10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2016.

OR

☐ TRANSITION 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 incorporation or organization)	(I.R.S. Employer Identification No.)

1920 Main Street, Suite 1200

Irvine, CA 92614

(Address of principal executive offices)

(949) 407-0700

(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 ☒ NO ☐

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 ☒ NO ☐

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 ☒	Accelerated Filer ☐
Non-accelerated Filer ☐	Smaller Reporting Company ☐
(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 ☐ NO ☒

As of April 29, 2016, there were 467,087,589 shares of the registrant’s $1.00 par value common stock outstanding.

HCP, INC.

INDEX

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of ComprehensiveIncome (Loss)	5
	Consolidated Statements of Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to the Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	52
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 5.	Other Information	54
Item 6.	Exhibits	55
Signatures		57

2

HCP, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	March 31,		December 31,
	2016		2015
ASSETS
Real estate:
Buildings and improvements	$	12,314,826	$	12,198,704
Development costs and construction in progress		430,104		388,576
Land		1,956,841		1,948,757
Accumulated depreciation and amortization		(2,636,636)		(2,541,334)
Net real estate		12,065,135		11,994,703
Net investment in direct financing leases		5,857,210		5,905,009
Loans receivable, net		768,896		768,743
Investments in and advances to unconsolidated joint ventures		608,665		605,244
Accounts receivable, net of allowance of $4,161 and $3,261, respectively		45,224		48,929
Cash and cash equivalents		94,665		346,500
Restricted cash		46,280		60,616
Intangible assets, net		585,330		603,706
Real estate assets held for sale, net		311,243		314,126
Other assets, net		817,279		802,273
Total assets(1)	$	21,199,927	$	21,449,849
LIABILITIES AND EQUITY
Bank line of credit	$	810,313	$	397,432
Term loans		511,737		524,807
Senior unsecured notes		8,623,376		9,120,107
Mortgage debt		895,289		932,212
Other debt		95,229		94,445
Intangible liabilities, net		52,794		56,147
Intangible liabilities on assets held for sale, net		18,064		19,126
Accounts payable and accrued liabilities		433,144		436,239
Deferred revenue		129,656		123,017
Total liabilities(1)		11,569,602		11,703,532
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 466,924,935 and 465,488,492 shares issued and outstanding, respectively		466,925		465,488
Additional paid-in capital		11,685,541		11,647,039
Cumulative dividends in excess of earnings		(2,890,046)		(2,738,414)
Accumulated other comprehensive loss		(31,673)		(30,470)
Total stockholders’ equity		9,230,747		9,343,643
Joint venture partners		218,110		217,066
Non-managing member unitholders		181,468		185,608
Total noncontrolling interests		399,578		402,674
Total equity		9,630,325		9,746,317
Total liabilities and equity	$	21,199,927	$	21,449,849

(1) HCP, Inc.’s consolidated total assets and total liabilities at March 31, 2016 and December 31, 2015 include certain assets of variable interest entities (“VIEs”) that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at March 31, 2016 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $60 million; land $327 million; accumulated depreciation and amortization $567 million; investments in unconsolidated joint ventures $14 million; accounts receivable $18 million; cash $60 million; restricted cash $23 million; intangible assets, net $197 million; and other assets, net $66 million. Total assets at December 31, 2015 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $54 million; land $327 million; accumulated depreciation and amortization $537 million; investments in unconsolidated joint ventures $14 million; accounts receivable $19 million; cash $61 million; restricted cash $21 million; intangible assets, net $204 million; and other assets, net $63 million. Total liabilities at March 31, 2016 include VIE liabilities as follows: mortgage debt $573 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $23 million from VIEs. Total liabilities at December 31, 2015 include VIE liabilities as follows: mortgage debt $589 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $19 million. See Note 16 to the Consolidated Financial Statements for additional information.

See accompanying Notes to the Consolidated Financial Statements.

3

HCP, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2016		2015
Revenues:
Rental and related revenues	$	297,194	$	275,082
Tenant recoveries		31,737		29,896
Resident fees and services		165,763		105,013
Income from direct financing leases		127,968		167,078
Interest income		18,029		33,262
Investment management fee income		91		460
Total revenues		640,782		610,791
Costs and expenses:
Interest expense		122,062		116,780
Depreciation and amortization		141,322		114,522
Operating		176,955		132,031
General and administrative		25,499		24,773
Acquisition and pursuit costs		2,475		3,390
Impairment		—		478,464
Total costs and expenses		468,313		869,960
Other income:
Gain on sales of real estate		—		6,264
Other income, net		1,222		1,724
Total other income, net		1,222		7,988
Income (loss) before income taxes and equity (loss) income from unconsolidated joint ventures		173,691		(251,181)
Income tax (expense) benefit		(53,038)		77
Equity (loss) income from unconsolidated joint ventures		(908)		13,601
Net income (loss)		119,745		(237,503)
Noncontrolling interests’ share in earnings		(3,626)		(3,111)
Net income (loss) attributable to HCP, Inc.		116,119		(240,614)
Participating securities’ share in earnings		(357)		(335)
Net income (loss) applicable to common shares	$	115,762	$	(240,949)
Earnings per common share:
Basic	$	0.25	$	(0.52)
Diluted	$	0.25	$	(0.52)
Weighted average shares used to calculate earnings per common share:
Basic		466,074		460,880
Diluted		466,262		460,880
Dividends declared per common share	$	0.575	$	0.565

See accompanying Notes to the Consolidated Financial Statements.

4

HCP, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2016		2015
Net income (loss)	$	119,745	$	(237,503)
Other comprehensive loss:
Change in net unrealized losses on securities		(15)		(5)
Change in net unrealized (losses) gains on cash flow hedges:
Unrealized (losses) gains		(690)		2,339
Reclassification adjustment realized in net income		169		(6)
Change in Supplemental Executive Retirement Plan obligation		70		69
Foreign currency translation adjustment		(737)		(6,963)
Total other comprehensive loss		(1,203)		(4,566)
Total comprehensive income (loss)		118,542		(242,069)
Total comprehensive income attributable to noncontrolling interests		(3,626)		(3,111)
Total comprehensive income (loss) attributable to HCP, Inc.	$	114,916	$	(245,180)

See accompanying Notes to the Consolidated Financial Statements.

5

HCP, Inc.

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		Loss		Equity		Interests		Equity
January 1, 2016	465,488	$	465,488	$	11,647,039	$	(2,738,414)	$	(30,470)	$	9,343,643	$	402,674	$	9,746,317
Net income	—		—		—		116,119		—		116,119		3,626		119,745
Other comprehensive loss	—		—		—		—		(1,203)		(1,203)		—		(1,203)
Issuance of common stock, net	1,428		1,428		33,978		—		—		35,406		—		35,406
Conversion of DownREIT units to common stock	—		—		—		—		—		—		(4,136)		(4,136)
Repurchase of common stock	(102)		(102)		(3,526)		—		—		(3,628)		—		(3,628)
Exercise of stock options	111		111		2,741		—		—		2,852		—		2,852
Amortization of deferred compensation	—		—		5,345		—		—		5,345		—		5,345
Common dividends ($0.575 per share)	—		—		—		(268,186)		—		(268,186)		—		(268,186)
Distributions to noncontrolling interests	—		—		(36)		—		—		(36)		(4,853)		(4,889)
Issuance of noncontrolling interests	—		—		—		—		—		—		2,200		2,200
Deconsolidation of noncontrolling interests	—		—		—		435		—		435		67		502
March 31, 2016	466,925	$	466,925	$	11,685,541	$	(2,890,046)	$	(31,673)	$	9,230,747	$	399,578	$	9,630,325

						Cumulative		Accumulated
				Additional		Dividends		Other		Total		Total
	Common Stock			Paid-In		In Excess		Comprehensive		Stockholders’		Noncontrolling		Total
	Shares	Amount		Capital		Of Earnings		Loss		Equity		Interests		Equity
January 1, 2015	459,746	$	459,746	$	11,431,987	$	(1,132,541)	$	(23,895)	$	10,735,297	$	261,802	$	10,997,099
Net loss	—		—		—		(240,614)		—		(240,614)		3,111		(237,503)
Other comprehensive loss	—		—		—		—		(4,566)		(4,566)		—		(4,566)
Issuance of common stock, net	1,155		1,155		35,657		—		—		36,812		(1,608)		35,204
Repurchase of common stock	(128)		(128)		(5,968)		—		—		(6,096)		—		(6,096)
Exercise of stock options	811		811		26,410		—		—		27,221		—		27,221
Amortization of deferred compensation	—		—		6,165		—		—		6,165		—		6,165
Common dividends ($0.565 per share)	—		—		—		(260,686)		—		(260,686)		—		(260,686)
Distributions to noncontrolling interests	—		—		(263)		—		—		(263)		(3,861)		(4,124)
Issuance of noncontrolling interests	—		—		—		—		—		—		2,932		2,932
March 31, 2015	461,584	$	461,584	$	11,493,988	$	(1,633,841)	$	(28,461)	$	10,293,270	$	262,376	$	10,555,646

See accompanying Notes to the Consolidated Financial Statements.

6

HCP, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2016		2015
Cash flows from operating activities:
Net income (loss)	$	119,745	$	(237,503)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		141,322		114,522
Amortization of market lease intangibles, net		(468)		(378)
Amortization of deferred compensation		5,345		6,165
Amortization of deferred financing costs, net		5,280		4,752
Straight-line rents		(7,576)		(9,546)
Loan and direct financing lease non-cash interest		165		(21,032)
Deferred rental revenues		(619)		(902)
Equity loss (income) from unconsolidated joint ventures		908		(13,601)
Distributions of earnings from unconsolidated joint ventures		1,589		1,159
Lease termination income, net		—		(1,103)
Gain on sales of real estate		—		(6,264)
Deferred income tax expense		49,156		—
Foreign exchange and other (gains) losses, net		(89)		134
Impairment		—		478,464
Changes in:
Accounts receivable, net		3,705		(3,814)
Other assets		(6,847)		(5,839)
Accounts payable and accrued liabilities		(42,999)		(75,146)
Net cash provided by operating activities		268,617		230,068
Cash flows from investing activities:
Acquisitions of real estate		(94,271)		(71,373)
Development of real estate		(99,096)		(61,805)
Leasing costs and tenant and capital improvements		(19,964)		(11,540)
Contributions to unconsolidated joint ventures		(10,136)		(27,279)
Distributions in excess of earnings from unconsolidated joint ventures		5,336		1,022
Principal repayments on loans receivable, direct financing leases and other		155,320		17,496
Investments in loans receivable and other		(117,282)		(176,504)
Decrease in restricted cash		14,336		1,697
Net cash used in investing activities		(165,757)		(328,286)
Cash flows from financing activities:
Net borrowings under bank line of credit		422,897		—
Repayments under bank line of credit		—		(455,506)
Borrowings under term loan		—		333,014
Issuance of senior unsecured notes		—		595,110
Repayments of senior unsecured notes		(500,000)		(200,000)
Repayments of mortgage and other debt		(36,918)		(6,354)
Deferred financing costs		—		(7,687)
Issuance of common stock and exercise of options		34,122		62,425
Repurchase of common stock		(3,628)		(6,096)
Dividends paid on common stock		(268,186)		(260,686)
Issuance of noncontrolling interests		2,200		1,626
Distributions to noncontrolling interests		(4,889)		(4,124)
Net cash (used in) provided by financing activities		(354,402)		51,722
Effect of foreign exchange on cash and cash equivalents		(293)		(144)
Net decrease in cash and cash equivalents		(251,835)		(46,640)
Cash and cash equivalents, beginning of period		346,500		183,810
Cash and cash equivalents, end of period	$	94,665	$	137,170

See accompanying Notes to the Consolidated Financial Statements.

7

HCP, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.  Business

HCP, Inc., a Standard & Poor’s (“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 organized in 1985 and qualifies as a self-administered real estate investment trust (“REIT”). The Company is headquartered in Irvine, California, with offices in Nashville, Los Angeles, San Francisco and London. The Company acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. The Company’s diverse portfolio is comprised of investments in the following healthcare segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital.

NOTE 2.  Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of HCP, Inc., its wholly-owned subsidiaries, joint ventures and 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 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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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, 2015 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”).

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 is intended to simplify accounting for share-based payment transactions. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-09 on January 1, 2017 to its consolidated financial position, results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-08 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-08 on January 1, 2018 to its consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the current accounting for leases to (i) require lessees to put most leases on their balance sheets, but continue recognizing expenses on their income statements in a manner similar to today’s accounting, (ii) eliminate current real estate specific lease

8

provisions, and (iii) modify classification criteria and accounting for sales-type leases for lessors. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This update requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. This update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment at each reporting period. ASU 2016-01 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted only for certain disclosure requirements. The Company is evaluating the impact of the adoption of ASU 2016-01 on January 1, 2018 to its consolidated financial position or results of operations.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined, (ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company adopted ASU 2015-16 on January 1, 2016; the adoption of which did not have a material impact on its consolidated financial position or results of operations.

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 requires amendments to both the VIE and voting consolidation accounting models. The amendments (i) rescind the indefinite deferral of certain aspects of accounting standards relating to consolidations and provide a permanent scope exception for registered money market funds and similar unregistered money market funds, (ii) modify (a) the identification of variable interests (fees paid to a decision maker or service provider), (b) the VIE characteristics for a limited partnership or similar entity and (c) the primary beneficiary determination under the VIE model, and (iii) eliminate the presumption within the current voting model that a general partner controls a limited partnership or similar entity. ASU 2015-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in ASU 2015-02 using either a modified retrospective or retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The Company adopted ASU 2015-02 on January 1, 2016; the adoption of which did not have a material impact to its consolidated financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update changes the requirements for recognizing revenue. ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for annual periods, and interim periods within, beginning after December 15, 2016. The Company is evaluating the impact of the adoption of ASU 2014-09 on January 1, 2018 to its consolidated financial position or results of operations.

Reclassification

Certain amounts in the Company’s consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Assets held for sale and associated liabilities have been reclassified on the consolidated balance sheets (see Note 4).

9

NOTE 3.  Real Estate Property Investments

2016 Acquisitions

A summary of real estate acquisitions for the three months ended March 31, 2016 (in thousands):

	Consideration				Assets Acquired(1)
			Liabilities				Net
Segment	Cash Paid		Assumed		Real Estate		Intangibles
Senior housing	$	76,362	$	1,200	$	71,875	$	5,687
Post-acute/skilled nursing		17,909		—		16,596		1,313
	$	94,271	$	1,200	$	88,471	$	7,000

(1) The purchase price allocation is preliminary and may be subject to change.

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

On June 30, 2015, the Company and Brookdale Senior Living (“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 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 seven years from the acquisition date). 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) lease-up 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 millionin 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 (i.e., resident occupancy above 80%). As of March 31, 2016, the purchase price allocation is preliminary and may be subject to change.

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
	March 31, 2015
Revenues	$	654,354
Net loss		(233,598)
Net loss applicable to HCP, Inc.		(237,099)
Basic earnings per common share		(0.51)
Diluted earnings per common share		(0.51)

2015 Other Acquisitions

A summary of real estate acquisitions for the three months ended March 31, 2015 (in thousands):

	Consideration						Assets Acquired
			Liabilities		Noncontrolling				Net
Segment	Cash Paid		Assumed		Interest		Real Estate		Intangibles
Senior housing	$	34,068	$	626	$	1,306	$	34,350	$	1,650
Medical office		180		—		—		180		—
	$	34,248	$	626	$	1,306	$	34,530	$	1,650

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Construction, Tenant and Other Capital Improvements

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

	Three Months Ended March 31,
Segment	2016		2015
Senior housing	$	39,513	$	16,172
Post-acute/skilled nursing		—		1,960
Life science		39,070		27,391
Medical office		30,920		19,233
Hospital		—		37
	$	109,503	$	64,793

Subsequent Event.In May 2016, the Company announced it entered into definitive agreements to acquire a portfolio of seven private pay senior housing communities for $190 million, including the assumption of $75 million of debt maturing in 2044 at a 4.0% rate. Consisting of 526 assisted living and memory care units, the portfolio will be managed by Senior Lifestyle Corporation in a 100% owned RIDEA structure at closing. The closing of this transaction is expected in the second half of 2016 and remains subject to customary closing conditions.

NOTE 4.  Dispositions of Real Estate

At March 31, 2016 and December 31, 2015, four life science facilities were classified as held for sale, with an aggregate carrying value of $311 million and $314 million, respectively.

During the three months ended March 31, 2015, the Company sold eight senior housing facilities for $51 million resulting from Brookdale’s exercise of its purchase option received as part of the 2014 Brookdale transaction.

Subsequent Event. In April 2016, the Company sold a life science facility for $74 million with a carrying value of $43 million at March 31, 2016.  

NOTE 5.  Net Investment in Direct Financing Leases

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

	March 31,		December 31,
	2016		2015
Minimum lease payments receivable	$	26,044,849	$	26,283,392
Estimated residual values		3,930,300		3,900,679
Less unearned income		(23,300,899)		(23,462,022)
Net investment in direct financing leases before allowance		6,674,250		6,722,049
Allowance for DFL losses		(817,040)		(817,040)
Net investment in direct financing leases	$	5,857,210	$	5,905,009
Properties subject to direct financing leases		340		348

HCR ManorCare, Inc.

The Company acquired 334 post-acute, skilled nursing and assisted living facilities in its 2011 transaction with HCR ManorCare Inc. (“HCRMC”) and entered into a triple-net Master Lease and Security Agreement (the “Master Lease”) with a subsidiary (“Lessee”) of HCRMC.

As part of the Company’s fourth quarter 2015 review process, including its internal rating evaluation, it assessed the collectibility of all contractual rent payments under the HCRMC amended master lease (the “Amended Master Lease”). The Company’s evaluation included, but was not limited to, consideration of: (i) the continued decline in HCRMC’s operating performance and fixed charge coverage ratio during the second half of 2015, with the most significant deterioration occurring during the fourth quarter, (ii) the reduced growth outlook for the post-acute/skilled nursing business

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and (iii) HCRMC’s 2015 audited financial statements. The Company determined that the timing and amounts owed under the HCRMC DFL investments were no longer reasonably assured and assigned an internal rating of “Watch List” as of December 31, 2015. Further, the Company placed the HCRMC DFL investments on nonaccrual and utilizes the cash method of accounting in accordance with its policy.

As a result of assigning an internal rating of “Watch List” for its HCRMC DFL investments during the quarterly review process, the Company further evaluated the carrying amount of its HCRMC DFL investments. As a result of the significant decline in HCRMC’s fixed charge coverage ratio in the fourth quarter of 2015, combined with a lower growth outlook for the post-acute/skilled nursing business, the Company determined that it was probable that its HCRMC DFL investments were impaired and the amount of the loss could be reasonably estimated. In the fourth quarter of 2015, the Company recorded an allowance for DFL losses (impairment charge) of $817 million, reducing the carrying amount of its HCRMC DFL investments from $6.0 billion to $5.2 billion.

In December 2015, the Company reduced the carrying amount of its equity investment in HCRMC to zero, and income will be recognized only if cash distributions are received from HCRMC; as a result, the Company no longer recharacterizes (eliminates) its proportional ownership share of income from DFLs to equity income from unconsolidated joint ventures (see Note 7).

During the quarter ended March 31, 2015, the Company and HCRMC agreed to market for sale the real estate and operations associated with 50 non-strategic facilities that are under the Master Lease. HCRMC will receive an annual rent reduction under the Master Lease based on 7.75% of the net sales proceeds received by HCP. During the year ended December 31, 2015, the Company completed sales of 22 non-strategic HCRMC facilities for $219 million. During the three months ended March 31, 2016, the Company sold an additional 11 facilities for $62 million, bringing the total facilities sold through May 9, 2016 to 33, with the remaining facility sales expected to close by the end of 2016.

On March 29, 2015, certain subsidiaries of the Company entered into an amendment to the Master Lease (the “HCRMC Lease Amendment”) effective April 1, 2015. The HCRMC Lease Amendment reduced initial annual rent by a net $68 million from $541 million to $473 million. Commencing on April 1, 2016, the minimum rent escalation was reset to 3.0% for each lease year through the expiration of the initial term of each applicable pool of facilities. Prior to the HCRMC Lease Amendment, rent payments would have increased 3.5% on April 1, 2015 and 2016 and 3.0% thereafter. The initial term was extended five years to an average of 16 years, and the extension options’ aggregate terms remained the same.

As consideration for the rent reduction, the Company received a Deferred Rent Obligation (“DRO”) from the Lessee equal to an aggregate amount of $525 million, which was allocated into two tranches: (i) a Tranche A DRO of $275 million and (ii) a Tranche B DRO of $250 million. The Lessee made rental payments equal to 6.9% of the outstanding amount (representing $19 million) for the initial lease year until the entire Tranche A DRO was paid in full in March 2016. Commencing on April 1, 2016, until the Tranche B DRO is paid in full, the outstanding principal balance of the Tranche B DRO will be increased annually by (i) 3.0% initially, (ii) 4.0% commencing on April 1, 2019, (iii) 5.0% commencing on April 1, 2020, and (iv) 6.0% commencing on April 1, 2021 and for the remainder of its term. The DRO is due and payable on the earlier of (i) certain capital or liquidity events of HCRMC, including an initial public offering or sale, or (ii) March 31, 2029, which is not subject to any extensions. The HCRMC Lease Amendment also imposes certain restrictions on the Lessee and HCRMC until the DRO is paid in full, including with respect to the payment of dividends and the transfer of interest in HCRMC.

Additionally, HCRMC agreed to sell, and HCP agreed to purchase, nine post-acute facilities for an aggregate purchase price of $275 million. Through March 31, 2016, HCRMC and HCP completed the nine facility purchases for $275 million, the proceeds of which were used to settle the Tranche A DRO. Following the purchase of a facility, the Lessee leases such facility from the Company pursuant to the Amended Master Lease. The nine facilities contribute an aggregate of $19 million of annual rent (subject to escalation) under the Amended Master Lease.

In March 2015, the Company recorded a net impairment charge of $478 million related to its HCRMC DFL investments. The impairment charge reduced the carrying value of the HCRMC DFL investments from $6.6 billion to $6.1 billion, based on the present value of the future lease payments effective April 1, 2015 under the Amended Master Lease discounted at the original DFL investments’ effective lease rate.

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During the three months ended March 31, 2016 and 2015, the Company recognized DFL income of $113 million and $152 million, respectively, and received cash payments of $113 million and $131 million, respectively, from the HCRMC DFL investments. During the three months ended March 31, 2015, the Company recognized a total of $21 million of net accretion related to its HCRMC DFL investments. The carrying value of the HCRMC DFL investments was $5.1 billion and $5.2 billion at March 31, 2016 and December 31, 2015, respectively.

The Company acquired the HCRMC DFL investments in 2011 through an acquisition of a C-Corporation, which was subject to federal and state built-in gain tax, if all the assets were sold within 10 years, of up to $2 billion. At the time, the Company intended to hold the assets for at least 10 years, at which time the assets would no longer be subject to the built-in gain tax.

In December 2015, the U.S. Federal Government passed legislation which permanently reduced the holding period, for federal tax purposes, to five years. The Company satisfied the five year holding period requirement in April 2016. However, certain states still require a 10-year holding period and, as such, the assets are still subject to state built-in gain tax.

During the three months ended March 31, 2016, the Company determined that it may sell assets during the next five years and, therefore, recorded a deferred tax liability of approximately $49 million representing its estimated exposure to state built-in gain tax.

On April 20, 2015, the DOJ unsealed a previously filed complaint in the U.S. District Court for the Eastern District of Virginia against HCRMC and certain of its affiliates in three consolidated cases following a civil investigation arising out of three lawsuits filed by former employees of HCRMC under the qui tam provisions of the federal False Claims Act. The DOJ’s complaint in intervention is captioned United States of America, ex rel. Ribik, Carson, and Slough v. HCR ManorCare, Inc., ManorCare Inc., HCR ManorCare Services, LLC and Heartland Employment Services, LLC (Civil Action Numbers: 1:09cv13; 1:11cv1054; 1:14cv1228 (CMH/TCB)). The complaint alleges that HCRMC submitted claims to Medicare for therapy services that were not covered by the skilled nursing facility benefit, were not medically reasonable and necessary, and were not skilled in nature, and therefore not entitled to Medicare reimbursement. HCRMC and the DOJ have filed a motion requesting that the court adopt their Joint Proposed Discovery Plan, which establishes the scope of discovery and depositions. Under the Joint Proposed Discovery Plan, motions for summary judgment would be due to be filed in April 2017. While this litigation is at an early stage and HCRMC has indicated that it believes the claims are unjust and it will vigorously defend against them, a significant adverse judgment against HCRMC or significant settlement obligation could impact the carrying value of the Company’s HCRMC DFL investments further.  

See Notes 7 and 20 for additional discussion of HCRMC.

Direct Financing Lease Internal Ratings

The following table summarizes the Company’s internal ratings for DFLs at March 31, 2016 (dollars in thousands):

	Carrying		Percentage of	Internal Ratings
Segment	Amount		DFL Portfolio	Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing	$	1,794,409	31	$	261,765	$	1,532,644	$	—
Post-acute/skilled nursing		3,938,910	67		—		3,938,910		—
Hospital		123,891	2		123,891		—		—
	$	5,857,210	100	$	385,656	$	5,471,554	$	—

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Beginning September 30, 2013, the Company placed a 14-property senior housing DFL (the “DFL Portfolio”) on nonaccrual status and assigned an internal rating of “Watch List.” The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue from the DFL Portfolio is recognized on a cash basis. During the three months ended March 31, 2016 and 2015, the Company recognized DFL income of $3 million and $4 million, respectively, and received cash payments of $4 million and $5 million, respectively, from the DFL Portfolio. The carrying value of the DFL Portfolio was $364 million and $366 million at March 31, 2016 and December 31, 2015, respectively.

NOTE 6.  Loans Receivable

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

	March 31, 2016						December 31, 2015
	Real Estate		Other				Real Estate		Other
	Secured		Secured		Total		Secured		Secured		Total
Mezzanine(1) (2)	$	—	$	657,235	$	657,235	$	—	$	660,138	$	660,138
Other(2)(3)		116,818		—		116,818		114,322		—		114,322
Unamortized discounts, fees and costs(1)		826		(5,983)		(5,157)		961		(6,678)		(5,717)
	$	117,644	$	651,252	$	768,896	$	115,283	$	653,460	$	768,743

(1) At March 31, 2016, included £278 million ($400 million) outstanding and £3 million ($5 million) of associated unamortized discounts, fees and costs. At December 31, 2015, included £273 million ($403 million) outstanding and £4 million ($5 million) of associated unamortized discounts, fees and costs.

(2) At March 31, 2016, the Company had £43 million ($62 million) remaining under its commitments to fund development projects and capital expenditures under its United Kingdom (“U.K.”) development projects.

(3) At March 31, 2016, the Company had $2 million remaining of commitments to fund development projects and capital expenditures under the senior housing development loan program.

Loans Receivable Internal Ratings

The following table summarizes the Company’s internal ratings for loans receivable at March 31, 2016 (dollars in thousands):

	Carrying		Percentage of	Internal Ratings
Investment Type	Amount		Loan Portfolio	Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	117,644	15	$	117,644	$	—	$	—
Other secured		651,252	85		651,252		—		—
	$	768,896	100	$	768,896	$	—	$	—

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Real Estate Secured Loans

Four Seasons Health Care.  In December 2015, the Company purchased £28 million ($42 million) of Four Seasons Health Care’s (“Four Seasons”) £40 million senior secured term loan. The loan is secured by, among other things, the real estate assets of Four Seasons, and represents the most senior debt tranche. The loan bears interest at a rate of LIBOR plus 6.0% per annum and matures in December 2017.

Other Secured Loans

HC-One Facility.  In November 2014, the Company was the lead investor in the financing for Formation Capital and Safanad’s acquisition of NHP, a company that, at closing, owned 273 nursing and residential care homes representing over 12,500 beds in the U.K. principally operated by HC-One. The Company provided a loan facility (the “HC-One Facility”), secured by substantially all of NHP’s assets, totaling £395 million, with £363 million ($574 million) drawn at closing and has a five-year term. In February 2015, the Company increased the HC-One Facility by £108 million ($164 million) to £502 million ($795 million), in conjunction with HC-One’s acquisition of Meridian Healthcare. In April 2015, the Company converted £174 million of the HC-One Facility into a sale-leaseback transaction for 36 nursing and residential care homes located throughout the U.K. In September 2015, the Company amended and increased its commitment under the HC-One Facility by £11 million primarily for the funding of capital expenditures and a development project. As part of the amendments, the Company shortened the non-call period by 17 months and provided consent for (i) the paydown of £34 million from disposition proceeds without a prepayment premium and (ii) the spinoff of 36 properties into a separate joint venture. In return, the Company retained security over the spinoff properties for a period of two years. During the year ended December 31, 2015, the Company received paydowns of £34 million ($52 million). At March 31, 2016, the HC-One Facility had an outstanding balance of $395 million.

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”), as part of the recapitalization of a post-acute/skilled nursing portfolio. The Company funded $100 million (the “First Tranche”) at closing and funded an additional $102 million (the “Second Tranche”) in June 2013. In May 2015, the Company increased and extended the mezzanine loan facility with Tandem to (i) fund $50 million (the “Third Tranche”) and $5 million (the “Fourth Tranche”), which proceeds were used to repay a portion of Tandem’s existing senior and mortgage debt, respectively; (ii) extend its maturity to October 2018; and (iii) extend the prepayment penalty period to January 2017. The loans bear interest at fixed rates of 12%, 14%, 6% and 6% per annum for the First, Second, Third and Fourth Tranches, respectively. At March 31, 2016, the facility had an outstanding balance of $256 million at an 11.5% blended interest rate and was subordinate to $380 million of senior mortgage debt.

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NOTE 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, 2016 (dollars in thousands):

Entity(1)	Segment	Carrying Amount		Ownership%
CCRC JV(2)	Senior housing	$	462,545		49
HCRMC(3)	Senior housing and post-acute/skilled nursing		—		9
MBK JV(4)	Senior housing		43,384		50
HCP Ventures III, LLC	Medical office		9,342		30
HCP Ventures IV, LLC	Medical office and hospital		7,236		20
HCP Life Science(5)	Life science		68,688	50	–	63
Vintage Park Development JV	Senior housing		8,593		85
MBK Development JV(4)	Senior housing		2,470		50
Suburban Properties, LLC	Medical office		4,614		67
K&Y(6)	Post-acute/skilled nursing		1,270		80
Advances to unconsolidated joint ventures, net and other			523
		$	608,665

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

(2) Includes two unconsolidated joint ventures in a RIDEA structure (CCRC PropCo and CCRC OpCo).

(3) In December 2014, September 2015 and December 2015, the Company recognized impairment charges of $36 million, $27 million and $19 million, respectively.

(4) Includes two unconsolidated joint ventures in a RIDEA structure (PropCo and OpCo).

(5) Includes three unconsolidated joint ventures between the Company and an institutional capital partner. HCP Life Science includes the following partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

(6) Includes three unconsolidated joint ventures.

Summarized combined financial information for the Company’s equity method investments (in thousands):

	March 31,		December 31,
	2016		2015
Real estate, net	$	4,471,115	$	4,470,249
Goodwill and other assets, net		4,921,705		4,935,343
Assets held for sale		70,584		94,866
Total assets	$	9,463,404	$	9,500,458
Capital lease obligations and mortgage debt	$	6,526,878	$	6,575,531
Accounts payable		1,147,155		1,111,350
Liabilities and mortgage debt held for sale		4,941		6,318
Other partners’ capital		1,140,381		1,163,501
HCP’s capital(1)		644,049		643,758
Total liabilities and partners’ capital	$	9,463,404	$	9,500,458

(1) The combined basis difference of the Company’s investments in these joint ventures of $35 million, as of March 31, 2016, is attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease-related net intangibles.

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	Three Months Ended March 31,
	2016		2015
Total revenues	$	1,089,911	$	1,146,468
Income (loss) from discontinued operations		1,997		(2,650)
Net (loss) income		(12,014)		9,783
HCP’s share of earnings(1)		(908)		13,601
Fees earned by HCP		91		460
Distributions received by HCP		6,925		2,181

(1) The Company’s joint venture interest in HCRMC is accounted for using the equity method and results in an elimination of DFL income proportional to HCP’s ownership in HCRMC. The elimination of the respective proportional lease expense at the HCRMC level in substance resulted in $16 million of DFL income that was recharacterized to the Company’s share of earnings from HCRMC (equity income from unconsolidated joint ventures) for the three months ended March 31, 2015. Beginning in January 2016, income will be recognized only if cash distributions are received from HCRMC; as a result, the Company no longer recharacterizes (eliminates) its proportional ownership share of income from DFLs to equity income (loss) from unconsolidated joint ventures.

HCRMC.  The Company concluded that its equity investment in HCRMC was other-than-temporarily impaired as of December 31, 2014, September 30, 2015 and December 31, 2015 and recorded impairment charges of $36 million, $27 million and $19 million, respectively. Beginning in January 2016, equity income will be recognized only if cash distributions are received from HCRMC (see Note 5).

MBK JVs.   On March 30, 2015, the Company and MBK Senior Living (“MBK”), a subsidiary of Mitsui & Co. Ltd, formed a new RIDEA joint venture (“MBK JV”) that owns three senior housing facilities with the Company and MBK each owning a 50% equity interest. MBK manages these communities on behalf of the joint venture. The Company contributed $27 million of cash and MBK contributed the three senior housing facilities with a fair value of $126 million, which were encumbered by $78 million of mortgage debt at closing.

On September 25, 2015, the Company and MBK formed a new RIDEA joint venture (“MBK Development JV”), which acquired a $3 million parcel of land for the purpose of developing a 74-unit class A senior housing facility in Santa Rosa, California. The parcel of land is located adjacent to the Oakmont Gardens independent living facility currently owned and operated by the MBK JV.

