall have given prior written notice to the Corporation to effectuate a reduction in the Payments if such a reduction is required, the Corporation shall reduce or eliminate the Payments by first reducing or eliminating any cash severance benefits, then by reducing or eliminating any accelerated vesting of stock options, then by reducing or eliminating any accelerated vesting of other equity-based awards, then by reducing or eliminating any other remaining Payments.

C-1

(c)The preceding provisions of this Section 1 shall take precedence over the provisions of any other plan, arrangement or agreement governing the Participant’s rights and entitlements to any benefits or compensation.

2.Determination of Gross-Up.

(a)Except as provided in Section 3, the determination that a Payment is subject to an Excise Tax, and in such event, whether a Gross-Up Payment or a reduction in Payments is required pursuant to Section 1(a) and Section 1(b), shall be made in writing by a nationally recognized accounting firm or executive compensation consulting firm selected by the Corporation (the “Accounting Firm”).  Such determination shall include the amount of the Gross-Up Payment or reduction in Payments, as applicable, and detailed computations thereof, including any assumptions used in such computations.  Any determination by the Accounting Firm will be binding on the Participant and the Corporation.

(b)For purposes of determining whether a Gross-Up Payment is required, and if so, the amount of any such Gross-Up Payment, the Participant shall be deemed to pay Federal income taxes at the highest marginal rate of Federal individual income taxation in the calendar year in which the Payment is to be made.  Such highest marginal rate shall take into account the loss of itemized deductions by the Participant and shall also include the Participant’s share of the hospital insurance portion of FICA and state and local income taxes at the highest marginal rate of individual income taxation in the state and locality of the Participant’s residence on the date that the Payment is made, net of the maximum reduction in Federal income taxes that could be obtained from the deduction of such state and local taxes.

3.Notification.

(a)The Participant shall notify the Corporation in writing of any claim by the Internal Revenue Service (or any successor thereof) or any state or local taxing authority (individually or collectively, the “Taxing Authority”) that, if successful, would require the payment by the Corporation of a Gross-Up Payment.  Such notification shall be given as soon as practicable but no later than 30 days after the Participant receives written notice of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that if the Participant fails to give such notice within such 30-day period it shall not result in a waiver or forfeiture of any of the Participant’s rights under this Exhibit C except to the extent of actual damages suffered by the Corporation as a result of such failure.  the Participant shall not pay such claim prior to the expiration of the 15-day period following the date on which the Participant gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes, interest, penalties or additions to tax with respect to such claim is due).  If the Corporation notifies the Participant in writing prior to the expiration of such 15-day period (regardless of whether such claim was earlier paid as contemplated by the preceding parenthetical) that it desires to contest such claim, the Participant shall:

C-2

(i)give the Corporation any information reasonably requested by the Corporation relating to such claim;

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

(iii)cooperate with the Corporation in good faith in order effectively to contest such claim; and

(iv)permit the Corporation to participate in any proceedings relating to such claim;

provided, however, that the Corporation shall bear and pay directly all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed in relation to such claim and in relation to the payment of such costs and expenses or indemnification.

(b)Without limitation on the foregoing provisions of this Section 3, and to the extent its actions do not unreasonably interfere with or prejudice the Participant’s disputes with the Taxing Authority as to other issues, the Corporation shall control all proceedings taken in connection with such contest and, in its reasonable discretion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Taxing Authority in respect of such claim and may, at its or in their sole option, either direct the Participant to pay the tax, interest or penalties claimed and sue for a refund or contest the claim in any permissible manner, and the Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs the Participant to pay such claim and sue for a refund, the Corporation shall advance an amount equal to such payment to the Participant, on an interest-free basis, and shall indemnify and hold the Participant harmless, on an after-tax basis, from all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed with respect to such advance or with respect to any imputed income with respect to such advance, as any such amounts are incurred; and, further, provided, that any extension of the statute of limitations relating to payment of taxes, interest, penalties or additions to tax for the Participant’s taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount; and, provided, further, that any settlement of any claim shall be reasonably acceptable to the Participant, and the Corporation’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the Participant shall be entitled to settle or contest, as the case may be, any other issue.

C-3

(c)If, after the Participant receives an amount advanced by the Corporation pursuant to Section 3(a), the Participant receives any refund with respect to such claim, the Participant shall (subject to the Corporation’s compliance with the requirements of this Exhibit C) promptly pay to the Corporation an amount equal to such refund (together with any interest paid or credited thereof after taxes applicable thereto), net of any taxes (including, without limitation, any income or excise taxes), interest, penalties or additions to tax and any other costs incurred by the Participant in connection with such advance, after giving effect to such repayment.  If, after the Participant receives an amount advanced by the Corporation pursuant to Section 3(a), it is finally determined that the Participant is not entitled to any refund with respect to such claim, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be treated as a Gross-Up Payment and shall offset, to the extent thereof, the amount of any Gross-Up Payment otherwise required to be paid.

(d)For purposes of this Exhibit C, whether the Excise Tax is applicable to a Payment shall be deemed to be “finally determined” upon the earliest of: (1) the expiration of the 15-day period referred to in Section 3(a) if the Corporation or the Participant’s Employer has not notified the Participant that it intends to contest the underlying claim, (2) the expiration of any period following which no right of appeal exists, (3) the date upon which a closing agreement or similar agreement with respect to the claim is executed by the Participant and the Taxing Authority (which agreement may be executed only in compliance with this section), or (4) the Participant receives notice from the Corporation that it no longer seeks to pursue a contest (which shall be deemed received if the Corporation does not, within 15 days following receipt of a written inquiry from the Participant, affirmatively indicate in writing to the Participant that the Corporation intends to continue to pursue such contest).

4.Underpayment and Overpayment.  It is possible that no Gross-Up Payment will initially be made but that a Gross-Up Payment should have been made, or that a Gross-Up Payment will initially be made in an amount that is less than what should have been made, or that a reduction in Payments was made that should not have been made (any of such events is referred to as an “Underpayment”).  It is also possible that a Gross-Up Payment will initially be made in an amount that is greater than what should have been made or that Payments were reduced by an amount less than that required by Section 1(b) (an “Overpayment”).  The determination of any Underpayment or Overpayment shall be made by the Accounting Firm in accordance with Section 2.  In the event of an Underpayment, the Corporation shall pay the Participant the amount of any such Underpayment (plus any interest or penalties payable with respect to such excess).  In the event of an Overpayment, the Participant shall promptly pay to the Corporation the amount of such Overpayment together with interest on such amount at the applicable Federal rate provided for in Section 1274(d) of the Code for the period commencing on the date of the Overpayment to the date of such payment by the Participant to the Corporation.  The Participant shall make such payment to the Corporation as soon as administratively practicable after the Corporation notifies the Participant of (a) the Accounting Firm’s determination that an Overpayment was made and (b) the amount to be repaid.

5.Compliance with Law.  Nothing in this Exhibit C is intended to violate the Sarbanes-Oxley Act of 2002, and to the extent that any advance or repayment obligation hereunder would constitute such a violation, such obligation shall be modified so as to make the advance a nonrefundable payment to the Participant and the repayment obligation null and void to the extent required by such Act.

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6.Section 409A.  Notwithstanding anything to the contrary provided herein, the payment by the Corporation to the Participant of any Gross-Up Payment required hereunder shall be paid to the Participant no later than the last day of the calendar year that follows the calendar year in which the applicable Excise Taxes on the Payments are remitted to the applicable Taxing Authority.

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, James F. Flaherty III, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 30, 2012	/s/ JAMES F. FLAHERTY III
	James F. Flaherty III
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Timothy M. Schoen, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: October 30, 2012	/s/ TIMOTHY M. SCHOEN
	Timothy M. Schoen
	Executive Vice President-
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

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

Date: October 30, 2012	/s/ JAMES F. FLAHERTY III
	James F. Flaherty III
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

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

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

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

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

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

Date: October 30, 2012	/s/ TIMOTHY M. SCHOEN
	Timothy M. Schoen
	Executive Vice President-
	Chief Financial Officer
	(Principal Financial Officer)

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

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Debt (Tables)

9 Months Ended

Sep. 30, 2012

Debt

Summary of stated debt maturities and scheduled principal repayments

Year	Term Loan(1)		Senior Unsecured Notes			Mortgage Debt			Total(2)
2012 (Three months)	$	—	$	—		$	8,715		$	8,715
2013	—		550,000			320,207			870,207
2014	—		487,000			184,495			671,495
2015	—		400,000			304,761			704,761
2016	221,214		900,000			293,175			1,414,389
Thereafter	—		3,600,000			584,762			4,184,762
	221,214		5,937,000			1,696,115			7,854,329
(Discounts) and premiums, net	—		(23,310		)	(11,601		)	(34,911		)
	$	221,214	$	5,913,690		$	1,684,514		$	7,819,418

(1)Represents £137 million translated into U.S. dollars as of September 30, 2012.

(2)Excludes $85 million of other debt that represents the Life Care Bonds that have no scheduled maturities.

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Net Investment in Direct Financing Leases (Details) (USD $)			9 Months Ended			12 Months Ended	9 Months Ended
	Sep. 30, 2012 item	Dec. 31, 2011 item	Sep. 30, 2012 HCR ManorCare item	Dec. 31, 2011 HCR ManorCare	Apr. 07, 2011 HCR ManorCare item	Mar. 31, 2013 HCR ManorCare Forecast	Sep. 30, 2012 HCR ManorCare Minimum	Sep. 30, 2012 HCR ManorCare Maximum
Net Investment in Direct Financing Leases
Minimum lease payments receivable	$ 25,350,888,000	$ 25,744,161,000	$ 24,200,000,000	$ 24,500,000,000
Estimated residual values	4,010,514,000	4,010,514,000
Less unearned income	(22,518,153,000)	(23,026,898,000)
Net investment in direct financing leases	6,843,249,000	6,727,777,000
Number of properties subject to direct financing leases	361	361
Direct financing leases
Number of post-acute, skilled nursing and assisted living facilities acquired					334
Minimum lease payments receivable	25,350,888,000	25,744,161,000	24,200,000,000	24,500,000,000
Annual rent receivable from triple-net master lease with HCR ManorCare						$ 489,000,000
Rate of increase in rent receivable per year after each of the next four years of initial lease term (as a percent)			3.50%
Rate of increase in rent receivable per year for remaining years of lease term (as a percent)			3.00%
Number of asset pools			4
Rate of increase in rent receivable for first year of extension option (as a percent)			3.00%
Total initial available term of asset pools							23 years	35 years

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Derivative Financial Instruments

Schedule of derivative instruments

Date Entered	Maturity Date	Hedge Designation	Fixed Rate/Buy Amount			Floating/Exchange Rate Index	Notional/  Sell Amount		Fair Value(1)
July 2005(2)	July 2020	Cash Flow	3.82		%	BMA Swap Index	$	45,600	$	(8,868	)
November 2008(3)	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	27,200		(4,142		)
July 2009(4)	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	13,700		(234		)
July 2012(4)	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	(75		)
July 2012(5)	June 2016	Cash Flow	$	11,400		Buy USD/Sell GBP	£	7,200	(2,317		)

(1)Interest-rate and foreign currency swap assets are recorded in other assets, net and interest-rate and foreign currency swap liabilities are recorded in accounts payable and accrued liabilities on the condensed consolidated balance sheets.

(2)Represents three interest-rate swap contracts with an aggregate notional amount of $45.6 million which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(3)Acquired in conjunction with mortgage debt assumed related to real estate acquired on December 28, 2010. Hedges fluctuations in interest payments on variable-rate secured debt due to fluctuations in the underlying benchmark interest rate.

(4)Hedges fluctuations in interest payments on variable-rate secured and unsecured debt due to fluctuations in the underlying benchmark interest rate.

(5)Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to a portion of the Company’s forecasted interest receipts on GBP denominated senior unsecured notes.

Schedule of effect of change in interest rate

		Effects of Change in Interest and Foreign Currency Rates
Date Entered	Maturity Date	+50 Basis Points			-50 Basis Points			+100 Basis Points			-100 Basis Points
July 2005	July 2020	$	1,605		$	(1,760	)	$	3,287		$	(3,443	)
November 2008	October 2016	528			(526		)	1,055			(1,052		)
July 2009	July 2013	49			(55		)	102			(107		)
July 2012	June 2016	4,238			(3,872		)	8,293			(7,926		)
July 2012	June 2016	(699		)	232			(1,164		)	697

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair value assets and liabilities measured on recurring basis:
Marketable equity securities	$ 22,769	$ 17,053
Fair value on a recurring basis | Fair Value
Fair value assets and liabilities measured on recurring basis:
Marketable equity securities	22,769
Total fair value assets and liabilities measured on recurring basis	8,423
Fair value on a recurring basis | Fair Value | Interest-rate swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	(13,319)
Fair value on a recurring basis | Fair Value | Currency swap liabilities
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	(2,317)
Fair value on a recurring basis | Fair Value | Warrants
Fair value assets and liabilities measured on recurring basis:
Derivative assets	1,290
Fair value on a recurring basis | Level 1
Fair value assets and liabilities measured on recurring basis:
Marketable equity securities	22,769
Total fair value assets and liabilities measured on recurring basis	22,769
Fair value on a recurring basis | Level 2
Fair value assets and liabilities measured on recurring basis:
Total fair value assets and liabilities measured on recurring basis	(15,636)
Fair value on a recurring basis | Level 2 | Interest-rate swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	(13,319)
Fair value on a recurring basis | Level 2 | Currency swap liabilities
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	(2,317)
Fair value on a recurring basis | Level 3
Fair value assets and liabilities measured on recurring basis:
Total fair value assets and liabilities measured on recurring basis	1,290
Fair value on a recurring basis | Level 3 | Warrants
Fair value assets and liabilities measured on recurring basis:
Derivative assets	$ 1,290

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Loans Receivable (Details) (USD $)	9 Months Ended							1 Months Ended			1 Months Ended		9 Months Ended				1 Months Ended								1 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Real Estate Secured	Dec. 31, 2011 Real Estate Secured	Sep. 30, 2012 Other Secured	Dec. 31, 2011 Other Secured	Jul. 31, 2012 Tandem Health Care Loan	Jul. 31, 2012 Tandem Health Care Loan First Tranche	Jul. 31, 2012 Tandem Health Care Loan Second Tranche	Sep. 30, 2011 Delphis	Dec. 31, 2009 Delphis	Sep. 30, 2012 Delphis	Sep. 30, 2011 Delphis	Oct. 31, 2012 Delphis	Dec. 31, 2011 Delphis	Apr. 30, 2011 HCR ManorCare	Dec. 31, 2007 HCR ManorCare, mezzanine loan	Jan. 31, 2011 HCR ManorCare, participation in first mortgage debt	Aug. 31, 2009 HCR ManorCare, participation in first mortgage debt	Apr. 30, 2011 Genesis HealthCare Loans	Sep. 30, 2010 Genesis Senior Loans	Sep. 30, 2010 Genesis Senior Loans Minimum	Sep. 30, 2010 Genesis Senior Loans Maximum	Oct. 31, 2010 Genesis Mezzanine participation loan
Loans receivable:
Mezzanine	$ 183,253,000		$ 90,148,000			$ 183,253,000	$ 90,148,000
Loan receivable	74,413,000		35,643,000	74,413,000	35,643,000			205,000,000	100,000,000	105,000,000
Unamortized discounts, fees and costs	(3,327,000)		(2,128,000)	(255,000)	(1,040,000)	(3,072,000)	(1,088,000)
Allowance for loan losses	(13,410,000)		(13,410,000)			(13,410,000)	(13,410,000)
Loans receivable, net	240,929,000		110,253,000	74,158,000	34,603,000	166,771,000	75,650,000
Loan receivable subordinated to senior mortgage debt								400,000,000
Loan receivable subordinated to senior mezzanine debt								137,000,000
Loan receivable, interest rate payable at maturity (as a percent)									12.00%	14.00%
Loan receivable term								63 months
Provision for loan loss											15,400,000	4,300,000
Distribution of fund to guarantor													1,500,000
Cash payment received													4,900,000
Legal expenses													500,000
Loans receivable, net reported amount													68,800,000		59,100,000	75,700,000
Proceeds from repayment	4,660,000	303,867,000											6,900,000	2,100,000							330,400,000
Proceeds from sale of collateral asset													9,700,000
Loans receivable purchased, face or par value																			360,000,000	720,000,000		278,000,000			50,000,000
Loan receivable purchased, acquisition cost																		900,000,000
Loans receivable purchased, discount																		100,000,000		130,000,000		28,000,000			10,000,000
Debt instrument, variable rate basis																		one-month London Interbank Offered Rate ("LIBOR")	LIBOR	LIBOR		LIBOR			LIBOR
Debt instrument, variable rate floor (as a percent)																							1.50%	2.50%
Debt instrument, basis spread on variable rate (as a percent)																		4.00%	1.25%	1.25%			4.75%	5.75%	7.50%
Additional interest income as a result of extinguishment of loans																	23,000,000				34,800,000
Termination fee																									$ 2,300,000

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Fair value measurements of financial assets and liabilities

Financial Instrument	Fair Value			Level 1		Level 2			Level 3
Marketable equity securities	$	22,769		$	22,769	$	—		$	—
Interest-rate swap liabilities(1)	(13,319		)	—		(13,319		)	—
Currency swap liabilities(1)	(2,317		)	—		(2,317		)	—
Warrants(1)	1,290			—		—			1,290
	$	8,423		$	22,769	$	(15,636	)	$	1,290

(1)Interest rate and currency swaps as well as common stock warrant fair values are determined based on observable and unobservable market assumptions utilizing standardized derivative pricing models.

