Segment Disclosures

3 Months Ended

Mar. 31, 2014

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 primarily invests in single operator or tenant properties, through the acquisition and development of triple-net leased real estate, management of operations (RIDEA) and by debt issued by operators in these sectors. Under the medical office segment, the Company 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 herein and in the Company’s 2013 Annual Report on Form 10-K filed with the SEC. There were no intersegment sales or transfers during the three months ended March 31, 2014 and 2013. The Company evaluates performance based upon property net operating income from continuing operations (“NOI”), adjusted (cash) 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 March 31, 2014:

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	$	150,085	$	38,053	$	3,284	$	—	$	191,422	$	163,590	$	150,375
Post-acute/skilled	137,780		—		13,412		—		151,192		137,248		118,099
Life science	76,122		—		—		1		76,123		61,961		58,829
Medical office	89,262		—		—		448		89,710		53,746		53,029
Hospital	21,545		—		—		—		21,545		20,595		20,661
Total	$	474,794	$	38,053	$	16,696	$	449	$	529,992	$	437,140	$	400,993

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	$	148,896	$	35,746	$	2,401	$	—	$	187,043	$	161,120	$	142,722
Post-acute/skilled	133,836		—		9,985		—		143,821		133,207		113,847
Life science	73,330		—		—		1		73,331		59,947		56,340
Medical office	86,831		—		—		442		87,273		52,567		51,240
Hospital	19,718		—		—		—		19,718		18,830		18,476
Total	$	462,611	$	35,746	$	12,386	$	443	$	511,186	$	425,671	$	382,625

(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 March 31,
	2014			2013
Net income	$	263,623		$	233,784
Interest income	(16,696		)	(12,386		)
Investment management fee income	(449		)	(443		)
Interest expense	106,638			109,110
Depreciation and amortization	107,388			103,179
General and administrative	21,394			20,656
Other income, net	(1,930		)	(12,112		)
Income taxes	1,446			916
Equity income from unconsolidated joint ventures	(14,528		)	(14,801		)
Total discontinued operations	(29,746		)	(2,232		)
NOI	437,140			425,671
Straight-line rents	(13,968		)	(18,793		)
DFL accretion	(21,422		)	(24,170		)
Amortization of above and below market lease intangibles, net	(168		)	(78		)
Lease termination fees	(578		)	—
NOI adjustments related to discontinued operations	(11		)	(5		)
Adjusted (Cash) NOI	$	400,993		$	382,625

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

	March 31,			December 31,
Segments	2014			2013
Senior housing	$	7,812,723		$	7,803,085
Post-acute/skilled nursing	6,301,607			6,266,938
Life science	4,003,001			3,986,187
Medical office	2,674,280			2,686,069
Hospital	639,357			639,357
Gross segment assets	21,430,968			21,381,636
Accumulated depreciation and amortization	(2,318,562		)	(2,254,591		)
Net segment assets	19,112,406			19,127,045
Assets held-for-sale, net	—			9,819
Other non-segment assets	746,272			939,006
Total assets	$	19,858,678		$	20,075,870

At both March 31, 2014 and December 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.