NOTE 4. Real Estate Property Investments

Acquisition of Private Pay Senior Housing Portfolio (“RIDEA III”)

On June 30, 2015, the Company and Brookdale acquired a portfolio of 35 private pay senior housing communities from Chartwell Retirement Residences, including two leasehold interests, representing 5,025 units. The portfolio was acquired in a RIDEA structure (“RIDEA III”), with Brookdale owning a 10% noncontrolling interest. Brookdale has operated these communities since 2011 after its acquisition of Horizon Bay and continues to manage the communities under a long-term management agreement, which is cancellable under certain conditions (subject to a fee) if terminated within the next seven years. The Company paid $770 million in cash consideration, net of cash assumed, and assumed $32 million of net liabilities and $29 million of noncontrolling interests to acquire: (i) real estate with a fair value of $771 million, (ii) intangible assets with a fair value of $53 million and (iii) working capital of $7 million. As a result of the acquisition, the Company recognized a net termination fee of $8 million in rental and related revenues, which represents the termination value of the two leasehold interests. The lease-up intangible assets recognized were attributable to the value of the acquired underlying operating resident leases of the senior housing communities that were stabilized or nearly stabilized (e.g., resident occupancy above 80%). As of June 30, 2015, 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 a change from the initial estimate.

Pro Forma Results of Operations

The following unaudited pro forma consolidated results of operations assume that the RIDEA III acquisition was completed as of January 1, 2014 (in thousands, except per share amounts):



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenues	$	651,095	$	584,339	$	1,305,449	$	1,162,549
Net income (loss)		171,653		226,327		(61,945)		493,999
Net income (loss) applicable to HCP, Inc.		168,400		222,528		(68,700)		485,283
Basic earnings per common share		0.36		0.48		(0.15)		1.06
Diluted earnings per common share		0.36		0.48		(0.15)		1.06

2015 Other Acquisitions

In addition to the RIDEA III acquisition discussed above, a summary of other real estate acquisitions for the six months ended June 30, 2015 follows (in thousands):


	Consideration							Assets Acquired(1)
	Cash Paid/			Liabilities		Noncontrolling				Net
Segment	Debt Settled			Assumed		Interest		Real Estate		Intangibles
Senior housing	$	178,888	(2)	$	821	$	3,885	$	166,732	$	16,862
Post-acute/skilled nursing		178,707	(2)		—		—		151,663		27,044
Medical office		377,351			12,851		—		349,650		40,552
	$	734,946		$	13,672	$	3,885	$	668,045	$	84,458

(1)Amounts include preliminary purchase price allocations which may be subject to change.

(2)Includes £174 million ($254 million) of the Company’s HC-One Facility (see Note 7) converted to fee ownership in a portfolio of 36 care homes located throughout the United Kingdom (“U.K.”).

Subsequent Acquisitions. In July 2015, the Company exercised the purchase option right under its £27 million ($42 million) loan with Maria Mallaband Care Group (“MMCG”) (see Note 7) and acquired two care homes in the U.K.

2014 Acquisitions

A summary of real estate acquisitions for the six months ended June 30, 2014 follows (in thousands):


	Consideration								Assets Acquired
				Liabilities		Noncontrolling					Net
Segment	Cash Paid			Assumed		Interest			Real Estate		Intangibles
Senior housing	$	215,381	(1)	$	1	$	6,321	(2)	$	204,758	$	16,945
Life science		43,500			250		—			41,281		2,469
Medical office		26,548			272		—			22,820		4,000
	$	285,429		$	523	$	6,321		$	268,859	$	23,414

(1)Includes £76 million translated into U.S. dollars.

(2)Includes $5 million of non-managing member limited liability company units.

Completed Developments

During the six months ended June 30, 2014, the Company placed in service the following: (i) two life science facilities, (ii) a medical office building (“MOB”) and (iii) a post-acute/skilled nursing facility. These completed developments represent $25 million of gross real estate on the Company’s consolidated balance sheets as of December 31, 2014. There were no completed developments during the six months ended June 30, 2015.

Construction, Tenant and Other Capital Improvements

A summary of the Company’s funding for construction, tenant and other capital improvements follows (in thousands):


	Six Months Ended June 30,
Segment	2015		2014
Senior housing	$	36,826	$	13,717
Post-acute/skilled nursing		2,492		2,533
Life science		50,548		57,476
Medical office		49,534		26,231
Hospital		37		1,188
	$	139,437	$	101,145