NOTE 8.  Intangibles

At March 31, 2016 and December 31, 2015, gross intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles, were $988 million and $984 million, respectively. At March 31, 2016 and December 31, 2015, the accumulated amortization of intangible assets was $403 million and $380 million, respectively.

At both March 31, 2016 and December 31, 2015, gross intangible lease liabilities, comprised of below market tenant lease intangibles and above market ground lease intangibles were $156 million. At March 31, 2016 and December 31, 2015, the accumulated amortization of intangible liabilities was $103 million and $100 million, respectively.

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NOTE 9.  Other Assets

A summary of the Company’s other assets (in thousands):

	March 31,		December 31,
	2016		2015
Straight-line rent receivables, net of allowance of $33,012 and $33,648, respectively	$	377,464	$	370,296
Marketable debt securities, net		100,915		102,958
Leasing costs and inducements, net		157,443		158,708
Goodwill		50,346		50,346
Other		131,111		119,965
Total other assets	$	817,279	$	802,273

At March 31, 2016 and December 31, 2015, other assets includes a non-interest bearing receivable of $5 million and $9 million, respectively, from Brookdale payable in eight quarterly installments.

Four Seasons Health Care Senior Unsecured Notes

Marketable debt securities, net are classified as held-to-maturity debt securities and primarily represent senior notes issued by Elli Investments Limited (“Elli”), a company beneficially owned by funds or limited partnerships managed by Terra Firma, as part of the financing for Elli’s acquisition of Four Seasons Health Care (the “Four Seasons Notes”). The Four Seasons Notes mature in June 2020, are non-callable through June 2016 and bear interest on their par value at a fixed rate of 12.25% per annum. The Company purchased an aggregate par value of £138.5 million of the Four Seasons Notes at a discount for £136.8 million ($215 million) in June 2012, representing 79% of the total £175 million issued and outstanding Four Seasons Notes. In June 2015 and September 2015, the Company determined that the Four Seasons Notes were other-than-temporarily impaired and recorded impairment charges of $42 million and $70 million, respectively. Elli remains obligated to repay the aggregate par value at maturity and interest payments due June 15 and December 15 each year. When the remaining semi-annual interest payments are received, the Company expects to reduce the carrying value of the Four Seasons Notes during the related fiscal period. In December 2015, the Company received its contractual interest payment of £8 million ($13 million), which was applied against the principal balance reducing the carrying amount to £58 million ($85 million and $83 million at December 31, 2015 and March 31, 2016, respectively).

NOTE 10.  Debt

Bank Line of Credit and Term Loans

The Company’s $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on March 31, 2018 and contains a one-year extension option. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends upon the Company’s credit ratings. The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings. Based on the Company’s credit ratings at March 31, 2016, the margin on the Facility was 0.925%, and the facility fee was 0.15%. The Facility also includes a feature that allows 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, 2016, the Company had $810 million, including £275 million ($395 million), outstanding under the Facility with a weighted average effective interest rate of 1.68%.

The Facility and term loans 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% and (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times. The Facility and term loans also require a Minimum Consolidated Tangible Net Worth of $9.5 billion at March 31, 2016. At March 31, 2016, the Company was in compliance with each of these restrictions and requirements.

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Senior Unsecured Notes

At March 31, 2016, the Company had senior unsecured notes outstanding with an aggregate principal balance of $8.7 billion. The senior unsecured notes contain certain covenants including limitations on debt, maintenance of unencumbered assets, cross-acceleration provisions and other customary terms. The Company believes it was in compliance with these covenants at March 31, 2016.

The following table summarizes the Company’s senior unsecured notes issuances for the periods presented (dollars in thousands):

	Issuance
Period	Amount		Coupon Rate			Maturity Date		Net Proceeds
Year ended December 31, 2015:
January 21, 2015	$	600,000		3.400	%		2025	$	591,000
May 20, 2015	$	750,000		4.000	%		2025	$	739,000
December 1, 2015	$	600,000		4.000	%		2022	$	594,000

The following table summarizes the Company’s senior unsecured notes payoffs for the periods presented (dollars in thousands):

Period	Amount		Coupon Rate
Three months ended March 31, 2016:
February 1, 2016	$	500,000		3.750	%
Year ended December 31, 2015:
March 1, 2015	$	200,000		6.000	%
June 8, 2015	$	200,000		7.072	%

Mortgage Debt

At March 31, 2016, the Company had $895 million in aggregate principal amount of mortgage debt outstanding, which is secured by 56 healthcare facilities (including redevelopment properties) with a carrying value of $1.1 billion.

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.

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Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2016, (in thousands):

					Senior
	Bank Line of				Unsecured		Mortgage
Year	Credit(1)		Term Loans(2)		Notes(3)		Debt(4)		Total(5)
2016 (nine months)	$	—	$	196,938	$	400,000	$	241,492	$	838,430
2017		—		—		750,000		581,891		1,331,891
2018		810,313		—		600,000		6,583		1,416,896
2019		—		316,250		450,000		2,072		768,322
2020		—		—		800,000		2,078		802,078
Thereafter		—		—		5,700,000		61,092		5,761,092
		810,313		513,188		8,700,000		895,208		10,918,709
Discounts, net		—		(1,451)		(76,624)		81		(77,994)
	$	810,313	$	511,737	$	8,623,376	$	895,289	$	10,840,715

(1) Includes £275 million ($395 million) translated into U.S. dollars (“USD”).

(2) Represents £357 million translated into USD.

(3) Interest rates on senior unsecured notes ranged from 2.79% to 6.88% with a weighted average effective interest rate of 4.72% and a weighted average maturity of six years.

(4) Interest rates on the mortgage debt ranged from 3.11% to 8.35% with a weighted average effective interest rate of 6.22% and a weighted average maturity of two years.

(5) Excludes $95 million of other debt that represents Life Care Bonds and Demand Notes that have no scheduled maturities.

Other Debt

At March 31, 2016, the Company had $67 million of non-interest bearing life care bonds at two of its continuing care retirement communities and non-interest bearing occupancy fee deposits at two of its senior housing facilities, all of which are payable to certain residents of the facilities (collectively, “Life Care Bonds”). The Life Care Bonds are generally refundable to the residents upon the termination of the contract or upon the successful resale of the unit.

At March 31, 2016, the Company had $28 million of on-demand notes (“Demand Notes”) from the CCRC JV. The Demand Notes bear interest at a rate of 4.5%.

NOTE 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.

NOTE 12.  Equity

Common Stock

The following table lists the common stock cash dividends declared by the Company in 2016:

		Amount		Dividend
Declaration Date	Record Date	Per Share		Payable Date
January 28	February 8	$	0.575	February 23
April 27	May 9		0.575	May 24

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

	Three Months Ended March 31,
	2016	2015
Dividend Reinvestment and Stock Purchase Plan	1,081	829
Conversion of DownREIT units(1)	99	38
Exercise of stock options	111	811
Vesting of restricted stock units	248	288
Repurchase of common stock	102	128

(1) Non-managing member limited liability company (“LLC”) units.

Accumulated Other Comprehensive Loss

The following is a summary of the Company’s accumulated other comprehensive loss (in thousands):

	March 31,		December 31,
	2016		2015
Cumulative foreign currency translation adjustment	$	(20,222)	$	(19,485)
Unrealized losses on cash flow hedges, net		(8,103)		(7,582)
Supplemental Executive Retirement Plan minimum liability		(3,341)		(3,411)
Unrealized (losses) gains on available for sale securities		(7)		8
Total accumulated other comprehensive loss	$	(31,673)	$	(30,470)

Noncontrolling Interests

At March 31, 2016, non-managing members held an aggregate of 4 million units in five limited liability companies (“DownREITs”), for which the Company is the managing member. At March 31, 2016, the carrying and fair values of these DownREIT units were $181 million and $191 million, respectively.

See Note 15 for the supplemental schedule of non-cash financing activities.

NOTE 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 medical office segment, the Company invests through the acquisition and development of medical office buildings (“MOBs”), which generally require a greater level of property management. Otherwise, the Company primarily invests, through the acquisition and development of real estate, in single tenant and operator properties and debt issued by tenants and operators in these sectors. 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 2015 Annual Report on Form 10-K filed with the SEC. There were no intersegment sales or transfers during the three months ended March 31, 2016 and 2015. The Company evaluates performance based upon (i) property net operating income from continuing operations (“NOI”), (ii) adjusted NOI (cash NOI), and (iii) adjusted NOI, including the Company’s pro rata share of unconsolidated joint ventures, plus interest income (“Portfolio 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 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 evaluating the Company’s segment-level performance. See Note 17 for other information regarding concentrations of credit risk.

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Summary information for the reportable segments (in thousands):

For the three months ended March 31, 2016:

	Senior		Post-acute/		Life		Medical
	Housing		Skilled Nursing		Science		Office		Hospital		Total
Rental revenues(1)	$	128,897	$	107,190	$	88,948	$	108,994	$	22,870	$	456,899
Resident fees and services		165,763		—		—		—		—		165,763
Operating expenses		(116,136)		(564)		(16,743)		(42,313)		(1,199)		(176,955)
NOI		178,524		106,626		72,205		66,681		21,671		445,707
Non-cash adjustments to NOI(2)		(5,956)		(271)		(673)		(805)		303		(7,402)
Adjusted (cash) NOI		172,568		106,355		71,532		65,876		21,974		438,305
Adjusted (cash) NOI from unconsolidated joint ventures		14,898		404		1,420		322		—		17,044
Interest income		1,851		16,178		—		—		—		18,029
Portfolio Income	$	189,317	$	122,937	$	72,952	$	66,198	$	21,974		473,378
Addback non-cash adjustments												7,402
Investment management fee income												91
Interest expense												(122,062)
Depreciation and amortization												(141,322)
General and administrative expenses												(25,499)
Acquisition and pursuit costs												(2,475)
Other income, net												1,222
Income tax expense												(53,038)
Equity loss in unconsolidated joint ventures, excluding adjusted (cash) NOI												(17,952)
Net income											$	119,745

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For the three months ended March 31, 2015:

	Senior		Post-acute/		Life		Medical
	Housing		Skilled Nursing		Science		Office		Hospital		Total
Rental revenues(1)	$	127,382	$	140,576	$	83,551	$	98,305	$	22,242	$	472,056
Resident fees and services		105,013		—		—		—		—		105,013
Operating expenses		(75,510)		(533)		(16,699)		(38,252)		(1,037)		(132,031)
NOI		156,885		140,043		66,852		60,053		21,205		445,038
Non-cash adjustments to NOI(2)		(6,413)		(18,083)		(3,075)		(1,866)		252		(29,185)
Adjusted (cash) NOI		150,472		121,960		63,777		58,187		21,457		415,853
Adjusted (cash) NOI from unconsolidated joint ventures		14,012		—		1,228		304		—		15,544
Interest income		7,394		25,868		—		—		—		33,262
Portfolio Income	$	171,878	$	147,828	$	65,005	$	58,491	$	21,457		464,659
Addback non-cash adjustments												29,185
Investment management fee income												460
Interest expense												(116,780)
Depreciation and amortization												(114,522)
General and administrative expenses												(24,773)
Acquisition and pursuit costs												(3,390)
Impairment												(478,464)
Gain on sales of real estate												6,264
Other income, net												1,724
Income tax benefit												77
Equity loss in unconsolidated joint ventures, excluding adjusted (cash) NOI												(1,943)
Net loss											$	(237,503)

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles and lease termination fees.

A summary of the Company’s total assets by segment (in thousands):

	March 31,		December 31,
Segment	2016		2015
Senior housing	$	9,931,444	$	9,812,142
Post-acute/skilled nursing		5,111,794		5,162,947
Life science		3,944,689		3,905,137
Medical office		3,485,010		3,469,048
Hospital		622,820		622,820
Gross segment assets		23,095,757		22,972,094
Accumulated depreciation and amortization		(3,059,436)		(2,941,568)
Net segment assets		20,036,321		20,030,526
Real estate assets held for sale, net		311,243		314,126
Other non-segment assets		852,363		1,105,197
Total assets	$	21,199,927	$	21,449,849

At both March 31, 2016 and December 31, 2015, 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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NOTE 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,
	2016		2015
Numerator
Net income (loss)	$	119,745	$	(237,503)
Noncontrolling interests’ share in earnings		(3,626)		(3,111)
Net income (loss) attributable to HCP, Inc.		116,119		(240,614)
Participating securities’ share in earnings		(357)		(335)
Net income (loss) applicable to common shares	$	115,762	$	(240,949)
Denominator
Basic weighted average common shares		466,074		460,880
Dilutive potential common shares		188		—
Diluted weighted average common shares		466,262		460,880
Earnings per common share
Basic	$	0.25	$	(0.52)
Diluted	$	0.25	$	(0.52)

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 requires the use of the two-class method when computing basic and diluted earnings per share. Options to purchase approximately 1.4 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, 2016 were not included in the Company’s earnings per share calculations because they are anti-dilutive. Restricted stock and performance restricted stock units representing 0.7 million shares of common stock during the three months ended March 31, 2016 were not included because they are anti-dilutive. Additionally, 6 million shares issuable upon conversion of 4 million DownREIT units during the three months ended March 31, 2016 were not included because they are anti-dilutive. For the three months ended March 31, 2015, the Company generated a net loss. The weighted-average basic shares outstanding was used in calculating diluted loss per share from continuing operations, as using diluted shares would be anti-dilutive to loss per share.

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NOTE 15.  Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2016		2015
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	171,422	$	168,165
Income taxes paid		1,213		383
Capitalized interest		3,128		1,698
Supplemental schedule of non-cash investing activities:
Accrued construction costs		56,972		32,236
Settlement of HCRMC Tranche A DRO as consideration for DFL acquisition		91,605		—
Tenant funded tenant improvements owned by HCP		9,178		572
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units		248		288
Conversion of non-managing member units into common stock		4,136		1,608
Noncontrolling interest issued in connection with real estate acquisitions		—		1,306
Other liabilities assumed with real estate acquisitions		1,200		626
Unrealized (losses) gains on available-for-sale securities and derivatives designated as cash flow hedges, net		(705)		2,334

NOTE 16.  Variable Interest Entities

On January 1, 2016, the Company adopted ASU 2015-02 using the modified retrospective method as permitted by the ASU. As a result of the adoption, the Company identified additional assets and liabilities of certain VIEs in its consolidated total assets and total liabilities at December 31, 2015 of $543 million and $651 million, respectively. Refer to the specific VIE descriptions below for detail on which entities were classified as consolidated VIEs subsequent to the adoption of ASU 2015-02. Additionally, the Company deconsolidated three joint ventures and recognized $0.5 million as a cumulative-effect adjustment to cumulative dividends in excess of earnings.

Unconsolidated Variable Interest Entities

At March 31, 2016, the Company had investments in: (i) four unconsolidated VIE joint ventures; (ii) 358 properties leased to VIE tenants; and (iii) marketable debt securities of, and a loan to two VIE borrowers. The Company has determined that it is not the primary beneficiary of these VIEs. The Company does not consolidate these VIEs because it does not have the ability to control the activities that most significantly impact their economic performance. Except for the Company’s equity interest in the unconsolidated joint ventures (CCRC OpCo, HCRMC OpCo, Vintage Park Development JV and LLC investments discussed below), it has no formal involvement in these VIEs beyond its investments.

The Company leases 310 properties to, and has an equity ownership investment in, HCRMC that has been identified as a VIE upon a reconsideration event in the fourth quarter of 2015. HCRMC has experienced continued operational declines and is a “thinly capitalized” entity that relies on the operating cash flows generated from its senior housing and post-acute facilities to fund operating expenses, including the rent obligations under the Amended Master Lease (see Notes 5 and 7).

The Company leases 48 properties to a total of seven tenants that have been identified as VIEs (“VIE tenants”). These VIE tenants are “thinly capitalized” entities that rely on the operating cash flows generated from the senior housing facilities to pay operating expenses, including the rent obligations under their leases.

The Company holds a 49% ownership interest in CCRC OpCo, a joint venture entity formed in August 2014 that operates senior housing properties in a RIDEA structure, that has been identified as a VIE (see Note 7). The equity members of CCRC OpCo “lack power” because they share certain operating rights with Brookdale as manager of the CCRCs. The assets of CCRC OpCo primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable, and cash and cash equivalents; its obligations primarily consist of operating lease obligations to CCRC PropCo and accounts payable and expense accruals associated with the cost of its CCRCs’ operations. Assets generated by the CCRC

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operations (primarily rents from CCRC residents) of CCRC OpCo may only be used to settle its contractual obligations (primarily the rental costs and operating expenses incurred to manage such facilities).

The Company holds Four Seasons Notes (see Note 9) and a portion of Four Season’s senior secured term loan (see Note 6). In the second quarter of 2015, upon the occurrence of a reconsideration event, it was determined that the issuer of the Four Seasons Notes is a VIE because this entity is “thinly capitalized.”

The Company holds an 85% ownership interest in Vintage Park Development JV (see Note 7) that has been identified as a VIE. Although power is shared among equity members, one equity member does not have a substantive investment in the entity. The assets of Vintage Park Development JV primarily consist of an in-progress independent living facility development project that it owns and cash and cash equivalents; its obligations primarily consist of accounts payable and expense accruals associated with the cost of the development obligations. Any assets generated by Vintage Park Development JV may only be used to settle its contractual obligations (primarily development expenses and debt service payments).

The Company holds a limited partner ownership interest in an unconsolidated LLC that has been identified as a VIE. The Company’s involvement in the entity is limited to its equity investment as a limited partner, and it does not have any ability to direct the activities that most significantly impact the entity. The assets and liabilities of the entity primarily consist of senior housing real estate and development activities. Any assets generated by the entity may only be used to settle its contractual obligations (primarily development expenses and debt service payments).

The Company holds commercial mortgage-backed securities (“CMBS”) issued by Federal Home Loan Mortgage Corporation (“Freddie MAC”) through a special purpose entity that has been identified as a VIE because it is “thinly capitalized.” The CMBS issued by the VIE are backed by mortgage debt obligations on real estate assets.

The classification of the related assets and liabilities and their maximum loss exposure as a result of the Company’s involvement with these VIEs at March 31, 2016 are presented below (in thousands):

	Maximum Loss			Carrying
VIE Type	Exposure(1)		Asset/Liability Type	Amount
HCRMC	$	5,107,180	Net investment in DFLs and investments in unconsolidated joint ventures	$	5,107,180
VIE tenants—DFLs		598,960	Net investment in DFLs		598,960
VIE tenants—operating leases		9,952	Lease intangibles, net and straight-line rent receivables		9,952
CCRC OpCo		230,275	Investments in unconsolidated joint ventures		230,275
Four Seasons		124,108	Loans and marketable debt securities		124,108
Vintage Park Development JV		8,593	Investments in unconsolidated joint ventures		8,593
CMBS and LLC investments		32,944	Marketable debt and cost method investments		32,944

(1) The Company’s maximum loss exposure related to HCRMC, VIE tenants, CCRC OpCo, Vintage Park Development JV, loan and marketable debt securities, and LLC investments to VIE borrowers represents the aggregate carrying amount of such investments (including accrued interest). The Company’s maximum loss exposure may be mitigated by re-leasing the underlying properties to new tenants upon an event of default.

As of March 31, 2016, 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). See Notes 5, 6, 7 and 9 for additional descriptions of the nature, purpose and operating activities of the Company’s unconsolidated VIEs and interests therein.

Consolidated Variable Interest Entities

RIDEA I.  The Company holds a 90% ownership interest in joint venture entities formed in September 2011 that own and operate senior housing properties in a RIDEA structure (“RIDEA I”). The Company has historically classified RIDEA I OpCo as a VIE and, as a result of the adoption of ASU 2015-02, now classifies RIDEA I PropCo as a VIE as well due to the non-managing member having no substantive participating rights in the management of RIDEA I PropCo or kick-out rights over the managing member. The Company consolidates RIDEA I PropCo and RIDEA I OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic

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performance. The assets of RIDEA I PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of notes payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA I OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA I PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA I structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

RIDEA II.  The Company holds an 80% ownership interest in joint venture entities formed in August 2014 that own and operate senior housing properties in a RIDEA structure (“RIDEA II”). The Company consolidates RIDEA II (“SH PropCo” and “SH OpCo”) as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of SH PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a note payable to a non-VIE consolidated subsidiary of the Company. The assets of SH OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to SH PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA II structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs). See Note 20 for additional discussion of potential RIDEA II transactions.

RIDEA III.  The Company holds a 90% ownership interest in joint venture entities formed in June 2015 that own and operate senior housing properties in a RIDEA structure (“RIDEA III”). The Company has historically classified RIDEA III OpCo as a VIE and, as a result of the adoption of ASU 2015-02, now classifies RIDEA III PropCo as a VIE as well due to the non-managing member having no substantive participating rights in the management of RIDEA III PropCo or kick-out rights over the managing member. The Company consolidates RIDEA III PropCo and RIDEA III OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of RIDEA III PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a note payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA III OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA III PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA III structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

HCP Ventures V, LLC.  The Company holds a 51% ownership interest in and is the managing member of a joint venture entity formed in October 2015 that owns and leases real estate assets (“HCP Ventures V, LLC”). Upon adoption of ASU 2015-02, the Company classified HCP Ventures V, LLC as a VIE due to the non-managing member having no substantive participating rights in the management of the HCP Ventures V, LLC or kick-out rights over the managing member. The Company consolidates HCP Ventures V, LLC as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of HCP Ventures V, LLC primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by the HCP Ventures V, LLC may only be used to settle its contractual obligations (primarily from capital expenditures).

Vintage Park JV.  The Company holds a 90% ownership interest in a joint venture entity formed in January 2015 that owns an 85% interest in an unconsolidated development VIE (“Vintage Park JV”). Upon adoption of ASU 2015-02, the Company classified Vintage Park JV as a VIE due to the non-managing member having no substantive participating rights in the management of the Vintage Park JV or kick-out rights over the managing member. The Company consolidates Vintage Park JV as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of Vintage Park JV primarily consist of an investment in the Vintage Park Development JV and cash and cash equivalents; its obligations primarily consist of funding the ongoing development of

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the Vintage Park Development JV. Assets generated by the Vintage Park JV may only be used to settle its contractual obligations (primarily from the funding of the Vintage Park Development JV).

DownREIT Partnerships.  The Company holds a controlling ownership interest in and is the managing member of five partnerships organized in downREIT structures (the “DownREIT Partnerships”). Upon adoption of ASU 2015-02, the Company classified the DownREIT Partnerships as VIEs due to the non-managing members having no substantive participating rights in the management of the DownREIT Partnerships or kick-out rights over the managing member. The Company consolidates the DownREIT Partnerships as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the DownREIT Partnerships primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by the DownREIT Partnerships (primarily from resident rents) may only be used to settle its contractual obligations (primarily from debt service and capital expenditures).

Other Consolidated Real Estate Partnerships.  The Company holds a controlling ownership interest in and is the general partner (or managing member) of multiple partnerships that own and lease real estate assets (the “Partnerships”). Upon adoption of ASU 2015-02, the Company classified the Partnerships as VIEs due to the limited partners (non-managing members) having no substantive participating rights in the management of the Partnerships or kick-out rights over the general partner (managing member). The Company consolidates the Partnerships as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance and its right (or obligation) to the majority of the returns (or losses). The assets of the Partnerships primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by the Partnerships (primarily from resident rents) may only be used to settle its contractual obligations (primarily from debt service and capital expenditures).

Other consolidated VIEs.  The Company made a loan to an entity that entered into a tax credit structure (“Tax Credit Subsidiary”) and a loan to an entity that made an investment in a development joint venture (“Development JV”) both of which are considered VIEs. The Company consolidates the Tax Credit Subsidiary and Development JV because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the VIEs’ economic performance. The assets and liabilities of the Tax Credit Subsidiary and Development JV substantially consist of development in progress, notes receivable, prepaid expenses, notes payable, and accounts payable and accrued liabilities generated from their operating activities. Any assets generated by the operating activities of the Tax Credit Subsidiary and Development JV may only be used to settle their contractual obligations.

NOTE 17.  Concentration of Credit Risk

Concentrations of credit risk arise when one or more tenants, operators 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 tables provide information regarding the Company’s concentrations with respect to certain tenants and operators; the information provided is presented for the gross assets and revenues that are associated with certain tenants and operators as percentages of their respective segment’s and total Company’s gross assets and revenues:

	Percentage of				Percentage of
	Senior Housing Gross Assets				Senior Housing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
Brookdale	27	%	28	%	21	%	25	%
HCRMC	12	%	12	%	6	%	8	%

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	Percentage of Post-Acute/				Percentage of Post-Acute/
	Skilled Nursing Gross Assets				Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	77	%	64	%	78	%	80	%

	Percentage of				Percentage of
	Total Company Gross Assets				Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	24	%	23	%	18	%	25	%
Brookdale	13	%	12	%	10	%	10	%

HCRMC’s summarized consolidated financial information (in millions):

	March 31,		December 31,
	2016		2015
Real estate and other property, net	$	2,611.8	$	2,628.5
Cash and cash equivalents		173.8		125.0
Goodwill, intangible and other assets, net		4,526.9		4,598.3
Total assets	$	7,312.5	$	7,351.8
Debt and financing obligations	$	5,783.8	$	5,836.4
Accounts payable, accrued liabilities and other		1,006.7		982.9
Total equity		522.0		532.5
Total liabilities and equity	$	7,312.5	$	7,351.8

	Three Months Ended March 31,
	2016		2015
Revenues	$	984.5	$	1,054.0
Operating, general and administrative expense		(857.2)		(897.9)
Depreciation and amortization expense		(32.5)		(35.9)
Interest expense		(115.1)		(100.3)
Other income, net		3.5		2.8
Gain on disposal of assets		3.3		—
(Loss) income from continuing operations before income tax (expense) benefit		(13.5)		22.7
Income tax benefit (expense)		2.9		(10.1)
(Loss) income from continuing operations		(10.6)		12.6
Income from discontinued operations, net of taxes		0.1		1.1
Net (loss) income	$	(10.5)	$	13.7

As of March 31, 2016, Brookdale provided comprehensive facility management and accounting services with respect to 108 of the Company’s senior housing facilities and 15 CCRCs owned by the CCRC JV, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. Most of the management agreements have terms ranging from 10 to 15 years, with three to four 5-year renewals. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.

Brookdale is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale contained or referred to in this report has been derived from SEC filings made by Brookdale or other publicly available information, or was provided to the Company by Brookdale, and the Company has not verified this information through an independent investigation or otherwise. The Company has no reason to believe

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that this information is inaccurate in any material respect, but the Company cannot assure the reader of its accuracy. The Company is providing this data for informational purposes only, and encourages the reader to obtain Brookdale’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.

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.

NOTE 18.  Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following table illustrates the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2016 in the consolidated balance sheets (in thousands):

Financial Instrument(1)	Fair Value		Level 1		Level 2		Level 3
Marketable equity securities	$	24	$	24	$	—	$	—
Interest-rate swap liabilities		7,384		—		7,384		—
Currency swap assets		2,469		—		2,469		—
Warrants		16		—		—		16

(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.

Recognized gains and losses are recorded in other income, net on the Company’s consolidated statements of operations. During the three months ended March 31, 2016, there were no transfers of financial assets or liabilities within the fair value hierarchy.

Disclosures About Fair Value of Financial Instruments

Cash and cash equivalents, restricted cash, accounts receivable, net, and accounts payable and accrued liabilities – The carrying values are reasonable estimates of fair value because of the short-term maturities of these instruments.

Loans receivable, net and mortgage debt – The fair values are based on discounting future cash flows utilizing current market rates for loans and debt of the same type and remaining maturity.

Marketable debt securities – The fair value is based on quoted prices from inactive markets.

Marketable equity securities and senior unsecured notes – The fair values are based on quoted prices in active markets.

Warrants – The fair value is based on significant unobservable market inputs utilizing standardized derivative pricing models.

Bank line of credit, term loans and other debt – The carrying values are reasonable estimates of fair value because the borrowings are primarily based on market interest rates and the Company’s current credit ratings.

Interest-rate swaps – The fair value is based on observable inputs utilizing standardized pricing models that consider forward yield curves and discount rates which are observable in active and inactive markets.

Currency swaps – The fair value is based on observable inputs utilizing standardized pricing models that consider the future value of the currency exchange rates, comprised of current spot and traded forward points, and calculating a present value of the net amount using discount rates based on observable traded interest rates.

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

	March 31, 2016				December 31, 2015
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value
Loans receivable, net(2)	$	768,896	$	775,109	$	768,743	$	770,052
Marketable debt securities(2)		100,915		100,915		102,958		102,958
Marketable equity securities(1)		24		24		39		39
Warrants(3)		16		16		55		55
Bank line of credit(2)		810,313		810,313		397,432		397,432
Term loans(2)		511,737		511,737		524,807		524,807
Senior unsecured notes(1)		8,623,376		8,854,121		9,120,107		9,390,668
Mortgage debt(2)		895,289		936,466		932,212		963,786
Other debt(2)		95,229		95,229		94,445		94,445
Interest-rate swap assets(2)		—		—		196		196
Interest-rate swap liabilities(2)		(7,384)		7,384		6,251		6,251
Currency swap assets(2)		2,469		2,469		1,551		1,551

(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 standardized pricing models 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.

NOTE 19.  Derivative Financial Instruments

The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts as of March 31, 2016 (dollars and GBP in thousands):

			Fixed
		Hedge	Rate/Buy			Floating/Exchange	Notional/
Date Entered	Maturity Date	Designation	Amount			Rate Index	Sell Amount		Fair Value(1)
Interest rate:
July 2005(2)	July 2020	Cash Flow		3.82	%	BMA Swap Index	$	45,600	$	(5,487)
November 2008(3)	October 2016	Cash Flow		5.95	%	1 Month LIBOR+1.50%	$	24,900	$	(532)
July 2012(4)	June 2016	Cash Flow		1.81	%	1 Month GBP LIBOR+1.20%	£	137,000	$	(29)
January 2015(4)	October 2017	Cash Flow		1.79	%	1 Month GBP LIBOR+0.975%	£	220,000	$	(1,336)
Foreign currency:
July 2012(5)	June 2016	N/A	$	11,400		Buy USD/Sell GBP	£	7,200	$	964
January 2015(6)	October 2017	Cash Flow	$	30,300		Buy USD/Sell GBP	£	20,000	$	1,505

(1) Derivative assets are recorded in other assets, net and derivative liabilities are recorded in accounts payable and accrued liabilities on the consolidated balance sheets.

(2) Represents three interest-rate swap contracts, which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(3) Represents an interest-rate swap contract, which hedges fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(4) Hedges fluctuations in interest payments on variable-rate 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 British pound sterling (“GBP”) denominated senior notes. Represents a currency swap to sell £7.2 million at a rate of 1.5695 in June 2016.

(6) Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to the Company’s forecasted GBP denominated interest receipts on its HC-One Facility. Represents a currency swap to sell approximately £1.0 million monthly at a rate of 1.5149 through October 2017.

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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. 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 and forecasted cash flows. 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. 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, 2016, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

During the three months ended March 31, 2016, the Company determined a portion of a cash flow hedge was ineffective and reclassified $0.1 million of unrealized gains related to this interest-rate swap contract into other income, net. The Company expects that the hedged forecasted transactions for each of the outstanding qualifying cash flow hedging relationships at March 31, 2016 remain probable of occurring, and as a result, no additional gains or losses recorded to accumulated other comprehensive loss are expected to be reclassified to earnings for any other outstanding hedges, other than those discussed above.

To illustrate the effect of movements in the interest rate and foreign currency markets, the Company performed a market sensitivity analysis on its outstanding derivative financial 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
		+50 Basis		-50 Basis		+100 Basis		-100 Basis
Date Entered	Maturity Date	Points		Points		Points		Points
Interest rate:
July 2005	July 2020	$	1,066	$	(773)	$	1,986	$	(1,692)
November 2008	October 2016		67		(68)		135		(135)
July 2012	June 2016		209		(200)		417		(401)
January 2015	October 2017		2,486		(2,494)		4,976		(4,984)
Foreign currency:
July 2012	June 2016		(47)		57		(99)		109
January 2015	October 2017		(72)		216		(215)		360

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NOTE 20.  Subsequent Events

In May 2016, the Company announced its intention to spin off interests in 338 properties (including 17 facility sales expected to close by the end of 2016 and potentially before completion of the spin off), primarily comprised of its HCRMC DFL investments, and its equity investment in HCRMC OpCo, into an independent, publicly-traded REIT (“SpinCo”). The spin-off is expected to be effectuated through a pro rata special distribution of SpinCo’s common shares to HCP stockholders and will be treated as a taxable transaction for U.S. federal income tax purposes. The transaction is subject to certain conditions, including the SEC declaring effective a registration statement for the SpinCo common share to be distributed, filing and approval of SpinCo to be listed on an exchange, customary third party consents, and formal approval and declaration of the distribution by the Company’s Board of Directors. The transaction is expected to be completed in the second half of 2016. The Company may, at any time and for any reason until the proposed transaction is complete, abandon the spin-off or modify or change its terms.

In May 2016, the Company entered into a master contribution agreement to contribute its interests in RIDEA II to an unconsolidated joint venture owned 50.1% by HCP and 49.9% by an investor group led by Columbia Pacific Advisors, LLC (“CPA”) (the “HCP/CPA JV”). In return, the Company will receive $109 million in cash proceeds from the HCP/CPA JV, a $636 million note receivable (“Note”) and retain an approximately 40% beneficial interest in RIDEA II. This transaction, upon completion, would result in the Company deconsolidating the net assets of RIDEA II because it will not direct the activities that most significantly impact the venture. The Company further expects that the members will recapitalize RIDEA II, at which time the Company expects to receive cash proceeds in payment against the Note. The closing of these transactions are expected to occur in 2016 and remain subject to regulatory and third party approvals and other customary closing conditions.