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Other Real Estate Property Investments (Tables)

9 Months Ended

Sep. 30, 2012

Other Real Estate Property Investments

Schedule of real estate acquisitions

A summary of real estate acquisitions for the nine months ended September 30, 2012 follows (in thousands):

	Consideration							Assets Acquired
Segment	Cash Paid		Debt and Other Liabilities Assumed		Noncontrolling Interest			Real Estate		Net Intangibles
Medical office	$	157,556	$	35,120	$	27,346	(1)	$	170,443	$	49,579
Life science	7,964		—		86			7,580		470
Senior housing	3,860		—		—			3,541		319
Hospital	3,000		—		—			3,000		—
	$	172,380	$	35,120	$	27,432		$	184,564	$	50,368

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

A summary of real estate acquisitions for the nine months ended September 30, 2011 follows (in thousands):

	Consideration						Assets Acquired
Segment	Cash Paid		Debt Assumed		Noncontrolling Interest		Real Estate		Net Intangibles
Life science	$	84,087	$	57,869	$	—	$	133,040	$	8,916
Medical office	29,743		—		1,500		26,191		5,052
	$	113,830	$	57,869	$	1,500	$	159,231	$	13,968

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Impairments (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Asset impairment
Impairment related to parcel of land	$ 7,878,000	$ 15,400,000	$ 7,878,000	$ 15,400,000
Carrying value, land	1,724,563,000		1,724,563,000		1,723,601,000
Loans receivable, before Impairment	74,413,000		74,413,000		35,643,000
Land
Asset impairment
Area under expanded tenant relationship (in square feet)	396,000		396,000
Area of lease extension (in square feet)	281,000		281,000
Real estate lease term	10 years
Area of building to be developed (in square feet)	115,000		115,000
Land acquired (in acres)	19
Sales price of parcel	19,000,000		19,000,000
Impairment related to parcel of land	7,900,000
Carrying value, land	27,000,000		27,000,000
Cirrus loan
Asset impairment
Provision for losses (impairment)		15,400,000
Loans receivable, before Impairment		91,100,000		91,100,000
Loans receivable, after Impairment		$ 75,700,000		$ 75,700,000

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Investments in and Advances to Unconsolidated Joint Ventures (Details 2) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended		6 Months Ended	9 Months Ended				9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 HCR ManorCare	Sep. 30, 2011 HCR ManorCare	Jun. 30, 2011 HCR ManorCare	Sep. 30, 2012 HCR ManorCare	Sep. 30, 2011 HCR ManorCare	Sep. 30, 2012 HCP Ventures III, LLC item	Sep. 30, 2012 HCP Ventures IV, LLC item	Sep. 30, 2012 HCP Life Science item	Sep. 30, 2012 HCP Life Science Minimum	Sep. 30, 2012 HCP Life Science Maximum	Sep. 30, 2012 Torrey Pines Science Center, LP	Sep. 30, 2012 Britannia Biotech Gateway, LP	Sep. 30, 2012 LASDK, LP	Sep. 30, 2012 Horizon Bay Hyde Park, LLC item	Sep. 30, 2012 Suburban Properties, LLC item	Sep. 30, 2012 Advances to unconsolidated joint ventures, net	Sep. 30, 2012 Edgewood Assisted Living Center, LLC item	Sep. 30, 2012 Seminole Shores Living Center, LLC item
Company owned interests in entities, accounted under equity method:
Number of medical office buildings											13	54								1
Number of hospitals												4
Number of life science facilities													4
Number of senior housing facilities																			1			1	1
Investments in and advances to unconsolidated joint ventures	$ 217,092,000		$ 217,092,000		$ 224,052,000	$ 94,358,000			$ 94,358,000		$ 7,774,000	$ 33,071,000	$ 67,263,000						$ 6,927,000	$ 7,508,000	$ 191,000
Investment reported in liabilities	(1,186,000)		(1,186,000)																			(449,000)	(737,000)
Investment ownership percentage						9.90%			9.90%		30.00%	20.00%		50.00%	63.00%	50.00%	55.00%	63.00%	72.00%	67.00%		45.00%	50.00%
Ownership percentage presented after adjusting						9.40%			9.40%
Number of unconsolidated joint ventures													3
Payment to acquire equity method investment								95,000,000
Reduction in DFL income						14,900,000	14,400,000		44,400,000	27,700,000
Summarized combined financial information for unconsolidated joint ventures:
Real estate, net	3,751,592,000		3,751,592,000		3,806,187,000
Goodwill	2,736,400,000		2,736,400,000		2,736,400,000
Other assets, net	3,019,757,000		3,019,757,000		3,061,290,000
Total assets	9,507,749,000		9,507,749,000		9,603,877,000
Capital lease obligations and other debt	6,014,200,000		6,014,200,000		5,976,500,000
Mortgage debt	887,956,000		887,956,000		895,243,000
Accounts payable	954,622,000		954,622,000		1,083,581,000
Other partners' capital	1,467,292,000		1,467,292,000		1,465,536,000
HCP's capital	183,679,000		183,679,000		183,017,000
Total liabilities and partners' capital	9,507,749,000		9,507,749,000		9,603,877,000
Combined basis difference	32,000,000		32,000,000
Total revenues	1,057,567,000	1,123,742,000	3,196,086,000	2,174,711,000
Net income (loss)	(8,851,000)	31,076,000	8,416,000	9,198,000
HCP's share in earnings	13,396,000	17,050,000	42,803,000	32,798,000
Fees earned by HCP	460,000	494,000	1,423,000	1,605,000
Distributions received by HCP	$ 1,419,000	$ 1,271,000	$ 4,826,000	$ 4,398,000

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Disclosures About Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Marketable debt securities	$ 221,018
Marketable equity securities	22,769	17,053
Bank line of credit		454,000
Senior unsecured notes	5,913,690	5,416,063
Mortgage debt	1,684,514	1,715,039
Other debt	84,580	87,985
Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Loans receivable, net	240,929	110,253
Marketable debt securities	221,018
Marketable equity securities	22,769	17,053
Bank line of credit		454,000
Term loan	221,214
Senior unsecured notes	5,913,690	5,416,063
Mortgage debt	1,684,514	1,764,571
Other debt	84,580	87,985
Carrying Value | Warrants
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative assets	1,290	1,334
Carrying Value | Interest-rate swap contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative liabilities	13,319	12,123
Carrying Value | Currency swap liabilities
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative liabilities	2,317
Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Loans receivable, net	252,032	111,073
Marketable debt securities	221,018
Marketable equity securities	22,769	17,053
Bank line of credit		454,000
Term loan	221,214
Senior unsecured notes	6,623,609	5,819,304
Mortgage debt	1,786,940	1,870,070
Other debt	84,580	87,985
Fair Value | Warrants
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative assets	1,290	1,334
Fair Value | Interest-rate swap contracts
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative liabilities	13,319	12,123
Fair Value | Currency swap liabilities
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative liabilities	$ 2,317

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Variable Interest Entities

9 Months Ended

Sep. 30, 2012

Variable Interest Entities

Variable Interest Entities

(17)Variable Interest Entities

At September 30, 2012, the Company leased 48 properties to a total of seven VIE tenants and had an additional investment in a loan to a VIE borrower. The Company has determined that it is not the primary beneficiary of these VIEs. The carrying value and classification of the related assets, liabilities and maximum exposure to loss as a result of the Company’s involvement with these VIEs are presented below at September 30, 2012 (in thousands):

VIE Type	Maximum Loss Exposure(1)		Asset/Liability Type	Carrying Amount
VIE tenants—operating leases	$	308,905	Lease intangibles, net and straight-line rent receivables	$	15,122
VIE tenants—DFLs	1,132,359		Net investment in DFLs	597,792
Loan—senior secured	68,755		Loans receivable, net	68,755

(1)The Company’s maximum loss exposure related to the VIE tenants represents the future minimum lease payments over the remaining term of the respective leases, which may be mitigated by re-leasing the properties to new tenants. The Company’s maximum loss exposure related to its loan to the VIE represents its current aggregate carrying amount.

As of September 30, 2012, the Company has not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash shortfalls).

The Company holds an interest-only, senior secured term loan made to a borrower that has been identified as a VIE. The Company does not consolidate the VIE because it does not have the ability to control the activities that most significantly impact the VIE’s economic performance. The loan is collateralized by all of the assets of the borrower (comprised primarily of interests in partnerships that operate surgical facilities, some of which are on the premises of properties owned by the Company or HCP Ventures IV, LLC) and is supported in part by limited guarantees made by certain former and current principals of the borrower. Recourse under certain of these guarantees is limited to the guarantors’ respective ownership interests in certain entities owning real estate that are pledged to secure such guarantees.

See Notes 6, 7 and 12 for additional description of the nature, purpose and activities of the Company’s VIEs and interests therein.

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Summary of Significant Accounting Policies (Details)	Sep. 30, 2012 item
Summary of Significant Accounting Policies
Number of senior living communities operated in a RIDEA structure	21

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Segment Disclosures (Tables)

9 Months Ended

Sep. 30, 2012

Segment Disclosures

Information of revenue of reportable segment

For the three months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	114,856	$	36,076	$	876	$	—	$	151,808	$	126,060	$	113,592
Post-acute/skilled		135,508		—		9,135		—		144,643		135,354		116,898
Life science		71,194		—		—		1		71,195		59,403		56,341
Medical office		85,800		—		—		459		86,259		50,852		49,669
Hospital		21,310		—		267		—		21,577		20,408		19,950
Total	$	428,668	$	36,076	$	10,278	$	460	$	475,482	$	392,077	$	356,450

For the three months ended September 30, 2011:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	122,849	$	11,974	$	42	$	—	$	134,865	$	125,209	$	112,755
Post-acute/skilled	132,392		—		287		—		132,679		132,148		112,881
Life science	71,093		—		—		1		71,094		57,860		52,785
Medical office	80,996		—		—		493		81,489		47,650		46,514
Hospital	20,854		—		248		—		21,102		19,629		19,065
Total	$	428,184	$	11,974	$	577	$	494	$	441,229	$	382,496	$	344,000

For the nine months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	341,936	$	107,824	$	1,686	$	—	$	451,446	$	379,834	$	342,368
Post-acute/skilled	404,180		—		9,842		—		414,022		403,654		346,900
Life science	215,569		—		—		3		215,572		177,339		171,179
Medical office	246,661		—		—		1,420		248,081		148,030		144,272
Hospital	63,300		—		785		—		64,085		60,530		58,996
Total	$	1,271,646	$	107,824	$	12,313	$	1,423	$	1,393,206	$	1,169,387	$	1,063,715

For the nine months ended September 30, 2011:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	355,496	$	15,314	$	49	$	70	$	370,929	$	359,460	$	319,393
Post-acute/skilled	265,377		—		98,167		—		363,544		265,059		228,034
Life science	215,045		—		—		3		215,048		176,384		159,544
Medical office	240,603		—		—		1,532		242,135		143,243		138,469
Hospital	62,118		—		983		—		63,101		58,704		56,863
Total	$	1,138,639	$	15,314	$	99,199	$	1,605	$	1,254,757	$	1,002,850	$	902,303

(1)Represents rental and related revenues, tenant recoveries, and income from DFLs.

(2)NOI is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate. The Company defines NOI as rental and related revenues, including tenant recoveries, resident fees and services, and income from direct financing leases, less property level operating expenses. NOI excludes interest income, investment management fee income, interest expense, depreciation and amortization, general and administrative expenses, litigation settlement, impairments, impairment recoveries, other income (expense), net, income taxes, equity income from and impairments of investments in unconsolidated joint ventures, and discontinued operations. The Company believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL accretion, amortization of above and below market lease intangibles, and lease termination fees. Adjusted NOI is sometimes referred to as “cash NOI.” The Company uses NOI and adjusted NOI to make decisions about resource allocations and to assess and compare property level performance. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP because it does not reflect the aforementioned excluded items. Further, the Company’s definition of NOI may not be comparable to the definition used by other REITs, as those companies may use different methodologies for calculating NOI.

Reconciliation from reported net income to NOI and adjusted NOI

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income	$	199,043		$	175,471		$	600,582		$	483,707
Interest income	(10,278		)	(577		)	(12,313		)	(99,199		)
Investment management fee income	(460		)	(494		)	(1,423		)	(1,605		)
Interest expense	103,513			103,459			309,875			315,695
Depreciation and amortization	88,686			86,672			259,039			265,742
General and administrative	19,443			19,647			54,356			76,471
Impairments	7,878			15,400			7,878			15,400
Other (income) expense, net	(770		)	772			(2,233		)	(17,056		)
Income taxes	(598		)	5			(1,131		)	289
Equity income from unconsolidated joint ventures	(13,396		)	(17,050		)	(42,803		)	(32,798		)
Total discontinued operations, net of income taxes	(984		)	(809		)	(2,440		)	(3,796		)
NOI	392,077			382,496			1,169,387			1,002,850
Straight-line rents	(11,821		)	(14,024		)	(33,608		)	(46,936		)
DFL accretion	(23,433		)	(23,571		)	(71,072		)	(48,508		)
Amortization of above and below market lease intangibles, net	(533		)	(1,178		)	(1,855		)	(3,271		)
Lease termination fees	(175		)	(239		)	(574		)	(3,417		)
NOI adjustments related to discontinued operations	335			516			1,437			1,585
Adjusted NOI	$	356,450		$	344,000		$	1,063,715		$	902,303

Reconciliation of company's assets to total assets

	September 30,			December 31,
Segments	2012			2011
Senior housing	$	5,867,914		$	5,792,196
Post-acute/skilled nursing	6,057,501			5,644,472
Life science	3,928,661			3,886,851
Medical office	2,586,231			2,336,302
Hospital	760,222			757,618
Gross segment assets	19,200,529			18,417,439
Accumulated depreciation and amortization	(1,885,172		)	(1,649,845		)
Net segment assets	17,315,357			16,767,594
Real estate held for sale, net	91,226			102,649
Other non-segment assets	672,753			538,232
Total assets	$	18,079,336		$	17,408,475

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Investments in and Advances to Unconsolidated Joint Ventures (Tables)

9 Months Ended

Sep. 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 (expense), 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	$	94,358		9.4(3)
HCP Ventures III, LLC	13 medical office	7,774			30
HCP Ventures IV, LLC	54 medical office and 4 hospital	33,071			20
HCP Life Science(4)	4 life science	67,263			50-63
Horizon Bay Hyde Park, LLC	1 senior housing	6,927			72
Suburban Properties, LLC	1 medical office	7,508			67
Advances to unconsolidated joint ventures, net		191
		$	217,092
Edgewood Assisted Living Center, LLC	1 senior housing	$	(449	)	45
Seminole Shores Living Center, LLC	1 senior housing	(737		)	50
		$	(1,186)

(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, as amended, 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, as amended, 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:

	September 30,		December 31,
	2012		2011
Real estate, net	$	3,751,592	$	3,806,187
Goodwill	2,736,400		2,736,400
Other assets, net	3,019,757		3,061,290
Total assets	$	9,507,749	$	9,603,877
Capital lease obligations and other debt	$	6,014,200	$	5,976,500
Mortgage debt	887,956		895,243
Accounts payable	954,622		1,083,581
Other partners’ capital	1,467,292		1,465,536
HCP’s capital(1)	183,679		183,017
Total liabilities and partners’ capital	$	9,507,749	$	9,603,877

(1)The combined basis difference of the Company’s investments in these joint ventures of $32 million, as of September 30, 2012, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

	Three Months Ended September 30,					Nine Months Ended September 30,(1)
	2012			2011		2012		2011(2)
Total revenues	$	1,057,567		$	1,123,742	$	3,196,086	$	2,174,711
Net income (loss)	(8,851		)	31,076		8,416		9,198
HCP’s share in earnings(3)	13,396			17,050		42,803		32,798
Fees earned by HCP	460			494		1,423		1,605
Distributions received by HCP	1,419			1,271		4,826		4,398

(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 $14.9 million and $44.4 million for the three and nine months ended September 30, 2012, respectively, and a reduction of $14.4 million and $27.7 million for the three and nine months ended September 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.

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Other Real Estate Property Investments (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Acquisition
Consideration, Cash Paid	$ 172,380,000	$ 113,830,000
Consideration, Debt and Other Liabilities Assumed	35,120,000	57,869,000
Consideration, Noncontrolling Interest	27,432,000	1,500,000
Assets Acquired, Real Estate	184,564,000	159,231,000
Assets Acquired, Net Intangibles	50,368,000	13,968,000
Medical office
Acquisition
Consideration, Cash Paid	157,556,000	29,743,000
Consideration, Debt and Other Liabilities Assumed	35,120,000
Consideration, Noncontrolling Interest	27,346,000	1,500,000
Assets Acquired, Real Estate	170,443,000	26,191,000
Assets Acquired, Net Intangibles	49,579,000	5,052,000
Life science
Acquisition
Consideration, Cash Paid	7,964,000	84,087,000
Consideration, Debt and Other Liabilities Assumed		57,869,000
Consideration, Noncontrolling Interest	86,000
Assets Acquired, Real Estate	7,580,000	133,040,000
Assets Acquired, Net Intangibles	470,000	8,916,000
Number of facilities placed into service		2
The square footage of facilities placed in service		88,000
Senior housing
Acquisition
Consideration, Cash Paid	3,860,000
Assets Acquired, Real Estate	3,541,000
Assets Acquired, Net Intangibles	319,000
Hospital
Acquisition
Consideration, Cash Paid	3,000,000
Assets Acquired, Real Estate	3,000,000
Life science and medical office
Acquisition
Payments to acquire productive assets	$ 126,000,000	$ 87,000,000

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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Numerator
Income from continuing operations	$ 198,059	$ 174,662	$ 598,142	$ 479,911
Noncontrolling interests' share in continuing operations	(2,935)	(3,276)	(9,070)	(12,660)
Income from continuing operations applicable to HCP, Inc.	195,124	171,386	589,072	467,251
Preferred stock dividends		(5,282)	(17,006)	(15,848)
Participating securities' share in continuing operations	(479)	(546)	(2,154)	(1,893)
Income from continuing operations applicable to common shares	194,645	165,558	569,912	449,510
Discontinued operations	984	809	2,440	3,796
Net income applicable to common shares	$ 195,629	$ 166,367	$ 572,352	$ 453,306
Denominator
Basic weighted-average common shares	429,557,000	407,081,000	420,049,000	395,258,000
Dilutive potential common shares	1,221,000	1,565,000	1,355,000	1,755,000
Diluted weighted-average common shares	430,778,000	408,646,000	421,404,000	397,013,000
Basic earnings per common share
Income from continuing operations (in dollars per share)	$ 0.45	$ 0.41	$ 1.36	$ 1.14
Discontinued operations (in dollars per share)	$ 0.01			$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.46	$ 0.41	$ 1.36	$ 1.15
Diluted earnings per common share
Income from continuing operations (in dollars per share)	$ 0.45	$ 0.41	$ 1.36	$ 1.13
Discontinued operations (in dollars per share)				$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.45	$ 0.41	$ 1.36	$ 1.14
Common stock options
Diluted earnings per common share
Shares of anti-dilutive securities excluded from earnings per share calculation	500,000	1,100,000
Restricted Stock and Performance Restricted Stock Units
Diluted earnings per common share
Shares of anti-dilutive securities excluded from earnings per share calculation		15,000
Down REIT
Diluted earnings per common share
Shares of anti-dilutive securities excluded from earnings per share calculation	6,400,000	5,900,000
DownREIT LLCs, non-managing member units outstanding	4,400,000	4,200,000

