(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 one or more 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 and tenants; the information provided is presented for the gross assets and revenues that are associated with certain operators and tenants as percentages of the respective segment’s and total Company’s assets and revenues:

Segment Concentrations:

	Percentage of Senior Housing Gross Assets							Percentage of Senior Housing Revenues					Percentage of Senior Housing Revenues
	September 30,			December 31,			Three Months Ended September 30,					Nine Months Ended September 30,
Operators	2013		2012			2013				2012		2013			2012
Emeritus	37.3	%	37.3		%	34.8			%	20.3	%	34.6		%	20.5	%
Sunrise Senior Living (“Sunrise”)(1)	17.2		17.5			11.5				15.6		12.2			15.7
HCR ManorCare	11.0		11.0			9.6				11.7		9.5			11.8
Brookdale Senior Living (“Brookdale”)(2)	10.6		10.7			11.7				14.4		11.6			14.2

	Percentage of Post-Acute/ Skilled Nursing Gross Assets							Percentage of Post-Acute/ Skilled Nursing Revenues					Percentage of Post-Acute/ Skilled Nursing Revenues
	September 30,			December 31,			Three Months Ended September 30,					Nine Months Ended September 30,
Operators	2013		2012			2013				2012		2013			2012
HCR ManorCare	88.1	%	89.3		%	72.7			%	87.2	%	81.3		%	90.9	%

Total Company Concentrations:

	Percentage of Total Company Assets							Percentage of Total Company Revenues					Percentage of Total Company Revenues
	September 30,			December 31,			Three Months Ended September 30,					Nine Months Ended September 30,
Operators	2013		2012			2013				2012		2013			2012
HCR ManorCare	32.1	%	31.5		%	27.0			%	30.7	%	28.0		%	31.2	%
Emeritus	14.6		14.3			12.2				6.6		12.6			6.7
Sunrise(1)	6.8		6.7			4.0				5.0		4.4			5.2
Brookdale(2)	4.2		4.1			4.1				4.7		4.2			4.7

(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 September 30, 2013 and December 31, 2012, Brookdale percentages exclude $778 million and $759 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 senior housing assets for Brookdale would be 21% at both September 30, 2013 and December 31, 2012. Assuming that these assets were attributable to Brookdale, the percentage of total assets for Brookdale would be 8% at both September 30, 2013 and December 31, 2012. For the three and nine months ended September 30, 2013, Brookdale percentages exclude $37.6 million and $112.0 million, respectively, of senior housing revenues related to these facilities. Assuming that these revenues were attributable to Brookdale, the percentage of senior housing revenues for Brookdale would be 31% for both the three and nine months ended September 30, 2013. Assuming that these revenues were attributable to Brookdale, the percentage of total revenues for Brookdale would be 11% for both the three and nine months ended September 30, 2013. For the three and nine months ended September 30, 2012, Brookdale percentages exclude $36.1 million and $106.8 million, respectively, of senior housing revenues related to these facilities. Assuming that these revenues were attributable to Brookdale, the percentage of senior housing revenues for Brookdale would be 38% for both the three and nine months ended September 30, 2012. Assuming that these revenues were attributable to Brookdale, the percentage of total revenues for Brookdale would be 12% for both the three and nine months ended September 30, 2012.

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

	September 30,		December 31,
	2013		2012
Real estate and other property, net	$	3,008.7	$	3,046.6
Cash and cash equivalents	158.5		120.5
Goodwill, intangible and other assets, net	5,563.7		5,625.4
Total assets	$	8,730.9	$	8,792.5

Debt and financing obligations	$	6,289.0	$	6,374.6
Accounts payable, accrued liabilities and other	1,021.8		1,021.9
Total equity	1,420.1		1,396.0
Total liabilities and equity	$	8,730.9	$	8,792.5

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012

Revenues	$	1,030.3		$	1,037.8		$	3,131.7		$	3,113.3
Operating, general and administrative expense	(888.1		)	(880.8		)	(2,677.4		)	(2,663.7		)
Depreciation and amortization expense	(36.3		)	(41.6		)	(110.0		)	(125.2		)
Interest expense	(103.8		)	(105.2		)	(312.3		)	(317.3		)
Other income, net	2.3			3.7			4.0			10.1
Income before income taxes	4.4			13.9			36.0			17.2
Income taxes	(1.8		)	(4.8		)	(11.6		)	(4.7		)
Net income	$	2.6		$	9.1		$	24.4		$	12.5

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 $113 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 $376 million as of September 30, 2013.