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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,” “potential,” “estimate,” “could,” “would,” “should” and other comparable and derivative terms or the negatives thereof.  Forward-looking statements reflect our current expectations and views about future events and are subject to risks and uncertainties that could significantly affect our future financial condition and results of operations. 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. Further, we cannot guarantee the accuracy of any such forward-looking statement contained in this Quarterly Report, and such forward-looking statements 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, 2015, risks and uncertainties that may cause our actual results to differ materially from the expectations contained in the forward-looking statements include, among other things:

· HCR ManorCare, Inc.’s (“HCRMC”) ability to meet its contractual obligations under the HCRMC lease amendment and risks related to the impact of the United States (“U.S.”) Department of Justice (“DOJ”) lawsuit against HCRMC, including the possibility of larger than expected litigation costs, adverse results and related developments;

· our reliance on a concentration of a small number of tenants and operators for a significant portion of our revenues;

· the financial weakness of our tenants, operators and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which results in uncertainties regarding our ability to continue to realize the full benefit of such tenants’ and operators’ leases and borrowers’ loans;

· the ability of our tenants, operators 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;

· competition for tenants and operators, including with respect to new leases and mortgages and the renewal or rollover of existing leases;

· competition for skilled management and other key personnel;

· availability of suitable properties to acquire at favorable prices and the competition for the acquisition and financing of those properties;

· 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 tenant or operator upon default;

· 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 partners’ financial condition and continued cooperation;

· our ability to achieve the benefits of investments within expected time frames or at all, or within expected cost projections;

· the potential impact on us, our tenants, operators and borrowers from current and future litigation matters, including the possibility of larger than expected litigation costs, adverse results and related developments;

· the effect on healthcare providers of legislation addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements;

· 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 tenants and operators;

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· volatility or uncertainty in the capital markets, the availability and cost of capital as impacted by interest rates, changes in our credit ratings, and the value of our common stock, and other conditions that may adversely impact our ability to fund our obligations or consummate transactions, or reduce the earnings from potential transactions;

· changes in global, national and local economic conditions, and currency exchange rates;

· our ability to manage our indebtedness level and changes in the terms of such indebtedness;

· our ability to maintain our qualification as a real estate investment trust (“REIT”)

· the ability of HCP and SpinCo to satisfy any necessary conditions to complete the spin-off transaction; and

· the ability of HCP and SpinCo to complete financings related to the spin-off transaction on acceptable terms or at all.

We do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, which speak only as of the date on which they are made.

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

· 2016 Transaction Overview

· Dividends

· Results of Operations

· Liquidity and Capital Resources

· Contractual Obligations

· Off-Balance Sheet Arrangements

· Inflation

· Non-GAAP Financial Measures Reconciliations

· Critical Accounting Policies

· Recent Accounting Pronouncements

Executive Summary

HCP, Inc., a Standard & Poor’s (“S&P”) 500 company, invests primarily in real estate serving the healthcare industry in the United States. We are a Maryland corporation organized in 1985 and qualify as a self-administered REIT. We acquire, develop, lease, manage and dispose of healthcare real estate, and provide financing to healthcare providers. At March 31, 2016, our portfolio of investments, including properties in our unconsolidated joint ventures, consisted of interests in 1,200 facilities.

We invest and manage our real estate portfolio for the long-term to maximize the benefit to our stockholders and support the growth of our dividends. The core elements of our strategy are: (i) to acquire, develop, lease, own and manage a diversified portfolio of quality healthcare properties across multiple business segments and geographic locations (including Europe); (ii) to align ourselves with leading healthcare companies, operators and service providers, which over the long-term should result in higher relative rental rates, net operating cash flows and appreciation of property values; (iii) to allocate capital targeting a balanced portfolio between longer-term escalating triple-net leases with high-quality tenants, and operating businesses with shorter-term leases in our medical office and life science segments; (iv) to maintain adequate liquidity with long-term fixed rate debt financing with staggered maturities, which supports the longer-term nature of our investments, while reducing our exposure to interest rate volatility and refinancing risk at any point in the interest rate or credit cycles; and (v) to continue to manage our balance sheet with a targeted financial leverage of 40% relative to our assets.

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We believe that our longer-term escalating triple-net leases with larger tenants and operators having scale enhance the quality, stability and growth of our rental income. Further, we believe many of our existing properties hold the potential for increased future cash flows as they are well maintained and in desirable locations within markets where the creation of new supply is limited by the lack of available sites and the difficulty of obtaining the necessary licensing, other approvals and/or financing. Our strategy for maximizing the benefits from these opportunities is to: (i) work with new or existing tenants and operators to address their space and capital needs; and (ii) provide high-quality property management services in order to motivate tenants to renew, expand or relocate into our properties.

The delivery of healthcare services requires real estate and, as a result, tenants and operators depend on real estate, in part, to maintain and grow their businesses. We believe that the healthcare real estate market provides investment opportunities due to the: (i) compelling long-term demographics driving the demand for healthcare services; (ii) specialized nature of healthcare real estate investing; and (iii) ongoing consolidation of the fragmented healthcare real estate sector.

While we emphasize healthcare real estate ownership, we may also provide real estate secured financing to, or invest in equity or debt securities of, healthcare operators or other entities engaged in healthcare real estate ownership. We may also acquire all or substantially all of the securities or assets of other REITs, operating companies or similar entities where such investments would be consistent with our investment strategies. We may co-invest alongside institutional or development investors through partnerships or limited liability companies.

We monitor, but do not limit, our investments based on the percentage of our total assets that may be invested in any one property type, investment vehicle or geographic location, the number of properties that may be leased to a single tenant or operator, or loans that may be made to a single borrower. In allocating capital to our multiple segments, we target opportunities with the most attractive risk/reward profile for our portfolio as a whole. We may take additional measures to mitigate risk, including diversifying our investments (by sector, geography, tenant or operator), structuring transactions as master leases, requiring tenant or operator insurance and indemnifications, and obtaining credit enhancements in the form of guarantees, letters of credit or security deposits.

Our REIT qualification requires us to distribute at least 90% of our REIT taxable income (excluding net capital gains); therefore, we do not retain capital. As a result, we regularly access the public equity and debt markets to raise the funds necessary to finance acquisitions and debt investments, develop and redevelop properties, and refinance maturing debt.

We maintain a disciplined balance sheet by actively managing our debt to equity levels and maintaining multiple sources of liquidity, such as our revolving line of credit facility, access to capital markets and secured debt lenders, relationships with current and prospective institutional joint venture partners, and our ability to divest assets. Our debt obligations are primarily long-term fixed rate with staggered maturities, which reduces the impact of rising interest rates on our operations.

We finance our investments based on our evaluation of available sources of funding. For short-term purposes, we may utilize our revolving line of credit facility or arrange for other short-term borrowings from banks or other sources. We arrange for longer-term financing by offering debt and equity securities, placing mortgage debt and obtaining capital from institutional lenders and joint venture partners.

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2016 Transaction Overview

HCR ManorCare, Inc.

Spin-Off of Real Estate Portfolio

In May 2016, we announced our intention to spin off interests in 338 properties (including 17 facility sales expected to close by the end of 2016 and potentially before completion of the spin off), primarily comprised of our HCRMC DFL investments, and equity investment in HCRMC OpCo, into an independent, publicly-traded REIT (“SpinCo”). The spin-off is expected to be effectuated through a pro rata special distribution of SpinCo’s shares to HCP stockholders and will be treated as a taxable transaction for U.S. federal income tax purposes. The transaction is subject to certain conditions, including the SEC declaring effective a registration statement for the SpinCo common share to be distributed, filing and approval of SpinCo to be listed on an exchange, customary third party consents, and formal approval and declaration of the distribution by the our Board of Directors. The transaction is expected to be completed in the second half of 2016. We may, at any time and for any reason until the proposed transaction is complete, abandon the spin-off or modify or change its terms.

First Quarter Operating Performance

For the first quarter 2016, HCRMC reported normalized EBITDAR of $131 million, which was up $22 million, or 20% sequentially, driven by a 110 basis point increase in core post-acute/skilled nursing occupancy. On a year-over-year basis, normalized EBITDAR decreased $27 million, or 17%, primarily due to a weaker flu season, continued pressure from payor mix shift, and shorter lengths of stay, as well as transaction costs and operational disruption from the non-strategic asset sales. HCRMC’s normalized fixed charge coverage ratio for the trailing twelve months ended March 31, 2016 was 1.06x and for the trailing three months was 1.11x.

HCRMC ended the quarter with $174 million of cash and cash equivalents and continues to be current on its obligations under the amended master lease.

Transaction Activity

During the quarter, we completed 11 of the 50 non-strategic asset sales, generating proceeds of $62 million.  Inclusive of this amount, we expect to receive $130 million during 2016, bringing total anticipated sales proceeds from all 50 facilities to $350 million. We expect the remaining 17 assets to close by year end. In addition, we completed the final transfer of the nine facilities that were part of the HCRMC lease amendment representing $275 million of value received in the fee ownership of these recently built post-acute facilities.

In February 2016, we acquired a new 64-bed memory care facility in Easton, Pennsylvania for $15 million that opened in January 2016, which is located adjacent to our existing post-acute facility that is currently 94% occupied. The facility was developed by HCRMC and was added to its master lease with a term of 16 years.

Accounting and Income Tax Update

We acquired the HCRMC DFL investments in 2011 through an acquisition of a C-Corporation, which was subject to federal and state built-in gain tax, if all the assets were sold within 10 years, of up to $2 billion. At the time, we intended to hold the assets for at least 10 years, at which time the assets would no longer be subject to the built-in gain tax.

In December 2015, the U.S. Federal Government passed legislation which permanently reduced the holding period, for federal tax purposes, to five years. We satisfied the five year holding period requirement in April 2016. However, certain states still require a 10-year holding period and, as such, the assets are still subject to state built-in gain tax.

During the three months ended March 31, 2016, we determined that we may sell assets during the next five years and, therefore, recorded a deferred tax liability of approximately $49 million representing our estimated exposure to state built-in gain tax.

See Notes 5 and 7 to the Consolidated Financial Statements for additional discussion of HCRMC, which information is incorporated by reference herein.

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Investment Transactions

In January 2016, we acquired a portfolio of five private pay senior housing communities with 364 units and one skilled nursing facility with 120 beds for $95 million. All of the communities were developed within the past two years and are triple-net leased to four regional operators.

We entered into definitive agreements to acquire a portfolio of seven private pay senior housing communities for $190 million, including the assumption of $75 million of debt maturing in 2044 at a 4.0% rate. Consisting of 526 assisted living and memory care units, the portfolio will be managed by Senior Lifestyle Corporation in a 100% owned RIDEA structure at closing. We anticipate that the transaction will close during the second half of 2016.

The Cove Development

We have pre-leased approximately 50% of The Cove Phase I, which consists of two buildings totaling up to 250,000 square feet, expected to be delivered in the third quarter of 2016. In response to Phase I leasing success and continued strong demand from life science users in South San Francisco, in February 2016, we commenced the $185 million development The Cove Phase II, which adds two Class A buildings totaling up to 230,000 square feet expected to be delivered by the third quarter of 2017.

Capital Recycling and Financing Activities

In May 2016, we entered into a master contribution agreement to contribute our interests in the RIDEA II joint venture (“RIDEA II”) to an unconsolidated joint venture owned 50.1% by HCP and 49.9% by an investor group led by Columbia Pacific Advisors, LLC (“CPA”) (the “HCP/CPA JV”). In return, we will receive $109 million in cash proceeds from the HCP/CPA JV, a $636 million note receivable (“Note”) and retain an approximately 40% beneficial interest in RIDEA II. This transaction, upon completion, would result in us deconsolidating the net assets of RIDEA II because we will not direct the activities that most significantly impact the venture. We further expect that the members will recapitalize RIDEA II, at which time we expect to receive cash proceeds in payment against the Note. The closing of these transactions are expected to occur in 2016 and remain subject to regulatory and third party approvals and other customary closing conditions.

In April 2016, we sold a life science facility and a medical office building for $90 million.

In February 2016, we refinanced $500 million of maturing unsecured debt using proceeds from our December 2015 offering of senior unsecured notes.

In January 2016, we entered into a sale agreement for a purchase option that was exercised on four life science facilities in South San Francisco, CA for $310 million. The transaction is expected to close in the second half of 2016.

Dividends

On April 27, 2016, we announced that our Board declared a quarterly common stock cash dividend of $0.575 per share. The common stock dividend will be paid on May 24, 2016 to stockholders of record as of the close of business on May 9, 2016.

Results of Operations

We evaluate our business and allocate resources among our 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, we primarily invest, through acquisition and development, in single operator or tenant properties and debt issued by operators in these sectors. Under the medical office segment, we invest, through acquisition and development, in single or multi-tenant medical office buildings (“MOBs”), which generally require a greater level of property management.

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Non-GAAP Financial Measures

Net Operating Income (“NOI”)

NOI and adjusted NOI are non-GAAP supplemental financial measures used to evaluate the operating performance of real estate. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from direct financing leases (“DFLs”), less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss) as presented in Note 13 to the Consolidated Financial Statements. Management 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 non-cash interest, amortization of market lease intangibles and lease termination fees. Adjusted NOI is oftentimes referred to as “cash NOI.” We use NOI and adjusted NOI to make decisions about resource allocations, to assess and compare property level performance, and evaluate our same property portfolio (“SPP”), as described below. We believe that net income (loss) is the most directly comparable U.S. generally accepted accounting principles (“GAAP”) measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect various excluded items. Further, our definition of NOI may not be comparable to the definition used by other REITs or real estate companies, as they may use different methodologies for calculating NOI. NOI and adjusted NOI are non-GAAP supplemental financial measures; for a reconciliation of net income (loss) to NOI and adjusted NOI and other relevant disclosure, refer to Note 13 to the Consolidated Financial Statements.

Operating expenses generally relate to leased medical office and life science properties and senior housing RIDEA properties. We generally recover all or a portion of our leased medical office and life science property expenses through tenant recoveries. We present expenses as operating or general and administrative 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.

Same Property Portfolio

SPP NOI and adjusted NOI information allows us to evaluate the performance of our 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, excluding assets held for sale. 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) control(s) the physical use of at least 80% of the space) or 12 months from the acquisition date. Newly completed developments and 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. SPP adjusted NOI excludes the effects of foreign exchange rate movements by using the average current period exchange rate to translate from British pound sterling (“GBP”) into U.S. dollar (“USD”) for the comparison periods. A property is removed from our SPP when it is sold, placed into redevelopment or changes its reporting structure.

Funds From Operations (“FFO”)

We believe FFO applicable to common shares, diluted FFO applicable to common shares, 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 use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is net income (loss) applicable to common shares (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, including any taxes directly associated with sales of depreciable property, impairments of, or related to, depreciable real

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estate, plus real estate and DFL depreciation and amortization, and after 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 (loss). We compute FFO in accordance with the current NAREIT definition; however, other REITs may report FFO differently or have a different interpretation of the current NAREIT definition from ours.

In addition, we present FFO before the impact of severance-related charges, litigation settlement charges, preferred stock redemption charges, impairments (recoveries) of non-depreciable assets, foreign currency remeasurement losses (gains) and transaction-related items (defined below) (“FFO as adjusted”). Transaction-related items include acquisition and pursuit costs (e.g., due diligence and closing) and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. Management believes that FFO as adjusted provides a meaningful supplemental measurement of our FFO run-rate. This measure is a modification of the NAREIT definition of FFO and should not be used as an alternative to net income (loss) (determined in accordance with GAAP) or NAREIT FFO. FFO and FFO as adjusted are non-GAAP supplemental financial measures; for a reconciliation of net income (loss) to FFO and FFO as adjusted and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.

Funds Available for Distribution (“FAD”)

FAD is defined as FFO as adjusted after excluding the impact of the following: (i) amortization of acquired market lease intangibles, net; (ii) amortization of deferred compensation expense; (iii) amortization of deferred financing costs, net; (iv) straight-line rents; (v) non-cash interest and depreciation related to DFLs and lease incentive amortization (reduction of straight-line rents); and (vi) deferred revenues, excluding amounts amortized into rental income that are associated with tenant funded improvements owned/recognized by us and up-front cash payments made by tenants to reduce their contractual rents. Also, FAD is: (i) computed after deducting recurring capital expenditures, including leasing costs and second generation tenant and capital improvements; and (ii) includes lease restructure payments and adjustments to compute our share of FAD from our unconsolidated joint ventures and those related to CCRC non-refundable entrance fees. Other REITs or real estate companies may use different methodologies for calculating FAD, and accordingly, our FAD may not be comparable to those reported by other REITs. Although our FAD computation may not be comparable to that of other REITs, management believes FAD provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. FAD does not represent cash generated from operating activities determined in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs, and should not be considered as an alternative to net income (loss) determined in accordance with GAAP. FAD is a non-GAAP supplemental financial measure; for a reconciliation of net income (loss) to FAD, as defined, and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.

Comparison of the Three Months Ended March 31, 2016 to the Three Months Ended March 31, 2015

Overview(1)

Results for the three months ended March 31, 2016 and 2015 (dollars in thousands except per share data):

	Three Months Ended				Three Months Ended				Per
	March 31, 2016				March 31, 2015				Share
	Amount		Per Share		Amount		Per Share		Change
FFO	$	319,266	$	0.68	$	(117,572)	$	(0.26)	$	0.94
FFO as adjusted		321,784		0.69		364,282		0.79		(0.10)
FAD		309,038		0.66		319,581		0.69		(0.03)
Net income (loss) applicable to common shares		115,762		0.25		(240,949)		(0.52)		0.77

________________________________________

(1) For the reconciliations, see “Non-GAAP Financial Measures Reconciliations” section below.

FAD decreased $0.03 per share primarily as a result of: (i) the rent reduction from the 2015 HCRMC lease amendment (see Note 5 to the Consolidated Financial Statements) effective April 1, 2015, (ii) reduction in interest income from placing our Four Seasons senior notes (“Four Seasons Notes”) on cost recovery method in the third quarter of 2015 (see Note 9 to

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the Consolidated Financial Statements) and (iii) reduction in interest income from loan repayments during 2015. The decrease was partially offset by increased NOI from our 2015 acquisitions and the other assets in our SPP, excluding our HCRMC DFL investments.

FFO as adjusted decreased $0.10 primarily as a result of the aforementioned items impacting FAD and reduction in income related to our HCRMC investments due to the change in income recognition method to cash basis accounting in January 2016 (see Note 5 to the Consolidated Financial Statements).

FFO and earnings per share (“EPS”) for the quarter ended March 31, 2015 included a $478 million impairment related to our HCRMC DFL investments (see Note 5 to the Consolidated Financial Statements), which were partially offset by the aforementioned events impacting FFO as adjusted. There were no impairments recognized for the quarter ended March 31, 2016. Additionally, EPS for the quarter ended March 31, 2016 included income tax expenses of $53 million related to our estimated exposure to state built-in gain taxes.

Segment NOI and Adjusted NOI

The tables below provide selected operating information for our SPP and total property portfolio for each of our business segments. Our consolidated SPP for the three months ended March 31, 2016 consists of 1,063 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 2015 and that remained in operations under a consistent reporting structure through March 31, 2016. Our consolidated total property portfolio consist of 1,168 and 1,101 properties at March 31, 2016 and 2015, respectively.

Results as of and for the three months ended March 31, 2016 and 2015 (dollars and square feet in thousands except per capacity data):

Senior Housing

	SPP							Total Portfolio
	Three Months Ended March 31,							Three Months Ended March 31,
	2016		2015		Change			2016		2015		Change
Rental revenues(1)	$	125,602	$	127,404	$	(1,802)		$	128,897	$	127,382	$	1,515
Resident fees and services		110,596		104,810		5,786			165,763		105,013		60,750
Total segment revenues		236,198		232,214		3,984			294,660		232,395		62,265
Operating expenses		(78,443)		(74,891)		(3,552)			(116,136)		(75,510)		(40,626)
NOI		157,755		157,323		432			178,524		156,885		21,639
Non-cash adjustments to NOI		(5,724)		(7,273)		1,549			(5,956)		(6,413)		457
Adjusted NOI	$	152,031	$	150,050	$	1,981		$	172,568	$	150,472	$	22,096
Adjusted NOI % change						1.3	%
Property count(2)		448		448					510		458
Average capacity (units)(3)		44,118		44,045					50,781		44,908
Average annual rent per unit(4)	$	13,868	$	13,648				$	13,767	$	13,481

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

(2) From our past presentation of SPP for the three months ended March 31, 2015, we removed seven senior housing properties from SPP that were sold.

(3) Represents average capacity as reported by the respective tenants or operators for the 12-month period and a quarter in arrears from the periods presented.

(4) Average annual rent per unit for RIDEA properties is based on NOI.

SPP Adjusted NOI. SPP adjusted NOI improved primarily as a result of improved performance from RIDEA properties and annual rent increases.

Total Portfolio NOI and Adjusted NOI. In addition to the impact of our SPP, our total portfolio NOI and adjusted NOI increased primarily as a result of the impact from our senior housing acquisitions in 2015 and 2016, primarily $16 million from our RIDEA III transaction in June 2015 (see Note 3 to the Consolidated Financial Statements).

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Post-Acute/Skilled Nursing

	SPP							Total Portfolio
	Three Months Ended March 31,							Three Months Ended March 31,
	2016		2015		Change			2016		2015		Change
Rental revenues(1)	$	104,059	$	133,749	$	(29,690)		$	107,190	$	140,576	$	(33,386)
Operating expenses		(42)		(47)		5			(564)		(533)		(31)
NOI		104,017		133,702		(29,685)			106,626		140,043		(33,417)
Non-cash adjustments to NOI		175		(17,344)		17,519			(271)		(18,083)		17,812
Adjusted NOI	$	104,192	$	116,358	$	(12,166)		$	106,355	$	121,960	$	(15,605)
Adjusted NOI % change						(10.5)	%
Property count(2)		279		279					301		301
Average capacity (beds)(3)		35,550		34,732					37,151		38,282
Average annual rent per bed	$	11,727	$	13,405				$	11,511	$	12,798

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

(2) From our past presentation of SPP for the three months ended March 31, 2015, we removed 27 post-acute/skilled nursing facilities from SPP that were sold and four post-acute/skilled nursing facilities that were deconsolidated as a result of the initial adoption of Accounting Standards Update No. 2015-02, Amendments to the Consolidation Analysis.

(3) Represents average capacity as reported by the respective tenants or operators for the 12-month period and a quarter in arrears from the periods presented.

NOI and Adjusted NOI.  SPP and total portfolio NOI and adjusted NOI decreased primarily as a result of the HCRMC Lease Amendment and reduction in income related to our HCRMC DFL investments due to the change in income recognition method to cash basis accounting in January 2016, see Notes 5 and 7 to the Consolidated Financial Statements.

Life Science

	SPP									Total Portfolio
	Three Months Ended March 31,									Three Months Ended March 31,
	2016			2015			Change			2016			2015			Change
Rental and related revenues	$	64,557		$	61,968		$	2,589		$	74,159		$	69,504		$	4,655
Tenant recoveries		13,112			13,029			83			14,789			14,047			742
Total segment revenues		77,669			74,997			2,672			88,948			83,551			5,397
Operating expenses		(14,011)			(14,540)			529			(16,743)			(16,699)			(44)
NOI		63,658			60,457			3,201			72,205			66,852			5,353
Non-cash adjustments to NOI		184			(2,215)			2,399			(673)			(3,075)			2,402
Adjusted NOI	$	63,842		$	58,242		$	5,600		$	71,532		$	63,777		$	7,755
Adjusted NOI % change								9.6	%
Property count(1)		108			108						114			111
Average occupancy		97.9	%		95.2	%					98.1	%		96.2	%
Average occupied square feet		6,782			6,590						7,408			7,046
Average annual total segment revenues per occupied square foot	$	46		$	44					$	48		$	46
Average annual base rent per occupied square foot	$	38		$	36					$	40		$	38

(1) From our past presentation of SPP for the three months ended March 31, 2015, we removed four life science facilities from SPP that were classified as held for sale.

SPP NOI and Adjusted NOI.  SPP NOI and adjusted NOI increased primarily as a result of increased occupancy. Additionally, SPP adjusted NOI increased as a result of annual rent escalations.

Total Portfolio NOI and Adjusted NOI.  In addition to the impact of our SPP, our total portfolio NOI and adjusted NOI increased primarily as a result of the impact of our life science acquisitions during 2015.

During the three months ended March 31, 2016, 310,000 square feet of new and renewal leases commenced at an average annual base rent of $33.75 per square foot compared to 311,000 square feet of expired leases with an average annual base

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rent of $26.90 per square foot. During the three months ended March 31, 2016, we classified 457,000 square feet as assets held for sale with an average annual base rent of $52.82 per square foot.

Medical Office

	SPP									Total Portfolio
	Three Months Ended March 31,									Three Months Ended March 31,
	2016			2015			Change			2016			2015			Change
Rental and related revenues	$	83,035		$	81,396		$	1,639		$	92,854		$	83,119		$	9,735
Tenant recoveries		15,328			15,096			232			16,140			15,186			954
Total segment revenues		98,363			96,492			1,871			108,994			98,305			10,689
Operating expenses		(37,394)			(36,257)			(1,137)			(42,313)			(38,252)			(4,061)
NOI		60,969			60,235			734			66,681			60,053			6,628
Non-cash adjustments to NOI		(455)			(1,632)			1,177			(805)			(1,866)			1,061
Adjusted NOI	$	60,514		$	58,603		$	1,911		$	65,876		$	58,187		$	7,689
Adjusted NOI % change								3.3	%
Property count(1)		212			212						227			215
Average occupancy		90.9	%		90.6	%					91.3	%		90.2	%
Average occupied square feet		13,574			13,517						15,593			13,750
Average annual total segment revenues per occupied square foot	$	29		$	28					$	28		$	28
Average annual base rent per occupied square foot	$	24		$	23					$	23		$	24

(1) From our past presentation of SPP for the three months ended March 31, 2015, we removed a MOB from SPP that was sold.

SPP NOI and Adjusted NOI.  SPP NOI and adjusted NOI increased as a result of annual rent escalations and increased occupancy.

Total Portfolio NOI and Adjusted NOI.  In addition to the impact of our SPP, our total portfolio NOI and adjusted NOI increased primarily as a result of the impact of our MOB acquisitions in 2015.

During the three months ended March 31, 2016, 403,000 square feet of new and renewal leases commenced at an average annual base rent of $22.15 per square foot compared to 469,000 square feet of expiring and terminated leases with an average annual base rent of $23.91 per square foot.

Hospital

	SPP							Total Portfolio
	Three Months Ended March 31,							Three Months Ended March 31,
	2016		2015		Change			2016		2015		Change
Rental revenues(1)	$	22,049	$	21,567	$	482		$	22,062	$	21,580	$	482
Tenant recoveries		808		662		146			808		662		146
Total segment revenues		22,857		22,229		628			22,870		22,242		628
Operating expenses		(1,199)		(1,037)		(162)			(1,199)		(1,037)		(162)
NOI		21,658		21,192		466			21,671		21,205		466
Non-cash adjustments to NOI		304		252		52			303		252		51
Adjusted NOI	$	21,962	$	21,444	$	518		$	21,974	$	21,457	$	517
Adjusted NOI % change						2.4	%		.
Property count		16		16					16		16
Average capacity (beds)(2)		2,231		2,221					2,231		2,221
Average annual rent per bed	$	41,531	$	40,488				$	41,552	$	40,511

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

(2) Represents capacity as reported by the respective tenants or operators for the 12-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.

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NOI and Adjusted NOI.  SPP and total portfolio NOI and adjusted NOI increased primarily as a result of additional rents earned in 2016 due to exceeding pre-established thresholds and annual rent escalations.

Other Income and Expense Items

Interest income

Interest income decreased $15 million to $18 million for the three months ended March 31, 2016. The decrease was primarily the result of: (i) a change in interest income recognition on our investment in the Four Seasons Notes (see Note 9 to the Consolidated Financial Statements), (ii) loan repayments during 2015 and (iii) reduced incremental interest income from our share in the appreciation of the underlying real estate asset from the repayment of a development loan in 2015.

Investment management fee income

Investment management fee income decreased $0.4 million to $91,000 for the three months ended March 31, 2016. The decrease was primarily the result of the sales of real estate from HCP Ventures III, LLC and HCP Ventures IV, LLC in December 2015 and January 2016.

Interest expense

Interest expense increased $5 million to $122 million for the three months ended March 31, 2016. The increase was primarily the result of: (i) our senior unsecured notes issuances during 2015 and (ii) increased borrowings under our line of credit facility. The increase in interest expense was partially offset by repayments of senior unsecured notes and mortgage debt that matured during 2015 and 2016. The increased borrowings were used to fund our investment activities and to refinance our debt maturities.

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 3.

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

	As of March 31, (1)
	2016			2015
Balance:
Fixed rate	$	10,108,396		$	9,553,025
Variable rate		810,313			367,055
Total	$	10,918,709		$	9,920,080
Percent of total debt:
Fixed rate		92.6	%		96.3	%
Variable rate		7.4	%		3.7	%
Total		100.0	%		100.0	%
Weighted average interest rate at end of period:
Fixed rate		4.71	%		4.80	%
Variable rate		1.68	%		1.70	%
Total		4.48	%		4.68	%

(1) At March 31, 2016 and 2015, excludes $95 million and $96 million, respectively, of other debt that represents non-interest bearing life care bonds and occupancy fee deposits at certain of our senior housing facilities and demand notes that have no scheduled maturities. At March 31, 2016 and 2015, principal balances of $71 million of variable-rate mortgages and £357 million ($513 million and $530 million, respectively) of term loans are presented as fixed-rate debt as the interest payments were swapped from variable to fixed (see Note 19 to the Consolidated Financial Statements).

Depreciation and amortization expense

Depreciation and amortization expense increased $27 million to $141 million for the three months ended March 31, 2016. The increase was primarily the result of the impact of our acquisitions and redevelopment projects placed in service during 2015.

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General and administrative expenses

General and administrative expenses increased $1 million to $25 million for the three months ended March 31, 2016. The increase was primarily the result of higher professional fees.

Acquisition and pursuit costs

Acquisition and pursuit costs decreased $1 million to $2 million for the three months ended March 31, 2016. The decrease was primarily due to lower levels of transactional activity in 2016 compared to the same period in 2015.

Impairment

During the three months endedMarch 31, 2015, we recognized an impairment charge of $478 million related to our HCRMC DFL investments (see Note 5 to the Consolidated Financial Statements).

Gain on sales of real estate

During the three months ended March 31, 2015, we sold eight senior housing facilities for $51 million, recognizing a gain on the sales of $6 million.

Income tax (expense) benefit

Income taxes increased $53 million to an expense of $53 million for the three months ended March 31, 2016. The increase was primarily the result of recognizing tax liabilities of $53 million representing our estimated exposure to state built-in gain tax, of which $49 million is related to our HCRMC DFL investments (see Note 5 to the Consolidated Financial Statements).

Equity (loss) income from unconsolidated joint ventures

During the three months ended March 31, 2016, we recognized equity loss from unconsolidated joint ventures of $1 million compared to equity income from unconsolidated joint ventures of $14 million for the three months ended March 31, 2015. The decrease was primarily the result of a change in income recognition on our equity investment in HCRMC.

Liquidity and Capital Resources

We anticipate: (i) funding recurring operating expenses, (ii) meeting debt service requirements including principal payments and maturities, and (iii) satisfying our distributions to our stockholders and non-controlling interest members, for the next 12 months primarily by using cash flow from operations, available cash balances and cash from our various financing activities.

Our principal investing needs for the next 12 months are to:

· fund capital expenditures, including tenant improvements and leasing costs; and

· fund future acquisition, transactional and development activities.

We anticipate satisfying these future investing needs using one or more of the following:

· issuance of common or preferred stock;

· issuance of additional debt, including unsecured notes and mortgage debt;

· draws on our credit facilities; and/or

· sale or exchange of ownership interests in properties.

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

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revolving line of credit facility accrues interest at a rate per annum equal to LIBOR plus a margin that depends upon our credit ratings. We also pay a facility fee on the entire revolving commitment that depends upon our credit ratings. As of April 29, 2016, we had a credit rating of BBB+ from Fitch, Baa1 from Moody’s and BBB+ from S&P on our senior unsecured debt securities.

Cash Flow Summary

The following summary discussion of our cash flows is based on the consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Cash and cash equivalents were $95 million and $347 million at March 31, 2016 and December 31, 2015, respectively, representing a decrease of $252 million. The following table sets forth changes in cash flows (in thousands):

	Three Months Ended March 31,
	2016		2015		Change
Net cash provided by operating activities	$	268,617	$	230,068	$	38,549
Net cash used in investing activities		(165,757)		(328,286)		162,529
Net cash (used in) provided by financing activities		(354,402)		51,722		(406,124)

The decrease in operating cash flow is the result of a net paydown of working capital. Our cash flow from operations is dependent upon the occupancy levels of our 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, 2016:

· made investments of $341 million (development and acquisition of real estate, and investments in DFLs, unconsolidated joint ventures and loans) and received repayments of $155 million primarily from DFL sales;

· paid dividends on common stock of $268 million, which were generally funded by cash provided by our operating activities and cash on hand; and

· raised proceeds of $457 million primarily from our net borrowings under our bank line of credit and issuances of common stock and repaid $537 million of senior unsecured notes and mortgage debt.