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified		3 Months Ended	9 Months Ended		9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended	12 Months Ended	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2012 item	Sep. 30, 2012 Senior housing Brookdale Senior Living item	Sep. 30, 2012 Senior housing Brookdale Senior Living item	Dec. 31, 2011 Senior housing Brookdale Senior Living	Sep. 30, 2012 Gross Assets Operators HCR ManorCare	Dec. 31, 2011 Gross Assets Operators HCR ManorCare	Sep. 30, 2012 Gross Assets Operators Brookdale Senior Living	Dec. 31, 2011 Gross Assets Operators Brookdale Senior Living	Sep. 30, 2012 Gross Assets Operators Emeritus Corporation	Dec. 31, 2011 Gross Assets Operators Emeritus Corporation	Sep. 30, 2012 Gross Assets Operators Sunrise Senior Living	Dec. 31, 2011 Gross Assets Operators Sunrise Senior Living	Sep. 30, 2012 Gross Assets Operators Senior housing HCR ManorCare	Dec. 31, 2011 Gross Assets Operators Senior housing HCR ManorCare	Sep. 30, 2012 Gross Assets Operators Senior housing Brookdale Senior Living	Dec. 31, 2011 Gross Assets Operators Senior housing Brookdale Senior Living	Sep. 30, 2012 Gross Assets Operators Senior housing Emeritus Corporation	Dec. 31, 2011 Gross Assets Operators Senior housing Emeritus Corporation	Sep. 30, 2012 Gross Assets Operators Senior housing Sunrise Senior Living	Dec. 31, 2011 Gross Assets Operators Senior housing Sunrise Senior Living	Sep. 30, 2012 Gross Assets Operators Post-acute/skilled nursing HCR ManorCare	Dec. 31, 2011 Gross Assets Operators Post-acute/skilled nursing HCR ManorCare	Sep. 30, 2012 Revenue Operators HCR ManorCare	Sep. 30, 2011 Revenue Operators HCR ManorCare	Sep. 30, 2012 Revenue Operators HCR ManorCare	Sep. 30, 2011 Revenue Operators HCR ManorCare	Sep. 30, 2012 Revenue Operators Brookdale Senior Living	Sep. 30, 2011 Revenue Operators Brookdale Senior Living	Sep. 30, 2012 Revenue Operators Brookdale Senior Living	Sep. 30, 2011 Revenue Operators Brookdale Senior Living	Sep. 30, 2012 Revenue Operators Emeritus Corporation	Sep. 30, 2011 Revenue Operators Emeritus Corporation	Sep. 30, 2012 Revenue Operators Emeritus Corporation	Sep. 30, 2011 Revenue Operators Emeritus Corporation	Sep. 30, 2012 Revenue Operators Sunrise Senior Living	Sep. 30, 2011 Revenue Operators Sunrise Senior Living	Sep. 30, 2012 Revenue Operators Sunrise Senior Living	Sep. 30, 2011 Revenue Operators Sunrise Senior Living	Sep. 30, 2012 Revenue Operators Senior housing HCR ManorCare	Sep. 30, 2011 Revenue Operators Senior housing HCR ManorCare	Sep. 30, 2012 Revenue Operators Senior housing HCR ManorCare	Sep. 30, 2011 Revenue Operators Senior housing HCR ManorCare	Sep. 30, 2012 Revenue Operators Senior housing Brookdale Senior Living	Sep. 30, 2011 Revenue Operators Senior housing Brookdale Senior Living	Sep. 30, 2012 Revenue Operators Senior housing Brookdale Senior Living	Sep. 30, 2011 Revenue Operators Senior housing Brookdale Senior Living	Sep. 30, 2012 Revenue Operators Senior housing Emeritus Corporation	Sep. 30, 2011 Revenue Operators Senior housing Emeritus Corporation	Sep. 30, 2012 Revenue Operators Senior housing Emeritus Corporation	Sep. 30, 2011 Revenue Operators Senior housing Emeritus Corporation	Sep. 30, 2012 Revenue Operators Senior housing Sunrise Senior Living	Sep. 30, 2011 Revenue Operators Senior housing Sunrise Senior Living	Sep. 30, 2012 Revenue Operators Senior housing Sunrise Senior Living	Sep. 30, 2011 Revenue Operators Senior housing Sunrise Senior Living	Sep. 30, 2012 Revenue Operators Post-acute/skilled nursing HCR ManorCare	Sep. 30, 2011 Revenue Operators Post-acute/skilled nursing HCR ManorCare	Sep. 30, 2012 Revenue Operators Post-acute/skilled nursing HCR ManorCare	Sep. 30, 2011 Revenue Operators Post-acute/skilled nursing HCR ManorCare
Concentration of Credit Risk
Concentration risk					34.00%	35.00%	4.00%	5.00%	6.00%	6.00%	7.00%	7.00%	14.00%	14.00%	14.00%	14.00%	18.00%	19.00%	22.00%	22.00%	89.00%	94.00%	30.00%	32.00%	31.00%	22.00%	5.00%	5.00%	5.00%	5.00%	7.00%	7.00%	7.00%	7.00%	5.00%	6.00%	5.00%	6.00%	12.00%	13.00%	12.00%	9.00%	14.00%	16.00%	14.00%	17.00%	20.00%	23.00%	21.00%	25.00%	16.00%	18.00%	16.00%	21.00%	87.00%	93.00%	91.00%	80.00%
Concentration risk, assets		$ 685.4	$ 685.4	$ 682.7
Concentration risk, revenue		$ 36.1	$ 106.8
Number of senior living communities operated in a RIDEA structure	21	21	21
Percentage of operator assets to segment assets after inclusion of assets under RIDEA structure															25.00%	26.00%
Percentage of operator assets to total entity assets after inclusion of assets under RIDEA structure							8.00%	9.00%
Percentage of operator revenue to segment revenue after inclusion of revenue under RIDEA structure																																											38.00%		38.00%
Percentage of operator revenue to total entity revenue after inclusion of revenue under RIDEA structure																											12.00%		12.00%

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Disclosures About Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Disclosures About Fair Value of Financial Instruments

Summary of the carrying amounts and fair values of financial instruments

	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	240,929	$	252,032	$	110,253	$	111,073
Marketable debt securities(3)	221,018		221,018		—		—
Marketable equity securities(1)	22,769		22,769		17,053		17,053
Warrants(3)	1,290		1,290		1,334		1,334
Bank line of credit(2)	—		—		454,000		454,000
Term loan(2)	221,214		221,214		—		—
Senior unsecured notes(1)	5,913,690		6,623,609		5,416,063		5,819,304
Mortgage debt(2)	1,684,514		1,786,940		1,764,571		1,870,070
Other debt(2)	84,580		84,580		87,985		87,985
Interest-rate swap liabilities(2)	13,319		13,319		12,123		12,123
Currency swap liabilities(2)	2,317		2,317		—		—

(1)Level 1: Fair value calculated based on quoted prices in active markets.

(2)Level 2: Fair value based on quoted prices for similar or identical instruments in active or inactive markets, respectively, or calculated utilizing model-derived valuations in which significant inputs or value drivers are observable in active markets.

(3)Level 3: Fair value determined based on significant unobservable market inputs using standardized derivative pricing models.

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Business

9 Months Ended

Sep. 30, 2012

Business

Business

(1)Business

HCP, Inc., an S&P 500 company, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). The Company is a Maryland corporation and was organized to qualify as a self-administered real estate investment trust (“REIT”) in 1985. The Company is headquartered in Long Beach, California, with offices in Nashville, Tennessee and San Francisco, California. The Company acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. The Company’s portfolio is comprised of investments in the following five healthcare segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. The Company makes investments within the healthcare segments using the following five investment products: (i) properties under lease, (ii) debt investments, (iii) developments and redevelopments, (iv) investment management and (v) RIDEA, which represents investments in senior housing operations utilizing the structure permitted by the Housing and Economic Recovery Act of 2008.

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Commitments and Contingencies (Details 2) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended	9 Months Ended
	Jun. 30, 2011	Sep. 30, 2012 item	Sep. 30, 2012 item	Sep. 01, 2011 item
Commitments and contingencies
Number of senior living communities operated in a RIDEA structure		21	21
Third party debt collateralized by facilities, debt amount (maturing in May 1, 2025)			$ 119
Third party debt collateralized by facilities, asset carrying amount (maturing in May 1, 2025)		374	374
Brookdale Senior Living
Commitments and contingencies
Number of senior housing communities				37
Number of senior housing communities assumed in existing triple-net lease				9
Number of senior housing communities in new triple-net lease				4
Number of senior housing communities assumed formerly managed by Horizon Bay				3
Number of senior housing communities developed by HCP				1
Interest in real estate and operations of senior living communities (as a percent)				10.00%
Number of senior living communities operated in a RIDEA structure		21	21
Purchase of equity marketable securities	22.4
Concentration risk, revenue		36.1	106.8
Concentration risk, operating expenses		$ 24.1	$ 67.5

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Common Share

Computation of basic and diluted earnings per share

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Numerator
Income from continuing operations	$	198,059		$	174,662		$	598,142		$	479,911
Noncontrolling interests’ share in continuing operations	(2,935		)	(3,276		)	(9,070		)	(12,660		)
Income from continuing operations applicable to HCP, Inc.	195,124			171,386			589,072			467,251
Preferred stock dividends	—			(5,282		)	(17,006		)	(15,848		)
Participating securities’ share in continuing operations	(479		)	(546		)	(2,154		)	(1,893		)
Income from continuing operations applicable to common shares	194,645			165,558			569,912			449,510
Discontinued operations	984			809			2,440			3,796
Net income applicable to common shares	$	195,629		$	166,367		$	572,352		$	453,306
Denominator
Basic weighted average common shares	429,557			407,081			420,049			395,258
Dilutive potential common shares	1,221			1,565			1,355			1,755
Diluted weighted average common shares	430,778			408,646			421,404			397,013
Basic earnings per common share
Income from continuing operations	$	0.45		$	0.41		$	1.36		$	1.14
Discontinued operations	0.01			—			—			0.01
Net income applicable to common shares	$	0.46		$	0.41		$	1.36		$	1.15
Diluted earnings per common share
Income from continuing operations	$	0.45		$	0.41		$	1.36		$	1.13
Discontinued operations	—			—			—			0.01
Net income applicable to common shares	$	0.45		$	0.41		$	1.36		$	1.14

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Impairments

9 Months Ended

Sep. 30, 2012

Impairments

Impairments

(21)Impairments

During the three months ended September 30, 2012, the Company executed an expansion of its tenant relationship with General Atomics in Poway, CA, to a total of 396,000 square feet, consisting of the following: (i) a lease extension of 281,000 square feet through June 2024, (ii) a new 10–year lease for a 115,000 square feet building to be developed and (iii) the purchase of a 19 acre land parcel from the Company for $19 million. As a result of the pending land sale the Company recognized an impairment charge of $7.9 million, which reduced the carrying value of the Company’s investment from $27 million to the expected sales price of $19 million. The fair value of the Company’s land parcel was based on the sales price from its anticipated disposition in conjunction with this transaction. The contractual sales price of the land parcel is considered to be a Level 2 measurement within the fair value hierarchy.

During the three months ended September 30, 2011, the Company recognized additional provisions for losses (impairment) of $15.4 million related to its Cirrus loan investment that reduced the carrying value of its loan and related receivables from $91.1 million to $75.7 million, which was the fair value of the collateral supporting this loan. See Note 7 for additional information on this loan and related impairment. The fair value of the collateral supporting the Company’s loan investment was based on a discounted cash flow valuation model and inputs considered to be a Level 3 measurement within the fair value hierarchy. Inputs to this valuation model include discount rates, earnings multiples, market comparables, industry growth rates and operating margins, some of which influence the fair value of the collateral supporting this loan.

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Derivative Financial Instruments

9 Months Ended

Sep. 30, 2012

Derivative Financial Instruments

Derivative Financial Instruments

(20) Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of September 30, 2012 (dollars in thousands):

Date Entered	Maturity Date	Hedge Designation	Fixed Rate/Buy Amount			Floating/Exchange Rate Index	Notional/  Sell Amount		Fair Value(1)
July 2005(2)	July 2020	Cash Flow	3.82		%	BMA Swap Index	$	45,600	$	(8,868	)
November 2008(3)	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	27,200		(4,142		)
July 2009(4)	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	13,700		(234		)
July 2012(4)	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	(75		)
July 2012(5)	June 2016	Cash Flow	$	11,400		Buy USD/Sell GBP	£	7,200	(2,317		)

(1)Interest-rate and foreign currency swap assets are recorded in other assets, net and interest-rate and foreign currency swap liabilities are recorded in accounts payable and accrued liabilities on the condensed consolidated balance sheets.

(2)Represents three interest-rate swap contracts with an aggregate notional amount of $45.6 million which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(3)Acquired in conjunction with mortgage debt assumed related to real estate acquired on December 28, 2010. Hedges fluctuations in interest payments on variable-rate secured debt due to fluctuations in the underlying benchmark interest rate.

(4)Hedges fluctuations in interest payments on variable-rate secured and unsecured debt due to fluctuations in the underlying benchmark interest rate.

(5)Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to a portion of the Company’s forecasted interest receipts on GBP denominated senior unsecured notes.

The Company uses derivative instruments to mitigate the effects of interest rate fluctuations on specific forecasted transactions as well as recognized financial obligations or assets. The Company does not use derivative instruments for speculative or trading purposes.

The primary risks associated with derivative instruments are market and credit risk. Market risk is defined as the potential for loss in value of a derivative instrument due to adverse changes in market prices. Utilizing derivative instruments allows the Company to effectively manage the risk of fluctuations in interest and foreign currency rates related to the potential effects these changes could have on future earnings, forecasted cash flows and the fair value of recognized obligations.

Credit risk is the risk that one of the parties to a derivative contract fails to perform or meet their financial obligation. The Company does not obtain collateral associated with its derivative contracts, but monitors the credit standing of its counterparties on a regular basis. Should a counterparty fail to perform, the Company would incur a financial loss to the extent that the associated derivative contract was in an asset position. At September 30, 2012, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

On July 27, 2012, the Company entered into a foreign currency swap contract to hedge the foreign currency exchange risk related to a portion of the forecasted interest receipts from its GBP denominated senior unsecured notes (see additional discussion of the Four Seasons Health Care Senior Unsecured Notes in Note 10). The cash flow hedge has a fixed USD/GBP exchange rate of 1.5695 (buy $11.4 million and sell £7.2 million) for a portion of its forecasted semi-annual cash receipts denominated in GBP. The foreign currency swap contract matures in June 2016 (the end of the non-call period of the senior unsecured notes). The fair value of the contract at September 30, 2012 was a liability of $2.3 million and is included in accounts payable and accrued liabilities. During the nine months ended September 30, 2012, there was no ineffective portion related to this hedge.

On July 27, 2012, the Company entered into an interest-rate swap contract that is designated as hedging the interest payments on its GBP denominated Term Loan due to fluctuations in the underlying benchmark interest rate (see additional discussions of the Term Loan in Note 11). The cash flow hedge has a notional amount of £137 million and expires in June 2016 (the maturity of the Term Loan). The fair value of the contract at September 30, 2012 was a liability of $75,000 and is included in accounts payable and accrued liabilities. During the nine months ended September 30, 2012, there was no ineffective portion related to this hedge.

In August 2009, the Company entered into an interest-rate swap contract (pay float and receive fixed), that was designated as hedging fluctuations in interest receipts related to its participation in the variable-rate first mortgage debt of HCR ManorCare. At March 31, 2011 the Company determined, based on the anticipated closing of the HCR ManorCare Acquisition during April 2011, that the underlying hedged transactions (underlying mortgage debt interest receipts) were not probable of occurring. As a result, the Company reclassified $1 million of unrealized gains related to this interest-rate swap contract into other income (expense), net. Concurrent with closing the HCR ManorCare Acquisition (for additional details see Note 3), the Company settled the interest-rate swap contract for proceeds of $1 million.

At September 30, 2012, the Company expects that the hedged forecasted transactions for each of the outstanding qualifying cash flow hedging relationships remain probable of occurring and as a result no gains or losses recorded to accumulated other comprehensive loss are expected to be reclassified to earnings.

To illustrate the effect of movements in the interest rate and foreign currency markets, the Company performed a market sensitivity analysis on its outstanding hedging instruments. The Company applied various basis point spreads to the underlying interest rate curves and foreign currency exchange rates of the derivative portfolio in order to determine the instruments’ change in fair value. The following table summarizes the results of the analysis performed (dollars in thousands):

		Effects of Change in Interest and Foreign Currency Rates
Date Entered	Maturity Date	+50 Basis Points			-50 Basis Points			+100 Basis Points			-100 Basis Points
July 2005	July 2020	$	1,605		$	(1,760	)	$	3,287		$	(3,443	)
November 2008	October 2016	528			(526		)	1,055			(1,052		)
July 2009	July 2013	49			(55		)	102			(107		)
July 2012	June 2016	4,238			(3,872		)	8,293			(7,926		)
July 2012	June 2016	(699		)	232			(1,164		)	697

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Investments in and Advances to Unconsolidated Joint Ventures (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		1 Months Ended
	Sep. 30, 2011	Sep. 30, 2012	Jan. 31, 2011 HCP Ventures II	Jan. 14, 2011 HCP Ventures II item
Acquisition
Percentage of interest acquired				65.00%
Number of senior housing facilities				25
Investment ownership percentage				35.00%
Calculation of the HCP Ventures II purchase consideration and total purchase price
Consideration, Cash Paid	$ 113,830	$ 172,380		$ 135,550
Fair value of HCP's 35% interest in HCP Ventures II (carrying value of $65,223 at closing)				72,992
Investments in and advances to unconsolidated joint ventures				65,223
Total purchase consideration				208,542
Estimated fees and costs
Legal, accounting and other fees and costs				150
Debt assumption fees				500
Total estimated fees and costs				650
Gain on consolidation of joint venture	7,769		8,000
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			635,182
Other liabilities				2,228
Total liabilities assumed				637,410
Net assets acquired				$ 208,542

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2012

Supplemental Cash Flow Information

Supplemental Cash Flow Information

	Nine Months Ended September 30,
	2012		2011
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	339,190	$	290,738
Income taxes paid	1,645		583
Capitalized interest	18,517		19,395
Supplemental schedule of non-cash investing activities:
Accrued construction costs	18,024		11,353
Settlement of loans receivable as consideration for the HCR ManorCare Acquisition	—		1,990,406
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units	385		228
Cancellation of restricted stock	6		(35		)
Conversion of non-managing member units into common stock	2,398		2,533
Mortgages included in the consolidation of HCP Ventures II	—		635,182
Noncontrolling interests issued in connection with acquisitions	27,432		1,500
Mortgages and other liabilities assumed with other real estate acquisitions	35,120		57,869
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	2,203		(14,244		)

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events

Subsequent Events

(22) Subsequent Events

On October 16, 2012, the Company entered into a definitive agreement to acquire 133 senior housing communities for $1.73 billion, from a joint venture between Emeritus Corporation (“Emeritus”) and Blackstone Real Estate Partners VI, an affiliate of Blackstone (the “Blackstone JV”). Located in 29 states, the portfolio encompasses 10,350 units representing a diversified care mix of 61% assisted living, 25% independent living, 13% memory care and 1% skilled nursing. Based on current operating performance, the 133 communities consist of 99 that are stabilized and 34 that are currently in lease–up.

Emeritus will continue to operate the communities pursuant to long-term triple-net leases. To the extent any of the communities are leased to a subsidiary of Emeritus, the leases will be guaranteed by Emeritus. The leases provide total contractual rent in the first year of $105.5 million. The contractual rent will increase annually by the greater of the percentage increase in the Consumer Price Index (“CPI”) or 3.7% on average over the initial five years, and thereafter by the greater of CPI or 3.0% for the remaining portion of the initial lease term. At the beginning of the sixth lease year, rent on the 34 lease-up properties will be increased to the greater of the percentage increase in CPI or fair market, subject to a floor of 103% and a cap of 130% of the prior year’s rent.

The properties will be grouped into three comparable pools with initial terms of 14 to 16 years. Emeritus has two extension options, which, if exercised, bring total available lease terms to 30 to 35 years.

Concurrent with the acquisition, Emeritus will purchase nine communities from the Blackstone JV, for which the Company has agreed to provide secured debt financing of $52 million with a four-year term. The loan is secured by the underlying real estate and is prepayable at Emeritus’ option. The interest rate on the loan will initially be 6.1% and will gradually increase during its four year term to 7.05%.

