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 March 31, 2013.

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 April 25, 2013, there were 454,486,181 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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
	PART II. OTHER INFORMATION
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 6.	Exhibits	36
Signatures		38

2

HCP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	March 31,			December 31,
	2013			2012
ASSETS
Real estate:
Buildings and improvements	$	10,623,382		$	10,537,484
Development costs and construction in progress	223,534			236,864
Land	1,853,392			1,850,397
Accumulated depreciation and amortization	(1,822,628		)	(1,739,718		)
Net real estate	10,877,680			10,885,027
Net investment in direct financing leases	6,921,421			6,881,393
Loans receivable, net	291,870			276,030
Investments in and advances to unconsolidated joint ventures	209,810			212,213
Accounts receivable, net of allowance of $1,632 and $1,668, respectively	32,183			34,150
Cash and cash equivalents	47,547			247,673
Restricted cash	37,675			37,848
Intangible assets, net	537,692			552,701
Other assets, net	776,853			788,520
Total assets(1)	$	19,732,731		$	19,915,555
LIABILITIES AND EQUITY
Bank line of credit	$	14,000		$	—
Term loan	208,213			222,694
Senior unsecured notes	6,563,749			6,712,624
Mortgage debt	1,680,792			1,676,544
Other debt	78,836			81,958
Intangible liabilities, net	101,633			105,909
Accounts payable and accrued liabilities	238,583			293,994
Deferred revenue	64,866			68,055
Total liabilities(2)	8,950,672			9,161,778
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 454,416,748 and 453,191,321 shares issued and outstanding, respectively	454,417			453,191
Additional paid-in capital	11,218,702			11,180,066
Cumulative dividends in excess of earnings	(1,075,249		)	(1,067,367		)
Accumulated other comprehensive loss	(16,604		)	(14,653		)
Total stockholders’ equity	10,581,266			10,551,237
Joint venture partners	15,185			14,752
Non-managing member unitholders	185,608			187,788
Total noncontrolling interests	200,793			202,540
Total equity	10,782,059			10,753,777
Total liabilities and equity	$	19,732,731		$	19,915,555

(1)The Company’s consolidated total assets at March 31, 2013 and December 31, 2012, include assets of certain variable interest entities (“VIEs”) that can only be used to settle the liabilities of those VIEs as follows: accounts receivable, net, $2 million in each period presented; cash and cash equivalents, $10 million in each period presented; and other assets, net, $3 million and $2 million, respectively. See Note 16 to the Condensed Consolidated Financial Statements for additional information.

(2)The Company’s consolidated total liabilities at March 31, 2013 and December 31, 2012, include liabilities of certain VIEs for which the VIE creditors do not have recourse to HCP, Inc. as follows: other debt, $0.2 million in each period presented; accounts payable and accrued liabilities, $15 million and $14 million, respectively; and deferred revenue, $2 million in each period presented. See Note 16 to the Condensed Consolidated Financial Statements for additional information.

See accompanying Notes to the Condensed Consolidated Financial Statements.

3

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2013			2012
Revenues:
Rental and related revenues	$	285,476		$	241,151
Tenant recoveries	24,203			22,650
Resident fees and services	36,891			36,179
Income from direct financing leases	156,870			154,535
Interest income	12,386			819
Investment management fee income	443			493
Total revenues	516,269			455,827
Costs and expenses:
Interest expense	109,351			103,752
Depreciation and amortization	104,717			85,280
Operating	73,605			67,333
General and administrative	20,744			20,089
Total costs and expenses	308,417			276,454
Other income, net	12,012			436
Income before income taxes and equity income from unconsolidated joint ventures	219,864			179,809
Income taxes	(881		)	709
Equity income from unconsolidated joint ventures	14,801			13,675
Income from continuing operations	233,784			194,193
Discontinued operations:
Loss before gain on sales of real estate	—			(485		)
Gain on sales of real estate	—			2,856
Total discontinued operations	—			2,371
Net income	233,784			196,564
Noncontrolling interests’ share in earnings	(3,199		)	(3,184		)
Net income attributable to HCP, Inc.	230,585			193,380
Preferred stock dividends	—			(17,006		)
Participating securities’ share in earnings	(478		)	(1,117		)
Net income applicable to common shares	$	230,107		$	175,257
Basic earnings per common share:
Continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43
Diluted earnings per common share:
Continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43
Weighted average shares used to calculate earnings per common share:
Basic	453,651			410,018
Diluted	454,613			411,661
Dividends declared per common share	$	0.525		$	0.50

See accompanying Notes to the Condensed Consolidated Financial Statements.

4

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2013			2012
Net income	$	233,784		$	196,564
Other comprehensive income (loss):
Unrealized gains on securities:
Unrealized gains	1,355			1,304
Reclassification adjustment realized in net income	(9,131		)	—
Change in net unrealized gains on cash flow hedges:
Unrealized gains	5,320			276
Reclassification adjustment realized in net income	272			89
Change in Supplemental Executive Retirement Plan obligation	55			45
Foreign currency translation adjustment	178			202
Total other comprehensive income (loss)	(1,951		)	1,916
Total comprehensive income	231,833			198,480
Total comprehensive income attributable to noncontrolling interests	(3,199		)	(3,184		)
Total comprehensive income attributable to HCP, Inc.	$	228,634		$	195,296

See accompanying Notes to the Condensed Consolidated Financial Statements.

5

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share data)

(Unaudited)

									Cumulative			Accumulated
						Additional			Dividends			Other			Total			Total
	Common Stock					Paid-In			In Excess			Comprehensive			Stockholders’			Noncontrolling			Total
	Shares		Amount			Capital			Of Earnings			Income (Loss)			Equity			Interests			Equity
January 1, 2013	453,191		$	453,191		$	11,180,066		$	(1,067,367	)	$	(14,653	)	$	10,551,237		$	202,540		$	10,753,777
Net income	—		—			—			230,585			—			230,585			3,199			233,784
Other comprehensive loss	—		—			—			—			(1,951		)	(1,951		)	—			(1,951		)
Issuance of common stock, net	555		555			13,901			—			—			14,456			(2,179		)	12,277
Repurchase of common stock	(14	)	(14		)	(675		)	—			—			(689		)	—			(689		)
Exercise of stock options	685		685			19,980			—			—			20,665			—			20,665
Amortization of deferred compensation	—		—			5,430			—			—			5,430			—			5,430
Common dividends ($0.525 per share)	—		—			—			(238,467		)	—			(238,467		)	—			(238,467		)
Distributions to noncontrolling interests	—		—			—			—			—			—			(3,754		)	(3,754		)
Issuance of noncontrolling interests	—		—			—			—			—			—			987			987
March 31, 2013	454,417		$	454,417		$	11,218,702		$	(1,075,249	)	$	(16,604	)	$	10,581,266		$	200,793		$	10,782,059

														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	—		—			—		—			—			193,380			—			193,380			3,184			196,564
Other comprehensive income	—		—			—		—			—			—			1,916			1,916			—			1,916
Preferred stock redemption	(11,820	)	(285,173		)	—		—			—			(11,723		)	—			(296,896		)	—			(296,896		)
Issuance of common stock, net	—		—			9,559		9,559			358,397			—			—			367,956			(1,034		)	366,922
Repurchase of common stock	—		—			(167	)	(167		)	(6,817		)	—			—			(6,984		)	—			(6,984		)
Exercise of stock options	—		—			1,412		1,412			36,219			—			—			37,631			—			37,631
Amortization of deferred compensation	—		—			—		—			5,373			—			—			5,373			—			5,373
Preferred dividends	—		—			—		—			—			(5,283		)	—			(5,283		)	—			(5,283		)
Common dividends ($0.50 per share)	—		—			—		—			—			(205,784		)	—			(205,784		)	—			(205,784		)
Distributions to noncontrolling interests	—		—			—		—			—			—			—			—			(3,912		)	(3,912		)
Issuance of noncontrolling interests	—		—			—		—			—			—			—			—			181			181
Purchase of noncontrolling interests	—		—			—		—						—			—			—			(388		)	(388		)
March 31, 2012	—		$	—		419,433		$	419,433		$	9,776,708		$	(1,053,684	)	$	(17,666	)	$	9,124,791		$	185,171		$	9,309,962

See accompanying Notes to the Condensed Consolidated Financial Statements.

6

HCP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

	Three Months Ended March 31,
	2013			2012
Cash flows from operating activities:
Net income	$	233,784		$	196,564
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	104,717			85,280
Discontinued operations	—			2,996
Amortization of above and below market lease intangibles, net	(78		)	(697		)
Amortization of deferred compensation	5,430			5,373
Amortization of deferred financing costs, net	4,644			4,529
Straight-line rents	(18,793		)	(9,927		)
Loan and direct financing lease interest accretion	(24,266		)	(25,878		)
Deferred rental revenues	1,257			1,839
Equity income from unconsolidated joint ventures	(14,801		)	(13,675		)
Distributions of earnings from unconsolidated joint ventures	803			913
Gain on sales of real estate	—			(2,856		)
Marketable securities gains, net	(10,977		)	—
Derivative (gains) losses, net	(105		)	203
Changes in:
Accounts receivable, net	1,967			2,300
Other assets	(8,699		)	(7,877		)
Accounts payable and accrued liabilities	(60,533		)	(52,619		)
Net cash provided by operating activities	214,350			186,468
Cash flows from investing activities:
Acquisitions of real estate	(25,654		)	—
Development of real estate	(38,749		)	(22,340		)
Leasing costs and tenant and capital improvements	(8,959		)	(8,931		)
Proceeds from sales of real estate, net	—			7,238
Distributions in excess of earnings from unconsolidated joint ventures	568			2,716
Proceeds from the sale of marketable securities	28,030			—
Principal repayments on loans receivable	2,188			4,015
Investments in loans receivable	(14,957		)	(9,939		)
(Increase) decrease in restricted cash	173			(3,905		)
Net cash used in investing activities	(57,360		)	(31,146		)
Cash flows from financing activities:
Net borrowings (repayments) under bank line of credit	14,000			(454,000		)
Issuance of senior unsecured notes	—			450,000
Repayment of senior unsecured notes	(150,000		)	—
Repayments of mortgage debt	(12,135		)	(10,057		)
Deferred financing costs	—			(10,117		)
Net proceeds from the issuance of common stock and exercise of options	32,253			397,569
Dividends paid on common and preferred stock	(238,467		)	(211,067		)
Issuance of noncontrolling interests	987			181
Distributions to noncontrolling interests	(3,754		)	(3,912		)
Net cash provided by (used in) financing activities	(357,116		)	158,597
Net increase (decrease) in cash and cash equivalents	(200,126		)	313,919
Cash and cash equivalents, beginning of period	247,673			33,506
Cash and cash equivalents, end of period	$	47,547		$	347,425

See accompanying Notes to the 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) investments in senior housing operations utilizing the structure permitted by the Housing and Economic Recovery Act of 2008, which is commonly referred to as “RIDEA.”

(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 three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012 included in the Company’s Annual Report on Form 10-K 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 statements of income (see Note 4).

Acquisition Costs

Transaction costs related to acquisitions of businesses, including properties, are expensed as incurred.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The adoption of ASU 2013-02 on January 1, 2013 did not have a material impact on the Company’s consolidated financial position or results of operations.

In July 2012, the 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. The adoption of ASU 2012-01 on January 1, 2013 did not have a material impact on the Company’s consolidated financial position or results of operations.

8

(3)Real Estate Property Investments

During the three months ended March 31, 2013 and 2012, the Company funded an aggregate of $42 million and $30 million, respectively, for construction, tenant and other capital improvement projects, primarily in its senior housing, life science and medical office segments.

$1.73 Billion Senior Housing Portfolio Acquisition (the “Blackstone JV Acquisition”)

During the first quarter of 2013 and fourth quarter of 2012, the Company acquired 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 the Blackstone Group (the “Blackstone JV”). Located in 29 states, the portfolio encompasses a diversified care mix of 61% assisted living, 25% independent living, 13% memory care and 1% skilled nursing based on units. Based on operating performance at closing, the 133 communities consisted of 99 that were stabilized and 34 that were in lease-up. The transaction closed in two stages: (i) 129 senior housing facilities during the fourth quarter of 2012 for $1.7 billion; and (ii) four senior housing facilities during the first quarter of 2013 for $38 million. The Company paid $1.73 billion in cash consideration and assumed $13 million of mortgage debt to acquire: (i) real estate with a fair value of $1.57 billion, (ii) intangible assets with a fair value of $174 million; and (iii) assumed intangible liabilities with a fair value of $4 million. As of March 31, 2013, the purchase price allocation is preliminary, and the final purchase price allocation will be determined pending the receipt of information necessary to complete the valuation of certain assets and liabilities, which may result in changes from the initial estimates.

Emeritus operates the communities pursuant to a new triple-net master lease for 128 properties (the “Master Lease”) and five individual leases, all guaranteed by Emeritus (together, the “Leases”). The Leases provide aggregate contractual rent in the first year of $105.8 million. The contractual rent will increase annually by the greater of the percentage increase in the Consumer Price Index (“CPI”) or 3.7% on average over the initial five years, and thereafter by the greater of CPI or 3.0% for the remaining initial lease term. At the beginning of the sixth lease year, rent on the 34 lease-up properties will increase to the greater of the percentage increase in CPI or fair market, subject to a floor of 103% and a cap of 130% of the prior year’s rent.

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

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

Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations for the three months ended March 31, 2012 assume that the Blackstone JV Acquisition was completed as of January 1, 2012 (in thousands, except per share amounts):

Revenues	$	482,277
Net income	204,408
Net income applicable to HCP, Inc.	201,224
Basic earnings per common share	0.43
Diluted earnings per common share	0.43

(4)   Dispositions of Real Estate and Discontinued Operations

During the three months ended March 31, 2012, the Company sold a medical office building for $7 million.

At March 31, 2012, three properties were classified as held for sale, with a combined aggregate carrying value of $98 million. There were no properties classified as held for sale or reported as discontinued operations as of or during the three months ended March 31, 2013.

9

The following table summarizes operating loss from discontinued operations and gain on sales of real estate included in discontinued operations for the three months ended March 31, 2012 (dollars in thousands):

Rental and related revenues	$	3,430
Depreciation and amortization expenses	2,996
Operating expenses	18
Other expense, net	901
Net loss before gain on sales of real estate	$	(485	)
Gain on sales of real estate, net of income taxes	$	2,856
Number of properties included in discontinued operations	4

(5)Net Investment in Direct Financing Leases

The components of net investment in direct financing leases (“DFLs”) consisted of the following (dollars in thousands):

	March 31,			December 31,
	2013			2012
Minimum lease payments receivable(1)	$	25,085,037		$	25,217,520
Estimated residual values	4,010,514			4,010,514
Less unearned income	(22,174,130		)	(22,346,641		)
Net investment in direct financing leases	$	6,921,421		$	6,881,393
Properties subject to direct financing leases	361			361

(1)The minimum lease payments receivable are primarily attributable to HCR ManorCare, Inc. (“HCR ManorCare”) ($23.9 billion and $24.0 billion at March 31, 2013 and December 31, 2012, respectively). The triple-net master lease with HCR ManorCare provides for annual rent of $506 million beginning April 1, 2013 (prior to April 1, 2013, annual rent was $489 million). The rent increases by 3.5% per year over the next three 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 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.

(6)   Loans Receivable

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

	March 31, 2013								December 31, 2012
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine	$	—	$	145,150		$	145,150		$	—	$	145,150		$	145,150
Other	163,008		—			163,008			147,264		—			147,264
Unamortized discounts, fees and costs	—		(2,878		)	(2,878		)	—		(2,974		)	(2,974		)
Allowance for loan losses	—		(13,410		)	(13,410		)	—		(13,410		)	(13,410		)
	$	163,008	$	128,862		$	291,870		$	147,264	$	128,766		$	276,030

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 has a commitment to fund an additional $105 million (the “Second Tranche”) through August 2013. The Second Tranche will be used to repay debt senior to the Company’s loan. At closing, the loan was 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 has a total term of up to 63 months from the initial closing, is prepayable at the borrower’s option and is secured by real estate partnership interests.

10

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. The Borrower’s 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. Further, 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.

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. 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.

Pursuant to the 2012 Agreement, the Company received the remaining cash ($4.8 million, after reducing this amount by $0.5 million for related legal expenses) and other consideration ($2.1 million) of $6.9 million from the Guarantors. In addition, during 2012 the Company received $38.1 million in net proceeds from the sales of two of the primary collateral assets, which proceeds, together with the cash payments and other consideration, were applied to reduce the carrying value of the loan. At both March 31, 2013 and December 31, 2012, the carrying value of the loan was $30.7 million. At March 31, 2013, the Company believes the fair value of the collateral supporting this loan is in excess of its carrying value.

(7)   Investments in and Advances to Unconsolidated Joint Ventures

The Company owns interests in the following entities that are accounted for under the equity method at March 31, 2013 (dollars in thousands):

Entity(1)	Properties/Segment	Investment(2)			Ownership%
HCR ManorCare	post-acute/skilled nursing operations	$	88,827		9.5(3)
HCP Ventures III, LLC	13 medical office	7,410			30
HCP Ventures IV, LLC	54 medical office and 4 hospital	31,480			20
HCP Life Science(4)	4 life science	68,287			50-63
Horizon Bay Hyde Park, LLC	1 senior housing	6,581			72
Suburban Properties, LLC	1 medical office	7,044			67
Advances to unconsolidated joint ventures, net		181
		$	209,810
Edgewood Assisted Living Center, LLC	1 senior housing	$	(704	)	45
Seminole Shores Living Center, LLC	1 senior housing	(428		)	50
		$	(1,132	)

(1)These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures.

(2)Represents the carrying value of the Company’s investment in the unconsolidated joint venture.

(3)Presented after adjusting the Company’s 9.9% ownership for the dilution of certain of HCR ManorCare’s outstanding employee equity awards.

(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):

	March 31,		December 31,
	2013		2012
Real estate, net	$	3,706,411	$	3,731,740
Goodwill and other assets, net	5,875,013		5,734,318
Total assets	$	9,581,424	$	9,466,058
Capital lease obligations and mortgage debt	$	6,844,859	$	6,875,932
Accounts payable	1,108,324		971,095
Other partners’ capital	1,445,199		1,435,885
HCP’s capital(1)	183,042		183,146
Total liabilities and partners’ capital	$	9,581,424	$	9,466,058

(1)The combined basis difference of the Company’s investments in these joint ventures of $25 million, as of March 31, 2013, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

11

	Three Months Ended March 31,
	2013		2012
Total revenues	$	1,093,374	$	1,044,509
Net income	10,584		1,125
HCP’s share in earnings (1)	14,801		13,675
Fees earned by HCP	443		493
Distributions received by HCP	1,371		3,629

(1)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 $15.9 million and $14.7 million for the three months ended March 31, 2013 and 2012, respectively. 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.

(8)Intangibles

At March 31, 2013 and December 31, 2012, intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles, were $797 million and $794 million, respectively. At March 31, 2013 and December 31, 2012, the accumulated amortization of intangible assets was $259 million and $241 million, respectively.

At both March 31, 2013 and December 31, 2012, intangible lease liabilities, comprised of below market lease intangibles and above market ground lease intangible liabilities were $199 million. At March 31, 2013 and December 31, 2012, the accumulated amortization of intangible liabilities was $97 million and $93 million, respectively.

(9)Other Assets

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

	March 31,		December 31,
	2013		2012
Straight-line rent assets, net of allowance of $33,767 and $33,521, respectively	$	323,513	$	306,294
Marketable debt securities(1)	208,214		222,809
Leasing costs, net	93,678		93,763
Deferred financing costs, net	42,944		45,490
Goodwill	50,346		50,346
Marketable equity securities	—		24,829
Other(2)	58,158		44,989
Total other assets	$	776,853	$	788,520

(1)Represents £136.9 million of Four Seasons senior unsecured notes translated into U.S. dollars (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 March 31, 2013 and December 31, 2012, the carrying value of interest accrued related to the Delphis loan was zero. See Note 6 for additional information about the Delphis loan and the related impairment. At March 31, 2013 and December 31, 2012, includes a loan receivable of $8 million and $10 million, respectively, from HCP Ventures IV, LLC, an unconsolidated joint venture (see Note 7 for additional information) with an interest rate of 12% which matures in May 2014. The loan is secured by HCP’s joint venture partner’s 80% partnership interest in the joint venture.

During the three months ended March 31, 2013, the Company realized gains from the sale of marketable equity securities of $11 million, which were included in other income, net. At December 31, 2012, the fair value and adjusted cost basis of the marketable equity securities were $24.8 million and $17.1 million, respectively. The marketable equity securities were classified as available-for-sale.

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 were 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 was financed by a GBP denominated unsecured term loan that is discussed in Note 10. These senior unsecured notes are accounted for as marketable debt securities and classified as held-to-maturity.

12

(10) Debt

Bank Line of Credit and Term Loan

The Company’s $1.5 billion unsecured revolving line of credit facility (the “Facility”) matures on March 2016 and contains a one-year extension option. Borrowings under the 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 March 31, 2013, the margin on the Facility was 1.075%, and the facility fee was 0.175%. The Facility also includes a feature that will allow the Company to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments from existing lenders or new lending institutions. At March 31, 2013, the Company had $14 million outstanding under the Facility.

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 million ($208 million at March 31, 2013) 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.

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 $9.2 billion at March 31, 2013. At March 31, 2013, the Company was in compliance with each of these restrictions and requirements of the Facility and Term Loan.

Senior Unsecured Notes

At March 31, 2013, the Company had senior unsecured notes outstanding with an aggregate principal balance of $6.6 billion. At March 31, 2013, interest rates on the notes ranged from 1.25% to 6.98% with a weighted average effective interest rate of 5.10% and a weighted average maturity of six 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 March 31, 2013.

On February 28, 2013, the Company repaid $150 million of maturing 5.625% senior unsecured notes.

On November 19, 2012, the Company issued $800 million of 2.625% senior unsecured notes due in 2020. The notes were priced at 99.7% of the principal amount with an effective yield to maturity of 2.7%; net proceeds from this offering were $793 million.

On July 23, 2012, the Company issued $300 million of 3.15% senior unsecured notes due in 2022. The notes were priced at 98.9% of the principal amount with an effective yield to maturity of 3.3%; net proceeds from the offering were $294 million.

On June 25, 2012, the Company repaid $250 million of maturing 6.45% senior unsecured notes. 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 99.5% of the principal amount with an effective yield to maturity of 3.8%; net proceeds from the offering were $444 million.

Mortgage Debt

At March 31, 2013, the Company had $1.7 billion in aggregate principal amount of mortgage debt outstanding that is secured by 139 healthcare facilities (including redevelopment properties) with a carrying value of $2.1 billion. At March 31, 2013, interest rates on the mortgage debt ranged from 1.54% to 8.69% with a weighted average effective interest rate of 6.13% and a weighted average maturity of three 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 or 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.

13

Other Debt

At March 31, 2013, the Company had $79 million of non-interest bearing life care bonds at two of its CCRCs 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”). The Life Care Bonds are refundable to the residents upon the termination of the contract or upon the successful resale of the unit.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2013 (in thousands):

Year	Line of Credit		Term Loan(1)		Senior Unsecured Notes			Mortgage Debt			Total(2)
2013 (Nine months)	$	—	$	—	$	400,000		$	283,104		$	683,104
2014	—		—		487,000			180,221			667,221
2015	—		—		400,000			308,611			708,611
2016	14,000		208,213		900,000			291,941			1,414,154
2017	—		—		750,000			550,698			1,300,698
Thereafter	—		—		3,650,000			73,468			3,723,468
	14,000		208,213		6,587,000			1,688,043			8,497,256
(Discounts) and premiums, net	—		—		(23,251		)	(7,251		)	(30,502		)
	$	14,000	$	208,213	$	6,563,749		$	1,680,792		$	8,466,754

(1)Represents £137 million translated into U.S. dollars.

(2)Excludes $79 million of other debt that represents the Life Care Bonds that have no scheduled maturities.

(11) 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, results of operations or cash flows. The Company’s policy is to expense legal costs 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. The Company does not have significant foreign operations.

The following table provides information regarding the Company’s concentrations 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
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
Emeritus	35	%	35	%	35	%	21	%
Sunrise Senior Living (“Sunrise”)(1)	17		17		13		16
HCR ManorCare	11		11		10		12
Brookdale Senior Living (“Brookdale”)(2)	10		11		12		14

	Percentage of Post-Acute/ Skilled Nursing Gross Assets				Percentage of Post-Acute/ Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
HCR ManorCare	89	%	89	%	87	%	93	%

14

Total Company Concentrations:

	Percentage of Total Company Gross Assets				Percentage of Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
HCR ManorCare	32	%	31	%	28	%	31	%
Emeritus	14		13		13		7
Sunrise(1)	7		7		5		5
Brookdale(2)	4		4		4		5

(1)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.

(2)At March 31, 2013 and December 31, 2012, Brookdale percentages exclude $700 million and $692 million, respectively, of senior housing assets related to 21 senior housing facilities that Brookdale operates 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 20% and 8%, respectively, at both March 31, 2013 and December 31, 2012. For the three months ended March 31, 2013 and 2012, Brookdale percentages exclude $37 million and $35 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 31% and 11% respectively, for the three months ended March 31, 2013. Assuming that these revenues were attributable to Brookdale, the percentage of segment and total revenues for Brookdale would be 37% and 12% respectively, for the three months ended March 31, 2012.

HCR ManorCare’s summarized condensed consolidated financial information follows (in millions):

	March 31,		December 31,
	2013		2012
Real estate and other property, net	$	3,030.7	$	3,046.6
Cash and cash equivalents	157.8		120.5
Deferred income taxes	1,622.3		1,627.1
Goodwill and intangible assets, net	3,243.7		3,243.8
Other assets, net	778.0		754.5
Total assets	$	8,832.5	$	8,792.5
Debt and financing obligations	$	6,348.7	$	6,374.6
Accounts payable and accrued liabilities	1,073.7		1,019.8
Total liabilities	7,422.4		7,394.4
Redeemable preferred stock	2.1		2.1
Total equity	1,408.0		1,396.0
Total liabilities and equity	$	8,832.5	$	8,792.5

	Three Months Ended March 31,
	2013			2012
Revenues:
Revenues	$	1,068.7		$	1,041.2
Costs and expenses:
Operating, general and administrative	912.4			885.4
Depreciation and amortization	37.3			42.0
Interest expense	104.4			106.3
Total costs and expenses	1,054.1			1,033.7
Other income, net	0.7			1.7
Income before income taxes and equity incomefrom unconsolidated joint ventures	15.3			9.2
Income taxes and equity income from unconsolidated joint ventures	(3.6		)	(2.9		)
Net income	$	11.7		$	6.3

	Three Months Ended March 31,
	2013			2012
Net cash provided by operating activities	$	88.6		$	22.1
Cash flows from investing activities:
Acquisitions of property and equipment	(21.2		)	(24.9		)
Purchase of securities and other	(4.1		)	(2.2		)
Net cash used in investing activities	(25.3		)	(27.1		)
Cash flows from financing activities:
Repayments of debt and financing obligations	(26.0		)	(19.6		)
Net increase (decrease) in cash and cash equivalents	37.3			(24.6		)
Cash and cash equivalents, beginning of period	120.5			186.5
Cash and cash equivalents, end of period	$	157.8		$	161.9

To mitigate the 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.

15

Credit Enhancement Guarantee

Certain of the Company’s senior housing facilities serve as collateral for $116 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 $375 million as of March 31, 2013.

(12) 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 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 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 during the three months ended March 31, 2012 related to the original issuance costs of the preferred stock (this charge is presented as an additional preferred stock dividend in the Company’s condensed consolidated statements of income).

Common Stock

The following table lists the common stock cash dividends declared by the Company in 2013:

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
January 24	February 4	$	0.525	February 19
April 25	May 6	0.525		May 21

In October 2012, the Company completed a $979 million offering of 22 million shares of common stock at a price of $45.50, which proceeds were primarily used to fund the Blackstone JV Acquisition.

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.

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.

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

	Three Months Ended March 31,
	2013	2012
Dividend Reinvestment and Stock Purchase Plan	382	210
Conversion of DownREIT units(1)	51	36
Exercise of stock options	796	1,412
Vesting of restricted stock units(2)	17	314

(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):

	March 31,			December 31,
	2013			2012
Unrealized gains on available for sale securities	$	—		$	7,776
Unrealized losses on cash flow hedges, net	(12,860		)	(18,452		)
Supplemental Executive Retirement Plan minimum liability	(3,095		)	(3,150		)
Cumulative foreign currency translation adjustment	(649		)	(827		)
Total accumulated other comprehensive loss	$	(16,604	)	$	(14,653	)

Noncontrolling Interests

At March 31, 2013, there were four million DownREIT units outstanding in four LLCs, for which the Company is the managing member. At March 31, 2013, the carrying and fair values of these DownREIT units were $186 million and $301 million, respectively.

16

(13) 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 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, 2012 in the Company’s Annual Report on Form 10-K filed with the SEC. There were no intersegment sales or transfers during the three months ended March 31, 2013 and 2012 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 corporate assets including cash, restricted cash, accounts receivable, net, marketable equity securities, deferred financing costs and, if any, real estate held-for-sale. 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 11 for other information regarding concentrations of credit risk.

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

For the three months ended March 31, 2013:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2) (Cash NOI)
Senior housing	$	149,091	$	36,891	$	2,401	$	—	$	188,383	$	161,591	$	143,193
Post-acute/skilled	136,103		—		9,985		—		146,088		135,456		116,158
Life science	73,330		—		—		1		73,331		59,947		56,340
Medical office	87,255		—		—		442		87,697		52,959		51,671
Hospital	20,770		—		—		—		20,770		19,882		19,432
Total	$	466,549	$	36,891	$	12,386	$	443	$	516,269	$	429,835	$	386,794

For the three months ended March 31, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2) (Cash NOI)
Senior housing	$	113,500	$	36,179	$	282	$	—	$	149,961	$	128,065	$	114,648
Post-acute/skilled	133,673		—		280		—		133,953		133,473		112,848
Life science	71,830		—		—		1		71,831		58,946		59,104
Medical office	79,955		—		—		492		80,447		48,250		46,921
Hospital	19,378		—		257		—		19,635		18,448		17,893
Total	$	418,336	$	36,179	$	819	$	493	$	455,827	$	387,182	$	351,414

(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, 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 of reported net income to NOI and adjusted NOI (in thousands):

	Three Months Ended March 31,
	2013			2012
Net income	$	233,784		$	196,564
Interest income	(12,386		)	(819		)
Investment management fee income	(443		)	(493		)
Interest expense	109,351			103,752
Depreciation and amortization	104,717			85,280
General and administrative	20,744			20,089
Other income, net	(12,012		)	(436		)
Income taxes	881			(709		)
Equity income from unconsolidated joint ventures	(14,801		)	(13,675		)
Total discontinued operations	—			(2,371		)
NOI	429,835			387,182
Straight-line rents	(18,793		)	(9,927		)
DFL accretion	(24,170		)	(25,622		)
Amortization of above and below market lease intangibles, net	(78		)	(697		)
Lease termination fees	—			(148		)
NOI adjustments related to discontinued operations	—			626
Adjusted NOI	$	386,794		$	351,414

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

	March 31,			December 31,
Segments	2013			2012
Senior housing	$	7,739,727		$	7,658,612
Post-acute/skilled nursing	6,098,982			6,080,826
Life science	3,943,454			3,932,397
Medical office	2,664,053			2,661,394
Hospital	729,826			724,999
Gross segment assets	21,176,042			21,058,228
Accumulated depreciation and amortization	(2,079,778		)	(1,978,597		)
Net segment assets	19,096,264			19,079,631
Other non-segment assets	636,467			835,924
Total assets	$	19,732,731		$	19,915,555

At March 31, 2013, 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.

(14) Earnings Per Common Share

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

	Three Months Ended March 31,
	2013			2012
Numerator
Income from continuing operations	$	233,784		$	194,193
Noncontrolling interests’ share in continuing operations	(3,199		)	(3,184		)
Income from continuing operations applicable to HCP, Inc.	230,585			191,009
Preferred stock dividends	—			(17,006		)
Participating securities’ share in continuing operations	(478		)	(1,117		)
Income from continuing operations applicable to common shares	230,107			172,886
Discontinued operations	—			2,371
Net income applicable to common shares	$	230,107		$	175,257
Denominator
Basic weighted average common shares	453,651			410,018
Dilutive potential common shares	962			1,643
Diluted weighted average common shares	454,613			411,661
Basic earnings per common share
Income from continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43
Diluted earnings per common share
Income from continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43

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 closing market price of the Company’s common stock during the three months ended March 31, 2013 and 2012, 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 0.4 million and 0.5 million shares of

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common stock during the three months ended March 31, 2013 and 2012, respectively, were not included because they are anti-dilutive. Additionally, 6.0 million shares issuable upon conversion of 4.0 million DownREIT units during the three months ended March 31, 2013 were not included because they are anti-dilutive. During the three months ended March 31, 2012, 5.9 million shares issuable upon conversion of 4.2 million DownREIT units were not included because they are anti-dilutive.

(15) Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2013			2012
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	154,127		$	137,001
Income taxes paid	75			142
Capitalized interest	4,111			6,683
Supplemental schedule of non-cash investing activities:
Accrued construction costs	15,029			14,589
Supplemental schedule of non-cash financing activities:
Preferred stock redemption accrual	—			296,896
Vesting of restricted stock units	17			314
Cancellation of restricted stock	(6		)	(1		)
Conversion of non-managing member units into common stock	2,179			1,034
Mortgages and other liabilities assumed with real estate acquisitions	12,728			—
Unrealized gains on available-for-sale securities and derivatives designated as cash flow hedges, net	6,675			1,580

See additional information regarding supplemental non-cash financing activities related to the preferred stock redemption in Note 12.

(16) Variable Interest Entities

Unconsolidated Variable Interest Entities

At March 31, 2013, 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 March 31, 2013 (in thousands):

VIE Type	Maximum Loss Exposure(1)		Asset/Liability Type	Carrying Amount
VIE tenants—operating leases	$	1,397,774	Lease intangibles, net and straight-line rent receivables	$	615,655
VIE tenants—DFLs	911,051		Net investment in DFLs	911,051
Loan—senior secured	30,652		Loans receivable, net	30,652

(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 March 31, 2013, 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 (Delphis Operations, L.P.) that has been identified as a VIE (see Note 6 for additional information on the Delphis loan). 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.

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See Notes 5 and 6 for additional description of the nature, purpose and activities of the Company’s unconsolidated VIEs and interests therein.

Consolidated Variable Interest Entities

In September 2011, the Company formed a partnership in which it has a 90% ownership interest and a leasing relationship with an entity that operates 21 properties in a RIDEA structure (“RIDEA Entity”). The Company consolidated this entity as a result of the rights it acquired through the joint venture agreement with Brookdale. In the fourth quarter of 2012, upon the occurrence of a reconsideration event, it was determined that this RIDEA Entity is a VIE and that the Company is the primary beneficiary; therefore, the Company continues to consolidate this entity. The assets and liabilities of this RIDEA Entity substantially consist of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities generated from its operating activities. The assets generated by the operating activities of the RIDEA Entity may be used to settle its contractual obligations, which include lease obligations to the Company. The Company is entitled to its ownership share of the RIDEA Entity’s assets; however, it does not guarantee its liabilities (or contractual obligations) and is not liable to its general creditors.

(17) Fair Value Measurements

The following table illustrates the Company’s financial assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets. Recognized gains and losses are recorded in other income, net on the Company’s condensed consolidated statements of income. During the three months ended March 31, 2013, 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 March 31, 2013 follow (in thousands):

Financial Instrument	Fair Value			Level 2			Level 3
Currency swap asset(1)	$	2,490		$	2,490		$	—
Interest-rate swap liabilities(1)	(12,421		)	(12,421		)	—
Warrants(1)	775			—			775
	$	(9,156	)	$	(9,931	)	$	775

(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.

(18) 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. The fair values 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 values of the marketable debt securities, interest-rate and currency swap contracts as well as common stock warrants are determined based on observable and unobservable market assumptions using standardized pricing models. The fair values of the senior unsecured notes and marketable equity securities are determined utilizing market quotes.

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

	March 31, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	291,870	$	294,724	$	276,030	$	279,850
Marketable debt securities(3)	208,214		226,337		222,809		234,137
Marketable equity securities(1)	—		—		24,829		24,829
Warrants(3)	775		775		670		670
Bank line of credit(2)	14,000		14,000		—		—
Term loan(2)	208,213		208,213		222,694		222,694
Senior unsecured notes(1)	6,563,749		7,303,804		6,712,624		7,432,012
Mortgage debt(2)	1,680,792		1,763,165		1,676,544		1,771,155
Other debt(2)	78,836		78,836		81,958		81,958
Interest-rate swap assets(2)	—		—		89		89
Interest-rate swap liabilities(2)	12,421		12,421		12,699		12,699
Currency swap asset(2)	2,490		2,490		—		—
Currency swap liabilities(2)	—		—		2,641		2,641

(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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(19) Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of March 31, 2013 (dollars and GBP 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	$	(8,189	)
November 2008(3)	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	$	26,900	$	(3,603	)
July 2009(4)	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	$	13,600	$	(79	)
July 2012(4)	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	$	(549	)
July 2012(5)	June 2016	Cash Flow	$	79,600		Buy USD/Sell GBP	£	50,700	$	2,490

(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. Represents seven foreign exchange contracts to sell £7.2 million at a rate of 1.5695 on various dates between June 2013 and June 2016.

The Company uses derivative instruments to mitigate the effects of interest rate and foreign currency 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 manage the risk of fluctuations in interest and foreign currency rates related to the potential impact 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 March 31, 2013, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

On July 27, 2012, the Company entered into foreign currency swap contracts 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 9). The cash flow hedge has a fixed USD/GBP exchange rate of 1.5695 (buy $11.4 million and sell £7.2 million semi-annually) for a portion of its forecasted semi-annual cash receipts denominated in GBP. The foreign currency swap contracts mature through June 2016 (the end of the non-call period of the senior unsecured notes). The fair value of the contracts at March 31, 2013 was $2.5 million and is included in other assets, net. During the three months ended March 31, 2013, 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 discussion of the Term Loan in Note 10). 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 March 31, 2013 was a liability of $0.5 million and is included in accounts payable and accrued liabilities. During the three months ended March 31, 2013, there was no ineffective portion related to this hedge.

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At March 31, 2013, 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	$	1,623		$	(1,520	)	$	3,195		$	(3,092	)
November 2008	October 2016	464			(455		)	924			(915		)
July 2009	July 2013	16			(20		)	34			(38		)
July 2012	June 2016	3,367			(3,263		)	6,683			(6,578		)
July 2012	June 2016	(336		)	434			(721		)	820

(20) Subsequent Events

On May 2, 2013, the Company acquired approximately $165 million of debt secured by real estate.

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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 expectation 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 for the fiscal year ended December 31, 2012, 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)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)The effect on healthcare providers of the automatic spending cuts enacted by Congress (“Sequestration”) on entitlement programs, including Medicare, will, unless modified, result in future reductions in reimbursements;

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

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

(g)Changes in 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;

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

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

(j)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;

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

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

(m)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;

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

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(o)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; and

(p)Changes in the credit ratings on U.S. government debt securities or default or delay in payment by the United States of its obligations.

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

·2013 Transaction Overview

·Dividends

·Critical Accounting Policies

·Results of Operations

·Liquidity and Capital Resources

·Funds from Operations (“FFO”)

·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 March 31, 2013, our portfolio of investments, including properties in our Investment Management Platform, consisted of interests in 1,164 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 or shorter investment horizons into assets representing longer term investments with attractive risk-adjusted 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 potential disposition of properties that no longer fit our strategy.

We primarily generate revenue by leasing healthcare properties under long-term leases with fixed and/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. Operating expenses are generally related to medical office building (“MOB”) and life science leased properties and senior housing properties managed on our behalf (“RIDEA properties”). Accordingly, for such MOBs, life science facilities and RIDEA properties, we incur certain property operating expenses, such as real estate taxes, repairs and maintenance, property management fees, utilities, employee costs for resident care 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.

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2013 Transaction Overview

Investment Transactions

During the quarter ended March 31, 2013, we made investments of $96 million as follows: (i) $38 million to purchase the four remaining senior housing facilities from our previously announced Blackstone JV Acquisition; and (ii) $58 million to fund development and other capital projects, primarily in our life science, medical office and senior housing segments.

During the quarter ended March 31, 2013, we placed into service a 70,000 square feet building located in Mountain View, California that is 100% leased.

Financing Activities

On February 28, 2013, we repaid $150 million of maturing 5.625% senior unsecured notes.

Dividends

On April 25, 2013, we announced that our Board declared a quarterly common stock cash dividend of $0.525 per share. The common stock dividend will be paid on May 21, 2013 to stockholders of record as of the close of business on May 6, 2013 and represents an annualized dividend pay rate of $2.10 per share.

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 revenue 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 for the year ended December 31, 2012 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”; our critical accounting policies have not changed during 2013.

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 from continuing operations (“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 13 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.

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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 March 31, 2013 to the Three Months Ended March 31, 2012

During the fourth quarter of 2012 and first quarter of 2013, we acquired a portfolio of 133 senior housing communities (the “Blackstone JV Acquisition”, see additional information in Note 3 to the Condensed Consolidated Financial Statements). The transaction closed in two stages: (i) 129 senior housing facilities during the fourth quarter of 2012 for $1.7 billion; and (ii) four senior housing facilities during the first quarter of 2013 for $38 million. The results of operations from the acquisitions are reflected in our condensed consolidated financial statements from those respective dates.

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 924 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 2012 and that remained in operations under a consistent reporting structure through March 31, 2013. Our consolidated total property portfolio represents 1,090 and 935 properties at March 31, 2013 and 2012, respectively, and excludes properties classified as discontinued operations.

Results are as of and for the three months ended March 31, 2013 and 2012 (dollars and square feet in thousands except per capacity data):

Senior Housing

	SPP									Total Portfolio
	2013			2012			Change			2013			2012			Change
Rental revenues(1)	$	115,575		$	113,500		$	2,075		$	149,091		$	113,500		$	35,591
Resident fees and services	36,891			36,179			712			36,891			36,179			712
Total revenues	152,466			149,679			2,787			185,982			149,679			36,303
Operating expenses	(23,498		)	(20,966		)	(2,532		)	(24,391		)	(21,614		)	(2,777		)
NOI	128,968			128,713			255			161,591			128,065			33,526
Straight-line rents	(6,118		)	(7,910		)	1,792			(13,177		)	(7,910		)	(5,267		)
DFL accretion	(5,031		)	(5,149		)	118			(5,031		)	(5,149		)	118
Amortization of above and below market lease intangibles, net	(358		)	(358		)	—			(190		)	(358		)	168
Adjusted NOI	$	117,461		$	115,296		$	2,165		$	143,193		$	114,648		$	28,545
Adjusted NOI % change							1.9		%
Property count(2)	312			312						445			312
Average capacity (units)(3)	35,401			35,396						45,402			35,396
Average annual rent per unit(4)	$	13,292		$	13,056					$	12,710		$	13,056

(1)Represents rental and related revenues and income from direct financing leases (“DFLs”).

(2)From our past presentation of SPP for the three months ended March 31, 2012, we removed two senior housing properties from SPP that were sold or classified as held for sale.

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

(4)Average annual rent per unit, includes operating income from properties under a RIDEA structure that are based on NOI.

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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 a decline in additional rents, which are based on the facility’s performance.

Total Portfolio NOI and Adjusted NOI. Including the impact of our SPP, our total portfolio NOI and adjusted NOI primarily increased as a result of our Blackstone JV Acquisition.

Post-Acute/Skilled Nursing

	SPP									Total Portfolio
	2013			2012			Change			2013			2012			Change
Rental revenues(1)	$	136,103		$	133,673		$	2,430		$	136,103		$	133,673		$	2,430
Operating expenses	(146		)	(198		)	52			(647		)	(200		)	(447		)
NOI	135,957			133,475			2,482			135,456			133,473			1,983
Straight-line rents	(170		)	(163		)	(7		)	(170		)	(163		)	(7		)
DFL accretion	(19,139		)	(20,473		)	1,334			(19,139		)	(20,473		)	1,334
Amortization of above and below market lease intangibles, net	11			11			—			11			11			—
Adjusted NOI	$	116,659		$	112,850		$	3,809		$	116,158		$	112,848		$	3,310
Adjusted NOI % change							3.4		%
Property count(2)	312			312						312			312
Average capacity (beds)(3)	39,855			39,798						39,855			39,798
Average annual rent per bed	$	11,722		$	11,361					$	11,722		$	11,361

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

(2)From our past presentation of SPP for the three months ended March 31, 2012, we removed a post-acute/skilled nursing property from SPP that was sold or classified as held for sale.

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

NOI and Adjusted NOI.  SPP and total portfolio NOI and adjusted NOI primarily increased as a result of annual rent escalations from 268 post-acute/skilled nursing facilities classified as DFLs from HCR ManorCare, Inc. (see Notes 5 and 11 to the Condensed Consolidated Financial Statements for additional information regarding the net investment in DFLs and HCR ManorCare, respectively).

Life Science

	SPP									Total Portfolio
	2013			2012			Change			2013			2012			Change
Rental and related revenues	$	60,129		$	59,887		$	242		$	62,438		$	61,410		$	1,028
Tenant recoveries	10,505			10,279			226			10,892			10,420			472
Total revenues	70,634			70,166			468			73,330			71,830			1,500
Operating expenses	(11,794		)	(11,687		)	(107		)	(13,383		)	(12,884		)	(499		)
NOI	58,840			58,479			361			59,947			58,946			1,001
Straight-line rents	(3,331		)	340			(3,671		)	(3,692		)	81			(3,773		)
Amortization of above and below market lease intangibles, net	97			89			8			85			77			8
Adjusted NOI	$	55,606		$	58,908		$	(3,302	)	$	56,340		$	59,104		$	(2,764	)
Adjusted NOI % change							(5.6		)%
Property count	101			101						110			108
Average occupancy	92.7		%	90.9		%				91.4		%	88.9		%
Average occupied square feet	6,195			6,079						6,423			6,146
Average annual rent per occupied sq. ft.	$	44		$	46					$	43		$	47

NOI and Adjusted NOI.  SPP and total portfolio NOI increased primarily as a result of an increase in life science occupancy, partially offset by mark-to-market rent reductions. SPP and total portfolio adjusted NOI decreased primarily as a result of a $4 million rent payment received in February 2012 in connection with a lease amendment and mark-to-market rent reductions, partially offset by annual rent escalations and an increase in life science occupancy.