Debt

Bank Line of Credit and Term Loan

Our $2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on March 31, 2018 and contains a one-year extension option. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends upon our credit ratings. We pay a facility fee on the entire revolving commitment that depends on our credit ratings. Based on our credit ratings at April 29, 2016, the margin on the Facility was 0.925%, and the facility fee was 0.15%. 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, 2016, we had $810 million, including £275 million ($395 million), outstanding under the Facility with a weighted average effective interest rate of 1.68%.

The Facility and term loans 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% and (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times. The Facility and term loans also require a Minimum Consolidated Tangible Net Worth of $9.5 billion at March 31, 2016. At March 31, 2016, we were in compliance with each of these restrictions and requirements.

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Senior Unsecured Notes

At March 31, 2016, we had senior unsecured notes outstanding with an aggregate principal balance of $8.7 billion. Interest rates on the notes ranged from 2.79% to 6.88% with a weighted average effective interest rate of 4.72% and a weighted average maturity of six years at March 31, 2016. 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, 2016.

Mortgage Debt

At March 31, 2016, we had $895 million in aggregate principal amount of mortgage debt outstanding, which is secured by 56 healthcare facilities (including redevelopment properties) with a carrying value of $1.1 billion. At March 31, 2016, interest rates on the mortgage debt ranged from 3.11% to 8.35% with a weighted average effective interest rate of 6.22% and a weighted average maturity of two 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 and 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.

Equity

At March 31, 2016, we had 467 million shares of common stock outstanding, equity totaled $9.6 billion, and our equity securities had a market value of $15.4 billion.

At March 31, 2016, non-managing members held an aggregate of 4 million units in five limited liability companies (“DownREITs”) for 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).

At-The-Market Program

In June 2015, we established an At-The-Market Program, in connection with the renewal of our Shelf Registration Statement. Under this program, we may sell shares of our common stock from time to time having an aggregate gross sales price of up to $750 million through a consortium of banks acting as sales agents or directly to the banks acting as principals. There was no activity during the three months ended March 31, 2016. Actual future sales will depend upon a variety of factors, including but not limited to market conditions, the trading price of our common stock and our capital needs. We have no obligation to sell the remaining shares available for sale under our program.

Shelf Registration

We filed a prospectus with the SEC as part of a registration statement on Form S-3ASR, using a shelf registration process, which expires in June 2018. Under the “shelf” process, we may sell any combination of the securities described in the prospectus through one or more offerings. The securities described in the prospectus include common stock, preferred stock, depositary shares, debt securities and warrants.

Capital Market Outlook

The capital markets have facilitated our continued growth, including our international expansion. For the 15 months ended March 31, 2016, we have raised $2.0 billion in senior unsecured notes and originated a £220 million ($333 million) four-year unsecured term loan. The capital raised, in combination with available cash and borrowing capacity under our Facility, supported $2.5 billion of investments completed during 15 months ended March 31, 2016. We believe our equity and debt investors, as well as our banking relationships, will provide additional capital as we pursue new investment opportunities.

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Contractual Obligations

The following table summarizes our material contractual payment obligations and commitments at March 31, 2016 (in thousands):

			Less than						More than
	Total(1)		One Year		2017-2018		2019-2020		Five Years
Bank line of credit(2)	$	810,313	$	—	$	810,313	$	—	$	—
Term loans(3)		513,188		196,938		—		316,250		—
Senior unsecured notes		8,700,000		400,000		1,350,000		1,250,000		5,700,000
Mortgage debt		895,208		241,492		588,474		4,150		61,092
U.K. loan commitments(4)		61,882		49,296		12,586		—		—
Construction loan commitments(5)		1,708		1,708		—		—		—
Development commitments(6)		90,188		76,325		11,703		2,160		—
Ground and other operating leases		392,121		5,805		14,189		13,849		358,278
Interest(7)		2,612,339		300,838		718,962		543,444		1,049,095
Total	$	14,076,947	$	1,272,402	$	3,506,227	$	2,129,853	$	7,168,465

(1) Excludes $95 million of other debt that represents Life Care Bonds and Demand Notes that have no scheduled maturities.

(2) Includes £275 million ($395 million) translated to USD.

(3) Represents £357 million translated to USD.

(4) Represents £43 million translated to USD for commitments to fund our U.K. loan facilities.

(5) Represents commitments to finance development projects and related working capital financings.

(6) Represents construction and other commitments for developments in progress.

(7) Interest on variable-rate debt is calculated using rates in effect at March 31, 2016.

Off-Balance Sheet Arrangements

We own interests in certain unconsolidated joint ventures as described in Note 7 to the 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 (see Note 16 to the Consolidated Financial Statements). In addition, we have certain properties which serve as collateral for debt that is owed by a previous owner of certain of our facilities. 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 above under “Contractual Obligations.”

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 tenant or operator 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 tenant or operator expense reimbursements and contractual rent increases described above.

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Non-GAAP Financial Measures Reconciliations

Funds From Operations and Funds Available for Distribution

The following is a reconciliation from net income applicable to common shares, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO, FFO as adjusted and FAD (in thousands, except per share data):

	Three Months Ended March 31,
	2016		2015
Net income (loss) applicable to common shares	$	115,762	$	(240,949)
Depreciation and amortization		141,322		114,522
Other depreciation and amortization		2,962		6,684
Taxes associated with real estate disposition		53,177		—
Gain on sales of real estate		—		(6,264)
Equity loss (income) from unconsolidated joint ventures		908		(13,601)
FFO from unconsolidated joint ventures		10,378		24,849
Noncontrolling interests’ and participating securities’ share in earnings		3,983		3,446
Noncontrolling interests’ and participating securities’ share in FFO		(9,226)		(6,259)
FFO applicable to common shares		319,266		(117,572)
Distributions on dilutive convertible units		3,583		—
Diluted FFO applicable to common shares	$	322,849	$	(117,572)
Diluted FFO per common share	$	0.68	$	(0.26)
Weighted average shares used to calculate diluted FFO per common share		472,186		460,880

	Three Months Ended March 31,
	2016		2015
Net income (loss) applicable to common shares	$	0.25	$	(0.52)
Depreciation and amortization		0.30		0.25
Other depreciation and amortization		0.01		0.01
Taxes related to real estate disposition and gain on sales of real estate		0.11		(0.01)
Joint venture and participating securities FFO adjustments		0.01		0.01
Diluted FFO applicable to common shares	$	0.68	$	(0.26)
Impact of adjustments to FFO:
Other impairment(1)	$	—	$	478,464
Transaction-related items and other		2,518		3,390
	$	2,518	$	481,854
FFO as adjusted applicable to common shares	$	321,784	$	364,282
Distributions on dilutive convertible units and other		3,579		3,194
Diluted FFO as adjusted applicable to common shares	$	325,363	$	367,476
Diluted FFO as adjusted per common share	$	0.69	$	0.79
Weighted average shares used to calculate diluted FFO as adjusted per common share		472,186		467,229

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	Three Months Ended March 31,
	2016		2015
FFO as adjusted applicable to common shares	$	321,784	$	364,282
Amortization of market lease intangibles, net		(468)		(378)
Amortization of deferred compensation		5,345		6,165
Amortization of deferred financing costs, net		5,280		4,752
Straight-line rents		(7,576)		(9,546)
DFL non-cash interest(2)		664		(20,304)
Other depreciation and amortization		(2,962)		(6,684)
Deferred revenues – tenant improvement related		(477)		(744)
Deferred revenues – additional rents		(142)		(158)
Leasing costs and tenant and capital improvements		(19,291)		(11,540)
Lease restructure payments		6,294		5,135
Joint venture adjustments – CCRC entrance fees		7,166		6,193
Joint venture and other FAD adjustments(2)		(6,579)		(17,592)
FAD applicable to common shares	$	309,038	$	319,581
Distributions on dilutive convertible units		3,583		3,568
Diluted FAD applicable to common shares	$	312,621	$	323,149
Diluted FAD per common share	$	0.66	$	0.69
Weighted average shares used to calculate diluted FAD per common share		472,186		467,229

(1) For the three months ended March 31, 2015, other impairment of $478 million relates to our HCRMC DFL investments.

(2) Our equity investment in HCRMC is accounted for using the equity method, which requires an elimination of DFL income that is proportional to our ownership in HCRMC. Further, our share of earnings from HCRMC (equity income) increases for the corresponding elimination of related lease expense recognized at the HCRMC entity level, which we present as a non-cash joint venture FAD adjustment. Beginning in January 2016, equity income is recognized only if cash distributions are received from HCRMC. As a result, we no longer eliminate our proportional ownership share of income from DFLs to equity income (loss) from unconsolidated joint ventures for our equity investment in HCRMC.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires 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 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, 2015 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to the Consolidated Financial Statements for the impact of the adoption of new accounting standards; our critical accounting policies have not changed during 2016.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements for the impact of new accounting standards.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign currency exchange rates, specifically the GBP. 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 consolidated balance sheets at fair value (see Note 19 to the Consolidated Financial Statements).

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 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 $5 million (see Note 19 to the Consolidated Financial Statements).

Interest Rate Risk.  At March 31, 2016, we are exposed to market risks related to fluctuations in interest rates primarily on variable rate debt, which has been predominately hedged through interest-rate swap contracts.

Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and assets until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could adversely be affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs. 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 debt and variable-rate investments, and assuming no other changes in the outstanding balance as of March 31, 2016, our annual interest expense would increase by approximately $7 million, or $0.01 per common share on a diluted basis.

Foreign Currency Risk.  At March 31, 2016, our exposure to foreign currencies primarily relates to U.K. investments in leased real estate, senior notes and related GBP denominated cash flows. Our foreign currency exposure is partially mitigated through the use of GBP denominated borrowings and foreign currency swap contracts. Based solely on our operating results for the three months ended March 31, 2016, including the impact of existing hedging arrangements, if the value of the GBP relative to the USD were to increase or decrease by 10% compared to the average exchange rate during the quarter ended March 31, 2016, our cash flows would have decreased or increased, as applicable, by less than $1 million.

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, 2016, both the fair and carrying value of marketable debt securities was $101 million.

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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, as amended (the “Exchange Act”), 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.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, 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, 2016. 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 as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) 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

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our most recent Annual Report on Form 10-K, which could materially affect our business, financial condition, or future results. The following updates the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015:

The proposed spin-off of our interests in 338 properties, primarily consisting of our HCRMC DFL investments and our equity investment in HCRMC OpCo, into an independent, publicly-traded REIT (“SpinCo”) may not be completed on the currently contemplated timeline or terms, or at all, and may not achieve the intended benefits.

In May 2016, we announced our intention to spin-off our interests in 338 properties (including 17 facility sales expected to close by the end of 2016 and potentially before completion of the spin-off), primarily consisting of our HCRMC DFL investments and our equity investment in HCRMC OpCo, into SpinCo. We expect to complete the proposed spin-off transaction in the second half of 2016. Unforeseen developments could delay or prevent the spin-off transaction or cause the spin-off transaction to occur on terms or conditions that are less favorable or different than anticipated. The conditions required to complete the spin-off transaction may not be satisfied, and expenses incurred to accomplish the spin-off transaction could be significantly higher than we currently anticipate.

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) under the Exchange Act, during the three months ended March 31, 2016.

					Maximum Number (Or
				Total Number Of Shares	Approximate Dollar Value)
		Average		(Or Units) Purchased As	Of Shares (Or Units) That
	Total Number	Price		Part Of Publicly	May Yet Be Purchased
	Of Shares	Paid Per		Announced Plans Or	Under The Plans Or
Period Covered	Purchased(1)	Share		Programs	Programs
January 1-31, 2016	32,135	$	35.62	—	—
February 1-29, 2016	62,757		36.00	—	—
March 1-31, 2016	6,868		32.46	—	—
Total	101,760		35.64	—	—

(1) Represents restricted shares withheld under our equity incentive plans to offset tax withholding obligations that occur upon vesting of restricted shares and restricted stock units. The value of the shares withheld is based on the closing price of our common stock on the last trading day prior to the date the relevant transaction occurs.

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Item 5.  Other Information

Appointment of Michael D. McKee as Executive Chairman and David B. Henry as Lead Independent Director

On May 6, 2016, the Board of Directors (the “Board”) appointed Michael D. McKee to serve as our Executive Chairman, and David B. Henry to serve as its Lead Independent Director, each effective immediately.  

The Board has determined that having an Executive Chairman is appropriate for us as it ensures that Board leadership and management maintain close communications and retain a strong working relationship. In his role as Executive Chairman, Mr. McKee will continue to lead the Board, and joins our executive team with a focus on strategic growth and leadership development. He will confer with Lauralee E. Martin, our President and Chief Executive Officers, on matters of strategic importance, while allowing Ms. Martin to focus more closely on day-to-day management. We believe that Mr. McKee, with his extensive experience and history with HCP dating back to 1989, is in an optimal position to provide support and guidance to our management team.

In addition, the Board appointed Mr. Henry, a member of the Board since 2004, to the position of Lead Independent Director. In his role as Lead Independent Director, Mr. Henry will serve as the principal liaison between Mr. McKee and the independent members of the Board, preside at all executive sessions at which only independent directors are present, consult with Mr. McKee regarding Board meeting agendas and schedules, and communicate with our stockholders, as appropriate.

In light of Mr. McKee’s appointment as Executive Chairman, and consistent with applicable NYSE rules, he has resigned from his service on the Compensation and the Nominating and Corporate Governance Committees of the Board, effective immediately. 

Mr. McKee will not receive any fees for his service as Chairman of the Board while he is serving as our Executive Chairman, but will receive the following compensation for 2016 in respect of his services as Executive Chairman:

· Base Salary – $500,000, which for 2016 will be pro-rated based on the portion of 2016 during which he serves as Executive Chairman, and paid in a single lump sum in early 2017;

· Cash Incentive – target cash bonus opportunity equal to the greater of $1,000,000 or an amount determined by the Compensation Committee of the Board, payable in February 2017 on a pro-rated basis based on the portion of 2016 during which he serves as Executive Chairman; and

· Long-Term Equity Award – an at-risk long-term equity award grant of restricted stock units relating to HCP common stock with a grant date fair value of $2,500,000, vesting over a three-year period, generally subject to Mr. McKee’s continued service as our Executive Chairman through the applicable vesting date or an earlier termination due to Mr. McKee’s death, disability or retirement.

Mr. McKee will also be eligible to participate in the HCP, Inc. Executive Severance Plan and HCP, Inc. Executive Change in Control Severance Plan, each as described in more detail below. Mr. McKee’s compensation will be reviewed on an annual basis by the Compensation Committee beginning in 2017

Adoption of Executive Severance Plan

On May 6, 2016, the Compensation Committee (the “Committee”) of the Board approved the HCP, Inc. Executive Severance Plan (the “Executive Plan”), effective as of the same date. The Committee determined that the adoption of the Executive Plan in lieu of entering into individual employment agreements with our executives was consistent with compensation best practices. 

The Executive Plan is intended to provide severance benefits to employees selected by the Committee to participate, including Lauralee E. Martin, President and Chief Executive Officer; Michael D. McKee, Executive Chairman; J. Justin Hutchens, Chief Investment Officer; and Thomas M. Klaritch, Executive Vice President — Medical Office Properties (the “Named Executives”), upon a termination of employment by us without “cause” (as defined in the Executive Plan) other

54

than in circumstances in which the participant would receive benefits under the HCP, Inc. Executive Change in Control Severance Plan (the “CIC Plan”). An individual who has an employment agreement with us will become eligible to participate in the Executive Plan upon the employment agreement’s expiration, if selected by the Committee.

Upon a qualifying termination of employment, a Named Executive will generally be entitled to receive the following benefits: (1) cash installment payments equal to two times the sum of (a) the Named Executive’s base salary plus (b) the target bonus in effect for the year of termination plus (c) the expected cost of the Named Executive’s COBRA premiums for medical coverage for 12 months; and (2) a lump sum cash payment equal to the Named Executive’s pro-rated annual cash incentive award amount for the year of termination, paid at such time as the award would have been paid had the Named Executive not been terminated.

In addition, the Named Executive’s outstanding unvested equity awards (other than performance-based awards) will generally become fully vested, except that unvested restricted stock unit awards will continue to vest according to their terms for 24 months, at which time any awards that remain unvested will become fully vested. The Named Executive’s outstanding performance-based equity awards will continue in accordance with their terms with respect to the performance requirements, although such awards will become fully vested with respect to any time-based vesting requirements.

A Named Executive’s right to receive benefits under the Executive Plan is subject to his or her execution of a general release of claims against us, and his or her agreement to confidentiality, non-solicitation and non-competition restrictive covenants.

Payments (or benefits payable) to a Named Executive under the Executive Plan will, to the extent applicable, either be reduced to avoid Section 280G excise taxes or be paid in full (with the Named Executive paying any such excise taxes), whichever option places the Named Executive in the best after-tax position.

Adoption of Amended and Restated Executive Change in Control Severance Plan

On May 6, 2016, the Compensation Committee of the Board approved an amendment and restatement of the CIC Plan, effective as of the same date. 

The CIC Plan was amended to revise the method for calculating severance payments that are determined with reference to a participant’s annual bonus in order to conform to the terms of the Executive Plan, and to make other clarifying and conforming changes, including changes relating to compliance with Section 409A of the Internal Revenue Code. 

The CIC Plan was not otherwise amended to change the amounts payable under the CIC Plan and the changes made are not expected to materially increase the aggregate amounts payable under the CIC Plan.

Item 6. Exhibits

Pursuant to the rules and regulations of the SEC, we have filed certain agreements as exhibits to this Quarterly Report on Form 10-Q. These agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and

· were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

· may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement;

· may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and

· were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.

55

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-Q not misleading.

3.1	Amendment No. 1 to the Fifth Amended and Restated Bylaws of HCP, Inc., effective January 28, 2016 (incorporated herein by reference to Exhibit 3.1 to HCP’s Current Report on Form 8-K (File No. 001-08895), filed February 1, 2016).
10.1	Separation, Consulting and General Release Agreement with James W. Mercer, effective February 5, 2016 (incorporated herein by reference to Exhibit 10.1 to HCP’s Current Report on Form 8-K (File No. 001-08895), filed January 13, 2016).†
10.2	Twelfth Amendment to Master Lease and Security Agreement, dated as of February 24, 2016, by and among the parties signatory thereto and HCR III Healthcare, LLC.*††
10.3	Addendum #4 to Master Lease and Security Agreement, dated as of February 16, 2016, by and among the parties signatory thereto and HCR III Healthcare, LLC.*
10.4	Addendum #5 to Master Lease and Security Agreement, dated as of March 14, 2016, by and among the parties signatory thereto and HCR III Healthcare, LLC.*
10.5	Form of NEO 3-Year LTIP RSU Agreement (2016).*†
10.6	Form of NEO Retentive LTIP RSU Agreement (2016).*†
31.1	Certification by Lauralee E. Martin, HCP’s Principal Executive Officer, Pursuant to Securities Exchange Act Rule 13a-14(a).*
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 Lauralee E. Martin, 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.

††     Portions of this exhibit have been omitted pursuant to a request for confidential treatment with the SEC.

56

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 9, 2016	HCP, Inc.
	(Registrant)
	/s/ LAURALEE E. MARTIN
	Lauralee E. Martin
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ TIMOTHY M. SCHOEN
	Timothy M. Schoen
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)
	/s/ SCOTT A. ANDERSON
	Scott A. Anderson
	Executive Vice President and
	Chief Accounting Officer
	(Principal Accounting Officer)

57

EX-10.2

EXHIBIT 10.2

TWELFTH AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT

This TWELFTH AMENDMENT TO MASTER LEASE AND SECURITY AGREEMENT (this “Amendment”) is made and entered into as of February 24, 2016, 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 4, 2012 (incorrectly referred to as dated May 5, 2012 in certain amendments due to a scrivener’s error), Sixth Amendment to Master Lease and Security Agreement dated as of May 30, 2012 (incorrectly referred to as dated July 30, 2012 in certain amendments due to a scrivener’s error), Seventh Amendment to Master Lease and Security Agreement dated as of February 11, 2013,  Eighth Amendment to Master Lease and Security Agreement dated as of July 31, 2014, Ninth Amendment to Master Lease and Security Agreement dated as of September 30, 2014 (the “Ninth Amendment”), Tenth Amendment to Master Lease and Security Agreement dated as of March 29, 2015 (the “Tenth Amendment”), Eleventh Amendment to Master Lease and Security Agreement dated as of August 1, 2015, Addendum #1 to Master Lease and Security Agreement dated as of October 23, 2015, Addendum #2 to Master Lease and Security Agreement dated as of November 2, 2015, Addendum #3 to Master Lease and Security Agreement dated as of December 16, 2015, and Addendum #4 to Master Lease and Security Agreement dated as of February 16, 2015 (as so amended, 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 on accordance with the terms thereof, the (“Guaranty”). 

C.         Lessor and Lessee desire to amend the Master Lease to modify certain provisions of the Ninth Amendment and Schedule 1 attached to the Tenth Amendment as more particularly provided herein.

762749.03-LACSR01A - MSW

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.         Recitals.  The foregoing recitals are adopted by Lessor and Lessee as true and correct and, by this reference, are incorporated herein as if set forth herein in full.

2.        Modifications to Ninth Amendment. 

(a)       The Master Lease is hereby modified by deleting Recital E from the Ninth Amendment in its entirety and replacing it with the following in lieu thereof:  “Reference is made to the Pool 3 Facility identified on Exhibit A-3 to the Master Lease as “Old Orchard Health Care Center,” located on the land identified on said Exhibit as 4100 Freemansburg Avenue, Easton, PA 18045 (the “Old Orchard Facility”).  Lessee desires to develop a sixty-four (64) bed assisted living facility (as used herein and in the Master Lease, the “Arden Courts of Old Orchard Facility”) on behalf of Lessor on the land located adjacent to the Old Orchard Facility and more particularly described as the crosshatched area shown on Exhibit B attached hereto (the “Arden Land”) and thereafter lease from Lessor pursuant to the Master Lease, the Arden Courts of Old Orchard Facility.  The Arden Land is currently being leased to Lessee by Lessor pursuant to the Master Lease, and Lessor is willing to agree to such development and lease, under the terms and conditions set forth in this Amendment.”

(b)       The Master Lease is hereby modified by deleting the heading of Section 4 from the Ninth Amendment in its entirety and replacing it with the following in lieu thereof:  “Construction of Arden Courts of Old Orchard Facility.”

(c)       The Master Lease is hereby modified by deleting Section 4(a) from the Ninth Amendment in its entirety and replacing it with the following in lieu thereof:  “Lessor hereby requests Lessee to construct and Lessee hereby agrees to construct the Arden Courts of Old Orchard Facility on behalf of Lessor, pursuant to the terms and conditions set forth in this Amendment.  Notwithstanding anything to the contrary contained in the Master Lease, including, without limitation, Section 6.3 thereof, within 360 days of “Substantial Completion” (as hereinafter defined) of construction of the Arden Courts of Old Orchard Facility, Lessee will lease the Arden Courts of Old Orchard Facility pursuant to the Master Lease from Lessor (such date, the “Arden Courts of Old Orchard Lease Start Date”).  Lessee will determine the Arden Courts of Old Orchard Lease Start Date, by providing at least thirty (30) days prior written notice to Lessor within three hundred (300) days after Substantial Completion.  If Lessee does not provide such written notice to Lessor within three hundred (300) days after Substantial Completion, then Lessor shall have the right to determine the Arden Courts of Old Orchard Lease Start Date, which shall be within such 360 day period following Substantial Completion, by providing written notice to Lessee.  As used herein, “Substantial Completion” means the date on which Lessor has received from Lessee an Officer's Certificate stating the following:  (i) Lessee has received a copy of the certificate of occupancy for the Arden Courts of Old Orchard Facility from the applicable Governmental Authority; (ii) Lessee has received copies of all

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necessary permits, approvals, healthcare licenses and Medicare certifications necessary for the operation of the Arden Courts of Old Orchard Facility; (iii) Lessee has received copies of lien releases from all parties that provided labor or materials for construction of the Arden Courts of Old Orchard Facility; (iv) the Arden Courts of Old Orchard Facility has commenced regular business operations; and (v) construction of the Arden Courts of Old Orchard Facility has been substantially completed in accordance with the plans and specifications and the applicable provisions of this Amendment and the Master Lease, except for punch-list items that remain to be completed.”

(d)       The Master Lease is hereby modified by deleting Section 4(b) from the Ninth Amendment in its entirety and replacing it with the following in lieu thereof:  “In connection with Lessee’s construction of the Arden Courts of Old Orchard Facility pursuant to the request of, and on behalf of, Lessor, Lessor shall reimburse Lessee for its costs, expenses and fees related to such construction (including, without limitation, a lease inducement fee and a construction management fee) in the total amount of Fifteen Million Dollars ($15,000,000.00) (the “Arden Courts of Old Orchard Construction Fee”), which such amount shall be payable by Lessor to Lessee on the Arden Courts of Old Orchard Lease Start Date.  Additionally, on or before the Arden Courts of Old Orchard Lease Start Date, Lessee shall supply or cause to be supplied to Lessor all documents and information pertaining to the construction of the Arden Courts of Old Orchard Facility as Lessor shall reasonably request (including, without limitation, any and all plans and specifications and all building, foundation, grading or other permits and/or authorizations necessary for the construction of the Arden Courts of Old Orchard Facility, and copies of the certificate of occupancy for the Arden Courts of Old Orchard Facility, copies of all necessary permits, approvals, healthcare licenses and Medicare certifications necessary for the operation of the Arden Courts of Old Orchard Facility) and Lessee shall also assign to Lessor each construction contract to which Lessee is a party and all guaranties and warranties relating thereto.  For purposes of clarity, the Arden Courts of Old Orchard Facility is and will remain Lessor’s property during and after the construction thereof and Lessee shall have no ownership rights thereto except as a lessee under the Master Lease.”

(e)       The Master Lease is hereby modified by deleting the phrase “the closing of the Purchase Transaction or the Closing Date, each” from Section 3(d)(ii) from the Ninth Amendment in its entirety and replacing it with the following in lieu thereof:  “the Arden Courts of Old Orchard Lease Start Date,”.

(f)       The Master Lease is hereby modified by deleting the term “Closing Date” from Sections 4(c), 4(c)(i)(2), 4(c)(ii)(4)(a), 4(c)(ii)(4)(b), 4(c)(ii)(4)(c), 4(c)(iii)(2), and 4(c)(iii)(3) from the Ninth Amendment in its entirety and replacing it with the following in lieu thereof:  “Arden Courts of Old Orchard Lease Start Date”.

(g)       The Master Lease is hereby modified by deleting the phrase “the closing of the Purchase Transaction on the Closing Date” from Sections 4(c)(i), 4(c)(ii) and 4(c)(iii) from the Ninth Amendment in its entirety and replacing it with the following in lieu thereof:  “the Arden Courts of Old Orchard Lease Start Date”.

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(h)       The Master Lease is hereby modified by deleting the phrase “and the closing of the Purchase Transaction” from Section 5 of the Ninth Amendment in its entirety.

3.         Arden Courts of Old Orchard Lease Start Date.  The parties hereby acknowledge and agree that the Arden Courts of Old Orchard Lease Start Date shall be February 24, 2016.  Concurrently with the execution of this Amendment, Lessor shall pay to Lessee the Arden Courts of Old Orchard Construction Fee as reimbursement for the construction of the Arden Courts of Old Orchard Facility on behalf of Lessor.  Notwithstanding anything to the contrary contained herein or in the Master Lease, Allocated Minimum Rent for the Arden Courts of Old Orchard Facility for the month of February 2016 commencing as of the Arden Courts of Old Orchard Lease Start Date shall be due and payable on March 1, 2016 (together with all other Allocated Minimum Rent due on such date pursuant to the Master Lease).

4.Schedule 1 (Additional Facilities).  The Master Lease is hereby amended, effective as of October 23, 2015, by deleting Schedule 1 (Additional Facilities) attached to the Tenth Amendment in its entirety and replacing it with Schedule 1 attached hereto in lieu thereof.  The parties hereby acknowledge and agree that the revised Schedule 1 attached hereto does not impact or affect in any way the Initial Deferred Rent Obligation or the Deferred Rent Obligation, as both terms are defined in the Tenth Amendment, or the provisions related thereto contained in the Tenth Amendment.

5.         Tranche B Rental Factor.  For purposes of clarity, the parties hereby acknowledge and agree that the Tranche B Rental Factor (as defined in Section 3.5.3 of the Master Lease) shall be calculated as being compounded annually.

6.         Further Assurances.  The parties agree to promptly sign all documents reasonably requested to give effect to the provisions of this Amendment.

7.         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.

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

9.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

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

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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

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

HCP PROPERTIES-SALMON CREEK WA,  LLC, a Delaware limited liability company

HCP PROPERTIES-WINGFIELD HILLS NV, LLC, a Delaware limited liability company

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HCP PROPERTIES-UTICA RIDGE  IA, LLC, a Delaware limited liability company
HCR TWINSBURG OH PROPERTY, LLC, a Delaware limited liability company
By:	/s/ Darren Kowalske
Name:	Darren Kowalske
Title:	Executive Vice President

HCR STERLING HEIGHTS MI PROPERTY, LLC, a Delaware limited liability company

By:      HCR Schoenherr Road Property, LLC, a Delaware limited liability company, its sole member

By:      HCP Properties, LP, a Delaware limited partnership, its sole member

By:      HCP I-B Properties, LLC, a Delaware limited liability company, its General Partner

By:	/s/ Darren Kowalske
Name:	Darren Kowalske
Title:	Executive Vice President

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“Lessee”

HCR III HEALTHCARE, LLC, a Delaware limited liability company

By:	/s/ Martin D. Allen
Name:	Martin D. Allen
Title:	Vice President

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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/ Martin D. Allen
Name:	Martin D. Allen
Title:	Vice President

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SCHEDULE 1

Additional Facilities

Facility	Facility Owner/ Lessor	Facility Description and Primary Intended Use	Initial Monthly Allocated Minimum Rent(1)	Allocated Initial Investment	Fixed Term	1st Extended Term	2nd Extended Term	HCP ID
To be included in Pool 4
MCNRC Winter Park 2075 Loch Lomond Dr Winter Park, FL 32792	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 138 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2345
MCHS Washington Twn 378 Fries Mill Road Sewell, NJ 08080	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2348
MCHS Wingfield Hills 2350 Wingfield Hills Road Sparks, NV 89436	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2342
MCHS Utica Ridge 3800 Commerce Blvd. Davenport, IA 52807	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2343
MCHS Salmon Creek 2811 N.E. 139th Street Vancouver, WA 98686	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2344
MCHS Lacey 4524 Intelco Loop SE Lacey, WA 98503	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2349
MCHS Sterling Heights 38200 Schoenherr Road Sterling Heights, MI 48312	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2350
Heartland of Dublin 4075 W. Dublin-Granville Road Dublin, OH 43017	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2347
Heartland of Twinsburg 8551 Darrow Road Twinsburg, OH 44087	HCP Properties, LP	Skilled nursing facility / long term care facility consisting of 120 beds	[***]	[***]	Coterminus with Pool 4 Facilities	13 years	5 years	2346

(1)If the closing for any Additional Facility does not occur before April 1, 2016, then the Initial Monthly Allocated Minimum Rent for such Additional Facility will be increased by three percent (3%).

Portions of this schedule that have been marked by [***] have been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission.

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EX-10.3

EXHIBIT 10.3

ADDENDUM #4 TO MASTER LEASE AND SECURITY AGREEMENT

This ADDENDUM #4 TO MASTER LEASE AND SECURITY AGREEMENT (this “Addendum”) is made and entered into as of February 16, 2016, 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 heretofore 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 12 of that certain Tenth Amendment to Master Lease and Security Agreement, dated as of March 29, 2015 and effective as of April 1, 2015 (the “Tenth Amendment”), by and among Lessor, Lessee and Guarantor, Lessor, Lessee and Guarantor desire to add the real property more particularly described on Exhibit A attached hereto (the “Additional Facility”) 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:

1.     Lessee’s Representations and Warranties.  Lessee hereby represents and warrants to Lessor that the Additional Facilities Owners have delivered to Lessor the materials and documentation required pursuant to Section 12 of the Tenth 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 contemplated hereby, that have not been previously disclosed by Lessee or Guarantor to Lessor in writing.

2.     Additional Facility. The Master Lease is hereby amended to modify the “Pool 4 Facilities” to add the Additional Facility thereto and Lessor hereby

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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 Additional Facility, 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.     Additional Lessors.  In connection with the Additional Facility, the Master Lease is hereby amended to add the following entity as Lessor under the Master Lease:  HCR Sterling Heights MI Property, LLC, a Delaware limited liability company.

4.     Opco Sublease:  Schedule 4 to the Master Lease is hereby amended to add the following operating sublease thereto: 

ManorCare Health Services, LLC d/b/a Heartland Health Care Center – Sterling Heights

5.     Sterling Heights Addition:  Lessor hereby consents to the development and construction of that certain addition to the Additional Facility, which will include adding up to 40 skilled nursing facility beds to the Additional Facility, at a cost that is expected to exceed One Million Five Hundred Thousand Dollars ($1,500,000), subject to Lessee complying with the conditions set forth in the Master Lease, including without limitation Section 10.2.2. thereof.

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

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

8.     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.