On October 19, 2012, the Company completed a public offering of 22 million shares of common stock and received net proceeds of $979 million.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management’s estimates.

The condensed consolidated financial statements include the accounts of HCP, its wholly-owned subsidiaries and joint ventures or variable interest entities (“VIEs”) that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been included. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K, as amended, filed with the U.S. Securities and Exchange Commission (“SEC”).

Certain amounts in the Company’s condensed consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and the related operating results reclassified from continuing to discontinued operations on the condensed consolidated income statements (see Note 5). Facility-level revenues from 21 senior housing communities that are in a RIDEA structure are presented in resident fees and services on the condensed consolidated income statements; all facility-level resident fee and service revenue previously reported in rental and related revenues has been reclassified to resident fees and services (see Note 12 for additional information regarding the 21 RIDEA facilities).

Foreign Currency Translation and Transactions

Foreign Currency Translation and Transactions

Assets and liabilities denominated in foreign currencies that are translated into U.S. dollars use exchange rates in effect at the end of the period, and revenues and expenses denominated in foreign currencies that are translated into U.S. dollars use average rates of exchange in effect during the related period. Gains or losses resulting from translation are included in accumulated other comprehensive income, a component of stockholders’ equity on the condensed consolidated balance sheets. Gains or losses resulting from foreign currency transactions are translated into U.S. dollars at the rates of exchange prevailing at the dates of the transactions. The effects of transaction gains or losses are included in other income (expense), net in the condensed consolidated statements of income.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2012-01, Continuing Care Retirement Communities—Refundable Advance Fees (“ASU 2012-01”). This update clarifies the situations in which recognition of deferred revenue for refundable advance fees is appropriate. ASU 2012-01 is effective for fiscal years beginning after December 15, 2012. The Company does not expect the adoption of ASU 2012-01 on January 1, 2013 to have a material impact on its consolidated financial position or results of operations.

In July 2012, the FASB issued Accounting Standards Update No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”). The amendments in this update provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. ASC 2012-02 is effective for fiscal years and interim periods beginning after September 15, 2012. The Company does not expect the adoption of ASU 2012-02 on January 1, 2013 to have an impact on its consolidated financial position or results of operations.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards. The amendments update the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of ASU 2011-04 on January 1, 2012 did not have an impact on the Company’s consolidated financial position or results of operations.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net income	$ 600,582	$ 483,707
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	259,039	265,742
Discontinued operations	7,300	4,286
Amortization of above and below market lease intangibles, net	(1,855)	(3,271)
Amortization of deferred compensation	16,947	15,286
Amortization of deferred financing costs, net	12,415	22,118
Straight-line rents	(33,608)	(46,936)
Loan and direct financing lease interest accretion	(71,923)	(65,973)
Deferred rental revenues	1,101	(1,284)
Equity income from unconsolidated joint ventures	(42,803)	(32,798)
Distributions of earnings from unconsolidated joint ventures	2,775	2,462
Gain on sales of real estate	(2,856)
Gain upon consolidation of joint venture		(7,769)
Gain upon settlement of loans receivable		(22,812)
Derivative (gains) losses, net	43	(1,226)
Impairments	7,878	15,400
Changes in:
Accounts receivable, net	(5,082)	3,206
Other assets	(7,303)	28,631
Accounts payable and accrued liabilities	(21,697)	(71,848)
Net cash provided by operating activities	720,953	586,921
Cash flows from investing activities:
Cash used in the HCR ManorCare Acquisition, net of cash acquired		(4,026,556)
Cash used in the HCP Ventures II purchase, net of cash acquired		(135,550)
Other acquisitions of real estate	(172,380)	(113,462)
Development of real estate	(87,119)	(57,167)
Leasing costs and tenant and capital improvements	(42,817)	(31,772)
Proceeds from sales of real estate, net	7,238
Purchase of an interest in unconsolidated joint ventures		(95,000)
Distributions in excess of earnings from unconsolidated joint ventures	2,051	1,936
Purchase of marketable securities	(214,859)	(22,449)
Principal repayments on loans receivable	4,660	303,867
Investments in loans receivable	(145,597)	(363,337)
Increase in restricted cash	(1,875)	(11,532)
Net cash used in investing activities	(650,698)	(4,551,022)
Cash flows from financing activities:
Net borrowings (repayments) under bank line of credit	(454,000)	375,000
Borrowings under term loan	214,789
Repayments of mortgage debt	(109,569)	(152,517)
Issuance of senior unsecured notes	750,000	2,400,000
Repayment of senior unsecured notes	(250,000)	(292,265)
Deferred financing costs	(18,256)	(43,716)
Preferred stock redemption	(295,500)
Net proceeds from the issuance of common stock and exercise of options	804,412	1,302,883
Dividends paid on common and preferred stock	(638,228)	(586,048)
Issuance of noncontrolling interests	826	14,028
Purchase of noncontrolling interests		(34,104)
Distributions to noncontrolling interests	(11,759)	(11,001)
Net cash provided by (used in) financing activities	(7,285)	2,972,260
Net increase (decrease) in cash and cash equivalents	62,970	(991,841)
Cash and cash equivalents, beginning of period	33,506	1,036,701
Cash and cash equivalents, end of period	$ 96,476	$ 44,860

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HCR ManorCare Acquisition (Tables)

9 Months Ended

Sep. 30, 2012

HCR ManorCare Acquisition

Schedule of total purchase price consideration paid

Payment of aggregate cash consideration, net of cash acquired	$	3,801,624
HCP’s loan investments in HCR ManorCare’s debt settled at fair value(1)	1,990,406
Assumed HCR ManorCare accrued liabilities at fair value(2)	224,932
Total purchase consideration	$	6,016,962
Legal, accounting and other fees and costs(3)	$	26,839

(1)At closing, the Company recognized a gain of approximately $23 million, included in interest income, which represented the fair value of the Company’s existing mezzanine and mortgage loan investments in HCR ManorCare in excess of its carrying value on the acquisition date.

(2)In August 2011, the Company paid these amounts to certain taxing authorities or the seller.

(3)Represents estimated fees and costs of $15.5 million (general and administrative) and the write-off of unamortized bridge loan fees of $11.3 million (interest expense) upon its termination that were expensed in 2010 and 2011, respectively. These charges are directly attributable to the transaction and represent non-recurring costs.

Summary of fair values of assets acquired and liabilities assumed

Assets acquired
Net investments in direct financing leases	$	6,002,074
Cash and cash equivalents	6,996
Intangible assets, net	14,888
Total assets acquired	6,023,958
Total liabilities assumed	224,932
Net assets acquired	$	5,799,026

Schedule of pro forma results of operations

	Nine Months Ended September 30, 2011
Revenues	$	1,351,574
Net income	590,333
Net income applicable to HCP, Inc.	577,673
Basic earnings per common share	$	1.38
Diluted earnings per common share	1.38

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies

Schedule of Concentration of Credit Risk

Segment Concentrations:

	Percentage of Senior Housing Gross Assets				Percentage of Senior Housing Revenues				Percentage of Senior Housing Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	14	%	14	%	12	%	13	%	12	%	9	%
Brookdale Senior Living(2)	14		14		14		16		14		17
Emeritus Corporation	18		19		20		23		21		25
Sunrise Senior Living(3)	22		22		16		18		16		21

	Percentage of Post-Acute/ Skilled Nursing Gross Assets				Percentage of Post-Acute/ Skilled Nursing Revenues				Percentage of Post-Acute/ Skilled Nursing Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	89	%	94	%	87	%	93	%	91	%	80	%

Total Company Concentrations:

	Percentage of Total Company Gross Assets				Percentage of Total Company Revenues				Percentage of Total Company Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	34	%	35	%	30	%	32	%	31	%	22	%
Brookdale Senior Living(2)	4		5		5		5		5		5
Emeritus Corporation	6		6		7		7		7		7
Sunrise Senior Living(3)	7		7		5		6		5		6

(1)On April 7, 2011, the Company completed the acquisition of HCR ManorCare’s real estate assets, which included the settlement of the Company’s HCR ManorCare debt investments, see Notes 3 and 7 for additional information.

(2)As of September 30, 2012 and December 31, 2011, Brookdale Senior Living (“Brookdale”) percentages exclude $685.4 and $682.7 million, respectively, of senior housing assets related to 21 senior housing facilities that Brookdale operates (beginning September 1, 2011) on the Company’s behalf under a RIDEA structure. Assuming that these assets were attributable to Brookdale, the percentage of segment and total assets for Brookdale would be 25% and 8%, respectively, as of September 30, 2012. Assuming that these assets were attributable to Brookdale, the percentage of segment and total assets for Brookdale would be 26% and 9%, respectively, as of December 31, 2011. For the three and nine months ended September 30, 2012, Brookdale percentages exclude $36.1 million and $106.8 million, respectively, of senior housing revenues related to these facilities. Assuming that these revenues were attributable to Brookdale, the percentage of segment and total revenues for Brookdale would be 38% and 12% respectively, for both the three months and nine months ended September 30, 2012.

(3)Certain of the Company’s properties are leased to tenants who have entered into management contracts with Sunrise to operate the respective property on their behalf. The Company’s concentration of gross assets includes properties directly leased to Sunrise and properties that are managed by Sunrise on behalf of third party tenants.

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Dispositions of Real Estate and Discontinued Operations (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012 item	Sep. 30, 2011 item	Sep. 30, 2012 item	Sep. 30, 2011 item
Dispositions of Real Estate
Total consideration for disposition of real estate			$ 7,238,000
Carrying value of properties classified as held for sale		102,600,000		102,600,000
Operating income from discontinued operations
Rental and related revenues	2,844,000	3,443,000	8,816,000	10,326,000
Depreciation and amortization expenses	1,453,000	1,884,000	7,300,000	4,286,000
Operating expenses	4,000	10,000	26,000	36,000
Other expense, net	403,000	740,000	1,906,000	2,208,000
Income (loss)	984,000	809,000	(416,000)	3,796,000
Gain on sales of real estate, net of income taxes			2,856,000
Number of properties included in discontinued operations	2	6	3	6
Medical office
Dispositions of Real Estate
Total consideration for disposition of real estate			7,000,000
Number of properties held for sale		5
Senior housing
Dispositions of Real Estate
Number of properties held for sale			2	5
Carrying value of properties classified as held for sale	$ 91,200,000		$ 91,200,000

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Derivative Financial Instruments (Details)	3 Months Ended	9 Months Ended					9 Months Ended
	Mar. 31, 2011 Interest rate swap, entered in August 2009, maturity in August 2011 USD ($)	Sep. 30, 2012 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2005, maturity in July 2020 USD ($) item	Sep. 30, 2012 Interest rate swap, variable rate, secured debt Interest rate swap, entered in November 2008, maturity in October 2016 USD ($)	Sep. 30, 2012 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2009, maturity in July 2013 USD ($)	Sep. 30, 2012 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2012, maturity in June 2016 USD ($)	Sep. 30, 2012 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2012, maturity in June 2016 GBP (£)	Sep. 30, 2012 Foreign currency swap contract Foreign currency swap, entered in July 2012, maturity in June 2016 USD ($)
Derivative
Fixed Rate/Buy Amount (as a percent)		3.82%	5.95%	6.13%	1.81%
Floating/Exchange Rate Index		BMA Swap Index	1 Month LIBOR	1 Month LIBOR	1 Month GBP LIBOR
Floating/Exchange Rate Index, percentage			1.50%	3.65%	1.20%
Notional / Sell Amount		$ 45,600,000	$ 27,200,000	$ 13,700,000		£ 137,000,000
Notional amount of foreign currency derivative purchase contracts							11,400,000
Notional amount of foreign currency derivative sale contracts							7,200,000
Fair value of hedge, liabilities		(8,868,000)	(4,142,000)	(234,000)	(75,000)		(2,317,000)
Exchange rate USD/GBP							1.5695
Number of interest-rate swap contracts		3
Reclassification of unrealized gains into other income	1,000,000
Proceeds from settlement of interest rate swap contract	1,000,000
Effects of Change in Interest Rates
+50 Basis Points		1,605,000	528,000	49,000	4,238,000		(699,000)
-50 Basis Points		(1,760,000)	(526,000)	(55,000)	(3,872,000)		232,000
+100 Basis Points		3,287,000	1,055,000	102,000	8,293,000		(1,164,000)
-100 Basis Points		$ (3,443,000)	$ (1,052,000)	$ (107,000)	$ (7,926,000)		$ 697,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Real estate:
Buildings and improvements	$ 9,069,420	$ 8,822,653
Development costs and construction in progress	229,543	190,590
Land	1,724,563	1,723,601
Accumulated depreciation and amortization	(1,662,116)	(1,452,688)
Net real estate	9,361,410	9,284,156
Net investment in direct financing leases	6,843,249	6,727,777
Loans receivable, net	240,929	110,253
Investments in and advances to unconsolidated joint ventures	217,092	224,052
Accounts receivable, net of allowance of $1,498 and $1,341, respectively	31,763	26,681
Cash and cash equivalents	96,476	33,506
Restricted cash	43,428	41,553
Intangible assets, net	382,321	372,390
Assets held for sale, net	91,226	102,649
Other assets, net	771,442	485,458
Total assets	18,079,336	17,408,475
LIABILITIES AND EQUITY
Bank line of credit		454,000
Term loan	221,214
Senior unsecured notes	5,913,690	5,416,063
Mortgage debt	1,684,514	1,715,039
Liabilities related to assets held for sale, net	5,649	55,897
Other debt	84,580	87,985
Intangible liabilities, net	105,191	117,777
Accounts payable and accrued liabilities	270,843	275,478
Deferred revenue	65,802	65,614
Total liabilities	8,351,483	8,187,853
Commitments and contingencies
Preferred stock, $1.00 par value: aggregate liquidation preference of $295.5 million as of December 31, 2011		285,173
Common stock, $1.00 par value: 750,000,000 shares authorized; 429,980,165 and 408,629,444 shares issued and outstanding, respectively	429,980	408,629
Additional paid-in capital	10,185,982	9,383,536
Cumulative dividends in excess of earnings	(1,081,317)	(1,024,274)
Accumulated other comprehensive loss	(16,646)	(19,582)
Total stockholders' equity	9,517,999	9,033,482
Joint venture partners	14,884	16,971
Non-managing member unitholders	194,970	170,169
Total noncontrolling interests	209,854	187,140
Total equity	9,727,853	9,220,622
Total liabilities and equity	$ 18,079,336	$ 17,408,475

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Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2012

Variable Interest Entities

Variable Interest Entities

VIE Type	Maximum Loss Exposure(1)		Asset/Liability Type	Carrying Amount
VIE tenants—operating leases	$	308,905	Lease intangibles, net and straight-line rent receivables	$	15,122
VIE tenants—DFLs	1,132,359		Net investment in DFLs	597,792
Loan—senior secured	68,755		Loans receivable, net	68,755

(1)The Company’s maximum loss exposure related to the VIE tenants represents the future minimum lease payments over the remaining term of the respective leases, which may be mitigated by re-leasing the properties to new tenants. The Company’s maximum loss exposure related to its loan to the VIE represents its current aggregate carrying amount.

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) In Thousands, unless otherwise specified	Total	Total Stockholders' Equity	Preferred Stock	Common Stock	Additional Paid-In Capital	Cumulative Dividends In Excess Of Earnings	Accumulated Other Comprehensive Income (Loss)	Total Noncontrolling Interests
Balance at Dec. 31, 2010	$ 8,146,047	$ 7,957,367	$ 285,173	$ 370,925	$ 8,089,982	$ (775,476)	$ (13,237)	$ 188,680
Balance (in shares) at Dec. 31, 2010			11,820	370,925
Increase (Decrease) in Stockholders' Equity
Net income	483,707	471,047				471,047		12,660
Other comprehensive income (loss)	(15,246)	(15,246)					(15,246)
Issuance of common stock, net	1,288,332	1,290,865		36,256	1,254,609			(2,533)
Issuance of common stock, net (in shares)				36,256
Repurchase of common stock	(4,940)	(4,940)		(135)	(4,805)
Repurchase of common stock (in shares)				(135)
Exercise of stock options	19,491	19,491		733	18,758
Exercise of stock options (in shares)	733			733
Amortization of deferred compensation	15,286	15,286			15,286
Preferred dividends	(15,848)	(15,848)				(15,848)
Common dividends ($1.50 and $1.44 per share for the period ended September 30, 2012 and 2011, respectively)	(570,200)	(570,200)				(570,200)
Distributions to noncontrolling interests	(11,001)							(11,001)
Noncontrolling interests in acquisitions	1,500							1,500
Issuance of noncontrolling interests	14,028							14,028
Purchase of noncontrolling interests	(34,104)	(20,045)			(20,045)			(14,059)
Balance at Sep. 30, 2011	9,317,052	9,127,777	285,173	407,779	9,353,785	(890,477)	(28,483)	189,275
Balance (in shares) at Sep. 30, 2011			11,820	407,779
Balance at Dec. 31, 2011	9,220,622	9,033,482	285,173	408,629	9,383,536	(1,024,274)	(19,582)	187,140
Balance (in shares) at Dec. 31, 2011			11,820	408,629
Increase (Decrease) in Stockholders' Equity
Net income	600,582	591,512				591,512		9,070
Other comprehensive income (loss)	2,936	2,936					2,936
Preferred stock redemption	(295,500)	(295,500)	(285,173)			(10,327)
Preferred stock redemption (in shares)		(11,820)	(11,820)
Issuance of common stock, net	761,070	763,508		19,096	744,412			(2,438)
Issuance of common stock, net (in shares)				19,096
Repurchase of common stock	(8,167)	(8,167)		(196)	(7,971)
Repurchase of common stock (in shares)				(196)
Exercise of stock options	51,509	51,509		2,451	49,058
Exercise of stock options (in shares)	2,451			2,451
Amortization of deferred compensation	16,947	16,947			16,947
Preferred dividends	(6,679)	(6,679)				(6,679)
Common dividends ($1.50 and $1.44 per share for the period ended September 30, 2012 and 2011, respectively)	(631,549)	(631,549)				(631,549)
Distributions to noncontrolling interests	(11,759)							(11,759)
Noncontrolling interests in acquisitions	27,432							27,432
Issuance of noncontrolling interests	826							826
Purchase of noncontrolling interests	(417)							(417)
Balance at Sep. 30, 2012	$ 9,727,853	$ 9,517,999		$ 429,980	$ 10,185,982	$ (1,081,317)	$ (16,646)	$ 209,854
Balance (in shares) at Sep. 30, 2012				429,980

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Other Assets (Details)	0 Months Ended
	Jun. 28, 2012 USD ($)	Jun. 28, 2012 GBP (£)	Sep. 30, 2012 USD ($)	Dec. 31, 2011 USD ($)
Other assets, details:
Straight-line rent assets, net of allowance of $32,940 and $34,457, respectively			$ 299,754,000	$ 266,620,000
Allowance on straight-line rent assets			32,940,000	34,457,000
Marketable debt securities			221,018,000
Leasing costs, net			93,619,000	92,288,000
Deferred financing costs, net			40,782,000	35,649,000
Goodwill			50,346,000	50,346,000
Marketable equity securities			22,769,000	17,053,000
Other			43,154,000	23,502,000
Total other assets			771,442,000	485,458,000
Adjusted cost basis of marketable equity securities			22,800,000	17,100,000
Additions related to accrued interest receivable			5,400,000	5,400,000
Interest rate on senior unsecured notes acquired (as a percent)	12.25%	12.25%
Yield to maturity (as a percent)	12.50%	12.50%
Marketable debt security, par value, discounted	214,900,000	136,800,000
Marketable debt security, par value		£ 138,500,000

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Net Investment in Direct Financing Leases (Tables)

9 Months Ended

Sep. 30, 2012

Net Investment in Direct Financing Leases

Schedule of net investment in direct financing leases

	September 30,			December 31,
	2012			2011
Minimum lease payments receivable(1)	$	25,350,888		$	25,744,161
Estimated residual values	4,010,514			4,010,514
Less unearned income	(22,518,153		)	(23,026,898		)
Net investment in direct financing leases	$	6,843,249		$	6,727,777
Properties subject to direct financing leases	361			361

(1)The minimum lease payments receivable are primarily attributable to HCR ManorCare ($24.2 billion and $24.5 billion at September 30, 2012 and December 31, 2011, respectively). The triple-net master lease with HCR ManorCare provides for annual rent of $489 million beginning April 1, 2012. The rent increases by 3.5% per year over the next four years and by 3% for the remaining portion of the initial lease term. The properties are grouped into four pools, and HCR ManorCare has 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. Including the extension options, which the Company determined to be bargain renewal options, the four leased pools had total initial available terms ranging from 23 to 35 years.