During the three months ended March 31, 2013, 183,000 square feet of new and renewal leases commenced at an average annual base rent of $33.17 per square foot compared to 105,000 square feet of expiring with an average annual base rent of $50.31 per square foot.

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Medical Office

	SPP									Total Portfolio
	2013			2012			Change			2013			2012			Change
Rental and related revenues	$	66,438		$	66,125		$	313		$	74,507		$	68,297		$	6,210
Tenant recoveries	11,231			11,545			(314		)	12,748			11,658			1,090
Total revenues	77,669			77,670			(1		)	87,255			79,955			7,300
Operating expenses	(29,446		)	(29,358		)	(88		)	(34,296		)	(31,705		)	(2,591		)
NOI	48,223			48,312			(89		)	52,959			48,250			4,709
Straight-line rents	(1,048		)	(1,315		)	267			(1,522		)	(1,359		)	(163		)
Amortization of above and below market lease intangibles, net	98			67			31			234			30			204
Adjusted NOI	$	47,273		$	47,064		$	209		$	51,671		$	46,921		$	4,750
Adjusted NOI % change							0.4		%
Property count(1)	183			183						206			186
Average occupancy	91.5		%	91.1		%				91.2		%	91.1		%
Average occupied square feet	11,591			11,508						12,915			11,844
Average annual rent per occupied sq. ft.	$	26		$	26					$	27		$	26

(1) From our past presentation of SPP for the three months ended March 31, 2012, we removed three MOBs that were placed into redevelopment in 2012 and 2013, which no longer meet our criteria for SPP as of the date they were placed into redevelopment.

SPP Portfolio NOI and Adjusted NOI.  SPP adjusted NOI increased primarily as a result of rent escalations, partially offset by a one-time rental revenue adjustment.

Total Portfolio NOI and Adjusted NOI.  In addition to the impact from our SPP, NOI and adjusted NOI increased primarily as a result of the impact of our MOB acquisitions during 2012.

During the quarter ended March 31, 2013, 340,000 square feet of new and renewal leases commenced at an average annual base rent of $24.36 per square foot compared to 580,000 square feet of expiring and terminated leases with an average annual base rent of $24.33 per square foot.

Hospital

	SPP									Total Portfolio
	2013			2012			Change			2013			2012			Change
Rental and related revenues	$	19,068		$	18,042		$	1,026		$	20,207		$	18,806		$	1,401
Tenant recoveries	563			572			(9		)	563			572			(9		)
Total revenues	19,631			18,614			1,017			20,770			19,378			1,392
Operating expenses	(887		)	(929		)	42			(888		)	(930		)	42
NOI	18,744			17,685			1,059			19,882			18,448			1,434
Straight-line rents	(90		)	(184		)	94			(232		)	(337		)	105
Amortization of above and below market lease intangibles, net	(192		)	(192		)	—			(218		)	(218		)	—
Adjusted NOI	$	18,462		$	17,309		$	1,153		$	19,432		$	17,893		$	1,539
Adjusted NOI % change							6.7		%
Property count	16			16						17			17
Average capacity (beds)(1)	2,379			2,375						2,410			2,406
Average annual rent per bed	$	32,533		$	30,723					$	33,726		$	31,300

(1) Represents capacity as reported by the respective tenants or operators for the twelve-month 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 primarily as a result of a new lease on our Plano hospital.

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Other Income and Expense Items

Interest income

Interest income increased $11.6 million to $12.4 million for the three months ended March 31, 2013. The increase was primarily the result of interest income from our mezzanine loan facility to Tandem Health Care and our Four Seasons Health Care senior unsecured notes made in 2012 (see Notes 6 and 9, respectively, to the Condensed Consolidated Financial Statements for additional information).

Interest expense

Interest expense increased $5.6 to $109.4 million for the three months ended March 31, 2013. The increase was primarily from our senior unsecured notes offerings during 2012, net of related maturities of certain senior unsecured notes during 2012 and 2013.

Our exposure to expense fluctuations related to our variable rate indebtedness is substantially mitigated by our interest rate swap contracts. For a more detailed discussion of our interest rate risk, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A.

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

	As of March 31,(1)
	2013			2012
Balance:
Fixed rate	$	8,442,891		$	7,607,626
Variable rate	54,365			48,835
Total	$	8,497,256		$	7,656,461
Percent of total debt:
Fixed rate	99		%	99		%
Variable rate	1			1
Total	100		%	100		%
Weighted average interest rate at end of period:
Fixed rate	5.24		%	5.72		%
Variable rate	1.46		%	1.44		%
Total weighted average rate	5.22		%	5.69		%

(1) Excludes $79 million and $87 million at March 31, 2013 and 2012, respectively, of other debt that represents non-interest bearing life care bonds and occupancy fee deposits at certain of our senior housing facilities, which have no scheduled maturities. At March 31, 2013, $86 million of variable-rate mortgages and £137 million ($208 million) term loan are presented as fixed-rate debt as the interest payments under such debt have been swapped (pay fixed and receive float). At March 31, 2012, $87 million of variable-rate mortgages are presented as fixed-rate debt as the interest payments under such debt have been swapped (pay fixed and receive float); the interest rates for swapped debt are presented at the swapped rates.

Depreciation and amortization expense

Depreciation and amortization expense increased $19.4 million to $104.7 million for the three months ended March 31, 2013. The increase was primarily the result of the impact of our Blackstone JV Acquisition.

General and administrative expenses

General and administrative expenses increased $0.7 million to $20.7 million for the three months ended March 31, 2013. The increase was primarily due to increases in compensation related expenses and acquisition pursuit costs, which increases were partially offset by a decrease in legal fees.

Other income, net

Other income, net increased $11.6 million to $12.0 million for the three months ended March 31, 2013. The increase was primarily the result of gains from the sale of marketable equity securities during 2013 of $11 million.

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Equity income from unconsolidated joint ventures

Equity income from unconsolidated joint ventures increased $1.1 million to $14.8 million for the three months ended March 31, 2013. The increase was primarily the result of an increase in our share of earnings from our interest in HCR ManorCare, Inc. (see Notes 7 and 11 to the Condensed Consolidated Financial Statements for additional information).

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 2013, (iii) fund capital expenditures, including tenant improvements and leasing costs, (iv) fund acquisition and development activities, and (v) make dividend distributions. During the three months ended March 31, 2013, distributions to shareholders and noncontrolling interest holders exceeded cash flows from operations by approximately $28 million that was primarily funded with available cash. We anticipate that cash flow from continuing operations over the next 12 months will be adequate to fund our business operations, debt service payments, recurring capital expenditures and cash dividends to shareholders. Capital requirements relating to maturing indebtedness, acquisitions and development activities may require funding from borrowings and/or equity and debt offerings.

Access to capital markets impacts our cost of capital and ability to refinance maturing indebtedness, as well as our ability to fund future acquisitions and development through the issuance of additional securities or secured debt. Credit ratings impact our ability to access capital and directly impact our cost of capital as well. For example, as noted below, our revolving line of credit facility accrues interest at a rate per annum equal to LIBOR plus a margin that depends upon our debt ratings. We also pay a facility fee on the entire revolving commitment that depends upon our debt ratings. As of April 25, 2013, we had a credit rating of BBB+ from Fitch, Baa1 from Moody’s and BBB+ from S&P on our senior unsecured debt securities.

Net cash provided by operating activities was $214 million and $186 million for the three months ended March 31, 2013 and 2012, respectively. The increase in operating cash flows is primarily the result of the following: (i) the impact of our investments in 2012 and 2013, (ii) assets placed in service during 2012 and 2013 and (iii) rent escalations and resets in 2012 and 2013, 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.

The following are significant investing and financing activities for the three months ended March 31, 2013:

·made investments of $88 million (development and acquisition of real estate and funding of loans);

·sold marketable equity securities for $28 million;

·paid dividends on common stock of $238 million, which were generally funded by cash provided by our operating activities; and

·repaid $150 million of senior unsecured notes.

Debt

Bank Line of Credit and Term Loan

Our $1.5 billion unsecured revolving line of credit facility (the “Facility”) matures on March 2016 and 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 April 25, 2013, the margin on the Facility was 1.075%, and the facility fee was 0.175%. The Facility also includes a feature that will allow us to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments from existing lenders or new lending institutions. At March 31, 2013, we had $14 million outstanding under the Facility.

On July 30, 2012, we entered into a credit agreement with a syndicate of banks for a £137 million ($208 million at March 31, 2013) four-year unsecured Term Loan (the “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 fixed 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.

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The 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 $9.2 billion at March 31, 2013. At March 31, 2013, we were in compliance with each of these restrictions and requirements of the Facility and Term Loan.

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 March 31, 2013, we had senior unsecured notes outstanding with an aggregate principal balance of $6.6 billion. Interest rates on the notes ranged from 1.25% to 6.98% with a weighted average effective interest rate of 5.10% and a weighted average maturity of six years at March 31, 2013. 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 March 31, 2013.

Mortgage Debt

At March 31, 2013, we had $1.7 billion in aggregate principal amount of mortgage debt outstanding that is secured by 139 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 6.13% and a weighted average maturity of three years at March 31, 2013.

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 March 31, 2013, we had $79 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”). The Life Care Bonds are refundable to the residents upon the termination of the contract or upon the successful resale of the unit.

Debt Maturities

The following table summarizes our stated debt maturities and scheduled principal repayments at March 31, 2013 (in thousands):

Year	Amount(1)
2013 (Nine months)	$	683,104
2014	667,221
2015	708,611
2016	1,414,154
2017	1,300,698
Thereafter	3,723,468
	8,497,256
(Discounts) and premiums, net	(30,502		)
	$	8,466,754

(1)Excludes $79 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 March 31, 2013 (dollars and GBP 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	$	(8,189	)
November 2008	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	$	26,900	$	(3,603	)
July 2009	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	$	13,600	$	(79	)
July 2012	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	$	(549	)
July 2012	June 2016	Cash Flow	$	79,600		Buy USD/Sell GBP	£	50,700	$	2,490

For a more detailed description of our derivative instruments, see Note 19 to the Condensed Consolidated Financial Statements and Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Equity

At March 31, 2013, we had 454 million shares of common stock outstanding. At March 31, 2013, equity totaled $10.8 billion, and our equity securities had a market value of $23 billion.

At March 31, 2013, there were a total of four million DownREIT units outstanding in four 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.

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.

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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 of 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 March 31,
	2013			2012
Net income applicable to common shares	$	230,107		$	175,257
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	104,717			85,280
Discontinued operations	—			2,996
DFL depreciation	3,429			3,050
Gain on sales of real estate	—			(2,856		)
Equity income from unconsolidated joint ventures	(14,801		)	(13,675		)
FFO from unconsolidated joint ventures	17,541			16,177
Noncontrolling interests’ and participating securities’ share in earnings	3,677			4,301
Noncontrolling interests’ and participating securities’ share in FFO	(5,141		)	(5,724		)
FFO applicable to common shares	339,529			264,806
Distributions on dilutive convertible units	3,328			3,122
Diluted FFO applicable to common shares	$	342,857		$	267,928
Diluted FFO per common share	$	0.74		$	0.64
Weighted average shares used to calculate diluted FFO per common share	460,650			417,524
Impact of adjustments to FFO:
Preferred stock redemption charge(1)	$	—		$	10,432
FFO as adjusted applicable to common shares	$	339,529		$	275,238
Distributions on dilutive convertible units and other	3,328			3,089
Diluted FFO as adjusted applicable to common shares	$	342,857		$	278,327
Diluted FFO as adjusted per common share	$	0.74		$	0.67
Weighted average shares used to calculate diluted FFO as adjusted per common share	460,650			417,524

(1) In connection with the redemption of our preferred stock, during the three months ended March 31, 2012, we incurred a redemption charge of $10.4 million related to the original issuance costs.

Off-Balance Sheet Arrangements

We own interests in certain unconsolidated joint ventures as described under Note 7 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 11 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.

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Contractual Obligations

The following table summarizes our material contractual payment obligations and commitments at March 31, 2013 (in thousands):

	Total(1)		Less than One Year		2014-2015		2016-2017		More than Five Years
Line of credit	$	14,000	$	—	$	—	$	14,000	$	—
Term loan(2)	208,213		—		—		208,213		—
Senior unsecured notes	6,587,000		400,000		887,000		1,650,000		3,650,000
Mortgage debt	1,688,043		283,104		488,832		842,639		73,468
Construction loan commitments(3)	35,259		21,272		13,987		—		—
Development commitments(4)	14,103		13,148		955		—		—
Ground and other operating leases	228,723		5,891		13,720		10,162		198,950
Interest(5)	2,402,187		267,191		718,998		527,862		888,136
Total	$	11,177,528	$	990,606	$	2,123,492	$	3,252,876	$	4,810,554

(1)	Excludes $79 million of other debt that represents Life Care Bonds that have no scheduled maturities.
(2)	Represents £137 million translated into U.S. dollars.
(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 March 31, 2013.

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. Most 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

See Note 2 to the Condensed Consolidated Financial Statements for the impact of new accounting standards. 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 19 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 $7 million. See Note 19 to the Condensed Consolidated Financial Statements for additional analysis details.

Interest Rate Risk.  At March 31, 2013, 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 $208 million (£137 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; (ii) $15 million of variable-rate mortgage debt payable (excludes $86 million of variable-rate mortgage notes that have been hedged through interest-rate swap contracts); and (iii) $14 million of variable-rate line of credit borrowings. Additionally, our exposure to market risks related to fluctuations in interest rates excludes our GBP denominated $208 million (£137 million) variable-rate Term Loan that has been hedged through interest-rate swap contracts.

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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 March 31, 2013, our annual interest expense would increase by approximately $0.3 million, or less than $0.01 per common share on a diluted basis.

Foreign Currency Risk.  At March 31, 2013, 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 9 to the Condensed Consolidated Financial Statements). Our foreign currency exchange exposure is mitigated by the forecasted interest and principal payments from our GBP denominated unsecured Term Loan (see Note 10 to the Condensed Consolidated Financial Statements for additional information) and a foreign currency swap contract for approximately 85% of the forecasted interest receipts from our senior unsecured notes through the non-call period which ends on June 15, 2016.

Market Risk.  We have investments in marketable debt securities classified as held-to-maturity, because we have the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are recorded at amortized cost and adjusted for the amortization of premiums and discounts through maturity. 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 adjusted carrying value; 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 March 31, 2013, the fair value and adjusted carrying value of marketable debt securities were $226 million and $208 million, respectively.

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 March 31, 2013. 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.

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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 for the year ended December 31, 2012.

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

(a)

None.

(b)

None.

(c)

The table below sets forth information with respect to purchases of our common stock made by us or on our behalf or by any “affiliated purchaser,” as such term is defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, as amended, during the three months ended March 31, 2013.

Period Covered	Total Number Of Shares Purchased(1)	Average Price Paid Per Share		Total Number Of Shares (Or Units) Purchased As Part Of Publicly Announced Plans Or Programs	Maximum Number (Or Approximate Dollar Value) Of Shares (Or Units) That May Yet Be Purchased Under The Plans Or Programs
January 1-31, 2013	14,630	$	47.07	—	—
February 1-28, 2013	23	46.51		—	—
Total	14,653	47.07		—	—

(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 6. Exhibits

2.2	Purchase and Sale Agreement, dated as of October 16, 2012, by and among BRE/SW Portfolio LLC, those owner entities listed on Schedule 1 thereto, HCP, Inc. and Emeritus Corporation; and First Amendment to such Purchase and Sale Agreement, by and among such parties, dated as of December 4, 2012.**
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	Amendment No. 1, dated as of April 5, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between the Company and Paul F. Gallagher (incorporated herein by reference to Exhibit 10.1 to HCP’s Current Report on Form 8-K (File No. 1-08895) filed April 5, 2013). †
10.2	Amendment No. 1, dated as of April 5, 2013, to the Employment Agreement, dated as of January 26, 2012, by and between the Company and Timothy M. Schoen (incorporated herein by reference to Exhibit 10.2 to HCP’s Current Report on Form 8-K (File No. 1-08895) filed April 5, 2013). †
10.3	Amendment No. 1, dated as of April 5, 2013, to the Employment Agreement, dated October 25, 2012, by and between the Company and James W. Mercer (incorporated herein by reference to Exhibit 10.3 to HCP’s Current Report on Form 8-K (File No. 1-08895) filed April 5, 2013). †
10.4	Seventh Amendment to Master Lease and Security Agreement, dated as of February 11, 2013, by and among the parties signatory thereto and HCR III Healthcare, LLC**
31.1	Certification by James F. Flaherty III, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(a). *

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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: May 2, 2013	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-2.2

Exhibit 2.2

EXECUTION VERSION

PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (the “Agreement”) is made and entered into as of October 16, 2012 (the “Execution Date”) by and among BRE/SW Portfolio LLC, a Delaware limited liability company (“Seller JV”), those owner entities listed on Schedule 1 (the Seller JV and each such entity, a “Seller” and, collectively, “Sellers”), HCP, Inc., a Maryland corporation (“Purchaser”), and Emeritus Corporation, a Washington corporation (“E”).

BACKGROUND

WHEREAS, Sellers own or ground lease, as applicable, those certain senior living facilities (each, a “Facility”) listed on Schedule 1(a) to the Disclosure Letter (as defined below), in each case consisting, collectively, of (x) the real property legally described in Exhibit A hereto, together with all rights, easements and interests appurtenant thereto including, but not limited to, any streets or other public ways adjacent to such real property and any water or mineral rights owned by, or leased to, Sellers (collectively, the “Land”); and (y) all buildings and other improvements located on the Land, including such listed senior living facilities, and all other structures, systems, fixtures and utilities associated with, and utilized in, the ownership and operation of such facilities (collectively, the “Improvements” and, together with the Land, the “Real Property”);

WHEREAS, Sellers desire to sell to Purchaser the Property (as hereinafter defined) and Purchaser desires to purchase the Property from Sellers, on the terms and conditions set forth in this Agreement;

WHEREAS, E is the administrative member of Seller JV which is the indirect parent of each Seller, and manages certain of the Real Property pursuant to the Current E Management Agreements (as defined herein) with certain Sellers; and

WHEREAS, concurrently with the Closing (as defined herein), Purchaser and/or Affiliates of Purchaser and E will enter into one or more lease agreements in the form attached as Exhibit B hereto pursuant to which Purchaser will lease the Real Property to E (such lease agreements, collectively, the “OpCo Lease Agreement”).

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

ARTICLE I

DEFINITIONS; INCORPORATION OF RECITALS AND EXHIBITS;
PRINCIPLES OF CONSTRUCTION

1.1          The following terms shall have the following meanings in this Agreement:

“Accounting Referee” shall have the meaning assigned to such term in Section 2.2(c) of this Agreement.

“Action” shall mean any claim, action, suit, audit, assessment, arbitration or inquiry, or any proceeding or investigation, whether judicial, arbitral, administrative or other, by or before any Governmental Entity.

“Affiliate” shall mean, with respect to a Person, any other Person that directly or indirectly Controls, is Controlled by, or is under common Control with such Person.

“Allocation Statement” shall have the meaning assigned to such term in Section 2.2(c) of this Agreement.

“Assumed Liabilities” means the obligations of Sellers (i) arising from and after the Closing Date and attributable to periods from and after the Closing Date, under the Leases, the Resident Agreements, the Contracts, the Other Current Management Agreements (to the extent such agreement has not been terminated prior to the Closing Date), the Assumed Loans, the Assumed Personal Property Debt and the Ground Leases and (ii) arising under the Entrance Fees, the Concessions of Rent and the CHOW Liabilities.

“Assumed Loan Amount” shall mean the outstanding principal amount of the Assumed Loans assumed at the Closing by Purchaser in connection with the transactions contemplated herein.

“Assumed Loans” shall mean Existing Loans assumed at the Closing by Purchaser in connection with the transactions contemplated herein.

“Assumed Loan Assignment Approval” shall mean (A) the applicable Existing Lender’s approval of the assumption of the applicable Existing Loan by Purchaser or its designee and (B) either (x) the release by the applicable Existing Lender of the Existing Guarantor under any applicable guaranties with respect to liabilities arising from and after the Closing Date or (y) execution by Purchaser of the indemnification agreement described in the last sentence of Section 3.5(b).

“Assumed Loan Existing Guaranties” shall mean the Existing Guaranties pertaining to the Assumed Loans.

“Audited Financial Statements” shall mean the financial statements listed on Schedule 1.1(a) of the Disclosure Letter and identified as being audited.

“Assumed Personal Property Debt” means those loans held by certain lenders, secured by certain Personal Property, a summary of which is set forth on Schedule 1.1(b) of the Disclosure Letter.

“Basket Amount” shall have the meaning assigned to such term in Section 11.4(b) of this Agreement.

“Business” shall mean the operation of the Facilities and other ancillary uses relating thereto as conducted at the Real Property as of the Execution Date.

2

“Business Records” shall mean, to the extent maintained by, issued to or held by Sellers:  all books and records relating to the Real Property or the Business or the ownership thereof, including all Tax Returns (excluding income tax returns), files, invoices, correspondence, studies, reports or summaries relating to any environmental matters, and other books and records relating to the ownership or maintenance of any of the Real Property or the Business, surveys, engineering or environmental reports and other studies, investigations or depictions of the Real Property or the Business.

“Buy-In Agreement” means any agreement with residents at the Real Properties providing for lump-sum payment to the owner of a Facility or its Affiliates of an amount equal to more than two months occupancy payments at the inception of residency in the Real Property, coupled with an undertaking to return to such resident or to such resident’s successors in interest a portion of such payment following such resident’s death, move-out, sale of such resident’s unit or any other event.

“Cash Deposits” shall have the meaning assigned to such term in Section 8.3 of this Agreement.

“CHOW Corrective Actions” shall mean any physical plant or other changes required to bring the Real Properties into compliance with the currently effective licensing and certification and other legal requirements if and to the extent such Real Properties are not currently in such compliance and such compliance is required as a matter of Legal Requirement, whether such costs or actions are required to be performed prior to the issuance of the Required Governmental Consents or are required as a further condition to be satisfied after such issuance.

“CHOW Liabilities” shall mean any and all costs associated with the change of ownership and/or licensure and/or certification survey process including, but not limited to, any CHOW Corrective Actions, and any fines payable in connection with the West Virginia Certificate of Need filings.

“Claims” shall have the meaning assigned to such term in Section 7.1 of this Agreement.

“Closing” shall mean the closing of the transactions contemplated by this Agreement.

“Closing Date” shall have the meaning assigned to such term in Section 2.3 of this Agreement.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Concessions of Rent” means any financial incentives in the form of future rent abatement, rent deferral or rent freezes granted to residents of the Real Properties which are still continuing in effect as of the date of this Agreement.

3

“Continuing E Manager Contracts” shall have the meaning assigned to such term in Section 12.21 of this Agreement.

“Contracts” shall mean, collectively, any and all agreements relating to the ownership, use, leasing, management, operation, development, construction, maintenance or repair of, or provision of materials, labor or services to, any Facility or any of the Real Property or any other Property, to which any Seller is party or is bound, but specifically excluding the Current Management Agreements, the Ground Leases, the Leases and the Resident Agreements.

“Control” (including the corollary terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

“Current E Management Agreements” shall mean, with respect to each Real Property, the management agreements listed opposite such Real Property in Schedule 1.1(c) of the Disclosure Letter.

“Current E Manager” shall mean the manager under the Current E Management Agreement with respect each applicable Real Property.

“Current Management Agreements” shall mean, the Current E Management Agreements and the Other Current Management Agreements.

“Current Manager” shall mean, with respect to each Real Property, the manager listed opposite such Real Property in Schedule 1.1(d) of the Disclosure Letter.

“Damages” means all actions, suits, proceedings, governmental investigations, injunctions, demands, charges, judgments, awards, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, Taxes, liens, losses, fees and expenses (including reasonable attorneys’ and accountants’ fees and expenses), equitable relief or conduct restriction; including consequential, lost profits and diminution in value, but specifically excluding punitive, treble or similar damages, except to the extent payable to a third party.

“Dataroom”  shall mean the Lightserve Corporation website data room that has been prepared by the E or CSCA and last modified on October 15, 2012, and to which access has been provided to Purchaser in connection with the execution and delivery of this Agreement.

“Deficit Amount” shall have the meaning assigned to such term in Section 11.7 of this Agreement.

“Delayed Closing Properties” shall have the meaning assigned to such term in Section 12.18 of this Agreement.

“Disclosure Letter” shall mean the disclosure letter that has been prepared by the Sellers and delivered by the Sellers to Purchaser in connection with the execution and delivery of this Agreement.

4

“E” shall have the meaning set forth in the Preamble to this Agreement.

“E Transferred Items” shall have the meaning assigned to such term in Section 12.21 of this Agreement.

“Eligible Existing Loans” shall mean the Existing Loans set forth on Exhibit C.

“Eligible Loan Documents” shall have the meaning assigned to such term in Section 3.1(d)(xvi) of this Agreement.

“Environmental Laws” shall mean all federal, state, local and foreign Legal Requirements relating to pollution or the environment, including laws relating to releases or threatened releases of or exposure to Hazardous Materials or relating to the manufacture, processing, distribution, use, treatment, storage, transport or handling of Hazardous Materials and Legal Requirements with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.

“Environmental Liabilities” shall mean any and all Damages and other liabilities arising in connection with or in any way relating to the Property, or the use, operation or ownership of the Property by Sellers or any Affiliates of Sellers, whether vested or unvested, contingent or fixed, actual or potential, that (i) arise under or relate to Environmental Laws, Hazardous Materials, or arise in connection with or relate to any matter disclosed or required to be disclosed in Schedule 1.1(e) of the Disclosure Letter and (ii) arise from or relate in any way to actions (and failures to act) occurring or conditions existing prior to the Closing Date.

“Entrance Fees” means any and all unpaid obligations to residents of Facilities pursuant to Buy-In Agreements at any of the Facilities.

“Excluded Assets” shall have the meaning assigned to such term in Section 2.1(c) of this Agreement.

“Excluded Liabilities” shall have the meaning assigned to such term in Section 2.1 of this Agreement.

“Execution Date” shall have the meaning assigned to such term in the Preamble of this Agreement.

“Existing Guaranties” shall mean those guaranty or indemnity agreements relating to the Eligible Existing Loans listed in Schedule 1.1(f) of the Disclosure Letter.

“Existing Guarantor” shall mean each of the Persons relating to the Eligible Existing Loans listed in Schedule 1.1(g) of the Disclosure Letter.

“Existing Lender” shall mean each of the lenders listed in Schedule 1.1(h) of the Disclosure Letter.

“Existing Loan” shall mean each of the loans listed in Schedule 1.1(i) of the Disclosure Letter.

5

“Existing Policies” shall have the meaning assigned to such term in Section 4.1 of this Agreement.

“Facility” shall have the meaning set forth in the Recitals to this Agreement.

“Final Adjustment Date” shall have the meaning assigned to such term in Section 8.1(f) of this Agreement.

“GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

“Governmental Entity” means any federal, state or local government, any court, administrative agency or commission or other governmental authority or instrumentality, including the Health Departments.

“Ground Lease Estoppels” shall have the meaning assigned to such term in Section 3.5(j).

“Ground Leases” means, collectively, all ground leases, subleases and similar agreements, and all other agreements and documents related thereto, pursuant to which any Seller owns or holds any interest in any Ground Leased Property.

“Ground Leased Properties” means, collectively, those Facilities which are denoted as ‘ground leased property’ on Schedule 1 of the Disclosure Letter.

“Hazardous Materials” shall mean (A) those substances included within the definitions of any one or more of the terms “hazardous substances,” “toxic pollutants,” “hazardous materials,” “toxic substances,” and “hazardous waste” or otherwise characterized as hazardous, toxic or harmful to human health or the environment, under any Environmental Law, (B) petroleum, radon gas, lead  based paint, asbestos or asbestos containing material and polychlorinated biphenyls and (C) mold or water conditions which may exist at such Property or other matters governed by any applicable federal, state or local law or statute.

“Health Departments” shall mean departments of health, and/or any Governmental Entity of each of the states where the Real Property is located which have jurisdiction over the licensing, ownership and/or operations of the Real Property as healthcare facilities.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Identified Financial Statements” shall mean the Audited Financial Statements and the Unaudited Financial Statements.

“Impermissible Defects” shall have the meaning assigned to such term in Section 4.5 of this Agreement.

6

“Improvements” shall have the meaning assigned to such term in the Recitals of this Agreement.

“Indemnification Amount” shall mean Eighty Million Dollars ($80,000,000.00).

“Indemnification Claim” shall have the meaning assigned to such term in Section 11.3 of this Agreement.

“Indemnification Funds” shall have the meaning assigned to such term in Section 11.9 of this Agreement.

“Indemnified Party” shall have the meaning assigned to such term in Section 11.3 of this Agreement.

“Indemnitor” shall mean the party required to provide indemnification pursuant to Section 11.2 of this Agreement.

“Initial Closing” shall have the meaning assigned to such term in Section 11.18 of this Agreement.

“Insurance Policies” shall have the meaning assigned to such term in Section 3.1(d)(xviii) of this Agreement.

“Intangible Personal Property” shall mean all interest of Sellers in and to the Intangibles.

“Intangibles” means any and all of the following: (i) the interest, if any, of Sellers in the identity or business of the Real Property as a going concern, including any names or trade names by which the Real Property or any part thereof may be known including names, if any, used on the date hereof in connection with the ownership and operation of the Real Property, and all registrations for such names, if any, and all intangible rights or interests associated with the Real Property, including goodwill and going concern value, and the registrations therefor; (ii) to the extent assignable or transferable, the interest, if any, of Sellers in and to each and every bond, guaranty and warranty concerning the Improvements and the Personal Property, including any roofing, air conditioning, heating, elevator or other bond, guaranty and warranty relating to the construction, maintenance or replacement of the Improvements or any portion thereof; (iii) the interest of Sellers in and to all guaranties and warranties given to Sellers that have not expired (either on a “claims made” or occurrence basis) in connection with the operation, construction, improvement, alteration or repair of the Improvements; (iv) the interest, if any, of Seller in the Permits, and (v) in each case to the extent arising or relating to periods of time after the Closing, any other non-real property and non-Personal Property interest of Sellers in the Facility or pertaining thereto and any and all interests of other intangible property of every kind and character owned or utilized by Sellers in connection with the ownership and operation of the Facilities.

“Interim Operating Agreements” shall have the meaning assigned to such term in Section 3.5(c)(iii).

7

“Inventory” shall mean, if any, building materials, supplies, hardware, carpeting and other inventory maintained in connection with Sellers’ ownership and operation of the Real Property.

“IRS” shall mean the United States Internal Revenue Service.

“Land” shall have the meaning assigned to such term in the Recitals of this Agreement.

“Leases” shall mean all written leases, subleases, license agreements or other occupancy agreements affecting the Real Property under which Seller is the landlord or lessor, and all rent, income and proceeds arising therefrom and security and other deposits made by the tenants thereunder, provided that none of the Resident Agreements, the Other Current Management Agreements or the Ground Leases shall be deemed to be Leases.

“Legal Requirements” means any statute, rule, regulation, ruling or requirement of any Governmental Entity.

“Liens” shall have the meaning assigned to such term in Section 2.1(a) of this Agreement.

“Loan Assumption Election” shall mean Purchaser’s election, at its sole discretion, to assume any of the Eligible Existing Loans.

“Management Agreement” shall have the meaning assigned to such term in the Recitals of this Agreement.

“Manager” means Current Manager or a replacement manager for the Real Property.

“Material Adverse Effect” means any event, circumstance, change or effect that (i) has had, or would reasonably be expected to have, a material adverse effect on the Properties or the operation or condition thereof, taken as a whole; provided, however, that in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been, or will be, a “Material Adverse Effect”: any event, circumstance, change, or effect relating to (a) changes in conditions in the U.S. or global economy or capital or financial markets in general, including changes in interest or exchange rates or to the senior living industry in general, (b) changes in general legal, tax, regulatory, political or business conditions that, in each case, generally affect the geographic regions in which the Real Property is located or the senior living industry, (c) changes in Legal Requirements and/or GAAP that are adopted or enacted after the date hereof or the interpretation thereof, (d) the announcement of this Agreement or the consummation of transactions contemplated hereby, including the impact thereof on relationships, contractual or otherwise, with tenants, suppliers, lenders, vendors, investors, venture partners or employees, provided that the exception in this clause (d) shall not be deemed to apply to “Material Adverse Effect” qualifications in the representations and warranties set forth in Section 3.1(b) and/or Section 3.1(c) or the conditions in Section 5.2(a) or Section 5.2(c) (in each case, solely to the extent relating to the representations and warranties in Section 3.1(b) and/or Section 3.1(c)), (e) any

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failure, in and of itself, to meet any internal projections of the Sellers or BRE/SW (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure shall be taken into account in determining whether there has been a Material Adverse Effect unless such event, circumstance, change or effect does not constitute, and is not taken into account in determining whether there has been, a Material Adverse Effect pursuant to the provisions of this definition other than this clause (e)), (f) declaration by the U.S. of a natural emergency or war, acts of war, hostilities, sabotage or terrorism, or any escalation or worsening of any such acts of war, hostilities, sabotage or terrorism threatened or underway as of the date of this Agreement, (g) earthquakes, hurricanes or other natural disasters, or (h) any action taken by Sellers at the express request or with the prior written consent of Purchaser (excluding any such consent which under the terms and provisions hereof Purchaser was not permitted to unreasonably withhold), which in the case of each of clauses (a), (b), (f), and (g) do not disproportionately affect the Properties, or the operation or condition thereof, taken as a whole, relative to similar properties owned or leased by other participants in the industries and geographic areas in which the Business operates, and (ii) will, or would reasonably be expected to, prevent or materially impair the ability of the Sellers to consummate the transactions contemplated hereby.

“Material Contracts” shall mean all Contracts, other than those Contracts which are terminable on 30 days’ notice without cost or penalty and require the payment of no more than $50,000 in any calendar year. “Material Contracts” shall not include any Existing Loans, Assumed Personal Property Debt, Resident Agreements, Current Management Agreements, Leases or Ground Leases.

“OpCo Lease Agreement” shall have the meaning assigned to such term in the Recitals of this Agreement.

“Operations Licenses” shall mean all permits, licenses, regulatory approvals, approvals, accreditations and comparable authorizations from all applicable Governmental Entities necessary or advisable for the use, operation, management and maintenance of the applicable Real Property and the conduct of the Business.

“Other Current Management Agreements” shall mean, with respect to each Real Property, the management agreement listed opposite such Real Property in Schedule 1.1(j) of the Disclosure Letter, other than any management agreement with E or its Affiliates.

“Outside Date” shall have the meaning assigned to such term in Section 10.1(b)(i) of this Agreement.

“Parties” means Purchaser, each Seller and E.

“Permits” shall mean all governmental permits, licenses, certificates and authorizations relating to the use or operation of any of the Property and/or the Business (including licenses held by any Current Manager), permits, accreditations, approvals and certificates used in or relating to the ownership, occupancy or operation of all or any part of the Property and/or the Business, including any permit, license, accreditation or other approvalnecessary under applicable federal, state or local law in order to permit the operation of the Property as healthcare facilities.

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“Permitted Exceptions” shall mean those matters set forth on Exhibit F attached hereto and made a part hereof and any other exception which shall be deemed to be a Permitted Exception in accordance with Article IV of this Agreement.

“Person” shall mean any individual, partnership, limited partnership, association, body corporate, trustee, trust, executor, administrator, legal representative, government (including any Governmental Entity) or any other entity, whether or not having a legal status.

“Personal Property” shall mean those items of equipment, any buses and other motor vehicles and other tangible personal property which are used by Sellers or Current Manager in connection with the ownership, maintenance and/or operation of the Real Property, including all Inventory, but not including any Excluded Assets.

“Per-Claim Basket” shall have the meaning assigned to such term in Section 11.4(b) of this Agreement.

“Pre-Closing Rents and Reimbursements” shall have the meaning assigned to such term in Section 8.1(e) of this Agreement.

“Prepayment Fees” shall have the meaning assigned to such term in Section 8.3 of this Agreement.

“Property” shall mean, collectively, the Real Property, the Personal Property and the Intangibles, but excluding the Excluded Assets.

“Purchase Price” shall have the meaning assigned to such term in Section 2.2 of this Agreement.

“Purchaser Indemnified Parties” shall have the meaning assigned to such term in Section 11.2(a) of this Agreement.

“Purchaser Waived Representation” shall have the meaning assigned to such term in Section 11.4(d).

“Purchaser’s Knowledge” or words of similar import shall be deemed to refer exclusively to matters within the actual, present, conscious knowledge of the Purchaser Knowledge Individual without any obligation to investigate or make inquiries of other Persons with respect to any of the representations and warranties contained in this Agreement.

“Purchaser Knowledge Individual” shall mean Timothy M. Schoen.

“Qualifying Income” shall mean income described in Sections 856(c)(2) or 856(c)(3) of the Code.

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“Real Property” shall have the meaning assigned to such term in the Recitals of this Agreement.

“REIT Requirements” shall have the meaning assigned to such term in Section 11.7 of this Agreement.

“Releasees” shall have the meaning assigned to such term in Section 7.2 of this Agreement.

“Rents” shall mean all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Sellers from any and all sources arising from or attributable to the Real Property.

“Required Filings” shall means those certain filings required to be made with Government Entities in connection with the consummation of the transactions contemplated herein, as set forth on Schedule 1.1(k) of the Disclosure Letter.

“Required Governmental Consents” shall mean those certain consents required from Governmental Entities in connection with the consummation of the transactions contemplated herein and listed on Schedule 1.1(l) of the Disclosure Letter.

“Resident Agreements” shall mean agreements for the use or occupancy of its Property by a Person or Persons residing in the Facilities, or other Persons residing at such Property, and all modifications and amendments thereto and renewals or extensions thereof (including any agreements relating to any notes, mortgages or other security granted to Sellers in connection with any Concessions of Rent).

“Resident Rents” shall have the meaning assigned to such term in Section 8.1(b)(iv) of this Agreement.

“Residents” shall mean the residents or tenants under the Resident Agreements.

“Seller Indemnified Parties” shall have the meaning assigned to such term in Section 11.2(b) of this Agreement.

“Seller JV” shall have the meaning assigned to such term in the Preamble this Agreement.

“Seller JV Rollover Investor” shall mean Sunwest Rollover Member LLC, a Delaware limited liability company which is the holder of certain ownership interests in Seller JV.

“Sellers’ Knowledge” or words of similar import shall be deemed to refer exclusively to matters within the actual knowledge of any Seller Knowledge Individual, after due inquiry of Current E Manager but without any other obligation to investigate or make inquiriesof other Persons with respect to any of the representations and warranties contained in this Agreement.

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“Seller Knowledge Individuals” shall mean David Roth and William Stein.

“Substitute Guarantor” shall have the meaning assigned to such term in Section 3.5(b) of this Agreement.

“Surveys” shall have the meaning assigned to such term in Section 4.1 of this Agreement.

“Survey Update” shall have the meaning assigned to such term in Section 4.3 of this Agreement.

“Survival Expiration Date” shall have the meaning assigned to such term in Section 11.1 of this Agreement.

“Taxes” shall mean (a) any federal, state, county, local or non-United States taxes, charges, fees, levies, or other assessments, including all net income, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, production, business, occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance or withholding taxes, charges imposed by any Governmental Entity, and including any interest and penalties (civil or criminal) on or additions to any such taxes, (b) any liability for the obligations of others with respect to any such item described in clause (a) as a result of being (or ceasing to be) a member of a group which files returns or reports or pays such items on a consolidated, combined, unitary or similar basis, or being included (or being required to be included) in any Tax Return related to such group and (c) any and all liability for the payment of any amounts as a result of any express or implied obligation to indemnify any other person, or any successor or transferee liability, in respect of any items described in clause (a) or (b) above.

“Tax Returns” means any returns, declarations, reports, claims for refund, information returns or statements filed or required to be filed with any Governmental Entity with respect to Taxes, including any Schedules or attachments thereto, and including any amendments thereof.

“Tenant Rents” shall have the meaning assigned to such term in Section 8.1(b)(v) of this Agreement.

“Tenants” shall mean the tenants under the Leases.

“Title Company” shall mean Chicago Title Insurance Company.

“Title Consent” shall have the meaning assigned to such term in Section 12.19 of this Agreement.

“Title Objection Notice” shall have the meaning assigned to such term in Section 4.4 of this Agreement.

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“Title Option” shall have the meaning assigned to such term in Section 12.19 of this Agreement.

“Title Update” shall have the meaning assigned to such term in Section 4.3 of this Agreement.

“Updates” shall have the meaning assigned to such term in Section 4.3 of this Agreement.

“Unaudited Financial Statements” shall mean the financial statements listed in Schedule 1.1(a) of the Disclosure Letter and identified as being unaudited.

1.2The Recitals set forth above and the Exhibits and Schedules attached to this Agreement and the Disclosure Letter are hereby incorporated by this reference.

1.3All references to Sections are to Sections in or to this Agreement and all references to Schedules are to Schedules of the Disclosure Letter unless otherwise specified. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term “financial statements” shall include the notes and Schedules thereto. Unless otherwise specified herein, all terms defined in this Agreement shall have the definitions given them in this Agreement when used in any certificate or other document made or delivered pursuant thereto. All uses of the word “including” shall mean including, without limitation unless the context shall indicate otherwise. Unless otherwise specified, the words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

1.4The representations, warranties, obligations and rights of each Seller, shall be those of all the parties comprising Sellers, such that each such Party shall be jointly and severally liable for all obligations of Sellers hereunder, and any consent, acceptance, amendment or waiver agreed to or given by any Seller shall be deemed binding on all Sellers.

ARTICLE II

SALE, PURCHASE PRICE, CLOSING

2.1Purchase and Sale.

(a)On the Closing Date, pursuant to the terms and subject to the conditions set forth in this Agreement, (i) Sellers shall sell and transfer to Purchaser and Purchaser shall purchase and accept from Sellers, all of Seller’s right, title and interest in and to the Property, free and clear of all mortgages, deeds of trust, pledges, hypothecations, assignments, security interests, liens, claims, encumbrances, easements or other title exceptions (collectively, “Liens”), except for Permitted Exceptions and the Assumed Liabilities, and (ii) Purchaser agrees to (A) purchase the Property from Sellers and shall accept title thereto, subject to the Permitted Exceptions and the Assumed Liabilities (which shall be assumed) and (B) assume the Assumed Liabilities.

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(b)Except as otherwise expressly set forth in this Agreement, Purchaser does not agree to assume, pay, perform, satisfy or discharge any liability or obligation of Sellers existing on the Closing Date or arising out of any transactions entered into, or any state of facts existing, or attributable to time periods, prior to the Closing Date (the “Excluded Liabilities”), and Purchaser expressly reserves any and all rights it may have against Sellers following the Closing Date on account of any Excluded Liability.  Without limiting the generality of the foregoing, the term “Excluded Liabilities” shall include the following:

(i)any liabilities or obligations of Sellers relating to employee benefits or compensation arrangements of any nature;

(ii)any liability or obligation of Sellers for breach of contract, personal injury or property damage (whether based on negligence, breach of warranty, strict liability or any other theory) caused by, arising out of or resulting from, directly or indirectly, any alleged or actual acts or omissions occurring prior to the Closing Date;

(iii)any liability or obligation of Sellers for money borrowed other than the Assumed Loans up to the Assumed Loan Amount and for the Assumed Personal Property Debt, and any accrued and unpaid interest thereon for which Purchaser receives a proration credit under Article 8; and

(iv)except as set forth in Section 8.1 or 8.2 or any other provision hereof (including provisions with respect to any Taxes for which Purchaser receives a credit against the Purchase Price under Article 8), (i) all liabilities, obligations and expenses of any kind or nature relating to Taxes of the Sellers and, with respect to the Property, for any period ending on or before the Closing Date (including, without limitation, any liabilities, obligations and expenses pursuant to any Tax sharing agreement, Tax indemnification or similar arrangement entered into on or prior to the Closing Date) and (ii) any Taxes payable by Sellers in connection with the transactions contemplated by this Agreement.

(c)Notwithstanding anything to the contrary contained in this Agreement, it is expressly agreed by the parties hereto that the following items are expressly excluded from the Property to be sold to the Purchaser (collectively, the “Excluded Assets”):

(i)Cash.  Subject to Article VIII of this Agreement, all cash on hand or on deposit in any house bank, operating account or other account maintained in connection with the ownership, operation or management of any Property, including, without limitation, any cash held in any reserves or escrow in connection with the Existing Loans and escrows or reserves maintained by the Sellers or any Current Manager pursuant to the terms of any Current Management Agreement;

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(ii)Third Party Property.  Any fixtures, personal property, equipment, trademarks or other intellectual property or other assetswhich are owned by (A) the supplier or vendor under any Contract, (B) the tenant under any Lease or Resident Agreement, (C) any employees, (D) any tenant, guest or customer of any Property, or (E) any Current Manager, but excluding (i.e., the following shall be included in Property and transferred to the Purchaser at Closing) any rights and/or interests the Sellers may have in the foregoing; and

(iii)Insurance Claims.  Any insurance claims or proceeds arising out of or relating to events that occur prior to the Closing Date, other than insurance claims and proceeds which are to be assigned to the Purchaser pursuant to the terms of Section 9.1 of this Agreement in connection with a casualty.

2.2Purchase Price.

