Segment Disclosures

9 Months Ended

Sep. 30, 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, management of operations (RIDEA) 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 nine months ended September 30, 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 and cash equivalents, 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 September 30, 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	$	149,443	$	37,589	$	3,121	$	—	$	190,153	$	162,391	$	148,997
Post-acute/skilled	138,289		—		38,642		—		176,931		137,642		120,258
Life science	72,531		—		—		1		72,532		58,440		56,352
Medical office	88,473		—		—		463		88,936		52,255		52,214
Hospital	15,091		—		315		—		15,406		14,119		14,148
Total	$	463,827	$	37,589	$	42,078	$	464	$	543,958	$	424,847	$	391,969

For the three months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)(Cash NOI)
Senior housing	$	114,661	$	36,076	$	877	$	—	$	151,614	$	125,865	$	113,401
Post-acute/skilled	135,183		—		9,135		—		144,318		135,029		116,573
Life science	71,194		—		—		1		71,195		59,403		56,341
Medical office	85,800		—		—		459		86,259		50,852		49,669
Hospital	14,414		—		266		—		14,680		13,526		13,165
Total	$	421,252	$	36,076	$	10,278	$	460	$	468,066	$	384,675	$	349,149

For the nine months ended September 30, 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	$	448,600	$	112,070	$	8,328	$	—	$	568,998	$	487,501	$	440,395
Post-acute/skilled	411,912		—		59,656		—		471,568		409,965		356,544
Life science	221,088		—		—		3		221,091		179,775		170,957
Medical office	265,902		—		—		1,403		267,305		160,170		157,742
Hospital	33,703		—		627		—		34,330		30,882		42,369
Total	$	1,381,205	$	112,070	$	68,611	$	1,406	$	1,563,292	$	1,268,293	$	1,168,007

For the nine months ended September 30, 2012:

Segments	Rental Revenues(1)		Resident Fees and Services		Interest Income		Investment Management Fee Income		Total Revenues		NOI(2)		Adjusted NOI(2)(Cash NOI)
Senior housing	$	341,353	$	107,824	$	1,686	$	—	$	450,863	$	379,251	$	341,794
Post-acute/skilled	403,209		—		9,842		—		413,051		402,690		345,936
Life science	215,569		—		—		3		215,572		177,339		171,179
Medical office	246,661		—		—		1,420		248,081		148,030		144,272
Hospital	42,647		—		785		—		43,432		39,919		38,696
Total	$	1,249,439	$	107,824	$	12,313	$	1,423	$	1,370,999	$	1,147,229	$	1,041,877

(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 DFLs, 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 or real estate companies, 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 September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net income	$	236,858		$	199,043		$	687,367		$	600,582
Interest income	(42,078		)	(10,278		)	(68,611		)	(12,313		)
Investment management fee income	(464		)	(460		)	(1,406		)	(1,423		)
Interest expense	108,088			103,355			326,094			309,399
Depreciation and amortization	104,859			87,170			317,430			254,463
General and administrative	45,423			19,415			90,080			54,299
Impairments	—			7,878			—			7,878
Other income, net	(1,584		)	(770		)	(16,887		)	(2,232		)
Income taxes	1,033			(602		)	3,563			(1,145		)
Equity income from unconsolidated joint ventures	(13,892		)	(13,396		)	(44,278		)	(42,803		)
Total discontinued operations	(13,396		)	(6,680		)	(25,059		)	(19,476		)
NOI	424,847			384,675			1,268,293			1,147,229
Straight-line rents	(12,604		)	(11,821		)	(28,559		)	(33,608		)
DFL accretion	(19,822		)	(23,433		)	(65,386		)	(71,072		)
Amortization of above and below market lease intangibles, net	(346		)	(533		)	(6,414		)	(1,855		)
Lease termination fees	(205		)	(175		)	(220		)	(574		)
NOI adjustments related to discontinued operations	99			436			293			1,757
Adjusted NOI	$	391,969		$	349,149		$	1,168,007		$	1,041,877

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

	September 30,			December 31,
Segments	2013			2012
Senior housing	$	7,811,003		$	7,654,221
Post-acute/skilled nursing	6,269,566			6,080,826
Life science	3,969,723			3,932,397
Medical office	2,686,241			2,661,394
Hospital	542,187			505,393
Gross segment assets	21,278,720			20,834,231
Accumulated depreciation and amortization	(2,192,342		)	(1,900,221		)
Net segment assets	19,086,378			18,934,010
Assets held-for-sale, net	130,765			145,621
Other non-segment assets	672,366			835,924
Total assets	$	19,889,509		$	19,915,555

At September 30, 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.