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Segment Disclosures (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reconciliation from reported net income to NOI and Adjusted NOI
Net income	$ 199,043	$ 175,471	$ 600,582	$ 483,707
Interest income	(10,278)	(577)	(12,313)	(99,199)
Investment management fee income	(460)	(494)	(1,423)	(1,605)
Interest expense	103,513	103,459	309,875	315,695
Depreciation and amortization	88,686	86,672	259,039	265,742
General and administrative	19,443	19,647	54,356	76,471
Impairments	7,878	15,400	7,878	15,400
Other income (expense), net	(770)	772	(2,233)	(17,056)
Income taxes	(598)	5	(1,131)	289
Equity income from unconsolidated joint ventures	(13,396)	(17,050)	(42,803)	(32,798)
Total discontinued operations, net of income taxes	(984)	(809)	(2,440)	(3,796)
NOI	392,077	382,496	1,169,387	1,002,850
Straight-line rents	(11,821)	(14,024)	(33,608)	(46,936)
DFL accretion	(23,433)	(23,571)	(71,072)	(48,508)
Amortization of above and below market lease intangibles, net	(533)	(1,178)	(1,855)	(3,271)
Lease termination fees	(175)	(239)	(574)	(3,417)
NOI adjustments related to discontinued operations	335	516	1,437	1,585
Adjusted NOI	$ 356,450	$ 344,000	$ 1,063,715	$ 902,303

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Segment Disclosures

9 Months Ended

Sep. 30, 2012

Segment Disclosures

Segment Disclosures

(14) Segment Disclosures

The Company evaluates its business and makes resource allocations based on its five business segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. Under the senior housing, post-acute/skilled nursing, life science and hospital segments, the Company invests or co-invests primarily in single operator or tenant properties, through the acquisition and development of real estate, management of operations and by debt issued by operators in these sectors. Under the medical office segment, the Company invests or co-invests through the acquisition and development of medical office buildings (“MOBs”) that are leased under gross, modified gross or triple-net leases, generally to multiple tenants, and which generally require a greater level of property management. The accounting policies of the segments are the same as those described in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2011 in the Company’s Annual Report on Form 10-K, as amended, filed with the SEC. There were no intersegment sales or transfers during the nine months ended September 30, 2012 and 2011. The Company evaluates performance based upon property net operating income from continuing operations (“NOI”), adjusted NOI and interest income of the combined investments in each segment.

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

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

For the three months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	114,856	$	36,076	$	876	$	—	$	151,808	$	126,060	$	113,592
Post-acute/skilled		135,508		—		9,135		—		144,643		135,354		116,898
Life science		71,194		—		—		1		71,195		59,403		56,341
Medical office		85,800		—		—		459		86,259		50,852		49,669
Hospital		21,310		—		267		—		21,577		20,408		19,950
Total	$	428,668	$	36,076	$	10,278	$	460	$	475,482	$	392,077	$	356,450

For the three months ended September 30, 2011:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	122,849	$	11,974	$	42	$	—	$	134,865	$	125,209	$	112,755
Post-acute/skilled	132,392		—		287		—		132,679		132,148		112,881
Life science	71,093		—		—		1		71,094		57,860		52,785
Medical office	80,996		—		—		493		81,489		47,650		46,514
Hospital	20,854		—		248		—		21,102		19,629		19,065
Total	$	428,184	$	11,974	$	577	$	494	$	441,229	$	382,496	$	344,000

For the nine months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	341,936	$	107,824	$	1,686	$	—	$	451,446	$	379,834	$	342,368
Post-acute/skilled	404,180		—		9,842		—		414,022		403,654		346,900
Life science	215,569		—		—		3		215,572		177,339		171,179
Medical office	246,661		—		—		1,420		248,081		148,030		144,272
Hospital	63,300		—		785		—		64,085		60,530		58,996
Total	$	1,271,646	$	107,824	$	12,313	$	1,423	$	1,393,206	$	1,169,387	$	1,063,715

For the nine months ended September 30, 2011:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)
Senior housing	$	355,496	$	15,314	$	49	$	70	$	370,929	$	359,460	$	319,393
Post-acute/skilled	265,377		—		98,167		—		363,544		265,059		228,034
Life science	215,045		—		—		3		215,048		176,384		159,544
Medical office	240,603		—		—		1,532		242,135		143,243		138,469
Hospital	62,118		—		983		—		63,101		58,704		56,863
Total	$	1,138,639	$	15,314	$	99,199	$	1,605	$	1,254,757	$	1,002,850	$	902,303

(1)Represents rental and related revenues, tenant recoveries, and income from DFLs.

(2)NOI is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate. The Company defines NOI as rental and related revenues, including tenant recoveries, resident fees and services, and income from direct financing leases, less property level operating expenses. NOI excludes interest income, investment management fee income, interest expense, depreciation and amortization, general and administrative expenses, litigation settlement, impairments, impairment recoveries, other income (expense), net, income taxes, equity income from and impairments of investments in unconsolidated joint ventures, and discontinued operations. The Company believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL accretion, amortization of above and below market lease intangibles, and lease termination fees. Adjusted NOI is sometimes referred to as “cash NOI.” The Company uses NOI and adjusted NOI to make decisions about resource allocations and to assess and compare property level performance. The Company believes that net income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income as defined by GAAP because it does not reflect the aforementioned excluded items. Further, the Company’s definition of NOI may not be comparable to the definition used by other REITs, as those companies may use different methodologies for calculating NOI.

The following is a reconciliation from reported net income to NOI and adjusted NOI (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income	$	199,043		$	175,471		$	600,582		$	483,707
Interest income	(10,278		)	(577		)	(12,313		)	(99,199		)
Investment management fee income	(460		)	(494		)	(1,423		)	(1,605		)
Interest expense	103,513			103,459			309,875			315,695
Depreciation and amortization	88,686			86,672			259,039			265,742
General and administrative	19,443			19,647			54,356			76,471
Impairments	7,878			15,400			7,878			15,400
Other (income) expense, net	(770		)	772			(2,233		)	(17,056		)
Income taxes	(598		)	5			(1,131		)	289
Equity income from unconsolidated joint ventures	(13,396		)	(17,050		)	(42,803		)	(32,798		)
Total discontinued operations, net of income taxes	(984		)	(809		)	(2,440		)	(3,796		)
NOI	392,077			382,496			1,169,387			1,002,850
Straight-line rents	(11,821		)	(14,024		)	(33,608		)	(46,936		)
DFL accretion	(23,433		)	(23,571		)	(71,072		)	(48,508		)
Amortization of above and below market lease intangibles, net	(533		)	(1,178		)	(1,855		)	(3,271		)
Lease termination fees	(175		)	(239		)	(574		)	(3,417		)
NOI adjustments related to discontinued operations	335			516			1,437			1,585
Adjusted NOI	$	356,450		$	344,000		$	1,063,715		$	902,303

The Company’s total assets by segment were (in thousands):

	September 30,			December 31,
Segments	2012			2011
Senior housing	$	5,867,914		$	5,792,196
Post-acute/skilled nursing	6,057,501			5,644,472
Life science	3,928,661			3,886,851
Medical office	2,586,231			2,336,302
Hospital	760,222			757,618
Gross segment assets	19,200,529			18,417,439
Accumulated depreciation and amortization	(1,885,172		)	(1,649,845		)
Net segment assets	17,315,357			16,767,594
Real estate held for sale, net	91,226			102,649
Other non-segment assets	672,753			538,232
Total assets	$	18,079,336		$	17,408,475

On October 5, 2006, simultaneous with the closing of the Company’s merger with CNL Retirement Properties, Inc. (“CRP”), the Company also merged with CNL Retirement Corp. (“CRC”). CRP was a REIT that invested primarily in senior housing facilities and MOBs. Under the purchase method of accounting, the assets and liabilities of CRC were recorded at their estimated relative fair values, with $51.7 million paid in excess of the estimated fair value of CRC’s assets and liabilities recorded as goodwill. The CRC goodwill amount was allocated in proportion to the assets of the Company’s reporting units (property sectors) subsequent to the CRP acquisition.

At September 30, 2012, goodwill of $50 million was allocated to segment assets as follows: (i) senior housing—$31 million, (ii) post-acute/skilled nursing—$3 million, (iii) medical office—$11 million, and (iv) hospital—$5 million.

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Loans Receivable (Tables)

9 Months Ended

Sep. 30, 2012

Loans Receivable

Schedule of loans receivable

	September 30, 2012									December 31, 2011
	Real Estate Secured			Other Secured			Total			Real Estate Secured			Other Secured			Total
Mezzanine	$	—		$	183,253		$	183,253		$	—		$	90,148		$	90,148
Other	74,413			—			74,413			35,643			—			35,643
Unamortized discounts, fees and costs	(255		)	(3,072		)	(3,327		)	(1,040		)	(1,088		)	(2,128		)
Allowance for loan losses	—			(13,410		)	(13,410		)	—			(13,410		)	(13,410		)
	$	74,158		$	166,771		$	240,929		$	34,603		$	75,650		$	110,253

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2012

Supplemental Cash Flow Information

Supplemental Cash Flow Information

(16) Supplemental Cash Flow Information

The following table provides supplemental cash flow information (in thousands):

	Nine Months Ended September 30,
	2012		2011
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	339,190	$	290,738
Income taxes paid	1,645		583
Capitalized interest	18,517		19,395
Supplemental schedule of non-cash investing activities:
Accrued construction costs	18,024		11,353
Settlement of loans receivable as consideration for the HCR ManorCare Acquisition	—		1,990,406
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units	385		228
Cancellation of restricted stock	6		(35		)
Conversion of non-managing member units into common stock	2,398		2,533
Mortgages included in the consolidation of HCP Ventures II	—		635,182
Noncontrolling interests issued in connection with acquisitions	27,432		1,500
Mortgages and other liabilities assumed with other real estate acquisitions	35,120		57,869
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	2,203		(14,244		)

See additional information regarding supplemental non-cash financing activities related to the HCR ManorCare transaction in Notes 3 and 7, the HCP Ventures II purchase in Note 8 and preferred stock redemption in Note 13.

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Supplemental Cash Flow Information (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Supplemental cash flow information:
Interest paid, net of capitalized interest	$ 339,190	$ 290,738
Income taxes paid	1,645	583
Capitalized interest	18,517	19,395
Supplemental schedule of non-cash investing activities:
Accrued construction costs	18,024	11,353
Settlement of loans receivable as consideration for the HCR ManorCare Acquisition		1,990,406
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units	385	228
Cancellation of restricted stock	6	(35)
Conversion of non-managing member units into common stock	2,398	2,533
Mortgages included in the consolidation of HCP Ventures II		635,182
Noncontrolling interests issued in connection with acquisitions	27,432	1,500
Mortgages and other liabilities assumed with other real estate acquisitions	35,120	57,869
Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	$ 2,203	$ (14,244)

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) (USD $)	1 Months Ended				3 Months Ended		9 Months Ended
	Oct. 31, 2012	Jul. 31, 2012	Apr. 30, 2012	Jan. 31, 2012	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Common dividends, per share (in dollars per share)	$ 0.50	$ 0.50	$ 0.50	$ 0.50	$ 0.50	$ 0.48	$ 1.50	$ 1.44

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance (in dollars)	$ 1,498,000	$ 1,341,000
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, liquidation preference (in dollars)		$ 295,500,000
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	429,980,165	408,629,444
Common stock, shares outstanding	429,980,165	408,629,444

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Intangibles

9 Months Ended

Sep. 30, 2012

Intangibles

Intangibles

(9)Intangibles

At September 30, 2012 and December 31, 2011, intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles, were $607.6 million and $571.5 million, respectively. At September 30, 2012 and December 31, 2011, the accumulated amortization of intangible assets was $225.3 million and $199.1 million, respectively.

At September 30, 2012 and December 31, 2011, intangible lease liabilities, comprised of below market lease intangibles and above market ground lease intangible liabilities were $194.0 million and $208.2 million, respectively. At September 30, 2012 and December 31, 2011, the accumulated amortization of intangible liabilities was $88.8 million and $90.4 million, respectively.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 25, 2012
Document and Entity Information
Entity Registrant Name	HCP, INC.
Entity Central Index Key	0000765880
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		452,066,005
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

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Other Assets

9 Months Ended

Sep. 30, 2012

Other Assets

Other Assets

(10) Other Assets

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

	September 30,		December 31,
	2012		2011
Straight-line rent assets, net of allowance of $32,940 and $34,457, respectively	$	299,754	$	266,620
Marketable debt securities(1)	221,018		—
Leasing costs, net	93,619		92,288
Deferred financing costs, net	40,782		35,649
Goodwill	50,346		50,346
Marketable equity securities	22,769		17,053
Other(2)	43,154		23,502
Total other assets	$	771,442	$	485,458

(1)Represents £136.8 million of Four Seasons senior unsecured notes translated into U.S. dollars as of September 30, 2012 (see below for additional information).

(2)Includes a $5.4 million allowance for losses related to accrued interest receivable on the Delphis loan, which accrued interest is included in other assets. At both September 30, 2012 and December 31, 2011, the carrying value of interest accrued related to the Delphis loan was zero. See Note 7 for additional information about the Delphis loan and the related impairment.

The marketable equity securities are classified as available-for-sale and had a fair value and adjusted cost basis of $22.8 million and $17.1 million, respectively, at September 30, 2012. At December 31, 2011, the fair value and adjusted cost basis of the marketable equity securities were both $17.1 million.

Four Seasons Health Care Senior Unsecured Notes

On June 28, 2012, the Company purchased senior unsecured notes with an aggregate par value of £138.5 million at a discount for £136.8 million ($214.9 million). The notes are issued by Elli Investments Limited, a subsidiary of Terra Firma, a European private equity firm, as part of its financing for the acquisition of Four Seasons Health Care, an elderly and specialist care provider in the United Kingdom. The notes mature in June 2020 and are non-callable through June 2016. The notes bear interest on their par value at a fixed rate of 12.25% per annum, with an original issue discount resulting in a yield to maturity of 12.5%. This investment is financed by a GBP denominated unsecured term loan that is discussed in Note 11. These senior unsecured notes are accounted for as marketable debt securities and classified as held-to-maturity.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenues:
Rental and related revenues	$ 249,409	$ 250,809	$ 736,645	$ 758,322
Tenant recoveries	23,425	23,879	69,656	69,764
Resident fees and services	36,076	11,974	107,824	15,314
Income from direct financing leases	155,834	153,496	465,345	310,553
Interest income	10,278	577	12,313	99,199
Investment management fee income	460	494	1,423	1,605
Total revenues	475,482	441,229	1,393,206	1,254,757
Costs and expenses:
Interest expense	103,513	103,459	309,875	315,695
Depreciation and amortization	88,686	86,672	259,039	265,742
Operating	72,667	57,662	210,083	151,103
General and administrative	19,443	19,647	54,356	76,471
Impairments	7,878	15,400	7,878	15,400
Total costs and expenses	292,187	282,840	841,231	824,411
Other income (expense), net	770	(772)	2,233	17,056
Income before income taxes and equity income from unconsolidated joint ventures	184,065	157,617	554,208	447,402
Income taxes	598	(5)	1,131	(289)
Equity income from unconsolidated joint ventures	13,396	17,050	42,803	32,798
Income from continuing operations	198,059	174,662	598,142	479,911
Discontinued operations:
Income (loss) before gain on sales of real estate, net of income taxes	984	809	(416)	3,796
Gain on sales of real estate, net of income taxes			2,856
Total discontinued operations	984	809	2,440	3,796
Net income	199,043	175,471	600,582	483,707
Noncontrolling interests' share in earnings	(2,935)	(3,276)	(9,070)	(12,660)
Net income attributable to HCP, Inc.	196,108	172,195	591,512	471,047
Preferred stock dividends		(5,282)	(17,006)	(15,848)
Participating securities' share in earnings	(479)	(546)	(2,154)	(1,893)
Net income applicable to common shares	$ 195,629	$ 166,367	$ 572,352	$ 453,306
Basic earnings per common share:
Continuing operations (in dollars per share)	$ 0.45	$ 0.41	$ 1.36	$ 1.14
Discontinued operations (in dollars per share)	$ 0.01			$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.46	$ 0.41	$ 1.36	$ 1.15
Diluted earnings per common share:
Continuing operations (in dollars per share)	$ 0.45	$ 0.41	$ 1.36	$ 1.13
Discontinued operations (in dollars per share)				$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.45	$ 0.41	$ 1.36	$ 1.14
Weighted average shares used to calculate earnings per common share:
Basic (in shares)	429,557	407,081	420,049	395,258
Diluted (in shares)	430,778	408,646	421,404	397,013
Dividends declared per common share (in dollars per share)	$ 0.50	$ 0.48	$ 1.50	$ 1.44

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Other Real Estate Property Investments

9 Months Ended

Sep. 30, 2012

Other Real Estate Property Investments

Other Real Estate Property Investments

(4)Other Real Estate Property Investments

A summary of real estate acquisitions for the nine months ended September 30, 2012 follows (in thousands):

	Consideration							Assets Acquired
Segment	Cash Paid		Debt and Other Liabilities Assumed		Noncontrolling Interest			Real Estate		Net Intangibles
Medical office	$	157,556	$	35,120	$	27,346	(1)	$	170,443	$	49,579
Life science	7,964		—		86			7,580		470
Senior housing	3,860		—		—			3,541		319
Hospital	3,000		—		—			3,000		—
	$	172,380	$	35,120	$	27,432		$	184,564	$	50,368

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

During the nine months ended September 30, 2012, the Company funded an aggregate of $126 million for construction, tenant and other capital improvement projects, primarily in its life science and medical office segments.