(a)The aggregate purchase price for the transfer of the Property and the consummation of the transactions described herein is One Billion Seven Hundred Ninety Million Dollars ($1,790,000,000.00) (as such amount may be adjusted pursuant to Article VIII, clause (2) of the proviso of the last sentence of Section 4.1, the proviso of the last sentence of Section 3.4(h), and/or the last sentence of Section 12.19, the “Purchase Price”), which amount shall be allocated among the respective Real Property as provided in this Section 2.2.

(b)The Purchase Price shall be paid by Purchaser to Sellers at the Closing by wire transfer of immediately available funds.

(c)Allocation of Purchase Price.

(i)Sellers and Purchaser agree that the allocation of the Purchase Price and any Assumed Liabilities between and among each Facility will be the amounts set forth in Schedule 2.2.  Either the Sellers or Purchaser may request of the other Party modifications to Schedule 2.2 of the Disclosure Letter solely with respect to Facilities which are not marked with an asterisk on Schedule 2.2, and such other Party shall not unreasonably withhold its consent to any such modification.

(ii)Sellers and Purchaser shall negotiate in good faith to agree upon an allocation statement of the different components of Property within each Facility (the “Allocation Statement”), which Allocation Statement shall be prepared in a manner consistent with Section 1060 of the Code and the treasury regulations thereunder and which in all events will be consistent with Schedule 2.2 of the Disclosure Letter.   To the extent Sellers and Purchasers have not agreed to the Allocation Statement before the Closing Date, they shall continue to negotiate in good faith after the Closing Date.  If Sellers and Purchaser have not agreed to the Allocation Statement on or before the  30th day after the Closing Date, any disputed items shall be resolved by a firm of independent nationally recognized accountants chosen and mutually accepted by both parties (the “Accounting Referee”), whose determination shall be final and binding on the parties.  The Accounting Referee shall resolve the dispute within thirty (30) days after the item has been referred to it.

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(iii)The costs, fees and expenses of the Accounting Referee shall be borne equally by the Sellers, on the one hand, and the Purchaser, on the other hand.  Purchaser, Sellers and their Affiliates shall report, act and file Tax Returns and reports (including, but not limited to, Internal Revenue Service Form 8594) in all respects and for all purposes consistent with the Allocation Statement. Purchaser and Sellers shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as may be reasonably required to prepare such Allocation Statement.  Neither Purchaser nor Sellers shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with the Allocation Statement unless required to do so by applicable law or a good faith resolution of a Tax contest.

2.3Closing.  The closing of the sale and purchase of the Property (the “Closing”) shall occur as promptly as practicable (but in no event later than the fifth (5th) business day) after all of the conditions set forth in Article V (other than those conditions that by their terms are required to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or waived by the party entitled to the benefit of the same (such date, the “Closing Date”); provided, however, that, consistent with Section 12.18, the Parties desire to effect the Closing prior to December 31, 2012, but in any event prior to the Outside Date. The Closing shall take place at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, or at such other place as agreed to by the Parties hereto.

ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS

3.1Sellers Representations and Warranties.

Sellers hereby jointly and severally represent and warrant to Purchaser, as follows:

(a)Capacity; Authority; Validity. Each Seller is a limited liability company, duly organized, validly existing and in good standing under the laws of its state of formation. Each Seller is duly qualified to do business and is in good standing in every domestic and foreign jurisdiction in which it owns Real Property, except for failures to be so qualified or in good standing as has not had and would not reasonably be expected to have a Material Adverse Effect.  Each Seller has all necessary limited liability company power and authority to enter into this Agreement, to perform the obligations to be performed by such Seller hereunder and to consummate the transactions contemplated hereby. This Agreement, the sale of the Property, and the consummation by Sellers of the transactions contemplated hereby, have been duly and validly authorized by all necessary limited liability company action of each Seller. This Agreement has been duly executed and delivered by each Seller and constitutes the legal, valid and binding obligation of each Seller, enforceable against such Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights and by general principles of equity (whether applied in a proceeding at law or in equity).

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(b)Restrictions. Neither the execution, delivery and performance of this Agreement by Sellers nor the consummation of the transactions contemplated hereby will conflict with or result in a breach of any term or provision of, or constitute a default or violation under, accelerate performance under, or create or impose any encumbrance pursuant to (i) the organizational or governing documents of any Seller or any of its Affiliates, (ii) any agreement, contract or instrument to which any Seller or any of its Affiliates is a party, subject, in the case of the Existing Loans and the Ground Leases, to the consent of the counterparties under such agreements to the assignment and assumption of such agreement as contemplated hereby, and as otherwise set forth on Schedule 3.1(b) of the Disclosure Letter, or (iii) any Legal Requirement to which any Seller or any of its Affiliates is subject, except as to clauses (ii) and (iii), as individually or in the aggregate, has not had and would not be reasonably expected to have a Material Adverse Effect; provided, however, for purposes of this Section 3.1(b), E shall not be deemed an Affiliate of the Sellers.

(c)Consents, Filings, etc. Other than (i) any consent, filing or approval set forth on Schedule 3.1(c) of the Disclosure Letter, and (ii) such consents and approvals as have been made or obtained, the execution, delivery and performance of this Agreement and the consummation by Sellers of the transactions contemplated hereby will not require any filing with, or consent or approval from, any Governmental Entity except (a) compliance with any applicable requirements of the HSR Act, (b) Required Governmental Consents, (c) Required Filings, or (d) as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.

(d)Real Property.

(i)Interests in Property.  Other than as set forth on Schedule 3.1(d)(i), the applicable Seller is the owner of fee simple title to, or in the case of Ground Leased Properties, a valid leasehold interest in, such Seller’s Real Property identified as being owned by such Seller on Schedule 1 of the Disclosure Letter , in each case, free and clear of Liens other than any Permitted Exceptions applicable to such Seller’s Real Property.  Sellers have good and valid title to, or a valid and enforceable right to the Personal Property and the same is (or will be at Closing) free and clear of all liens, charges and encumbrances, other than the rights of any vendors or suppliers under Contracts, any Assumed Personal Property Debt and the rights, if any of any Current Manager under any applicable Current Management Agreement.

(ii)Possession.  Except for Leases of less than one thousand (1,000) square feet and the Leases set forth on Schedule 3.1(d)(ii) of the Disclosure Letter, the Other Current Management Agreements and the Resident Agreements, there are no lease, license or other occupancy agreements pursuant to which any Person is the lessee, licensee or occupant of any space at any Facility.  On the Closing Date, except for the Tenants or Residents, no Person (other than the Sellers and the Current Managers) is entitled to present or future possession of or a right to use all or any part of the Real Property.

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(iii)Provisions Affecting the Real Property. Except as set forth in Schedule 3(d)(iii) of the Disclosure Letter, as of the date hereof, to Seller’s Knowledge, there are no, pending or overtly threatened in writing condemnation or any similar proceedings relating to the Real Property or the Business.

(iv)No Notice of Violation. Except as set forth in Schedule 3(d)(iv) of the Disclosure Letter, as of the date hereof, no Seller has received any written notice of any, and to Seller’s Knowledge, there are no, material violations of any Legal Requirements pertaining to the Real Property or the Business, which in either case have not been cured except that, individually or in the aggregate, would not be reasonably expected to have a Material Adverse Effect.

(v)Environmental Matters.  Except as described on Schedule 3.1(d)(v) of the Disclosure Letter, to Seller’s Knowledge (i)  no Seller has received any written notice of any Actions pursuant to Environmental Laws arising out of violations of any Environmental Laws or any release of Hazardous Materials on the Real Property and (ii) no material remediation of Hazardous Materials is currently being performed or currently required to be performed on the Real Property.  No written claims, complaints, notices, or requests for information have been received by any Seller concerning any violation or alleged violation of any Environmental Law or any releases of Hazardous Materials on the Real Property or any portion thereof by any Governmental Entity which remains unresolved.

(vi)Real Estate Taxes.  Except as set forth in Schedule 3.1(d)(vi)(A), there is not now pending, and Sellers agree that they will not, without the prior written consent of Purchaser (which consent will not be unreasonably withheld or delayed), institute prior to the Closing Date, any material proceeding or application for a reduction in the real estate Tax assessment of the Land or the Improvements or any other relief for any Tax year.  Except as set forth in Schedule 3.1(d)(vi)(B) of the Disclosure Letter, there are no outstanding written agreements with attorneys or consultants with respect to real estate Taxes that will be binding on Purchaser or any Real Property after the Closing.

(vii)No Lawsuits. Except as set forth on Schedule 3.1(d)(vii) of the Disclosure Letter, as of the date hereof, there is no claim, lawsuit, proceeding or investigation pending or, to Sellers’ Knowledge, overtly threatened in writing, against any Seller or any of the Real Property that would prevent or materially delay consummation of the transactions contemplated hereby or that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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(viii)  Financial Statements. Sellers have delivered to Purchaser the Identified Financial Statements. The Identified Financial Statementshave been prepared in accordance with GAAP in all material respects, consistently applied (except, in the case of the Unaudited Financial Statements, for the absence of footnotes (that, if presented, would not differ materially from those included in the Audited Financial Statements) and normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be material)). The Identified Financial Statements fairly present in all material respects the result of the operations (with respect to the Unaudited Financial Statements), and the result of the operations and the assets and liabilities (with respect to all of the other Identified Financial Statements), of the Sellers on a consolidated basis with respect to the periods covered therein.  No Seller has any material liabilities or obligations, and to Seller’s Knowledge, there is no basis for any assertion against Sellers of any material liability or obligation, except those liabilities or obligations which are (a) fully reflected or adequately reserved against in the Identified Financial Statements, (b) disclosed in this Agreement or in the Schedules hereto, or (c) incurred in the ordinary course of Business consistent with past practice from and after the date of the last Audited Financial Statements.

(ix)    Tax Status. No Seller is a foreign person as defined in Section 1445 of the Code.

(x)     Permits. Except as set forth in Schedule 3.1(d)(x) of the Disclosure Letter, Sellers or the Current Managers hold all material Permits from Governmental Entities necessary for the ownership and operation of the Real Property and the Business under applicable Legal Requirements except for (i) incidental Permits which would be readily obtainable by any qualified applicant without undue burden in the event of any lapse, termination, cancellation or forfeiture thereof or (ii) those that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  Sellers, and to Seller’s Knowledge, the Current Managers, are in compliance in all material respects with the terms of the Permits covered by the preceding sentence and all such Permits are valid and in full force and effect in all material respects except to the extent any non-compliance or failure of Permits to be in full force and effect would not reasonably be expected to have a Material Adverse Effect.   Sellers have not received any written notice alleging that any Seller or Current Manager is in default under any of the Permits and to Seller’s Knowledge there does not exist a default under any of the Permits which default, individually or in the aggregate, has had or would be reasonably expected to have a Material Adverse Effect.

(xi)    Contracts.  Each Current Management Agreement and each Ground Lease and the other party thereto, is identified on Schedule 3.1(d)(xi) attached hereto, and Sellers have delivered to Purchaser true and complete copies of all Other Current Management Agreements and all Ground Leases listed on Schedule 3.1(d)(xi) of the Disclosure Letter.  Each of the Material Contracts has been entered into in the ordinary course of business.  Sellers have not received any written notice alleging that any Seller or Current

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Manager is in default under any of the Contracts and to Seller’s Knowledge there does not exist a default under any of the Contracts which default, individually or in the aggregate, has had or would be reasonably expected to have a Material Adverse Effect.

(xii)    Absence of Certain Changes.  Since September 30, 2012, Sellers, and to Seller’s Knowledge, the Current Managers, have operated the Real Property in the ordinary course, consistent with past practice, and no Seller and, to Seller’s Knowledge, no Property, has:  suffered any adverse change, event, occurrence, development or state of circumstances or facts which has had or could reasonably be expected to result in or have a Material Adverse Effect.

(xiii)   Affiliated Transactions.  Since January 1, 2011, no Seller has entered into any transaction with any of their respective Affiliates with respect to any Facility, and no such transaction is in effect, other than in the ordinary course of, and pursuant to the reasonable requirements of, the business at the Real Property and upon terms that are no less favorable than could be obtained in a comparable transaction with a Person who was not such an Affiliate.

(xiv)  Insurance Policies.  The current insurance policies that any Seller or any Current Manager maintain with respect to the Facilities are set forth on Schedule 3.1(d)(xiv) of the Disclosure Letter (such insurance policies, the “Insurance Policies”).

(xv)   Ground Leases.  Schedule 3.1(d)(xv) of the Disclosure Letter is a true, complete and correct schedule of all Ground Leases.  Seller has heretofore delivered or made available to Purchaser true, correct and complete copies of all Ground Leases (including all modifications, amendments and supplements thereto).  Each Ground Lease is valid, binding and in full force and effect, all rent and other sums and charges payable by the applicable Seller as tenant thereunder are current, no notice of default or termination under any Ground Lease is outstanding, no termination event or condition or uncured default on the part of the tenant or (to Seller’s Knowledge) Landlord exists under any Ground Lease, and no event has occurred and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default or termination event or condition on the part of tenant.

(xvi)  Existing Loans.  The Dataroom contains true, correct, and complete copies of all of the material documents and instruments (the “Eligible Loan Documents”) whether or not of record, evidencing or securing the Eligible Existing Loans.   The outstanding principal balance of each of the Eligible Existing Loans as of the date hereof is set forth on Schedule 3.1(d)(xvi) of the Disclosure Letter.  All required payments of principal and interest due and payable under the Eligible Loan Documents have been paid.  The reserves on deposit with each Eligible Existing Lender as of the date hereof are set forth in Schedule 3.1(d)(xvi) of the Disclosure Letter.  The prepayment restrictions andpenalties of the Eligible Existing Loans are set forth on Schedule 3.1(d)(xvi) of the Disclosure Letter.

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(e)No Operation of Nursing Facilities.  With the exception of the Facilities located in California, none of the Sellers: (1) currently operate or manage a skilled nursing facility, assisted living facility or other licensed health care facility; (2) hold a license to operate or manage a skilled nursing facility, assisted living facility or other licensed health care facility; or (3) participate in any federal, state or local health care benefit program or are otherwise reimbursed for services from such programs.

(f)None of the Sellers or their respective Affiliates (1) appears on the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control in the United States Department of the Treasury (“OFAC”) or the Annex to United States Executive Order 132224-Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, or (2) is a prohibited party under the laws of the United States.

(g)No Sellers have any employees.

3.2Representations and Warranties of Purchaser.  Purchaser hereby represents and warrants to Sellers and E, as follows:

(a)Capacity; Authority; Validity. Purchaser is a corporation, duly organized, validly existing and in good standing under the laws of the State of Maryland. Purchaser has all necessary power and authority to enter into this Agreement, to perform the obligations to be performed by Purchaser hereunder and to consummate the transactions contemplated hereby. This Agreement and the consummation by Purchaser of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights and by general principles of equity (whether applied in a proceeding at law or in equity).

(b)Restrictions.  Neither the execution, delivery and performance of this Agreement by Purchaser nor the consummation of the transactions contemplated hereby will conflict with or result in a material breach of any term or provision of, or constitute a default or violation under or accelerate performance under, or result in the creation or imposition of any encumbrance pursuant to, (i) the organizational or governing documents of Purchaser, (ii) any material agreement, contract or instrument to which Purchaser is a party or (iii) any Legal Requirement to which Purchaser is subject except as to clauses (ii) and (iii), as would not, individually or in the aggregate, be reasonably expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement).

(c)Consents, Filings, etc. Other than such consents, filings and approvals as are referenced in clauses (a)-(d) of Section 3.1(c) or have been made or obtained and such consents, filings and approvals set forth on Schedule 3.1(c) of the Disclosure Letter,

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and assuming the accuracy of the representations and warranties made by the Sellers hereunder, the execution and delivery of this Agreement and the performance and consummation by Purchaser of the transactions contemplated hereby will not require any filing, consent or approval from any Governmental Authority except as would not, individually or in the aggregate, be reasonably expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement.

(d)No Lawsuits. There is no lawsuit, proceeding or investigation pending or, to the Purchaser’s Knowledge, threatened, against Purchaser that would prevent or materially delay consummation of the transactions contemplated hereby.

(e)Neither Purchaser nor any of its Affiliates (1) appears on the Specially Designated Nationals and Blocked Persons List of the OFAC or the Annex to United States Executive Order 132224-Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, or (2) is a prohibited party under the laws of the United States.

3.3Representations and Warranties of E. E  hereby represents and warrants to Sellers and Purchaser, as follows:

(a)Capacity; Authority; Validity. E is a Washington corporation, duly organized, validly existing and in good standing under the laws of the State of Washington. E has all necessary power and authority to enter into this Agreement, to perform the obligations to be performed by E hereunder and to consummate the transactions contemplated hereby. This Agreement and the consummation by E of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action of E. This Agreement has been duly executed and delivered by E and constitutes the legal, valid and binding obligation of E, enforceable against E in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights and by general principles of equity (whether applied in a proceeding at law or in equity).

(b)Restrictions. Neither the execution, delivery and performance of this Agreement by E nor the consummation of the transactions contemplated hereby will conflict with or result in a breach of any term or provision of, or constitute a default or violation under or accelerate performance under, or result in or impose any encumbrance pursuant to (i) the organizational or governing documents of E, (ii) any material contract, agreement or instrument to which E is a party or (iii) any Legal Requirement to which E is subject, except, in the case of clauses (ii) and (iii), as would not, individually or in the aggregate, be reasonably expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement.

(c)Consents, Filings, etc.  Other than as described on Schedule 3.3(c) of the disclosure letter that has been prepared by E and delivered by E to Purchaser in connection with the execution and delivery of this Agreement, such consents, filings and approvals as have been made or obtained, such consents, filings and approvals as are referenced in clauses (a)-(d) of Section 3.1(c) and such consents, filings and approvals set forth on Schedule 3.1(c) of the Disclosure Letter, the execution and delivery of this Agreement and the performance and

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consummation by E of the transactions contemplated hereby will not require any filing with, or consent or approval from, any Governmental Entity, except as would not, individually or in the aggregate, be reasonably expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement.

3.4Covenants of Sellers and E. Sellers (and E, where expressly indicated) hereby covenant as follows:

(a)Operation of Property.  For the period from the Execution Date until the Closing Date, Sellers shall use commercially reasonable efforts to cause the Current Managers to (and each Seller shall itself to the extent within its control), and E agrees to cause the Current E Managers under the Current E Management Agreements (to the extent within their control) to: (i) operate the Property and the Business (A) substantially in the ordinary course consistent with past practice while maintaining present services and (B) substantially in accordance with Legal Requirements, (ii) keep on hand sufficient materials, supplies, equipment and other personal property for the efficient operation and management of the Real Property in the ordinary course consistent with past practice; (iii) except as otherwise provided in this Agreement, not amend, modify, supplement, or terminate any of the Ground Leases or allow a default by the Seller thereunder; (iv) other than as contemplated by this Agreement, not amend, modify,  or supplement (or, with respect to any Assumed Loan, allow a default under) the Eligible Loan Documents or satisfy, in whole or in part, any Eligible Existing Loan; (v) not make any material alterations to the Real Property other than repairs in the ordinary course, in each case, without obtaining Purchaser’s prior written consent, not to be unreasonably withheld; (vi) not, without the consent of the Purchaser, cancel or waive any claims or rights of material value held by Sellers and related to the Business or the Property, or settle or compromise any Action with respect to Sellers’ interest in the Business or the Property, to the extent any such cancellation, waiver, settlement or compromise would bind Purchaser or the Property after the Closing Date or would affect Purchaser in any material respect or the ability to operate the Property, or the Property’s profitability, after the Closing Date ; and (vii) not incur, assume or guarantee any material indebtedness for money borrowed that is secured by any portion of the Property, or incur any liabilities or obligations relating to the Property other than in the ordinary course of business other than those which will be satisfied or discharged prior to Closing.

(b)Solicitation. For a period commencing on the Execution Date and continuing to the earlier to occur of the Closing or the termination of this Agreement in accordance with its terms, Sellers shall not, and Sellers shall cause their respective Affiliates, officers, managers, employees, agents, representatives or any other person acting at the direction of any Seller not to, directly or indirectly, sell, assign, alienate, lien, encumber or otherwise transfer or finance the Property or any portion thereof (or solicit, negotiate, accept any offers or enter into any agreement, arrangement, letter of intent or understanding, formal or informal, to do any of the foregoing), other than Permitted Exceptions and the sale, assignment, alienation, encumbering or other transfer of any Personal Property in the ordinary course of business consistent with past practice (including for the use and consumption of inventory, office and other supplies and spare parts and the replacement of worn out, obsolete and defective tools, equipment and appliances).  For a period commencing on the Execution Date and continuing to the earlier to occur of the Closing and the termination of this Agreement in accordance with its terms, E shall not, and E shall cause its Affiliates, officers, managers, employees, agents,

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representatives or any other person acting at the direction of E, not to, directly or indirectly, sell, assign, alienate, lien, encumber or otherwise transfer or finance the Property or any portion thereof (or solicit, negotiate, accept any offers or enter into any agreement, arrangement, letter of intent or understanding, formal or informal, to do any of the foregoing), other than Permitted Exceptions and the sale, assignment, alienation, encumbering or other transfer of any Personal Property in the ordinary course of business consistent with past practice (including for the use and consumption of inventory, office and other supplies and spare parts and the replacement of worn out, obsolete and defective tools, equipment and appliances). Any transactions (or discussions regarding possible transactions) between E and any of its Affiliates and Purchaser and any of its Affiliates shall not be deemed a violation of this paragraph (b).

(c)Insurance.  Sellers shall keep continuously in force through and including the Closing Date the Insurance Policies, or insurance policies in substantially the same or better coverage and amounts.

(d)Change in Conditions.  Sellers shall, to the extent any Seller obtains knowledge thereof, and E shall, to the extent any Current E Manager obtains knowledge thereof, without prejudice to Purchaser’s rights and remedies, promptly notify Purchaser of any change in any condition with respect to the Property, or of the occurrence of any event or circumstance, that makes any representation or warranty of Sellers to Purchaser under this Agreement untrue or misleading, or any covenant of Sellers under this Agreement incapable or materially less likely to be performed, or any condition precedent incapable or materially less likely to be satisfied.  Promptly, and in any event within five (5) business days, after receipt, delivery, filing or preparation, as the case may be, Sellers shall deliver to Purchaser true and complete copies of: (i)  any reports, filings, applications, or petitions made by any Seller to any Governmental Entity with respect to any Real Property; (ii) any material written correspondence or notices to or from any Seller or Governmental Entity with respect to any Real Property (excluding tax invoices); and (iii) any other document, information, material, notice or comparable report or item that would be required to be delivered hereunder as of the Execution Date but either did not exist, was not discovered or was not in Sellers’ possession or reasonable control as of the Execution Date.

(e)SEC Requirements. At Purchaser’s request, at any time after the Execution Date, upon reasonable advance notice, Sellers shall provide to Purchaser’s designated independent auditor reasonable access to the books and records of Sellers pertaining to the Property, and all related information regarding the period for which Purchaser is required to have the  Property audited under the regulations of the Securities and Exchange Commission.

(f)Transfer of Permits.  Sellers shall use commercially reasonable efforts to, and Sellers and E shall use commercially reasonable efforts to cause the Current Managers to, transfer and assign, to the extent transferable or assignable, at Purchaser’s sole cost and expense, to Purchaser or its designee at Closing any Permit designated by Purchaser to be so transferred or assigned.  In addition Sellers shall reasonably assist Purchaser, and E shall cause Current E Managers to reasonably assist Purchaser, in its efforts to obtain the Required Governmental Consents, any replacement Permit and to make the Required Filings.

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(g)Consents. Sellers, at Purchaser’s sole cost and expense, shall use commercially reasonable efforts to assist Purchaser and E in their efforts to obtain, the Required Governmental Consents and any other consents required or necessary for the consummation of the transactions contemplated herein. In connection therewith, (a) Purchaser shall promptly provide such information and applications as are reasonably requested by the applicable Governmental Entity and have its officers and representatives attend any meetings, as reasonably requested by the applicable Governmental Entity, and (b) E shall cause the Current E Managers to reasonably cooperate and assist in such efforts.

(h)Loan Assumption Election. If Purchaser timely makes a Loan Assumption Election, Sellers shall reasonably cooperate with Purchaser in obtaining assignments of the applicable Eligible Loans including obtaining any Assumed Loan Assignment Approval. Purchaser agrees that, in connection with obtaining an Assumed Loan Assignment Approval, Sellers shall not be required to pay or commit to pay any cash or other consideration or to incur any liability in connection with obtaining such Assumed Loan Assignment Approval, except that Sellers shall be required to pay its own legal fees. With respect to the Existing Loans that are not Assumed Loans (including any Eligible Existing Loan where Purchaser has made a Loan Assumption Election but failed to obtain an Assumed Loan Assignment Approval prior to the Closing Date), Sellers shall cause such Existing Loans to be paid in full and the lien created by such Existing Loans to be discharged of record at or prior to the Closing (or, if any such lien is not so discharged but the Title Company insures over it, Sellers shall provide Purchaser with reasonably satisfactory evidence that such lien will be discharged of record promptly after the Closing); provided, however that if such prepayment in full is prohibited under the terms governing any such Existing Loan and the applicable Existing Lender refuses to waive such prohibition against prepayment, then Purchaser shall have the right to elect in its sole discretion, by written notice to Seller at any time prior to the Closing, to either (1) subject to Section 12.18, exclude the applicable Facility and all Property comprising or relating to such Facility from the transactions contemplated by this Agreement in which case (w) the Purchase Price shall be reduced by the portion of the Purchase Price allocable to such Facility, (x) such Facility and such Property shall not be transferred to Purchaser at the Closing, (y) the OpCo Lease Agreement shall not include such Facility or Property, and (z) from and after the Closing Date none of the Parties hereto shall have any claims against any other Party hereto in connection with such Facility and such Property, or (2) proceed with the acquisition of such Facility and such Property on the Closing Date as contemplated herein (provided that if Purchaser makes an election to proceed with an acquisition under this clause (2), then Purchaser shall indemnify and hold harmless the Sellers and the Existing Guarantor for all Damages suffered by Sellers and the Existing Guarantor as a result of any default under the applicable Existing Loan due to such acquisition).

(i)Access to Premises and Information.

(i)From the date hereof until the Closing Date, or the earlier termination of this Agreement, Sellers shall, and shall cause the Current Managers to, permit Purchaser, and its respective representatives to have reasonable access to the Real Properties (including for the purposes of conducting a Phase I environmental site assessment, which shall not include any monitoring or any type of sample collection), and to the Business Records as shall be

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reasonably requested to verify the accuracy of the representations and warranties contained in this Agreement, to verify that the covenants of Sellers contained in this Agreement have been completed and to determine whether the conditions set forth in Section 5.2 have been satisfied (provided, however, Seller shall not be required by this Section 3.4 to provide Purchaser, and its respective representatives with access to or to disclose information (x) that is subject to the terms of a confidentiality agreement with a third party (provided, however, that the withholding party shall use its commercially reasonable efforts to obtain the required consent of such third party to such access or disclosure), (y) the disclosure of which would violate any Legal Requirement or fiduciary duty (provided, however, that the withholding party shall use its commercially reasonable efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any Legal Requirement or fiduciary duty) or (z) that is subject to any attorney-client privilege (provided, however, that the withholding party shall use its commercially reasonable efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of attorney-client privilege); provided that in each instance in which Seller elects to withhold information described in the foregoing clauses (x), (y) and/or (z), Seller promptly notifies Purchaser that such information is being withheld); provided that in each such instance in which Purchaser intends to enter the Real Property pursuant to this Section 3.4(i)(i), (i) Purchaser notifies Sellers in writing of its intent to enter the Real Property to conduct its due diligence not less than forty-eight (48) hours prior to such entry; (ii) such entry shall be during normal business hours; (iii) the date and time period are scheduled with Sellers (which shall act reasonably in such scheduling); (iv) Sellers shall have the right to have a representative present at the time of any such discussion or entry upon the Real Property; and (v) Purchaser shall not in any event conduct any invasive testing or invasive investigation or sampling of any environmental media or building materials with respect to the Real Property.  Notwithstanding the foregoing, (A) Purchaser shall not have the right to interview the Tenants under Leases or residents under Resident Agreements or any employee without the prior written consent of Sellers not to be unreasonably withheld, conditioned or delayed and (B) Purchaser’s rights hereunder shall be subject to the terms and limitations of any Ground Lease. In the event Purchaser is granted permission to conduct its inspection Purchaser shall conduct such inspections so as to minimize interference with the Business and the use of the Real Property by any of the Tenants or Residents.  Failure of Sellers to grant Purchaser access to a Real Property due to Sellers’ obligations under or, restrictions contained in the Leases, shall not constitute a breach of this Section 3.4 or this Agreement by Sellers if Sellers are acting reasonably. Sellers shall use commercially reasonable efforts to arrange for such access.

(ii)To the extent that Purchaser damages the Property or any portion thereof, Purchaser shall repair the same at its sole cost and expense. Purchaser shall reimburse Sellers and hold Sellers and their affiliates (and each of their respective officers, directors, partners, advisors, managers, employees and agents) (collectively, the “Indemnitees”) harmless from and against all  claims for

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losses, liabilities, expenses, costs (including without limitation, reasonable attorney’s fees), damages or injuries suffered or incurred as a result of the entering upon the Real Property by Purchaser or Purchaser’s representatives or consultants or otherwise incurred in connection with Purchaser’s inspection. Purchaser shall deliver to Sellers certificates reasonably satisfactory to Sellers evidencing that Purchaser and Purchaser’s representatives carry and maintain such general liability insurance policies with such companies and in such scope and amounts as are acceptable to Sellers in their reasonable discretion.

(iii)The obligations of Purchaser under this Section 3.4(i) shall survive the Closing or the earlier termination of this Agreement.

(j)Ground Lease Estoppels. The Seller shall request and use commercially reasonable efforts to obtain an executed estoppel certificate from the landlord under each Ground Lease in substantially the same form as the applicable form attached as Exhibit D or such other form as such landlord is required or permitted to deliver under the relevant Ground Lease (each a “Ground Lease Estoppel”) (without the obligation to incur any material cost or liability in connection with such efforts or making any payments or granting any concessions under the Ground Lease and without the obligation to declare any Ground Lease in default or to initiate any proceeding thereunder).  Subject to Section 8.4, the receipt of any Ground Lease Estoppel or any matter raised in any Ground Lease Estoppel shall not be a condition to the Purchaser’s obligation to close and shall not constitute grounds to refuse to close.

3.5Covenants of Purchaser. Purchaser hereby covenants with Seller as follows:

(a)Consents. Purchaser, at Purchaser’s sole cost and expense, shall use commercially reasonable and good faith efforts to obtain the Required Governmental Consents and promptly provide such information and applications as are reasonably requested by the applicable Governmental Entity and have its officers and representatives attend any meetings, as reasonably requested by such Governmental Entity.

(b)Loan Assumption Election.  Purchaser shall have the right to make a Loan Assumption Election by notifying Seller within ten (10) Business Days of the Execution Date. If Purchaser timely makes a Loan Assumption Election, Purchaser shall diligently pursue such assignments in a commercially reasonable manner. In connection with obtaining the Assumed Loan Assignment Approval, Purchaser shall, at its sole cost and expense (other than legal fees of Sellers), use diligent efforts, in good faith, to obtain from the applicable Existing Lender the approval of one or more entities, acceptable to such Existing Lender, at its sole discretion, as a substitute guarantor in lieu of the Existing Guarantor (such person, a “Substitute Guarantor”) under each of the Assumed Loan Existing Guaranties still in effect and shall (i) cause the Substitute Guarantor to execute, as and to the extent required by the Existing Lender, replacement guaranties or indemnities and other related agreements in a form substantially similar to the applicable Existing Guaranties, with modifications reasonably required by Existing Lender and reasonably acceptable to Purchaser (provided that no such modifications shall (other than to a de minimis extent) expand the scope or amount of liability thereunder) , as applicable,

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with respect to all obligations guaranteed thereunder accruing from and after the Closing, and (ii) use diligent good faith efforts to cause Existing Guarantor to be released and discharged from any and all obligations, claims, actions, damages, judgments, settlements and liabilities, arising under the Existing Guaranties on or after the Closing Date. In connection therewith, Purchaser shall cause the Substitute Guarantor to promptly provide such information and applications as are reasonably requested by the applicable Existing Lender. If an Existing Lender does not consent to replacement of the Existing Guarantor with a Substitute Guarantor, or does not release Existing Guarantor from any and all obligations, claims, actions, damages, judgments, settlements (at Purchaser’s option) and liabilities, arising under any Existing Guaranties on or after the Closing Date, then either (x) Purchaser and Substitute Guarantor will execute in favor of Existing Guarantor an indemnification agreement reasonably and mutually acceptable to Existing Guarantor and Purchaser, indemnifying Existing Guarantor from and against all liabilities under such Existing Guaranties then in effect accruing from and after the Closing (which agreement shall survive the Closing) or (y) such Existing Loan shall (subject to the proviso clause of the last sentence of Section 3.4(h)) be repaid at Closing.

(c)Required Governmental Consents; Required Filings; CHOW Corrective Actions.

(i)Purchaser and E shall submit to the appropriate Governmental Entity completed applications with schedules and required background information in order to obtain the Required Governmental Consents and to make the Required Filings as and when due as set forth on Schedule 1.1(l) and Schedule 1.1(k) of the Disclosure Letter respectively.

(ii)Purchaser shall be solely responsible for any and all CHOW Liabilities.

(iii)With respect to the Real Properties located in California, if Purchaser and/or E has not obtained all Required Governmental Consents on or before the Closing Date, then at Closing, the applicable Seller and E shall enter into an interim sublease and services agreement in a form reasonably satisfactory to Sellers, Purchaser and E (collectively, the “Interim Operating Agreements”) and upon the execution of the Interim Operating Agreement, the Required Government Consent shall be deemed obtained.

3.6Covenants With Respect to the Related Transactions.

(a)At the Closing, each of Purchaser and E shall, and (in the case of E) shall cause any applicable Affiliates to, duly execute and deliver the OpCo Lease Agreement.

(b)At the Closing, each of E and the applicable Seller shall, or shall cause its applicable Affiliate to, duly execute and deliver such documents as reasonably necessary to effect and evidence the termination of the Current E Management Agreements.

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3.7Covenants with Respect to HSR Act.

(a)The parties shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Entity is required or advisable under the HSR Act in connection with the consummation of the transactions contemplated by this Agreement, and (ii) in seeking and obtaining any such actions or making any such filings and furnishing information required in connection therewith.  Each of the Parties will give any notices to, make any filings with, and use its commercially reasonable efforts to obtain any authorizations, consents, and approvals of Governmental Entities required under the HSR Act.  Each of the Parties will make all required filings (if any) under the HSR Act as promptly as practicable.  Purchaser shall be responsible for payment of the filing fees with regard to such filing. To the extent reasonably requested, in connection with any filing required under the HSR Act, the Parties shall have the right to review in advance, and to the extent reasonably practicable each will consult with the other on, all the information relating to the other and its respective affiliates that appears in any filing made with, or written materials submitted to, any Governmental Entity in connection with the transactions contemplated by this Agreement.  Each Party agrees to supply as promptly as practicable any additional information and documentary material that may be requested by applicable Governmental Entity pursuant to the HSR Act and to use commercially reasonable efforts to cause the expiration or termination of the applicable waiting periods under the HSR Act in order to facilitate a Closing as soon as practicable.

(b)In furtherance and not in limitation of the covenants of the Parties contained in this Section 3.7 if any objections are asserted by any Governmental Entity or any third party with respect to the transactions contemplated hereby under the HSR Act, then each of Purchaser and Seller shall use their commercially reasonable efforts to resolve any such objections so as to permit the consummation of the transactions contemplated by this Agreement.

ARTICLE IV

TITLE MATTERS

4.1Title and Survey. Purchaser acknowledges receipt of a copy of (a) the existing title policy for each Real Property as provided in the Dataroom (collectively, the “Existing Policies”) and (b) an existing survey of each Real Property as provided in the Dataroom (collectively, the “Surveys”). Purchaser acknowledges that it has had sufficient opportunity to review the Existing Policies and the Surveys, and accepts the state of facts revealed therein, and agrees that except as set forth in Schedule 4.1, in no event may any matters disclosed in the Existing Policies or the Surveys constitute Title Objections, and shall in all instances constitute Permitted Exceptions.  At the Closing, Sellers shall convey and Purchaser shall accept fee simple title to, or with respect to the Ground Leased Properties, valid leasehold interest in, the Real Property, in each case, free and clear of Liens other than Permitted Exceptions; provided, however, in the event that at Closing the Real Property is encumbered by one or more Liens which are not Permitted Exceptions and (i) Seller is not obligated to remove such Liens under Section 4.5, (ii) the Title Company will neither remove such Liens as an exception from any new or updated applicable title policy nor insure over such Liens in a manner reasonably acceptable to Purchaser, and (iii) such Liens do not have a Material Adverse Effect, then either (1) Purchaser shall accept such title to the Real Property but shall reserve its right to make a claim for breach of the representation under Section 3.1(d)(i) following the Closing in accordance with Article XI, or (2) if such Liens materially adversely affect the value or

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operations of the applicable Real Property or materially interfere with the current use thereof,  Purchaser may elect, in its sole discretion but subject to the treatment of such Facility as a Delayed Closing Property pursuant to Section 12.18, to exclude the applicable Facility and all Property comprising or relating to such Facility from the transactions contemplated by this Agreement, in which case (w) the Purchase Price shall be reduced by the portion of the Purchase Price allocable to such Facility, (x) such Facility and such Property shall not be transferred to Purchaser at the Closing, (y) the OpCo Lease Agreement shall not include such Facility or Property, and (z) from and after the Closing Date none of the Parties hereto shall have any claims against any other Party hereto in connection with such Facility and such Property.

4.2UCC Searches. Purchaser may obtain, at Purchaser’s sole cost, state and local UCC searches, fixture searches, federal and state tax liens searches, local and federal litigation searches, judgment liens searches and bankruptcy searches with respect to any Seller and such other persons or entities as Purchaser deems appropriate in such jurisdictions as Purchaser deems necessary and appropriate or the Real Property in such jurisdictions as Purchaser deems necessary and appropriate (collectively, the “Search Reports”). Purchaser shall promptly after receipt forward a copy of any Search Report to Sellers.

4.3Updated Commitment and Survey. Purchaser may order new title search reports from the Title Company (each a “Title Update”) at 50% Purchaser’s cost and 50% Sellers’ cost. Purchaser shall instruct Title Company to simultaneously deliver directly to Purchaser and Sellers copies of each Title Update (including tax and departmental searches) ordered by Purchaser or otherwise issued by Title Company, and copies of all underlying documentation referenced as an exception to the title policy as soon as available. Purchaser may order updates of any Survey or new surveys (each a “Survey Update”, and together with Title Updates and Search Reports, “Updates”) at Purchaser’s sole cost and expense, and shall instruct the surveyor to forward a copy of any Survey Update and any further updates thereof to Sellers’ attorney and the Title Company simultaneously with the issuance thereof to Purchaser.

4.4Objections. Purchaser shall have the right to deliver a written notice (a “Title Objection Notice”) to Sellers objecting to any items contained in an Update which are not Permitted Exceptions within ten (10) business days after Purchaser’s receipt of such Update (it being understood and agreed that Schedule 4.1 shall be deemed a delivery of the Title Objection Notice on the Execution Date with respect to the items set forth therein).  Failure of Purchaser to provide a Title Objection Notice within such ten (10) business day period (or to include any such matters in a timely delivered and valid Title Objection Notice) shall be deemed Purchaser’s approval of all items contained in such Update which are not Permitted Exceptions. All such items that are not objected to by Purchaser in a timely delivered and valid Title Objection Notice shall be deemed to be Permitted Exceptions.  Sellers shall use such efforts and expend such amounts as they may, in their sole judgment, deem appropriate to remove or cure prior to the Closing any title exceptions which are not Permitted Exceptions to which Purchaser properly objects in the Title Objection Notice; it being understood and agreed that causing the Title Company to insure over any such title exception in a manner reasonably acceptable to Purchaser shall be deemed a cure of such title exception.  Except as set forth herein, Sellers shall not have the obligation, however, to cure any such exceptions or pay any amounts to cure or remove the same.  Sellers shall notify Purchaser in writing within fifteen (15) days after receipt of notice from Purchaser regarding such exceptions whether Sellers elect to attempt to remove or cure any

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such exceptions, and Sellers’ failure to deliver such notice in a timely manner shall be deemed an election by Sellers not to remove or cure such exceptions. If Sellers notify Purchaser that Sellers have elected to remove or cure any such exceptions, then Sellers shall be entitled to one or more adjournments of the Closing for a period of time not to exceed forty-five (45) days in the aggregate in order to remove or cure such exceptions. If Sellers notify Purchaser that Sellers have elected not to remove or cure any such exceptions (or are deemed to have elected not to remove or cure such exceptions), and if any such exception can reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect,  then Purchaser shall notify Sellers within fifteen (15) Business Days after receipt of such notice (or date of deemed election, as applicable), whether Purchaser elects to terminate this Agreement or to proceed to Closing taking title subject to such title exceptions and waiving any claim on account of such exception. Failure of Purchaser to provide such notice in a timely manner shall be deemed an election by Purchaser to proceed to Closing taking title subject to such title exceptions and waiving any claim on account of such exception.

4.5Cure. Notwithstanding anything contained herein to the contrary, Sellers shall be obligated to cause to be either (x) released, satisfied and otherwise discharged of record (except with respect to clause (A) of this sentence) or (y) cause the Title Company to remove as an exception from any new or updated applicable title policy, or insure over in a manner reasonably acceptable to Purchaser all of the following defects which are a lien on the Real Property and are not Permitted Exceptions:  (A) a mortgage, security agreement, financing statement, or any other instrument which evidences or secures indebtedness for money borrowed by Sellers or which Sellers have assumed (for the avoidance of doubt, other than any such item related to the Assumed Loans or the Assumed Personal Property Debt), (B) a mechanics’ lien created by, through or under Sellers or any prior owners of the Real Property, (C) any other monetary liens which can be satisfied by the payment of a liquidated sum, and (D) any encumbrances (including Liens) voluntarily recorded by Sellers against the Real Property after the Execution Date and not approved by Purchaser (the items described in the preceding (A), (B), (C) and (D), the “Impermissible Defects”). Sellers shall be entitled to one or more adjournments of the Closing for a period of time not to exceed, in combination with any prior adjournments by Sellers, thirty (30) days in the aggregate in order to remove any Impermissible Defect.  Notwithstanding anything in this Agreement to the contrary, Sellers shall not be obligated to spend more than Twenty Million Dollars ($20,000,000) in the aggregate to remove any Impermissible Defects described under clauses (B) and (C) above. If Sellers breach their covenant relating to Impermissible Defects described in subclauses (A), (B) and (C) of the first sentence of this Section 4.5 (as such sentence is modified by the immediately preceding sentence), caused by Sellers or any of its Affiliates or any Person acting by, through or under any of them, and Purchaser nonetheless elects to close, Purchaser shall be entitled to a credit against the Purchase Price in an amount equal to the amount necessary to discharge of record all of such unsatisfied Impermissible Defects.

ARTICLE V

CONDITIONS PRECEDENT TO CLOSING

5.1Conditions Precedent to Sellers’ Obligations. The obligation of Sellers to consummate the transfer of the Property to Purchaser on the Closing Date is subject to thesatisfaction (or waiver by Sellers) as of the Closing of the following conditions, provided that Sellers may waive such conditions in its sole discretion:

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(a)(i) The representations and warranties made by Purchaser in Section 3.2(a) or Section 12.1 shall be true and correct in all respects when made and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date and (ii) each of the other representations and warranties made by Purchaser in this Agreement shall be true and correct when made and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date and (y) in the case of clause (ii) where the failure of such representations or warranties to be true and correct (without giving effect to any “materiality” qualifications set forth therein) does not, and would not reasonably be expected to, individually or in the aggregate, prevent or materially impair the ability of Purchaser to consummate the transactions contemplated by this Agreement before the Outside Date.

(b)Purchaser shall have performed or complied in all material respects with each obligation and covenant required by this Agreement to be performed or complied with by Purchaser on or before the Closing and which is not otherwise specifically referred to as a condition to closing in this Section 5.1.

(c)Purchaser shall have delivered to Sellers a certificate dated as of the Closing Date and signed by an executive officer of Purchaser certifying to the effect that the conditions set forth in Sections 5.1(a) and 5.1(b) have been satisfied.

(d)No order or injunction of any court or administrative agency of competent jurisdiction nor any statute, rule, regulation or executive order promulgated by any Governmental Entity of competent jurisdiction (whether temporary, preliminary or permanent) shall be in effect as of the Closing, which has the effect of making the purchase and sale of the Property or the transactions contemplated herein illegal or otherwise preventing or prohibiting the purchase and sale of the Property or the transactions contemplated herein or otherwise restraining, enjoining, preventing, prohibiting or making illegal the purchase and sale of the Property or the transactions contemplated herein.

(e)Sellers shall have received all of the documents required to be delivered by Purchaser under Section 6.2.

(f)Sellers shall have received the Purchase Price in accordance with Section 2.2 and all other amounts due to Sellers hereunder.

(g)If Purchaser makes a Loan Assumption Election, in connection therewith either (i) the Assumed Loan Assignment Approval shall have been obtained or (ii) if the condition set forth in clause (i) above cannot be satisfied by the Closing Date, the applicable Existing Loan shall be prepaid at or prior to Closing.

(h)The Required Governmental Consents listed on Schedule 1.1(l) of the Disclosure Letter to be obtained prior to Closing shall have been obtained and the Required Filings listed on Schedule 1.1(k) of the Disclosure Letter to be made prior to Closing shall have

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been made.

(i)Any waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act shall have expired or been terminated, and any approval required under the HSR Act shall have been obtained.