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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

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

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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

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

HCP PROPERTIES-SALMON CREEK WA,  LLC, a Delaware limited liability company

HCP PROPERTIES-WINGFIELD HILLS NV, LLC, a Delaware limited liability company

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HCP PROPERTIES-UTICA RIDGE  IA, LLC, a Delaware limited liability company
HCR TWINSBURG OH PROPERTY, LLC, a Delaware limited liability company
By:	/s/ Darren Kowalske
Name:	Darren Kowalske
Title:	Executive Vice President

HCR STERLING HEIGHTS MI PROPERTY, LLC, a Delaware limited liability company
By:HCR Schoenherr Road Property, LLC, a Delaware limited liability company, its sole member
By:HCP Properties, LP, a Delaware limited partnership, its sole member
By:HCP I-B Properties, LLC, a Delaware limited liability company, its General Partner
By:	/s/ Darren Kowalske
Name:	Darren Kowalske
Title:	Executive Vice President

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

“Lessee”

HCR III HEALTHCARE, LLC, a Delaware limited liability company

aniel
By:	/s/ Daniel H. Kight
Name:			Daniel H. Kight
Title:		Treasurer

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Addendum #4

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:	/s/ Daniel H. Kight
Name:			Daniel H. Kight
Title:		Treasurer

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EXHIBIT A

Legal Description of Additional Property

A part of the Northwest 1/4 of Section 24, Town 2 North, Range 12 East, City of Sterling Heights, Macomb County, Michigan, more particularly described as: Commencing at the West 1/4 corner of said Section 24; thence North 89 degrees 30 minutes 22 seconds East, 623.10 feet along the East-West 1/4 line of Section 24, (Plumbrook Road); thence North 33 degrees 19 minutes 38 seconds West, 63.21 feet to the point of beginning; thence continuing North 33 degrees 19 minutes 38 seconds West, 334.27 feet to a point on the Easterly line of Schoenherr Road (204 feet wide); thence North 08 degrees 48 minutes 48 seconds East, 573.95 feet along said line to a point on the Southerly line of Utica Road (60 feet wide Southerly right-of-way); thence South 56 degrees 53 minutes 40 seconds East, 706.01 feet along said line; thence South 01 degrees 44 minutes 52 seconds West, 248.88 feet; thence South 89 degrees 30 minutes 22 seconds West, 453.07 feet; thence South 09 degrees 35 minutes 21 seconds West, 210.13 feet to the point of beginning.

Surveyed as:

Land situated in the City of Sterling Heights, Macomb County, Michigan, described as: a part of the Northwest 1/4 of Section 24, Town 2 North, Range 12 East, City of Sterling Heights, Macomb County, Michigan, more particularly described as: Commencing at the West 1/4 corner of said Section 24; thence along the centerline of Plumbrook Road (86 feet wide) North 89 degrees 27 minutes 00 seconds East, 623.10 feet; thence North 33 degrees 23 minutes 00 seconds West, 63.21 feet to the Point of Beginning; thence North 33 degrees 23 minutes 00 seconds West, 334.27 feet to a point on the Easterly Right of Way of Schoenherr Road (204 feet wide); thence along the Easterly Right of Way line of said Schoenherr Road North 08 degrees 45 minutes 26 seconds East, 573.95 feet to point of intersection of the Easterly Right of Way line of said Schoenherr Road and the Southerly Right of Way line of Utica Road (120 feet wide); thence along the Southerly Right of Way line of said Utica Road South 56 degrees 57 minutes 02 seconds East, 706.01 feet; thence South 01 degrees 41 minutes 30 seconds West, 249.88 feet to a point on the North line of "Plumbrook Professional Centre" Condominium (M.C.C.P. No. 1014); thence along the North line of "Plumbrook Professional Centre" Condominium South 89 degrees 27 minutes 00 seconds West, 453.08 feet; thence South 09 degrees 31 minutes 59 seconds West, 210.13 feet to the Point of Beginning.

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EX-10.4

EXHIBIT 10.4

ADDENDUM #5 TO MASTER LEASE AND SECURITY AGREEMENT

This ADDENDUM #5 TO MASTER LEASE AND SECURITY AGREEMENT (this “Addendum”) is made and entered into as of March 14, 2016, 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 heretofore 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 12 of that certain Tenth Amendment to Master Lease and Security Agreement, dated as of March 29, 2015 and effective as of April 1, 2015 (the “Tenth Amendment”), by and among Lessor, Lessee and Guarantor, Lessor, Lessee and Guarantor desire to add the real property more particularly described on Exhibit A attached hereto (the “Additional Facility”) to the Leased Property under the Master Lease.  HCP Properties, LP, one of the entities comprising Lessor, leases the Additional Facility from HCR Lacey WA Property, LLC, pursuant to a Lease Agreement of even date (the “Lacey Superior 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:

1.     Lessee’s Representations and Warranties.  Lessee hereby represents and warrants to Lessor that the Additional Facilities Owners have delivered to Lessor the materials and documentation required pursuant to Section 12 of the Tenth 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 contemplated hereby, that have not been previously disclosed by Lessee or Guarantor to Lessor in writing.

2.     Additional Facility. The Master Lease is hereby amended to modify the “Pool 4 Facilities” to add the Additional Facility 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 Additional Facility, 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, subject to all of the terms, conditions and provisions of the Lacey Superior Lease.  Notwithstanding that the Lacey Superior Lease is not a ground lease, Lessor and Lessee hereby agree that each shall be considered a “Superior Lease” as defined and used in the Master Lease.  The foregoing notwithstanding, to the extent that discrepancies exist between Lessee’s obligations under the Master Lease and the Lacey Superior Lease, Lessee’s obligations under the Master Lease shall control.

3.     Lacey Superior Lease.  Lessor hereby confirms that the Lacey Superior Lease is intended to be a short term lease which will be terminated as soon as practicable after one or more of the entities comprising Lessor or an affiliate of Lessor purchases the fee interest, directly or indirectly, in the Additional Facility.  Concurrently with the termination of the Lacey Superior Lease, the parties agree to enter into an addendum or amendment to the Master Lease in order to add such fee owner of the Additional Facility as “Lessor” under the Master Lease.

4.     Opco Sublease:  Schedule 4 to the Master Lease is hereby amended to add the following operating sublease thereto: 

Manor Care of Lacey WA, LLC d/b/a ManorCare Health Services – Lacey

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

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

7.     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.

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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

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

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

HCP PROPERTIES-SALMON CREEK WA,  LLC, a Delaware limited liability company

HCP PROPERTIES-WINGFIELD HILLS NV, LLC, a Delaware limited liability company

HCP PROPERTIES-UTICA RIDGE  IA, LLC, a Delaware limited liability company

HCR TWINSBURG OH PROPERTY, LLC, a Delaware limited liability company

By:	/s/ Darren Kowalske
Name:	Darren Kowalske
Title:	EVP

HCR STERLING HEIGHTS MI PROPERTY, LLC, a Delaware limited liability company

By:HCR Schoenherr Road Property, LLC, a Delaware limited liability company, its sole member

By:HCP Properties, LP, a Delaware limited partnership, its sole member

By:HCP I-B Properties, LLC, a Delaware limited liability company, its General Partner

By:	/s/ Darren Kowalske
Name:	Darren Kowalske
Title:	EVP

	ACKNOWLEDGMENT
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA	)
	) SS:
COUNTY OFLOS ANGELES	)

On March 9, 2016, before me, Claudia M. Adair, a Notary Public, personally appeared Darren Kowalske, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

[NOTARY STAMP & SEAL]	/s/ Claudia M. Adair
	Notary Public

My Commission Expires

December 7, 2018

	ACKNOWLEDGMENT
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA	)
	) SS:
COUNTY OFLOS ANGELES	)

On March 9, 2016, before me, Claudia M. Adair, a Notary Public, personally appeared Darren Kowalske, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

[NOTARY STAMP & SEAL]	/s/ Claudia M. Adair
	Notary Public

My Commission Expires

December 7, 2018

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

“Lessee”

HCR III HEALTHCARE, LLC, a Delaware limited liability company

By:	/s/ Martin D. Allen
Name:	Martin D. Allen
Title:	Vice President

STATE OF OHIO	)
	) ss:
COUNTY OFLUCAS	)

Before me, a Notary Public in and for said County and State, personally appeared   Martin D. Allen, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed within the instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed this instrument.

I certify under PENALTY OF PERJURY under the law of the State of Ohio that the forgoing paragraph is true and correct.

Witness my hand and official seal.

[NOTARY STAMP & SEAL]	/s/ Meredith Decker
	Printed Name:	Meredith Decker
	Notary Public,	Lucas		County,	Ohio
	My Commission Expires:		N/A
	Acting in the County of		Lucas

Addendum #5

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:	/s/ Daniel H. Kight
Name:	Daniel H. Kight
Title:	Vice President & Treasurer

EXHIBIT A

Legal Description of Additional Property

Lot 28 of the Replat of Lacey Corporate Center, according to the Plat recorded in Volume 24 of Plats at Pages 67 and 68, in Thurston County, Washington;

Except that portion conveyed to the City of Lacey by Deed recorded under recording no. 4239618.

EX-10.5

EXHIBIT 10.5

NEO 3-YEAR LTIP RSU AGREEMENT

THIS NEO 3-YEAR LTIP RSU AGREEMENT (this “Agreement”) is dated as of [●], 20___ (the “Award Date”) by and between HCP, Inc., a Maryland corporation (the “Corporation”), and [●] (the “Participant”). 

W I T N E S S E T H

WHEREAS, the Compensation Committee has determined that the Participant is eligible to receive an award of restricted stock units, as described below, and

WHEREAS, pursuant to the HCP, Inc. 2014 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), the Corporation hereby grants to the Participant, effective as of the date hereof, an award of restricted stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1. Defined Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Plan.

2. Grant.  Subject to the terms of this Agreement, the Corporation hereby grants to the Participant a target Award of [●] stock units (the “Performance Units”) with respect to the performance period beginning on January 1, [2016] and ending on December 31, [2018] (the “Performance Period”).  As used herein, the term “stock unit” means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock solely for purposes of the Plan and this Agreement.  The Performance Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Performance Units vest pursuant to Section 3.  The Performance Units shall not be treated as property or as a trust fund of any kind.  The Compensation Committee (the “Committee”) of the Board is the Administrator of the Plan for purposes of the Performance Units.  The Performance Units are subject to all of the terms and conditions set forth in this Agreement, and are further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Committee, as such rules are in effect from time to time.

3. Vesting.  Subject to this Section 3, the number of Performance Units ultimately earned and vested under this Award shall be determined in accordance with Exhibit A attached hereto based on whether the Corporation has attained certain pre-established performance goals with respect to the Performance Period. The determination as to whether the Corporation has attained the performance goals set forth in Exhibit A with respect to the Performance Period shall be made by the Committee (the “Committee Determination”).  The Committee Determination shall be made no later than March 15 following the end of the

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Performance Period.  The Performance Units shall not be deemed vested pursuant to any other provision of this Agreement earlier than the date that the Committee makes such determination, as required by Section 162(m) of the Code and the regulations promulgated thereunder.

4. Continuance of Employment.  The vesting schedule requires continued employment through the date of the Committee Determination (the “Vesting Period”), as provided in Section 3, as a condition to the vesting of the Award and the rights and benefits under this Agreement.  Employment for only a portion of the Vesting Period, even if a substantial portion, will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment as provided in Section 8 below or under the Plan. 

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation or any of its Subsidiaries, affects the Participant’s status as an employee at will who is subject to termination without Cause (as defined herein), confers upon the Participant any right to remain employed by or in service to the Corporation or any of its Subsidiaries, interferes in any way with the right of the Corporation or any of its Subsidiaries at any time to terminate such employment or services, or affects the right of the Corporation or any of its Subsidiaries to increase or decrease the Participant’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Participant without his or her consent thereto.

5. Dividend and Voting Rights.

(a) Limitations on Rights Associated with Units.  The Participant shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 5(b) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Performance Units and any shares of Common Stock underlying or issuable in respect of such Performance Units until such shares of Common Stock are actually issued to and held of record by the Participant. 

(b) Dividend Equivalent Rights.  During such time as each Performance Unit remains outstanding and prior to the distribution of such Performance Unit in accordance with Section 7, the Participant will have the right to receive, with respect to such Performance Unit, an amount equal to the amount of any ordinary cash dividend paid by the Corporation on a share of Common Stock (a “Dividend Equivalent Right”); provided, however, that any Dividend Equivalent Right credited with respect to an outstanding Performance Unit (including, without limitation, any dividend equivalent credited through and including the date of the Committee Determination) that does not vest pursuant to Section 3 hereof shall immediately terminate upon the forfeiture of such Performance Unit, and the Participant shall not be entitled to any payment with respect thereto. In the case of Dividend Equivalent Rights credited with respect to an outstanding Performance Unit that vests pursuant to Section 3, the Dividend Equivalent Rights will be paid to the Participant in cash (without interest) as soon as practicable after the Committee Determination and in all

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events not later than March 15 of the year that follows the Performance Period.  Dividend Equivalent Rights will not be paid to the Participant with respect to any Performance Units that are forfeited pursuant to Section 3 or 8.

6. Restrictions on Transfer.  Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily.  The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7. Timing and Manner of Payment. As soon as administratively practical following the Committee Determination (and in all events no later than March 15 following the end of the Performance Period), the Corporation shall deliver to the Participant a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Performance Units that vest in accordance with Section 3; provided, however, that in the event that the vesting and payment of the Performance Units is triggered by the Participant’s “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) and the Participant is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of such separation from service, the Participant shall not be entitled to any payment of the Performance Units until the earlier of (a) the date which is six months after the Participant’s separation from service with the Corporation for any reason other than death, or (b) the date of the Participant’s death, if and to the extent such delay in payment is required to comply with Section 409A of the Code.  The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Performance Units is subject to the condition precedent that the Participant or other person entitled under the Plan to receive any shares with respect to the vested Performance Units deliver to the Corporation any representations or other documents or assurances that the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.  The Participant shall have no further rights with respect to any Performance Units that are paid or that terminate pursuant to this Agreement.

8. Termination of Employment.  Notwithstanding any provisions to the contrary in any employment agreement, the HCP, Inc. Change in Control Severance Plan (or successor plan) or any other severance plan adopted by the Corporation, the provisions set forth in this Section 8 are applicable in the event of a termination of the Participant’s employment with the Corporation and its Subsidiaries.

(a) Qualifying Termination.If, at any time during the Vesting Period, the Participant’s employment with the Corporation and its Subsidiaries is terminated (i) as a result of the Participant’s death, Disability or Retirement, or (ii) by the Corporation without Cause or by the Participant for Good Reason, the Performance Units will remain outstanding during the remainder of the Vesting Period and will remain subject to Section 3. The Participant will be entitled to the number of Performance Units the Participant would have

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received in accordance with Section 3, if any, had the Participant remained employed until the end of the Vesting Period.

(b) Forfeiture of Performance Units Upon Certain Terminations of Employment.  If at any time during the Vesting Period, the Participant’s employment with the Corporation and its Subsidiaries is terminated (i) by the Corporation or (ii) by the Participant, excluding any termination contemplated by Section 8(a), all of the Performance Units shall be automatically forfeited and cancelled in full effective as of such termination of employment and this Agreement shall be null and void and of no further force and effect.

(c) Termination of Performance Units. Any portion of any of the Participant’s Performance Units that is not vested after giving effect to the provisions of Section 8(a) shall terminate. If any unvested Performance Units are terminated hereunder, such Performance Units shall automatically terminate and be cancelled as of the date of the Committee’s determination of the relevant level of performance achieved, without payment of any consideration by the Corporation and without any other action by the Participant, or the Participant’s beneficiary or personal representative, as the case may be.

(d) Definitions. As used in this Agreement:

(i) “Disability” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator). 

(ii) “Retirement” means, that, as of the date of termination of the Participant’s employment, the Participant has attained [CEO: age 65 and completed at least 5 full years of service as an officer of the Corporation and its Subsidiaries] [Other Participants: (A) age 65 and completed at least 5 full years of service as an employee of the Corporation and its Subsidiaries and/or a member of the Board, or (B) age 60 and completed at least 15 full years of service as an employee of the Corporation and its Subsidiaries and/or a member of the Board].

(iii) “Cause” shall have the meaning set forth in the Participant’s applicable employment agreement, or if the Participant is not party to an employment agreement with the Corporation or its Subsidiaries, then in the Corporation’s general severance plan applicable to the Participant.

(iv) “Good Reason” shall have the meaning set forth in the Participant’s applicable employment agreement, or if the Participant is not party to an employment agreement with the Corporation or its Subsidiaries, then in the Corporation’s general severance plan applicable to the Participant.

9. Adjustments Upon Specified Events; Change in Control Event.

(a) Adjustments.  Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Performance Units then outstanding and the number and kind of securities that may be issued in respect of the Award.  No such

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adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are paid pursuant to Section 5(b).

(b) Change in Control Event.  Notwithstanding any provisions to the contrary in any employment agreement, the HCP, Inc. Change in Control Severance Plan (or successor plan) or any other severance plan adopted by the Corporation, if a Change in Control Event with respect to the Corporation occurs at any time during the Vesting Period, the Performance Period for all outstanding Awards will be shortened, if such Performance Period has not already ended, so that the Performance Period will be deemed to have ended on the last day prior to such Change in Control Event and the Committee Determination pursuant to Section 3 shall be made within 20 days following the Change in Control Event. A Participant shall become vested in a number of Performance Units, if any, determined in accordance with Section 3 based on such shortened Performance Period.  On or as soon as administratively practical following the Change in Control Event (and in all events no later than 30 days following such Change in Control Event), the Corporation shall deliver to the Participant a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Performance Units that vest in accordance with this Section 9(b).

10. Tax Withholding.  Upon vesting of any Performance Units or any distribution of shares of Common Stock in respect of the Performance Units, the Participant or other person entitled to receive such distribution may irrevocably elect, in such manner and at such time or times prior to any applicable tax date as may be permitted or required under Section 8.5 of the Plan and rules established by the Administrator, to have the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates; provided, however, that in the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Performance Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other compensation payable to the Participant any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

11. Notices.  Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s payroll records.  Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.  Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 11.

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12. Plan.  The Award and all rights of the Participant under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference.  The Participant agrees to be bound by the terms of the Plan and this Agreement.  The Participant acknowledges having read and understanding the Plan, the Prospectus for the Plan and this Agreement.  Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof. 

13. Entire Agreement.  This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof.  The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan.  Any such amendment must be in writing and signed by the Corporation.  Any such amendment that materially and adversely affects the Participant’s rights under this Agreement requires the consent of the Participant in order to be effective with respect to the Award.  The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.  The Participant acknowledges receipt of a copy of this Agreement, the Plan and the Prospectus for the Plan.

14. Limitation on Participant’s Rights.  Participation in the Planconfers norights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  The Participant shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Performance Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to the Performance Units, as and when payable hereunder.  The Award has been granted to the Participant in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant.

15. Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

16. Section Headings.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

17. Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

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18. Construction.  It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code.  This Agreement shall be construed and interpreted consistent with that intent. 

19. Clawback Policy.The Performance Units are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Performance Units or any shares of Common Stock or other cash or property received with respect to the Performance Units (including any value received from a disposition of the shares acquired upon payment of the Performance Units).

The Participant’s acceptance of the Award through the electronic stock plan award recordkeeping system maintained by the Corporation or its designee constitutes the Participant’s agreement to the terms and conditions hereof, and that the Award is granted under and governed by the terms and conditions of the Plan and this Agreement.

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EXHIBIT A

Award Subject to Relative TSR Performance. One hundred percent (100%) of the Award (the “TSR Award”) shall be eligible to vest in accordance with this Exhibit A.  The TSR Award will be subject to forfeiture and cancellation by the Corporation if the Corporation’s performance during the Performance Period does not meet or exceed the threshold goal for the Performance Period.  Performance at or above the threshold level will result in the TSR Award becoming vested in the amount set forth below.  The vesting for performance between the threshold and extraordinary levels shall be based on linear interpolation.

Performance	Threshold	Target	High	Extraordinary
Relative Three-Year Annualized Total Shareholder Return	25th percentile ranking	50th percentile ranking	65th percentile ranking	80th percentile ranking
Percentage of TSR Award Vesting	50%	100%	150%	200%

“Total Shareholder Return” or “TSR” means total shareholder return as applied to the Corporation, meaning stock price appreciation from the beginning to the end of the Performance Period, plus dividends and distributions made or declared (assuming such dividends or distributions are reinvested in the common stock of the Corporation) during the Performance Period.  For purposes of computing TSR, the stock price at the beginning of the Performance Period will be the closing price of a share of common stock on the first day of the Performance Period, and the stock price at the end of the Performance Period will be the average price of a share of common stock over the 10 trading days ending on the last day of the Performance Period, adjusted for changes in capital structure.

“Relative Three-Year Annualized Total Shareholder Return” shall be based on the Corporation's three-year annualized TSR compared to the TSRs of the companies that constitute the FTSE NAREIT Equity Health Care Index on the date of the applicable determination and that, during the Performance Period, traded continuously on a national securities exchange, as such term is defined by the SEC.

A-1

EX-10.6

EXHIBIT 10.6

NEO RETENTIVE LTIP RSU AGREEMENT

THIS NEO RETENTIVE LTIP RSU AGREEMENT (this “Agreement”) is dated as of [●], 20___ (the “Award Date”) by and between HCP, Inc., a Maryland corporation (the “Corporation”), and [●] (the “Participant”). 

W I T N E S S E T H

WHEREAS, the Compensation Committee has determined that, based on the achievement of pre-established performance goals with respect to 20___, the Participant is eligible to receive an award of restricted stock units, as described below, and

WHEREAS, pursuant to the HCP, Inc. 2014 Performance Incentive Plan, as amended and/or restated from time to time (the “Plan”), the Corporation hereby grants to the Participant, effective as of the date hereof, an award of restricted stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1. Defined Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Plan.

2. Grant.  Subject to the terms of this Agreement, the Corporation hereby grants to the Participant an Award of [●] stock units (the “Stock Units”).  As used herein, the term “stock unit” means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock solely for purposes of the Plan and this Agreement.  The Stock Units shall be used solely as a device for the determination of the payment to eventually be made to the Participant if such Stock Units vest pursuant to Section 3.  The Stock Units shall not be treated as property or as a trust fund of any kind.  The Award is subject to all of the terms and conditions set forth in this Agreement and is further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Administrator, as such rules are in effect from time to time.

3. Vesting.  Subject to Section 8 below, the Award shall vest and become nonforfeitable with respect to one-third of the total number of the Stock Units on each of the first, second and third anniversaries of the Award Date.  Notwithstanding the foregoing, no portion of the Award will vest unless the Corporation’s normalized FFO Per Share, as defined in the Corporation’s [2016] Cash Incentive Plan, with respect to the [2016] calendar year equals or exceeds $[2.06].

4. Continuance of Employment.  The vesting schedule requires continued employment through each applicable vesting date as a condition to the vesting of the

1

applicable installment of the Award and the rights and benefits under this Agreement.  Employment for only a portion of the vesting period, even if a substantial portion, will not entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment as provided in Section 8 below or under the Plan.

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation or any of its Subsidiaries, affects the Participant’s status as an employee at will who is subject to termination without Cause (as defined below), confers upon the Participant any right to remain employed by or in service to the Corporation or any of its Subsidiaries, interferes in any way with the right of the Corporation or any of its Subsidiaries at any time to terminate such employment or services, or affects the right of the Corporation or any of its Subsidiaries to increase or decrease the Participant’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Participant without his or her consent thereto.

5. Dividend and Voting Rights.

(a) Limitations on Rights Associated with Units.  The Participant shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 5(b) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Participant. 

(b) Dividend Equivalent Rights.  As of any date that the Corporation pays an ordinary cash dividend on its Common Stock, the Corporation shall pay the Participant an amount equal to the per share cash dividend paid by the Corporation on its Common Stock on such date multiplied by the number of Stock Units remaining subject to this Award as of the related dividend payment record date.  No such payment shall be made with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Section 8.

6. Restrictions on Transfer.  Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily.  The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7. Timing and Manner of Payment.  As soon as administratively practical following each vesting of the applicable portion of the total Award pursuant to the terms hereof (and in all events within 60 days after such vesting event), the Corporation shall deliver to the Participant a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Stock Units subject

2

to this Award that vest on the applicable vesting date; provided, however, that in the event that the vesting and payment of the Stock Units is triggered by the Participant’s “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) and the Participant is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of such separation from service, the Participant shall not be entitled to any payment of the Stock Units until the earlier of (a) the date which is six months after the Participant’s separation from service with the Corporation for any reason other than death, or (b) the date of the Participant’s death, if and to the extent such delay in payment is required to comply with Section 409A of the Code.  The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Stock Units is subject to the condition precedent that the Participant or other person entitled under the Plan to receive any shares with respect to the vested Stock Units deliver to the Corporation any representations or other documents or assurances that the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.  The Participant shall have no further rights with respect to any Stock Units that are paid or that terminate pursuant to Section 8.

8. Termination of Employment or Services.Notwithstanding any provisions to the contrary in any employment agreement, the HCP, Inc. Change in Control Severance Plan (or successor plan) or any other severance plan adopted by the Corporation, the provisions set forth in this Section 8 are applicable in the event of a termination of the Participant’s employment with the Corporation and its Subsidiaries.

(a) Effect of Termination. If the Participant ceases to be employed by the Corporation and its Subsidiaries (the date of such termination of employment is referred to as the Participant’s “Severance Date”), the Participant’s Stock Units shall terminate to the extent such units have not become vested pursuant to Section 3 hereof upon the Severance Date regardless of the reason for the termination of the Participant’s employment; provided, however, that if the Participant’s employment is terminated (i) as a result of the Participant’s death, Disability (as defined below) or Retirement (as defined below) or (ii) by the Corporation without Cause or by the Participant for Good Reason (each as defined below), the Participant’s Stock Units, to the extent such units are not then vested, shall become fully vested as of the Severance Date and shall be paid in accordance with Section 7. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable Severance Date without payment of any consideration by the Corporation and without any other action by the Participant, or the Participant’s beneficiary or personal representative, as the case may be.

(b) Definitions. As used in this Agreement:

(i) “Disability” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator). 

(ii) “Retirement” means, that, as of the date of termination of the Participant’s employment, the Participant has attained [CEO: age 65 and completed at least 5 full years of service as an officer of the Corporation and its Subsidiaries]

3

[Other NEOs: (A) age 65 and completed at least 5 full years of service as an employee of the Corporation and its Subsidiaries and/or a member of the Board, or (B) age 60 and completed at least 15 full years of service as an employee of the Corporation and its Subsidiaries and/or a member of the Board].

(iii) “Cause” shall have the meaning set forth in the Participant’s applicable employment agreement, or if the Participant is not party to an employment agreement with the Corporation or its Subsidiaries, then in the Corporation’s general severance plan applicable to the Participant.

(iv) “Good Reason” shall have the meaning set forth in the Participant’s applicable employment agreement, or if the Participant is not party to an employment agreement with the Corporation or its Subsidiaries, then in the Corporation’s general severance plan applicable to the Participant.

9. Adjustments Upon Specified Events; Change in Control Event. 

(a)Adjustments.  Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Award.  No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are paid pursuant to Section 5(b).

(b)Change in Control Event.  Upon the occurrence of an event contemplated by Section 7.2 or 7.3 of the Plan and notwithstanding any provision of Section 7.2 and 7.3 of the Plan, any employment agreement, the HCP, Inc. Change in Control Severance Plan (or successor plan) or any other severance plan adopted by the Corporation to the contrary, the Award (to the extent outstanding at the time of such event) shall continue in effect in accordance with its terms following such event (subject to adjustment in connection with such event pursuant to Section 7.1 of the Plan); provided, however, that the Administrator shall determine, in its sole discretion, whether the vesting of the Stock Units will accelerate in connection with such event and the extent of any such accelerated vesting; provided, further, that any Stock Units that are so accelerated will be paid on or as soon as administratively practical after (and in all events within 60 days after) the first to occur of the original vesting date of such accelerated Stock Units set forth in Section 3 above or the Participant’s separation from service (and subject to the six-month delayed payment provision of Section 7 in the event payment is triggered by the Participant’s separation from service).  Notwithstanding the foregoing, the Administrator may provide for payment of the Stock Units in connection with such event, to the extent such payment does not result in noncompliance with Section 409A of the Code, including providing for payment, in accordance with the requirements of Treasury Regulation 1.409A-3(j)(4)(ix)(A), (B) or (C) promulgated under Section 409A of the Code (or any similar successor provision), which regulation generally provides that a deferred compensation arrangement may be terminated in limited circumstances following a dissolution or change

4

in control of the Corporation, provided that any otherwise outstanding and unvested units shall become vested upon (or, to the extent necessary to effect the acceleration, immediately prior to) such a termination.

10. Tax Withholding.  Upon vesting of any Stock Units or any distribution of shares of Common Stock in respect of the Stock Units, the Participant or other person entitled to receive such distribution may irrevocably elect, in such manner and at such time or times prior to any applicable tax date as may be permitted or required under Section 8.5 of the Plan and rules established by the Administrator, to have the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates; provided, however, that in the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Stock Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other compensation payable to the Participant any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

11. Notices.  Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s payroll records.  Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.  Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 11.

12. Plan.  The Award and all rights of the Participant under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference.  The Participant agrees to be bound by the terms of the Plan and this Agreement.  The Participant acknowledges having read and understanding the Plan, the Prospectus for the Plan and this Agreement.  Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof. 

13. Entire Agreement.  This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof.  The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan.  Any such amendment

5

must be in writing and signed by the Corporation.  Any such amendment that materially and adversely affects the Participant’s rights under this Agreement requires the consent of the Participant in order to be effective with respect to the Award.  The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.  The Participant acknowledges receipt of a copy of this Agreement, the Plan and the Prospectus for the Plan.

14. Limitation on Participant’s Rights.  Participation in the Planconfers norights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  The Participant shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to the Stock Units, as and when payable hereunder.  The Award has been granted to the Participant in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Participant.

15. Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 

16. Section Headings.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

17. Governing Law.   This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

18. Construction.It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code.  This Agreement shall be construed and interpreted consistent with that intent.

19. Clawback Policy.  The Stock Units are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Stock Units or any shares of Common Stock or other cash or property received with respect to the Stock Units (including any value received from a disposition of the shares acquired upon payment of the Stock Units).

The Participant’s acceptance of the Award through the electronic stock plan award recordkeeping system maintained by the Corporation or its designee constitutes the Participant’s agreement to the terms

6

and conditions hereof, and that the Award is granted under and governed by the terms and conditions of the Plan and this Agreement.

***

[The remainder of this page is intentionally left blank.]

7

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Lauralee E. Martin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HCP, Inc. for the period ended March 31, 2016;

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 the 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.

4
Date: May 9, 2016	/s/ LAURALEE E. MARTIN
	Lauralee E. Martin
	President 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. for the period ended March 31, 2016;

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 the 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.