A summary of real estate acquisitions for the nine months ended September 30, 2011 follows (in thousands):

	Consideration						Assets Acquired
Segment	Cash Paid		Debt Assumed		Noncontrolling Interest		Real Estate		Net Intangibles
Life science	$	84,087	$	57,869	$	—	$	133,040	$	8,916
Medical office	29,743		—		1,500		26,191		5,052
	$	113,830	$	57,869	$	1,500	$	159,231	$	13,968

See discussion of the January 2011 purchase and consolidation of HCP Ventures II in Note 8.

During the nine months ended September 30, 2011, the Company funded an aggregate of $87 million for construction, tenant and other capital improvement projects, primarily in its life science and medical office segments. During the nine months ended September 30, 2011, two of the Company’s life science facilities located in South San Francisco were placed in service representing 88,000 square feet.

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HCR ManorCare Acquisition

9 Months Ended

Sep. 30, 2012

HCR ManorCare Acquisition

HCR ManorCare Acquisition

(3)HCR ManorCare Acquisition

On April 7, 2011, the Company completed its acquisition of substantially all of the real estate assets of HCR ManorCare, Inc. (“HCR ManorCare”), for a purchase price of $6 billion (“HCR ManorCare Acquisition”). The purchase price consisted of the following: (i) $4 billion in cash consideration; and (ii) $2 billion representing the fair value of the Company’s former HCR ManorCare debt investments that were settled as part of this acquisition. Through this transaction, the Company acquired 334 HCR ManorCare post-acute, skilled nursing and assisted living facilities. The facilities are located in 30 states, with the highest concentrations in Ohio, Pennsylvania, Florida, Illinois and Michigan. A wholly-owned subsidiary of HCR ManorCare operates the assets pursuant to a long-term triple-net master lease agreement supported by a guaranty from HCR ManorCare. Additionally, the Company exercised its option to purchase an ownership interest in HCR ManorCare for $95 million that represented a 9.9% equity interest at closing.

The total purchase price of the HCR ManorCare Acquisition follows (in thousands):

Payment of aggregate cash consideration, net of cash acquired	$	3,801,624
HCP’s loan investments in HCR ManorCare’s debt settled at fair value(1)	1,990,406
Assumed HCR ManorCare accrued liabilities at fair value(2)	224,932
Total purchase consideration	$	6,016,962
Legal, accounting and other fees and costs(3)	$	26,839

(1)At closing, the Company recognized a gain of approximately $23 million, included in interest income, which represented the fair value of the Company’s existing mezzanine and mortgage loan investments in HCR ManorCare in excess of its carrying value on the acquisition date.

(2)In August 2011, the Company paid these amounts to certain taxing authorities or the seller.

(3)Represents estimated fees and costs of $15.5 million (general and administrative) and the write-off of unamortized bridge loan fees of $11.3 million (interest expense) upon its termination that were expensed in 2010 and 2011, respectively. These charges are directly attributable to the transaction and represent non-recurring costs.

The following table summarizes the fair value of the HCR ManorCare assets acquired and liabilities assumed at the April 7, 2011 acquisition date (in thousands):

Assets acquired
Net investments in direct financing leases	$	6,002,074
Cash and cash equivalents	6,996
Intangible assets, net	14,888
Total assets acquired	6,023,958
Total liabilities assumed	224,932
Net assets acquired	$	5,799,026

In connection with the HCR ManorCare Acquisition, the Company entered into a credit agreement for a 365-day bridge loan facility (from funding to maturity) in an aggregate amount of up to $3.3 billion, which was terminated in accordance with its terms in March 2011.

The assets and liabilities of the Company’s investments related to HCR ManorCare and the related results of operations are included in the condensed consolidated financial statements from the April 7, 2011 acquisition date. From the acquisition date to September 30, 2011, the Company recognized revenues and earnings from its investments related to HCR ManorCare of $270.4 million and $301.5 million, respectively.

See Note 8 for additional information regarding the Company’s investment related to HCR ManorCare.

Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations assume that the HCR ManorCare Acquisition, including the Company’s equity interest in HCR ManorCare, was completed as of January 1, 2011 (in thousands, except per share amounts):

	Nine Months Ended September 30, 2011
Revenues	$	1,351,574
Net income	590,333
Net income applicable to HCP, Inc.	577,673
Basic earnings per common share	$	1.38
Diluted earnings per common share	1.38

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2012

Earnings Per Common Share

Earnings Per Common Share

(15) Earnings Per Common Share

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Numerator
Income from continuing operations	$	198,059		$	174,662		$	598,142		$	479,911
Noncontrolling interests’ share in continuing operations	(2,935		)	(3,276		)	(9,070		)	(12,660		)
Income from continuing operations applicable to HCP, Inc.	195,124			171,386			589,072			467,251
Preferred stock dividends	—			(5,282		)	(17,006		)	(15,848		)
Participating securities’ share in continuing operations	(479		)	(546		)	(2,154		)	(1,893		)
Income from continuing operations applicable to common shares	194,645			165,558			569,912			449,510
Discontinued operations	984			809			2,440			3,796
Net income applicable to common shares	$	195,629		$	166,367		$	572,352		$	453,306
Denominator
Basic weighted average common shares	429,557			407,081			420,049			395,258
Dilutive potential common shares	1,221			1,565			1,355			1,755
Diluted weighted average common shares	430,778			408,646			421,404			397,013
Basic earnings per common share
Income from continuing operations	$	0.45		$	0.41		$	1.36		$	1.14
Discontinued operations	0.01			—			—			0.01
Net income applicable to common shares	$	0.46		$	0.41		$	1.36		$	1.15
Diluted earnings per common share
Income from continuing operations	$	0.45		$	0.41		$	1.36		$	1.13
Discontinued operations	—			—			—			0.01
Net income applicable to common shares	$	0.45		$	0.41		$	1.36		$	1.14

Restricted stock and certain of the Company’s performance restricted stock units are considered participating securities, because dividend payments are not forfeited even if the underlying award does not vest, which require the use of the two-class method when computing basic and diluted earnings per share.

Options to purchase approximately 0.5 million and 1.1 million shares of common stock that had an exercise price (including deferred compensation expense) in excess of the average market price of the Company’s common stock during the three months ended September 30, 2012 and 2011, respectively, were not included in the Company’s earnings per share calculations because they are anti-dilutive. Restricted stock and performance restricted stock units representing 15,000 shares of common stock during the three months ended September 30, 2011 were not included because they are anti-dilutive. Additionally, 6.4 million shares issuable upon conversion of 4.4 million DownREIT units during the three months ended September 30, 2012 were not included because they are anti-dilutive. During the three months ended September 30, 2011, 5.9 million shares issuable upon conversion of 4.2 million DownREIT units were not included because they are anti-dilutive.

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Debt

9 Months Ended

Sep. 30, 2012

Debt

Debt

(11) Debt

Bank Line of Credit and Term Loan

On March 27, 2012, the Company executed an amendment to its existing $1.5 billion unsecured revolving line of credit facility (the “Facility”). This amendment reduces the cost to the Company of the Facility (lower borrowing rate and facility fee) and extends the Facility’s maturity by one additional year to March 2016. The Facility contains a one-year extension option. Borrowings under this Facility accrue interest at LIBOR plus a margin that depends on the Company’s debt ratings. The Company pays a facility fee on the entire revolving commitment that depends upon its debt ratings. Based on the Company’s debt ratings at September 30, 2012, the margin on the Facility was 1.075%, and the facility fee was 0.175%. The Company has the right to increase the commitments under the Facility by an aggregate amount of up to $500 million, subject to customary conditions. At September 30, 2012, the Company had had no balance outstanding under this Facility.

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 million ($221 million at September 30, 2012) four-year unsecured term loan (the “Term Loan”) that accrues interest at a rate of GBP LIBOR plus 1.20%, based on the Company’s current debt ratings. Concurrent with the closing of the Term Loan, the Company entered into a four-year interest rate swap contract that fixes the interest rate of the Term Loan at 1.81%, subject to adjustments based on the Company’s debt ratings. The Term Loan contains a one-year committed extension option and covenants similar to those in the Facility.

The Facility and Term Loan contain certain financial restrictions and other customary requirements, including cross-default provisions to other indebtedness. Among other things, these covenants, using terms defined in the agreements (i) limit the ratio of Consolidated Total Indebtedness to Consolidated Total Asset Value to 60%, (ii) limit the ratio of Secured Debt to Consolidated Total Asset Value to 30%, (iii) limit the ratio of Unsecured Debt to Consolidated Unencumbered Asset Value to 60%, (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times and (v) require a formula-determined Minimum Consolidated Tangible Net Worth of $8.3 billion at September 30, 2012. At September 30, 2012, the Company was in compliance with each of these restrictions and requirements of the Facility and Term Loan.

Senior Unsecured Notes

At September 30, 2012, the Company had senior unsecured notes outstanding with an aggregate principal balance of $5.9 billion. At September 30, 2012, interest rates on the notes ranged from 1.29% to 7.07% with a weighted average effective interest rate of 5.40% and a weighted average maturity of 6.11 years. Discounts and premiums are amortized to interest expense over the term of the related senior unsecured notes. The senior unsecured notes contain certain covenants including limitations on debt, cross-acceleration provisions and other customary terms. The Company believes it was in compliance with these covenants at September 30, 2012.

On July 23, 2012, the Company issued $300 million of 3.15% senior unsecured notes due in 2022. The notes were priced at 98.888% of the principal amount with an effective yield to maturity of 3.28%; net proceeds from the offering were $294 million.

On June 25, 2012, the Company repaid $250 million of maturing senior unsecured notes, which accrued interest at a rate of 6.45%. The senior unsecured notes were repaid with proceeds from the Company’s June 2012 common stock offering.

On January 23, 2012, the Company issued $450 million of 3.75% senior unsecured notes due in 2019. The notes were priced at 99.523% of the principal amount with an effective yield to maturity of 3.83%; net proceeds from the offering were $444 million.

On September 15, 2011, the Company repaid $292 million of maturing senior unsecured notes, which accrued interest at a rate of 4.82%. The senior unsecured notes were repaid with funds available under the Facility.

On January 24, 2011, the Company 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 had an initial weighted average maturity of 10.3 years and a weighted average yield of 4.83%; net proceeds from the offering were $2.37 billion.

Mortgage Debt

At September 30, 2012, the Company had $1.7 billion in aggregate principal amount of mortgage debt outstanding that is secured by 137 healthcare facilities (including redevelopment properties) with a carrying value of $2.1 billion. At September 30, 2012, interest rates on the mortgage debt ranged from 1.54% to 8.69% with a weighted average effective interest rate of 6.14% and a weighted average maturity of 3.80 years.

Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into and terminate material leases. Some of the mortgage debt is also cross-collateralized by multiple assets and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.

Other Debt

At September 30, 2012, the Company had $85 million of non-interest bearing life care bonds at two of its continuing care retirement communities and non-interest bearing occupancy fee deposits at two of its senior housing facilities, all of which were payable to certain residents of the facilities (collectively, “Life Care Bonds”). At September 30, 2012, $28 million of the Life Care Bonds were refundable to the residents upon the resident moving out or to their estate upon death, and $57 million of the Life Care Bonds were refundable after the unit is successfully remarketed to a new resident.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at September 30, 2012 (in thousands):

Year	Term Loan(1)		Senior Unsecured Notes			Mortgage Debt			Total(2)
2012 (Three months)	$	—	$	—		$	8,715		$	8,715
2013	—		550,000			320,207			870,207
2014	—		487,000			184,495			671,495
2015	—		400,000			304,761			704,761
2016	221,214		900,000			293,175			1,414,389
Thereafter	—		3,600,000			584,762			4,184,762
	221,214		5,937,000			1,696,115			7,854,329
(Discounts) and premiums, net	—		(23,310		)	(11,601		)	(34,911		)
	$	221,214	$	5,913,690		$	1,684,514		$	7,819,418

(1)Represents £137 million translated into U.S. dollars as of September 30, 2012.

(2)Excludes $85 million of other debt that represents the Life Care Bonds that have no scheduled maturities.

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Loans Receivable

9 Months Ended

Sep. 30, 2012

Loans Receivable

Loans Receivable

(7)Loans Receivable

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

	September 30, 2012									December 31, 2011
	Real Estate Secured			Other Secured			Total			Real Estate Secured			Other Secured			Total
Mezzanine	$	—		$	183,253		$	183,253		$	—		$	90,148		$	90,148
Other	74,413			—			74,413			35,643			—			35,643
Unamortized discounts, fees and costs	(255		)	(3,072		)	(3,327		)	(1,040		)	(1,088		)	(2,128		)
Allowance for loan losses	—			(13,410		)	(13,410		)	—			(13,410		)	(13,410		)
	$	74,158		$	166,771		$	240,929		$	34,603		$	75,650		$	110,253

Tandem Health Care Loan

On July 31, 2012, the Company closed a mezzanine loan facility to lend up to $205 million to Tandem Health Care (“Tandem”), an affiliate of Formation Capital, as part of the recapitalization of a post-acute/skilled nursing portfolio. The Company funded $100 million (the “First Tranche”) at closing and expects to fund an additional $105 million (the “Second Tranche”) between March 2013 and August 2013. The Second Tranche will be used to repay debt senior to the Company’s loan. The loan is subordinate to $400 million in senior mortgage debt and $137 million in senior mezzanine debt. The loan bears interest at a fixed rate of 12% and 14% per annum for the First and Second Tranche, respectively. The facility will have a total term of up to 63 months from the initial closing.

Delphis Operations, L.P. Loan

The Company holds a secured term loan made to Delphis Operations, L.P. (“Delphis” or the “Borrower”) that is collateralized by all of the assets of the Borrower, which collateral is comprised primarily of interests in partnerships operating surgical facilities, some of which are on the premises of properties owned by the Company or HCP Ventures IV, LLC, an unconsolidated joint venture of the Company. In December 2009, the Company determined that the loan was impaired and recognized a provision for loan loss (impairment) of $4.3 million. In January 2011, the Company placed the loan on cost-recovery status, whereby accrual of interest income was suspended and any payments received from the Borrower are applied to reduce the recorded investment in the loan. In September 2011, the Company determined that the fair value of the collateral assets was no longer in excess of the carrying value of the loan and therefore recognized an additional provision for losses of $15.4 million.

As part of a March 2012 agreement (the “2012 Agreement”) between Delphis, certain past and current principals of Delphis and the Cirrus Group, LLC (the “Guarantors”), and the Company, the Company agreed, among other things, to allow the distribution of $1.5 million to certain of the Guarantors from funds generated from sales of assets that were pledged as additional collateral for this loan. In consideration of this distribution, among other things, the Company received cash of $4.9 million (including funds that had been escrowed from past sales of the Guarantors’ collateral) and the assignment of certain rights to general and limited partnership interests (including the release of claims by such entities). Further, the Company, as part of the 2012 Agreement, agreed to provide financial incentives to the Borrower regarding the liquidation of the primary collateral assets for this loan.

The Company valued the cash payments and other consideration received through the 2012 Agreement (after reducing the consideration by $0.5 million for related legal expenses) at $6.9 million, which the Company applied to the carrying value of the loan, reducing the balance to $68.8 million as of September 30, 2012 from its balance of $75.7 million as of December 31, 2011. During the nine months ended September 30, 2011, the Company received cash payments from the Borrower of $2.1 million. At September 30, 2012, the Company believes that the fair value of the collateral supporting this loan is in excess of the loan’s carrying value.

Subsequent to September 30, 2012, Delphis closed on the sale of one of the primary collateral assets for the loan, and the Company received $9.7 million in sales proceeds, net of an incentive payment provided for in the 2012 Agreement, which net proceeds were applied to reduce the principal balance of the loan to $59.1 million as of October 2012.

HCR ManorCare Loans

In December 2007, the Company made a $900 million investment (at a discount of $100 million) in HCR ManorCare mezzanine loans, which paid interest at a floating rate of one-month London Interbank Offered Rate (“LIBOR”) plus 4.0%. Also, in August 2009 and January 2011, the Company purchased $720 million (at a discount of $130 million) and $360 million, respectively, in participations in HCR ManorCare first mortgage debt, which paid interest at LIBOR plus 1.25%.

On April 7, 2011, upon closing of the HCR ManorCare Acquisition, the Company’s loans to HCR ManorCare were settled, which resulted in additional interest income of $23 million, which represents the excess of the loans’ fair values above their carrying values at the acquisition date. See Note 3 for additional discussion related to the HCR ManorCare Acquisition.

Genesis HealthCare Loans

In September and October 2010, the Company purchased participations in a senior loan and mezzanine note of Genesis HealthCare (“Genesis”) with par values of $278 million (at a discount of $28 million) and $50 million (at a discount of $10 million), respectively. The Genesis senior loan paid interest at LIBOR (subject to a floor of 1.5%, increasing to 2.5% by maturity) plus a spread of 4.75%, increasing to 5.75% by maturity. The senior loan was secured by all of Genesis’ assets. The mezzanine note paid interest at LIBOR plus a spread of 7.50%. In addition to the coupon interest payments, the mezzanine note required the payment of a termination fee, of which the Company’s share prior to the early repayment of this loan was $2.3 million.

On April 1, 2011, the Company received $330.4 million from the early repayment of its loans to Genesis, and recognized additional interest income of $34.8 million, which represents the related unamortized discounts and termination fee.