5.2Conditions Precedent to Purchaser’s Obligations. Purchaser acknowledges and agrees that Purchaser has completed its due diligence of the Property. However, the obligation of Purchaser to purchase the Property on the Closing Date is subject to the satisfaction (or waiver by Purchaser) as of the Closing of the following conditions, provided that Purchaser may waive such conditions in its sole discretion:

(a)(i) The representations and warranties made by Sellers in Section 3.1(a) and Section 12.1 shall be true and correct in all respects when made and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date and (ii) each of the other representations and warranties made by Sellers in this Agreement shall be true and correct when made and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date and (y) in the case of clause (ii), where the failure of such representations or warranties to be true and correct (without giving effect to any “materiality” or “Material Adverse Effect” qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b)Sellers shall have performed or complied in all material respects with each obligation and covenant required by this Agreement to be performed or complied with by Sellers on or before the Closing and which is not otherwise specifically referred to as a condition to closing in this Section 5.2.

(c)Sellers shall have delivered to Purchaser a certificate dated as of the Closing Date and signed by an executive officer of Sellers certifying to the effect that the conditions set forth in Sections 5.2(a) and 5.2(b) have been satisfied.

(d)No order or injunction of any court or administrative agency of competent jurisdiction nor any statute, rule, regulation or executive order promulgated by any Governmental Entity of competent jurisdiction (whether temporary, preliminary or permanent) shall be in effect as of the Closing, which has the effect of making the purchase and sale of the Property or the transactions contemplated herein illegal or otherwise preventing or prohibiting the purchase and sale of the Property or the transactions contemplated herein or otherwise restraining, enjoining, preventing, prohibiting or making illegal the purchase and sale of the Property or the transactions contemplated herein.

(e)Purchaser shall have received all of the documents required to be delivered by Sellers under Section 6.3.

(f)With respect to the Existing Loans that are not Assumed Loans, such Existing Loans shall have been paid in full and the lien created by such Existing Loans shall have been discharged of record concurrently with the Closing (or, if any such lien is not so discharged but the Title Company insures over it, Sellers shall have provided Purchaser withreasonably satisfactory evidence that such lien will be discharged of record promptly after the Closing).

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(g)The Required Governmental Consents listed on Schedule 1.1(l) of the Disclosure Letter to be obtained prior to Closing shall have been obtained and the Required Filings listed on Schedule 1.1(k) of the Disclosure Letter to be made prior to Closing shall have been made.

(h)The OpCo Lease Agreement shall have been executed and delivered by E and its applicable Affiliate.

(i)Any waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act shall have expired or been terminated, and any approval required under the HSR Act shall have been obtained.

(j)(i) The representations and warranties made by E in Section 3.3(a) and Section 12.1 shall be true and correct in all respects when made and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date and (ii) each of the other representations and warranties made by E in this Agreement shall be true and correct when made and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date and (y) in the case of clause (ii), where the failure of such representations or warranties to be true and correct (without giving effect to any “materiality” or “Material Adverse Effect” qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(k)E shall have performed or complied in all material respects with each obligation and covenant required by this Agreement to be performed or complied with by E on or before the Closing and which is not otherwise specifically referred to as a condition to closing in this Section 5.2.

(l)E shall have delivered to Purchaser a certificate dated as of the Closing Date and signed by an executive officer of E certifying to the effect that the conditions set forth in Sections 5.2(j) and 5.2(k) have been satisfied.

Notwithstanding anything in this Agreement to the contrary, if the representations and warranties relating to the Leases and Material Contracts set forth in Section 3.1 and the status of its tenants and contract parties thereunder (other than the Sellers) were true and correct as of the date of this Agreement, no change in circumstance or status of such tenants or contract parties (e.g. defaults, bankruptcies or other adverse matters relating to such tenants or contract parties) occurring after the date hereof shall permit the Purchaser to terminate this Agreement or constitute grounds for the Purchaser’s failure to close.

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5.3Conditions Precedent to E’s Obligations

The obligation of E to consummate the transactions contemplated by this Agreement on the Closing Date is subject to (a) the execution and delivery by Purchaser on the Closing Date of the OpCo Lease Agreement, provided that E may waive such conditions in its sole discretion, and (b) the Required Governmental Consents listed on Schedule 1.1(l) of the Disclosure Letter to be obtained prior to Closing shall have been obtained and the Required Filings listed on Schedule 1.1(k)  of the Disclosure Letter to be made prior to Closing shall have been made.

ARTICLE VI

CLOSING DELIVERIES.

6.1Mutual Deliveries. At the Closing, Purchaser and Sellers shall (or shall cause its applicable Affiliates to) deliver the following to each other or the Title Company, as applicable, (provided that where delivery of documents, signatures or funds to the other Party is required, such delivery shall be deemed satisfied if such documents or funds are delivered to Title Company to be held in escrow, provided such items are released therefrom at Closing):

(a)to the other Party, an assignment and assumption agreement substantially similar to the form attached as Exhibit H duly executed and acknowledged by each Seller and Purchaser, as applicable, (or Purchaser’s designee), pursuant to which Sellers shall transfer to Purchaser all of their right, title and interest in and Purchaser assumes all of the obligations (other than Excluded Liabilities) under the (i) Contracts, (ii) Leases, (iii) Ground Leases, (iv) Resident Agreements, (v) the transferable Permits, if any, relating to the Real Property, (vi) any Personal Property, (vii) any transferable Intangibles and (viii) the Assumed Liabilities;

(b)to the Title Company, the Tax Returns and other documents as may be required under the laws and regulations related to the applicable real property transfer taxes, if any, and any other Tax laws applicable to the transactions contemplated hereby;

(c)to the Title Company, to the extent required, such Party’s and its Affiliates’ organizational documents and resolutions evidencing its authority to close the transactions contemplated hereby; and

(d)to the other Party, one or more settlement statements reflecting the Purchase Price and all adjustments and prorations to be made thereto at the Closing pursuant to this Agreement, as agreed to among the Parties.

6.2Purchaser Deliveries At the Closing, Purchaser shall deliver the following to Sellers (provided that where delivery of documents, signatures or funds to the other Party is required, such delivery shall be deemed satisfied if such documents or funds are delivered to Title Company to be held in escrow, provided such items are released therefrom at Closing):

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(i)a duly executed certificate as contemplated by Section 5.1(c) hereof;

(ii)such other assignments, instruments of transfer, and other documents as Sellers may reasonably require in order to complete the transactions contemplated hereunder or to evidence compliance by Purchaser with the covenants, agreements, representations and warranties made by it hereunder, in each case, duly executed by Purchaser;  and

(iii)any documentation required by any Existing Lender to obtain an Assumed Loan Assignment Approval, provided that if such documentation with respect to an Existing Loan cannot be delivered by the Closing Date, such Existing Loan shall be prepaid at or prior to Closing.

6.3Sellers Deliveries.

(a)At the Closing, each Seller shall (or shall cause its applicable Affiliates to) deliver the following to Purchaser (provided that where delivery of documents, signatures or funds to the other Party is required, such delivery shall be deemed satisfied if such documents or funds are delivered to Title Company to be held in escrow, provided such items are released therefrom at Closing):

(i)duly executed deeds substantially in the form attached hereto as Exhibit I with Purchaser or Purchaser’s designee as grantee, as may be amended as reasonably required to conform such deed to the customary practice in the jurisdiction the Real Property is located and to reflect items noted in the vesting deed for such Real Property;

(ii)duly executed bills of sale for the benefit of Purchaser or Purchaser’s designee, in the form attached hereto as Exhibit J;

(iii)a duly executed certificate as contemplated by Section 5.2(c) hereof;

(iv)duly executed FIRPTA certificates of each Seller’s non-foreign status that comply with Section 1445 of the Code in the form attached hereto as Exhibit K;

(v)originals or copies of all of the Business Records in Sellers’ or its Affiliates possession or reasonable control;

(vi)keys to all locks located in the Improvements, to the extent in Sellers’ possession or reasonable control;

(vii)an owner’s title affidavit in the form attached hereto as Exhibit L with respect to each Property, subject to changes reasonably requested by the Title Company;

(viii)to the extent not previously delivered to Purchaser, originals or copies of the Ground Leases, the Leases, the Resident Agreements Contracts, and the Permits;

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(ix)all plans and specifications related to the Improvements in Sellers’ possession or reasonable control or otherwise available to Sellers; and

(x)such other assignments, instruments of transfer, and other documents as the Purchaser may reasonably require (or as may be required under applicable law) and including, without limitation, a customary and reasonably satisfactory operations transfer agreement with respect to the Facilities and the Business, in order to complete the transactions contemplated hereunder in each case, duly executed by Sellers; provided that none of the documents described in this clause (x) shall increase, other than to a de minimis extent, the liability or obligations of the Sellers.

6.4Frustration of Closing Conditions. No Party hereto may rely on the failure of any condition set forth in Sections 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was caused by such Party’s failure to use its commercially reasonable efforts to consummate the transactions contemplated hereby, as required by and subject to Section 12.17.

ARTICLE VII

7.1“As Is” Condition of Property. PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, SECTION 3.1 AND ARTICLE XI HEREOF, SELLERS HAVE NOT MADE, DO NOT MAKE AND SPECIFICALLY DISCLAIM ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE NATURE, QUALITY OR CONDITION OF THE REAL PROPERTY, INCLUDING THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE REAL PROPERTY OR THE FINANCEABILITY OF THE REAL PROPERTY, (C) THE SUITABILITY OF THE REAL PROPERTY AND BUILDINGS THEREON FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT THEREON, (D) ANY PROPOSED OR THREATENED CONDEMNATION OF ALL OR ANY PORTION OF THE REAL PROPERTY OR DESIGNATION OF ANY PORTION OF THE REAL PROPERTY AS PART OF A REDEVELOPMENT ZONE, (E) THE COMPLIANCE OF OR BY THE REAL PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES, DESIGNATIONS OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL ENTITY OR BODY, (F) THE CURRENT OR FUTURE REAL ESTATE TAX LIABILITY, ASSESSMENT OR VALUATION OF THE REAL PROPERTY, (G) THE AVAILABILITY OR NON-AVAILABILITY OR WITHDRAWAL OR REVOCATION OF ANY BENEFITS OR INCENTIVES CONFERRED BY ANY FEDERAL, STATE OR MUNICIPAL AUTHORITIES, OR (H) THE PHYSICAL CONDITION OF THE LAND AND IMPROVEMENTS INCLUDING THE STATE OF MAINTENANCE AND REPAIR THEREOF, AND SPECIFICALLY THAT EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT SELLERS HAVE NOT MADE, DO NOT MAKE AND SPECIFICALLY DISCLAIM ANY REPRESENTATIONS REGARDING SOLID WASTE, AS DEFINED BY

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THE U.S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R., PART 261, OR THE DISPOSAL OR EXISTENCE, IN OR ON THE REAL PROPERTY, OF ANY HAZARDOUS SUBSTANCE, AS DEFINED BY THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, AND APPLICABLE STATE LAWS, AND REGULATIONS PROMULGATED THEREUNDER. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLERS. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE REAL PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLERS, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, AND AS A MATERIAL INDUCEMENT TO THE SELLERS’ EXECUTION AND DELIVERY OF THIS AGREEMENT, THE SALE AND CONVEYANCE OF THE REAL PROPERTY TO PURCHASER (AND THE ACCEPTANCE THEREOF BY PURCHASER) AS PROVIDED FOR HEREIN IS ON AN “AS IS, WHERE IS” CONDITION AND BASIS WITH ALL FAULTS, AND WITHOUT ANY WRITTEN OR VERBAL REPRESENTATIONS OR WARRANTIES WHATSOEVER (INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY), WHETHER EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW. PURCHASER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT PURCHASER IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH RESPECT TO SELLERS IN CONNECTION WITH THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT; THAT PURCHASER FREELY AND FAIRLY AGREED TO THIS WAIVER AS PART OF THE NEGOTIATIONS FOR THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT; AND THAT PURCHASER IS REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THIS TRANSACTION AND PURCHASER HAS CONFERRED WITH SUCH LEGAL COUNSEL CONCERNING THIS WAIVER. THE TERMS AND PROVISIONS OF THIS ARTICLE VII SHALL SURVIVE THE CLOSING AND/OR TERMINATION OF THIS AGREEMENT.

7.2RELEASE.  EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, SECTION 11.9 HEREOF, THE PURCHASER HEREBY AGREES THAT EACH SELLER, AND EACH OF ITS PARTNERS, MEMBERS, TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, PROPERTY MANAGERS, ASSET MANAGERS, AGENTS, ATTORNEYS, AFFILIATES AND RELATED ENTITIES, HEIRS, SUCCESSORS, AND ASSIGNS (COLLECTIVELY, THE “RELEASEES”) SHALL BE, AND ARE HEREBY, FULLY AND FOREVER RELEASED AND DISCHARGED FROM ANY AND ALL LIABILITIES, LOSSES, CLAIMS (INCLUDING THIRD PARTY CLAIMS), DEMANDS, DAMAGES (OF ANY NATURE WHATSOEVER), CAUSES OF ACTION, COSTS, PENALTIES, FINES, JUDGMENTS, REASONABLE ATTORNEYS’ FEES, CONSULTANTS’ FEES AND COSTS AND EXPERTS’ FEES (COLLECTIVELY, THE “CLAIMS”) WITH RESPECT TO ANY AND ALL CLAIMS, WHETHER DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN

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OR UNFORESEEN, THAT MAY ARISE ON ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE ASSETS OR THE PROPERTY OF SUCH SELLER, INCLUDING, WITHOUT LIMITATION, THE PHYSICAL, ENVIRONMENTAL AND STRUCTURAL CONDITION OF THE PROPERTY OF SUCH SELLER OR ANY LAW OR REGULATION APPLICABLE THERETO, INCLUDING, WITHOUT LIMITATION, ANY CLAIM OR MATTER (REGARDLESS OF WHEN IT FIRST APPEARED) RELATING TO OR ARISING FROM (A) THE PRESENCE OF ANY ENVIRONMENTAL PROBLEMS, OR THE USE, PRESENCE, STORAGE, RELEASE, DISCHARGE, OR MIGRATION OF HAZARDOUS MATERIALS ON, IN, UNDER OR AROUND SUCH PROPERTY, REGARDLESS OF WHEN SUCH HAZARDOUS MATERIALS WERE FIRST INTRODUCED IN, ON OR ABOUT SUCH PROPERTY, INCLUDING, WITHOUT LIMITATION ANY RIVER SITE CLAIMS, (B) ANY PATENT OR LATENT DEFECTS OR DEFICIENCIES WITH RESPECT TO SUCH PROPERTY, (C) ANY AND ALL MATTERS RELATED TO SUCH PROPERTY OR ANY PORTION THEREOF, INCLUDING WITHOUT LIMITATION, THE CONDITION AND/OR OPERATION OF SUCH PROPERTY AND EACH PART THEREOF, AND (D) THE PRESENCE, RELEASE AND/OR REMEDIATION OF ASBESTOS AND ASBESTOS CONTAINING MATERIALS IN, ON OR ABOUT SUCH PROPERTY REGARDLESS OF WHEN SUCH ASBESTOS AND ASBESTOS CONTAINING MATERIALS WERE FIRST INTRODUCED IN, ON OR ABOUT SUCH PROPERTY; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL RELEASEES BE RELEASED FROM ANY CLAIMS ARISING PURSUANT TO THE PROVISIONS OF THIS AGREEMENT OR WITH RESPECT TO EXCLUDED LIABILITIES OR ANY SELLER’S OBLIGATIONS, IF ANY, UNDER THE CLOSING DOCUMENTS TO WHICH IT IS A PARTY. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, SECTION 11.9 HEREOF, THE PURCHASER HEREBY WAIVES AND AGREES NOT TO COMMENCE ANY ACTION, LEGAL PROCEEDING, CAUSE OF ACTION OR SUITS IN LAW OR EQUITY, OF WHATEVER KIND OR NATURE, INCLUDING, BUT NOT LIMITED TO, A PRIVATE RIGHT OF ACTION UNDER THE FEDERAL SUPERFUND LAWS, 42 U.S.C. SECTIONS 9601 ET SEQ. AND CALIFORNIA HEALTH AND SAFETY CODE SECTIONS 25300 ET SEQ. (AS SUCH LAWS AND STATUTES MAY BE AMENDED, SUPPLEMENTED OR REPLACED FROM TIME TO TIME), DIRECTLY OR INDIRECTLY, AGAINST THE RELEASEES OR THEIR AGENTS IN CONNECTION WITH THE CLAIMS DESCRIBED ABOVE.  EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, SECTION 11.9 HEREOF, IN THIS CONNECTION AND TO THE GREATEST EXTENT PERMITTED BY LAW, THE PURCHASER HEREBY AGREES, REPRESENTS AND WARRANTS THAT THE PURCHASER REALIZES AND ACKNOWLEDGES THAT FACTUAL MATTERS NOW KNOWN TO IT MAY HAVE GIVEN OR MAY HEREAFTER GIVE RISE TO CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, COSTS, LOSSES AND EXPENSES WHICH ARE PRESENTLY UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND  THE PURCHASER FURTHER AGREES, REPRESENTS AND WARRANTS THAT THE WAIVERS AND RELEASES HEREIN HAVE BEEN NEGOTIATED AND AGREED UPON IN LIGHT OF THAT REALIZATION AND THAT THE PURCHASER NEVERTHELESS HEREBY INTENDS TO RELEASE, DISCHARGE AND ACQUIT THE SELLERS FROM ANY SUCH UNKNOWN CLAIMS, DEBTS, AND CONTROVERSIES WHICH MIGHT IN ANY WAY BE INCLUDED AS A MATERIAL

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PORTION OF THE CONSIDERATION GIVEN TO THE SELLERS BY THE PURCHASER IN EXCHANGE FOR THE SELLERS’ PERFORMANCE HEREUNDER.  THE SELLERS HAVE GIVEN THE PURCHASER MATERIAL CONCESSIONS REGARDING THIS TRANSACTION IN EXCHANGE FOR THE PURCHASER AGREEING TO THE PROVISIONS OF THIS SECTION 7.2.  THE PROVISIONS OF THIS SECTION 7.2 SHALL SURVIVE THE CLOSING AND SHALL NOT BE DEEMED MERGED INTO ANY INSTRUMENT OR CONVEYANCE DELIVERED AT THE CLOSING.

NOTWITHSTANDING THE FOREGOING, THE RELEASES SET FORTH IN THIS SECTION 7.2 SHALL NOT APPLY TO ANY CLAIMS ARISING OUT OF OR IN CONNECTION WITH (I) THE ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT OR ANY AGREEMENT ENTERED INTO IN CONNECTION HEREWITH OR CONTEMPLATED HEREBY TO BE ENTERED INTO AT CLOSING, (II) EXCLUDED LIABILITIES, (III) FRAUD, OR (IV) THE OBLIGATIONS OF THE PARTIES IN RESPECT OF AGREEMENTS UNRELATED TO THE PROPERTY, THE BUSINESS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

7.3California Specific Provisions,

(a)Section 25359.7 of the California Health and Safety Code requires owners of nonresidential property who know or have reasonable cause to believe that a release of a Hazardous Material have come to be located on or beneath real property to provide written notice of that condition to a purchaser of said real property. There is a possibility that a release of Hazardous Material may have come to be located on or beneath one or more Properties.  By the Purchaser’s execution of this Agreement, the Purchaser (i) acknowledges the Purchaser’s receipt of the foregoing notice given pursuant to Section 25359.7 of the California Health and Safety Code and that it is aware of the benefits conferred to the Purchaser by Section 1542 of the California Civil Code and the risks it assumes by any waiver of the Purchaser’s benefits thereunder and (ii) as of the date hereof and as of the Closing and after receiving advice of the Purchaser’s legal counsel, waives any and all rights or remedies whatsoever, express, implied, statutory or by operation of law, the Purchaser may have against any Seller, including remedies for actual damages under Section 25359.7 of the California Health and Safety Code, arising out of or resulting from any unknown, unforeseen or unanticipated presence or releases of hazardous substances or other hazardous materials from, on or about any Property.  The foregoing shall not qualify any of the representations and warranties expressly set forth in this Agreement.

(b)The Purchaser and the Sellers acknowledge that the Sellers are required to disclose if any Property in California lies within the following natural hazardous areas or zones: (i) a special flood hazard area (any type Zone “A” or “V”) designated by the Federal Emergency Management Agency (Cal. Gov. Code §8589.3); (ii) an area of potential flooding shown on a dam failure inundation map designated pursuant to Cal. Gov. Code § 8589.5 (Cal. Gov. Code §8589.4); (iii) a very high fire hazard severity zone designated pursuant to Cal. Gov. Code § 51178 or 51179 (in which event the owner maintenance obligations of Cal. Gov. Code § 51182 would apply) (Cal. Gov. Code §51183.5); (iv) a wildland area that may contain substantial forest fire risks and hazards designated pursuant to Cal. Pub. Resources Code § 4125 (in which event (A) the property owner would be subject to maintenance requirements of Cal. Pub. Resources Code § 4291 and (B) it would not be the State’s responsibility to provide fire

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protection services to any building or structure located within the wildland area except, if applicable, pursuant to Cal. Pub. Resources Code § 4129 or pursuant to a cooperative agreement with a local agency for those purposes pursuant to Cal. Pub. Resources Code §4142) (Cal. Pub. Resources Code § 4136); (u) an earthquake fault zone (Cal. Pub. Resources Code § 2621.9); or (v) a seismic hazard zone (and, if applicable, whether a landslide zone or liquefaction zone) (Cal. Pub. Resources Code § 2694).  The Purchaser and the Sellers further acknowledge that (x) they have employed the services of a natural hazard expert (which, in such capacity is herein called “Natural Hazard Expert”) to examine the maps and other information specifically made available to public by government agencies for the purpose of enabling each of the Sellers to fulfill its disclosure obligations with respect to the natural hazards referred to the above-referenced statutory provisions, and (y) the Natural Hazard Expert has provided a report in writing to the Sellers and the Purchaser showing the results of its examination (the receipt of which is hereby acknowledged by the Sellers and the Purchaser).  As contemplated in the above-referenced statutory provisions, if an earthquake fault zone, seismic hazard zone, very high fire hazard severity zone or wildland fire area map or accompanying information is not of sufficient accuracy of scale for the Natural Hazard Expert to determine if a Property in California is within the respective natural hazard zone, then for purposes of the disclosure such Property shall be considered to lie within such natural hazard zone.  The Purchaser acknowledges and agrees that the written report prepared by the Natural Hazard Expert regarding the results of its examination fully and completely discharges the Sellers for errors or omission not within in its personal knowledge shall be deemed to apply and the Natural Hazard Expert shall be deemed to be an expert, dealing with matters within the scope of its expertise with respect to the examination and written report regarding the natural hazards referred to above.  In no event shall any Seller have any responsibility for matters not actually known to such Seller.  THESE HAZARDS MAY LIMIT THE PURCHASER’S ABILITY TO DEVELOP A PROPERTY, TO OBTAIN INSURANCE, OR TO RECEIVE ASSISTANCE AFTER A DISASTER.  THE MAPS ON WHICH THESE DISCLOSURES ARE BASED ESTIMATE WHERE NATURAL HAZARDS EXIST.  THEY ARE NOT DEFINITIVE INDICATORS OF WHETHER OR NOT A PROPERTY WILL BE AFFECTED BY A NATURAL DISASTER.  PURCHASER MAY WISH TO OBTAIN PROFESSIONAL ADVICE REGARDING THOSE HAZARDS AND OTHER HAZARDS THAT MAY AFFECT ANY OF THE PROPERTIES.

(c)        The provisions of this Section 7.3 shall survive the Closing.

ARTICLE VIII

ADJUSTMENTS

8.1          Adjustments(a)

(a)        The Purchase Price shall not be subject to adjustment except as provided in Sections 8.1, 8.3 and 8.4.

(b)        The following shall be prorated and adjusted between Sellers and Purchaser as of 11:59 p.m. Eastern Standard Time on the day immediately prior to the Closing Date on the basis of the actual number of days of the month which shall have elapsed as of the Closing Date and based upon the actual number of days in the month and a 365 day year:

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(i)    All assessments, general or special, with Sellers being responsible for any installments of assessments which are due prior to the Closing Date and Purchaser being responsible for any installments of assessments which are due on or after the Closing Date;

(ii)   All real estate Taxes on the Real Property and personal property Taxes on the Personal Property and similar Taxes levied against the Property (but, for the avoidance of doubt, excluding any income, gain or similar Taxes); provided that, to the extent a Tax is not fixed as of the Closing, proration of such Tax shall be based upon the tax rate for the preceding taxable year applied to the latest assessed valuation of the applicable Property; provided further, that Purchaser shall pay any supplemental Taxes (other than transfer taxes and sales and use taxes governed by Section 8.2) resulting from any change in ownership or reassessment occurring as of the Closing Date;

(iii)  Fuel, water, electricity, sewer, gas, telephone and other utility charges for the Real Property (including any Taxes thereon) based, to the extent practicable, on final meter readings and final invoices; provided, however, Sellers shall be entitled to a refund from the applicable utility company of all deposits held by utility companies and if retained by such utility company with respect to the Property, then Sellers shall be entitled to a credit equal to such deposit;

(iv)  all rental and similar payments (other than Entrance Fees) received from any Tenant under any Lease (“Tenant Rents”);

(v)   all rental and similar payments received from any Resident under any Resident Agreement (“Resident Rents”);

(vi)  all rental payments required to be made by any Seller under any Ground Lease;

(vii) all fees and other amounts payable to the Current Managers or Sellers under the Current Management Agreements which are not terminated at or prior to the Closing and without duplication of any other adjustments in this Section 8.1;

(viii)prepaid fees for Permits assigned to Purchaser at the Closing;

(ix)  any amounts prepaid by Sellers under the Contracts with respect to any periods after the Closing Date;

(x)   amounts owed under the Assumed Personal Property Debt.

(xi)  any dues, fees, common charges, maintenance fees relating to any homeowners associations, planned unit developments andreciprocal easement agreements, and any other expenses pertaining to the Property; and

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(xii) Such other items as are customarily apportioned in real estate closings of similar transactions except to the extent otherwise specifically provided in this Agreement;

(c)        There shall be no adjustment to the Purchase Price on account of (1) CHOW Liabilities, (2) Concessions of Rent, and (3) any reserves required to be funded or maintained by Purchaser with respect to the Facilities as a Continuing Care Retirement Community or in connection with the Permits, and any costs or expenses relating to the foregoing shall be assumed by and be the sole responsibility of Purchaser.

(d)        There shall be no adjustment to the Purchase Price on account of cash maintained by Seller or Current Manager with respect to each Property through the Closing Date, and Sellers shall be entitled to retain or receive all such cash.

(e)        Seller shall retain its right, title and interest in and to all unpaid accounts receivable with respect to the Properties (including any Tenant Rents, Resident Rents and payments owed to Sellers under the Other Current Management Agreements, as applicable) which relate to the period prior to the Closing Date and any amount received by Seller or Purchaser in reimbursement of Medicaid, Medicare or VA services attributable to periods prior to the Closing Date (collectively the “Pre-Closing Rents and Reimbursements”).  On the Closing Date, with respect to Tenant Rents and Resident Rents, Sellers shall provide Purchaser with a schedule setting forth by Property and by Tenant or Resident, as applicable their outstanding accounts receivable as of the Closing Date and showing dates of service related to each such outstanding account receivable.  Sellers shall be entitled to retain any amounts received by Seller or Current Manager with respect to Pre-Closing Rents and Reimbursements and Purchaser and Purchaser’s tenant shall be required to promptly pay to Sellers any Pre-Closing Rents and Reimbursements received on behalf of Purchaser or E, in its capacity as the tenant of the Facilities after the Closing.  Until the Final Adjustment Date Purchaser shall provide to Seller on a quarterly basis to enable Seller to track Purchaser’s obligations under this Section 8.1(e), (i) a schedule setting forth by Property and by Resident the Resident’s outstanding accounts receivable; (ii) a schedule setting forth by Property and by each Tenant, the Tenant’s outstanding accounts receivable; and (iii) a rent roll for each Property. Seller shall use such information solely for the purpose set forth in this Section 8.1(e) and for no other purpose.  Until the Final Adjustment Date, Seller shall provide to Purchaser on a quarterly basis a written accounting of the payments it has received under this Section 8.1(e).

(f)        If any errors or omissions in computing the apportionments under Section 8.1 shall be discovered, Sellers and Purchaser shall promptly make appropriate adjusting payments to each other to correct such errors or omissions.  All amounts owing from or to Sellers, or from or to Purchaser, that require adjustment after the Closing Date shall be settled within 180 days after the Closing Date (the “Final Adjustment Date”).  Purchaser and Sellers shall each make such records available for inspection by the other party as are reasonable to demonstrate the accuracy of any adjustments.  In connection with determining the amount of adjustments payable on the Final Adjustment Date under this Section 8.1(f), all such amountsshall be aggregated together and the party responsible for the net payment as a result of such adjustments shall make such payment within two (2) business days of the Final Adjustment Date.

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(g)        Sellers, in their sole discretion and at their sole expense, (i) may prosecute an appeal of real or personal property Taxes for any taxable year up to and including the taxable year in which the Closing occurs and (ii) may take any related action which Sellers deem appropriate in connection with such appeal. Purchaser shall reasonably cooperate with Sellers in connection with such appeal and the collection of any refund of real or personal property Taxes paid. Any such refunds shall be distributed and promptly paid over by the Party receiving the refund as follows: first, to reimburse Sellers and Purchaser for all reasonable costs incurred in connection with the appeal; second, to Sellers to the extent such refund relates to periods prior to the Closing Date; and third, to Purchaser to the extent such refund relates to the Closing Date or periods thereafter.  To the extent any such appeal relates to the Closing Date or periods thereafter, Purchaser shall have the right to participate in such appeal at its sole cost and expense.  Notwithstanding anything in this Section 8.1(g) to the contrary, Sellers may not take any action pursuant to this Section 8.1(g) that could reasonably be expected to increase the Tax liability of Purchaser with respect to the Property to the extent not payable by Sellers pursuant to this Agreement without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, conditioned, or delayed.

8.2          Transfer and Sales Taxes; Transaction Costs. All transfer, sales and use taxes imposed with respect to the transactions contemplated by this Agreement, and the costs and expenses of preparing and filing the reports and/or Tax Returns with respect thereto, shall be paid 50% by Sellers and 50% by Purchaser. Sellers shall prepare and timely file all necessary Tax Returns with respect to the foregoing, and Purchaser shall reasonably cooperate with Sellers as necessary for Sellers to prepare and file such Tax Returns. The costs and expenses of title insurance (but only with respect to “standard coverage” as opposed to “extended coverage” endorsements) and Title Updates shall be paid 50% by Sellers and 50% by Purchaser and Purchaser shall pay all other title insurance premiums and costs. Except as otherwise expressly provided in this Agreement, each of Sellers and Purchaser will pay its own costs and expenses (including attorneys’ fees) in connection with this Agreement and the transactions contemplated hereby.  Each Party shall indemnify and hold harmless the other Party from any liability for its failure to pay any Taxes as provided in this Section 8.2, which indemnity shall survive the Closing.

8.3          Assumed Loans, other Existing Loan and Entrance Fees. Purchaser shall receive a credit against the Purchase Price in the amount of (x) the Assumed Loan Amount at the Closing and (y) all Entrance Fees (less the restricted cash deposits currently maintained in respect thereof, provided that at Closing Seller shall transfer all of its right, title and interest in and to such restricted cash deposits (“Cash Deposits”) to Purchaser or its designee). Sellers shall be given a credit for all escrows and reserves held under the Assumed Loans, the rights to which shall be assigned to Purchaser. Purchaser shall be given a credit for any accrued and unpaid interest, and any due but unpaid amounts, under the Assumed Loans related to periods prior to the Closing Date.  Sellers shall be given a credit for all prepayment fees, premiums, penalties, exit fees, yield maintenance payments or other charges incurred in connection with the prepayment of the Existing Loans which are not Assumed Loans, but only to the extent such charges are not due to a default by the applicable Sellers thereunder (the “Prepayment Fees”).

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To the extent Sellers breach their obligation under the second sentence of Section 3.4(h) to pay in full an Existing Loan (which is not an Assumed Loan) and cause the lien created thereby to be discharged of record at or prior to the Closing (or, if any such lien is not so discharged but the Title Company insures over it, Sellers shall provide Purchaser with reasonably satisfactory evidence that such lien will be discharged of record promptly after the Closing), or their obligation under clause (vii) of Section 3.4(a) with respect to either secured indebtedness or liabilities or obligations relating to the Property and outside of the ordinary course of business (but only to the extent Purchaser or the Property would be bound by such liabilities or obligations after the Closing), Purchaser shall receive a credit against the Purchase Price in the amount necessary to pay such Existing Loan in full (less any Prepayment Fees) and cause such lien to be discharged of record or satisfy and discharge such secured indebtedness, liabilities or obligations, as applicable.

8.4          Excluded Ground Leases.  Notwithstanding any other provision of this Agreement to the contrary, but subject to Section 12.18, in the event that either (a) a Ground Lease Estoppel is not obtained prior to Closing, (b) such Ground Lease Estoppel is obtained but indicates a breach of any of the representations set forth in Section 3.1(d)(v), or (c) such Ground Lease Estoppel is obtained but does not include a consent to the assignment of the applicable Ground Lease to the Purchaser (to the extent the applicable ground lessor has such consent right) or a waiver of the applicable ground lessor’s right of first refusal, purchase option and/or termination right with respect to an assignment of such Ground Lease (to the extent the applicable ground lessor has such right of first refusal, purchase option and/or termination right), then Purchaser shall have the right to elect in its sole discretion, by written notice to Seller at any time prior to the Closing, to either (1) exclude from the transactions contemplated by this Agreement the applicable Facility and all Property comprising or relating to such Facility, in which case (w) the Purchase Price shall be reduced by the portion of the Purchase Price allocable to such Facility, (x) such Facility and such Property shall not be transferred to Purchaser at the Closing, (y) the OpCo Lease Agreement shall not include such Facility or Property, and (z) from and after the Closing Date none of the Parties hereto shall have any claims against any other Party hereto in connection with such Facility and such Property, (2) acquire all of the direct equity interests in the Seller that owns such Facility and such Property, in which event the Closing deliveries described in Article VI shall be appropriately modified, in a manner reasonably satisfactory to Sellers and Purchaser, to document and reflect such acquisition, or (3) proceed with the acquisition of such Facility and such Property on the Closing Date as contemplated herein (provided that if Purchaser makes an election to proceed with an acquisition under this clause (3), then Purchaser shall indemnify and hold harmless the Sellers for all Damages suffered by Sellers as a result of any default under the applicable Ground Lease due to such acquisition).

ARTICLE IX

CASUALTY; CONDEMNATION; ENVIRONMENTAL LIABILITY

9.1          No Purchase Price Adjustment.  If prior to Closing, any of the Improvements are damaged by any casualty, any Seller learns of any actual or threatened taking in condemnation or by eminent domain (or a sale in lieu thereof) of all or any portion of the Real Property, or Seller learns of any Environmental Liability, such Seller shall promptly give

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Purchaser written notice of such occurrence and with respect to a casualty, give Purchaser access to the Real Property to examine the casualty. Notwithstanding anything to the contrary herein, in the event of any casualty or condemnation with respect to any Real Property, Purchaser shall purchase the applicable Property without any adjustment to the Purchase Price, provided, however:

(a)        in the case of a casualty, (i) the applicable Seller shall give Purchaser a credit at Closing equal to any insurance proceeds received by such Seller prior to Closing on account of such casualty and at Closing shall designate Purchaser as loss payee under the applicable insurance policies in respect of such casualty and shall assign to Purchaser, and Purchaser shall have the right to make a claim for and to retain any casualty insurance proceeds received under the casualty insurance policies in effect with respect to such Real Property on account of such physical damage or destruction and (ii) for any loss due to cancellation or lapse of an insurance policy due to such Seller’s gross negligence or willful conduct, Seller shall pay to Purchaser any other amounts as may be required to perform repairs to such Real Property or rebuild such Real Property to substantially the same condition as it existed prior to the occurrence of such casualty up to and in no event exceeding the Purchase Price allocated to such Real Property; and

(b)        in the case of a condemnation, applicable Seller shall assign to Purchaser the right to receive all condemnation awards with respect to such Real Property, together with the right to file any claim and the right to contest, negotiate, settle and/or litigate any such claim.

ARTICLE X

TERMINATION; DEFAULT

10.1        Termination. This Agreement may be terminated at any time prior to the Closing Date, as follows:

(a)        by written agreement of Seller and Purchaser; or

(b)        by Sellers or Purchaser, if:

(i)    the Closing shall not have occurred on or before March 31, 2013 (the “Outside Date”) provided, however, that the right to terminate this Agreement pursuant to this Section 10.1(b)(i) shall not be available to any Party if the failure of such Party or its Affiliates to perform any of its obligations under this Agreement has been a principal cause of, or resulted in, the failure of the transactions contemplated herein to be consummated on or before such date; or

(ii)   any Governmental Entity of competent jurisdiction shall have issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated herein, and such order or other action shall have become final and non-appealable; provided, however, that the right to terminate this Agreement under this Section 10.1(b)(ii)shall not be available to a Party if the issuance of such final, non-appealable order was primarily due to the failure of such Party or its Affiliates to perform any of its obligations under this Agreement.

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(c)        by Sellers if Purchaser shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth in Section 5.1(a) or Section 5.1(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by Purchaser within twenty (20) days of receipt by Purchaser of written notice of such breach or failure; provided that no Seller shall have the right to terminate this Agreement pursuant to this Section 10.1(c) if Sellers or their Affiliates are then in breach of any of their respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 5.2(a) or Section 5.2(b) would not be satisfied.

(d)        by Purchaser, if Sellers shall have breached or failed to perform in any material respect any of their representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth in Section 5.2(a) or Section 5.2(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by Sellers within twenty (20) days of receipt by Sellers of written notice of such breach or failure; provided that Purchaser shall not have the right to terminate this Agreement pursuant to this Section 10.1(d) if Purchaser is then in breach of any of its respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 5.1(a) or Section 5.1(b) would not be satisfied.

10.2        Effect of Termination.  In the event that this Agreement is terminated and the transactions contemplated by this Agreement are abandoned pursuant to Section 10.1, written notice thereof shall be given to the other Party or Parties, specifying the provisions hereof pursuant to which such termination is made and describing the basis therefor in reasonable detail, and this Agreement shall forthwith become null and void and of no further force or effect whatsoever without liability on the part of any Party hereto, and all rights and obligations of any Party hereto shall cease and each party shall be relieved of any liability or damages resulting out of any breach of this Agreement which is no willful or intentional; provided, however, that, notwithstanding anything in the foregoing to the contrary, no such termination shall relieve any Party hereto of any liability or damages resulting from or arising out of any willful or intentional breach of this Agreement.  The Parties acknowledge and agree that the failure of Purchaser to pay the Purchase Price if Seller has satisfied the conditions in Section 5.2(a) and Section 5.2(b) is deemed a willful and intentional breach of this Agreement.

ARTICLE XI

INDEMNIFICATION

11.1        Survival of Representations and Warranties. Notwithstanding anything in this Agreement to the contrary, each representation and warranty contained herein and each covenant contained herein to be performed prior to the Closing Date, will survive the Closing

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and continue in full force and effect until the date that is six (6) months following the Closing Date (the “Survival Expiration Date”), and no claim for indemnification for breach of any such representation or warranty or covenant may be asserted  and no action or proceeding thereon shall be valid or enforceable at law or equity pursuant to this Agreement unless, at or before midnight on the Survival Expiration Date, the Indemnified Party delivers written notice of claim to the Indemnitor setting forth, in reasonable detail, the nature and basis of the claim and (to the extent known at such time) an estimate of the amount of Damages reasonably expected to arise in connection with such claim (it being understood that in no event shall such estimate limit any claim for Damages hereunder); provided, however, that the obligation to indemnify shall continue following the Survival Expiration Date with respect to any claim for indemnification as to which notice was provided in accordance with this Section 11.1 prior to the Survival Expiration Date.   Notwithstanding the foregoing, no claim for indemnification for breach of the representation or warranty contained in the first sentence of Section 3.1(d)(i) may be asserted after the Closing by the Purchaser if the applicable title exception was insured over or omitted in the applicable title policy issued by Title Company on the Closing Date.

11.2        Indemnification.

(a)        Subject to the terms and conditions of this Article XI, Sellers shall jointly and severally indemnify from and after the Closing, Purchaser, its Affiliates and their respective directors, officers, employees, agents, successors and permitted assigns (collectively, the “Purchaser Indemnified Parties”) for any and all Damages to the extent arising from any (i) breach by Sellers of any of their representations or warranties contained in this Agreement to be true and correct on the date hereof or on the Closing Date, as if made on such date (except in the case of any representations or warranties that address matters only as of a particular date, as of such date) or (ii) breach by Sellers of any of their covenants contained in this Agreement to be performed at or prior to Closing.

(b)        Subject to the terms and conditions of this Article XI, from and after the Closing, Purchaser shall indemnify and defend Sellers and their Affiliates and their respective members, directors, officers, employees, agents, successors and assigns (collectively, the “Seller Indemnified Parties”) for, and hold the Seller Indemnified Parties harmless from, any and all Damages to the extent arising from any (i) breach of any representation or warranty by Purchaser contained in this Agreement to be true and correct on the date hereof or on the Closing Date, as if made on such date (except, in the cases of any representations or warranties that address matters only as of a particular date, as of such date), or (ii) breach by Purchaser of any of its covenants contained in this Agreement to be performed at or prior to Closing.

(c)        The amount of indemnification to which an Indemnified Party shall be entitled under this Article XI shall be determined: (i) by written agreement between the Indemnified Party and the Indemnitor; (ii) by a judgment or decree of any court of competent jurisdiction; or (iii) by any other means to which the Indemnified Party and the Indemnitor shall agree.  Without limiting a party’s obligation to make payment upon the earliest event specified in the preceding sentence, from and after the date on which the amount of Damages for which an Indemnified Party is entitled to indemnification under this Article XI is determined in accordance with this Section 11.2(c), interest will accrue on such amount from such date until the date of payment at 10% per annum, compounding monthly; provided, however, that no such

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interest will be payable in the event that a final judgment or decree of any court of competent jurisdiction subsequently determines that the Indemnified Party was not entitled to indemnification for the underlying amount under this Article XI.

(d)        For purposes of this Article XI and for purposes of determining whether a Purchaser Indemnified Party is entitled to indemnification pursuant to Section 11.2(a) and whether a Seller Indemnified Party is entitled to indemnification pursuant to Section 11.2(b), any inaccuracy in or breach of any representation or warranty made by any Seller or Purchaser, as applicable, shall be determined without regard to any qualification as to “Material Adverse Effect” or “materiality” set forth in such representation or warranty or in any document delivered or made available in connection herewith, and all references to the terms “material”, “materiality”, “materially”, “ Material Adverse Effect” or any similar terms shall be ignored for purposes of determining whether such representation or warranty was true and correct.

11.3        Indemnification Claim Procedures.

(a)        If any Action is commenced or threatened that may give rise to a claim for indemnification pursuant to this Article XI (an “Indemnification Claim”) by any person entitled to indemnification under this Agreement (each, an “Indemnified Party”), then such Indemnified Party shall promptly (i) notify the Indemnitor and (ii) deliver to the Indemnitor a written notice (A) describing in reasonable detail the nature of and the facts giving rise to the Action, (B) including a copy of all papers served, if any, with respect to such Action, (C) to the extent known at such time, including the Indemnified Party’s estimate of the amount of Damages (including the method of calculation thereof) that may arise from such Action (it being understood that in no event shall such estimate limit any claim for Damages hereunder), and (D) describing in reasonable detail the basis for the Indemnified Party’s request for indemnification under this Agreement.  Failure to notify the Indemnitor in accordance with this Section 11.3(a) will not relieve the Indemnitor of any liability that it may have to the Indemnified Party, except to the extent (1) the Indemnitor is actually and materially prejudiced by the Indemnified Party’s failure to give such notice or (2) the Indemnified Party fails to notify the Indemnitor of such Indemnification Claim in accordance with this Section 11.3(a) prior to the Survival Expiration Date.

(b)        An Indemnitor may elect at any time to assume and thereafter conduct the defense, compromise or settlement of any Action subject to any such Indemnification Claim with counsel of the Indemnitor’s choice (which counsel shall be reasonably satisfactory to the Indemnified Party), and the Indemnified Party shall bear any fees, costs and expenses of its counsel in connection with such Action; provided, however, an Indemnitor may not assume and thereafter conduct the defense of any Action subject to any such Indemnification Claim in the event that (A) the amount of such Indemnification Claim is (i) less than the Basket Amount or (ii) greater than the Indemnification Amount, (B) such Indemnification Claim involves criminal allegations or any Governmental Authority or (C) such Indemnification Claim seeks any equitable remedy.  Notwithstanding the foregoing, the Indemnitor will bear the reasonable fees, costs and expenses of one such separate counsel to the Indemnified Party in each jurisdiction (and shall pay such fees, costs and expenses as incurred), if the defendants in, or targets of, any such action or proceeding include both the Indemnified Party and the Indemnitor, and the Indemnified Party shall have reasonably concluded that there

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are or are reasonably likely to be legal defenses available to it which are different from or additional to those available to the Indemnitor or that representation by the same counsel is or is reasonably likely to be a conflict of interest.  If the Indemnitor assumes such defense, the Indemnified Party shall have the right, but not the obligation, to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnitor, it being understood that the Indemnitor shall control such defense.  If the Indemnitor assumes such defense, it shall be permitted to settle or compromise any such Action, and each Indemnified Party shall reasonably cooperate in all respects with the conduct of such defense by the Indemnitor (including the making of any related claims, counterclaim or cross complaint against any Person in connection with the Action) and/or the settlement of such Action by the Indemnitor; provided, however, that the Indemnitor will not approve of the entry of any judgment or enter into any settlement or compromise with respect to the Indemnification Claim without the Indemnified Party’s prior written approval, unless (i) the terms of such settlement provide for a full and complete release by the third-party claimant of the claims that are the subject of such Action in favor of the Indemnified Party, (ii) the Indemnitor does not admit or otherwise acknowledge in writing to the relevant court of Governmental Entity or third-party claimant any liability, wrongdoing or misconduct on behalf of the Indemnified Party or any of its Affiliates and (iii) such settlement is only for money damages that are paid by Indemnitor and does not include any equitable relief.  If the Indemnified Party gives an Indemnitor notice of an Indemnification Claim and the Indemnitor does not, within thirty (30) days after such notice is given, (i) give notice to the Indemnified Party of its election to assume the defense of the Action or Actions subject to such Indemnification Claim and (ii) thereafter promptly assume such defense, then the Indemnified Party may conduct the defense of such Action, provided, however, that the Indemnified Party will not agree to the entry of any judgment or enter into any settlement or compromise with respect to the Action or Actions subject to any such Indemnification Claim without the prior written consent of the Indemnitor (which consent shall not be unreasonably withheld or delayed).  The Indemnitor may participate in any defense or settlement controlled by the Indemnified Party pursuant to this Section 11.3(a) and the Indemnitor shall bear its own costs and expenses with respect to such participation.