4
Date: May 9, 2016	/s/ TIMOTHY M. SCHOEN
	Timothy M. Schoen
	Executive Vice President and
	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 her knowledge, that:

(i) the accompanying quarterly report on Form 10-Q of the Company for the period ended March 31, 2016 (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 9, 2016	/s/ LAURALEE E. MARTIN
	Lauralee E. Martin
	President and Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company 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, 2016 (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 9, 2016	/s/ TIMOTHY M. SCHOEN
	Timothy M. Schoen
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company 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.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Document and Entity Information
Entity Registrant Name	HCP, INC.
Entity Central Index Key	0000765880
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
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		467,087,589
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Real estate:
Buildings and improvements		$ 12,314,826	$ 12,198,704
Development costs and construction in progress		430,104	388,576
Land		1,956,841	1,948,757
Accumulated depreciation and amortization		(2,636,636)	(2,541,334)
Net real estate		12,065,135	11,994,703
Net investment in direct financing leases		5,857,210	5,905,009
Loans receivable, net		768,896	768,743
Investments in and advances to unconsolidated joint ventures		608,665	605,244
Accounts receivable, net of allowance of $4,161 and $3,261, respectively		45,224	48,929
Cash and cash equivalents		94,665	346,500
Restricted cash		46,280	60,616
Intangible assets, net		585,330	603,706
Other assets, net		817,279	802,273
Real estate assets held for sale, net		311,243	314,126
Total assets	[1]	21,199,927	21,449,849
LIABILITIES AND EQUITY
Bank line of credit		810,313	397,432
Term loans		511,737	524,807
Senior unsecured notes		8,623,376	9,120,107
Mortgage debt		895,289	932,212
Other debt		95,229	94,445
Intangible liabilities, net		52,794	56,147
Intangible liabilities on assets held for sale, net		18,064	19,126
Accounts payable and accrued liabilities		433,144	436,239
Deferred revenue		129,656	123,017
Total liabilities	[1]	$ 11,569,602	$ 11,703,532
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 466,924,935 and 465,488,492 shares issued and outstanding, respectively		$ 466,925	$ 465,488
Additional paid-in capital		11,685,541	11,647,039
Cumulative dividends in excess of earnings		(2,890,046)	(2,738,414)
Accumulated other comprehensive loss		(31,673)	(30,470)
Total stockholders' equity		9,230,747	9,343,643
Joint venture partners		218,110	217,066
Non-managing member unitholders		181,468	185,608
Total noncontrolling interests		399,578	402,674
Total equity		9,630,325	9,746,317
Total liabilities and equity		$ 21,199,927	$ 21,449,849

[1] HCP, Inc.’s consolidated total assets and total liabilities at March 31, 2016 and December 31, 2015 include certain assets of variable interest entities (“VIEs”) that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at March 31, 2016 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $60 million; land $327 million; accumulated depreciation and amortization $567 million; investments in unconsolidated joint ventures $14 million; accounts receivable $18 million; cash $60 million; restricted cash $23 million; intangible assets, net $197 million; and other assets, net $66 million. Total assets at December 31, 2015 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $54 million; land $327 million; accumulated depreciation and amortization $537 million; investments in unconsolidated joint ventures $14 million; accounts receivable $19 million; cash $61 million; restricted cash $21 million; intangible assets, net $204 million; and other assets, net $63 million. Total liabilities at March 31, 2016 include VIE liabilities as follows: mortgage debt $573 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $23 million from VIEs. Total liabilities at December 31, 2015 include VIE liabilities as follows: mortgage debt $589 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $19 million. See Note 16 to the Consolidated Financial Statements for additional information.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Company's involvement with VIEs:
Development costs	$ 430,104	$ 388,576
Land	1,956,841	1,948,757
Accumulated depreciation and amortization	2,636,636	2,541,334
Investments in unconsolidated joint ventures	608,665	605,244
Accounts Receivable	45,224	48,929
Cash	94,665	346,500
Restricted cash	46,280	60,616
Intangible assets, net	585,330	603,706
Other assets, net	817,279	802,273
Mortgage debt	895,289	932,212
Intangible liabilities, net	52,794	56,147
Accounts payable and accrued liabilities	433,144	436,239
Deferred Revenue	129,656	123,017
Balance Sheet Parenthetical Disclosures
Accounts receivable, allowance (in dollars)	$ 4,161	$ 3,261
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	466,924,935	465,488,492
Common stock, shares outstanding	466,924,935	465,488,492
VIEs
Company's involvement with VIEs:
Buildings and improvements	$ 3,400,000	$ 3,400,000
Development costs	60,000	54,000
Land	327,000	327,000
Accumulated depreciation and amortization	567,000	537,000
Investments in unconsolidated joint ventures	14,000	14,000
Accounts Receivable	18,000	19,000
Cash	60,000	61,000
Restricted cash	23,000	21,000
Intangible assets, net	197,000	204,000
Other assets, net	66,000	63,000
Mortgage debt	573,000	589,000
Intangible liabilities, net	10,000	10,000
Accounts payable and accrued liabilities	107,000	107,000
Deferred Revenue	$ 23,000	$ 19,000

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Rental and related revenues	$ 297,194	$ 275,082
Tenant recoveries	31,737	29,896
Resident fees and services	165,763	105,013
Income from direct financing leases	127,968	167,078
Interest income	18,029	33,262
Investment management fee income	91	460
Total revenues	640,782	610,791
Costs and expenses:
Interest expense	122,062	116,780
Depreciation and amortization	141,322	114,522
Operating	176,955	132,031
General and administrative	25,499	24,773
Acquisition and pursuit costs	2,475	3,390
Impairment		478,464
Total costs and expenses	468,313	869,960
Other income:
Gain on sales of real estate		6,264
Other income, net	1,222	1,724
Total other income, net	1,222	7,988
Income (loss) before income taxes and equity (loss) income from unconsolidated joint ventures	173,691	(251,181)
Income tax (expense) benefit	(53,038)	77
Equity (loss) income from unconsolidated joint ventures	(908)	13,601
Net income (loss)	119,745	(237,503)
Noncontrolling interests' share in earnings	(3,626)	(3,111)
Net income (loss) attributable to HCP, Inc.	116,119	(240,614)
Participating securities' share in earnings	(357)	(335)
Net income (loss) applicable to common shares	$ 115,762	$ (240,949)
Earnings per common share:
Basic (in dollars per share)	$ 0.25	$ (0.52)
Diluted (in dollars per share)	$ 0.25	$ (0.52)
Weighted average shares used to calculate earnings per common share:
Basic (in shares)	466,074	460,880
Diluted (in shares)	466,262	460,880
Dividends declared per common share (in dollars per share)	$ 0.575	$ 0.565

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income (loss)	$ 119,745	$ (237,503)
Other comprehensive loss:
Change in net unrealized losses on securities	(15)	(5)
Change in net unrealized (losses) gains on cash flow hedges:
Unrealized (losses) gains	(690)	2,339
Reclassification adjustment realized in net income	169	(6)
Change in Supplemental Executive Retirement Plan obligation	70	69
Foreign currency translation adjustment	(737)	(6,963)
Total other comprehensive loss	(1,203)	(4,566)
Total comprehensive income (loss)	118,542	(242,069)
Total comprehensive income attributable to noncontrolling interests	(3,626)	(3,111)
Total comprehensive (loss) income attributable to HCP, Inc.	$ 114,916	$ (245,180)

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Thousands, $ in Thousands	Total Stockholders' Equity	Common Stock	Additional Paid-In Capital	Cumulative Dividends In Excess Of Earnings	Accumulated Other Comprehensive Loss	Noncontrolling Interests	Total
Balance at Dec. 31, 2014	$ 10,735,297	$ 459,746	$ 11,431,987	$ (1,132,541)	$ (23,895)	$ 261,802	$ 10,997,099
Balance (in shares) at Dec. 31, 2014		459,746
Increase (Decrease) in Stockholders' Equity
Net income (loss)	(240,614)			(240,614)		3,111	(237,503)
Other comprehensive income	(4,566)				(4,566)		(4,566)
Issuance of common stock, net	36,812	$ 1,155	35,657			(1,608)	35,204
Issuance of common stock, net (in shares)		1,155
Conversion of DownREIT units to common stock							(1,608)
Repurchase of common stock	(6,096)	$ (128)	(5,968)				(6,096)
Repurchase of common stock (in shares)		(128)
Exercise of stock options	27,221	$ 811	26,410				27,221
Exercise of stock options (in shares)		811
Amortization of deferred compensation	6,165		6,165				6,165
Common dividends ($2.26, $2.18 and $2.10 per share for the year ended 2015, 2014 and 2013, respectively)	(260,686)			(260,686)			(260,686)
Distributions to noncontrolling interests	(263)		(263)			(3,861)	(4,124)
Issuance of noncontrolling interests						2,932	2,932
Balance at Mar. 31, 2015	10,293,270	$ 461,584	11,493,988	(1,633,841)	(28,461)	262,376	10,555,646
Balance (in shares) at Mar. 31, 2015		461,584
Balance at Dec. 31, 2015	9,343,643	$ 465,488	11,647,039	(2,738,414)	(30,470)	402,674	9,746,317
Balance (in shares) at Dec. 31, 2015		465,488
Increase (Decrease) in Stockholders' Equity
Net income (loss)	116,119			116,119		3,626	119,745
Other comprehensive income	(1,203)				(1,203)		(1,203)
Issuance of common stock, net	35,406	$ 1,428	33,978				35,406
Issuance of common stock, net (in shares)		1,428
Conversion of DownREIT units to common stock						(4,136)	(4,136)
Repurchase of common stock	(3,628)	$ (102)	(3,526)				(3,628)
Repurchase of common stock (in shares)		(102)
Exercise of stock options	2,852	$ 111	2,741				2,852
Exercise of stock options (in shares)		111
Amortization of deferred compensation	5,345		5,345				5,345
Common dividends ($2.26, $2.18 and $2.10 per share for the year ended 2015, 2014 and 2013, respectively)	(268,186)			(268,186)			(268,186)
Distributions to noncontrolling interests	(36)		(36)			(4,853)	(4,889)
Issuance of noncontrolling interests						2,200	2,200
Deconsolidation of noncontrolling interests	435			435		67	502
Balance at Mar. 31, 2016	$ 9,230,747	$ 466,925	$ 11,685,541	$ (2,890,046)	$ (31,673)	$ 399,578	$ 9,630,325
Balance (in shares) at Mar. 31, 2016		466,925

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CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares			3 Months Ended
	Apr. 27, 2016	Jan. 28, 2016	Mar. 31, 2016	Mar. 31, 2015
CONSOLIDATED STATEMENTS OF EQUITY
Common dividends, per share (in dollars per share)	$ 0.575	$ 0.575	$ 0.575	$ 0.565

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net income (loss)	$ 119,745	$ (237,503)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract]
Depreciation and amortization	141,322	114,522
Amortization of market lease intangibles, net	(468)	(378)
Amortization of deferred compensation	5,345	6,165
Amortization of deferred financing costs, net	5,280	4,752
Straight-line rents	(7,576)	(9,546)
Loan and direct financing lease non-cash interest	165	(21,032)
Deferred rental revenues	(619)	(902)
Equity loss (income) from unconsolidated joint ventures	908	(13,601)
Distributions of earnings from unconsolidated joint ventures	1,589	1,159
Lease termination income, net		(1,103)
Gain on sales of real estate		(6,264)
Deferred income tax expense	49,156
Foreign exchange and other (gains) losses, net	(89)	134
Impairment		478,464
Changes in:
Accounts receivable, net	3,705	(3,814)
Other assets	(6,847)	(5,839)
Accounts payable and other accrued liabilities	(42,999)	(75,146)
Net cash provided by operating activities	268,617	230,068
Cash flows from investing activities:
Acquisitions of real estate	(94,271)	(71,373)
Development of real estate	(99,096)	(61,805)
Leasing costs and tenant and capital improvements	(19,964)	(11,540)
Contributions to unconsolidated joint ventures	(10,136)	(27,279)
Distributions in excess of earnings from unconsolidated joint ventures	5,336	1,022
Principal repayments on loans receivable, direct financing leases and other	155,320	17,496
Investments in loans receivable and other	(117,282)	(176,504)
Decrease in restricted cash	14,336	1,697
Net cash used in investing activities	(165,757)	(328,286)
Cash flows from financing activities:
Net borrowings under bank line of credit	422,897
Repayments under bank line of credit		(455,506)
Borrowings under term loan		333,014
Issuance of senior unsecured notes		595,110
Repayments of senior unsecured notes	(500,000)	(200,000)
Repayments of mortgage and other debt	(36,918)	(6,354)
Deferred financing costs		(7,687)
Issuance of common stock and exercise of options	34,122	62,425
Repurchase of common stock	(3,628)	(6,096)
Dividends paid on common stock	(268,186)	(260,686)
Issuance of noncontrolling interests	2,200	1,626
Distributions to noncontrolling interest	(4,889)	(4,124)
Net cash (used in) provided by financing activities	(354,402)	51,722
Effect of foreign exchange on cash and cash equivalents	(293)	(144)
Net decrease in cash and cash equivalents	(251,835)	(46,640)
Cash and cash equivalents, beginning of year	346,500	183,810
Cash and cash equivalents, end of year	$ 94,665	$ 137,170

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Business

3 Months Ended

Mar. 31, 2016

Business

Business

NOTE 1.  Business

HCP, Inc., a Standard & Poor’s (“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 organized in 1985 and qualifies as a self-administered real estate investment trust (“REIT”). The Company is headquartered in Irvine, California, with offices in Nashville, Los Angeles, San Francisco and London. The Company acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. The Company’s diverse portfolio is comprised of investments in the following healthcare segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

NOTE 2.  Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of HCP, Inc., its wholly-owned subsidiaries, joint ventures and 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 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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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, 2015 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”).

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 is intended to simplify accounting for share-based payment transactions. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-09 on January 1, 2017 to its consolidated financial position, results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-08 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-08 on January 1, 2018 to its consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the current accounting for leases to (i) require lessees to put most leases on their balance sheets, but continue recognizing expenses on their income statements in a manner similar to today’s accounting, (ii) eliminate current real estate specific lease provisions, and (iii) modify classification criteria and accounting for sales-type leases for lessors. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This update requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. This update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment at each reporting period. ASU 2016-01 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted only for certain disclosure requirements. The Company is evaluating the impact of the adoption of ASU 2016-01 on January 1, 2018 to its consolidated financial position or results of operations.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined, (ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company adopted ASU 2015-16 on January 1, 2016; the adoption of which did not have a material impact on its consolidated financial position or results of operations.

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 requires amendments to both the VIE and voting consolidation accounting models. The amendments (i) rescind the indefinite deferral of certain aspects of accounting standards relating to consolidations and provide a permanent scope exception for registered money market funds and similar unregistered money market funds, (ii) modify (a) the identification of variable interests (fees paid to a decision maker or service provider), (b) the VIE characteristics for a limited partnership or similar entity and (c) the primary beneficiary determination under the VIE model, and (iii) eliminate the presumption within the current voting model that a general partner controls a limited partnership or similar entity. ASU 2015-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in ASU 2015-02 using either a modified retrospective or retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The Company adopted ASU 2015-02 on January 1, 2016; the adoption of which did not have a material impact to its consolidated financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update changes the requirements for recognizing revenue. ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for annual periods, and interim periods within, beginning after December 15, 2016. The Company is evaluating the impact of the adoption of ASU 2014-09 on January 1, 2018 to its consolidated financial position or results of operations.

Reclassification

Certain amounts in the Company’s consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Assets held for sale and associated liabilities have been reclassified on the consolidated balance sheets (see Note 4).

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Real Estate Property Investments

3 Months Ended

Mar. 31, 2016

Real Estate Property Investments

Real Estate Property Investments

NOTE 3.  Real Estate Property Investments

2016 Acquisitions

A summary of real estate acquisitions for the three months ended March 31, 2016 (in thousands):

	Consideration				Assets Acquired(1)
			Liabilities				Net
Segment	Cash Paid		Assumed		Real Estate		Intangibles
Senior housing	$	76,362	$	1,200	$	71,875	$	5,687
Post-acute/skilled nursing		17,909		—		16,596		1,313
	$	94,271	$	1,200	$	88,471	$	7,000

(1) The purchase price allocation is preliminary and may be subject to change.

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

On June 30, 2015, the Company and Brookdale Senior Living (“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 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 seven years from the acquisition date). 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) lease-up 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 millionin 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 (i.e., resident occupancy above 80%). As of March 31, 2016, the purchase price allocation is preliminary and may be subject to change.

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
	March 31, 2015
Revenues	$	654,354
Net loss		(233,598)
Net loss applicable to HCP, Inc.		(237,099)
Basic earnings per common share		(0.51)
Diluted earnings per common share		(0.51)

2015 Other Acquisitions

A summary of real estate acquisitions for the three months ended March 31, 2015 (in thousands):

	Consideration						Assets Acquired
			Liabilities		Noncontrolling				Net
Segment	Cash Paid		Assumed		Interest		Real Estate		Intangibles
Senior housing	$	34,068	$	626	$	1,306	$	34,350	$	1,650
Medical office		180		—		—		180		—
	$	34,248	$	626	$	1,306	$	34,530	$	1,650

Construction, Tenant and Other Capital Improvements

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

	Three Months Ended March 31,
Segment	2016		2015
Senior housing	$	39,513	$	16,172
Post-acute/skilled nursing		—		1,960
Life science		39,070		27,391
Medical office		30,920		19,233
Hospital		—		37
	$	109,503	$	64,793

Subsequent Event.In May 2016, the Company announced it entered into definitive agreements to acquire a portfolio of seven private pay senior housing communities for $190 million, including the assumption of $75 million of debt maturing in 2044 at a 4.0% rate. Consisting of 526 assisted living and memory care units, the portfolio will be managed by Senior Lifestyle Corporation in a 100% owned RIDEA structure at closing. The closing of this transaction is expected in the second half of 2016 and remains subject to customary closing conditions.

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Dispositions of Real Estate

3 Months Ended

Mar. 31, 2016

Dispositions of Real Estate

Dispositions of Real Estate

NOTE 4.  Dispositions of Real Estate

At March 31, 2016 and December 31, 2015, four life science facilities were classified as held for sale, with an aggregate carrying value of $311 million and $314 million, respectively.

During the three months ended March 31, 2015, the Company sold eight senior housing facilities for $51 million resulting from Brookdale’s exercise of its purchase option received as part of the 2014 Brookdale transaction.

Subsequent Event. In April 2016, the Company sold a life science facility for $74 million with a carrying value of $43 million at March 31, 2016.  

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Net Investment in Direct Financing Leases

3 Months Ended

Mar. 31, 2016

Net Investment in Direct Financing Leases

Net Investment in Direct Financing Leases

NOTE 5.  Net Investment in Direct Financing Leases

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

	March 31,		December 31,
	2016		2015
Minimum lease payments receivable	$	26,044,849	$	26,283,392
Estimated residual values		3,930,300		3,900,679
Less unearned income		(23,300,899)		(23,462,022)
Net investment in direct financing leases before allowance		6,674,250		6,722,049
Allowance for DFL losses		(817,040)		(817,040)
Net investment in direct financing leases	$	5,857,210	$	5,905,009
Properties subject to direct financing leases		340		348

HCR ManorCare, Inc.

The Company acquired 334 post-acute, skilled nursing and assisted living facilities in its 2011 transaction with HCR ManorCare Inc. (“HCRMC”) and entered into a triple-net Master Lease and Security Agreement (the “Master Lease”) with a subsidiary (“Lessee”) of HCRMC.

As part of the Company’s fourth quarter 2015 review process, including its internal rating evaluation, it assessed the collectibility of all contractual rent payments under the HCRMC amended master lease (the “Amended Master Lease”). The Company’s evaluation included, but was not limited to, consideration of: (i) the continued decline in HCRMC’s operating performance and fixed charge coverage ratio during the second half of 2015, with the most significant deterioration occurring during the fourth quarter, (ii) the reduced growth outlook for the post-acute/skilled nursing business and (iii) HCRMC’s 2015 audited financial statements. The Company determined that the timing and amounts owed under the HCRMC DFL investments were no longer reasonably assured and assigned an internal rating of “Watch List” as of December 31, 2015. Further, the Company placed the HCRMC DFL investments on nonaccrual and utilizes the cash method of accounting in accordance with its policy.

As a result of assigning an internal rating of “Watch List” for its HCRMC DFL investments during the quarterly review process, the Company further evaluated the carrying amount of its HCRMC DFL investments. As a result of the significant decline in HCRMC’s fixed charge coverage ratio in the fourth quarter of 2015, combined with a lower growth outlook for the post-acute/skilled nursing business, the Company determined that it was probable that its HCRMC DFL investments were impaired and the amount of the loss could be reasonably estimated. In the fourth quarter of 2015, the Company recorded an allowance for DFL losses (impairment charge) of $817 million, reducing the carrying amount of its HCRMC DFL investments from $6.0 billion to $5.2 billion.

In December 2015, the Company reduced the carrying amount of its equity investment in HCRMC to zero, and income will be recognized only if cash distributions are received from HCRMC; as a result, the Company no longer recharacterizes (eliminates) its proportional ownership share of income from DFLs to equity income from unconsolidated joint ventures (see Note 7).

During the quarter ended March 31, 2015, the Company and HCRMC agreed to market for sale the real estate and operations associated with 50 non-strategic facilities that are under the Master Lease. HCRMC will receive an annual rent reduction under the Master Lease based on 7.75% of the net sales proceeds received by HCP. During the year ended December 31, 2015, the Company completed sales of 22 non-strategic HCRMC facilities for $219 million. During the three months ended March 31, 2016, the Company sold an additional 11 facilities for $62 million, bringing the total facilities sold through May 9, 2016 to 33, with the remaining facility sales expected to close by the end of 2016.

On March 29, 2015, certain subsidiaries of the Company entered into an amendment to the Master Lease (the “HCRMC Lease Amendment”) effective April 1, 2015. The HCRMC Lease Amendment reduced initial annual rent by a net $68 million from $541 million to $473 million. Commencing on April 1, 2016, the minimum rent escalation was reset to 3.0% for each lease year through the expiration of the initial term of each applicable pool of facilities. Prior to the HCRMC Lease Amendment, rent payments would have increased 3.5% on April 1, 2015 and 2016 and 3.0% thereafter. The initial term was extended five years to an average of 16 years, and the extension options’ aggregate terms remained the same.

As consideration for the rent reduction, the Company received a Deferred Rent Obligation (“DRO”) from the Lessee equal to an aggregate amount of $525 million, which was allocated into two tranches: (i) a Tranche A DRO of $275 million and (ii) a Tranche B DRO of $250 million. The Lessee made rental payments equal to 6.9% of the outstanding amount (representing $19 million) for the initial lease year until the entire Tranche A DRO was paid in full in March 2016. Commencing on April 1, 2016, until the Tranche B DRO is paid in full, the outstanding principal balance of the Tranche B DRO will be increased annually by (i) 3.0% initially, (ii) 4.0% commencing on April 1, 2019, (iii) 5.0% commencing on April 1, 2020, and (iv) 6.0% commencing on April 1, 2021 and for the remainder of its term. The DRO is due and payable on the earlier of (i) certain capital or liquidity events of HCRMC, including an initial public offering or sale, or (ii) March 31, 2029, which is not subject to any extensions. The HCRMC Lease Amendment also imposes certain restrictions on the Lessee and HCRMC until the DRO is paid in full, including with respect to the payment of dividends and the transfer of interest in HCRMC.

Additionally, HCRMC agreed to sell, and HCP agreed to purchase, nine post-acute facilities for an aggregate purchase price of $275 million. Through March 31, 2016, HCRMC and HCP completed the nine facility purchases for $275 million, the proceeds of which were used to settle the Tranche A DRO. Following the purchase of a facility, the Lessee leases such facility from the Company pursuant to the Amended Master Lease. The nine facilities contribute an aggregate of $19 million of annual rent (subject to escalation) under the Amended Master Lease.

In March 2015, the Company recorded a net impairment charge of $478 million related to its HCRMC DFL investments. The impairment charge reduced the carrying value of the HCRMC DFL investments from $6.6 billion to $6.1 billion, based on the present value of the future lease payments effective April 1, 2015 under the Amended Master Lease discounted at the original DFL investments’ effective lease rate.

During the three months ended March 31, 2016 and 2015, the Company recognized DFL income of $113 million and $152 million, respectively, and received cash payments of $113 million and $131 million, respectively, from the HCRMC DFL investments. During the three months ended March 31, 2015, the Company recognized a total of $21 million of net accretion related to its HCRMC DFL investments. The carrying value of the HCRMC DFL investments was $5.1 billion and $5.2 billion at March 31, 2016 and December 31, 2015, respectively.

The Company acquired the HCRMC DFL investments in 2011 through an acquisition of a C-Corporation, which was subject to federal and state built-in gain tax, if all the assets were sold within 10 years, of up to $2 billion. At the time, the Company intended to hold the assets for at least 10 years, at which time the assets would no longer be subject to the built-in gain tax.

In December 2015, the U.S. Federal Government passed legislation which permanently reduced the holding period, for federal tax purposes, to five years. The Company satisfied the five year holding period requirement in April 2016. However, certain states still require a 10-year holding period and, as such, the assets are still subject to state built-in gain tax.

During the three months ended March 31, 2016, the Company determined that it may sell assets during the next five years and, therefore, recorded a deferred tax liability of approximately $49 million representing its estimated exposure to state built-in gain tax.

On April 20, 2015, the DOJ unsealed a previously filed complaint in the U.S. District Court for the Eastern District of Virginia against HCRMC and certain of its affiliates in three consolidated cases following a civil investigation arising out of three lawsuits filed by former employees of HCRMC under the qui tam provisions of the federal False Claims Act. The DOJ’s complaint in intervention is captioned United States of America, ex rel. Ribik, Carson, and Slough v. HCR ManorCare, Inc., ManorCare Inc., HCR ManorCare Services, LLC and Heartland Employment Services, LLC (Civil Action Numbers: 1:09cv13; 1:11cv1054; 1:14cv1228 (CMH/TCB)). The complaint alleges that HCRMC submitted claims to Medicare for therapy services that were not covered by the skilled nursing facility benefit, were not medically reasonable and necessary, and were not skilled in nature, and therefore not entitled to Medicare reimbursement. HCRMC and the DOJ have filed a motion requesting that the court adopt their Joint Proposed Discovery Plan, which establishes the scope of discovery and depositions. Under the Joint Proposed Discovery Plan, motions for summary judgment would be due to be filed in April 2017. While this litigation is at an early stage and HCRMC has indicated that it believes the claims are unjust and it will vigorously defend against them, a significant adverse judgment against HCRMC or significant settlement obligation could impact the carrying value of the Company’s HCRMC DFL investments further.  

See Notes 7 and 20 for additional discussion of HCRMC.

Direct Financing Lease Internal Ratings

The following table summarizes the Company’s internal ratings for DFLs at March 31, 2016 (dollars in thousands):

	Carrying		Percentage of	Internal Ratings
Segment	Amount		DFL Portfolio	Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing	$	1,794,409	31	$	261,765	$	1,532,644	$	—
Post-acute/skilled nursing		3,938,910	67		—		3,938,910		—
Hospital		123,891	2		123,891		—		—
	$	5,857,210	100	$	385,656	$	5,471,554	$	—

Beginning September 30, 2013, the Company placed a 14-property senior housing DFL (the “DFL Portfolio”) on nonaccrual status and assigned an internal rating of “Watch List.” The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue from the DFL Portfolio is recognized on a cash basis. During the three months ended March 31, 2016 and 2015, the Company recognized DFL income of $3 million and $4 million, respectively, and received cash payments of $4 million and $5 million, respectively, from the DFL Portfolio. The carrying value of the DFL Portfolio was $364 million and $366 million at March 31, 2016 and December 31, 2015, respectively.

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Loans Receivable

3 Months Ended

Mar. 31, 2016

Loans Receivable.

Loans Receivable

NOTE 6.  Loans Receivable

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

	March 31, 2016						December 31, 2015
	Real Estate		Other				Real Estate		Other
	Secured		Secured		Total		Secured		Secured		Total
Mezzanine(1) (2)	$	—	$	657,235	$	657,235	$	—	$	660,138	$	660,138
Other(2)(3)		116,818		—		116,818		114,322		—		114,322
Unamortized discounts, fees and costs(1)		826		(5,983)		(5,157)		961		(6,678)		(5,717)
	$	117,644	$	651,252	$	768,896	$	115,283	$	653,460	$	768,743

(1) At March 31, 2016, included £278 million ($400 million) outstanding and £3 million ($5 million) of associated unamortized discounts, fees and costs. At December 31, 2015, included £273 million ($403 million) outstanding and £4 million ($5 million) of associated unamortized discounts, fees and costs.

(2) At March 31, 2016, the Company had £43 million ($62 million) remaining under its commitments to fund development projects and capital expenditures under its United Kingdom (“U.K.”) development projects.

(3) At March 31, 2016, the Company had $2 million remaining of commitments to fund development projects and capital expenditures under the senior housing development loan program.

Loans Receivable Internal Ratings

The following table summarizes the Company’s internal ratings for loans receivable at March 31, 2016 (dollars in thousands):

	Carrying		Percentage of	Internal Ratings
Investment Type	Amount		Loan Portfolio	Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	117,644	15	$	117,644	$	—	$	—
Other secured		651,252	85		651,252		—		—
	$	768,896	100	$	768,896	$	—	$	—

Real Estate Secured Loans

Four Seasons Health Care.  In December 2015, the Company purchased £28 million ($42 million) of Four Seasons Health Care’s (“Four Seasons”) £40 million senior secured term loan. The loan is secured by, among other things, the real estate assets of Four Seasons, and represents the most senior debt tranche. The loan bears interest at a rate of LIBOR plus 6.0% per annum and matures in December 2017.

Other Secured Loans

HC-One Facility.  In November 2014, the Company was the lead investor in the financing for Formation Capital and Safanad’s acquisition of NHP, a company that, at closing, owned 273 nursing and residential care homes representing over 12,500 beds in the U.K. principally operated by HC-One. The Company provided a loan facility (the “HC-One Facility”), secured by substantially all of NHP’s assets, totaling £395 million, with £363 million ($574 million) drawn at closing and has a five-year term. In February 2015, the Company increased the HC-One Facility by £108 million ($164 million) to £502 million ($795 million), in conjunction with HC-One’s acquisition of Meridian Healthcare. In April 2015, the Company converted £174 million of the HC-One Facility into a sale-leaseback transaction for 36 nursing and residential care homes located throughout the U.K. In September 2015, the Company amended and increased its commitment under the HC-One Facility by £11 million primarily for the funding of capital expenditures and a development project. As part of the amendments, the Company shortened the non-call period by 17 months and provided consent for (i) the paydown of £34 million from disposition proceeds without a prepayment premium and (ii) the spinoff of 36 properties into a separate joint venture. In return, the Company retained security over the spinoff properties for a period of two years. During the year ended December 31, 2015, the Company received paydowns of £34 million ($52 million). At March 31, 2016, the HC-One Facility had an outstanding balance of $395 million.

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”), as part of the recapitalization of a post-acute/skilled nursing portfolio. The Company funded $100 million (the “First Tranche”) at closing and funded an additional $102 million (the “Second Tranche”) in June 2013. In May 2015, the Company increased and extended the mezzanine loan facility with Tandem to (i) fund $50 million (the “Third Tranche”) and $5 million (the “Fourth Tranche”), which proceeds were used to repay a portion of Tandem’s existing senior and mortgage debt, respectively; (ii) extend its maturity to October 2018; and (iii) extend the prepayment penalty period to January 2017. The loans bear interest at fixed rates of 12%,14%,6% and 6% per annum for the First, Second, Third and Fourth Tranches, respectively. At March 31, 2016, the facility had an outstanding balance of $256 million at an 11.5% blended interest rate and was subordinate to $380million of senior mortgage debt.

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Investments in and Advances to Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2016

Investments in and Advances to Unconsolidated Joint Ventures

Investments in and Advances to Unconsolidated Joint Ventures

NOTE 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, 2016 (dollars in thousands):

Entity(1)	Segment	Carrying Amount		Ownership%
CCRC JV(2)	Senior housing	$	462,545		49
HCRMC(3)	Senior housing and post-acute/skilled nursing		—		9
MBK JV(4)	Senior housing		43,384		50
HCP Ventures III, LLC	Medical office		9,342		30
HCP Ventures IV, LLC	Medical office and hospital		7,236		20
HCP Life Science(5)	Life science		68,688	50	–	63
Vintage Park Development JV	Senior housing		8,593		85
MBK Development JV(4)	Senior housing		2,470		50
Suburban Properties, LLC	Medical office		4,614		67
K&Y(6)	Post-acute/skilled nursing		1,270		80
Advances to unconsolidated joint ventures, net and other			523
		$	608,665

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

(2) Includes two unconsolidated joint ventures in a RIDEA structure (CCRC PropCo and CCRC OpCo).

(3) In December 2014, September 2015 and December 2015, the Company recognized impairment charges of $36 million, $27 million and $19 million, respectively.

(4) Includes two unconsolidated joint ventures in a RIDEA structure (PropCo and OpCo).

(5) Includes three unconsolidated joint ventures between the Company and an institutional capital partner. HCP Life Science includes the following partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

(6) Includes three unconsolidated joint ventures.

Summarized combined financial information for the Company’s equity method investments (in thousands):

	March 31,		December 31,
	2016		2015
Real estate, net	$	4,471,115	$	4,470,249
Goodwill and other assets, net		4,921,705		4,935,343
Assets held for sale		70,584		94,866
Total assets	$	9,463,404	$	9,500,458
Capital lease obligations and mortgage debt	$	6,526,878	$	6,575,531
Accounts payable		1,147,155		1,111,350
Liabilities and mortgage debt held for sale		4,941		6,318
Other partners’ capital		1,140,381		1,163,501
HCP’s capital(1)		644,049		643,758
Total liabilities and partners’ capital	$	9,463,404	$	9,500,458

(1) The combined basis difference of the Company’s investments in these joint ventures of $35 million, as of March 31, 2016, is attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease-related net intangibles.

	Three Months Ended March 31,
	2016		2015
Total revenues	$	1,089,911	$	1,146,468
Income (loss) from discontinued operations		1,997		(2,650)
Net (loss) income		(12,014)		9,783
HCP’s share of earnings(1)		(908)		13,601
Fees earned by HCP		91		460
Distributions received by HCP		6,925		2,181

(1) The Company’s joint venture interest in HCRMC is accounted for using the equity method and results in an elimination of DFL income proportional to HCP’s ownership in HCRMC. The elimination of the respective proportional lease expense at the HCRMC level in substance resulted in $16 million of DFL income that was recharacterized to the Company’s share of earnings from HCRMC (equity income from unconsolidated joint ventures) for the three months ended March 31, 2015. Beginning in January 2016, income will be recognized only if cash distributions are received from HCRMC; as a result, the Company no longer recharacterizes (eliminates) its proportional ownership share of income from DFLs to equity income (loss) from unconsolidated joint ventures.

HCRMC.  The Company concluded that its equity investment in HCRMC was other-than-temporarily impaired as of December 31, 2014, September 30, 2015 and December 31, 2015 and recorded impairment charges of $36 million, $27 million and $19 million, respectively. Beginning in January 2016, equity income will be recognized only if cash distributions are received from HCRMC (see Note 5).

MBK JVs.   On March 30, 2015, the Company and MBK Senior Living (“MBK”), a subsidiary of Mitsui & Co. Ltd, formed a new RIDEA joint venture (“MBK JV”) that owns three senior housing facilities with the Company and MBK each owning a 50% equity interest. MBK manages these communities on behalf of the joint venture. The Company contributed $27 million of cash and MBK contributed the three senior housing facilities with a fair value of $126 million, which were encumbered by $78 million of mortgage debt at closing.

On September 25, 2015, the Company and MBK formed a new RIDEA joint venture (“MBK Development JV”), which acquired a $3 million parcel of land for the purpose of developing a 74-unit class A senior housing facility in Santa Rosa, California. The parcel of land is located adjacent to the Oakmont Gardens independent living facility currently owned and operated by the MBK JV.

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Intangibles

3 Months Ended

Mar. 31, 2016

Intangibles

Intangibles

NOTE 8.  Intangibles

At March 31, 2016 and December 31, 2015, gross intangible lease assets, comprised of lease-up intangibles, above market tenant lease intangibles and below market ground lease intangibles, were $988 million and $984 million, respectively. At March 31, 2016 and December 31, 2015, the accumulated amortization of intangible assets was $403 million and $380 million, respectively.

At both March 31, 2016 and December 31, 2015, gross intangible lease liabilities, comprised of below market tenant lease intangibles and above market ground lease intangibles were $156 million. At March 31, 2016 and December 31, 2015, the accumulated amortization of intangible liabilities was $103 million and $100 million, respectively.