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Debt (Details)				9 Months Ended			0 Months Ended			0 Months Ended		9 Months Ended			0 Months Ended	1 Months Ended					1 Months Ended		1 Months Ended		9 Months Ended
	Sep. 30, 2012 USD ($)	Dec. 31, 2011 USD ($)	Sep. 30, 2012 Line of Credit and Term Loan USD ($)	Sep. 30, 2012 Bank Line of Credit USD ($)	Sep. 30, 2012 Bank Line of Credit GBP (£)	Mar. 27, 2012 Bank Line of Credit USD ($)	Jul. 30, 2012 Term Loan USD ($)	Jul. 30, 2012 Term Loan GBP (£)	Sep. 30, 2012 Term Loan USD ($)	Jul. 30, 2012 Term Loan Interest-rate swap contracts	Jan. 24, 2011 Senior Unsecured Notes USD ($)	Sep. 30, 2012 Senior Unsecured Notes USD ($)	Sep. 30, 2012 Senior Unsecured Notes Minimum	Sep. 30, 2012 Senior Unsecured Notes Maximum	Jun. 25, 2012 Senior Unsecured, 6.45% notes due 2012 USD ($)	Sep. 30, 2011 Senior Unsecured, 4.82% notes due 2011 USD ($)	Jan. 24, 2011 Senior Unsecured, 2.70% notes due 2014 USD ($)	Jan. 24, 2011 Senior Unsecured, 3.75% notes due 2016 USD ($)	Jan. 24, 2011 Senior Unsecured, 5.375% notes due 2021 USD ($)	Jan. 24, 2011 Senior Unsecured, 6.75% notes due 2041 USD ($)	Jan. 31, 2012 Senior Unsecured, 3.75% notes due 2019 USD ($)	Jan. 23, 2012 Senior Unsecured, 3.75% notes due 2019 USD ($)	Jul. 31, 2012 Senior Unsecured, 3.15% notes due 2022 USD ($)	Jul. 23, 2012 Senior Unsecured, 3.15% notes due 2022 USD ($)	Sep. 30, 2012 Mortgage Debt USD ($) item	Sep. 30, 2012 Mortgage Debt Minimum	Sep. 30, 2012 Mortgage Debt Maximum	Sep. 30, 2012 Other Debt USD ($) item
Debt Instrument
Line of credit facility, maximum borrowing capacity						$ 1,500,000,000
Length of debt instrument extension period				1 year			1 year	1 year
Debt instrument, variable rate basis				LIBOR			GBP LIBOR	GBP LIBOR
Debt instrument, basis spread on variable rate (as a percent)				1.075%			1.20%	1.20%
Debt instrument, facility fee (as a percent)				0.175%
Line of credit facility additional aggregate amount				500,000,000
Debt instrument, covenant debt to assets (as a percent)			60.00%
Debt instrument, covenant secured debt to assets (as a percent)			30.00%
Debt instrument, covenant unsecured debt to unencumbered assets (as a percent)			60.00%
Debt instrument, covenant minimum fixed charge coverage ratio			1.5
Debt instrument, covenant net worth			8,300,000,000
Debt instrument, effective interest rate (as a percent)																						3.83%		3.28%
Weighted-average interest rate (as a percent)											4.83%	5.40%													6.14%
Weighted-average maturity											10 years 3 months 18 days	6 years 1 month 10 days													3 years 9 months 18 days
Issuance of senior unsecured notes											2,400,000,000						400,000,000	500,000,000	1,200,000,000	300,000,000		450,000,000		300,000,000
Debt issuance price as a percentage of principal amount																						99.523%		98.888%
Net proceeds from issuance of senior unsecured notes											2,370,000,000										444,000,000		294,000,000
Repayment of senior unsecured notes															250,000,000	292,000,000
Stated interest rate (as a percent)													1.29%	7.07%	6.45%	4.82%	2.70%	3.75%	5.375%	6.75%		3.75%		3.15%		1.54%	8.69%
2012 (Three months)	8,715,000																								8,715,000
2013	870,207,000											550,000,000													320,207,000
2014	671,495,000											487,000,000													184,495,000
2015	704,761,000											400,000,000													304,761,000
2016	1,414,389,000								221,214,000			900,000,000													293,175,000
Thereafter	4,184,762,000											3,600,000,000													584,762,000
Debt instrument principal outstanding, total	7,854,329,000								221,214,000			5,937,000,000													1,696,115,000
(Discounts) and premiums, net	(34,911,000)											(23,310,000)													(11,601,000)
Debt instruments, carrying amount	7,819,418,000								221,214,000			5,913,690,000													1,684,514,000
Unsecured term loan	221,214,000						221,000,000	137,000,000
Maturity period of debt instruments							4 years	4 years
Term of the interest rate swap agreement										4 years
Debt instrument, fixed interest rate (as a percent)										1.81%
Bank line of credit		454,000,000		221,000,000	137,000,000
Senior unsecured notes	5,913,690,000	5,416,063,000
Mortgage debt	1,684,514,000	1,715,039,000																							1,700,000,000
Number of healthcare facilities used to secure debt																									137
Debt instrument, collateral, healthcare facilities carrying value																									2,100,000,000
Portion of other debt and occupancy fee deposits excluded from schedule of debt maturities	84,580,000	87,985,000																										85,000,000
Number of CCRC issuing life care bonds																												2
Non-interest bearing occupancy fee deposits																												2
Debt instrument, principal outstanding, refundable upon moving out																												28,000,000
Debt instrument, principal outstanding, refundable after remarketed																												$ 57,000,000

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Dispositions of Real Estate and Discontinued Operations

9 Months Ended

Sep. 30, 2012

Dispositions of Real Estate and Discontinued Operations

Dispositions of Real Estate and Discontinued Operations

(5)Dispositions of Real Estate and Discontinued Operations

During the nine months ended September 30, 2012, the Company sold a medical office building for $7 million.

At September 30, 2012, properties classified as held for sale included two senior housing facilities with an aggregate carrying value of $91.2 million. At September 30, 2011, properties classified as held for sale included five senior housing facilities and a medical office building, with a combined aggregate carrying value of $102.6 million.

The following table summarizes operating income from discontinued operations (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012			2011
Rental and related revenues	$	2,844	$	3,443	$	8,816		$	10,326
Depreciation and amortization expenses	1,453		1,884		7,300			4,286
Operating expenses	4		10		26			36
Other expense, net	403		740		1,906			2,208
Income (loss)	$	984	$	809	$	(416	)	$	3,796
Gain on sales of real estate, net of income taxes	$	—	$	—	$	2,856		$	—
Number of properties included in discontinued operations	2		6		3			6

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Net Investment in Direct Financing Leases

9 Months Ended

Sep. 30, 2012

Net Investment in Direct Financing Leases

Net Investment in Direct Financing Leases

(6)Net Investment in Direct Financing Leases

On April 7, 2011, the Company completed the acquisition of 334 HCR ManorCare properties subject to a single master lease that the Company classified as a direct financing lease (“DFL”). See discussion of the HCR ManorCare Acquisition in Note 3.

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

	September 30,			December 31,
	2012			2011
Minimum lease payments receivable(1)	$	25,350,888		$	25,744,161
Estimated residual values	4,010,514			4,010,514
Less unearned income	(22,518,153		)	(23,026,898		)
Net investment in direct financing leases	$	6,843,249		$	6,727,777
Properties subject to direct financing leases	361			361

(1)The minimum lease payments receivable are primarily attributable to HCR ManorCare ($24.2 billion and $24.5 billion at September 30, 2012 and December 31, 2011, respectively). The triple-net master lease with HCR ManorCare provides for annual rent of $489 million beginning April 1, 2012. The rent increases by 3.5% per year over the next four years and by 3% for the remaining portion of the initial lease term. The properties are grouped into four pools, and HCR ManorCare has 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. Including the extension options, which the Company determined to be bargain renewal options, the four leased pools had total initial available terms ranging from 23 to 35 years.

Certain of the non-HCR ManorCare leases contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms.

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Investments in and Advances to Unconsolidated Joint Ventures

9 Months Ended

Sep. 30, 2012

Investments in and Advances to Unconsolidated Joint Ventures

Investments in and Advances to Unconsolidated Joint Ventures

(8)Investments in and Advances to Unconsolidated Joint Ventures

HCP Ventures II

On January 14, 2011, the Company acquired its partner’s 65% interest in HCP Ventures II, a joint venture that owned 25 senior housing facilities, becoming the sole owner of the portfolio.

The purchase consideration of HCP Ventures II follows (in thousands):

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 (expense), 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.

In accordance with the accounting guidance applicable to acquisitions of the partner’s ownership interests that result in consolidation of previously unconsolidated entities, the Company recorded all of the assets and liabilities of HCP Ventures II at fair value as of the acquisition date. The Company utilized relevant market data and valuation techniques to determine the acquisition date fair value for HCP Ventures II. Relevant market data and valuation techniques included, but were not limited to, market data comparables for capitalization and discount rates, credit spreads, property specific building cost information and cash flow assumptions. The market data comparables utilized in the Company’s valuation model were based on information that it believes to be within a reasonable range of the then current market transactions.

The following table summarizes the fair values of the HCP Ventures II assets acquired and liabilities assumed at the January 14, 2011 acquisition date (in thousands):

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

The related assets, liabilities and results of operations of HCP Ventures II are included in the condensed consolidated financial statements from the January 14, 2011 acquisition date.

Summary of Unconsolidated Joint Venture Information

The Company owns interests in the following entities that are accounted for under the equity method at September 30, 2012 (dollars in thousands):

Entity(1)	Properties/Segment	Investment(2)			Ownership%
HCR ManorCare	post-acute/skilled nursing operations	$	94,358		9.4(3)
HCP Ventures III, LLC	13 medical office	7,774			30
HCP Ventures IV, LLC	54 medical office and 4 hospital	33,071			20
HCP Life Science(4)	4 life science	67,263			50-63
Horizon Bay Hyde Park, LLC	1 senior housing	6,927			72
Suburban Properties, LLC	1 medical office	7,508			67
Advances to unconsolidated joint ventures, net		191
		$	217,092
Edgewood Assisted Living Center, LLC	1 senior housing	$	(449	)	45
Seminole Shores Living Center, LLC	1 senior housing	(737		)	50
		$	(1,186)	)

(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, as amended, 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, as amended, 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 the Company’s unconsolidated joint ventures follows (in thousands):

	September 30,		December 31,
	2012		2011
Real estate, net	$	3,751,592	$	3,806,187
Goodwill	2,736,400		2,736,400
Other assets, net	3,019,757		3,061,290
Total assets	$	9,507,749	$	9,603,877
Capital lease obligations and other debt	$	6,014,200	$	5,976,500
Mortgage debt	887,956		895,243
Accounts payable	954,622		1,083,581
Other partners’ capital	1,467,292		1,465,536
HCP’s capital(1)	183,679		183,017
Total liabilities and partners’ capital	$	9,507,749	$	9,603,877

(1)The combined basis difference of the Company’s investments in these joint ventures of $32 million, as of September 30, 2012, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

	Three Months Ended September 30,					Nine Months Ended September 30,(1)
	2012			2011		2012		2011(2)
Total revenues	$	1,057,567		$	1,123,742	$	3,196,086	$	2,174,711
Net income (loss)	(8,851		)	31,076		8,416		9,198
HCP’s share in earnings(3)	13,396			17,050		42,803		32,798
Fees earned by HCP	460			494		1,423		1,605
Distributions received by HCP	1,419			1,271		4,826		4,398

(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 $14.9 million and $44.4 million for the three and nine months ended September 30, 2012, respectively, and a reduction of $14.4 million and $27.7 million for the three and nine months ended September 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.

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Segment Disclosures (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 item	Sep. 30, 2011
Segment reporting information, revenues
Number of reportable segments			5
Rental Revenues	$ 428,668	$ 428,184	$ 1,271,646	$ 1,138,639
Resident Fees and Services	36,076	11,974	107,824	15,314
Interest Income	10,278	577	12,313	99,199
Investment Management Fee Income	460	494	1,423	1,605
Total revenues	475,482	441,229	1,393,206	1,254,757
NOI	392,077	382,496	1,169,387	1,002,850
Adjusted NOI	356,450	344,000	1,063,715	902,303
Senior housing
Segment reporting information, revenues
Rental Revenues	114,856	122,849	341,936	355,496
Resident Fees and Services	36,076	11,974	107,824	15,314
Interest Income	876	42	1,686	49
Investment Management Fee Income				70
Total revenues	151,808	134,865	451,446	370,929
NOI	126,060	125,209	379,834	359,460
Adjusted NOI	113,592	112,755	342,368	319,393
Post-acute/skilled nursing
Segment reporting information, revenues
Rental Revenues	135,508	132,392	404,180	265,377
Interest Income	9,135	287	9,842	98,167
Total revenues	144,643	132,679	414,022	363,544
NOI	135,354	132,148	403,654	265,059
Adjusted NOI	116,898	112,881	346,900	228,034
Life science
Segment reporting information, revenues
Rental Revenues	71,194	71,093	215,569	215,045
Investment Management Fee Income	1	1	3	3
Total revenues	71,195	71,094	215,572	215,048
NOI	59,403	57,860	177,339	176,384
Adjusted NOI	56,341	52,785	171,179	159,544
Medical office
Segment reporting information, revenues
Rental Revenues	85,800	80,996	246,661	240,603
Investment Management Fee Income	459	493	1,420	1,532
Total revenues	86,259	81,489	248,081	242,135
NOI	50,852	47,650	148,030	143,243
Adjusted NOI	49,669	46,514	144,272	138,469
Hospital
Segment reporting information, revenues
Rental Revenues	21,310	20,854	63,300	62,118
Interest Income	267	248	785	983
Total revenues	21,577	21,102	64,085	63,101
NOI	20,408	19,629	60,530	58,704
Adjusted NOI	$ 19,950	$ 19,065	$ 58,996	$ 56,863

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Segment Disclosures (Details 3) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Oct. 05, 2006 CRC	Sep. 30, 2012 Identifiable segment	Dec. 31, 2011 Identifiable segment	Sep. 30, 2012 Senior housing	Dec. 31, 2011 Senior housing	Sep. 30, 2012 Post-acute/skilled nursing	Dec. 31, 2011 Post-acute/skilled nursing	Sep. 30, 2012 Life science	Dec. 31, 2011 Life science	Sep. 30, 2012 Medical office	Dec. 31, 2011 Medical office	Sep. 30, 2012 Hospital	Dec. 31, 2011 Hospital	Sep. 30, 2012 Other non-segment	Dec. 31, 2011 Other non-segment
Reconciliation of assets from segment to consolidated
Gross segment assets				$ 19,200,529,000	$ 18,417,439,000	$ 5,867,914,000	$ 5,792,196,000	$ 6,057,501,000	$ 5,644,472,000	$ 3,928,661,000	$ 3,886,851,000	$ 2,586,231,000	$ 2,336,302,000	$ 760,222,000	$ 757,618,000
Accumulated depreciation and amortization				(1,885,172,000)	(1,649,845,000)
Total assets	18,079,336,000	17,408,475,000		17,315,357,000	16,767,594,000											672,753,000	538,232,000
Assets held for sale, net	91,226,000	102,649,000														91,226,000	102,649,000
Amount paid in merger in excess of the fair value, recorded as goodwill			51,700,000
Goodwill	$ 50,346,000	$ 50,346,000		$ 50,000,000		$ 31,000,000		$ 3,000,000				$ 11,000,000		$ 5,000,000

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Equity (Details) (USD $)	1 Months Ended				3 Months Ended		9 Months Ended			1 Months Ended					1 Months Ended			1 Months Ended
	Oct. 31, 2012	Jul. 31, 2012	Apr. 30, 2012	Jan. 31, 2012	Sep. 30, 2012 item	Sep. 30, 2011	Sep. 30, 2012 item	Sep. 30, 2011	Dec. 31, 2011	Jun. 30, 2012 Public offering completed in June 2012	Mar. 31, 2012 Public offering completed in March 2012	Mar. 31, 2011 Public offering completed in March 2011	Apr. 30, 2012 Preferred Stock	Apr. 23, 2012 Preferred Stock	Apr. 30, 2012 Preferred Stock Series E cumulative redeemable preferred stock	Jan. 31, 2012 Preferred Stock Series E cumulative redeemable preferred stock	Apr. 23, 2012 Preferred Stock Series E cumulative redeemable preferred stock	Apr. 30, 2012 Preferred Stock Series F cumulative redeemable preferred stock	Jan. 31, 2012 Preferred Stock Series F cumulative redeemable preferred stock	Apr. 23, 2012 Preferred Stock Series F cumulative redeemable preferred stock
Class of Stock
Shares redeemed																	4,000,000			7,820,000
Dividend Rate (as a percent)															7.25%			7.10%
Preferred stock redemption value (in dollars per share)																	$ 25.00			$ 25.00
Aggregate redemption amount														$ 295,500,000
Preferred stock issuance costs write-off													10,400,000
Dividends declared per preferred share (in dollars per share)																$ 0.45313			$ 0.44375
Dividends declared per common share (in dollars per share)	$ 0.50	$ 0.50	$ 0.50	$ 0.50	$ 0.50	$ 0.48	$ 1.50	$ 1.44
Issuance of common stock, net							761,070,000	1,288,332,000		376,000,000	359,000,000	1,273,000,000
Issuance of common stock, net (in shares)										8,970,000	9,000,000	34,500,000
Stock issued under new issues (in dollars per share)										$ 41.88	$ 39.93	$ 36.90
Proceeds from issuance of common stock												1,235,000,000
Repayment of senior unsecured notes										250,000,000
Interest rate on repaid maturing debt (as a percent)										6.45%
Company's common stock issuances
Dividend Reinvestment and Stock Purchase Plan (in shares)							675,000	1,533,000
Conversion of DownREIT units (in shares)							72,000	30,000
Exercise of stock options (in shares)							2,451,000	733,000
Vesting of restricted stock units (in shares)							385,000	228,000
Accumulated Other Comprehensive Loss
Unrealized gains on available for sale securities					5,716,000		5,716,000
Unrealized losses on cash flow hedges, net					(18,917,000)		(18,917,000)		(15,712,000)
Supplemental Executive Retirement Plan minimum liability					(2,658,000)		(2,658,000)		(2,794,000)
Cumulative foreign currency translation adjustment					(787,000)		(787,000)		(1,076,000)
Total accumulated other comprehensive loss					(16,646,000)		(16,646,000)		(19,582,000)
Noncontrolling interests
DownREIT units outstanding					4,400,000		4,400,000
Number of DownREIT LLCs					5		5
DownREIT unit, carrying value					194,970,000		194,970,000		170,169,000
DownREIT unit, fair value					$ 285,000,000		$ 285,000,000

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Dispositions of Real Estate and Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2012

Dispositions of Real Estate and Discontinued Operations

Schedule of income from discontinued operations

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012			2011
Rental and related revenues	$	2,844	$	3,443	$	8,816		$	10,326
Depreciation and amortization expenses	1,453		1,884		7,300			4,286
Operating expenses	4		10		26			36
Other expense, net	403		740		1,906			2,208
Income (loss)	$	984	$	809	$	(416	)	$	3,796
Gain on sales of real estate, net of income taxes	$	—	$	—	$	2,856		$	—
Number of properties included in discontinued operations	2		6		3			6

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HCR ManorCare Acquisition (Details) (USD $)			1 Months Ended		6 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Apr. 30, 2011 HCR ManorCare	Mar. 31, 2011 HCR ManorCare	Sep. 30, 2011 HCR ManorCare	Sep. 30, 2011 HCR ManorCare	Apr. 07, 2011 HCR ManorCare item
Acquisition
Number of post-acute, skilled nursing and assisted living facilities acquired							334
Number of states where acquired post-acute, skilled nursing and assisted living facilities are located							30
Amount paid for additional equity interest acquired through exercise of option							$ 95,000,000
Percentage of additional interest acquired through exercise of option							9.90%
Total purchase price consideration
Payment of aggregate cash consideration, net of cash acquired	172,380,000	113,830,000					3,801,624,000
HCP's loan investments in HCR ManorCare's debt settled at fair value		1,990,406,000					1,990,406,000
Assumed HCR ManorCare accrued liabilities at fair value							224,932,000
Total purchase consideration							6,016,962,000
Legal, accounting and other fees and costs							26,839,000
Gain on settlement of loan investments			23,000,000
Cost of transaction classified as general and administrative expense							15,500,000
Cost of transaction classified as interest expense							11,300,000
Assets acquired
Net investments in direct financing leases							6,002,074,000
Cash and cash equivalents							6,996,000
Intangible assets, net							14,888,000
Total assets acquired							6,023,958,000
Total liabilities assumed							224,932,000
Net assets acquired							5,799,026,000
Length of bridge loan facility term				365 days
Bridge loan commitments obtained from a syndicate of banks				3,300,000,000
Total revenues					270,400,000
Net income (loss)					301,500,000
Unaudited pro forma consolidated results of operations
Revenues						1,351,574,000
Net income						590,333,000
Net income applicable to HCP, Inc.						$ 577,673,000
Basic earnings per common share (in dollars per share)						$ 1.38
Diluted earnings per common share (in dollars per share)						$ 1.38

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Equity

9 Months Ended

Sep. 30, 2012

Equity

Equity

(13) Equity

Preferred Stock

On April 23, 2012, the Company redeemed all of its outstanding preferred stock consisting of 4,000,000 shares of its 7.25% Series E preferred stock and the 7,820,000 shares of its 7.10% Series F preferred stock. The shares of Series E and Series F preferred stock were redeemed at a price of $25.00 per share, or $295.5 million in aggregate, plus all accrued and unpaid dividends to the redemption date. As a result of the redemption, which was announced on March 22, 2012, the Company incurred a charge of $10.4 million related to the original issuance costs of the preferred stock (this charge is presented as an additional preferred stock dividend in the Company’s consolidated income statements).