(c)        If any Indemnified Party becomes aware of any circumstances that it reasonably expects would give rise to an Indemnification Claim for any matter not involving an Action, then such Indemnified Party shall promptly (i) notify the Indemnitor and (ii) deliver to the Indemnitor a written notice (A) describing in reasonable detail the nature of and the facts giving rise to the circumstances giving rise to the Indemnification Claim and (B) to the extent known at such time, including the Indemnified Party’s estimate of the amount of Damages (including the method of calculation thereof) that may arise from such circumstances (it being understood that in no event shall such estimate limit any claim for Damages hereunder).  Failure to notify the Indemnitor in accordance with this Section 11.3(c) will not relieve the Indemnitor of any liability that it may have to the Indemnified Party, except to the extent (1) the Indemnified Party is materially prejudiced by the Indemnified Party’s failure to give such notice or (2) the Indemnified Party fails to notify the Indemnitor of such Indemnification Claim in accordance with this Section 11.3(c) prior to the Survival Expiration Date.

(d)        At the reasonable request of the Indemnitor or the Indemnified Party, each such party shall grant the other party and its representatives, upon reasonable prior notice, all reasonable access to the books, records, employees and properties of such Indemnified

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Party to the extent reasonably related to the matters to which the applicable Indemnification Claim relates.  All such access shall be granted during normal business hours and shall be granted under the conditions which shall not unreasonably interfere with the business and operations of such Indemnified Party.

11.4        Limitations on Indemnification Liability. Notwithstanding any provision of this Agreement to the contrary, any claims an Indemnified Party makes under this Article XI) will be limited as follows:(a)

(a)        Indemnification Cap.  The aggregate amount of Damages for which the Purchaser Indemnified Parties shall be entitled to indemnification pursuant to Section 11.2(a) will not exceed the Indemnification Amount.

(b)        Claims Basket.  The Purchaser Indemnified Parties shall not be entitled to indemnification pursuant to this Article XI with respect to any claim for indemnification pursuant to clause (i) of Section 11.2(a) unless and until the amount of Damages (excluding costs and expenses of the Purchaser Indemnified Parties incurred in connection with making such claim under this Agreement) incurred by the Purchaser Indemnified Parties that are the subject of such claim (or any series of related claims arising out of similar circumstances) exceeds Fifty Thousand Dollars ($50,000) (the “Per-Claim Basket”), and the Purchaser Indemnified Parties shall only be entitled to indemnification pursuant to this Article XI with respect to any claim for indemnification pursuant to clause (i) of Section 11.2(a) to the extent the aggregate amount of all Damages (excluding costs and expenses of Purchaser Indemnified Parties incurred in connection with making such claim under this Agreement) incurred by the Purchaser Indemnified Parties for which the Purchaser Indemnified Parties are entitled to indemnification pursuant to this Article XI (excluding amounts below any applicable Per-Claim Basket) exceeds Twenty Million Dollars ($20,000,000) (the “Basket Amount”), and then only to the extent of such excess.  The Seller Indemnified Parties shall not be entitled to indemnification pursuant to this Article XI with respect to any claim for indemnification pursuant to clause (i) of Section 11.2(b) unless and until the amount of Damages incurred by the Seller Indemnified Parties that are the subject of such claim exceeds the Per-Claim Basket, and the Seller Indemnified Parties shall only be entitled to indemnification pursuant to this Article XI with respect to any claim for indemnification pursuant to clause (i) of Section 11.2(b) to the extent the aggregate amount of Damages in connection with any such claim incurred by the Seller Indemnified Parties for which the Seller Indemnified Parties are entitled to indemnification pursuant to this Article XI (excluding amounts below any applicable Per-Claim Basket) exceeds the Basket Amount, and the Seller Indemnified Parties shall only be entitled to indemnification for such Damages to the extent such Damages exceed the Basket Amount and then only to the extent of such excess.

(c)        Assignment of Claims.  If any Indemnified Party receives any indemnification payment pursuant to this Article XI, at the election of the Indemnitor, such Indemnified Party shall use commercially reasonable efforts to assign to the Indemnitor all of its claims for recovery against third persons as to such Damages, whether by insurance coverage, contribution claims, subrogation or otherwise.

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(d)        Purchaser Waived Breach.  In the event that (i) Purchaser obtains knowledge prior to the Closing of any inaccuracy or breach of any representation or warranty of the Seller contained in this Agreement that would give Purchaser the right to not consummate the Closing under Section 5.2 (a “Purchaser Waived Representation”) (ii) Sellers acknowledge in writing prior to the Closing that Purchaser has such right to not consummate the Closing, and (iii) Purchaser nonetheless proceeds with and consummates the Closing, then the Purchaser and any Purchaser Indemnified Party shall be deemed to have waived and forever renounced any right to assert a claim for indemnification under this Article XI for, or any other claim or cause of action under this Agreement, at law or in equity on account of any such Purchaser Waived Representation.

(e)        Punitive Damages.  No Indemnified Party shall be entitled to indemnification for any punitive Damages related to the breach or alleged breach of this Agreement except to the extent such punitive Damages are owed to a third party.

(f)        Tax Treatment of Indemnity Payments.  It is the intention of the parties to treat any indemnity payment made under this Agreement as an adjustment to the Purchase Price for all federal, state, local and non-United States Tax purposes, and the parties agree to file their Tax Returns accordingly, except as otherwise required by applicable Law or a final determination.

11.5        No Duplication.  Any liability for indemnification under this Agreement shall be determined without duplication of recovery due to the facts giving rise to such liability constituting a breach of more than one representation, warranty, covenant or agreement.  Without limiting the foregoing, all Damages for which any Indemnified Party would otherwise be entitled to indemnification under this Article XI shall be reduced by the amount of any indemnification payments or other recoveries actually received by such Indemnified Party from any third party, net of any costs incurred by the Indemnified Parties in recovering such amounts.

11.6        Mitigation.  An Indemnified Party shall use commercially reasonable efforts to mitigate any Damages for which it is entitled to indemnification pursuant to this Article XI.

11.7        Indemnification Sole and Exclusive Remedy.  Following the Closing, except for the remedies described in Section 12.2 (which shall not include any action for monetary damages) and in the case of fraud, indemnification pursuant to this Article XI shall be the sole and exclusive remedy against the Sellers in the case of the Purchaser Indemnified Parties  and the sole and exclusive remedy against the Purchaser in the case of the Seller Indemnified Parties, related to or arising from any breach of any representation, warranty, covenant or agreement contained in, or otherwise pursuant to, this Agreement which survives Closing, excluding covenants contained herein which are to be performed after the Closing Date.  The preceding sentence shall not apply with respect to any Purchaser claims against the Sellers relating to Excluded Liabilities or Seller claims against Purchaser relating to Assumed Liabilities.

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11.8        REIT Savings Clause.  Notwithstanding anything in this Agreement to the contrary, in no event shall any amount paid to any Purchaser Indemnified Party pursuant to thisArticle XI in any taxable year exceed the maximum amount that can be paid in such year without causing any Parent Indemnified Party, or any direct or indirect owner of such Parent Indemnified Party, in each case which is REIT, to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code (the “REIT Requirements”) for such year, determined as if the payment of such amount did not constitute Qualifying Income as determined by independent accountants to Parent.  If the maximum amount that can be paid for any taxable year under the preceding sentence is less than the amount which Sellers would otherwise be obligated to pay to the Purchaser Indemnified Parties pursuant to Article XI (the amount of such deficit, the “Deficit Amount”), the Purchaser Indemnified Parties shall so notify Sellers, and Sellers shall (at the Purchaser Indemnified Parties’ sole cost and expense) place the Deficit Amount in escrow and shall not execute any instrumentation permitting a release of any portion thereof to the Purchaser Indemnified Parties, and the Purchaser Indemnified Parties shall not be entitled to any such amount, unless and until Sellers and escrow holder receive (all at the Purchaser Indemnified Parties’ sole cost and expense) notice from Purchaser, together with either (a) an opinion of Purchaser’s tax counsel to the effect that such amount, if and to the extent paid, would not constitute gross income which is not Qualifying Income, (b) a ruling from the IRS holding that the receipt by the Purchaser Indemnified Parties of the Deficit Amount would either constitute Qualifying Income or would be excluded from gross income within the meaning of Sections 856(c)(2) and (3) of the Code or (c) a letter from Purchaser’s independent accountants indicating the maximum amount that can be paid at that time to the Purchaser Indemnified Parties without causing any Purchaser Indemnified Party or any direct or indirect owner of such Purchaser Indemnified Party, in each case which is a REIT, to fail to meet the REIT Requirements for any relevant taxable year, together with either a ruling from the IRS issued to Purchaser or an opinion of Purchaser’s tax counsel to the effect that such payment would not be treated as includible in the income of the applicable Purchaser Indemnified Party for any prior taxable year, in which event the escrow holder shall pay such maximum amount.  Sellers’ and escrow holder’s obligation to pay any Deficit Amounts shall terminate ten (10) years from the date of this Agreement and, upon such date, the escrow holder shall remit any remaining funds in escrow to Sellers and Sellers shall have no obligation to make any further payments to the Purchaser Indemnified Parties notwithstanding that such Deficit Amounts have not been paid as of such date.  For all purposes of this Agreement, (i) the Purchaser Indemnified Parties release Sellers from any claims that may arise from actions taken by Sellers at the request of the Purchaser Indemnified Parties or their agents under this Section 11.8, and (ii) the Purchaser Indemnified Parties’ right to receive Deficit Amounts shall be limited to the amounts in escrow and Sellers shall have no obligation to make any further payments to any Purchaser Indemnified Party with respect to such Deficit Amounts.

11.9        Indemnification Funds.  At all times following the Closing Date and prior to the Survival Expiration Date, Seller JV shall (i) hold and maintain funds in its own name in an amount not less than the Indemnification Amount plus such additional amount as may reasonably be expected to be necessary to satisfy any and all liabilities of Seller JV other than under this Article XI (such funds, as reduced by any payments to Purchaser on account of the Indemnification Amount, the “Indemnification Funds”), (ii) not sell, transfer, pledge, hypothecate, encumber or grant any direct or indirect interest in or to the Indemnification Funds, (iii) not conduct any new operations or incur any new liabilities or indebtedness other than with respect to any Property that remains owned by the Sellers, and (iv) not liquidate, wind-up or dissolve; provided, however, that in the event that Purchaser has made any Indemnification

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Claim as to which notice was provided in accordance with Section 11.1 prior to the Survival Expiration Date, Seller JV’s obligations in this sentence shall continue with respect to the amount of Damages estimated by Purchaser with respect to such Indemnification Claim until the date upon which the obligations of Sellers pursuant to Article XI with respect to such claim shall have been satisfied in full or such Indemnification Claim has been resolved.

ARTICLE XII

MISCELLANEOUS

12.1        Brokers. Each Party hereby represents and warrants to the other Party hereto that it has dealt with no broker, salesman, finder or consultant with respect to this Agreement or the transactions contemplated hereby other than (a) CSCA Capital Advisors, LLC, whose fees shall be paid by E, and (b) any other broker, salesman, finder or consultant whose fees are paid by such Party.

12.2        Specific Performance. The Parties hereto agree that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that the Parties hereto intentionally and materially breach their obligations under this Agreement (including intentionally and materially failing to take such actions as are required of it hereunder to consummate the transactions contemplated herein).  Accordingly, the Parties acknowledge and agree that the Parties shall be entitled to an injunction, specific performance and other equitable relief to prevent any such intentional and material breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.  Each Party agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other Party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity.  Any Party seeking an injunction or injunctions to prevent any such intentional and material breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.

12.3        Intentionally Omitted.

12.4        Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned by any Party without the prior written consent of the other Party hereto; provided, however, no such consent shall be required in the event of an assignment by Purchaser, in whole or in part, prior to the Closing Date of its rights or obligations hereunder to an entity which is Controlled by Purchaser, provided, however, that no such assignment shall relieve Purchaser of its obligations hereunder.  Notwithstanding the foregoing, Purchaser shall also be entitled, without the consent of Sellers, to designate E or any affiliate of E to take title to one or more of the Facilities (and all related Property) at the Closing, provided, however, any such designation shall not relieve Purchaser of its obligations hereunder.

12.5        Entire Agreement. This Agreement (together with all schedules and exhibits hereto) supersedes any other agreement, whether written or oral, which may have been made or entered into by the Parties hereto relating to the matters contemplated hereby, and

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constitutes the entire agreement of the Parties. Except as expressly set forth in this Agreement, no Party hereto is making any representations or warranties, express or implied, as to such Party or the Property.

12.6        Amendments and Waivers. This Agreement may be amended, modified, superseded, or canceled, and any of the terms, representations, warranties or covenants hereof may be waived, only by written instrument executed by the Parties hereto or, in the case of a waiver, by the Party waiving compliance.  Notwithstanding the foregoing or anything to the contrary in this Agreement, the Sellers and the Purchaser may amend, modify, or supplement any provision of this Agreement, other than to the extent such modification adversely affects E, without the approval or consent of E.

12.7        Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.

12.8        Successors and Assigns, No Third Party Beneficiaries. This Agreement shall be binding upon, inure to the benefit of, and may be enforced by, each of the Parties to this Agreement and its successors and permitted assigns and nothing herein express or implied shall give or be construed to give any person or entity (including, for the avoidance of doubt, the Seller JV Rollover Investor), other than the parties hereto and such assigns, any legal or equitable rights.

12.9        Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of Delaware.

12.10      Submission to Jurisdiction. Purchaser, E and each Seller irrevocably submits to the exclusive jurisdiction of the Delaware Chancery Court (or, if the Delaware Chancery Court shall be unavailable, any other court of the State of Delaware or, in the case of claims to which the federal courts have exclusive subject matter jurisdiction, the United States District Court for the District of Delaware) for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Purchaser, E and each Seller further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth above shall be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Purchaser, E and Seller irrevocably and unconditionally waive trial by jury and irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in Delaware Chancery Court (or, if the Delaware Chancery Court shall be unavailable, any other court of the State of Delaware or, in the case of claims to which the federal courts have exclusive subject matter jurisdiction, the United States District Court for the district of Delaware), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

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12.11      Cooperation and Further Assurances. Sellers, E and Purchaser agree to execute any further instruments or perform any acts which are or may become reasonably necessary to carry out the intent of this Agreement.

12.12      Severability. Each provision of this Agreement shall be considered separable, and if, for any reason, any provision or provisions hereof are determined to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

12.13      Headings. Section titles are for convenience of reference only and shall not control or alter the meaning of this Agreement set forth in the text.

12.14      Bulk Sales Laws. Purchaser and Sellers hereby waive compliance by the other with the provisions of any bulk sales, bulk transfer or similar laws of any jurisdiction that may otherwise be applicable with respect to the sale of all or any portion of the Property to Purchaser.

12.15      Notices. All notices, demands or requests made pursuant to, under or by virtue of this Agreement must be in writing and shall be (a) personally delivered, (b) delivered by express mail, Federal Express or other comparable overnight courier service, or (c) faxed (and confirmed by telephone), as follows:

To E or Purchaser:

Emeritus Corporation
3131 Elliott Ave., Ste. 500
Seattle, WA 90121
Fax No. (206) 204-6706
Attention: Mark A. Finkelstein
E-mail: mark.finkelstein@emeritus.com

HCP, Inc.
3760 Kilroy Airport Way, Suite 300
Long Beach, California 90806
Fax No. (562) 733-5200
Attention: Brian J. Maas
E-mail: bmaas@hcpi.com

(562) 733-5119 with copies thereof to:

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Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036-6522
Fax No. (917) 777-3000
Attention: Joseph A. Coco, Audrey L. Sokoloff, and Peter D. Serating
E-mails: joseph.coco@skadden.com, audrey.sokoloff@skadden.com, and peter.serating@skadden.com

and

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Fax No. (212) 757-3990
Attention: Robert B. Schumer, Harris B. Freidus, and Justin Hamill
E-mails: rschumer@paulweiss.com, hfreidus@paulweiss.com, and jhamill@paulweiss.com

To Sellers:

c/o BRE/SW Portfolio LLC
345 Park Avenue
New York, NY 10154
Attention: David Roth
Facsimile: (212) 583-5202
E-mail:  roth@blackstone.com

with copies thereof to:

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Erik Quarfordt, Esq.
Facsimile:  (212) 455-2502
E-mail:  equarfordt@stblaw.com

All notices (A) shall be deemed to have been given on the date that the same shall have been received in accordance with the provisions of this Section and (B) may be given either by a Party or by such Party’s attorneys. Any Party may, from time to time, specify as its address for purposes of this Agreement any other address upon the giving of 10 days’ prior written notice thereof to the other Parties.

12.16      Dates. If any date set forth in this Agreement for the delivery of any document or the happening of any event (other than the Closing Date) should, under the terms hereof, fall on a weekend or holiday, then such date shall be automatically extended to the next succeeding weekday that is not a holiday.

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12.17      Commercially Reasonable Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agree to use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated herein.

12.18      Cooperation for Multiple Closings. Notwithstanding anything in this Agreement to the contrary, if (1) any Party shall reasonably determine that the Closing is not expected to occur on or prior to December 31, 2012 because of a failure to satisfy the closing conditions with respect to some but not all of the Facilities (other than those conditions that by their terms are required to be satisfied or waived at the Closing and would be capable of being satisfied as of such time), (2) clause (a), (b) or (c) of Section 8.4 applies with respect to any Ground Lease, (3) clause (2) of the proviso of the last sentence of Section 4.1 applies with respect to any Facility, (4) the proviso of the last sentence of Section 3.4(h) applies with respect to any Existing Loan, or (5) the last sentence of Section 12.19 applies with respect to any Title Consent or Title Waiver (any Facility covered by any of the foregoing clauses (1) — (5), a “Delayed Closing Property”), then, provided at least one hundred twenty (120) Facilities are not Delayed Closing Properties, the Parties shall (at the request of Seller or Purchaser) cooperate to consummate the transactions contemplated by this Agreement with respect to each of the Facilities that are not Delayed Closing Properties (such consummation, (the “Initial Closing”) and shall reasonably agree to appropriate changes to this Agreement and adjustments on account of the Delayed Closing Properties, including the Purchase Price payable at the Initial Closing being reduced by the portion of the Purchase Price allocable to the Delayed Closing Properties.  The Parties acknowledge and confirm that in all events there shall be no Initial Closing unless and until all conditions precedent to the Closing have, with respect to the Facilities that are not Delayed Closing Properties, been satisfied (or waived by the Party entitled to waive).  After such Initial Closing, the Parties shall cooperate to provide for the consummation of the transactions contemplated by this Agreement with respect to any Delayed Closing Properties as and when the applicable closing conditions applicable thereto have been satisfied or waived.

12.19      Required Title Consents and Waivers.  Sellers and Purchaser acknowledge that there are certain Real Properties that have title exceptions which require (i) the consent of third parties in order to consummate the transactions contemplated by this Agreement (as more particularly described on Schedule 12.19 of the Disclosure Letter, each a “Title Consent”) or (ii) the waiver of a right of first refusal or purchase option in order to consummate the transactions contemplated by this Agreement (as more particularly described on Schedule 12.19 of the Disclosure Letter, a “Title Waiver”).  The Parties agree that the foregoing exceptions are not Permitted Exceptions in the absence of the applicable Title Consent in a form reasonably satisfactory to Purchaser; provided, however, once the Title Consent or Title Waiver shall be obtained, such exception shall be deemed a Permitted Exception.  In the event that a Title Consent or Title Waiver is not obtained prior to the Outside Closing Date, the applicable Facility and all Property comprising or relating to such Facility shall be excluded from the transactions contemplated by this Agreement, in which case (w) the Purchase Price shall be reduced by the portion of the Purchase Price allocable to such Facility (x) such Facility and such Property shall not be transferred to Purchaser at the Closing, (y) the OpCo Lease Agreement shall not include such Facility or Property, and (z) from and after the Closing Date none of the Parties hereto shallhave any claims against any other Party hereto in connection with such Facility and such Property.

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12.20      Alternative Transaction Structure.  Purchaser and E agree to consider in good faith any alternative transaction structures proposed by Sellers or the Seller JV Rollover Investor in order to mitigate potential adverse tax consequences to the holders of interests in the Seller JV Rollover Investor, provided that such alternative transaction structure is without cost or increased liability to Purchaser or E (including, without limitation, with respect to Taxes) and without any delay in the performance of any of the obligations of the Parties under this Agreement.  The parties hereto acknowledge and agree that the failure to agree to and implement such an alternative transaction structure mutually acceptable to Sellers, Purchaser, E and the Seller JV Rollover Investor shall not constitute a breach of this Agreement or failure of a condition precedent to Seller’s obligations to close under Section 5.1(b).

12.21      Cooperation with E.  Notwithstanding any other provision of this Agreement, the Parties shall cooperate to use commercially reasonable efforts (at Purchaser’s sole cost and expense) to cause the transfer of the Resident Agreements, Leases, Contracts, Other Current Management Agreements (to the extent such agreements have not been terminated prior to the Closing Date), the Assumed Personal Property Debt, the Entrance Fees, the Concessions of Rent, the CHOW Liabilities (exclusive of any CHOW Corrective Actions) and other applicable operational assets and agreements of Sellers (but excluding any Leased Property (as defined in the OpCo Lease Agreement)) and excluding, for the avoidance of doubt, any Existing Loans, Assumed Loans or Prepayment Fees (collectively, the “E Transferred Items”) to E or an Affiliate of E at the Closing (and, consistent with Section 45.20.2 of the OpCo Lease Agreement, Purchaser will designate E as the transferee of such items, as applicable, pursuant to this Agreement), together with the economic benefits and obligations solely with respect to such items in respect of periods beginning after the Closing (including for purposes of proration adjustments pursuant to Article VIII, with such benefits and obligations, including any Tenant Rents and Resident Rents, allocated to E).  In connection with the transfer of the Entrance Fees to E (and without limiting anything in this Section 12.21), at the Closing, Purchaser shall cause to be (i) transferred to E the Cash Deposits and (ii) paid to E an amount in cash equal to the excess of the Entrance Fees over the Cash Deposits, in each case, as of Closing.  Without limiting the generality of the foregoing, in connection with the foregoing assignments to E or an Affiliate of E, E will (a) assume the Assumed Liabilities relating to the E Transferred Items (and excluding, for the avoidance of doubt, any obligations arising under the CHOW Corrective Actions, Existing Loans, Assumed Loans, Prepayment Fees or Ground Leases), (b) cooperate with Sellers and Purchaser as reasonably requested by Sellers and Purchaser in connection with providing the information and records required to be provided by Purchaser under Sections 8.1(e) and 8.1(f) and taking the actions required to be taken by Purchaser under Section 8.1(g).  In addition, E will use commercially reasonable efforts to make modifications, if any, as required to give effect to the transactions contemplated by this Agreement under any agreements relating to the Property or the Business to which E (but not Sellers) is a party (the “Continuing E Manager Contracts”), it being the intention of the parties that after the Closing E shall continue to have the rights, and be subject to its obligations under, such Continuing E Manager Contracts.  If requested by E and to the extent reasonably practicable, the Parties will cooperate at E’s sole cost and expense to provide for the termination of any Other Current Management Agreement, provided, however, it shall not be a condition to Purchaser’s or Sellers’ obligation to close that

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such Other Current Management Agreements are terminated.  E (i) acknowledges that certain of the Contracts may be held in the name of the Sellers and an assignment or transfer of those Contracts to E at the Closing may require the consent of the counterparty thereto and (ii) waives any claim against the Sellers arising out of a breach of any such Contracts arising out of any such assignment or transfer.  With respect to any CHOW Corrective Actions, E and Purchaser shall reasonably agree whether such CHOW Corrective Actions are appropriate and, if agreed, will reasonably agree on adjustments to the rent under the OpCo Lease Agreement to reflect the costs of such CHOW Corrective Actions.

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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.

SELLERS:

BRE/SW Absaroka LLC

BRE/SW Alpine Court LLC

BRE/SW Alpine Springs LLC

BRE/SW Beacon Pointe LLC

BRE/SW Waterford Bellevue LLC

BRE/SW Brentmoor LLC

BRE/SW Brookside LLC

BRE/SW Buckingham Estates LLC

BRE/SW Cambridge Place LLC

BRE/SW Canterbury Court LLC

BRE/SW Canterbury Gardens LLC

BRE/SW Canyonview Estates LLC

BRE/SW Carriage Inn LLC

BRE/SW Cedar Ridge LLC

BRE/SW Century Fields LLC

BRE/SW Champlin Shores LLC

BRE/SW Chandler Place LLC

BRE/SW Chehalem Springs LLC

BRE/SW Chesterley Court LLC

BRE/SW Chesterley Meadows LLC

BRE/SW Chestnut Lane LLC

BRE/SW Chris Ridge LLC

BRE/SW Churchill LLC

BRE/SW Clearlake LLC

BRE/SW Cliff View LLC

BRE/SW Cordova Estates LLC

BRE/SW Cottage Village LLC

BRE/SW Cottages LLC

BRE/SW Cougar Springs LLC

BRE/SW Courtyard Gardens LLC

BRE/SW Crimson Ridge LLC

BRE/SW Crown Pointe LLC

BRE/SW Culpepper Place LLC

BRE/SW Dry Creek LLC

BRE/SW Eagle Cove LLC

BRE/SW Eagle Meadows LLC

BRE/SW Eden Estates LLC

BRE/SW Eldorado Heights LLC

BRE/SW Emerald Estates LLC

BRE/SW Emerald Pointe LLC

[signature page to Purchase and Sale Agreement]

BRE/SW Englewood Arbor LLC

BRE/SW Fishers Landing LLC

BRE/SW Flint River LLC

BRE/SW Fox River LLC

BRE/SW Grayson View LLC

BRE/SW Hawthorne Inn Greenville LLC

BRE/SW Hawthorne Inn Hilton Head LLC

BRE/SW Heartland Park LLC

BRE/SW Heritage Place LLC

BRE/SW Bridgeport Heritage LLC

BRE/SW Hermiston Terrace LLC

BRE/SW Heron Pointe Cottages LLC

BRE/SW Heron Pointe LLC

BRE/SW Apple Ridge LLC

BRE/SW Hillside LLC

BRE/SW Holiday Lane LLC

BRE/SW La Villa LLC

BRE/SW Lake Pointe LLC

BRE/SW Lake Springs LLC

BRE/SW Lakeside LLC

BRE/SW Lakeside Cottages LLC

BRE/SW Lassen House LLC

BRE/SW Laurel Gardens LLC

BRE/SW Legacy Crossing LLC

BRE/SW Legacy Gardens LLC

BRE/SW Lexington Gardens LLC

BRE/SW Magnolia Gardens LLC

BRE/SW Bluegrass Terrace LLC

BRE/SW Manor House LLC

BRE/SW Maplewood LLC

BRE/SW Meadowlark LLC

BRE/SW Minnetonka LLC

BRE/SW Monroe House LLC

BRE/SW Montclair Park LLC

BRE/SW Moses Lake LLC

BRE/SW Mountain Laurel LLC

BRE/SW Mountain View LLC

BRE/SW Glendale Place LLC

BRE/SW Georgian Place LLC

BRE/SW Northpark Place LLC

BRE/SW Northridge LLC

BRE/SW Oak Tree Village LLC

BRE/SW Oakridge LLC

BRE/SW Orchard Glen LLC

BRE/SW Orchard Park LLC

[signature page to Purchase and Sale Agreement]

BRE/SW Osprey Court LLC

BRE/SW Oswego Springs LLC

BRE/SW Azalea Gardens LLC

BRE/SW Palm Meadows LLC

BRE/SW Palm Meadows Village LLC

BRE/SW Palms LLC

BRE/SW Paradise Valley LLC

BRE/SW Park Avenue LLC

BRE/SW Park Place LLC

BRE/SW Peachtree Village-GA LLC

BRE/SW Peridot LLC

BRE/SW River Plaza LLC

BRE/SW Medallion LLC

BRE/SW Quail Hollow LLC

BRE/SW Quakers Landing LLC

BRE/SW Remington House LLC

BRE/SW River Road LLC

BRE/SW River Valley Landing LLC

BRE/SW Riverstone Terrace LLC

BRE/SW Rose Terrace LLC

BRE/SW Rose Valley LLC

BRE/SW Rose Valley Cottages LLC

BRE/SW Sandia Springs LLC

BRE/SW Sellwood Landing LLC

BRE/SW Sequoia Springs LLC

BRE/SW Sequoia Springs Cottages LLC

BRE/SW Parkway Village LLC

BRE/SW Spring Arbor LLC

BRE/SW Spring Creek LLC

BRE/SW Spring Estates LLC

BRE/SW Spring Meadows Cottages LLC

BRE/SW Spring Mountain LLC

BRE/SW Spring Pointe LLC

BRE/SW Spring Village LLC

BRE/SW Briarwood LLC

BRE/SW Woodside Village LLC

BRE/SW Manchester House LLC

BRE/SW Stone Mountain LLC

BRE/SW Stonebridge LLC

BRE/SW Sugarland Ridge LLC

BRE/SW Sunrise Creek LLC

BRE/SW Sunshine Village LLC

BRE/SW Sweetwater Springs LLC

BRE/SW Jasper Terrace LLC

BRE/SW Oaks LLC

[signature page to Purchase and Sale Agreement]

BRE/SW Sun Mountain Plaza LLC
BRE/SW Spring Meadows LLC
BRE/SW Del Ray Villa LLC
BRE/SW West Park Place LLC
BRE/SW Willow Ridge LLC
BRE/SW Willows at Sherman LLC
BRE/SW Windfield Village LLC
BRE/SW Woodstock Estates LLC
BRE/SW Woodstock Terrace LLC
By:	/s/ David Roth
	Name: David Roth
	Title: Managing Director
BRE/SW PORTFOLIO LLC, a Delaware limited liability company
	BRE/SW Member LLC,
	a Delaware limited liability company
	By:	/s/ David Roth
		Name: David Roth
		Title: Managing Director
EMERITUS CORPORATION,
a Washington corporation
By:	/s/ Eric Mendelson
	Name:		Eric Mendelson
	Title:		SVP Corporate Development
HCP, INC.,
a Maryland corporation
By:	/s/ Paul F. Gallagher
	Name:		Paul F. Gallagher
	Title:		Executive Vice President and
			Chief Investment Officer

[signature page to Purchase and Sale Agreement]

EXHIBIT F

Permitted Exceptions

1)            All liens, encumbrances or other title exceptions set forth on Schedule B-1 to the applicable Existing Policies.

2)            Any state of facts disclosed on the applicable Survey.

3)            Any liens or encumbrances pursuant to the Assumed Loan documents or the Assumed Personal Property Debt.

4)            The standard printed exceptions appearing on the title policy issued by Title Company.

5)            Zoning regulations and ordinances and municipal building restrictions, provided that the current use of all of the Real Property does not violate any such regulations or restrictions.

6)            Sewer usage charges, not yet due and payable, subject to the terms of the Purchase Agreement.

7)            Any liens or encumbrances for Taxes not yet due and payable.

8)            Encroachments projecting from the Real Property over any street or highway or over any adjoining property and encroachments of similar elements projecting from adjoining property over the Real Property, provided that such encroachments do not materially adversely affect the value or operations of the applicable Real Property or materially interfere with the current use thereof.

9)            Utility and telephone company rights and easements to maintain poles, wires, cables, pipes, boxes and other facilities and equipment in, over and upon the Real Property, provided that such rights and easements do not materially adversely affect the value or operations of the applicable Real Property or materially interfere with the current use thereof.

10)          Rights and easements for the installation, maintenance and replacement of water pipes and mains and sewer lines, facilities and equipment in, over and upon the Real Property, whether or not of record, provided that such rights and easements do not materially adversely affect the value or operations of the applicable Real Property or materially interfere with the current use thereof.

11)          Any other non-monetary title encumbrance that does not materially adversely affect the value or operations of the applicable Real Property or materially interfere with the current use thereof.

12)          The rights of Tenants and Residents under the Leases and the Resident Agreements.

13)          Any other matter that would otherwise constitute an objection and that is consented to by Purchaser in writing or waived by Purchaser (or deemed waived by Purchaser pursuant to the Purchase Agreement).

EXHIBIT K

Certificate of Non-Foreign Status

Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person.  For U.S. tax purposes (including Section 1445 of the Code), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity.  To inform HCP, Inc., a Maryland corporation (“Purchaser”) that withholding of tax will not be required in connection with the disposition of a U.S. real property interest pursuant to that certain Purchase and Sale Agreement, dated as of October 16, 2012 by and among Purchaser and Seller (as defined in such Purchase and Sale Agreement), the undersigned certifies the following on behalf of BRE/SW Portfolio LLC:

1.Seller is treated as an entity disregarded as separate from BRE/SW Portfolio LLC for U.S. federal income tax purposes as defined in Treasury Regulation Section 1.1445-2(b)(2)(iii);

2.BRE/SW Portfolio LLC is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and the regulations promulgated thereunder);

3.BRE/SW Portfolio LLC is not a disregarded entity as defined in Treasury Regulation Section 1.1445-2(b)(2)(iii);

4.BRE/SW Portfolio LLC’s U.S. employer identification number is [    ]; and

5.BRE/SW Portfolio LLC’s office address is [    ].

BRE/SW Portfolio LLC understands that this certificate may be disclosed to the Internal Revenue Service by Purchaser and that any false statement contained herein could be punished by fine, imprisonment or both.

Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of BRE/SW Portfolio LLC.

	Date:                                     , 2012
Name:
Title:

EXECUTION

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made as of December 4, 2012 (the “Effective Date”), by and among  BRE/SW Portfolio LLC, a Delaware limited liability company (“JV Seller”), the entities listed on Schedule 1 (“Other SPE Sellers”), BRE/SW Holdings LLC (“Holdings”), BRE/SW Crown Pointe LLC (“Crown Pointe Seller”, and together with JV Seller, Other SPE Sellers and Holdings, collectively, “Sellers”), HCP, Inc., a Maryland corporation (“Purchaser”), and Emeritus Corporation, a Washington corporation (“E”).

RECITALS

WHEREAS, the parties to this Amendment, together with the other Sellers, entered into that certain Purchase and Sale Agreement dated as of October 16, 2012, relating to the sale of certain properties by Sellers to Purchaser (as amended by the Closing Agreement hereinafter referred to, the “Original Purchase Agreement”);

WHEREAS, on October 31, 2012: (i) the Purchaser, E, JV Seller, and certain Sellers consummated the Initial Closing; and (ii) Sellers, Purchaser, E and Chicago Title Insurance Company entered into that certain Closing Agreement (the “Closing Agreement”) relating to, among other things, the Crown Pointe Property and Cordova Estates (each as defined in the Closing Agreement);

WHERAS, the Crown Pointe Property and Cordova Estates are each a Delayed Closing Property;

WHEREAS, the Parties desire to consummate the transactions contemplated by the Original Purchase Agreement (in the case of the Crown Pointe Property, as amended by this Amendment) with respect to the Crown Pointe Property and Cordova Estates; and

WHEREAS, the Parties desire to modify the Original Purchase Agreement in certain respects as hereinafter set forth.

NOW THEREFORE, in consideration of the foregoing and the terms, covenants and conditions contained in this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties hereto hereby agree as follows:

1.Definitions.

(a)Capitalized terms used but not defined herein shall have the meaning given to such terms in the Original Purchase Agreement. Capitalized terms defined herein shall be deemed incorporated in the Original Purchase Agreement.

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(b)The Original Purchase Agreement, as amended by this Amendment, is hereinafter referred to as the “Purchase Agreement”.

2.Purchase of Crown Pointe Seller Entity.

(a)Notwithstanding anything to the contrary contained in the Closing Agreement or in the Original Purchase Agreement, including Section 2.1 thereof, the Crown Pointe Seller shall not convey the Crown Pointe Property to Purchaser but instead, simultaneously with the execution and delivery of this Amendment, Holdings shall sell and transfer to Purchaser (or to Purchaser’s designee) and Purchaser (or Purchaser’s designee) shall purchase and accept from Holdings, the Interest. The term “Interest,” as used herein, shall mean 100% of the membership interests in Crown Pointe Seller and shall include all of Holdings’ right, title and interest in, to and under (i) the Organizational Documents (as hereinafter defined), (ii) all distributions of interests or other property by Crown Pointe Seller from and after the Closing Date, (iii) all repayments from and after the Closing Date of any and all loans made by Holdings to Crown Pointe Seller, whether pursuant to the terms of the Organizational Documents or otherwise, (iv) all property of the Crown Pointe Seller to which Holdings may be entitled from and after the Closing Date, (v) all other claims which Holdings may have against the Crown Pointe Seller from and after the Closing Date, (vi) the proceeds of any liquidation upon the dissolution of the Crown Pointe Seller and winding up of its affairs, (vii) all general intangibles for money due from the Crown Pointe Seller from and after the Closing Date, (viii) all other rights of Holdings to receive any distributions or other payments of any kind whatsoever from or in respect of the Crown Pointe Seller or in any way derived from the Crown Pointe Property in each case from and after the Closing Date, and (ix) all other rights of Holdings as a member of Crown Pointe Seller including, without limitation, rights to reports, accounting, information and voting from and after the Closing Date, provided that (x) the term Interest shall not include any proceeds of the sale of the Interest contemplated hereby, and (y) other than expressly set forth in this Amendment, nothing herein shall derogate from the provisions of Article VIII of the Original Purchase Agreement (which provisions shall be applied as if Crown Pointe Seller were selling the Crown Pointe Property to Purchaser).

(b)Notwithstanding that JV Seller is selling to Purchaser the Interest rather than the Crown Pointe Property, all of the provisions contained in the Original Purchase Agreement (including without limitation Articles III, VIII and XI) shall, except as otherwise set forth in this Amendment, apply with respect to the sale of the Interest as if the Crown Pointe Property were being sold by the Crown Pointe Seller to Purchaser; provided, however, notwithstanding anything to the contrary in the Purchase Agreement, including, without limitation, Section 8.3 of the Purchase Agreement, the Purchaser shall not be entitled to a credit against the Purchase Price in the amount of the Assumed Loan Amount at Closing and shall instead receive a credit equal to $2,000.00 with respect to the Existing Crown Pointe Loans.

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(c)Simultaneously with the sale of the Interest pursuant to the Purchase Agreement, JV Seller shall assign to Purchaser (or Purchaser’s designee), for no additional consideration: (i) all of JV Seller’s right title and interest as lender in and to that certain first lien loan to Crown Pointe Seller, as borrower, as more particularly described on Exhibit A attached hereto (the “First Lien Debt”) and (ii) JV Seller’s right (the “Loan Purchase Option”), pursuant to that certain Non-Recourse Loan Sale Agreement dated March 13, 2012 (the “Non-Recourse Loan Sale Agreement) by and between Cathay Bank, and JV Seller, to purchase from Cathay Bank that certain second lien loan which is more particularly described on Exhibit A attached hereto (the “Second Lien Debt”).

3.Closing.  With respect to the Crown Pointe Property and Cordova Estates, the term “Closing Date” shall mean December 4, 2012 at 12:01am.

4.Additional Seller Representations and Warranties with respect to Crown Pointe. Section 3.1 of the Original Purchase Agreement is hereby amended by inserting the following provisions as Sections 3.1(h)(i)-(xi) (provided that the representations given by the Sellers in Article 3, as amended hereby, shall be deemed given by all of the Sellers except Crown Pointe Seller):

(a)Ownership of Interests. Holdings is the legal and beneficial owner of the Interest, free and clear of any and all Liens. The Interest represents 100% of the ownership interests in Crown Pointe Seller. The Interest is not certificated.

(b)No Rights or Options. Except for the purchase by Purchaser or its designee pursuant to the Original Purchase Agreement and this Amendment, there are no outstanding subscriptions, warrants, options, conversion rights, or other agreements of any kind to purchase or otherwise acquire the Interest or any other interest in the Crown Pointe Seller.  Upon the consummation of the transactions contemplated hereunder, Holdings shall transfer the Interest to Purchaser free and clear of any restrictions on transfer and liens and encumbrances. No person or entity has any voting or management rights with respect to Crown Pointe Seller except as set forth in Organizational Documents. Except as set forth in the Organizational Documents, Holdings is not a party to any voting agreement, voting trusts, proxies or any other agreements or understandings with respect to the voting of the ownership interests in Crown Pointe Seller.

(c)No Other Property. Other than personal property and other property incidental to the Crown Pointe Property, Crown Pointe Seller has never owned any assets other than the Crown Pointe Property, and has never conducted any activity other than the ownership and operation of the Crown Pointe Property.

(d)Solvency. Crown Pointe Seller has not: (i) filed any petition seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any law relating to bankruptcy or insolvency, nor has any such petition been filed against Crown Pointe Seller; (ii) made a general assignment of Crown Pointe Seller’s property

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for the benefit of creditors; or (iii) suffered an appointment of a receiver, master, liquidator or trustee for Crown Pointe Seller or any of its property;

(e)Organizational Documents. Attached hereto as Exhibit B is a true, correct and complete list of all of the organizational documents of Crown Pointe Seller (the “Organizational Documents”).  The Seller has made available to Purchaser true, correct and complete copies of the Organizational Documents, and the Organizational Documents are in full force and effect on the Closing Date.

(f)Contracts. Crown Pointe Seller is not a party to any Contracts, other than Contracts which would be assigned to Purchaser if Crown Pointe Seller were being sold pursuant to the Original Purchase Agreement.

(g)No Employees. Crown Pointe Seller does not employ any personnel.  Crown Pointe Seller is not a party to any employment, collective bargaining or similar agreements or arrangements. Crown Pointe Seller does not maintain, contribute to, sponsor or otherwise have any liability or obligation relating to any employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) which cover or provide benefits to any former employee of Crown Pointe Seller.  Crown Pointe Seller has no liabilities or obligations (whether current, contingent or future) as a result of any event or condition by reason of its affiliation with any “ERISA Affiliate” (defined as any organization which is a member of a controlled group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code).

(h)No Subsidiaries or Other Interests. Crown Pointe Seller does not have any subsidiaries and does not hold any direct or indirect beneficial ownership interest in any corporation, partnership, joint venture, limited liability company or other entity.

(i)First Lien Debt. The First Lien Debt is in full force and effect and JV Seller is the legal holder of the First Lien Debt, free and clear of any and all Liens. JV Seller has made available to Purchaser true and correct copies of all of the loan documents relating to the First Lien Debt (the “First Lien Debt Loan Documents”), including all amendments, modifications, extensions and supplements thereto (all of which loan documents are listed on Exhibit C attached hereto). As of the date hereof, the outstanding principal balance of the First Lien Debt is TWELVE MILLION TWO HUNDRED SEVENTY-FIVE THOUSAND TWO HUNDRED NINETY-SIX AND 50/100 DOLLARS ($12,275,296.50)  and the accrued and unpaid interest under the First Lien Debt ZERO DOLLARS ($0).

(j)Second Lien Debt. JV Seller has made available to Purchaser true and correct copies of all of the loan documents relating to the Second Lien Debt (the “Second Lien Debt Loan Documents”), including all amendments, modifications, extensions and supplements thereto (all of which loan documents are listed on Exhibit C attached hereto). As of the date hereof, the outstanding

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principal balance of the Second Lien Debt is FOUR MILLION DOLLARS ($4,000,000.00) and there are no amounts due and owing under the Second Lien Debt. As of the date hereof, Sellers have not received any written notice of, and to Sellers’ Knowledge, there are no, material defaults under the Second Lien Debt which have not been cured. There exist no verbal agreements between JV Seller or any of its Affiliates on the one hand, and Cathay Bank or any of its Affiliates on the other hand, relating to the Second Lien Debt.

(k)Loan Purchase Option. The Loan Purchase Option is valid, binding and in full force and effect and JV Seller holds the Loan Purchase Option free and clear of any and all Liens. The Non-Recourse Loan Sale Agreement is the only document evidencing or otherwise relating to the Loan Purchase Option and the Non-Recourse Loan Sale Agreement has not been amended, modified, extended or supplemented in any way. JV Seller has made available to Purchaser a true, correct and complete copy of the Non-Recourse Loan Sale Agreement. There exist no verbal agreements between JV Seller or any of its Affiliates on the one hand, and Cathay Bank or any of its Affiliates on the other hand, relating to the Loan Purchase Option.

5.Indemnification. The indemnification provided for in Article XI of the Original Purchase Agreement shall apply with respect to all liabilities of the Crown Pointe Seller that would constitute “Excluded Liabilities’ under the Original Purchase Agreement, and the provisions of Sections 11.4(a) and (b) of the Original Purchase Agreement shall not apply with respect to claims for indemnification with respect to such liabilities (notwithstanding that the same may also be covered by one or more representations contained in the Purchase Agreement).

6.Closing Deliveries.

(a)Deliveries. Except as otherwise provided herein or as would be inconsistent with the provisions hereof, simultaneously with the execution and delivery of this Amendment, the parties shall deliver all of the deliveries with respect to the Crown Pointe Property required by Article VI of the Original Purchase Agreement.