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Other Assets

3 Months Ended

Mar. 31, 2016

Other Assets

Other Assets

NOTE 9.  Other Assets

A summary of the Company’s other assets (in thousands):

	March 31,		December 31,
	2016		2015
Straight-line rent receivables, net of allowance of $33,012 and $33,648, respectively	$	377,464	$	370,296
Marketable debt securities, net		100,915		102,958
Leasing costs and inducements, net		157,443		158,708
Goodwill		50,346		50,346
Other		131,111		119,965
Total other assets	$	817,279	$	802,273

At March 31, 2016 and December 31, 2015, other assets includes a non-interest bearing receivable of $5 million and $9 million, respectively, from Brookdale payable in eight quarterly installments.

Four Seasons Health Care Senior Unsecured Notes

Marketable debt securities, net are classified as held-to-maturity debt securities and primarily represent senior notes issued by Elli Investments Limited (“Elli”), a company beneficially owned by funds or limited partnerships managed by Terra Firma, as part of the financing for Elli’s acquisition of Four Seasons Health Care (the “Four Seasons Notes”). The Four Seasons Notes mature in June 2020, are non-callable through June 2016 and bear interest on their par value at a fixed rate of 12.25% per annum. The Company purchased an aggregate par value of £138.5 million of the Four Seasons Notes at a discount for £136.8 million ($215 million) in June 2012, representing 79% of the total £175 million issued and outstanding Four Seasons Notes. In June 2015 and September 2015, the Company determined that the Four Seasons Notes were other-than-temporarily impaired and recorded impairment charges of $42 million and $70 million, respectively. Elli remains obligated to repay the aggregate par value at maturity and interest payments due June 15 and December 15 each year. When the remaining semi-annual interest payments are received, the Company expects to reduce the carrying value of the Four Seasons Notes during the related fiscal period. In December 2015, the Company received its contractual interest payment of £8 million ($13 million), which was applied against the principal balance reducing the carrying amount to £58 million ($85 million and $83 million at December 31, 2015 and March 31, 2016, respectively).

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Debt

3 Months Ended

Mar. 31, 2016

Debt

Debt

NOTE 10.  Debt

Bank Line of Credit and Term Loans

The Company’s$2.0 billion unsecured revolving line of credit facility (the “Facility”) matures on March 31, 2018 and contains a one-year extension option. Borrowings under the Facility accrue interest at LIBOR plus a margin that depends upon the Company’s credit ratings. The Company pays a facility fee on the entire revolving commitment that depends on its credit ratings. Based on the Company’s credit ratings at March 31, 2016, the margin on the Facility was 0.925%, and the facility fee was 0.15%. The Facility also includes a feature that allows 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, 2016, the Company had $810 million, including £275 million ($395 million), outstanding under the Facility with a weighted average effective interest rate of 1.68%.

The Facility and term loans 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% and (iv) require a minimum Fixed Charge Coverage ratio of 1.5 times. The Facility and term loans also require a Minimum Consolidated Tangible Net Worth of $9.5 billion at March 31, 2016. At March 31, 2016, the Company was in compliance with each of these restrictions and requirements.

Senior Unsecured Notes

At March 31, 2016, the Company had senior unsecured notes outstanding with an aggregate principal balance of $8.7 billion. The senior unsecured notes contain certain covenants including limitations on debt, maintenance of unencumbered assets, cross-acceleration provisions and other customary terms. The Company believes it was in compliance with these covenants at March 31, 2016.

The following table summarizes the Company’s senior unsecured notes issuances for the periods presented (dollars in thousands):

	Issuance
Period	Amount		Coupon Rate			Maturity Date		Net Proceeds
Year ended December 31, 2015:
January 21, 2015	$	600,000		3.400	%		2025	$	591,000
May 20, 2015	$	750,000		4.000	%		2025	$	739,000
December 1, 2015	$	600,000		4.000	%		2022	$	594,000

The following table summarizes the Company’s senior unsecured notes payoffs for the periods presented (dollars in thousands):

Period	Amount		Coupon Rate
Three months ended March 31, 2016:
February 1, 2016	$	500,000		3.750	%
Year ended December 31, 2015:
March 1, 2015	$	200,000		6.000	%
June 8, 2015	$	200,000		7.072	%

Mortgage Debt

At March 31, 2016, the Company had $895 million in aggregate principal amount of mortgage debt outstanding, which is secured by 56 healthcare facilities (including redevelopment properties) with a carrying value of $1.1 billion.

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.

Debt Maturities

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2016, (in thousands):

					Senior
	Bank Line of				Unsecured		Mortgage
Year	Credit(1)		Term Loans(2)		Notes(3)		Debt(4)		Total(5)
2016 (nine months)	$	—	$	196,938	$	400,000	$	241,492	$	838,430
2017		—		—		750,000		581,891		1,331,891
2018		810,313		—		600,000		6,583		1,416,896
2019		—		316,250		450,000		2,072		768,322
2020		—		—		800,000		2,078		802,078
Thereafter		—		—		5,700,000		61,092		5,761,092
		810,313		513,188		8,700,000		895,208		10,918,709
Discounts, net		—		(1,451)		(76,624)		81		(77,994)
	$	810,313	$	511,737	$	8,623,376	$	895,289	$	10,840,715

(1) Includes £275 million ($395 million) translated into U.S. dollars (“USD”).

(2) Represents £357 million translated into USD.

(3) Interest rates on senior unsecured notes ranged from 2.79% to 6.88% with a weighted average effective interest rate of 4.72% and a weighted average maturity of six years.

(4) Interest rates on the mortgage debt ranged from 3.11% to 8.35% with a weighted average effective interest rate of 6.22% and a weighted average maturity of two years.

(5) Excludes $95 million of other debt that represents Life Care Bonds and Demand Notes that have no scheduled maturities.

Other Debt

At March 31, 2016, the Company had $67 million of non-interest bearing life care bonds at two of its continuing care retirement communities and non-interest bearing occupancy fee deposits at two of its senior housing facilities, all of which are payable to certain residents of the facilities (collectively, “Life Care Bonds”). The Life Care Bonds are generally refundable to the residents upon the termination of the contract or upon the successful resale of the unit.

At March 31, 2016, the Company had $28 million of on-demand notes (“Demand Notes”) from the CCRC JV. The Demand Notes bear interest at a rate of 4.5%.  

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies.

Commitments and Contingencies

NOTE 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.

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Equity

3 Months Ended

Mar. 31, 2016

Equity

Equity

NOTE 12.  Equity

Common Stock

The following table lists the common stock cash dividends declared by the Company in 2016:

		Amount		Dividend
Declaration Date	Record Date	Per Share		Payable Date
January 28	February 8	$	0.575	February 23
April 27	May 9		0.575	May 24

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

	Three Months Ended March 31,
	2016	2015
Dividend Reinvestment and Stock Purchase Plan	1,081	829
Conversion of DownREIT units(1)	99	38
Exercise of stock options	111	811
Vesting of restricted stock units	248	288
Repurchase of common stock	102	128

(1) Non-managing member limited liability company (“LLC”) units.

Accumulated Other Comprehensive Loss

The following is a summary of the Company’s accumulated other comprehensive loss (in thousands):

	March 31,		December 31,
	2016		2015
Cumulative foreign currency translation adjustment	$	(20,222)	$	(19,485)
Unrealized losses on cash flow hedges, net		(8,103)		(7,582)
Supplemental Executive Retirement Plan minimum liability		(3,341)		(3,411)
Unrealized (losses) gains on available for sale securities		(7)		8
Total accumulated other comprehensive loss	$	(31,673)	$	(30,470)

Noncontrolling Interests

At March 31, 2016, non-managing members held an aggregate of 4 million units in five limited liability companies (“DownREITs”), for which the Company is the managing member. At March 31, 2016, the carrying and fair values of these DownREIT units were $181 million and $191 million, respectively.

See Note 15 for the supplemental schedule of non-cash financing activities.

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Segment Disclosures

3 Months Ended

Mar. 31, 2016

Segment Disclosures

Segment Disclosures

NOTE 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 medical office segment, the Company invests through the acquisition and development of medical office buildings (“MOBs”), which generally require a greater level of property management. Otherwise, the Company primarily invests, through the acquisition and development of real estate, in single tenant and operator properties and debt issued by tenants and operators in these sectors. 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 2015 Annual Report on Form 10-K filed with the SEC. There were no intersegment sales or transfers during the three months ended March 31, 2016 and 2015. The Company evaluates performance based upon (i) property net operating income from continuing operations (“NOI”), (ii) adjusted NOI (cash NOI), and (iii) adjusted NOI, including the Company’s pro rata share of unconsolidated joint ventures, plus interest income (“Portfolio 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 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 evaluating the Company’s segment-level performance. See Note 17 for other information regarding concentrations of credit risk.

Summary information for the reportable segments (in thousands):

For the three months ended March 31, 2016:

	Senior		Post-acute/		Life		Medical
	Housing		Skilled Nursing		Science		Office		Hospital		Total
Rental revenues(1)	$	128,897	$	107,190	$	88,948	$	108,994	$	22,870	$	456,899
Resident fees and services		165,763		—		—		—		—		165,763
Operating expenses		(116,136)		(564)		(16,743)		(42,313)		(1,199)		(176,955)
NOI		178,524		106,626		72,205		66,681		21,671		445,707
Non-cash adjustments to NOI(2)		(5,956)		(271)		(673)		(805)		303		(7,402)
Adjusted (cash) NOI		172,568		106,355		71,532		65,876		21,974		438,305
Adjusted (cash) NOI from unconsolidated joint ventures		14,898		404		1,420		322		—		17,044
Interest income		1,851		16,178		—		—		—		18,029
Portfolio Income	$	189,317	$	122,937	$	72,952	$	66,198	$	21,974		473,378
Addback non-cash adjustments												7,402
Investment management fee income												91
Interest expense												(122,062)
Depreciation and amortization												(141,322)
General and administrative expenses												(25,499)
Acquisition and pursuit costs												(2,475)
Other income, net												1,222
Income tax expense												(53,038)
Equity loss in unconsolidated joint ventures, excluding adjusted (cash) NOI												(17,952)
Net income											$	119,745

For the three months ended March 31, 2015:

	Senior		Post-acute/		Life		Medical
	Housing		Skilled Nursing		Science		Office		Hospital		Total
Rental revenues(1)	$	127,382	$	140,576	$	83,551	$	98,305	$	22,242	$	472,056
Resident fees and services		105,013		—		—		—		—		105,013
Operating expenses		(75,510)		(533)		(16,699)		(38,252)		(1,037)		(132,031)
NOI		156,885		140,043		66,852		60,053		21,205		445,038
Non-cash adjustments to NOI(2)		(6,413)		(18,083)		(3,075)		(1,866)		252		(29,185)
Adjusted (cash) NOI		150,472		121,960		63,777		58,187		21,457		415,853
Adjusted (cash) NOI from unconsolidated joint ventures		14,012		—		1,228		304		—		15,544
Interest income		7,394		25,868		—		—		—		33,262
Portfolio Income	$	171,878	$	147,828	$	65,005	$	58,491	$	21,457		464,659
Addback non-cash adjustments												29,185
Investment management fee income												460
Interest expense												(116,780)
Depreciation and amortization												(114,522)
General and administrative expenses												(24,773)
Acquisition and pursuit costs												(3,390)
Impairment												(478,464)
Gain on sales of real estate												6,264
Other income, net												1,724
Income tax benefit												77
Equity loss in unconsolidated joint ventures, excluding adjusted (cash) NOI												(1,943)
Net loss											$	(237,503)

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles and lease termination fees.

A summary of the Company’s total assets by segment (in thousands):

	March 31,		December 31,
Segment	2016		2015
Senior housing	$	9,931,444	$	9,812,142
Post-acute/skilled nursing		5,111,794		5,162,947
Life science		3,944,689		3,905,137
Medical office		3,485,010		3,469,048
Hospital		622,820		622,820
Gross segment assets		23,095,757		22,972,094
Accumulated depreciation and amortization		(3,059,436)		(2,941,568)
Net segment assets		20,036,321		20,030,526
Real estate assets held for sale, net		311,243		314,126
Other non-segment assets		852,363		1,105,197
Total assets	$	21,199,927	$	21,449,849

At both March 31, 2016 and December 31, 2015, 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—$5million.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2016

Earnings Per Common Share

Earnings Per Common Share

NOTE 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,
	2016		2015
Numerator
Net income (loss)	$	119,745	$	(237,503)
Noncontrolling interests’ share in earnings		(3,626)		(3,111)
Net income (loss) attributable to HCP, Inc.		116,119		(240,614)
Participating securities’ share in earnings		(357)		(335)
Net income (loss) applicable to common shares	$	115,762	$	(240,949)
Denominator
Basic weighted average common shares		466,074		460,880
Dilutive potential common shares		188		—
Diluted weighted average common shares		466,262		460,880
Earnings per common share
Basic	$	0.25	$	(0.52)
Diluted	$	0.25	$	(0.52)

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 requires the use of the two-class method when computing basic and diluted earnings per share. Options to purchase approximately 1.4 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, 2016 were not included in the Company’s earnings per share calculations because they are anti-dilutive. Restricted stock and performance restricted stock units representing 0.7 million shares of common stock during the three months ended March 31, 2016 were not included because they are anti-dilutive. Additionally, 6 million shares issuable upon conversion of 4 million DownREIT units during the three months ended March 31, 2016 were not included because they are anti-dilutive. For the three months ended March 31, 2015, the Company generated a net loss. The weighted-average basic shares outstanding was used in calculating diluted loss per share from continuing operations, as using diluted shares would be anti-dilutive to loss per share.

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2016

Supplemental Cash Flow Information

Supplemental Cash Flow Information

NOTE 15.  Supplemental Cash Flow Information

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

	Three Months Ended March 31,
	2016		2015
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	171,422	$	168,165
Income taxes paid		1,213		383
Capitalized interest		3,128		1,698
Supplemental schedule of non-cash investing activities:
Accrued construction costs		56,972		32,236
Settlement of HCRMC Tranche A DRO as consideration for DFL acquisition		91,605		—
Tenant funded tenant improvements owned by HCP		9,178		572
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units		248		288
Conversion of non-managing member units into common stock		4,136		1,608
Noncontrolling interest issued in connection with real estate acquisitions		—		1,306
Other liabilities assumed with real estate acquisitions		1,200		626
Unrealized (losses) gains on available-for-sale securities and derivatives designated as cash flow hedges, net		(705)		2,334

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Variable Interest Entities

3 Months Ended

Mar. 31, 2016

Variable Interest Entities

Variable Interest Entities

NOTE 16.  Variable Interest Entities

On January 1, 2016, the Company adopted ASU 2015-02 using the modified retrospective method as permitted by the ASU. As a result of the adoption, the Company identified additional assets and liabilities of certain VIEs in its consolidated total assets and total liabilities at December 31, 2015 of $543 million and $651 million, respectively. Refer to the specific VIE descriptions below for detail on which entities were classified as consolidated VIEs subsequent to the adoption of ASU 2015-02. Additionally, the Company deconsolidated three joint ventures and recognized $0.5 million as a cumulative-effect adjustment to cumulative dividends in excess of earnings.

Unconsolidated Variable Interest Entities

At March 31, 2016,  the Company had investments in: (i) four unconsolidated VIE joint ventures; (ii) 358 properties leased to VIE tenants; and (iii) marketable debt securities of, and a loan to two VIE borrowers. The Company has determined that it is not the primary beneficiary of these VIEs. The Company does not consolidate these VIEs because it does not have the ability to control the activities that most significantly impact their economic performance. Except for the Company’s equity interest in the unconsolidated joint ventures (CCRC OpCo, HCRMC OpCo, Vintage Park Development JV and LLC investments discussed below), it has no formal involvement in these VIEs beyond its investments.

The Company leases 310 properties to, and has an equity ownership investment in, HCRMC that has been identified as a VIE upon a reconsideration event in the fourth quarter of 2015. HCRMC has experienced continued operational declines and is a “thinly capitalized” entity that relies on the operating cash flows generated from its senior housing and post-acute facilities to fund operating expenses, including the rent obligations under the Amended Master Lease (see Notes 5 and 7).

The Company leases 48 properties to a total of seven tenants that have been identified as VIEs (“VIE tenants”). These VIE tenants are “thinly capitalized” entities that rely on the operating cash flows generated from the senior housing facilities to pay operating expenses, including the rent obligations under their leases.

The Company holds a 49% ownership interest in CCRC OpCo, a joint venture entity formed in August 2014 that operates senior housing properties in a RIDEA structure, that has been identified as a VIE (see Note 7). The equity members of CCRC OpCo “lack power” because they share certain operating rights with Brookdale as manager of the CCRCs. The assets of CCRC OpCo primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable, and cash and cash equivalents; its obligations primarily consist of operating lease obligations to CCRC PropCo and accounts payable and expense accruals associated with the cost of its CCRCs’ operations. Assets generated by the CCRC operations (primarily rents from CCRC residents) of CCRC OpCo may only be used to settle its contractual obligations (primarily the rental costs and operating expenses incurred to manage such facilities).

The Company holds Four Seasons Notes (see Note 9) and a portion of Four Season’s senior secured term loan (see Note 6). In the second quarter of 2015, upon the occurrence of a reconsideration event, it was determined that the issuer of the Four Seasons Notes is a VIE because this entity is “thinly capitalized.”

The Company holds an 85% ownership interest in Vintage Park Development JV (see Note 7) that has been identified as a VIE. Although power is shared among equity members, one equity member does not have a substantive investment in the entity. The assets of Vintage Park Development JV primarily consist of an in-progress independent living facility development project that it owns and cash and cash equivalents; its obligations primarily consist of accounts payable and expense accruals associated with the cost of the development obligations. Any assets generated by Vintage Park Development JV may only be used to settle its contractual obligations (primarily development expenses and debt service payments).

The Company holds a limited partner ownership interest in an unconsolidated LLC that has been identified as a VIE. The Company’s involvement in the entity is limited to its equity investment as a limited partner, and it does not have any ability to direct the activities that most significantly impact the entity. The assets and liabilities of the entity primarily consist of senior housing real estate and development activities. Any assets generated by the entity may only be used to settle its contractual obligations (primarily development expenses and debt service payments).

The Company holds commercial mortgage-backed securities (“CMBS”) issued by Federal Home Loan Mortgage Corporation (“Freddie MAC”) through a special purpose entity that has been identified as a VIE because it is “thinly capitalized.” The CMBS issued by the VIE are backed by mortgage debt obligations on real estate assets.

The classification of the related assets and liabilities and their maximum loss exposure as a result of the Company’s involvement with these VIEs at March 31, 2016 are presented below (in thousands):

	Maximum Loss			Carrying
VIE Type	Exposure(1)		Asset/Liability Type	Amount
HCRMC	$	5,107,180	Net investment in DFLs and investments in unconsolidated joint ventures	$	5,107,180
VIE tenants—DFLs		598,960	Net investment in DFLs		598,960
VIE tenants—operating leases		9,952	Lease intangibles, net and straight-line rent receivables		9,952
CCRC OpCo		230,275	Investments in unconsolidated joint ventures		230,275
Four Seasons		124,108	Loans and marketable debt securities		124,108
Vintage Park Development JV		8,593	Investments in unconsolidated joint ventures		8,593
CMBS and LLC investments		32,944	Marketable debt and cost method investments		32,944

(1) The Company’s maximum loss exposure related to HCRMC, VIE tenants, CCRC OpCo, Vintage Park Development JV, loan and marketable debt securities, and LLC investments to VIE borrowers represents the aggregate carrying amount of such investments (including accrued interest). The Company’s maximum loss exposure may be mitigated by re-leasing the underlying properties to new tenants upon an event of default.

As of March 31, 2016, 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). See Notes 5, 6, 7 and 9 for additional descriptions of the nature, purpose and operating activities of the Company’s unconsolidated VIEs and interests therein.

Consolidated Variable Interest Entities

RIDEA I.  The Company holds a 90% ownership interest in joint venture entities formed in September 2011 that own and operate senior housing properties in a RIDEA structure (“RIDEA I”). The Company has historically classified RIDEA I OpCo as a VIE and, as a result of the adoption of ASU 2015-02, now classifies RIDEA I PropCo as a VIE as well due to the non-managing member having no substantive participating rights in the management of RIDEA I PropCo or kick-out rights over the managing member. The Company consolidates RIDEA I PropCo and RIDEA I OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of RIDEA I PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of notes payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA I OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA I PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA I structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

RIDEA II.  The Company holds an 80% ownership interest in joint venture entities formed in August 2014 that own and operate senior housing properties in a RIDEA structure (“RIDEA II”). The Company consolidates RIDEA II (“SH PropCo” and “SH OpCo”) as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of SH PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a note payable to a non-VIE consolidated subsidiary of the Company. The assets of SH OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to SH PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA II structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs). See Note 20 for additional discussion of potential RIDEA II transactions.

RIDEA III.  The Company holds a 90% ownership interest in joint venture entities formed in June 2015 that own and operate senior housing properties in a RIDEA structure (“RIDEA III”). The Company has historically classified RIDEA III OpCo as a VIE and, as a result of the adoption of ASU 2015-02, now classifies RIDEA III PropCo as a VIE as well due to the non-managing member having no substantive participating rights in the management of RIDEA III PropCo or kick-out rights over the managing member. The Company consolidates RIDEA III PropCo and RIDEA III OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of RIDEA III PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a note payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA III OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA III PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA III structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).

HCP Ventures V, LLC.  The Company holds a 51% ownership interest in and is the managing member of a joint venture entity formed in October 2015 that owns and leases real estate assets (“HCP Ventures V, LLC”). Upon adoption of ASU 2015-02, the Company classified HCP Ventures V, LLC as a VIE due to the non-managing member having no substantive participating rights in the management of the HCP Ventures V, LLC or kick-out rights over the managing member. The Company consolidates HCP Ventures V, LLC as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of HCP Ventures V, LLC primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by the HCP Ventures V, LLC may only be used to settle its contractual obligations (primarily from capital expenditures).

Vintage Park JV.  The Company holds a 90% ownership interest in a joint venture entity formed in January 2015 that owns an 85% interest in an unconsolidated development VIE (“Vintage Park JV”). Upon adoption of ASU 2015-02, the Company classified Vintage Park JV as a VIE due to the non-managing member having no substantive participating rights in the management of the Vintage Park JV or kick-out rights over the managing member. The Company consolidates Vintage Park JV as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of Vintage Park JV primarily consist of an investment in the Vintage Park Development JV and cash and cash equivalents; its obligations primarily consist of funding the ongoing development of the Vintage Park Development JV. Assets generated by the Vintage Park JV may only be used to settle its contractual obligations (primarily from the funding of the Vintage Park Development JV).

DownREIT Partnerships.  The Company holds a controlling ownership interest in and is the managing member of five partnerships organized in downREIT structures (the “DownREIT Partnerships”). Upon adoption of ASU 2015-02, the Company classified the DownREIT Partnerships as VIEs due to the non-managing members having no substantive participating rights in the management of the DownREIT Partnerships or kick-out rights over the managing member. The Company consolidates the DownREIT Partnerships as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the DownREIT Partnerships primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by the DownREIT Partnerships (primarily from resident rents) may only be used to settle its contractual obligations (primarily from debt service and capital expenditures).

Other Consolidated Real Estate Partnerships.  The Company holds a controlling ownership interest in and is the general partner (or managing member) of multiple partnerships that own and lease real estate assets (the “Partnerships”). Upon adoption of ASU 2015-02, the Company classified the Partnerships as VIEs due to the limited partners (non-managing members) having no substantive participating rights in the management of the Partnerships or kick-out rights over the general partner (managing member). The Company consolidates the Partnerships as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance and its right (or obligation) to the majority of the returns (or losses). The assets of the Partnerships primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by the Partnerships (primarily from resident rents) may only be used to settle its contractual obligations (primarily from debt service and capital expenditures).

Other consolidated VIEs.  The Company made a loan to an entity that entered into a tax credit structure (“Tax Credit Subsidiary”) and a loan to an entity that made an investment in a development joint venture (“Development JV”) both of which are considered VIEs. The Company consolidates the Tax Credit Subsidiary and Development JV because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the VIEs’ economic performance. The assets and liabilities of the Tax Credit Subsidiary and Development JV substantially consist of development in progress, notes receivable, prepaid expenses, notes payable, and accounts payable and accrued liabilities generated from their operating activities. Any assets generated by the operating activities of the Tax Credit Subsidiary and Development JV may only be used to settle their contractual obligations.

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Concentration of Credit Risk

3 Months Ended

Mar. 31, 2016

Concentration of Credit Risk

Concentration of Credit Risk

NOTE 17.  Concentration of Credit Risk

Concentrations of credit risk arise when one or more tenants, operators 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 tables provide information regarding the Company’s concentrations with respect to certain tenants and operators; the information provided is presented for the gross assets and revenues that are associated with certain tenants and operators as percentages of their respective segment’s and total Company’s gross assets and revenues:

	Percentage of				Percentage of
	Senior Housing Gross Assets				Senior Housing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
Brookdale	27	%	28	%	21	%	25	%
HCRMC	12	%	12	%	6	%	8	%

	Percentage of Post-Acute/				Percentage of Post-Acute/
	Skilled Nursing Gross Assets				Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	77	%	64	%	78	%	80	%

	Percentage of				Percentage of
	Total Company Gross Assets				Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	24	%	23	%	18	%	25	%
Brookdale	13	%	12	%	10	%	10	%

HCRMC’s summarized consolidated financial information (in millions):

	March 31,		December 31,
	2016		2015
Real estate and other property, net	$	2,611.8	$	2,628.5
Cash and cash equivalents		173.8		125.0
Goodwill, intangible and other assets, net		4,526.9		4,598.3
Total assets	$	7,312.5	$	7,351.8
Debt and financing obligations	$	5,783.8	$	5,836.4
Accounts payable, accrued liabilities and other		1,006.7		982.9
Total equity		522.0		532.5
Total liabilities and equity	$	7,312.5	$	7,351.8

	Three Months Ended March 31,
	2016		2015
Revenues	$	984.5	$	1,054.0
Operating, general and administrative expense		(857.2)		(897.9)
Depreciation and amortization expense		(32.5)		(35.9)
Interest expense		(115.1)		(100.3)
Other income, net		3.5		2.8
Gain on disposal of assets		3.3		—
(Loss) income from continuing operations before income tax (expense) benefit		(13.5)		22.7
Income tax benefit (expense)		2.9		(10.1)
(Loss) income from continuing operations		(10.6)		12.6
Income from discontinued operations, net of taxes		0.1		1.1
Net (loss) income	$	(10.5)	$	13.7

As of March 31, 2016,  Brookdale provided comprehensive facility management and accounting services with respect to 108 of the Company’s senior housing facilities and 15 CCRCs owned by the CCRC JV, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. Most of the management agreements have terms ranging from 10 to 15 years, with three to four5-year renewals. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.

Brookdale is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale contained or referred to in this report has been derived from SEC filings made by Brookdale or other publicly available information, or was provided to the Company by Brookdale, and the Company has not verified this information through an independent investigation or otherwise. The Company has no reason to believe that this information is inaccurate in any material respect, but the Company cannot assure the reader of its accuracy. The Company is providing this data for informational purposes only, and encourages the reader to obtain Brookdale’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.

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.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements

Fair Value Measurements

NOTE 18.  Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following table illustrates the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2016 in the consolidated balance sheets (in thousands):

Financial Instrument(1)	Fair Value		Level 1		Level 2		Level 3
Marketable equity securities	$	24	$	24	$	—	$	—
Interest-rate swap liabilities		7,384		—		7,384		—
Currency swap assets		2,469		—		2,469		—
Warrants		16		—		—		16

(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.

Recognized gains and losses are recorded in other income, net on the Company’s consolidated statements of operations. During the three months ended March 31, 2016, there were no transfers of financial assets or liabilities within the fair value hierarchy.

Disclosures About Fair Value of Financial Instruments

Cash and cash equivalents, restricted cash, accounts receivable, net, and accounts payable and accrued liabilities – The carrying values are reasonable estimates of fair value because of the short-term maturities of these instruments.

Loans receivable, net and mortgage debt – The fair values are based on discounting future cash flows utilizing current market rates for loans and debt of the same type and remaining maturity.

Marketable debt securities – The fair value is based on quoted prices from inactive markets.

Marketable equity securities and senior unsecured notes – The fair values are based on quoted prices in active markets.

Warrants – The fair value is based on significant unobservable market inputs utilizing standardized derivative pricing models.

Bank line of credit, term loans and other debt – The carrying values are reasonable estimates of fair value because the borrowings are primarily based on market interest rates and the Company’s current credit ratings.

Interest-rate swaps – The fair value is based on observable inputs utilizing standardized pricing models that consider forward yield curves and discount rates which are observable in active and inactive markets.

Currency swaps – The fair value is based on observable inputs utilizing standardized pricing models that consider the future value of the currency exchange rates, comprised of current spot and traded forward points, and calculating a present value of the net amount using discount rates based on observable traded interest rates.

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

	March 31, 2016				December 31, 2015
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value
Loans receivable, net(2)	$	768,896	$	775,109	$	768,743	$	770,052
Marketable debt securities(2)		100,915		100,915		102,958		102,958
Marketable equity securities(1)		24		24		39		39
Warrants(3)		16		16		55		55
Bank line of credit(2)		810,313		810,313		397,432		397,432
Term loans(2)		511,737		511,737		524,807		524,807
Senior unsecured notes(1)		8,623,376		8,854,121		9,120,107		9,390,668
Mortgage debt(2)		895,289		936,466		932,212		963,786
Other debt(2)		95,229		95,229		94,445		94,445
Interest-rate swap assets(2)		—		—		196		196
Interest-rate swap liabilities(2)		(7,384)		7,384		6,251		6,251
Currency swap assets(2)		2,469		2,469		1,551		1,551

(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 standardized pricing models 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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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

Derivative Financial Instruments

Derivative Financial Instruments

NOTE 19.  Derivative Financial Instruments

The following table summarizes the Company’s outstandinginterest-rate and foreign currency swap contracts as of March 31, 2016 (dollars and GBP in thousands):

			Fixed
		Hedge	Rate/Buy			Floating/Exchange	Notional/
Date Entered	Maturity Date	Designation	Amount			Rate Index	Sell Amount		Fair Value(1)
Interest rate:
July 2005(2)	July 2020	Cash Flow		3.82	%	BMA Swap Index	$	45,600	$	(5,487)
November 2008(3)	October 2016	Cash Flow		5.95	%	1 Month LIBOR+1.50%	$	24,900	$	(532)
July 2012(4)	June 2016	Cash Flow		1.81	%	1 Month GBP LIBOR+1.20%	£	137,000	$	(29)
January 2015(4)	October 2017	Cash Flow		1.79	%	1 Month GBP LIBOR+0.975%	£	220,000	$	(1,336)
Foreign currency:
July 2012(5)	June 2016	N/A	$	11,400		Buy USD/Sell GBP	£	7,200	$	964
January 2015(6)	October 2017	Cash Flow	$	30,300		Buy USD/Sell GBP	£	20,000	$	1,505

(1) Derivative assets are recorded in other assets, net and derivative liabilities are recorded in accounts payable and accrued liabilities on the consolidated balance sheets.

(2) Represents three interest-rate swap contracts, which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(3) Represents an interest-rate swap contract, which hedges fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(4) Hedges fluctuations in interest payments on variable-rate 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 British pound sterling (“GBP”) denominated senior notes. Represents a currency swap to sell £7.2 million at a rate of 1.5695 in June 2016.

(6) Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to the Company’s forecasted GBP denominated interest receipts on its HC-One Facility. Represents a currency swap to sell approximately £1.0 million monthly at a rate of 1.5149through October 2017.

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. 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 and forecasted cash flows. 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. 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, 2016, the Company does not anticipate non-performance by the counterparties to its outstanding derivative contracts.

During the three months ended March 31, 2016, the Company determined a portion of a cash flow hedge was ineffective and reclassified $0.1 million of unrealized gains related to this interest-rate swap contract into other income, net. The Company expects that the hedged forecasted transactions for each of the outstanding qualifying cash flow hedging relationships at March 31, 2016 remain probable of occurring, and as a result, no additional gains or losses recorded to accumulated other comprehensive loss are expected to be reclassified to earnings for any other outstanding hedges, other than those discussed above.

To illustrate the effect of movements in the interest rate and foreign currency markets, the Company performed a market sensitivity analysis on its outstanding derivative financial 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
		+50 Basis		-50 Basis		+100 Basis		-100 Basis
Date Entered	Maturity Date	Points		Points		Points		Points
Interest rate:
July 2005	July 2020	$	1,066	$	(773)	$	1,986	$	(1,692)
November 2008	October 2016		67		(68)		135		(135)
July 2012	June 2016		209		(200)		417		(401)
January 2015	October 2017		2,486		(2,494)		4,976		(4,984)
Foreign currency:
July 2012	June 2016		(47)		57		(99)		109
January 2015	October 2017		(72)		216		(215)		360

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events

Subsequent Events

NOTE 20.  Subsequent Events

In May 2016, the Company announced its intention to spin off interests in 338 properties (including 17 facility sales expected to close by the end of 2016 and potentially before completion of the spin off), primarily comprised of its HCRMC DFL investments, and its equity investment in HCRMC OpCo, into an independent, publicly-traded REIT (“SpinCo”). The spin-off is expected to be effectuated through a pro rata special distribution of SpinCo’s common shares to HCP stockholders and will be treated as a taxable transaction for U.S. federal income tax purposes. The transaction is subject to certain conditions, including the SEC declaring effective a registration statement for the SpinCo common share to be distributed, filing and approval of SpinCo to be listed on an exchange, customary third party consents, and formal approval and declaration of the distribution by the Company’s Board of Directors. The transaction is expected to be completed in the second half of 2016. The Company may, at any time and for any reason until the proposed transaction is complete, abandon the spin-off or modify or change its terms.