On January 26, 2012, the Company announced that its Board declared a quarterly cash dividend of $0.45313 per share on its Series E cumulative redeemable preferred stock and $0.44375 per share on its Series F cumulative redeemable preferred stock. These dividends were paid on March 30, 2012 to stockholders of record as of the close of business on March 15, 2012.

Common Stock

The following table lists the common stock cash dividends declared by the Company in 2012:

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
January 26	February 6	$	0.50	February 22
April 26	May 7	0.50		May 22
July 26	August 6	0.50		August 21
October 25	November 5	0.50		November 20

In June 2012, the Company completed a $376 million offering of 8.97 million shares of common stock at a price of $41.88 per share, which proceeds were primarily used to repay $250 million of maturing senior unsecured notes, which accrued interest at a rate of 6.45%.

In March 2012, the Company completed a $359 million offering of 9.0 million shares of common stock at a price of $39.93 per share, which proceeds were primarily used to redeem all outstanding shares of the Company’s preferred stock.

In March 2011, the Company completed a $1.273 billion public offering of 34.5 million shares of common stock at a price of $36.90 per share. The Company received total net proceeds of $1.235 billion, which proceeds were used to fund the HCR ManorCare Acquisition. See Note 3 for additional information on the HCR ManorCare Acquisition.

The following is a summary of the Company’s other common stock issuances (shares in thousands):

	Nine Months Ended September 30,
	2012	2011
Dividend Reinvestment and Stock Purchase Plan	675	1,533
Conversion of DownREIT units(1)	72	30
Exercise of stock options	2,451	733
Vesting of restricted stock units(2)	385	228

(1)Non-managing member LLC units.

(2)Issued under the Company’s 2006 Performance Incentive Plan.

Accumulated Other Comprehensive Loss

The following is a summary of the Company’s accumulated other comprehensive loss (in thousands):

	September 30,			December 31,
	2012			2011
Unrealized gains on available for sale securities	$	5,716		$	—
Unrealized losses on cash flow hedges, net	(18,917		)	(15,712		)
Supplemental Executive Retirement Plan minimum liability	(2,658		)	(2,794		)
Cumulative foreign currency translation adjustment	(787		)	(1,076		)
Total accumulated other comprehensive loss	$	(16,646	)	$	(19,582	)

Noncontrolling Interests

At September 30, 2012, there were 4.4 million DownREIT units outstanding in five LLCs, for which the Company is the managing member. At September 30, 2012, the carrying and fair values of these DownREIT units were $195 million and $285 million, respectively.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Fair Value Measurements

(18)Fair Value Measurements

The following table presents the Company’s fair value measurements of its financial assets and liabilities measured at fair value in the condensed consolidated balance sheets. Recognized gains and losses are recorded in other income (expense), net in the condensed consolidated income statements. During the nine months ended September 30, 2012, there were no transfers of financial assets or liabilities within the fair value hierarchy.

The financial assets and liabilities carried at fair value on a recurring basis at September 30, 2012 follow (in thousands):

Financial Instrument	Fair Value			Level 1		Level 2			Level 3
Marketable equity securities	$	22,769		$	22,769	$	—		$	—
Interest-rate swap liabilities(1)	(13,319		)	—		(13,319		)	—
Currency swap liabilities(1)	(2,317		)	—		(2,317		)	—
Warrants(1)	1,290			—		—			1,290
	$	8,423		$	22,769	$	(15,636	)	$	1,290

(1)Interest rate and currency swaps as well as common stock warrant fair values are determined based on observable and unobservable market assumptions utilizing standardized derivative pricing models.

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Business (Details)	9 Months Ended
	Sep. 30, 2012 item
Business
Number of reportable segments	5
Number of products in reportable segment	5

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Equity (Tables)

9 Months Ended

Sep. 30, 2012

Equity

Schedule of common stock, cash dividends

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
January 26	February 6	$	0.50	February 22
April 26	May 7	0.50		May 22
July 26	August 6	0.50		August 21
October 25	November 5	0.50		November 20

Schedule of company's common stock issuances

	Nine Months Ended September 30,
	2012	2011
Dividend Reinvestment and Stock Purchase Plan	675	1,533
Conversion of DownREIT units(1)	72	30
Exercise of stock options	2,451	733
Vesting of restricted stock units(2)	385	228

(1)Non-managing member LLC units.

(2)Issued under the Company’s 2006 Performance Incentive Plan.

Schedule of accumulated other comprehensive income (loss)

	September 30,			December 31,
	2012			2011
Unrealized gains on available for sale securities	$	5,716		$	—
Unrealized losses on cash flow hedges, net	(18,917		)	(15,712		)
Supplemental Executive Retirement Plan minimum liability	(2,658		)	(2,794		)
Cumulative foreign currency translation adjustment	(787		)	(1,076		)
Total accumulated other comprehensive loss	$	(16,646	)	$	(19,582	)

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net income	$ 199,043	$ 175,471	$ 600,582	$ 483,707
Other comprehensive income (loss):
Unrealized gains (losses) on securities	5,374	(11,483)	5,716	(10,152)
Change in net unrealized gains (losses) on cash flow hedges:
Unrealized losses	(2,734)	(3,051)	(3,513)	(4,092)
Reclassification adjustment realized in net income	129	96	308	(1,122)
Change in Supplemental Executive Retirement Plan obligation	46	34	136	100
Foreign currency translation adjustment	243	(246)	289	20
Total other comprehensive income (loss)	3,058	(14,650)	2,936	(15,246)
Total comprehensive income	202,101	160,821	603,518	468,461
Total comprehensive income attributable to noncontrolling interests	(2,935)	(3,276)	(9,070)	(12,660)
Total comprehensive income attributable to HCP, Inc.	$ 199,166	$ 157,545	$ 594,448	$ 455,801

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(2)Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management’s estimates.

The condensed consolidated financial statements include the accounts of HCP, its wholly-owned subsidiaries and joint ventures or variable interest entities (“VIEs”) that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been included. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K, as amended, filed with the U.S. Securities and Exchange Commission (“SEC”).

Certain amounts in the Company’s condensed consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and the related operating results reclassified from continuing to discontinued operations on the condensed consolidated income statements (see Note 5). Facility-level revenues from 21 senior housing communities that are in a RIDEA structure are presented in resident fees and services on the condensed consolidated income statements; all facility-level resident fee and service revenue previously reported in rental and related revenues has been reclassified to resident fees and services (see Note 12 for additional information regarding the 21 RIDEA facilities).

Foreign Currency Translation and Transactions

Assets and liabilities denominated in foreign currencies that are translated into U.S. dollars use exchange rates in effect at the end of the period, and revenues and expenses denominated in foreign currencies that are translated into U.S. dollars use average rates of exchange in effect during the related period. Gains or losses resulting from translation are included in accumulated other comprehensive income, a component of stockholders’ equity on the condensed consolidated balance sheets. Gains or losses resulting from foreign currency transactions are translated into U.S. dollars at the rates of exchange prevailing at the dates of the transactions. The effects of transaction gains or losses are included in other income (expense), net in the condensed consolidated statements of income.

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2012-01, Continuing Care Retirement Communities—Refundable Advance Fees (“ASU 2012-01”). This update clarifies the situations in which recognition of deferred revenue for refundable advance fees is appropriate. ASU 2012-01 is effective for fiscal years beginning after December 15, 2012. The Company does not expect the adoption of ASU 2012-01 on January 1, 2013 to have a material impact on its consolidated financial position or results of operations.

In July 2012, the FASB issued Accounting Standards Update No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”). The amendments in this update provide an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative impairment test. ASU 2012-02 is effective for fiscal years and interim periods beginning after September 15, 2012. The Company does not expect the adoption of ASU 2012-02 on January 1, 2013 to have an impact on its consolidated financial position or results of operations.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards. The amendments update the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of ASU 2011-04 on January 1, 2012 did not have an impact on the Company’s consolidated financial position or results of operations.

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Intangibles (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Intangibles disclosure, details
Intangible assets, gross	$ 607.6	$ 571.5
Intangible assets, accumulated amortization	225.3	199.1
Intangibles, below market lease and above market ground lease	194.0	208.2
Intangible liabilities, below market lease and above market ground lease, accumulated amortization	$ 88.8	$ 90.4

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Variable Interest Entities (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Company's involvement with VIEs:
Number of senior housing facilities leased	48
Number of VIE tenants	7
Variable Interest Entity, Not Primary Beneficiary | VIE tenants-operating leases
Company's involvement with VIEs:
Maximum Loss Exposure	$ 308,905
Assets/liability type	Lease intangibles, net and straight-line rent receivables
Carrying amount	15,122
Variable Interest Entity, Not Primary Beneficiary | VIE tenants-DFLs
Company's involvement with VIEs:
Maximum Loss Exposure	1,132,359
Assets/liability type	Net investment in DFLs
Carrying amount	597,792
Variable Interest Entity, Not Primary Beneficiary | Loan-senior secured
Company's involvement with VIEs:
Maximum Loss Exposure	68,755
Assets/liability type	Loans receivable, net
Carrying amount	$ 68,755

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Disclosures About Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Disclosures About Fair Value of Financial Instruments

Disclosures About Fair Value of Financial Instruments

(19)Disclosures About Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are reasonable estimates of fair value because of the short-term maturities of these instruments. Fair value of loans receivable, bank line of credit, term loan, mortgage debt and other debt are based on rates currently prevailing for similar instruments with similar maturities. The fair value of the marketable debt securities, interest-rate and currency swap contracts as well as common stock warrants were determined based on observable and unobservable market assumptions using standardized pricing models. The fair values of the senior unsecured notes and marketable equity securities were determined utilizing market quotes.

The table below summarizes the carrying amounts and fair values of the Company’s financial instruments (in thousands):

	September 30, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	240,929	$	252,032	$	110,253	$	111,073
Marketable debt securities(3)	221,018		221,018		—		—
Marketable equity securities(1)	22,769		22,769		17,053		17,053
Warrants(3)	1,290		1,290		1,334		1,334
Bank line of credit(2)	—		—		454,000		454,000
Term loan(2)	221,214		221,214		—		—
Senior unsecured notes(1)	5,913,690		6,623,609		5,416,063		5,819,304
Mortgage debt(2)	1,684,514		1,786,940		1,764,571		1,870,070
Other debt(2)	84,580		84,580		87,985		87,985
Interest-rate swap liabilities(2)	13,319		13,319		12,123		12,123
Currency swap liabilities(2)	2,317		2,317		—		—

(1)Level 1: Fair value calculated based on quoted prices in active markets.

(2)Level 2: Fair value based on quoted prices for similar or identical instruments in active or inactive markets, respectively, or calculated utilizing model-derived valuations in which significant inputs or value drivers are observable in active markets.

(3)Level 3: Fair value determined based on significant unobservable market inputs using standardized derivative pricing models.

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Subsequent Events (Details) (USD $) Share data in Thousands, unless otherwise specified	9 Months Ended				0 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Common Stock	Sep. 30, 2011 Common Stock	Oct. 16, 2012 Subsequent Blackstone JV Senior housing item	Oct. 16, 2012 Subsequent Blackstone JV Senior housing Minimum	Oct. 16, 2012 Subsequent Blackstone JV Senior housing Maximum	Oct. 19, 2012 Subsequent Blackstone JV Senior housing Common Stock	Oct. 16, 2012 Subsequent Blackstone JV Senior housing Real Estate Secured item	Oct. 16, 2012 Subsequent Blackstone JV Senior housing Assisted living	Oct. 16, 2012 Subsequent Blackstone JV Senior housing Independent living	Oct. 16, 2012 Subsequent Blackstone JV Senior housing Memory care	Oct. 16, 2012 Subsequent Blackstone JV Senior housing Skilled nursing
Subsequent Events
Number of senior housing communities					133
Purchase price of agreed acquisition					$ 17,300,000,000
Number of states where acquired senior housing communities are located					29
Number of units					10,350
Percentage of units of real estate property										61.00%	25.00%	13.00%	1.00%
Number of communities that are stabilized					99
Number of communities currently lease-up					34
Rental and related revenues					105,500,000
Rate of increase in rent receivable per year after each of the next four years of initial lease term (as a percent)						3.70%
Rate of increase in rent receivable per year for remaining years of lease term (as a percent)						3.00%
Percentage of operating leases basis spread on variable floor rate						103.00%
Percentage of operating leases basis spread on variable cap rate						130.00%
Number of asset pools					3
Initial available term of asset pools						14 years	16 years
Initial lease term with Emeritus Corporation					5 years
Number of extension options with Emeritus Corporation					2
Total initial available term of asset pools						30 years	35 years
Principal amount of secured debt									52,000,000
Term of loan									4 years
Interest rate on debt, initially (as a percent)									6.10%
Interest rate on debt after four year term (as a percent)									7.05%
Number of senior housing facilities purchased									9
Issuance of common stock, net	761,070,000	1,288,332,000	19,096,000	36,256,000
Issuance of common stock, net (in shares)			19,096	36,256				22,000
Proceeds from issuance of common stock								$ 979,000,000

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Other Assets (Tables)

9 Months Ended

Sep. 30, 2012

Other Assets

Schedule of other assets

	September 30,		December 31,
	2012		2011
Straight-line rent assets, net of allowance of $32,940 and $34,457, respectively	$	299,754	$	266,620
Marketable debt securities(1)	221,018		—
Leasing costs, net	93,619		92,288
Deferred financing costs, net	40,782		35,649
Goodwill	50,346		50,346
Marketable equity securities	22,769		17,053
Other(2)	43,154		23,502
Total other assets	$	771,442	$	485,458

(1)Represents £136.8 million of Four Seasons senior unsecured notes translated into U.S. dollars as of September 30, 2012 (see below for additional information).

(2)Includes a $5.4 million allowance for losses related to accrued interest receivable on the Delphis loan, which accrued interest is included in other assets. At both September 30, 2012 and December 31, 2011, the carrying value of interest accrued related to the Delphis loan was zero. See Note 7 for additional information about the Delphis loan and the related impairment.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies

Commitments and Contingencies

(12) Commitments and Contingencies

Legal Proceedings

From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Company’s business. The Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s business, prospects, financial condition or results of operations. The Company’s policy is to accrue legal expenses as they are incurred.

Concentration of Credit Risk

Concentrations of credit risks arise when a number of operators, tenants or obligors related to the Company’s investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors various segments of its portfolio to assess potential concentrations of risks. Management believes the current portfolio is reasonably diversified across healthcare related real estate and does not contain any other significant concentration of credit risks, except as disclosed herein. The Company does not have significant foreign operations.

The following table provides information regarding the Company’s concentration with respect to certain operators; the information provided is presented for the gross assets and revenues that are associated with certain operators as percentages of the respective segment’s and total Company’s gross assets and revenues:

Segment Concentrations:

	Percentage of Senior Housing Gross Assets				Percentage of Senior Housing Revenues				Percentage of Senior Housing Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	14	%	14	%	12	%	13	%	12	%	9	%
Brookdale Senior Living(2)	14		14		14		16		14		17
Emeritus Corporation	18		19		20		23		21		25
Sunrise Senior Living(3)	22		22		16		18		16		21

	Percentage of Post-Acute/ Skilled Nursing Gross Assets				Percentage of Post-Acute/ Skilled Nursing Revenues				Percentage of Post-Acute/ Skilled Nursing Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	89	%	94	%	87	%	93	%	91	%	80	%

Total Company Concentrations:

	Percentage of Total Company Gross Assets				Percentage of Total Company Revenues				Percentage of Total Company Revenues
	September 30,		December 31,		Three Months Ended September 30,				Nine Months Ended September 30,
Operators	2012		2011		2012		2011		2012		2011
HCR ManorCare(1)	34	%	35	%	30	%	32	%	31	%	22	%
Brookdale Senior Living(2)	4		5		5		5		5		5
Emeritus Corporation	6		6		7		7		7		7
Sunrise Senior Living(3)	7		7		5		6		5		6

(1)On April 7, 2011, the Company completed the acquisition of HCR ManorCare’s real estate assets, which included the settlement of the Company’s HCR ManorCare debt investments, see Notes 3 and 7 for additional information.

(2)As of September 30, 2012 and December 31, 2011, Brookdale Senior Living (“Brookdale”) percentages exclude $685.4 and $682.7 million, respectively, of senior housing assets related to 21 senior housing facilities that Brookdale operates (beginning September 1, 2011) on the Company’s behalf under a RIDEA structure. Assuming that these assets were attributable to Brookdale, the percentage of segment and total assets for Brookdale would be 25% and 8%, respectively, as of September 30, 2012. Assuming that these assets were attributable to Brookdale, the percentage of segment and total assets for Brookdale would be 26% and 9%, respectively, as of December 31, 2011. For the three and nine months ended September 30, 2012, Brookdale percentages exclude $36.1 million and $106.8 million, respectively, of senior housing revenues related to these facilities. Assuming that these revenues were attributable to Brookdale, the percentage of segment and total revenues for Brookdale would be 38% and 12% respectively, for both the three months and nine months ended September 30, 2012.

(3)Certain of the Company’s properties are leased to tenants who have entered into management contracts with Sunrise to operate the respective property on their behalf. The Company’s concentration of gross assets includes properties directly leased to Sunrise and properties that are managed by Sunrise on behalf of third party tenants.

On September 1, 2011, the Company completed a strategic venture with Brookdale that includes the operation of 37 HCP-owned senior living communities previously leased to or operated by Horizon Bay Retirement Living (“Horizon Bay”). As part of this transaction, Brookdale acquired Horizon Bay and: (i) assumed an existing triple-net lease for nine HCP communities; (ii) entered into a new triple-net lease related to four HCP communities; (iii) assumed Horizon Bay’s management of three HCP communities, one of which was developed by HCP; and (iv) entered into management contracts and a joint venture agreement for a 10% interest in the real estate and operations for 21 of the Company’s communities that are in a RIDEA structure. Concurrent with these transactions, the Company purchased $22.4 million of Brookdale’s common stock in June 2011 (see Note 10 for additional information regarding these marketable equity securities).

Under the provisions of RIDEA, a REIT may lease “qualified healthcare properties” on an arm’s length basis to a taxable REIT subsidiary if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” The three months ended September 30, 2012 include $36.1 million and $24.1 million in revenues and operating expenses, respectively, and the nine months ended September 30, 2012 include $106.8 million and $67.5 million in revenues and operating expenses, respectively, as a result of reflecting the facility-level results for the 21 RIDEA facilities operated by Brookdale beginning September 1, 2011.

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

Credit Enhancement Guarantee

Certain of the Company’s senior housing facilities serve as collateral for $119 million of debt (maturing May 1, 2025) that is owed by a previous owner of the facilities. This indebtedness is guaranteed by the previous owner who has an investment grade credit rating. These senior housing facilities, which are classified as DFLs, had a carrying value of $374 million as of September 30, 2012.