(b)Crown Pointe Deliveries. With respect to the Crown Pointe Property only, Article VI of the Original Purchase Agreement is hereby amended as follows:

(i)Assignment of Membership Interests. Section 6.1 of the Original Purchase Agreement is hereby amended by inserting the following provision as Section 6.1(e): “to the other Party, a duly executed counterpart of an Assignment and Assumption of Membership Interest, transferring the Interest from Holdings to Purchaser (or its designee).”

(ii)Assignment of Second Lien Debt Purchase Option. Section 6.1 is hereby further amended by inserting the following provision as Section 6.1(f): “a duly executed counterpart of an Assignment and Assumption of

5

Purchase Option transferring the Loan Purchase Option from JV Seller to Purchaser (or to Purchaser’s designee).”

(iii)Assignment of Insurance Claims. Section 6.2 is hereby amended by inserting the following provision as Section 6.2(iv): “a duly executed counterpart of an instrument in a form reasonably acceptable to JV Seller, assigning to JV Seller any insurance claims relating to the Crown Pointe Property which would be Excluded Assets under the Original Purchase Agreement.”

(iv)Non-Imputation. Section 6.3(a)(vii) of the Original Purchase Agreement is hereby amended by adding the following language thereto: “and a duly executed affidavit in the form attached hereto as Exhibit D to induce the Title Company to include a so-called non-imputation endorsement with the owner’s policy of title insurance being issued simultaneously with the execution and delivery of this Amendment for the Crown Pointe Property.”

(v)Assignment of First Lien Debt. Section 6.3(a) is hereby further amended by inserting the following provision as Section 6.3(a)(xi): “a duly executed counterpart of (A) an assignment of loan documents, (B) a note allonge, (C) an assignment of deed of trust, and (D) such other instruments and deliveries (including delivery of the original Revised and Restated Promissory Note dated August 1, 2010, and the Allonge dated March 13, 2012) as are necessary in Purchaser’s reasonable judgment to assign the First Lien Loan to Purchaser.”

(vi)Resignations. Section 6.3(a) is hereby further amended by inserting the following provision as Section 6.3(a)(xii): “the resignations of the managers, directors and officers of the Crown Pointe Seller, if any.”

7.Survival of Representations and Warranties. With respect to the representations, warranties and covenants contained in the Purchase Agreement relating to the Crown Pointe Property and to Cordova Estates: (i) the term “Survival Expiration Date” shall mean the date that is six (6) months following the Closing Date, and (ii) Holdings will be deemed a Seller as it relates to the Crown Pointe Property.

8.Release.  Effective as of the Closing, each Seller hereby unconditionally and irrevocably waives any claims, including claims for indemnification under Section 17 of the LLC Agreement (as such term is defined on Exhibit B attached hereto) that such Seller has or may have in the future against the Crown Pointe Seller and releases, on its own behalf and on behalf of its successors and assigns, the Crown Pointe Seller from any and all Actions with respect thereto. Crown Pointe Seller shall have no obligations or liabilities as a Seller under the Purchase Agreement.

9.Waiver.  Purchaser hereby waives any right to obtain an Approved Loan Assignment Approval with respect to the Existing Crown Point Loans and shall have no claims against Sellers arising out of any failure to obtain such Approved Loan Assumption Approval.

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10.Miscellaneous.

(a)Ratification and Confirmation of Purchase Agreement.  This Amendment shall be deemed incorporated into the Purchase Agreement and shall be construed and interpreted as though fully set forth therein. As amended by this Amendment, the terms and provisions of the Purchase Agreement are hereby ratified and confirmed. The term ‘this Agreement’ in the Purchase Agreement shall mean the Original Purchase Agreement as amended by this Amendment. Except as amended and modified herein, the Original Purchase Agreement shall remain in full force and effect. Notwithstanding the foregoing, the provisions of Section 6 of the Closing Agreement, other than those contained in clauses (iv) and (v) thereof (except as would be inconsistent with the provisions hereof) shall be of no further force and effect.

(b)Conflicts.  In the event of any conflict between the provisions of this Amendment and those of the Purchase Agreement, the provisions of this Amendment shall control.

(c)Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, legal representatives, successors and permitted assigns.

(d)Counterparts; Section Headings. This Amendment may be executed in counterparts, each of which shall constitute an original and all of which, taken together, shall constitute but one instrument. The exchange of counterparts of this Amendment among the Parties by means of facsimile transmission or by electronic email transmission (pdf) which shall contain authentic reproductions shall constitute a valid exchange of this Amendment and shall be binding upon the Parties hereto. The headings of the sections of this Amendment are for reference only and are not to be construed as confining or limiting in any way the scope or intent of the provisions hereof.

(e)Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws, and any applicable law of the United States of America.

(f)Unenforceability. In the event that any one or more of the provisions contained in this Amendment shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Amendment, and this Amendment shall be construed as if such invalid, illegal or unenforceable provision had never been incorporated herein or therein, as the case may be.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed the day and year first above written.

Crown Pointe Seller:
BRE/SW Crown Pointe LLC,
a Delaware limited liability company
	By:	/s/ David Roth
		Name:	David Roth
		Title:	Managing Director
JV Seller:
BRE/SW PORTFOLIO LLC,
a Delaware limited liability company
By:	BRE/SW Member LLC,
	a Delaware limited liability company
	By:	/s/ David Roth
		Name:	David Roth
		Title:	Managing Director
Holdings:
BRE/SW Holdings LLC,
a Delaware limited liability company
	By:	/s/ David Roth
		Name:	David Roth
		Title:	Managing Director

[Signatures Continue]

[Signature to First Amendment to Purchase Agreement]

EMERITUS CORPORATION,
a Washington corporation
By:	/s/ Eric Mendelson
	Name:	Eric Mendelson
	Title:	SVP Corporate Development

[Signatures Continue]

[Signature to First Amendment to Purchase Agreement]

HCP, INC.,
a Maryland corporation
By:	/s/ Timothy M. Schoen
	Name:	Timothy M. Schoen
	Title:	Executive Vice President and
		Chief Financial Officer

[Signatures Continue]

[Signature to First Amendment to Purchase Agreement]

SELLERS:

BRE/SW Absaroka LLC

BRE/SW Alpine Court LLC

BRE/SW Alpine Springs LLC

BRE/SW Beacon Pointe LLC

BRE/SW Waterford Bellevue LLC

BRE/SW Brentmoor LLC

BRE/SW Brookside LLC

BRE/SW Buckingham Estates LLC

BRE/SW Cambridge Place LLC

BRE/SW Canterbury Court LLC

BRE/SW Canterbury Gardens LLC

BRE/SW Canyonview Estates LLC

BRE/SW Carriage Inn LLC

BRE/SW Cedar Ridge LLC

BRE/SW Century Fields LLC

BRE/SW Champlin Shores LLC

BRE/SW Chandler Place LLC

BRE/SW Chehalem Springs LLC

BRE/SW Chesterley Court LLC

BRE/SW Chesterley Meadows LLC

BRE/SW Chestnut Lane LLC

BRE/SW Chris Ridge LLC

BRE/SW Churchill LLC

BRE/SW Clearlake LLC

BRE/SW Cliff View LLC

BRE/SW Cordova Estates LLC

BRE/SW Cottage Village LLC

BRE/SW Cottages LLC

BRE/SW Cougar Springs LLC

BRE/SW Courtyard Gardens LLC

BRE/SW Crimson Ridge LLC

BRE/SW Culpepper Place LLC

BRE/SW Dry Creek LLC

BRE/SW Eagle Cove LLC

BRE/SW Eagle Meadows LLC

BRE/SW Eden Estates LLC

BRE/SW Eldorado Heights LLC

BRE/SW Emerald Estates LLC

BRE/SW Emerald Pointe LLC

BRE/SW Englewood Arbor LLC

BRE/SW Fishers Landing LLC

BRE/SW Flint River LLC

[Signature to First Amendment to Purchase Agreement]

BRE/SW Fox River LLC

BRE/SW Grayson View LLC

BRE/SW Hawthorne Inn Greenville LLC

BRE/SW Hawthorne Inn Hilton Head LLC

BRE/SW Heartland Park LLC

BRE/SW Heritage Place LLC

BRE/SW Bridgeport Heritage LLC

BRE/SW Hermiston Terrace LLC

BRE/SW Heron Pointe Cottages LLC

BRE/SW Heron Pointe LLC

BRE/SW Apple Ridge LLC

BRE/SW Hillside LLC

BRE/SW Holiday Lane LLC

BRE/SW La Villa LLC

BRE/SW Lake Pointe LLC

BRE/SW Lake Springs LLC

BRE/SW Lakeside LLC

BRE/SW Lakeside Cottages LLC

BRE/SW Lassen House LLC

BRE/SW Laurel Gardens LLC

BRE/SW Legacy Crossing LLC

BRE/SW Legacy Gardens LLC

BRE/SW Lexington Gardens LLC

BRE/SW Magnolia Gardens LLC

BRE/SW Bluegrass Terrace LLC

BRE/SW Manor House LLC

BRE/SW Maplewood LLC

BRE/SW Meadowlark LLC

BRE/SW Minnetonka LLC

BRE/SW Monroe House LLC

BRE/SW Montclair Park LLC

BRE/SW Moses Lake LLC

BRE/SW Mountain Laurel LLC

BRE/SW Mountain View LLC

BRE/SW Glendale Place LLC

BRE/SW Georgian Place LLC

BRE/SW Northpark Place LLC

BRE/SW Northridge LLC

BRE/SW Oak Tree Village LLC

BRE/SW Oakridge LLC

BRE/SW Orchard Glen LLC

BRE/SW Orchard Park LLC

BRE/SW Osprey Court LLC

BRE/SW Oswego Springs LLC

BRE/SW Azalea Gardens LLC

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BRE/SW Palm Meadows LLC

BRE/SW Palm Meadows Village LLC

BRE/SW Palms LLC

BRE/SW Paradise Valley LLC

BRE/SW Park Avenue LLC

BRE/SW Park Place LLC

BRE/SW Peachtree Village-GA LLC

BRE/SW Peridot LLC

BRE/SW River Plaza LLC

BRE/SW Medallion LLC

BRE/SW Quail Hollow LLC

BRE/SW Quakers Landing LLC

BRE/SW Remington House LLC

BRE/SW River Road LLC

BRE/SW River Valley Landing LLC

BRE/SW Riverstone Terrace LLC

BRE/SW Rose Terrace LLC

BRE/SW Rose Valley LLC

BRE/SW Rose Valley Cottages LLC

BRE/SW Sandia Springs LLC

BRE/SW Sellwood Landing LLC

BRE/SW Sequoia Springs LLC

BRE/SW Sequoia Springs Cottages LLC

BRE/SW Parkway Village LLC

BRE/SW Spring Arbor LLC

BRE/SW Spring Creek LLC

BRE/SW Spring Estates LLC

BRE/SW Spring Meadows Cottages LLC

BRE/SW Spring Mountain LLC

BRE/SW Spring Pointe LLC

BRE/SW Spring Village LLC

BRE/SW Briarwood LLC

BRE/SW Woodside Village LLC

BRE/SW Manchester House LLC

BRE/SW Stone Mountain LLC

BRE/SW Stonebridge LLC

BRE/SW Sugarland Ridge LLC

BRE/SW Sunrise Creek LLC

BRE/SW Sunshine Village LLC

BRE/SW Sweetwater Springs LLC

BRE/SW Jasper Terrace LLC

BRE/SW Oaks LLC

BRE/SW Sun Mountain Plaza LLC

BRE/SW Spring Meadows LLC

BRE/SW Del Ray Villa LLC

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BRE/SW West Park Place LLC

BRE/SW Willow Ridge LLC

BRE/SW Willows at Sherman LLC

BRE/SW Windfield Village LLC

BRE/SW Woodstock Estates LLC

BRE/SW Woodstock Terrace LLC

By:	/s/ David Roth
	Name:	David Roth
	Title:	Managing Director

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EX-10.4

Exhibit 10.4

SEVENTH AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT

This SEVENTH AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT (this “Amendment”) is made and entered into as of February 11, 2013, by and between the parties signatory hereto, as lessors (collectively, “Lessor”) and HCR III Healthcare, LLC, as lessee (“Lessee”).

RECITALS

A.Lessor is the current “Lessor” and Lessee is the current “Lessee” pursuant to that certain Master Lease and Security Agreement dated as of April 7, 2011, as amended by that certain First Amendment to Master Lease and Security Agreement dated as of April 7, 2011, as further amended by that certain Second Amendment to Master Lease and Security Agreement dated as of May 16, 2011, Third Amendment to Master Lease and Security Agreement dated as of January 10, 2012, Fourth Amendment to Master Lease and Security Agreement dated as of April 18, 2012, Fifth Amendment to Master Lease and Security Agreement dated as of May 5, 2012 and Sixth Amendment to Master Lease and Security Agreement dated as of July 30, 2012 (as so amended, the “Master Lease”).  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Master Lease.

B.Lessor and Lessee desire to modify certain terms and provisions of the Master Lease as more particularly provided herein.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows:

1.Changes to Certain Definitions.

(a)The Master Lease is hereby amended by deleting the definition of “Consolidated Adjusted Total Net Debt” contained in Section 2.1 thereof in its entirety and inserting the following definition in lieu thereof:

“Consolidated Adjusted Total Net Debt:  (x) the aggregate principal amount of all Funded Debt of Guarantor and its Subsidiaries at such date, minus cash and Cash Equivalents held by Guarantor and its Subsidiaries on such date, in each case determined on a consolidated basis in accordance with GAAP, plus (y) eight (8) times the total aggregate annual lease payments under this Lease of Guarantor and its Subsidiaries.”

(b)The Master Lease is hereby amended by deleting the definition of “Consolidated EBITDA” contained in Section 2.1 thereof in its entirety and inserting the following definition in lieu thereof:

“Consolidated EBITDA:  With respect to any Person for anyperiod, Consolidated Net Income of such Person and its Subsidiaries for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of:

(a)provision for taxes based on income, profits and/or capital, including, without limitation, federal, foreign, state, franchise, excise and similar taxes and foreign withholding taxes of such Person paid or accrued during such period, including any penalties and interest relating to such taxes;

(b)Consolidated Net Interest Expense of such Person and its Subsidiaries and, to the extent not reflected in such Consolidated Net Interest Expense, any losses on hedging obligations or other derivative instruments entered into in the ordinary course of business for the purpose of hedging interest rate risk, net of interest income and gains on such hedging obligations, amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including commitment, facility letter of credit and administrative fees and charges with respect to the Facilities);

(c)depreciation and amortization expense (including, but not limited to, deferred financing fees and capitalized software expenditures, customer acquisition costs and incentive payments, conversion costs, contract acquisition costs and amortization of unrecognized prior service costs and actuarial gains and losses related to pensions and other post-employment benefits);

(d)amortization or impairment of intangibles (including, but not limited to, goodwill) and organization costs;

(e)any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business and accruals and payments for amounts payable under executive employment agreements in connection with the transactions contemplated under the Purchase Agreement);

(f)any other non-cash charges, expenses or losses (except to the extent such charges, expenses or losses represent an accrual of or reserve for cash expenses in any future period or an amortization of a prepaid cash expense paid in a prior

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period), including in relation to earn outs and similar obligations and any non-cash expenses resulting from the revaluation of inventory (including any impact of changes to inventory valuation policies or methods and changes in capitalization of variances);

(g)restructuring and integration costs or reserves, including, without limitation, any severance costs, costs associated with office and facility openings or closings and consolidation, relocation or integration costs and other non-recurring business optimization and restructuring charges and expenses;

(h)stock-option based and other equity-based compensation expenses;

(i)transaction costs, fees, losses and expenses (including those relating to the transactions contemplated by the Purchase Agreement or this Lease) payable in connection with (1) the sale of Capital Stock, (2) the incurrence of Indebtedness or dispositions, (3) any Restricted Payments, or (4) any acquisition or other investment (in each case whether or not successful);

(j)all fees and expenses paid pursuant to (i) that certain Consulting Services Agreement, by and between HCR ManorCare, Inc. and TC Group V, L.L.C., (ii) that certain Transaction Services Agreement, by and between HCR ManorCare, Inc. and TC Group V, L.L.C., each as in effect on or about April 6, 2011, and each as modified from time to time; and (iii) any other agreement between HCR ManorCare, Inc. or any of its Subsidiaries and any equity holder or any affiliated entity of such equity holder of HCR ManorCare, Inc.;

(k)proceeds from any business interruption insurance (in the case of this clause (k), to the extent not reflected as revenue or income in such statement of such Consolidated Net Income);

(l)the amount of cost savings and other operating improvements and synergies projected by Guarantor in good faith and certified in writing to Lessor to be realized as a result of any acquisition, merger, disposition (including the termination or discontinuance of activities constituting such business) of business entities, properties or assets constituting a division or line of business of any business entity, division or line of business that is the subject of any such acquisition or

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disposition, including any synergies and cost savings (calculated on a pro forma basis as though such cost savings and other operating improvements and synergies had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions to the extent already included in the Consolidated Net Income for such period, provided that (i) Guarantor shall have certified to the Lessor that (A) such cost savings are reasonably anticipated to be realizable within 12 months following such acquisition or disposition and (B) such actions are taken or committed to be taken within 12 months after such acquisition, disposition or operational change and (ii) no cost savings shall be added pursuant to this clause (l) to the extent duplicative of any expenses or charges relating to such cost savings that are included in clause (g) above and clause (o) below with respect to such period;

(m)cash expenses relating to earn outs and similar obligations;

(n)to the extent actually reimbursed, expenses incurred to the extent covered by indemnification provisions in any agreement in connection with a permitted acquisition or other permitted investment;

(o)the amount of cost savings and other operating improvements and synergies reasonably expected to result from any operational change taken or committed to be taken during such period (calculated on a pro forma basis as though such cost savings had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions to the extent already included in the Consolidated Net Income for such period, provided that no cost savings shall be added pursuant to this clause (o) to the extent duplicative of any expenses or charges relating to such cost savings that are included in clauses (l) and (g) above with respect to such period;

(p)the non-cash portion of straight-line rent expense;

(q)payments made to Guarantor or Manor Care, Inc. to pay (i) any taxes which are attributable to Guarantor or Manor Care, Inc. or any of their respective parent companies, (ii) customary fees, salary, bonus, severance and other benefits payable to, and indemnities provided on behalf of, their current and former officers and employees and members of their board of directors, (iii) ordinary course corporate operating expenses and other fees and expenses required to maintain their corporate

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existence, (iv) fees and expenses related to the agreements described in clause (j) above, (v) fees and expenses incurred in connection with any unsuccessful debt or equity offering by Guarantor or Manor Care, Inc. or any of their respective parent companies to the extent that the proceeds of such proceeds were intended to be used for the benefit of Lessee, Guarantor or any of their respective Subsidiaries;

(r)costs of surety bonds in connection with financing activities of such Person and its Subsidiaries;

(s)losses from start-up businesses;

(t)other non-operating expenses (including, without limitation, environmental and asset retirement obligations);

(u)accretion of asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations and FASB Interpretation No. 47, and any similar accounting in prior periods;

(v)the amount of cash payments made in respect of pensions and other post-employment benefits in such period;

(w)charges, losses or expenses to the extent indemnified or insured by a third party as to which the indemnifying or insuring party has not denied liability; and

(x)equity earnings in affiliated companies received in cash by Guarantor or its Subsidiaries,

minus, to the extent reflected as income or a gain in the statement of such Consolidated Net Income for such period, the sum of:

(a)any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business);

(b)any other non-cash income or gains (other than the accrual and/or deferral of revenue in the ordinary course), but excluding any such items (i) in respect of which cash was received in a prior period or will be received in a future period or (ii) which represent the reversal in such period of any accrual of, or cash reserve for, anticipated cash charges in any prior period where such accrual or reserve is no longer required, all as determined on a consolidated basis; and

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(c)cash payments in connection with “straight-line” rent expense which exceed the amount expensed in respect of such rent expense;

provided that for purposes of calculating Consolidated EBITDA of Lessee, Guarantor and their respective Subsidiaries for any period, (A) the Consolidated EBITDA of any Person or property acquired by Lessee, Guarantor or their respective Subsidiaries during such period (assuming any synergies, cost savings and other operating improvements to the extent certified by Guarantor as having been determined in good faith to be reasonably anticipated to be realizable within 18 months following such acquisition), shall be included on a pro forma basis for such period (but assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith or such designation, as the case may be, occurred on the first day of such period), and (B) the Consolidated EBITDA of any Person or property disposed of by Lessee, Guarantor or any of their respective Subsidiaries during such period, shall be excluded for such period (assuming the consummation of such Disposition and the repayment of any Indebtedness in connection therewith or such designation, as the case may be, occurred on the first day of such period).

Notwithstanding the foregoing, Consolidated EBITDA shall be calculated without giving effect to the non-cash effects of purchase accounting or similar adjustments required or permitted by GAAP in connection with any other acquisition or investment occurring prior to the date hereof.

Notwithstanding anything to the contrary herein, the rent and other expenses associated with this Lease or any subleases hereunder shall reduce Consolidated Net Income as used in the calculation of Consolidated EBITDA (with such rent and other expenses being calculated as though such lease has operating lease accounting treatment, irrespective of any accounting treatment or classification of such lease as a capital lease obligation).”

(c)The Master Lease is hereby amended by deleting the definition of “Consolidated EBITDAR” contained in Section 2.1 thereof in its entirety and inserting the following definition in lieu thereof:

“Consolidated EBITDAR:  Consolidated EBITDA plus cash rent payments under this Lease.”

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(d)The Master Lease is hereby amended by deleting the definition of “Consolidated Net Interest Expense” contained in Section 2.1 thereof in its entirety andinserting the following definition in lieu thereof:

“Consolidated Net Interest Expense:  Of any Person for any period, (a) total cash interest expense (including that attributable to obligations under capital leases) of such Person and its Subsidiaries for such period with respect to all outstanding Indebtedness of such Person and its Subsidiaries, minus (b) the sum of (i) total cash interest income of such Person and its Subsidiaries for such period, in each case determined in accordance with GAAP plus (ii) any one time financing fees (to the extent included in such Person’s consolidated interest expense for such period). For purposes of the foregoing, interest expense of any Person shall be determined after giving effect to any net payments made or received by such Person with respect to interest rate hedge agreements (other than early termination payments).”

(e)The Master Lease is hereby amended by deleting the definition of “Fixed Charges” contained in Section 2.1 thereof in its entirety and inserting the following definition in lieu thereof:

“Fixed Charges:  As to any Person and its Subsidiaries, on a consolidated basis, with respect to any period, the sum of, without duplication, (a) all Consolidated Net Interest Expense paid in cash during such period, plus (b) the aggregate cash rental payments under this Lease of Guarantor and its Subsidiaries during such period.”

(f)The Master Lease is hereby amended by deleting the definition of “Funded Debt” contained in Section 2.1 thereof in its entirety and inserting the following definition in lieu thereof :

“Funded Debt:  With respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, and (c) all payment obligations of such Person under any capital leases (other than this Lease or other operating leases given capital lease treatment under GAAP).”

(g)The Master Lease is hereby amended by deleting the definition of “Guarantor” contained in Section 2.1 thereof in its entirety and inserting the following definition in lieu thereof:

“Guarantor:  Collectively, HCR ManorCare, Inc. (successor by merger to HCR Manor Care, LLC and formerly known as HCRMC Operations, LLC), and any present or future guarantor of Lessee’s obligations pursuant to this Lease (each individually, a “Guarantor”).”

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(h)The Master Lease is hereby amended by adding the following definition to Section 2.1 thereof :

“Indebtedness:  Of any Person shall mean, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person for the deferred purchase price of property or services, (d) all guaranteed obligations by such Person of indebtedness of others, (e) all capital lease obligations of such Person, other than any capitalized rent or other capitalized obligation under this Lease, (f) all payments that such Person would have to make in the event of an early termination, on the date indebtedness of such Person is being determined in respect of outstanding hedge agreements (such payments in respect of any hedge agreement with a counterparty being calculated subject to and in accordance with any netting provisions in such hedge agreement) and (g) the principal component of all obligations, contingent or otherwise, of such Person (i) as an account party in respect of letters of credit (other than any letters of credit, bank guarantees or similar instrument in respect of which a back-to-back letter of credit has been issued under or permitted by this Lease) and (ii) in respect of bankers’ acceptances; provided that Indebtedness shall not include (A) trade and other ordinary course payables arising in the ordinary course of business, (B) prepaid or deferred revenue arising in the ordinary course of business, (C) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase price of an asset to satisfy unperformed obligations of the seller of such asset or (D) earn-out obligations until such obligations become a liability on the balance sheet of such Person in accordance with GAAP.  The indebtedness of any Person shall include the Funded Debt of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Funded Debt expressly limits the liability of such Person in respect thereof.”

2.Additional Reporting Requirements.  From and after the date hereof, Lessee shall provide to Lessor the following reports with respect to Guarantor and its respective Subsidiaries:

(a)as soon as available, but in any event not later than thirty-one (31) days after the end of each calendar year, a monthly budget for the following calendar year for the Guarantor, which will include a consolidated balance sheet, a consolidated cash flow, and a consolidated income statement, provided that the consolidated income statement shall be broken out by Guarantor’s business lines;

(b)within twenty (20) days after the end of each calendar month, monthly reports comparing actual results vs. budget by Guarantor’s business line, including relevant operational metrics, including operating expenses in form and substance substantially similar to the Facility level statements Lessee provides under the Master Lease; and

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(c)within twenty (20) days after the end of each calendar month, monthly reports of free cash flow reconciliation (comparing actual results vs. budget) in a format to be mutually agreed upon by Guarantor and Lessor.

All reports and statements required under this Section 2 shall be prepared on an accrual basis consistently maintained throughout the applicable period and shall be subject to the requirements of Section 25.1.3 of the Master Lease.  For the avoidance of doubt, the reports required under this Section 2 shall be in addition to any other reports and statements required to be delivered by Lessee under Section 25.1.2 of the Master Lease and the annual and quarterly financial statements required by Section 25.1.2(a) and (b) of the Master Lease shall be prepared in accordance with GAAP applied on a basis consistently maintained throughout the applicable period.  To the extent that and for so long as (i) MC Operations Investments, Inc. or any other affiliate or subsidiary of HCP, Inc. are shareholders of Guarantor; (ii) Guarantor files with the Securities and Exchange Commission (the “SEC”) an annual report on Form 10-K or a quarterly report on Form 10-Q, as applicable; and (iii) Lessee delivers to Lessor and its Affiliates full copies of Guarantor’s SEC filings, Lessee’s obligations in Sub-sections 2(a)-(c) shall be modified to the extent required to avoid the disclosure of any items which the SEC prohibits to be disclosed by Lessee or Guarantor to Lessor, for any period during which such prohibition shall apply.

In addition, the Master Lease is hereby amended by deleting sub-clause (d) of Section 45.1.7 thereof in its entirety and inserting the following in lieu thereof:  “(d) in connection with reporting of Facility portfolio based performance, other Facility portfolio information and certain credit metrics for Guarantor and its Subsidiaries in filings with Securities and Exchange Commission by Lessor and its Affiliates;”

3.Addition of Property to the Master Lease.

(a)In the event that Lessee shall desire to add any real property (the “Additional Property”) to the Leased Property, Lessee shall, at least forty-five (45) days prior to the date of such proposed addition, provide to Lessor the following:

(i)a written request to Lessor describing the proposed location and use of the Additional Property;

(ii)a pro forma owner’s title insurance policy (“Pro Forma”) showing fee title to the Additional Property vested in HCP Properties, L.P., a Delaware limited partnership, or such other entity as designated by Lessor (“Grantee”), in an amount reasonably acceptable to Lessor, subject to no financial encumbrances (other than tax liens not yet due and payable), and containing the following endorsements (in each case, where and if applicable):  owner’s comprehensive; same as survey; access and entry; separate tax parcel; location; street assessments; zoning; environmental protection lien; subdivision; mechanic’s lien; deletion of arbitration; and other endorsements reasonably requested by Lessor;

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(iii)copies of all underlying documents for any exceptions shown on the Pro Forma;

(iv)an ALTA survey which accurately depicts the Additional Property, certified to Grantee (and such other parties as may be reasonably requested by Lessor) and an affidavit of no change to survey reasonably acceptable to the title company for the purpose of removing the standard survey exception and issuing any survey-related endorsements;

(v)a Phase I environmental report of the Additional Property (completed within the six (6) month period prior to the date of the proposed addition) and any other environmental reports concerning the Additional Property in Lessee’s possession or control or reasonably available to Lessee, in each case, which report(s) shall be certified to Grantee (or the consultant(s) preparing such reports shall issue a reliance letter establishing a relationship between such consultant and Grantee);

(vi)if applicable and requested by Lessor, a property condition report for the Additional Property;

(vii)if applicable and requested by Lessor, a zoning report for the Additional Property (which shall include a zoning letter from the applicable municipal agency, provided that such agency issues such letters);

(viii)copies of all agreements and documents pursuant to which Lessee purchased, or has contracted to purchase, the Additional Property; and

(ix)forms of any conveyance documents (e.g., deeds, bills of sale, etc.) and any other documents required to be executed by Grantee in connection with conveyance of the Additional Property to Grantee (collectively, the “Conveyance Documents”).

(b)Within thirty (30) days following Lessor’s receipt of all of the documents and materials required pursuant to Section 3(a) above, Lessor shall provide written notice to Lessee either approving the addition of the Additional Property to the Leased Property, requesting additional information regarding the Additional Property, or denying the addition of the Additional Property to the Leased Property and setting forth the reasons for such denial.  Lessor’s approval of the addition of the Additional Property to the Leased Property, shall be conditioned on the following:

(x)Lessor’s receipt of an owner’s title policy in the form of the Pro Forma (including all requested endorsements thereto in accordance with the terms hereof) approved by Lessor (“Owner’s Policy”);

(xi)Lessor and Lessee’s execution of an addendum to the Master Lease in the form attached hereto as Exhibit A (the “Addendum”); and

(xii)Lessee’s payment of all costs in connection with the conveyance of the Additional Property and the addition of the Additional Property to the Leased Property, including, but not limited to, the cost of the Owner’s Policy, all recording and escrow costs and any transfer taxes.

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(c)If Lessor shall approve the addition of the Additional Property to the Leased Property, Lessee shall deliver to Lessor:

(xiii)concurrently with the conveyance of the Additional Property to Grantee:  an original of the Addendum executed by Lessee; copies of all Conveyance Documents; and funds to cover the payment of all costs and expenses of Lessor in connection with the conveyance of the Additional Property to Grantee and the addition of the Additional Property to the Leased Property; and

(xiv)promptly upon Lessee’s receipt, a copy of the recorded deed conveying the Additional Property to Grantee and an original of the Owner’s Policy.

(d)The failure by Lessor to respond to Lessee’s written request to approve the addition of the Additional Property (provided that such request also includes all items required to be delivered to Lessor in connection with any such request under Section 3(a) above) within the applicable time period shall constitute Lessor’s deemed disapproval of the addition of the Additional Property to the Leased Property, provided that Lessee shall have the right to resubmit such request together with any additional information subsequently requested by Lessor.

(e)Pursuant to Lessee’s obligations under Section 42.2 of the Master Lease, Lessee hereby agrees to pay all costs and expenses (including, without limitation, attorneys’ fees and expenses) incurred by Lessor in connection with Lessor’s review of any requests to add Additional Property to the Leased Property and the preparation, negotiation and documentation of any documents or agreements in connection therewith (whether or not such requests are approved by Lessor or such Additional Property is added to the Leased Property), which amounts shall constitute Additional Charges under the Master Lease, unless otherwise provided pursuant to Section 3(c)(i).

4.Effect of Amendment. All references in the Master Lease to the “Master Lease” shall be deemed to be references to the Master Lease as amended hereby.

5.Full Force and Effect; Acknowledgement. The Master Lease, as hereby amended, shall remain and continue in full force and effect.

6.Counterparts; Facsimile or Electronically Transmitted Signatures. This Amendment may be executed in any number of counterparts, all of which shall constitute one and the same instrument.  Signatures transmitted by facsimile or other electronic means may be used in place of original signatures on this Amendment, and Lessor and Lessee both intend to be bound by the signatures on the document transmitted by facsimile or such other electronic means.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.

“LESSOR”
HCP PROPERTIES, LP, a Delaware limited partnership
By:	HCP I-B Properties, LLC, a Delaware limited liability company, its General Partner
HCP WEST VIRGINIA PROPERTIES, LLC, a Delaware limited liability company
HCP PROPERTIES OF ALEXANDRIA VA, LLC, a Delaware limited liability company
HCP PROPERTIES OF ARLINGTON VA, LLC, a Delaware limited liability company
HCP PROPERTIES OF MIDWEST CITY OK, LLC, a Delaware limited liability company
HCP PROPERTIES OF OKLAHOMA CITY (NORTHWEST), LLC, a Delaware limited liability company
HCP PROPERTIES OF OKLAHOMA CITY (SOUTHWEST), LLC, a Delaware limited liability company
HCP PROPERTIES OF TULSA OK, LLC, a Delaware limited liability company

S-1

HCP PROPERTIES-ARDEN COURTS OF ANNANDALE VA, LLC, a Delaware limited liability company

HCP PROPERTIES-CHARLESTON OF HANAHAN SC, LLC, a Delaware limited liability company

HCP PROPERTIES-COLUMBIA SC, LLC, a Delaware limited liability company

HCP PROPERTIES-FAIR OAKS OF FAIRFAX VA, LLC, a Delaware limited liability company

HCP PROPERTIES-IMPERIAL OF RICHMOND VA, LLC, a Delaware limited liability company

HCP PROPERTIES-LEXINGTON SC, LLC, a Delaware limited liability company

HCP PROPERTIES-MEDICAL CARE CENTER-LYNCHBURG VA, LLC, a Delaware limited liability company

HCP PROPERTIES-OAKMONT EAST-GREENVILLE SC, LLC, a Delaware limited liability company

HCP PROPERTIES-OAKMONT OF UNION SC, LLC, a Delaware limited liability company

HCP PROPERTIES-OAKMONT WEST-GREENVILLE SC, LLC, a Delaware limited liability company

S-2

HCP PROPERTIES-STRATFORD HALL OF RICHMOND VA, LLC, a Delaware limited liability company
HCP PROPERTIES-WEST ASHLEY-CHARLESTON SC, LLC, a Delaware limited liability company
HCP MARYLAND PROPERTIES, LLC, a Delaware limited liability company
By:	/s/ Susan M. Tate
	Name:	Susan M. Tate
	Title:	Executive Vice President
“LESSEE”
HCR III HEALTHCARE, LLC, a Delaware limited liability company
By:	/s/ Matthew S. Kang
	Name: Matthew S. Kang
	Title: Vice President, Chief Financial Officer

S-3

CONSENT, REAFFIRMATION AND AGREEMENT OF GUARANTOR

Guarantor hereby (i) reaffirms all of its obligations under the Guaranty, (ii) consents to the foregoing Amendment and (iii) agrees that its obligations under the Guaranty shall extend to Lessee’s duties, covenants and obligations pursuant to the Master Lease, as amended pursuant to the foregoing Amendment.

HCR MANORCARE, INC., a Delaware corporation
By:	/s/ Matthew S. Kang
	Name: Matthew S. Kang
	Title: Vice President, Chief Financial Officer

Consent, Reaffirmation and Agreement

EXHIBIT A

Form of Addendum

[Addendum #    ]

ADDENDUM #     TO MASTER LEASE AND SECURITY AGREEMENT

This ADDENDUM #     TO MASTER LEASE AND SECURITY AGREEMENT (this “Addendum”) is made and entered into as of                        , 20    , by and between the parties signatory hereto, as lessors (collectively, “Lessor”) and HCR III Healthcare, LLC, as lessee (“Lessee”).

RECITALS

A.            Lessor is the current “Lessor” and Lessee is the current “Lessee” pursuant to that certain Master Lease and Security Agreement dated as of April 7, 2011 (as the same may have been amended, restated or otherwise modified prior to the date hereof, the “Master Lease”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Master Lease.

B.            Lessee’s obligations under the Master Lease are guaranteed by HCR ManorCare, Inc., a Delaware corporation, successor in interest to HCR ManorCare, LLC, a Delaware limited liability company, pursuant to that certain Guaranty of Obligations dated as of April 7, 2011 (as the same may have been or may hereafter be further amended, modified or reaffirmed from time to time in accordance with the terms thereof, the “Guaranty”).

C.            Pursuant to Section 3 of that certain Seventh Amendment to Master Lease and Security Agreement, dated as of December     , 2012 (the “Seventh Amendment”), by and between Lessor and Lessee, Lessor and Lessee desire to add the real property more particularly described on Exhibit A attached hereto (the “New Property”) to the Leased Property under the Master Lease.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows:

Exhibit A - 1

1.             Lessee’s Representations and Warranties.  Lessee hereby represents and warrants to Lessor that Lessee has delivered to Lessor the materials and documentation required pursuant to Section 3(a) of the Seventh Amendment and that, to Lessee’s knowledge, (i) all such materials and documentation were true, correct and complete at the time delivered and (ii) there have been no changes affecting any such materials or documentation or any information disclosed thereby, that would interfere with or materially adversely affect the consummation of the transactions contemplatedhereby, that have not been previously disclosed by Lessee to Lessor in writing.

2.             Additional Property. The Master Lease is hereby amended to modify the “Leased Property” to add the New Property thereto and Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, as part of the Leased Property, all of Lessor’s right, title and interest in and to the New Property, including any improvements currently and to be located thereon, subject to all of the terms, conditions and provisions of the Master Lease, as it is hereby, and may be hereafter, amended, supplemented, restated or otherwise modified.

3.             Effect of Addendum. All references in the Master Lease to the “Master Lease” shall be deemed to be references to the Master Lease as amended hereby.

4.             Full Force and Effect; Acknowledgement. The Master Lease, as hereby amended, shall remain and continue in full force and effect.

5.             Counterparts; Facsimile or Electronically Transmitted Signatures. This Addendum may be executed in any number of counterparts, all of which shall constitute one and the same instrument. Signatures transmitted by facsimile or other electronic means may be used in place of original signatures on this Addendum, and Lessor and Lessee both intend to be bound by the signatures on the document transmitted by facsimile or such other electronic means.

6.             Fees and Costs. Pursuant to Lessee’s obligations under Section 42.2 of the Master Lease, Lessee hereby agrees to pay all of Lessor’s actual out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and documentation of this Addendum, which amounts shall constitute Additional Charges under the Master Lease.

[NO FURTHER TEXT ON THIS PAGE]

Consent, Reaffirmation and Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed as of the day and year first written above.

“LESSOR”
HCP PROPERTIES, LP, a Delaware limited partnership
By:	HCP I-B Properties, LLC, a Delaware limited liability company, its General Partner
HCP WEST VIRGINIA PROPERTIES, LLC, a Delaware limited liability company
HCP PROPERTIES OF ALEXANDRIA VA, LLC, a Delaware limited liability company
HCP PROPERTIES OF ARLINGTON VA, LLC, a Delaware limited liability company
HCP PROPERTIES OF MIDWEST CITY OK, LLC, a Delaware limited liability company
HCP PROPERTIES OF OKLAHOMA CITY (NORTHWEST), LLC, a Delaware limited liability company
HCP PROPERTIES OF OKLAHOMA CITY (SOUTHWEST), LLC, a Delaware limited liability company
HCP PROPERTIES OF TULSA OK, LLC, a Delaware limited liability company

S-1

HCP PROPERTIES-ARDEN COURTS OF ANNANDALE VA, LLC, a Delaware limited liability company

HCP PROPERTIES-CHARLESTON OF HANAHAN SC, LLC, a Delaware limited liability company

HCP PROPERTIES-COLUMBIA SC, LLC, a Delaware limited liability company

HCP PROPERTIES-FAIR OAKS OF FAIRFAX VA, LLC, a Delaware limited liability company

HCP PROPERTIES-IMPERIAL OF RICHMOND VA, LLC, a Delaware limited liability company

HCP PROPERTIES-LEXINGTON SC, LLC, a Delaware limited liability company

HCP PROPERTIES-MEDICAL CARE CENTER-LYNCHBURG VA, LLC, a Delaware limited liability company

HCP PROPERTIES-OAKMONT EAST-GREENVILLE SC, LLC, a Delaware limited liability company

HCP PROPERTIES-OAKMONT OF UNION SC, LLC, a Delaware limited liability company

HCP PROPERTIES-OAKMONT WEST-GREENVILLE SC, LLC, a Delaware limited liability company

Exhibit A - S-2

HCP PROPERTIES-STRATFORD HALL OF RICHMOND VA, LLC, a Delaware limited liability company
HCP PROPERTIES-WEST ASHLEY-CHARLESTON SC, LLC, a Delaware limited liability company
HCP MARYLAND PROPERTIES, LLC, a Delaware limited liability company
By:
	Name:
	Title:
“LESSEE”
HCR III HEALTHCARE, LLC, a Delaware limited liability company
By:
	Name:
	Title:

Exhibit A - S-3

[Addendum #    ]

CONSENT, REAFFIRMATION AND AGREEMENT OF GUARANTOR

Guarantor hereby (i) reaffirms all of its obligations under the Guaranty, (ii) consents to the foregoing Addendum and (iii) agrees that its obligations under the Guaranty shall extend to Lessee’s duties, covenants and obligations pursuant to the Master Lease, as amended or modified pursuant to the foregoing Addendum.

HCR MANORCARE, INC., a Delaware corporation
By:
	Name:
	Title:

Exhibit A - Consent, Reaffirmation and Agreement

EXHIBIT A

Legal Description of Additional Property

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: May 2, 2013	/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: May 2, 2013	/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 March 31, 2013 (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: May 2, 2013	/s/ JAMES F. FLAHERTY III
	James F. Flaherty III
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

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

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

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

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended March 31, 2013 (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: May 2, 2013	/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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Segment Disclosures (Tables)

3 Months Ended

Mar. 31, 2013

Segment Disclosures

Information of revenue of reportable segment

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

For the three months ended March 31, 2013:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2) (Cash NOI)
Senior housing	$	149,091	$	36,891	$	2,401	$	—	$	188,383	$	161,591	$	143,193
Post-acute/skilled	136,103		—		9,985		—		146,088		135,456		116,158
Life science	73,330		—		—		1		73,331		59,947		56,340
Medical office	87,255		—		—		442		87,697		52,959		51,671
Hospital	20,770		—		—		—		20,770		19,882		19,432
Total	$	466,549	$	36,891	$	12,386	$	443	$	516,269	$	429,835	$	386,794

For the three months ended March 31, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2) (Cash NOI)
Senior housing	$	113,500	$	36,179	$	282	$	—	$	149,961	$	128,065	$	114,648
Post-acute/skilled	133,673		—		280		—		133,953		133,473		112,848
Life science	71,830		—		—		1		71,831		58,946		59,104
Medical office	79,955		—		—		492		80,447		48,250		46,921
Hospital	19,378		—		257		—		19,635		18,448		17,893
Total	$	418,336	$	36,179	$	819	$	493	$	455,827	$	387,182	$	351,414

(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, 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 of reported net income to NOI and adjusted NOI

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

	Three Months Ended March 31,
	2013			2012
Net income	$	233,784		$	196,564
Interest income	(12,386		)	(819		)
Investment management fee income	(443		)	(493		)
Interest expense	109,351			103,752
Depreciation and amortization	104,717			85,280
General and administrative	20,744			20,089
Other income, net	(12,012		)	(436		)
Income taxes	881			(709		)
Equity income from unconsolidated joint ventures	(14,801		)	(13,675		)
Total discontinued operations	—			(2,371		)
NOI	429,835			387,182
Straight-line rents	(18,793		)	(9,927		)
DFL accretion	(24,170		)	(25,622		)
Amortization of above and below market lease intangibles, net	(78		)	(697		)
Lease termination fees	—			(148		)
NOI adjustments related to discontinued operations	—			626
Adjusted NOI	$	386,794		$	351,414

Reconciliation of company's assets to total assets

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

	March 31,			December 31,
Segments	2013			2012
Senior housing	$	7,739,727		$	7,658,612
Post-acute/skilled nursing	6,098,982			6,080,826
Life science	3,943,454			3,932,397
Medical office	2,664,053			2,661,394
Hospital	729,826			724,999
Gross segment assets	21,176,042			21,058,228
Accumulated depreciation and amortization	(2,079,778		)	(1,978,597		)
Net segment assets	19,096,264			19,079,631
Other non-segment assets	636,467			835,924
Total assets	$	19,732,731		$	19,915,555

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Debt (Details)				3 Months Ended	0 Months Ended			0 Months Ended	3 Months Ended			0 Months Ended					3 Months Ended
	Mar. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Mar. 31, 2013 Line of Credit and Term Loan USD ($)	Mar. 31, 2013 Bank Line of Credit USD ($)	Jul. 30, 2012 2012 Term Loan	Mar. 31, 2013 2012 Term Loan USD ($)	Mar. 31, 2013 2012 Term Loan GBP (£)	Jul. 30, 2012 2012 Term Loan Interest-rate swap contracts	Mar. 31, 2013 Senior Unsecured Notes USD ($)	Mar. 31, 2013 Senior Unsecured Notes Minimum	Mar. 31, 2013 Senior Unsecured Notes Maximum	Jun. 25, 2012 Senior Unsecured, 6.45% notes due 2012 USD ($)	Jan. 23, 2012 Senior Unsecured, 3.75% notes due 2019 USD ($)	Jul. 23, 2012 Senior Unsecured, 3.15% notes due 2022 USD ($)	Nov. 19, 2012 Senior Unsecured, 2.625% notes due 2020 USD ($)	Feb. 28, 2013 Senior Unsecured, 5.625% USD ($)	Mar. 31, 2013 Mortgage Debt USD ($) item	Mar. 31, 2013 Mortgage Debt Minimum	Mar. 31, 2013 Mortgage Debt Maximum	Mar. 31, 2013 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
Debt instrument, variable rate basis				LIBOR	GBP LIBOR
Debt instrument, basis spread on variable rate (as a percent)				1.075%	1.20%
Debt instrument, facility fee (as a percent)				0.175%
Line of credit facility additional aggregate amount, maximum				500,000,000
Line of credit facility, amount outstanding				14,000,000
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			9,200,000,000
Debt instrument, effective interest rate (as a percent)													3.80%	3.30%	2.70%
Weighted-average interest rate (as a percent)									5.10%								6.13%
Weighted-average maturity									6 years								3 years
Issuance of senior unsecured notes													450,000,000	300,000,000	800,000,000
Debt issuance price as a percentage of principal amount													99.50%	98.90%	99.70%
Net proceeds from issuance of senior unsecured notes													444,000,000	294,000,000	793,000,000
Repayment of senior unsecured notes												250,000,000				150,000,000
Stated interest rate (as a percent)										1.25%	6.98%	6.45%	3.75%	3.15%	2.625%	5.625%		1.54%	8.69%
2013 (Nine months)	683,104,000								400,000,000								283,104,000
2014	667,221,000								487,000,000								180,221,000
2015	708,611,000								400,000,000								308,611,000
2016	1,414,154,000			14,000,000		208,213,000			900,000,000								291,941,000
2017	1,300,698,000								750,000,000								550,698,000
Thereafter	3,723,468,000								3,650,000,000								73,468,000
Debt instrument principal outstanding, total	8,497,256,000			14,000,000		208,213,000			6,587,000,000								1,688,043,000
(Discounts) and premiums, net	(30,502,000)								(23,251,000)								(7,251,000)
Debt instruments, carrying amount	8,466,754,000			14,000,000		208,213,000	136,900,000		6,563,749,000								1,680,792,000
Maturity period of debt instruments					4 years
Term of the interest rate swap agreement								4 years
Debt instrument, fixed interest rate (as a percent)								1.81%
Number of healthcare facilities used to secure debt																	139
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	$ 78,836,000	$ 81,958,000																		$ 79,000,000
Number of CCRC issuing life care bonds																				2
Non-interest bearing occupancy fee deposits																				2

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Dispositions of Real Estate and Discontinued Operations (Details) (USD $)	3 Months Ended
	Mar. 31, 2013 item	Mar. 31, 2012 item
Dispositions of Real Estate and Land
Number of properties held for sale	0	3
Carrying value of properties classified as held for sale		$ 98,000,000
Operating income from discontinued operations
Rental and related revenues		3,430,000
Depreciation and amortization expenses		2,996,000
Operating expenses		18,000
Other expense, net		901,000
Net loss before gain on sales of real estate		(485,000)
Gain on sales of real estate, net of income taxes		2,856,000
Number of properties included in discontinued operations		4
Medical office
Dispositions of Real Estate and Land
Total consideration for disposition of real estate		$ 7,000,000

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Commitments and Contingencies (Details) (USD $)	3 Months Ended						3 Months Ended			3 Months Ended					3 Months Ended			12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012	Dec. 31, 2012		Dec. 31, 2011	Mar. 31, 2013 HCR ManorCare	Mar. 31, 2012 HCR ManorCare	Dec. 31, 2012 HCR ManorCare	Mar. 31, 2013 Senior housing	Mar. 31, 2012 Senior housing	Mar. 31, 2013 Senior housing Brookdale Senior Living item	Mar. 31, 2012 Senior housing Brookdale Senior Living	Dec. 31, 2012 Senior housing Brookdale Senior Living item	Mar. 31, 2013 Post-acute/skilled	Mar. 31, 2012 Post-acute/skilled	Mar. 31, 2013 Gross Assets Operators HCR ManorCare	Dec. 31, 2012 Gross Assets Operators HCR ManorCare	Mar. 31, 2013 Gross Assets Operators Brookdale Senior Living	Dec. 31, 2012 Gross Assets Operators Brookdale Senior Living	Mar. 31, 2013 Gross Assets Operators Emeritus	Dec. 31, 2012 Gross Assets Operators Emeritus	Mar. 31, 2013 Gross Assets Operators Sunrise Senior Living	Dec. 31, 2012 Gross Assets Operators Sunrise Senior Living	Mar. 31, 2013 Gross Assets Operators Senior housing HCR ManorCare	Dec. 31, 2012 Gross Assets Operators Senior housing HCR ManorCare	Mar. 31, 2013 Gross Assets Operators Senior housing Brookdale Senior Living	Dec. 31, 2012 Gross Assets Operators Senior housing Brookdale Senior Living	Mar. 31, 2013 Gross Assets Operators Senior housing Emeritus	Dec. 31, 2012 Gross Assets Operators Senior housing Emeritus	Mar. 31, 2013 Gross Assets Operators Senior housing Sunrise Senior Living	Dec. 31, 2012 Gross Assets Operators Senior housing Sunrise Senior Living	Mar. 31, 2013 Gross Assets Operators Post-acute/skilled HCR ManorCare	Dec. 31, 2012 Gross Assets Operators Post-acute/skilled HCR ManorCare	Mar. 31, 2013 Revenue Operators HCR ManorCare	Mar. 31, 2012 Revenue Operators HCR ManorCare	Mar. 31, 2013 Revenue Operators Brookdale Senior Living	Mar. 31, 2012 Revenue Operators Brookdale Senior Living	Mar. 31, 2013 Revenue Operators Emeritus	Mar. 31, 2012 Revenue Operators Emeritus	Mar. 31, 2013 Revenue Operators Sunrise Senior Living	Mar. 31, 2012 Revenue Operators Sunrise Senior Living	Mar. 31, 2013 Revenue Operators Senior housing HCR ManorCare	Mar. 31, 2012 Revenue Operators Senior housing HCR ManorCare	Mar. 31, 2013 Revenue Operators Senior housing Brookdale Senior Living	Mar. 31, 2012 Revenue Operators Senior housing Brookdale Senior Living	Mar. 31, 2013 Revenue Operators Senior housing Emeritus	Mar. 31, 2012 Revenue Operators Senior housing Emeritus	Mar. 31, 2013 Revenue Operators Senior housing Sunrise Senior Living	Mar. 31, 2012 Revenue Operators Senior housing Sunrise Senior Living	Mar. 31, 2013 Revenue Operators Post-acute/skilled HCR ManorCare	Mar. 31, 2012 Revenue Operators Post-acute/skilled HCR ManorCare
Concentration of Credit Risk
Concentration risk (as a percent)																	32.00%	31.00%	4.00%	4.00%	14.00%	13.00%	7.00%	7.00%	11.00%	11.00%	10.00%	11.00%	35.00%	35.00%	17.00%	17.00%	89.00%	89.00%	28.00%	31.00%	4.00%	5.00%	13.00%	7.00%	5.00%	5.00%	10.00%	12.00%	12.00%	14.00%	35.00%	21.00%	13.00%	16.00%	87.00%	93.00%
Concentration risk, assets												$ 700,000,000		$ 692,000,000
Concentration risk, revenue												37,000,000	35,000,000
Number of senior living communities operated in a RIDEA structure												21		21
Percentage of operator assets to segment assets after inclusion of assets under RIDEA structure																											20.00%	8.00%
Percentage of operator assets to total entity assets after inclusion of assets under RIDEA structure																			20.00%	8.00%
Percentage of operator revenue to segment revenue after inclusion of revenue under RIDEA structure																																													31.00%	37.00%
Percentage of operator revenue to total entity revenue after inclusion of revenue under RIDEA structure																																					11.00%	12.00%
Balance Sheets:
Real estate and other property, net	10,877,680,000			10,885,027,000			3,030,700,000		3,046,600,000
Cash and cash equivalents	47,547,000		347,425,000				157,800,000	161,900,000
Deferred income taxes							1,622,300,000		1,627,100,000
Goodwill and intangible assets, net							3,243,700,000		3,243,800,000
Other assets, net	776,853,000			788,520,000			778,000,000		754,500,000
Total assets	19,732,731,000	[1]		19,915,555,000	[1]		8,832,500,000		8,792,500,000
Debt and financing obligations							6,348,700,000		6,374,600,000
Accounts payable and accrued liabilities	238,583,000			293,994,000			1,073,700,000		1,019,800,000
Total liabilities	8,950,672,000	[2]		9,161,778,000	[2]		7,422,400,000		7,394,400,000
Redeemable preferred stock							2,100,000		2,100,000
Total equity	10,782,059,000		9,309,962,000	10,753,777,000		9,220,622,000	1,408,000,000		1,396,000,000
Total liabilities and equity	19,732,731,000			19,915,555,000			8,832,500,000		8,792,500,000
Revenues:
Revenues	516,269,000		455,827,000				1,068,700,000	1,041,200,000		188,383,000	149,961,000				146,088,000	133,953,000
Costs and expenses:
Operating, general and administrative							912,400,000	885,400,000
Depreciation and amortization	104,717,000		85,280,000				37,300,000	42,000,000
Interest expense	109,351,000		103,752,000				104,400,000	106,300,000
Total costs and expenses	308,417,000		276,454,000				1,054,100,000	1,033,700,000
Other income, net	12,012,000		436,000				700,000	1,700,000
Income before income taxes and equity income from unconsolidated joint ventures	219,864,000		179,809,000				15,300,000	9,200,000
Income taxes and equity income from unconsolidated joint ventures							(3,600,000)	(2,900,000)
Net income	233,784,000		196,564,000				11,700,000	6,300,000
Statements of Cash Flows:
Net cash provided by operating activities	214,350,000		186,468,000				88,600,000	22,100,000
Cash flows from investing activities:
Acquisitions of property and equipment							(21,200,000)	(24,900,000)
Purchase of securities and other							(4,100,000)	(2,200,000)
Net cash used in investing activities	(57,360,000)		(31,146,000)				(25,300,000)	(27,100,000)
Cash flows from financing activities:
Repayments of debt and financing obligations							(26,000,000)	(19,600,000)
Net increase (decrease) in cash and cash equivalents	(200,126,000)		313,919,000				37,300,000	(24,600,000)
Cash and cash equivalents, beginning of period	247,673,000		33,506,000				120,500,000	186,500,000
Cash and cash equivalents, end of period	47,547,000		347,425,000				157,800,000	161,900,000
Credit Enhancement Guarantee
Third party debt collateralized by facilities, debt amount (maturing in May 1, 2025)	116,000,000
Third party debt collateralized by facilities, asset carrying amount (maturing in May 1, 2025)	$ 375,000,000

[1] The Company's consolidated total assets at March 31, 2013 and December 31, 2012, include assets of certain variable interest entities ("VIEs") that can only be used to settle the liabilities of those VIEs as follows: accounts receivable, net, $2 million in each period presented; cash and cash equivalents, $10 million in each period presented; and other assets, net, $3 million and $2 million, respectively. See Note 16 to the Condensed Consolidated Financial Statements for additional information.

[2] The Company's consolidated total liabilities at March 31, 2013 and December 31, 2012, include liabilities of certain VIEs for which the VIE creditors do not have recourse to HCP, Inc. as follows: other debt, $0.2 million in each period presented; accounts payable and accrued liabilities, $15 million and $14 million, respectively; and deferred revenue, $2 million in each period presented. See Note 16 to the Condensed Consolidated Financial Statements for additional information.

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Business (Details)	3 Months Ended
	Mar. 31, 2013 item
Business
Number of reportable segments	5
Number of products in reportable segment	5

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Loans Receivable (Tables)

3 Months Ended

Mar. 31, 2013

Loans Receivable

Schedule of loans receivable

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

	March 31, 2013								December 31, 2012
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine	$	—	$	145,150		$	145,150		$	—	$	145,150		$	145,150
Other	163,008		—			163,008			147,264		—			147,264
Unamortized discounts, fees and costs	—		(2,878		)	(2,878		)	—		(2,974		)	(2,974		)
Allowance for loan losses	—		(13,410		)	(13,410		)	—		(13,410		)	(13,410		)
	$	163,008	$	128,862		$	291,870		$	147,264	$	128,766		$	276,030

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Segment Disclosures (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 item	Mar. 31, 2012
Segment reporting information, revenues
Number of reportable segments	5
Intersegment sales or transfers	$ 0	$ 0
Rental Revenues	466,549	418,336
Resident Fees and Services	36,891	36,179
Interest Income	12,386	819
Investment Management Fee Income	443	493
Total revenues	516,269	455,827
NOI	429,835	387,182
Adjusted NOI (Cash NOI)	386,794	351,414
Senior housing
Segment reporting information, revenues
Rental Revenues	149,091	113,500
Resident Fees and Services	36,891	36,179
Interest Income	2,401	282
Total revenues	188,383	149,961
NOI	161,591	128,065
Adjusted NOI (Cash NOI)	143,193	114,648
Post-acute/skilled
Segment reporting information, revenues
Rental Revenues	136,103	133,673
Interest Income	9,985	280
Total revenues	146,088	133,953
NOI	135,456	133,473
Adjusted NOI (Cash NOI)	116,158	112,848
Life science
Segment reporting information, revenues
Rental Revenues	73,330	71,830
Investment Management Fee Income	1	1
Total revenues	73,331	71,831
NOI	59,947	58,946
Adjusted NOI (Cash NOI)	56,340	59,104
Medical office
Segment reporting information, revenues
Rental Revenues	87,255	79,955
Investment Management Fee Income	442	492
Total revenues	87,697	80,447
NOI	52,959	48,250
Adjusted NOI (Cash NOI)	51,671	46,921
Hospital
Segment reporting information, revenues
Rental Revenues	20,770	19,378
Interest Income		257
Total revenues	20,770	19,635
NOI	19,882	18,448
Adjusted NOI (Cash NOI)	$ 19,432	$ 17,893

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Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Measurements

Fair Value Measurements

(17) Fair Value Measurements

The following table illustrates the Company’s financial assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets. Recognized gains and losses are recorded in other income, net on the Company’s condensed consolidated statements of income. During the three months ended March 31, 2013, 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 March 31, 2013 follow (in thousands):

Financial Instrument	Fair Value			Level 2			Level 3
Currency swap asset(1)	$	2,490		$	2,490		$	—
Interest-rate swap liabilities (1)	(12,421		)	(12,421		)	—
Warrants(1)	775			—			775
	$	(9,156	)	$	(9,931	)	$	775

(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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Loans Receivable (Details) (USD $)										1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2013 Real Estate Secured	Dec. 31, 2012 Real Estate Secured	Mar. 31, 2013 Other Secured	Dec. 31, 2012 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	Jul. 31, 2012 Tandem Health Care Loan Maximum	Mar. 31, 2012 Delphis	Dec. 31, 2012 Delphis item	Mar. 31, 2013 Delphis
Loans receivable:
Mezzanine	$ 145,150,000	$ 145,150,000			$ 145,150,000	$ 145,150,000
Loan receivable, other	163,008,000	147,264,000	163,008,000	147,264,000				100,000,000	105,000,000	205,000,000
Unamortized discounts, fees and costs	(2,878,000)	(2,974,000)			(2,878,000)	(2,974,000)
Allowance for loan losses	(13,410,000)	(13,410,000)			(13,410,000)	(13,410,000)
Loans receivable, net	291,870,000	276,030,000	163,008,000	147,264,000	128,862,000	128,766,000
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
Distribution of fund to guarantor												1,500,000
Cash payment received											4,800,000
Legal expenses											500,000
Other consideration received											2,100,000
Proceeds from guarantor											6,900,000
Proceeds from sale of collateral asset												38,100,000
Number of collateral primary assets sold												2
Loans receivable, net reported amount												$ 30,700,000	$ 30,700,000

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Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2013

Variable Interest Entities

Variable Interest Entities

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 March 31, 2013 (in thousands):

VIE Type	Maximum Loss Exposure(1)		Asset/Liability Type	Carrying Amount
VIE tenants—operating leases	$	1,397,774	Lease intangibles, net and straight-line rent receivables	$	615,655
VIE tenants—DFLs	911,051		Net investment in DFLs	911,051
Loan—senior secured	30,652		Loans receivable, net	30,652

(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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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies

Schedule of concentration of credit risk by segments

Segment Concentrations:

	Percentage of Senior Housing Gross Assets				Percentage of Senior Housing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
Emeritus	35	%	35	%	35	%	21	%
Sunrise Senior Living (“Sunrise”)(1)	17		17		13		16
HCR ManorCare	11		11		10		12
Brookdale Senior Living (“Brookdale”)(2)	10		11		12		14

	Percentage of Post-Acute/ Skilled Nursing Gross Assets				Percentage of Post-Acute/ Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
HCR ManorCare	89	%	89	%	87	%	93	%

Total Company Concentrations:

	Percentage of Total Company Gross Assets				Percentage of Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
HCR ManorCare	32	%	31	%	28	%	31	%
Emeritus	14		13		13		7
Sunrise(1)	7		7		5		5
Brookdale(2)	4		4		4		5

(1) 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.

(2) At March 31, 2013 and December 31, 2012, Brookdale percentages exclude $700 million and $692 million, respectively, of senior housing assets related to 21 senior housing facilities that Brookdale operates 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 20% and 8%, respectively, at both March 31, 2013 and December 31, 2012. For the three months ended March 31, 2013 and 2012, Brookdale percentages exclude $37 million and $35 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 31% and 11% respectively, for the three months ended March 31, 2013. Assuming that these revenues were attributable to Brookdale, the percentage of segment and total revenues for Brookdale would be 37% and 12% respectively, for the three months ended March 31, 2012.

Schedule of HCR ManorCare's summarized condensed consolidated financial information

HCR ManorCare’s summarized condensed consolidated financial information follows (in millions):

	March 31,		December 31,
	2013		2012
Real estate and other property, net	$	3,030.7	$	3,046.6
Cash and cash equivalents	157.8		120.5
Deferred income taxes	1,622.3		1,627.1
Goodwill and intangible assets, net	3,243.7		3,243.8
Other assets, net	778.0		754.5
Total assets	$	8,832.5	$	8,792.5
Debt and financing obligations	$	6,348.7	$	6,374.6
Accounts payable and accrued liabilities	1,073.7		1,019.8
Total liabilities	7,422.4		7,394.4
Redeemable preferred stock	2.1		2.1
Total equity	1,408.0		1,396.0
Total liabilities and equity	$	8,832.5	$	8,792.5

	Three Months Ended March 31,
	2013			2012
Revenues:
Revenues	$	1,068.7		$	1,041.2
Costs and expenses:
Operating, general and administrative	912.4			885.4
Depreciation and amortization	37.3			42.0
Interest expense	104.4			106.3
Total costs and expenses	1,054.1			1,033.7
Other income, net	0.7			1.7
Income before income taxes and equity income from unconsolidated joint ventures	15.3			9.2
Income taxes and equity income from unconsolidated joint ventures	(3.6		)	(2.9		)
Net income	$	11.7		$	6.3

	Three Months Ended March 31,
	2013			2012
Net cash provided by operating activities	$	88.6		$	22.1
Cash flows from investing activities:
Acquisitions of property and equipment	(21.2		)	(24.9		)
Purchase of securities and other	(4.1		)	(2.2		)
Net cash used in investing activities	(25.3		)	(27.1		)
Cash flows from financing activities:
Repayments of debt and financing obligations	(26.0		)	(19.6		)
Net increase (decrease) in cash and cash equivalents	37.3			(24.6		)
Cash and cash equivalents, beginning of period	120.5			186.5
Cash and cash equivalents, end of period	$	157.8		$	161.9

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Intangibles (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Intangibles
Intangible assets, gross	$ 797	$ 794
Intangible assets, accumulated amortization	259	241
Intangibles liabilities, below market lease and above market ground lease	199	199
Intangible liabilities, below market lease and above market ground lease, accumulated amortization	$ 97	$ 93

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Supplemental Cash Flow Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Supplemental cash flow information:
Interest paid, net of capitalized interest	$ 154,127	$ 137,001
Income taxes paid	75	142
Capitalized interest	4,111	6,683
Supplemental schedule of non-cash investing activities:
Accrued construction costs	15,029	14,589
Supplemental schedule of non-cash financing activities:
Preferred stock redemption accrual		296,896
Vesting of restricted stock units	17	314
Cancellation of restricted stock	(6)	(1)
Conversion of non-managing member units into common stock	2,179	1,034
Mortgages and other liabilities assumed with real estate acquisitions	12,728
Unrealized gains on available-for-sale securities and derivatives designated as cash flow hedges, net	$ 6,675	$ 1,580

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Real Estate Property Investments (Details) (USD $)	3 Months Ended			6 Months Ended
	Mar. 31, 2013 item	Dec. 31, 2012 item	Mar. 31, 2012	Mar. 31, 2013 item
Senior housing, life science and medical office
Acquisition
Payments to acquire productive assets	$ 42,000,000		$ 30,000,000
Blackstone JV | Senior housing
Acquisition
Number of senior housing communities	4	129		133
Number of states where acquired senior housing communities are located	29			29
Number of communities that are stabilized	99			99
Number of communities currently lease-up	34			34
Number of stages for acquisition to close				2
Acquistion of senior housing	38,000,000	1,700,000,000		38,000,000
Cash consideration	1,730,000,000			1,730,000,000
Liabilities assumed	13,000,000			13,000,000
Cash consideration paid to acquire real estate	1,570,000,000			1,570,000,000
Cash consideration paid to acquire intangible assets	174,000,000			174,000,000
Consideration, Debt and Other Liabilities Assumed	4,000,000			4,000,000
Unaudited pro forma consolidated results of operations
Revenues			482,277,000
Net income			204,408,000
Net income applicable to HCP, Inc.			201,224,000
Basic earnings per common share (in dollars per share)	$ 0.43
Diluted earnings per common share (in dollars per share)	$ 0.43
Blackstone JV | Senior housing | Emeritus Corporation
Acquisition
Number of individual leases				5
Number of properties operated pursuant to a new triple-net master lease				128
Rental and related revenues	105,800,000			105,800,000
Rate of increase in rent receivable per year on average over the initial lease term (as a percent)				3.70%
Initial lease term with Emeritus Corporation				5 years
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			3
Number of extension options with Emeritus Corporation				2
Blackstone JV | Senior housing | Emeritus Corporation | Real Estate Secured
Acquisition
Number of senior housing communities				9
Principal amount of secured debt	$ 52,000,000			$ 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)				6.80%
Blackstone JV | Senior housing | Minimum | Emeritus Corporation
Acquisition
Initial available term of asset pools				14 years
Total initial available term of asset pools				30 years
Blackstone JV | Senior housing | Maximum | Emeritus Corporation
Acquisition
Initial available term of asset pools				16 years
Total initial available term of asset pools				35 years
Blackstone JV | Senior housing | Assisted living
Acquisition
Percentage of units of real estate property				61.00%
Blackstone JV | Senior housing | Independent living
Acquisition
Percentage of units of real estate property				25.00%
Blackstone JV | Senior housing | Memory care
Acquisition
Percentage of units of real estate property				13.00%
Blackstone JV | Senior housing | Skilled nursing
Acquisition
Percentage of units of real estate property				1.00%

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Business

3 Months Ended

Mar. 31, 2013

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) investments in senior housing operations utilizing the structure permitted by the Housing and Economic Recovery Act of 2008, which is commonly referred to as “RIDEA.”

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Variable Interest Entities (Details) (USD $) In Thousands, unless otherwise specified		3 Months Ended			1 Months Ended
	Mar. 31, 2013 Unconsolidated Variable Interest Entities item	Mar. 31, 2013 Unconsolidated Variable Interest Entities VIE tenants-operating leases	Mar. 31, 2013 Unconsolidated Variable Interest Entities VIE tenants-DFLs	Mar. 31, 2013 Unconsolidated Variable Interest Entities Loan-senior secured	Sep. 30, 2011 Consolidated Variable Interest Entities item
Company's involvement with VIEs:
Number of senior housing facilities leased	48				21
Number of VIE tenants	7
Maximum Loss Exposure		$ 1,397,774	$ 911,051	$ 30,652
Assets/liability type		Lease intangibles, net and straight-line rent receivables	Net investment in DFLs	Loans receivable, net
Carrying amount		$ 615,655	$ 911,051	$ 30,652
Percentage of partnership interest					90.00%

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Measurements

Fair value measurements of financial assets and liabilities

The financial assets and liabilities carried at fair value on a recurring basis at March 31, 2013 follow (in thousands):

Financial Instrument	Fair Value			Level 2			Level 3
Currency swap asset(1)	$	2,490		$	2,490		$	—
Interest-rate swap liabilities (1)	(12,421		)	(12,421		)	—
Warrants(1)	775			—			775
	$	(9,156	)	$	(9,931	)	$	775

(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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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

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 three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012 included in the Company’s Annual Report on Form 10-K 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 statements of income (see Note 4).

Acquisition Costs

Acquisition Costs

Transaction costs related to acquisitions of businesses, including properties, are expensed as incurred.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The adoption of ASU 2013-02 on January 1, 2013 did not have a material impact on the Company’s consolidated financial position or results of operations.

In July 2012, the 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. The adoption of ASU 2012-01 on January 1, 2013 did not have a material impact on the Company’s consolidated financial position or results of operations.

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Subsequent Events

3 Months Ended

Mar. 31, 2013

Subsequent Events

Subsequent Events

(20) Subsequent Events

On May 2, 2013, the Company acquired approximately $165 million of debt secured by real estate.

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Equity (Details) (USD $)	0 Months Ended		3 Months Ended			1 Months Ended			0 Months Ended	3 Months Ended	0 Months Ended
	Apr. 25, 2013	Jan. 24, 2013	Mar. 31, 2013 item	Mar. 31, 2012	Dec. 31, 2012	Mar. 31, 2012 Public offering completed in March 2012	Jun. 30, 2012 Public offering completed in June 2012	Oct. 31, 2012 Public offering completed in October 2012	Apr. 23, 2012 Preferred Stock	Mar. 31, 2012 Preferred Stock	Apr. 23, 2012 Preferred Stock Series E 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	$ 25
Aggregate redemption amount									$ 295,500,000
Preferred stock issuance costs write-off										10,400,000
Dividends declared per common share (in dollars per share)	$ 0.525	$ 0.525	$ 0.525	$ 0.50
Issuance of common stock, net			12,277,000	366,922,000		359,000,000	376,000,000	979,000,000
Issuance of common stock, net (in shares)						9,000,000	8,970,000	22,000,000
Stock issued under new issues (in dollars per share)						$ 39.93	$ 41.88	$ 45.50
Repayment of senior unsecured notes							250,000,000
Company's common stock issuances
Dividend Reinvestment and Stock Purchase Plan (in shares)			382,000	210,000
Conversion of DownREIT units (in shares)			51,000	36,000
Exercise of stock options (in shares)			796,000	1,412,000
Vesting of restricted stock units (in shares)			17,000	314,000
Accumulated Other Comprehensive Loss
Unrealized gains on available for sale securities					7,776,000
Unrealized losses on cash flow hedges, net			(12,860,000)		(18,452,000)
Supplemental Executive Retirement Plan minimum liability			(3,095,000)		(3,150,000)
Cumulative foreign currency translation adjustment			(649,000)		(827,000)
Total accumulated other comprehensive loss			(16,604,000)		(14,653,000)
Noncontrolling interests
DownREIT units outstanding			4,000,000
Number of DownREIT LLCs			4
DownREIT unit, carrying value			185,608,000		187,788,000
DownREIT unit, fair value			$ 301,000,000

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Disclosures About Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Disclosures About Fair Value of Financial Instruments

Summary of the carrying amounts and fair values of financial instruments

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

	March 31, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	291,870	$	294,724	$	276,030	$	279,850
Marketable debt securities(3)	208,214		226,337		222,809		234,137
Marketable equity securities(1)	—		—		24,829		24,829
Warrants(3)	775		775		670		670
Bank line of credit(2)	14,000		14,000		—		—
Term loan(2)	208,213		208,213		222,694		222,694
Senior unsecured notes(1)	6,563,749		7,303,804		6,712,624		7,432,012
Mortgage debt(2)	1,680,792		1,763,165		1,676,544		1,771,155
Other debt(2)	78,836		78,836		81,958		81,958
Interest-rate swap assets(2)	—		—		89		89
Interest-rate swap liabilities(2)	12,421		12,421		12,699		12,699
Currency swap asset(2)	2,490		2,490		—		—
Currency swap liabilities(2)	—		—		2,641		2,641

(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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Real Estate Property Investments (Tables) (Blackstone JV, Senior housing)

3 Months Ended

Mar. 31, 2013

Blackstone JV | Senior housing

Acquisition

Schedule of unaudited pro forma consolidated results of operations

The following unaudited pro forma consolidated results of operations for the three months ended March 31, 2012 assume that the Blackstone JV Acquisition was completed as of January 1, 2012 (in thousands, except per share amounts):

Revenues	$	482,277
Net income	204,408
Net income applicable to HCP, Inc.	201,224
Basic earnings per common share	0.43
Diluted earnings per common share	0.43

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Dispositions of Real Estate and Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2013

Dispositions of Real Estate and Discontinued Operations

Summary of operating loss from discontinued operations and gain on sales of real estate included in discontinued operations

The following table summarizes operating loss from discontinued operations and gain on sales of real estate included in discontinued operations for the three months ended March 31, 2012 (dollars in thousands):

Rental and related revenues	$	3,430
Depreciation and amortization expenses	2,996
Operating expenses	18
Other expense, net	901
Net loss before gain on sales of real estate	$	(485	)
Gain on sales of real estate, net of income taxes	$	2,856
Number of properties included in discontinued operations	4

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net income	$ 233,784	$ 196,564
Depreciation and amortization of real estate, in-place lease and other intangibles:
Continuing operations	104,717	85,280
Discontinued operations		2,996
Amortization of above and below market lease intangibles, net	(78)	(697)
Amortization of deferred compensation	5,430	5,373
Amortization of deferred financing costs, net	4,644	4,529
Straight-line rents	(18,793)	(9,927)
Loan and direct financing lease interest accretion	(24,266)	(25,878)
Deferred rental revenues	1,257	1,839
Equity income from unconsolidated joint ventures	(14,801)	(13,675)
Distributions of earnings from unconsolidated joint ventures	803	913
Gain on sales of real estate		(2,856)
Marketable securities gains, net	(10,977)
Derivative (gains) losses, net	(105)	203
Changes in:
Accounts receivable, net	1,967	2,300
Other assets	(8,699)	(7,877)
Accounts payable and accrued liabilities	(60,533)	(52,619)
Net cash provided by operating activities	214,350	186,468
Cash flows from investing activities:
Acquisitions of real estate	(25,654)
Development of real estate	(38,749)	(22,340)
Leasing costs and tenant and capital improvements	(8,959)	(8,931)
Proceeds from sales of real estate, net		7,238
Distributions in excess of earnings from unconsolidated joint ventures	568	2,716
Proceeds from the sale of marketable securities	28,030
Principal repayments on loans receivable	2,188	4,015
Investments in loans receivable	(14,957)	(9,939)
(Increase) decrease in restricted cash	173	(3,905)
Net cash used in investing activities	(57,360)	(31,146)
Cash flows from financing activities:
Net borrowings (repayments) under bank line of credit	14,000	(454,000)
Issuance of senior unsecured notes		450,000
Repayment of senior unsecured notes	(150,000)
Repayments of mortgage debt	(12,135)	(10,057)
Deferred financing costs		(10,117)
Net proceeds from the issuance of common stock and exercise of options	32,253	397,569
Dividends paid on common and preferred stock	(238,467)	(211,067)
Issuance of noncontrolling interests	987	181
Distributions to noncontrolling interests	(3,754)	(3,912)
Net cash provided by (used in) financing activities	(357,116)	158,597
Net increase (decrease) in cash and cash equivalents	(200,126)	313,919
Cash and cash equivalents, beginning of period	247,673	33,506
Cash and cash equivalents, end of period	$ 47,547	$ 347,425

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Net Investment in Direct Financing Leases (Tables)

3 Months Ended

Mar. 31, 2013

Net Investment in Direct Financing Leases

Schedule of net investment in direct financing leases

The components of net investment in direct financing leases (“DFLs”) consisted of the following (dollars in thousands):

	March 31,			December 31,
	2013			2012
Minimum lease payments receivable(1)	$	25,085,037		$	25,217,520
Estimated residual values	4,010,514			4,010,514
Less unearned income	(22,174,130		)	(22,346,641		)
Net investment in direct financing leases	$	6,921,421		$	6,881,393
Properties subject to direct financing leases	361			361

(1) The minimum lease payments receivable are primarily attributable to HCR ManorCare, Inc. (“HCR ManorCare”) ($23.9 billion and $24.0 billion at March 31, 2013 and December 31, 2012, respectively). The triple-net master lease with HCR ManorCare provides for annual rent of $506 million beginning April 1, 2013 (prior to April 1, 2013, annual rent was $489 million). The rent increases by 3.5% per year over the next three 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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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Common Share

Computation of basic and diluted earnings per share

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

	Three Months Ended March 31,
	2013			2012
Numerator
Income from continuing operations	$	233,784		$	194,193
Noncontrolling interests’ share in continuing operations	(3,199		)	(3,184		)
Income from continuing operations applicable to HCP, Inc.	230,585			191,009
Preferred stock dividends	—			(17,006		)
Participating securities’ share in continuing operations	(478		)	(1,117		)
Income from continuing operations applicable to common shares	230,107			172,886
Discontinued operations	—			2,371
Net income applicable to common shares	$	230,107		$	175,257
Denominator
Basic weighted average common shares	453,651			410,018
Dilutive potential common shares	962			1,643
Diluted weighted average common shares	454,613			411,661
Basic earnings per common share
Income from continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43
Diluted earnings per common share
Income from continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43

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Other Assets (Details)	3 Months Ended				0 Months Ended				3 Months Ended	12 Months Ended
	Mar. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Mar. 31, 2013 Delphis USD ($)	Dec. 31, 2012 Delphis USD ($)	Jun. 28, 2012 Four Seasons USD ($)	Jun. 28, 2012 Four Seasons GBP (£)	Mar. 31, 2013 Four Seasons GBP (£)	Dec. 31, 2012 Four Seasons GBP (£)	Mar. 31, 2013 HCP Ventures IV, LLC USD ($)	Dec. 31, 2012 HCP Ventures IV, LLC USD ($)
Other Assets
Straight-line rent assets, net of allowance of $33,767 and $33,521, respectively	$ 323,513,000	$ 306,294,000
Allowance on straight-line rent assets	33,767,000	33,521,000
Marketable debt securities	208,214,000	222,809,000
Leasing costs, net	93,678,000	93,763,000
Deferred financing costs, net	42,944,000	45,490,000
Goodwill	50,346,000	50,346,000
Marketable equity securities		24,829,000
Other	58,158,000	44,989,000
Total other assets	776,853,000	788,520,000
Cost basis of marketable equity securities		17,100,000
Other assets
Carrying value of interest accrued related to the Delphis loan			0	0
Additions related to accrued interest receivable			5,400,000	5,400,000
Loans receivables	291,870,000	276,030,000							8,000,000	10,000,000
Interest rate on marketable debt security					12.25%	12.25%			12.00%	12.00%
Percentage of counter party's partnership interest in the joint venture, by which loans receivable from unconsolidated joint venture are secured									80.00%
Realized gains on marketable debt securities sold	11,000,000
Marketable debt security, par value						138,500,000
Marketable debt security, par value, discounted					$ 214,900,000	£ 136,800,000	£ 136,900,000	£ 136,900,000
Yield to maturity (as a percent)					12.50%	12.50%

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
Real estate:
Buildings and improvements	$ 10,623,382		$ 10,537,484
Development costs and construction in progress	223,534		236,864
Land	1,853,392		1,850,397
Accumulated depreciation and amortization	(1,822,628)		(1,739,718)
Net real estate	10,877,680		10,885,027
Net investment in direct financing leases	6,921,421		6,881,393
Loans receivable, net	291,870		276,030
Investments in and advances to unconsolidated joint ventures	209,810		212,213
Accounts receivable, net of allowance of $1,632 and $1,668, respectively	32,183		34,150
Cash and cash equivalents	47,547		247,673
Restricted cash	37,675		37,848
Intangible assets, net	537,692		552,701
Other assets, net	776,853		788,520
Total assets	19,732,731	[1]	19,915,555	[1]
LIABILITIES AND EQUITY
Bank line of credit	14,000
Term loan	208,213		222,694
Senior unsecured notes	6,563,749		6,712,624
Mortgage debt	1,680,792		1,676,544
Other debt	78,836		81,958
Intangible liabilities, net	101,633		105,909
Accounts payable and accrued liabilities	238,583		293,994
Deferred revenue	64,866		68,055
Total liabilities	8,950,672	[2]	9,161,778	[2]
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 454,416,748 and 453,191,321 shares issued and outstanding, respectively	454,417		453,191
Additional paid-in capital	11,218,702		11,180,066
Cumulative dividends in excess of earnings	(1,075,249)		(1,067,367)
Accumulated other comprehensive loss	(16,604)		(14,653)
Total stockholders' equity	10,581,266		10,551,237
Joint venture partners	15,185		14,752
Non-managing member unitholders	185,608		187,788
Total noncontrolling interests	200,793		202,540
Total equity	10,782,059		10,753,777
Total liabilities and equity	$ 19,732,731		$ 19,915,555

[1] The Company's consolidated total assets at March 31, 2013 and December 31, 2012, include assets of certain variable interest entities ("VIEs") that can only be used to settle the liabilities of those VIEs as follows: accounts receivable, net, $2 million in each period presented; cash and cash equivalents, $10 million in each period presented; and other assets, net, $3 million and $2 million, respectively. See Note 16 to the Condensed Consolidated Financial Statements for additional information.

[2] The Company's consolidated total liabilities at March 31, 2013 and December 31, 2012, include liabilities of certain VIEs for which the VIE creditors do not have recourse to HCP, Inc. as follows: other debt, $0.2 million in each period presented; accounts payable and accrued liabilities, $15 million and $14 million, respectively; and deferred revenue, $2 million in each period presented. See Note 16 to the Condensed Consolidated Financial Statements for additional information.

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Derivative Financial Instruments

Schedule of derivative instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of March 31, 2013 (dollars and GBP 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	$	(8,189	)
November 2008(3)	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	$	26,900	$	(3,603	)
July 2009(4)	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	$	13,600	$	(79	)
July 2012(4)	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	$	(549	)
July 2012(5)	June 2016	Cash Flow	$	79,600		Buy USD/Sell GBP	£	50,700	$	2,490

(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. Represents seven foreign exchange contracts to sell £7.2 million at a rate of 1.5695 on various dates between June 2013 and June 2016.

Schedule of effect of change in interest and foreign currancy rate

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	$	1,623		$	(1,520	)	$	3,195		$	(3,092	)
November 2008	October 2016	464			(455		)	924			(915		)
July 2009	July 2013	16			(20		)	34			(38		)
July 2012	June 2016	3,367			(3,263		)	6,683			(6,578		)
July 2012	June 2016	(336		)	434			(721		)	820

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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, 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	196,564	193,380				193,380		3,184
Other comprehensive income (loss)	1,916	1,916					1,916
Preferred stock redemption	(296,896)	(296,896)	(285,173)			(11,723)
Preferred stock redemption (in shares)			(11,820)
Issuance of common stock, net	366,922	367,956		9,559	358,397			(1,034)
Issuance of common stock, net (in shares)				9,559
Repurchase of common stock	(6,984)	(6,984)		(167)	(6,817)
Repurchase of common stock (in shares)				(167)
Exercise of stock options	37,631	37,631		1,412	36,219
Exercise of stock options (in shares)	1,412			1,412
Amortization of deferred compensation	5,373	5,373			5,373
Preferred dividends	(5,283)	(5,283)				(5,283)
Common dividends ($0.525 and $0.50 per share for the period ended March 31, 2013 and 2012, respectively)	(205,784)	(205,784)				(205,784)
Distributions to noncontrolling interests	(3,912)							(3,912)
Issuance of noncontrolling interests	181							181
Purchase of noncontrolling interests	(388)							(388)
Balance at Mar. 31, 2012	9,309,962	9,124,791		419,433	9,776,708	(1,053,684)	(17,666)	185,171
Balance (in shares) at Mar. 31, 2012				419,433
Balance at Dec. 31, 2012	10,753,777	10,551,237		453,191	11,180,066	(1,067,367)	(14,653)	202,540
Balance (in shares) at Dec. 31, 2012				453,191
Increase (Decrease) in Stockholders' Equity
Net income	233,784	230,585				230,585		3,199
Other comprehensive income (loss)	(1,951)	(1,951)					(1,951)
Issuance of common stock, net	12,277	14,456		555	13,901			(2,179)
Issuance of common stock, net (in shares)				555
Repurchase of common stock	(689)	(689)		(14)	(675)
Repurchase of common stock (in shares)				(14)
Exercise of stock options	20,665	20,665		685	19,980
Exercise of stock options (in shares)	796			685
Amortization of deferred compensation	5,430	5,430			5,430
Common dividends ($0.525 and $0.50 per share for the period ended March 31, 2013 and 2012, respectively)	(238,467)	(238,467)				(238,467)
Distributions to noncontrolling interests	(3,754)							(3,754)
Issuance of noncontrolling interests	987							987
Balance at Mar. 31, 2013	$ 10,782,059	$ 10,581,266		$ 454,417	$ 11,218,702	$ (1,075,249)	$ (16,604)	$ 200,793
Balance (in shares) at Mar. 31, 2013				454,417

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Segment Disclosures (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
Reconciliation of assets from segment to consolidated
Total assets	$ 19,732,731	[1]	$ 19,915,555	[1]
Goodwill	50,346		50,346
Identifiable segment
Reconciliation of assets from segment to consolidated
Gross segment assets	21,176,042		21,058,228
Accumulated depreciation and amortization	(2,079,778)		(1,978,597)
Total assets	19,096,264		19,079,631
Senior housing
Reconciliation of assets from segment to consolidated
Gross segment assets	7,739,727		7,658,612
Goodwill	31,000
Post-acute/skilled nursing
Reconciliation of assets from segment to consolidated
Gross segment assets	6,098,982		6,080,826
Goodwill	3,000
Life science
Reconciliation of assets from segment to consolidated
Gross segment assets	3,943,454		3,932,397
Medical office
Reconciliation of assets from segment to consolidated
Gross segment assets	2,664,053		2,661,394
Goodwill	11,000
Hospital
Reconciliation of assets from segment to consolidated
Gross segment assets	729,826		724,999
Goodwill	5,000
Other non-segment assets
Reconciliation of assets from segment to consolidated
Total assets	$ 636,467		$ 835,924

[1] The Company's consolidated total assets at March 31, 2013 and December 31, 2012, include assets of certain variable interest entities ("VIEs") that can only be used to settle the liabilities of those VIEs as follows: accounts receivable, net, $2 million in each period presented; cash and cash equivalents, $10 million in each period presented; and other assets, net, $3 million and $2 million, respectively. See Note 16 to the Condensed Consolidated Financial Statements for additional information.

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Other Assets (Tables)

3 Months Ended

Mar. 31, 2013

Other Assets

Schedule of other assets

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

	March 31,		December 31,
	2013		2012
Straight-line rent assets, net of allowance of $33,767 and $33,521, respectively	$	323,513	$	306,294
Marketable debt securities(1)	208,214		222,809
Leasing costs, net	93,678		93,763
Deferred financing costs, net	42,944		45,490
Goodwill	50,346		50,346
Marketable equity securities	—		24,829
Other(2)	58,158		44,989
Total other assets	$	776,853	$	788,520

(1) Represents £136.9 million of Four Seasons senior unsecured notes translated into U.S. dollars (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 March 31, 2013 and December 31, 2012, the carrying value of interest accrued related to the Delphis loan was zero. See Note 6 for additional information about the Delphis loan and the related impairment. At March 31, 2013 and December 31, 2012, includes a loan receivable of $8 million and $10 million, respectively, from HCP Ventures IV, LLC, an unconsolidated joint venture (see Note 7 for additional information) with an interest rate of 12% which matures in May 2014. The loan is secured by HCP’s joint venture partner’s 80% partnership interest in the joint venture.

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Derivative Financial Instruments (Details)	3 Months Ended						3 Months Ended
	Mar. 31, 2013 USD ($)	Mar. 31, 2013 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2005, maturity in July 2020 USD ($) item	Mar. 31, 2013 Interest rate swap, variable rate, secured debt Interest rate swap, entered in November 2008, maturity in October 2016 USD ($)	Mar. 31, 2013 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2009, maturity in July 2013 USD ($)	Mar. 31, 2013 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2012, maturity in June 2016 USD ($)	Mar. 31, 2013 Interest rate swap, variable rate, secured debt Interest rate swap, entered in July 2012, maturity in June 2016 GBP (£)	Mar. 31, 2013 Foreign currency swap contract Foreign currency swap, entered in July 2012, maturity in June 2016 USD ($) item	Mar. 31, 2013 Foreign currency swap contract Foreign currency swap, entered in July 2012, maturity in June 2016 GBP (£)
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	$ 26,900,000	$ 13,600,000		£ 137,000,000
Notional amount of foreign currency derivative purchase contracts							79,600,000
Notional amount of foreign currency derivative sale contracts								50,700,000
Semi-annual buy (sell) amount							11,400,000	(7,200,000)
Fair value of hedge, liabilities		(8,189,000)	(3,603,000)	(79,000)	(549,000)
Number of interest-rate swap contracts		3
Exchange rate USD/GBP							1.5695
Fair value of hedge, assets							2,490,000
Gain (loss) on cash flow hedge, ineffective portion					0		0
Gains or losses recorded to accumulated other comprehensive loss reclassified to earnings	0
Effects of Change in Interest Rates
+50 Basis Points		1,623,000	464,000	16,000	3,367,000		(336,000)
-50 Basis Points		(1,520,000)	(455,000)	(20,000)	(3,263,000)		434,000
+100 Basis Points		3,195,000	924,000	34,000	6,683,000		(721,000)
-100 Basis Points		$ (3,092,000)	$ (915,000)	$ (38,000)	$ (6,578,000)		$ 820,000
Number of foreign exchange contracts							7

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2013

Earnings Per Common Share

Earnings Per Common Share

(14) Earnings Per Common Share

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

	Three Months Ended March 31,
	2013			2012
Numerator
Income from continuing operations	$	233,784		$	194,193
Noncontrolling interests’ share in continuing operations	(3,199		)	(3,184		)
Income from continuing operations applicable to HCP, Inc.	230,585			191,009
Preferred stock dividends	—			(17,006		)
Participating securities’ share in continuing operations	(478		)	(1,117		)
Income from continuing operations applicable to common shares	230,107			172,886
Discontinued operations	—			2,371
Net income applicable to common shares	$	230,107		$	175,257
Denominator
Basic weighted average common shares	453,651			410,018
Dilutive potential common shares	962			1,643
Diluted weighted average common shares	454,613			411,661
Basic earnings per common share
Income from continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43
Diluted earnings per common share
Income from continuing operations	$	0.51		$	0.42
Discontinued operations	—			0.01
Net income applicable to common shares	$	0.51		$	0.43

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 closing market price of the Company’s common stock during the three months ended March 31, 2013 and 2012, 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 0.4 million and 0.5 million shares of common stock during the three months ended March 31, 2013 and 2012, respectively, were not included because they are anti-dilutive. Additionally, 6.0 million shares issuable upon conversion of 4.0 million DownREIT units during the three months ended March 31, 2013 were not included because they are anti-dilutive. During the three months ended March 31, 2012, 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 (Tables)

3 Months Ended

Mar. 31, 2013

Debt

Summary of stated debt maturities and scheduled principal repayments

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2013 (in thousands):

Year	Line of Credit		Term Loan(1)		Senior Unsecured Notes			Mortgage Debt			Total(2)
2013 (Nine months)	$	—	$	—	$	400,000		$	283,104		$	683,104
2014	—		—		487,000			180,221			667,221
2015	—		—		400,000			308,611			708,611
2016	14,000		208,213		900,000			291,941			1,414,154
2017	—		—		750,000			550,698			1,300,698
Thereafter	—		—		3,650,000			73,468			3,723,468
	14,000		208,213		6,587,000			1,688,043			8,497,256
(Discounts) and premiums, net	—		—		(23,251		)	(7,251		)	(30,502		)
	$	14,000	$	208,213	$	6,563,749		$	1,680,792		$	8,466,754

(1) Represents £137 million translated into U.S. dollars.

(2) Excludes $79 million of other debt that represents the Life Care Bonds that have no scheduled maturities.

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Variable Interest Entities

3 Months Ended

Mar. 31, 2013

Variable Interest Entities

Variable Interest Entities

(16) Variable Interest Entities

Unconsolidated Variable Interest Entities

At March 31, 2013, 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 March 31, 2013 (in thousands):

VIE Type	Maximum Loss Exposure(1)		Asset/Liability Type	Carrying Amount
VIE tenants—operating leases	$	1,397,774	Lease intangibles, net and straight-line rent receivables	$	615,655
VIE tenants—DFLs	911,051		Net investment in DFLs	911,051
Loan—senior secured	30,652		Loans receivable, net	30,652

(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 March 31, 2013, 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 (Delphis Operations, L.P.) that has been identified as a VIE (see Note 6 for additional information on the Delphis loan). 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 5 and 6 for additional description of the nature, purpose and activities of the Company’s unconsolidated VIEs and interests therein.

Consolidated Variable Interest Entities

In September 2011, the Company formed a partnership in which it has a 90% ownership interest and a leasing relationship with an entity that operates 21 properties in a RIDEA structure (“RIDEA Entity”). The Company consolidated this entity as a result of the rights it acquired through the joint venture agreement with Brookdale. In the fourth quarter of 2012, upon the occurrence of a reconsideration event, it was determined that this RIDEA Entity is a VIE and that the Company is the primary beneficiary; therefore, the Company continues to consolidate this entity. The assets and liabilities of this RIDEA Entity substantially consist of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities generated from its operating activities. The assets generated by the operating activities of the RIDEA Entity may be used to settle its contractual obligations, which include lease obligations to the Company. The Company is entitled to its ownership share of the RIDEA Entity’s assets; however, it does not guarantee its liabilities (or contractual obligations) and is not liable to its general creditors.

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) (USD $)	0 Months Ended		3 Months Ended
	Apr. 25, 2013	Jan. 24, 2013	Mar. 31, 2013	Mar. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Common dividends, per share (in dollars per share)	$ 0.525	$ 0.525	$ 0.525	$ 0.50

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Accounts receivable, net	$ 32,183	$ 34,150
Cash and cash equivalents	47,547	247,673
Other assets, net	776,853	788,520
Other debt	78,836	81,958
Accounts payable and accrued liabilities	238,583	293,994
Deferred revenue	64,866	68,055
Accounts receivable, allowance (in dollars)	1,632	1,668
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	454,416,748	453,191,321
Common stock, shares outstanding	454,416,748	453,191,321
VIEs
Accounts receivable, net	2,000	2,000
Cash and cash equivalents	10,000	10,000
Other assets, net	3,000	2,000
Other debt	200	200
Accounts payable and accrued liabilities	15,000	14,000
Deferred revenue	$ 2,000	$ 2,000

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Other Assets

3 Months Ended

Mar. 31, 2013

Other Assets

Other Assets

(9) Other Assets

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

	March 31,		December 31,
	2013		2012
Straight-line rent assets, net of allowance of $33,767 and $33,521, respectively	$	323,513	$	306,294
Marketable debt securities(1)	208,214		222,809
Leasing costs, net	93,678		93,763
Deferred financing costs, net	42,944		45,490
Goodwill	50,346		50,346
Marketable equity securities	—		24,829
Other(2)	58,158		44,989
Total other assets	$	776,853	$	788,520

(1) Represents £136.9 million of Four Seasons senior unsecured notes translated into U.S. dollars (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 March 31, 2013 and December 31, 2012, the carrying value of interest accrued related to the Delphis loan was zero. See Note 6 for additional information about the Delphis loan and the related impairment. At March 31, 2013 and December 31, 2012, includes a loan receivable of $8 million and $10 million, respectively, from HCP Ventures IV, LLC, an unconsolidated joint venture (see Note 7 for additional information) with an interest rate of 12% which matures in May 2014. The loan is secured by HCP’s joint venture partner’s 80% partnership interest in the joint venture.

During the three months ended March 31, 2013, the Company realized gains from the sale of marketable equity securities of $11 million, which were included in other income, net. At December 31, 2012, the fair value and adjusted cost basis of the marketable equity securities were $24.8 million and $17.1 million, respectively. The marketable equity securities were classified as available-for-sale.

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 were 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 was financed by a GBP denominated unsecured term loan that is discussed in Note 10. These senior unsecured notes are accounted for as marketable debt securities and classified as held-to-maturity.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 25, 2013
Document and Entity Information
Entity Registrant Name	HCP, INC.
Entity Central Index Key	0000765880
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
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		454,486,181
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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Debt

3 Months Ended

Mar. 31, 2013

Debt

Debt

(10) Debt

Bank Line of Credit and Term Loan

The Company’s $1.5 billion unsecured revolving line of credit facility (the “Facility”) matures on March 2016 and contains a one-year extension option. Borrowings under the 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 March 31, 2013, the margin on the Facility was 1.075%, and the facility fee was 0.175%. The Facility also includes a feature that will allow the Company to increase the borrowing capacity by an aggregate amount of up to $500 million, subject to securing additional commitments from existing lenders or new lending institutions. At March 31, 2013, the Company had $14 million outstanding under the Facility.

On July 30, 2012, the Company entered into a credit agreement with a syndicate of banks for a £137 million ($208 million at March 31, 2013) 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.

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 $9.2 billion at March 31, 2013. At March 31, 2013, the Company was in compliance with each of these restrictions and requirements of the Facility and Term Loan.

Senior Unsecured Notes

At March 31, 2013, the Company had senior unsecured notes outstanding with an aggregate principal balance of $6.6 billion. At March 31, 2013, interest rates on the notes ranged from 1.25% to 6.98% with a weighted average effective interest rate of 5.10% and a weighted average maturity of six 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 March 31, 2013.

On February 28, 2013, the Company repaid $150 million of maturing 5.625% senior unsecured notes.

On November 19, 2012, the Company issued $800 million of 2.625% senior unsecured notes due in 2020. The notes were priced at 99.7% of the principal amount with an effective yield to maturity of 2.7%; net proceeds from this offering were $793 million.

On July 23, 2012, the Company issued $300 million of 3.15% senior unsecured notes due in 2022. The notes were priced at 98.9% of the principal amount with an effective yield to maturity of 3.3%; net proceeds from the offering were $294 million.

On June 25, 2012, the Company repaid $250 million of maturing 6.45% senior unsecured notes. 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 99.5% of the principal amount with an effective yield to maturity of 3.8%; net proceeds from the offering were $444 million.

Mortgage Debt

At March 31, 2013, the Company had $1.7 billion in aggregate principal amount of mortgage debt outstanding that is secured by 139 healthcare facilities (including redevelopment properties) with a carrying value of $2.1 billion. At March 31, 2013, interest rates on the mortgage debt ranged from 1.54% to 8.69% with a weighted average effective interest rate of 6.13% and a weighted average maturity of three 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 or 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 March 31, 2013, the Company had $79 million of non-interest bearing life care bonds at two of its CCRCs 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”). The Life Care Bonds are refundable to the residents upon the termination of the contract or upon the successful resale of the unit.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2013 (in thousands):

Year	Line of Credit		Term Loan(1)		Senior Unsecured Notes			Mortgage Debt			Total(2)
2013 (Nine months)	$	—	$	—	$	400,000		$	283,104		$	683,104
2014	—		—		487,000			180,221			667,221
2015	—		—		400,000			308,611			708,611
2016	14,000		208,213		900,000			291,941			1,414,154
2017	—		—		750,000			550,698			1,300,698
Thereafter	—		—		3,650,000			73,468			3,723,468
	14,000		208,213		6,587,000			1,688,043			8,497,256
(Discounts) and premiums, net	—		—		(23,251		)	(7,251		)	(30,502		)
	$	14,000	$	208,213	$	6,563,749		$	1,680,792		$	8,466,754

(1) Represents £137 million translated into U.S. dollars.

(2) Excludes $79 million of other debt that represents the Life Care Bonds that have no scheduled maturities.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Revenues:
Rental and related revenues	$ 285,476	$ 241,151
Tenant recoveries	24,203	22,650
Resident fees and services	36,891	36,179
Income from direct financing leases	156,870	154,535
Interest income	12,386	819
Investment management fee income	443	493
Total revenues	516,269	455,827
Costs and expenses:
Interest expense	109,351	103,752
Depreciation and amortization	104,717	85,280
Operating	73,605	67,333
General and administrative	20,744	20,089
Total costs and expenses	308,417	276,454
Other income, net	12,012	436
Income before income taxes and equity income from unconsolidated joint ventures	219,864	179,809
Income taxes	(881)	709
Equity income from unconsolidated joint ventures	14,801	13,675
Income from continuing operations	233,784	194,193
Discontinued operations:
Loss before gain on sales of real estate		(485)
Gain on sales of real estate		2,856
Total discontinued operations		2,371
Net income	233,784	196,564
Noncontrolling interests' share in earnings	(3,199)	(3,184)
Net income attributable to HCP, Inc.	230,585	193,380
Preferred stock dividends		(17,006)
Participating securities' share in earnings	(478)	(1,117)
Net income applicable to common shares	$ 230,107	$ 175,257
Basic earnings per common share:
Continuing operations (in dollars per share)	$ 0.51	$ 0.42
Discontinued operations (in dollars per share)		$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.51	$ 0.43
Diluted earnings per common share:
Continuing operations (in dollars per share)	$ 0.51	$ 0.42
Discontinued operations (in dollars per share)		$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.51	$ 0.43
Weighted average shares used to calculate earnings per common share:
Basic (in shares)	453,651	410,018
Diluted (in shares)	454,613	411,661
Dividends declared per common share (in dollars per share)	$ 0.525	$ 0.50

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Dispositions of Real Estate and Discontinued Operations

3 Months Ended

Mar. 31, 2013

Dispositions of Real Estate and Discontinued Operations

Dispositions of Real Estate and Discontinued Operations

(4)   Dispositions of Real Estate and Discontinued Operations

During the three months ended March 31, 2012, the Company sold a medical office building for $7 million.

At March 31, 2012, three properties were classified as held for sale, with a combined aggregate carrying value of $98 million. There were no properties classified as held for sale or reported as discontinued operations as of or during the three months ended March 31, 2013.

The following table summarizes operating loss from discontinued operations and gain on sales of real estate included in discontinued operations for the three months ended March 31, 2012 (dollars in thousands):

Rental and related revenues	$	3,430
Depreciation and amortization expenses	2,996
Operating expenses	18
Other expense, net	901
Net loss before gain on sales of real estate	$	(485	)
Gain on sales of real estate, net of income taxes	$	2,856
Number of properties included in discontinued operations	4

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Real Estate Property Investments

3 Months Ended

Mar. 31, 2013

Real Estate Property Investments

Real Estate Property Investments

(3) Real Estate Property Investments

During the three months ended March 31, 2013 and 2012, the Company funded an aggregate of $42 million and $30 million, respectively, for construction, tenant and other capital improvement projects, primarily in its senior housing, life science and medical office segments.

$1.73 Billion Senior Housing Portfolio Acquisition (the “Blackstone JV Acquisition”)

During the first quarter of 2013 and fourth quarter of 2012, the Company acquired 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 the Blackstone Group (the “Blackstone JV”). Located in 29 states, the portfolio encompasses a diversified care mix of 61% assisted living, 25% independent living, 13% memory care and 1% skilled nursing based on units. Based on operating performance at closing, the 133 communities consisted of 99 that were stabilized and 34 that were in lease-up. The transaction closed in two stages: (i) 129 senior housing facilities during the fourth quarter of 2012 for $1.7 billion; and (ii) four senior housing facilities during the first quarter of 2013 for $38 million. The Company paid $1.73 billion in cash consideration and assumed $13 million of mortgage debt to acquire: (i) real estate with a fair value of $1.57 billion, (ii) intangible assets with a fair value of $174 million; and (iii) assumed intangible liabilities with a fair value of $4 million. As of March 31, 2013, the purchase price allocation is preliminary, and the final purchase price allocation will be determined pending the receipt of information necessary to complete the valuation of certain assets and liabilities, which may result in changes from the initial estimates.

Emeritus operates the communities pursuant to a new triple-net master lease for 128 properties (the “Master Lease”) and five individual leases, all guaranteed by Emeritus (together, the “Leases”). The Leases provide aggregate contractual rent in the first year of $105.8 million. The contractual rent will increase annually by the greater of the percentage increase in the Consumer Price Index (“CPI”) or 3.7% on average over the initial five years, and thereafter by the greater of CPI or 3.0% for the remaining initial lease term. At the beginning of the sixth lease year, rent on the 34 lease-up properties will increase to the greater of the percentage increase in CPI or fair market, subject to a floor of 103% and a cap of 130% of the prior year’s rent.

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

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

Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations for the three months ended March 31, 2012 assume that the Blackstone JV Acquisition was completed as of January 1, 2012 (in thousands, except per share amounts):

Revenues	$	482,277
Net income	204,408
Net income applicable to HCP, Inc.	201,224
Basic earnings per common share	0.43
Diluted earnings per common share	0.43

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2013

Supplemental Cash Flow Information

Supplemental Cash Flow Information

(15) Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2013			2012
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	154,127		$	137,001
Income taxes paid	75			142
Capitalized interest	4,111			6,683
Supplemental schedule of non-cash investing activities:
Accrued construction costs	15,029			14,589
Supplemental schedule of non-cash financing activities:
Preferred stock redemption accrual	—			296,896
Vesting of restricted stock units	17			314
Cancellation of restricted stock	(6		)	(1		)
Conversion of non-managing member units into common stock	2,179			1,034
Mortgages and other liabilities assumed with real estate acquisitions	12,728			—
Unrealized gains on available-for-sale securities and derivatives designated as cash flow hedges, net	6,675			1,580

See additional information regarding supplemental non-cash financing activities related to the preferred stock redemption in Note 12.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies

Commitments and Contingencies

(11) 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, results of operations or cash flows. The Company’s policy is to expense legal costs 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. The Company does not have significant foreign operations.

The following table provides information regarding the Company’s concentrations 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
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
Emeritus	35	%	35	%	35	%	21	%
Sunrise Senior Living (“Sunrise”)(1)	17		17		13		16
HCR ManorCare	11		11		10		12
Brookdale Senior Living (“Brookdale”)(2)	10		11		12		14

	Percentage of Post-Acute/ Skilled Nursing Gross Assets				Percentage of Post-Acute/ Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
HCR ManorCare	89	%	89	%	87	%	93	%

Total Company Concentrations:

	Percentage of Total Company Gross Assets				Percentage of Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2013		2012		2013		2012
HCR ManorCare	32	%	31	%	28	%	31	%
Emeritus	14		13		13		7
Sunrise(1)	7		7		5		5
Brookdale(2)	4		4		4		5

(1) 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.

(2) At March 31, 2013 and December 31, 2012, Brookdale percentages exclude $700 million and $692 million, respectively, of senior housing assets related to 21 senior housing facilities that Brookdale operates 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 20% and 8%, respectively, at both March 31, 2013 and December 31, 2012. For the three months ended March 31, 2013 and 2012, Brookdale percentages exclude $37 million and $35 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 31% and 11% respectively, for the three months ended March 31, 2013. Assuming that these revenues were attributable to Brookdale, the percentage of segment and total revenues for Brookdale would be 37% and 12% respectively, for the three months ended March 31, 2012.

HCR ManorCare’s summarized condensed consolidated financial information follows (in millions):

	March 31,		December 31,
	2013		2012
Real estate and other property, net	$	3,030.7	$	3,046.6
Cash and cash equivalents	157.8		120.5
Deferred income taxes	1,622.3		1,627.1
Goodwill and intangible assets, net	3,243.7		3,243.8
Other assets, net	778.0		754.5
Total assets	$	8,832.5	$	8,792.5
Debt and financing obligations	$	6,348.7	$	6,374.6
Accounts payable and accrued liabilities	1,073.7		1,019.8
Total liabilities	7,422.4		7,394.4
Redeemable preferred stock	2.1		2.1
Total equity	1,408.0		1,396.0
Total liabilities and equity	$	8,832.5	$	8,792.5

	Three Months Ended March 31,
	2013			2012
Revenues:
Revenues	$	1,068.7		$	1,041.2
Costs and expenses:
Operating, general and administrative	912.4			885.4
Depreciation and amortization	37.3			42.0
Interest expense	104.4			106.3
Total costs and expenses	1,054.1			1,033.7
Other income, net	0.7			1.7
Income before income taxes and equity income from unconsolidated joint ventures	15.3			9.2
Income taxes and equity income from unconsolidated joint ventures	(3.6		)	(2.9		)
Net income	$	11.7		$	6.3

	Three Months Ended March 31,
	2013			2012
Net cash provided by operating activities	$	88.6		$	22.1
Cash flows from investing activities:
Acquisitions of property and equipment	(21.2		)	(24.9		)
Purchase of securities and other	(4.1		)	(2.2		)
Net cash used in investing activities	(25.3		)	(27.1		)
Cash flows from financing activities:
Repayments of debt and financing obligations	(26.0		)	(19.6		)
Net increase (decrease) in cash and cash equivalents	37.3			(24.6		)
Cash and cash equivalents, beginning of period	120.5			186.5
Cash and cash equivalents, end of period	$	157.8		$	161.9

To mitigate the 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 $116 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 $375 million as of March 31, 2013.

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Investments in and Advances to Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2013

Investments in and Advances to Unconsolidated Joint Ventures

Investments in and Advances to Unconsolidated Joint Ventures

(7)   Investments in and Advances to Unconsolidated Joint Ventures

The Company owns interests in the following entities that are accounted for under the equity method at March 31, 2013 (dollars in thousands):

Entity(1)	Properties/Segment	Investment(2)			Ownership%
HCR ManorCare	post-acute/skilled nursing operations	$	88,827		9.5(3)
HCP Ventures III, LLC	13 medical office	7,410			30
HCP Ventures IV, LLC	54 medical office and 4 hospital	31,480			20
HCP Life Science(4)	4 life science	68,287			50-63
Horizon Bay Hyde Park, LLC	1 senior housing	6,581			72
Suburban Properties, LLC	1 medical office	7,044			67
Advances to unconsolidated joint ventures, net		181
		$	209,810
Edgewood Assisted Living Center, LLC	1 senior housing	$	(704	)	45
Seminole Shores Living Center, LLC	1 senior housing	(428		)	50
		$	(1,132	)

(1) These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures.

(2) Represents the carrying value of the Company’s investment in the unconsolidated joint venture.

(3) Presented after adjusting the Company’s 9.9% ownership for the dilution of certain of HCR ManorCare’s outstanding employee equity awards.

(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):

	March 31,		December 31,
	2013		2012
Real estate, net	$	3,706,411	$	3,731,740
Goodwill and other assets, net	5,875,013		5,734,318
Total assets	$	9,581,424	$	9,466,058
Capital lease obligations and mortgage debt	$	6,844,859	$	6,875,932
Accounts payable	1,108,324		971,095
Other partners’ capital	1,445,199		1,435,885
HCP’s capital(1)	183,042		183,146
Total liabilities and partners’ capital	$	9,581,424	$	9,466,058

(1) The combined basis difference of the Company’s investments in these joint ventures of $25 million, as of March 31, 2013, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

	Three Months Ended March 31,
	2013		2012
Total revenues	$	1,093,374	$	1,044,509
Net income	10,584		1,125
HCP’s share in earnings (1)	14,801		13,675
Fees earned by HCP	443		493
Distributions received by HCP	1,371		3,629

(1) 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 $15.9 million and $14.7 million for the three months ended March 31, 2013 and 2012, respectively. 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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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Numerator
Income from continuing operations	$ 233,784	$ 194,193
Noncontrolling interests' share in continuing operations	(3,199)	(3,184)
Income from continuing operations applicable to HCP, Inc.	230,585	191,009
Preferred stock dividends		(17,006)
Participating securities' share in continuing operations	(478)	(1,117)
Income from continuing operations applicable to common shares	230,107	172,886
Discontinued operations		2,371
Net income applicable to common shares	$ 230,107	$ 175,257
Denominator
Basic weighted-average common shares	453,651,000	410,018,000
Dilutive potential common shares	962,000	1,643,000
Diluted weighted-average common shares	454,613,000	411,661,000
Basic earnings per common share
Income from continuing operations (in dollars per share)	$ 0.51	$ 0.42
Discontinued operations (in dollars per share)		$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.51	$ 0.43
Diluted earnings per common share
Income from continuing operations (in dollars per share)	$ 0.51	$ 0.42
Discontinued operations (in dollars per share)		$ 0.01
Net income applicable to common shares (in dollars per share)	$ 0.51	$ 0.43
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	400,000	500,000
Down REIT
Diluted earnings per common share
Shares of anti-dilutive securities excluded from earnings per share calculation	6,000,000	5,900,000
DownREIT LLCs, non-managing member units outstanding	4,000,000	4,200,000

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Net Investment in Direct Financing Leases

3 Months Ended

Mar. 31, 2013

Net Investment in Direct Financing Leases

Net Investment in Direct Financing Leases

(5) Net Investment in Direct Financing Leases

The components of net investment in direct financing leases (“DFLs”) consisted of the following (dollars in thousands):

	March 31,			December 31,
	2013			2012
Minimum lease payments receivable(1)	$	25,085,037		$	25,217,520
Estimated residual values	4,010,514			4,010,514
Less unearned income	(22,174,130		)	(22,346,641		)
Net investment in direct financing leases	$	6,921,421		$	6,881,393
Properties subject to direct financing leases	361			361

(1) The minimum lease payments receivable are primarily attributable to HCR ManorCare, Inc. (“HCR ManorCare”) ($23.9 billion and $24.0 billion at March 31, 2013 and December 31, 2012, respectively). The triple-net master lease with HCR ManorCare provides for annual rent of $506 million beginning April 1, 2013 (prior to April 1, 2013, annual rent was $489 million). The rent increases by 3.5% per year over the next three 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 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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Loans Receivable

3 Months Ended

Mar. 31, 2013

Loans Receivable

Loans Receivable

(6)   Loans Receivable

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

	March 31, 2013								December 31, 2012
	Real Estate Secured		Other Secured			Total			Real Estate Secured		Other Secured			Total
Mezzanine	$	—	$	145,150		$	145,150		$	—	$	145,150		$	145,150
Other	163,008		—			163,008			147,264		—			147,264
Unamortized discounts, fees and costs	—		(2,878		)	(2,878		)	—		(2,974		)	(2,974		)
Allowance for loan losses	—		(13,410		)	(13,410		)	—		(13,410		)	(13,410		)
	$	163,008	$	128,862		$	291,870		$	147,264	$	128,766		$	276,030

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 has a commitment to fund an additional $105 million (the “Second Tranche”) through August 2013. The Second Tranche will be used to repay debt senior to the Company’s loan. At closing, the loan was 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 has a total term of up to 63 months from the initial closing, is prepayable at the borrower’s option and is secured by real estate partnership interests.

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. The Borrower’s 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. Further, 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.

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. 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.

Pursuant to the 2012 Agreement, the Company received the remaining cash ($4.8 million, after reducing this amount by $0.5 million for related legal expenses) and other consideration ($2.1 million) of $6.9 million from the Guarantors. In addition, during 2012 the Company received $38.1 million in net proceeds from the sales of two of the primary collateral assets, which proceeds, together with the cash payments and other consideration, were applied to reduce the carrying value of the loan. At both March 31, 2013 and December 31, 2012, the carrying value of the loan was $30.7 million. At March 31, 2013, the Company believes the fair value of the collateral supporting this loan is in excess of its carrying value.

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Intangibles

3 Months Ended

Mar. 31, 2013

Intangibles

Intangibles

(8) Intangibles

At March 31, 2013 and December 31, 2012, intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles, were $797 million and $794 million, respectively. At March 31, 2013 and December 31, 2012, the accumulated amortization of intangible assets was $259 million and $241 million, respectively.

At both March 31, 2013 and December 31, 2012, intangible lease liabilities, comprised of below market lease intangibles and above market ground lease intangible liabilities were $199 million. At March 31, 2013 and December 31, 2012, the accumulated amortization of intangible liabilities was $97 million and $93 million, respectively.

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Disclosures About Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Summary of financial instruments
Bank line of credit	$ 14,000
Senior unsecured notes	6,563,749	6,712,624
Mortgage debt	1,680,792	1,676,544
Other debt	78,836	81,958
Carrying Amount
Summary of financial instruments
Loans receivable, net	291,870	276,030
Marketable debt securities	208,214	222,809
Marketable equity securities		24,829
Bank line of credit	14,000
Term loan	208,213	222,694
Senior unsecured notes	6,563,749	6,712,624
Mortgage debt	1,680,792	1,676,544
Other debt	78,836	81,958
Carrying Amount | Warrants
Summary of financial instruments
Derivative assets	775	670
Carrying Amount | Interest-rate swap contracts
Summary of financial instruments
Derivative assets		89
Derivative liabilities	12,421	12,699
Carrying Amount | Currency swap contracts
Summary of financial instruments
Derivative assets	2,490
Derivative liabilities		2,641
Fair Value
Summary of financial instruments
Loans receivable, net	294,724	279,850
Marketable debt securities	226,337	234,137
Marketable equity securities		24,829
Bank line of credit	14,000
Term loan	208,213	222,694
Senior unsecured notes	7,303,804	7,432,012
Mortgage debt	1,763,165	1,771,155
Other debt	78,836	81,958
Fair Value | Warrants
Summary of financial instruments
Derivative assets	775	670
Fair Value | Interest-rate swap contracts
Summary of financial instruments
Derivative assets		89
Derivative liabilities	12,421	12,699
Fair Value | Currency swap contracts
Summary of financial instruments
Derivative assets	2,490
Derivative liabilities		$ 2,641

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Subsequent Events (Details) (Subsequent, USD $) In Millions, unless otherwise specified	0 Months Ended
	May 02, 2013
Subsequent
Subsequent Events
Loan receivable purchased, acquisition cost	$ 165

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Fair Value Measurements (Details) (Fair value on a recurring basis, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Fair Value Assets and Liabilities Measured on Recurring Basis
Transfers of financial assets or liabilities within the fair value hierarchy	$ 0
Fair Value
Fair value assets and liabilities measured on recurring basis:
Total fair value assets and liabilities measured on recurring basis	(9,156)
Fair Value | Currency swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative assets	2,490
Fair Value | Interest-rate swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	(12,421)
Fair Value | Warrants
Fair value assets and liabilities measured on recurring basis:
Derivative assets	775
Level 2
Fair value assets and liabilities measured on recurring basis:
Total fair value assets and liabilities measured on recurring basis	(9,931)
Level 2 | Currency swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative assets	2,490
Level 2 | Interest-rate swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	(12,421)
Level 3
Fair value assets and liabilities measured on recurring basis:
Total fair value assets and liabilities measured on recurring basis	775
Level 3 | Warrants
Fair value assets and liabilities measured on recurring basis:
Derivative assets	$ 775

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Investments in and Advances to Unconsolidated Joint Ventures (Tables)

3 Months Ended

Mar. 31, 2013

Investments in and Advances to Unconsolidated Joint Ventures

Company owned interests in entities, accounted under equity method

The Company owns interests in the following entities that are accounted for under the equity method at March 31, 2013 (dollars in thousands):

Entity(1)	Properties/Segment	Investment(2)			Ownership%
HCR ManorCare	post-acute/skilled nursing operations	$	88,827		9.5(3)
HCP Ventures III, LLC	13 medical office	7,410			30
HCP Ventures IV, LLC	54 medical office and 4 hospital	31,480			20
HCP Life Science(4)	4 life science	68,287			50-63
Horizon Bay Hyde Park, LLC	1 senior housing	6,581			72
Suburban Properties, LLC	1 medical office	7,044			67
Advances to unconsolidated joint ventures, net		181
		$	209,810
Edgewood Assisted Living Center, LLC	1 senior housing	$	(704	)	45
Seminole Shores Living Center, LLC	1 senior housing	(428		)	50
		$	(1,132	)

(1) These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures.

(2) Represents the carrying value of the Company’s investment in the unconsolidated joint venture.

(3) Presented after adjusting the Company’s 9.9% ownership for the dilution of certain of HCR ManorCare’s outstanding employee equity awards.

(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

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

	March 31,		December 31,
	2013		2012
Real estate, net	$	3,706,411	$	3,731,740
Goodwill and other assets, net	5,875,013		5,734,318
Total assets	$	9,581,424	$	9,466,058
Capital lease obligations and mortgage debt	$	6,844,859	$	6,875,932
Accounts payable	1,108,324		971,095
Other partners’ capital	1,445,199		1,435,885
HCP’s capital(1)	183,042		183,146
Total liabilities and partners’ capital	$	9,581,424	$	9,466,058

(1) The combined basis difference of the Company’s investments in these joint ventures of $25 million, as of March 31, 2013, is primarily attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease related net intangibles.

	Three Months Ended March 31,
	2013		2012
Total revenues	$	1,093,374	$	1,044,509
Net income	10,584		1,125
HCP’s share in earnings (1)	14,801		13,675
Fees earned by HCP	443		493
Distributions received by HCP	1,371		3,629

(1) 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 $15.9 million and $14.7 million for the three months ended March 31, 2013 and 2012, respectively. 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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Investments in and Advances to Unconsolidated Joint Ventures (Details) (USD $)	3 Months Ended			3 Months Ended					12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012	Mar. 31, 2013 HCR ManorCare	Mar. 31, 2012 HCR ManorCare	Apr. 07, 2011 HCR ManorCare	Mar. 31, 2013 HCP Ventures III, LLC item	Mar. 31, 2013 HCP Ventures IV, LLC item	Dec. 31, 2012 HCP Life Science item	Mar. 31, 2013 HCP Life Science item	Mar. 31, 2013 HCP Life Science Minimum	Mar. 31, 2013 HCP Life Science Maximum	Mar. 31, 2013 Torrey Pines Science Center, LP	Mar. 31, 2013 Britannia Biotech Gateway, LP	Mar. 31, 2013 LASDK, LP	Mar. 31, 2013 Horizon Bay Hyde Park, LLC item	Mar. 31, 2013 Suburban Properties, LLC item	Mar. 31, 2013 Advances to unconsolidated joint ventures, net	Mar. 31, 2013 Edgewood Assisted Living Center, LLC item	Mar. 31, 2013 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	$ 209,810,000		$ 212,213,000	$ 88,827,000			$ 7,410,000	$ 31,480,000		$ 68,287,000						$ 6,581,000	$ 7,044,000	$ 181,000
Investment reported in liabilities	(1,132,000)																		(704,000)	(428,000)
Investment ownership percentage				9.50%		9.90%	30.00%	20.00%			50.00%	63.00%	50.00%	55.00%	63.00%	72.00%	67.00%		45.00%	50.00%
Number of unconsolidated joint ventures									3
Reduction in DFL income				15,900,000	14,700,000
Summarized combined financial information for unconsolidated joint ventures:
Real estate, net	3,706,411,000		3,731,740,000
Goodwill and other assets, net	5,875,013,000		5,734,318,000
Total assets	9,581,424,000		9,466,058,000
Capital lease obligations and mortgage debt	6,844,859,000		6,875,932,000
Accounts payable	1,108,324,000		971,095,000
Other partners' capital	1,445,199,000		1,435,885,000
HCP's capital	183,042,000		183,146,000
Total liabilities and partners' capital	9,581,424,000		9,466,058,000
Combined basis difference	25,000,000
Total revenues	1,093,374,000	1,044,509,000
Net income	10,584,000	1,125,000
HCP's share in earnings	14,801,000	13,675,000
Fees earned by HCP	443,000	493,000
Distributions received by HCP	$ 1,371,000	$ 3,629,000

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Segment Disclosures

3 Months Ended

Mar. 31, 2013

Segment Disclosures

Segment Disclosures

(13) 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 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, 2012 in the Company’s Annual Report on Form 10-K filed with the SEC. There were no intersegment sales or transfers during the three months ended March 31, 2013 and 2012 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 corporate assets including cash, restricted cash, accounts receivable, net, marketable equity securities, deferred financing costs and, if any, real estate held-for-sale. 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 11 for other information regarding concentrations of credit risk.

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

For the three months ended March 31, 2013:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2) (Cash NOI)
Senior housing	$	149,091	$	36,891	$	2,401	$	—	$	188,383	$	161,591	$	143,193
Post-acute/skilled	136,103		—		9,985		—		146,088		135,456		116,158
Life science	73,330		—		—		1		73,331		59,947		56,340
Medical office	87,255		—		—		442		87,697		52,959		51,671
Hospital	20,770		—		—		—		20,770		19,882		19,432
Total	$	466,549	$	36,891	$	12,386	$	443	$	516,269	$	429,835	$	386,794

For the three months ended March 31, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2) (Cash NOI)
Senior housing	$	113,500	$	36,179	$	282	$	—	$	149,961	$	128,065	$	114,648
Post-acute/skilled	133,673		—		280		—		133,953		133,473		112,848
Life science	71,830		—		—		1		71,831		58,946		59,104
Medical office	79,955		—		—		492		80,447		48,250		46,921
Hospital	19,378		—		257		—		19,635		18,448		17,893
Total	$	418,336	$	36,179	$	819	$	493	$	455,827	$	387,182	$	351,414

(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, 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 of reported net income to NOI and adjusted NOI (in thousands):

	Three Months Ended March 31,
	2013			2012
Net income	$	233,784		$	196,564
Interest income	(12,386		)	(819		)
Investment management fee income	(443		)	(493		)
Interest expense	109,351			103,752
Depreciation and amortization	104,717			85,280
General and administrative	20,744			20,089
Other income, net	(12,012		)	(436		)
Income taxes	881			(709		)
Equity income from unconsolidated joint ventures	(14,801		)	(13,675		)
Total discontinued operations	—			(2,371		)
NOI	429,835			387,182
Straight-line rents	(18,793		)	(9,927		)
DFL accretion	(24,170		)	(25,622		)
Amortization of above and below market lease intangibles, net	(78		)	(697		)
Lease termination fees	—			(148		)
NOI adjustments related to discontinued operations	—			626
Adjusted NOI	$	386,794		$	351,414

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

	March 31,			December 31,
Segments	2013			2012
Senior housing	$	7,739,727		$	7,658,612
Post-acute/skilled nursing	6,098,982			6,080,826
Life science	3,943,454			3,932,397
Medical office	2,664,053			2,661,394
Hospital	729,826			724,999
Gross segment assets	21,176,042			21,058,228
Accumulated depreciation and amortization	(2,079,778		)	(1,978,597		)
Net segment assets	19,096,264			19,079,631
Other non-segment assets	636,467			835,924
Total assets	$	19,732,731		$	19,915,555

At March 31, 2013, 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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Disclosures About Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Disclosures About Fair Value of Financial Instruments

Disclosures About Fair Value of Financial Instruments

(18) 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. The fair values 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 values of the marketable debt securities, interest-rate and currency swap contracts as well as common stock warrants are determined based on observable and unobservable market assumptions using standardized pricing models. The fair values of the senior unsecured notes and marketable equity securities are determined utilizing market quotes.

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

	March 31, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Loans receivable, net(2)	$	291,870	$	294,724	$	276,030	$	279,850
Marketable debt securities(3)	208,214		226,337		222,809		234,137
Marketable equity securities(1)	—		—		24,829		24,829
Warrants(3)	775		775		670		670
Bank line of credit(2)	14,000		14,000		—		—
Term loan(2)	208,213		208,213		222,694		222,694
Senior unsecured notes(1)	6,563,749		7,303,804		6,712,624		7,432,012
Mortgage debt(2)	1,680,792		1,763,165		1,676,544		1,771,155
Other debt(2)	78,836		78,836		81,958		81,958
Interest-rate swap assets(2)	—		—		89		89
Interest-rate swap liabilities(2)	12,421		12,421		12,699		12,699
Currency swap asset(2)	2,490		2,490		—		—
Currency swap liabilities(2)	—		—		2,641		2,641

(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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Net Investment in Direct Financing Leases (Details) (USD $)	0 Months Ended	3 Months Ended
	Apr. 01, 2013	Mar. 31, 2013 item	Dec. 31, 2012
Acquisition
Minimum lease payments receivable		$ 25,085,037,000	$ 25,217,520,000
Estimated residual values		4,010,514,000	4,010,514,000
Less unearned income		(22,174,130,000)	(22,346,641,000)
Net investment in direct financing leases		6,921,421,000	6,881,393,000
Number of properties subject to direct financing leases		361	361
HCR ManorCare
Acquisition
Minimum lease payments receivable		23,900,000,000	24,000,000,000
Rent receivable from triple-net lease with HCR ManorCare	$ 506,000,000	$ 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%
HCR ManorCare | Minimum
Acquisition
Total initial available term of asset pools		23 years
HCR ManorCare | Maximum
Acquisition
Total initial available term of asset pools		35 years

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2013

Supplemental Cash Flow Information

Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2013			2012
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	154,127		$	137,001
Income taxes paid	75			142
Capitalized interest	4,111			6,683
Supplemental schedule of non-cash investing activities:
Accrued construction costs	15,029			14,589
Supplemental schedule of non-cash financing activities:
Preferred stock redemption accrual	—			296,896
Vesting of restricted stock units	17			314
Cancellation of restricted stock	(6		)	(1		)
Conversion of non-managing member units into common stock	2,179			1,034
Mortgages and other liabilities assumed with real estate acquisitions	12,728			—
Unrealized gains on available-for-sale securities and derivatives designated as cash flow hedges, net	6,675			1,580

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 233,784	$ 196,564
Unrealized gains on securities:
Unrealized gains	1,355	1,304
Reclassification adjustment realized in net income	(9,131)
Change in net unrealized gains on cash flow hedges:
Unrealized gains	5,320	276
Reclassification adjustment realized in net income	272	89
Change in Supplemental Executive Retirement Plan obligation	55	45
Foreign currency translation adjustment	178	202
Total other comprehensive income (loss)	(1,951)	1,916
Total comprehensive income	231,833	198,480
Total comprehensive income attributable to noncontrolling interests	(3,199)	(3,184)
Total comprehensive income attributable to HCP, Inc.	$ 228,634	$ 195,296

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

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 three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012 included in the Company’s Annual Report on Form 10-K 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 statements of income (see Note 4).

Acquisition Costs

Transaction costs related to acquisitions of businesses, including properties, are expensed as incurred.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). This update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The adoption of ASU 2013-02 on January 1, 2013 did not have a material impact on the Company’s consolidated financial position or results of operations.

In July 2012, the 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. The adoption of ASU 2012-01 on January 1, 2013 did not have a material impact on the Company’s consolidated financial position or results of operations.

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Segment Disclosures (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Reconciliation from reported net income to NOI and adjusted NOI
Net income	$ 233,784	$ 196,564
Interest income	(12,386)	(819)
Investment management fee income	(443)	(493)
Interest expense	109,351	103,752
Depreciation and amortization	104,717	85,280
General and administrative	20,744	20,089
Other income, net	(12,012)	(436)
Income taxes	881	(709)
Equity income from unconsolidated joint ventures	(14,801)	(13,675)
Total discontinued operations		(2,371)
NOI	429,835	387,182
Straight-line rents	(18,793)	(9,927)
DFL accretion	(24,170)	(25,622)
Amortization of above and below market lease intangibles, net	(78)	(697)
Lease termination fees		(148)
NOI adjustments related to discontinued operations		626
Adjusted NOI	$ 386,794	$ 351,414

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2013

Derivative Financial Instruments

Derivative Financial Instruments

(19) Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of March 31, 2013 (dollars and GBP 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	$	(8,189	)
November 2008(3)	October 2016	Cash Flow	5.95		%	1 Month LIBOR+1.50%	$	26,900	$	(3,603	)
July 2009(4)	July 2013	Cash Flow	6.13		%	1 Month LIBOR+3.65%	$	13,600	$	(79	)
July 2012(4)	June 2016	Cash Flow	1.81		%	1 Month GBP LIBOR+1.20%	£	137,000	$	(549	)
July 2012(5)	June 2016	Cash Flow	$	79,600		Buy USD/Sell GBP	£	50,700	$	2,490

(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. Represents seven foreign exchange contracts to sell £7.2 million at a rate of 1.5695 on various dates between June 2013 and June 2016.

The Company uses derivative instruments to mitigate the effects of interest rate and foreign currency 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 manage the risk of fluctuations in interest and foreign currency rates related to the potential impact 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 March 31, 2013, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

On July 27, 2012, the Company entered into foreign currency swap contracts 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 9). The cash flow hedge has a fixed USD/GBP exchange rate of 1.5695 (buy $11.4 million and sell £7.2 million semi-annually) for a portion of its forecasted semi-annual cash receipts denominated in GBP. The foreign currency swap contracts mature through June 2016 (the end of the non-call period of the senior unsecured notes). The fair value of the contracts at March 31, 2013 was $2.5 million and is included in other assets, net. During the three months ended March 31, 2013, 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 discussion of the Term Loan in Note 10). 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 March 31, 2013 was a liability of $0.5 million and is included in accounts payable and accrued liabilities. During the three months ended March 31, 2013, there was no ineffective portion related to this hedge.

At March 31, 2013, 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	$	1,623		$	(1,520	)	$	3,195		$	(3,092	)
November 2008	October 2016	464			(455		)	924			(915		)
July 2009	July 2013	16			(20		)	34			(38		)
July 2012	June 2016	3,367			(3,263		)	6,683			(6,578		)
July 2012	June 2016	(336		)	434			(721		)	820

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Equity (Tables)

3 Months Ended

Mar. 31, 2013

Equity

Schedule of common stock, cash dividends

The following table lists the common stock cash dividends declared by the Company in 2013:

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
January 24	February 4	$	0.525	February 19
April 25	May 6	0.525		May 21

Schedule of company's other common stock issuances

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

	Three Months Ended March 31,
	2013	2012
Dividend Reinvestment and Stock Purchase Plan	382	210
Conversion of DownREIT units(1)	51	36
Exercise of stock options	796	1,412
Vesting of restricted stock units(2)	17	314

(1) Non-managing member LLC units.

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

Schedule of accumulated other comprehensive income (loss)

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

	March 31,			December 31,
	2013			2012
Unrealized gains on available for sale securities	$	—		$	7,776
Unrealized losses on cash flow hedges, net	(12,860		)	(18,452		)
Supplemental Executive Retirement Plan minimum liability	(3,095		)	(3,150		)
Cumulative foreign currency translation adjustment	(649		)	(827		)
Total accumulated other comprehensive loss	$	(16,604	)	$	(14,653	)

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Equity

3 Months Ended

Mar. 31, 2013

Equity

Equity

(12) 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 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 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 during the three months ended March 31, 2012 related to the original issuance costs of the preferred stock (this charge is presented as an additional preferred stock dividend in the Company’s condensed consolidated statements of income).

Common Stock

The following table lists the common stock cash dividends declared by the Company in 2013:

Declaration Date	Record Date	Amount Per Share		Dividend Payable Date
January 24	February 4	$	0.525	February 19
April 25	May 6	0.525		May 21

In October 2012, the Company completed a $979 million offering of 22 million shares of common stock at a price of $45.50, which proceeds were primarily used to fund the Blackstone JV Acquisition.

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.

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.

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

	Three Months Ended March 31,
	2013	2012
Dividend Reinvestment and Stock Purchase Plan	382	210
Conversion of DownREIT units(1)	51	36
Exercise of stock options	796	1,412
Vesting of restricted stock units(2)	17	314

(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):

	March 31,			December 31,
	2013			2012
Unrealized gains on available for sale securities	$	—		$	7,776
Unrealized losses on cash flow hedges, net	(12,860		)	(18,452		)
Supplemental Executive Retirement Plan minimum liability	(3,095		)	(3,150		)
Cumulative foreign currency translation adjustment	(649		)	(827		)
Total accumulated other comprehensive loss	$	(16,604	)	$	(14,653	)

Noncontrolling Interests

At March 31, 2013, there were four million DownREIT units outstanding in four LLCs, for which the Company is the managing member. At March 31, 2013, the carrying and fair values of these DownREIT units were $186 million and $301 million, respectively.