In May 2016, the Company entered into a master contribution agreement to contribute its interests in RIDEA II to an unconsolidated joint venture owned 50.1% by HCP and 49.9% by an investor group led by Columbia Pacific Advisors, LLC (“CPA”) (the “HCP/CPA JV”). In return, the Company will receive $109 million in cash proceeds from the HCP/CPA JV, a $636 million note receivable (“Note”) and retain an approximately 40% beneficial interest in RIDEA II. This transaction, upon completion, would result in the Company deconsolidating the net assets of RIDEA II because it will not direct the activities that most significantly impact the venture. The Company further expects that the members will recapitalize RIDEA II, at which time the Company expects to receive cash proceeds in payment against the Note. The closing of these transactions are expected to occur in 2016 and remain subject to regulatory and third party approvals and other customary closing conditions.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The accompanying unaudited 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of HCP, Inc., its wholly-owned subsidiaries, joint ventures and 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 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, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. 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, 2015 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”).

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 is intended to simplify accounting for share-based payment transactions. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within, beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-09 on January 1, 2017 to its consolidated financial position, results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-08 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-08 on January 1, 2018 to its consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the current accounting for leases to (i) require lessees to put most leases on their balance sheets, but continue recognizing expenses on their income statements in a manner similar to today’s accounting, (ii) eliminate current real estate specific lease provisions, and (iii) modify classification criteria and accounting for sales-type leases for lessors. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position or results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This update requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. This update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment at each reporting period. ASU 2016-01 is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted only for certain disclosure requirements. The Company is evaluating the impact of the adoption of ASU 2016-01 on January 1, 2018 to its consolidated financial position or results of operations.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined, (ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company adopted ASU 2015-16 on January 1, 2016; the adoption of which did not have a material impact on its consolidated financial position or results of operations.

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 requires amendments to both the VIE and voting consolidation accounting models. The amendments (i) rescind the indefinite deferral of certain aspects of accounting standards relating to consolidations and provide a permanent scope exception for registered money market funds and similar unregistered money market funds, (ii) modify (a) the identification of variable interests (fees paid to a decision maker or service provider), (b) the VIE characteristics for a limited partnership or similar entity and (c) the primary beneficiary determination under the VIE model, and (iii) eliminate the presumption within the current voting model that a general partner controls a limited partnership or similar entity. ASU 2015-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendments in ASU 2015-02 using either a modified retrospective or retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The Company adopted ASU 2015-02 on January 1, 2016; the adoption of which did not have a material impact to its consolidated financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). This update changes the requirements for recognizing revenue. ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for annual periods, and interim periods within, beginning after December 15, 2016. The Company is evaluating the impact of the adoption of ASU 2014-09 on January 1, 2018 to its consolidated financial position or results of operations.

Reclassifications

Reclassification

Certain amounts in the Company’s consolidated financial statements have been reclassified for prior periods to conform to the current period presentation. Assets held for sale and associated liabilities have been reclassified on the consolidated balance sheets (see Note 4).

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Real Estate Property Investments (Tables)

3 Months Ended

Mar. 31, 2016

Real Estate Property Investments

Schedule of real estate acquisitions (in thousands)

A summary of real estate acquisitions for the three months ended March 31, 2016 follows (in thousands):

	Consideration				Assets Acquired(1)
			Liabilities				Net
Segment	Cash Paid		Assumed		Real Estate		Intangibles
Senior housing	$	76,362	$	1,200	$	71,875	$	5,687
Post-acute/skilled nursing		17,909		—		16,596		1,313
	$	94,271	$	1,200	$	88,471	$	7,000

(1) The purchase price allocation is preliminary and may be subject to change.

A summary of real estate acquisitions for the three months ended March 31, 2015 follows (in thousands):

	Consideration						Assets Acquired
			Liabilities		Noncontrolling				Net
Segment	Cash Paid		Assumed		Interest		Real Estate		Intangibles
Senior housing	$	34,068	$	626	$	1,306	$	34,350	$	1,650
Medical office		180		—		—		180		—
	$	34,248	$	626	$	1,306	$	34,530	$	1,650

Schedule of unaudited pro forma consolidated results of operations (in thousands, except per share amounts)

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
	March 31, 2015
Revenues	$	654,354
Net loss		(233,598)
Net loss applicable to HCP, Inc.		(237,099)
Basic earnings per common share		(0.51)
Diluted earnings per common share		(0.51)

Schedule of capital improvements (in thousands)

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

	Three Months Ended March 31,
Segment	2016		2015
Senior housing	$	39,513	$	16,172
Post-acute/skilled nursing		—		1,960
Life science		39,070		27,391
Medical office		30,920		19,233
Hospital		—		37
	$	109,503	$	64,793

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Net Investment in Direct Financing Leases (Tables)

3 Months Ended

Mar. 31, 2016

Loans Receivable:

Schedule of components of net investment in DFLs (dollars in thousands)

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

	March 31,		December 31,
	2016		2015
Minimum lease payments receivable	$	26,044,849	$	26,283,392
Estimated residual values		3,930,300		3,900,679
Less unearned income		(23,300,899)		(23,462,022)
Net investment in direct financing leases before allowance		6,674,250		6,722,049
Allowance for DFL losses		(817,040)		(817,040)
Net investment in direct financing leases	$	5,857,210	$	5,905,009
Properties subject to direct financing leases		340		348

Direct Financing Leases

Loans Receivable:

Summary of the Company's internal ratings for DFLs (dollars in thousands)

The following table summarizes the Company’s internal ratings for DFLs at March 31, 2016 (dollars in thousands):

	Carrying		Percentage of	Internal Ratings
Segment	Amount		DFL Portfolio	Performing DFLs		Watch List DFLs		Workout DFLs
Senior housing	$	1,794,409	31	$	261,765	$	1,532,644	$	—
Post-acute/skilled nursing		3,938,910	67		—		3,938,910		—
Hospital		123,891	2		123,891		—		—
	$	5,857,210	100	$	385,656	$	5,471,554	$	—

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Loans Receivable (Tables) - Loans receivable

3 Months Ended

Mar. 31, 2016

Loans Receivable:

Schedule of loans receivable (in thousands)

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

	March 31, 2016						December 31, 2015
	Real Estate		Other				Real Estate		Other
	Secured		Secured		Total		Secured		Secured		Total
Mezzanine(1) (2)	$	—	$	657,235	$	657,235	$	—	$	660,138	$	660,138
Other(2)(3)		116,818		—		116,818		114,322		—		114,322
Unamortized discounts, fees and costs(1)		826		(5,983)		(5,157)		961		(6,678)		(5,717)
	$	117,644	$	651,252	$	768,896	$	115,283	$	653,460	$	768,743

(1) At March 31, 2016, included £278 million ($400 million) outstanding and £3 million ($5 million) of associated unamortized discounts, fees and costs. At December 31, 2015, included £273 million ($403 million) outstanding and £4 million ($5 million) of associated unamortized discounts, fees and costs.

(2) At March 31, 2016, the Company had £43 million ($62 million) remaining under its commitments to fund development projects and capital expenditures under its United Kingdom (“U.K.”) development projects.

(3) At March 31, 2016, the Company had $2 million remaining of commitments to fund development projects and capital expenditures under the senior housing development loan program.

Summary of the Company's internal ratings for loans receivable (dollars in thousands)

The following table summarizes the Company’s internal ratings for loans receivable at March 31, 2016 (dollars in thousands):

	Carrying		Percentage of	Internal Ratings
Investment Type	Amount		Loan Portfolio	Performing Loans		Watch List Loans		Workout Loans
Real estate secured	$	117,644	15	$	117,644	$	—	$	—
Other secured		651,252	85		651,252		—		—
	$	768,896	100	$	768,896	$	—	$	—

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Investments in and Advances to Unconsolidated Joint Ventures (Tables)

3 Months Ended

Mar. 31, 2016

Investments in and Advances to Unconsolidated Joint Ventures

Company owned interests in entities, accounted under equity method (dollars in thousands)

The Company owns interests in the following entities that are accounted for under the equity method at March 31, 2016 (dollars in thousands):

Entity(1)	Segment	Carrying Amount		Ownership%
CCRC JV(2)	Senior housing	$	462,545		49
HCRMC(3)	Senior housing and post-acute/skilled nursing		—		9
MBK JV(4)	Senior housing		43,384		50
HCP Ventures III, LLC	Medical office		9,342		30
HCP Ventures IV, LLC	Medical office and hospital		7,236		20
HCP Life Science(5)	Life science		68,688	50	–	63
Vintage Park Development JV	Senior housing		8,593		85
MBK Development JV(4)	Senior housing		2,470		50
Suburban Properties, LLC	Medical office		4,614		67
K&Y(6)	Post-acute/skilled nursing		1,270		80
Advances to unconsolidated joint ventures, net and other			523
		$	608,665

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

(2) Includes two unconsolidated joint ventures in a RIDEA structure (CCRC PropCo and CCRC OpCo).

(3) In December 2014, September 2015 and December 2015, the Company recognized impairment charges of $36 million, $27 million and $19 million, respectively.

(4) Includes two unconsolidated joint ventures in a RIDEA structure (PropCo and OpCo).

(5) Includes three unconsolidated joint ventures between the Company and an institutional capital partner. HCP Life Science includes the following partnerships (and the Company’s ownership percentage): (i) Torrey Pines Science Center, LP (50%); (ii) Britannia Biotech Gateway, LP (55%); and (iii) LASDK, LP (63%).

(6) Includes three unconsolidated joint ventures.

Summarized combined financial information for equity method investments (in thousands)

Summarized combined financial information for the Company’s equity method investments (in thousands):

	March 31,		December 31,
	2016		2015
Real estate, net	$	4,471,115	$	4,470,249
Goodwill and other assets, net		4,921,705		4,935,343
Assets held for sale		70,584		94,866
Total assets	$	9,463,404	$	9,500,458
Capital lease obligations and mortgage debt	$	6,526,878	$	6,575,531
Accounts payable		1,147,155		1,111,350
Liabilities and mortgage debt held for sale		4,941		6,318
Other partners’ capital		1,140,381		1,163,501
HCP’s capital(1)		644,049		643,758
Total liabilities and partners’ capital	$	9,463,404	$	9,500,458

(1) The combined basis difference of the Company’s investments in these joint ventures of $35 million, as of March 31, 2016, is attributable to goodwill, real estate, capital lease obligations, deferred tax assets and lease-related net intangibles.

	Three Months Ended March 31,
	2016		2015
Total revenues	$	1,089,911	$	1,146,468
Income (loss) from discontinued operations		1,997		(2,650)
Net (loss) income		(12,014)		9,783
HCP’s share of earnings(1)		(908)		13,601
Fees earned by HCP		91		460
Distributions received by HCP		6,925		2,181

(1) The Company’s joint venture interest in HCRMC is accounted for using the equity method and results in an elimination of DFL income proportional to HCP’s ownership in HCRMC. The elimination of the respective proportional lease expense at the HCRMC level in substance resulted in $16 million of DFL income that was recharacterized to the Company’s share of earnings from HCRMC (equity income from unconsolidated joint ventures) for the three months ended March 31, 2015. Beginning in January 2016, income will be recognized only if cash distributions are received from HCRMC; as a result, the Company no longer recharacterizes (eliminates) its proportional ownership share of income from DFLs to equity income (loss) from unconsolidated joint ventures.

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Other Assets (Tables)

3 Months Ended

Mar. 31, 2016

Other Assets

Schedule of other assets (in thousands)

A summary of the Company’s other assets (in thousands):

	March 31,		December 31,
	2016		2015
Straight-line rent receivables, net of allowance of $33,012 and $33,648, respectively	$	377,464	$	370,296
Marketable debt securities, net		100,915		102,958
Leasing costs and inducements, net		157,443		158,708
Goodwill		50,346		50,346
Other		131,111		119,965
Total other assets	$	817,279	$	802,273

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Debt (Tables)

3 Months Ended

Mar. 31, 2016

Debt

Summary of senior notes issuances (dollars in thousands)

The following table summarizes the Company’s senior unsecured notes issuances for the periods presented (dollars in thousands):

	Issuance
Period	Amount		Coupon Rate			Maturity Date		Net Proceeds
Year ended December 31, 2015:
January 21, 2015	$	600,000		3.400	%		2025	$	591,000
May 20, 2015	$	750,000		4.000	%		2025	$	739,000
December 1, 2015	$	600,000		4.000	%		2022	$	594,000

Summary of senior notes payoffs (dollars in thousands)

The following table summarizes the Company’s senior unsecured notes payoffs for the periods presented (dollars in thousands):

Period	Amount		Coupon Rate
Three months ended March 31, 2016:
February 1, 2016	$	500,000		3.750	%
Year ended December 31, 2015:
March 1, 2015	$	200,000		6.000	%
June 8, 2015	$	200,000		7.072	%

Summary of stated debt maturities and scheduled principal repayments (in thousands)

The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at March 31, 2016, (in thousands):

					Senior
	Bank Line of				Unsecured		Mortgage
Year	Credit(1)		Term Loans(2)		Notes(3)		Debt(4)		Total(5)
2016 (nine months)	$	—	$	196,938	$	400,000	$	241,492	$	838,430
2017		—		—		750,000		581,891		1,331,891
2018		810,313		—		600,000		6,583		1,416,896
2019		—		316,250		450,000		2,072		768,322
2020		—		—		800,000		2,078		802,078
Thereafter		—		—		5,700,000		61,092		5,761,092
		810,313		513,188		8,700,000		895,208		10,918,709
Discounts, net		—		(1,451)		(76,624)		81		(77,994)
	$	810,313	$	511,737	$	8,623,376	$	895,289	$	10,840,715

(1) Includes £275 million ($395 million) translated into U.S. dollars (“USD”).

(2) Represents £357 million translated into USD.

(3) Interest rates on senior unsecured notes ranged from 2.79% to 6.88% with a weighted average effective interest rate of 4.72% and a weighted average maturity of six years.

(4) Interest rates on the mortgage debt ranged from 3.11% to 8.35% with a weighted average effective interest rate of 6.22% and a weighted average maturity of two years.

(5) Excludes $95 million of other debt that represents Life Care Bonds and Demand Notes that have no scheduled maturities.

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Equity (Tables)

3 Months Ended

Mar. 31, 2016

Equity

Schedule of common stock, cash dividends

		Amount		Dividend
Declaration Date	Record Date	Per Share		Payable Date
January 28	February 8	$	0.575	February 23
April 27	May 9		0.575	May 24

Schedule of company's other common stock activities (shares in thousands)

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

	Three Months Ended March 31,
	2016	2015
Dividend Reinvestment and Stock Purchase Plan	1,081	829
Conversion of DownREIT units(1)	99	38
Exercise of stock options	111	811
Vesting of restricted stock units	248	288
Repurchase of common stock	102	128

(1) Non-managing member limited liability company (“LLC”) units.

Schedule of accumulated other comprehensive loss (in thousands)

The following is a summary of the Company’s accumulated other comprehensive loss (in thousands):

	March 31,		December 31,
	2016		2015
Cumulative foreign currency translation adjustment	$	(20,222)	$	(19,485)
Unrealized losses on cash flow hedges, net		(8,103)		(7,582)
Supplemental Executive Retirement Plan minimum liability		(3,341)		(3,411)
Unrealized (losses) gains on available for sale securities		(7)		8
Total accumulated other comprehensive loss	$	(31,673)	$	(30,470)

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Segment Disclosures (Tables)

3 Months Ended

Mar. 31, 2016

Segment Disclosures

Summary financial information of reportable segment (in thousands)

Summary information for the reportable segments (in thousands):

For the three months ended March 31, 2016:

	Senior		Post-acute/		Life		Medical
	Housing		Skilled Nursing		Science		Office		Hospital		Total
Rental revenues(1)	$	128,897	$	107,190	$	88,948	$	108,994	$	22,870	$	456,899
Resident fees and services		165,763		—		—		—		—		165,763
Operating expenses		(116,136)		(564)		(16,743)		(42,313)		(1,199)		(176,955)
NOI		178,524		106,626		72,205		66,681		21,671		445,707
Non-cash adjustments to NOI(2)		(5,956)		(271)		(673)		(805)		303		(7,402)
Adjusted (cash) NOI		172,568		106,355		71,532		65,876		21,974		438,305
Adjusted (cash) NOI from unconsolidated joint ventures		14,898		404		1,420		322		—		17,044
Interest income		1,851		16,178		—		—		—		18,029
Portfolio Income	$	189,317	$	122,937	$	72,952	$	66,198	$	21,974		473,378
Addback non-cash adjustments												7,402
Investment management fee income												91
Interest expense												(122,062)
Depreciation and amortization												(141,322)
General and administrative expenses												(25,499)
Acquisition and pursuit costs												(2,475)
Other income, net												1,222
Income tax expense												(53,038)
Equity loss in unconsolidated joint ventures, excluding adjusted (cash) NOI												(17,952)
Net income											$	119,745

For the three months ended March 31, 2015:

	Senior		Post-acute/		Life		Medical
	Housing		Skilled Nursing		Science		Office		Hospital		Total
Rental revenues(1)	$	127,382	$	140,576	$	83,551	$	98,305	$	22,242	$	472,056
Resident fees and services		105,013		—		—		—		—		105,013
Operating expenses		(75,510)		(533)		(16,699)		(38,252)		(1,037)		(132,031)
NOI		156,885		140,043		66,852		60,053		21,205		445,038
Non-cash adjustments to NOI(2)		(6,413)		(18,083)		(3,075)		(1,866)		252		(29,185)
Adjusted (cash) NOI		150,472		121,960		63,777		58,187		21,457		415,853
Adjusted (cash) NOI from unconsolidated joint ventures		14,012		—		1,228		304		—		15,544
Interest income		7,394		25,868		—		—		—		33,262
Portfolio Income	$	171,878	$	147,828	$	65,005	$	58,491	$	21,457		464,659
Addback non-cash adjustments												29,185
Investment management fee income												460
Interest expense												(116,780)
Depreciation and amortization												(114,522)
General and administrative expenses												(24,773)
Acquisition and pursuit costs												(3,390)
Impairment												(478,464)
Gain on sales of real estate												6,264
Other income, net												1,724
Income tax benefit												77
Equity loss in unconsolidated joint ventures, excluding adjusted (cash) NOI												(1,943)
Net loss											$	(237,503)

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

(2) Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles and lease termination fees.

Reconciliation of company's assets to total assets (in thousands)

A summary of the Company’s total assets by segment (in thousands):

	March 31,		December 31,
Segment	2016		2015
Senior housing	$	9,931,444	$	9,812,142
Post-acute/skilled nursing		5,111,794		5,162,947
Life science		3,944,689		3,905,137
Medical office		3,485,010		3,469,048
Hospital		622,820		622,820
Gross segment assets		23,095,757		22,972,094
Accumulated depreciation and amortization		(3,059,436)		(2,941,568)
Net segment assets		20,036,321		20,030,526
Real estate assets held for sale, net		311,243		314,126
Other non-segment assets		852,363		1,105,197
Total assets	$	21,199,927	$	21,449,849

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Common Share

Computation of basic and diluted earnings per share (in thousands, except per share amounts)

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

	Three Months Ended March 31,
	2016		2015
Numerator
Net income (loss)	$	119,745	$	(237,503)
Noncontrolling interests’ share in earnings		(3,626)		(3,111)
Net income (loss) attributable to HCP, Inc.		116,119		(240,614)
Participating securities’ share in earnings		(357)		(335)
Net income (loss) applicable to common shares	$	115,762	$	(240,949)
Denominator
Basic weighted average common shares		466,074		460,880
Dilutive potential common shares		188		—
Diluted weighted average common shares		466,262		460,880
Earnings per common share
Basic	$	0.25	$	(0.52)
Diluted	$	0.25	$	(0.52)

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2016

Supplemental Cash Flow Information

Supplemental cash flow information (in thousands)

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

	Three Months Ended March 31,
	2016		2015
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	171,422	$	168,165
Income taxes paid		1,213		383
Capitalized interest		3,128		1,698
Supplemental schedule of non-cash investing activities:
Accrued construction costs		56,972		32,236
Settlement of HCRMC Tranche A DRO as consideration for DFL acquisition		91,605		—
Tenant funded tenant improvements owned by HCP		9,178		572
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units		248		288
Conversion of non-managing member units into common stock		4,136		1,608
Noncontrolling interest issued in connection with real estate acquisitions		—		1,306
Other liabilities assumed with real estate acquisitions		1,200		626
Unrealized (losses) gains on available-for-sale securities and derivatives designated as cash flow hedges, net		(705)		2,334

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Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2016

Variable Interest Entities

Schedule of Variable Interest Entities (in thousands)

	Maximum Loss			Carrying
VIE Type	Exposure(1)		Asset/Liability Type	Amount
HCRMC	$	5,107,180	Net investment in DFLs and investments in unconsolidated joint ventures	$	5,107,180
VIE tenants—DFLs		598,960	Net investment in DFLs		598,960
VIE tenants—operating leases		9,952	Lease intangibles, net and straight-line rent receivables		9,952
CCRC OpCo		230,275	Investments in unconsolidated joint ventures		230,275
Four Seasons		124,108	Loans and marketable debt securities		124,108
Vintage Park Development JV		8,593	Investments in unconsolidated joint ventures		8,593
CMBS and LLC investments		32,944	Marketable debt and cost method investments		32,944

(1) The Company’s maximum loss exposure related to HCRMC, VIE tenants, CCRC OpCo, Vintage Park Development JV, loan and marketable debt securities, and LLC investments to VIE borrowers represents the aggregate carrying amount of such investments (including accrued interest). The Company’s maximum loss exposure may be mitigated by re-leasing the underlying properties to new tenants upon an event of default.

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Concentration of Credit Risk (Tables)

3 Months Ended

Mar. 31, 2016

Summary of consolidated financial information (in millions)

	March 31,		December 31,
	2016		2015
Real estate and other property, net	$	2,611.8	$	2,628.5
Cash and cash equivalents		173.8		125.0
Goodwill, intangible and other assets, net		4,526.9		4,598.3
Total assets	$	7,312.5	$	7,351.8
Debt and financing obligations	$	5,783.8	$	5,836.4
Accounts payable, accrued liabilities and other		1,006.7		982.9
Total equity		522.0		532.5
Total liabilities and equity	$	7,312.5	$	7,351.8

	Three Months Ended March 31,
	2016		2015
Revenues	$	984.5	$	1,054.0
Operating, general and administrative expense		(857.2)		(897.9)
Depreciation and amortization expense		(32.5)		(35.9)
Interest expense		(115.1)		(100.3)
Other income, net		3.5		2.8
Gain on disposal of assets		3.3		—
(Loss) income from continuing operations before income tax (expense) benefit		(13.5)		22.7
Income tax benefit (expense)		2.9		(10.1)
(Loss) income from continuing operations		(10.6)		12.6
Income from discontinued operations, net of taxes		0.1		1.1
Net (loss) income	$	(10.5)	$	13.7

Tenants and Operators

Schedule of concentration of credit risk

	Percentage of				Percentage of
	Total Company Gross Assets				Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	24	%	23	%	18	%	25	%
Brookdale	13	%	12	%	10	%	10	%

Senior housing | Tenants and Operators

Schedule of concentration of credit risk

	Percentage of				Percentage of
	Senior Housing Gross Assets				Senior Housing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
Brookdale	27	%	28	%	21	%	25	%
HCRMC	12	%	12	%	6	%	8	%

Post-acute/skilled | Tenants and Operators

Schedule of concentration of credit risk

	Percentage of Post-Acute/				Percentage of Post-Acute/
	Skilled Nursing Gross Assets				Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2016		2015		2016		2015
HCRMC	77	%	64	%	78	%	80	%

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Measurements

Fair value measurements of financial assets and liabilities (in thousands)

The following table illustrates the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2016 in the consolidated balance sheets (in thousands):

Financial Instrument(1)	Fair Value		Level 1		Level 2		Level 3
Marketable equity securities	$	24	$	24	$	—	$	—
Interest-rate swap liabilities		7,384		—		7,384		—
Currency swap assets		2,469		—		2,469		—
Warrants		16		—		—		16

(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.

Summary of the carrying values and fair values of financial instruments (in thousands)

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

	March 31, 2016				December 31, 2015
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value
Loans receivable, net(2)	$	768,896	$	775,109	$	768,743	$	770,052
Marketable debt securities(2)		100,915		100,915		102,958		102,958
Marketable equity securities(1)		24		24		39		39
Warrants(3)		16		16		55		55
Bank line of credit(2)		810,313		810,313		397,432		397,432
Term loans(2)		511,737		511,737		524,807		524,807
Senior unsecured notes(1)		8,623,376		8,854,121		9,120,107		9,390,668
Mortgage debt(2)		895,289		936,466		932,212		963,786
Other debt(2)		95,229		95,229		94,445		94,445
Interest-rate swap assets(2)		—		—		196		196
Interest-rate swap liabilities(2)		(7,384)		7,384		6,251		6,251
Currency swap assets(2)		2,469		2,469		1,551		1,551

(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 standardized pricing models 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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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Financial Instruments

Schedule of derivative instruments (dollars and GBP in thousands)

The following table summarizes the Company’s outstandinginterest-rate and foreign currency swap contracts as of March 31, 2016 (dollars and GBP in thousands):

			Fixed
		Hedge	Rate/Buy			Floating/Exchange	Notional/
Date Entered	Maturity Date	Designation	Amount			Rate Index	Sell Amount		Fair Value(1)
Interest rate:
July 2005(2)	July 2020	Cash Flow		3.82	%	BMA Swap Index	$	45,600	$	(5,487)
November 2008(3)	October 2016	Cash Flow		5.95	%	1 Month LIBOR+1.50%	$	24,900	$	(532)
July 2012(4)	June 2016	Cash Flow		1.81	%	1 Month GBP LIBOR+1.20%	£	137,000	$	(29)
January 2015(4)	October 2017	Cash Flow		1.79	%	1 Month GBP LIBOR+0.975%	£	220,000	$	(1,336)
Foreign currency:
July 2012(5)	June 2016	N/A	$	11,400		Buy USD/Sell GBP	£	7,200	$	964
January 2015(6)	October 2017	Cash Flow	$	30,300		Buy USD/Sell GBP	£	20,000	$	1,505

(1) Derivative assets are recorded in other assets, net and derivative liabilities are recorded in accounts payable and accrued liabilities on the consolidated balance sheets.

(2) Represents three interest-rate swap contracts, which hedge fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(3) Represents an interest-rate swap contract, which hedges fluctuations in interest payments on variable-rate secured debt due to overall changes in hedged cash flows.

(4) Hedges fluctuations in interest payments on variable-rate 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 British pound sterling (“GBP”) denominated senior notes. Represents a currency swap to sell £7.2 million at a rate of 1.5695 in June 2016.

(6) Currency swap contract (buy USD/sell GBP) hedges the foreign currency exchange risk related to the Company’s forecasted GBP denominated interest receipts on its HC-One Facility. Represents a currency swap to sell approximately £1.0 million monthly at a rate of 1.5149through October 2017.

Schedule of effect of change in interest and foreign currency rate (dollars in thousands)

The following table summarizes the results of the analysis performed (dollars in thousands):

		Effects of Change in Interest and Foreign Currency Rates
		+50 Basis		-50 Basis		+100 Basis		-100 Basis
Date Entered	Maturity Date	Points		Points		Points		Points
Interest rate:
July 2005	July 2020	$	1,066	$	(773)	$	1,986	$	(1,692)
November 2008	October 2016		67		(68)		135		(135)
July 2012	June 2016		209		(200)		417		(401)
January 2015	October 2017		2,486		(2,494)		4,976		(4,984)
Foreign currency:
July 2012	June 2016		(47)		57		(99)		109
January 2015	October 2017		(72)		216		(215)		360

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Real Estate Property Investments (Details) $ / shares in Units, $ in Thousands			1 Months Ended		3 Months Ended
	Jun. 30, 2015 USD ($)	Mar. 29, 2015 USD ($)	May. 31, 2016 USD ($) property item	Jun. 30, 2015 USD ($) property item	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($) $ / shares
Acquisition
Net termination fee revenue						$ 1,103
Real estate acquisitions
Consideration, Cash Paid					$ 94,271	34,248
Consideration, Liabilities assumed					1,200	626
Consideration, Noncontrolling Interest						1,306
Assets Acquired, Real Estate					88,471	34,530
Assets Acquired, Net Intangibles					7,000	1,650
Funding for construction, tenant and other capital improvements					109,503	64,793
Senior housing
Real estate acquisitions
Consideration, Cash Paid					76,362	34,068
Consideration, Liabilities assumed					1,200	626
Consideration, Noncontrolling Interest						1,306
Assets Acquired, Real Estate					71,875	34,350
Assets Acquired, Net Intangibles					5,687	1,650
Funding for construction, tenant and other capital improvements					39,513	16,172
Post-acute/skilled
Real estate acquisitions
Consideration, Cash Paid					17,909
Assets Acquired, Real Estate					16,596
Assets Acquired, Net Intangibles					1,313
Funding for construction, tenant and other capital improvements						1,960
Aggregate purchase price		$ 275,000			275,000
Life science
Real estate acquisitions
Funding for construction, tenant and other capital improvements					39,070	27,391
Medical office
Real estate acquisitions
Consideration, Cash Paid						180
Assets Acquired, Real Estate						180
Funding for construction, tenant and other capital improvements					$ 30,920	19,233
Hospital
Real estate acquisitions
Funding for construction, tenant and other capital improvements						37
RIDEA III
Acquisition
Assets Acquired, Working Capital	$ 7,000			$ 7,000
Net termination fee revenue	8,000
Stabilized occupancy rate (as a percent)					80.00%
Unaudited pro forma consolidated results of operations
Revenues						654,354
Net (loss) income						(233,598)
Net (loss) income applicable to HCP, Inc.						$ (237,099)
Basic earnings per common share (in dollars per share) | $ / shares						$ (0.51)
Diluted earnings per common share (in dollars per share) | $ / shares						$ (0.51)
Real estate acquisitions
Consideration, Cash Paid	770,000
Consideration, Liabilities assumed	32,000			32,000
Consideration, Noncontrolling Interest	29,000			29,000
Assets Acquired, Real Estate	771,000			771,000
Assets Acquired, Net Intangibles	$ 53,000			$ 53,000
RIDEA III | Subsequent event
Acquisition
Number of facilities acquired | property			7
Number of Units Acquired | item			526
Real estate acquisitions
Consideration, Liabilities assumed			$ 75,000
Aggregate purchase price			$ 190,000
Stated interest rate (as a percent)			4.00%
Parent ownership percentage (as a percent)			100.00%
RIDEA III | Brookdale JV
Acquisition
Number of individual leases | property				2
Number of Units Acquired | item				5,025
Noncontrolling interest (as a percent)					10.00%
Management Agreement Term					7 years
RIDEA III | Senior housing | Brookdale JV
Acquisition
Number of facilities acquired | property				35

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Dispositions of Real Estate (Details) $ in Thousands	1 Months Ended	3 Months Ended
	Apr. 30, 2016 USD ($)	Mar. 31, 2015 USD ($) property	Mar. 31, 2016 USD ($) item	Dec. 31, 2015 USD ($) item
Dispositions of Real Estate
Real estate assets held for sale, net			$ 311,243	$ 314,126
Senior housing
Dispositions of Real Estate
Number of properties disposed | property		8
Total consideration for disposition of real estate		$ 51,000
Life science
Dispositions of Real Estate
Number of properties classified as held for sale | item			4	4
Real estate assets held for sale, net			$ 43,000
Life science | Subsequent event
Dispositions of Real Estate
Total consideration for disposition of real estate	$ 74,000

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Net Investment in Direct Financing Leases (Details) $ in Thousands				1 Months Ended			3 Months Ended			12 Months Ended		16 Months Ended
	Apr. 01, 2016	Apr. 01, 2015	Mar. 29, 2015 USD ($) property	May. 31, 2016 facility	Dec. 31, 2015 USD ($) property	Mar. 31, 2015 USD ($)	Mar. 31, 2016 USD ($) property	Dec. 31, 2015 USD ($) property	Mar. 31, 2015 USD ($) property	Dec. 31, 2015 USD ($) property	Dec. 31, 2011 USD ($) property	May. 09, 2016 property	Sep. 30, 2015 USD ($)	Feb. 28, 2015 USD ($)	Sep. 30, 2013 item
Net Investment in Direct Financing Leases
Minimum lease payments receivable					$ 26,283,392		$ 26,044,849	$ 26,283,392		$ 26,283,392
Estimated residual values					3,900,679		3,930,300	3,900,679		3,900,679
Less unearned income					(23,462,022)		(23,300,899)	(23,462,022)		(23,462,022)
Net investment in direct financing leases before allowance					6,722,049		6,674,250	6,722,049		6,722,049
Allowance for DFL losses					(817,040)		(817,040)	(817,040)		(817,040)
Net investment in direct financing leases					$ 5,905,009		$ 5,857,210	$ 5,905,009		$ 5,905,009
Properties subject to direct financing leases | property					348		340	348		348
DFL income							$ 127,968		$ 167,078
Number of facility sales closed | property							11			22		33
Sales price							$ 62,000			$ 219,000
Percentage of DFL Portfolio							100.00%
Subsequent event
Net Investment in Direct Financing Leases
Number of non-strategic assets involved in sales transaction | facility				17
HCRMC
Net Investment in Direct Financing Leases
Net investment in direct financing leases					$ 5,200,000	$ 6,100,000		$ 5,200,000	$ 6,100,000	5,200,000			$ 6,000,000	$ 6,600,000
Number of Facilities Acquired | property											334
Number of non-strategic assets involved in sales transaction | property									50
Annual rent reduction on sold properties, as a percent of the sales proceeds									7.75%
Reduction in initial net annual rent due to lease amendment			$ 68,000
Annual rent under Master Agreement							$ 473,000		$ 541,000
Minimum rent escalation during the initial term (as a percent)	3.00%
Increase in Rent, first two years (as a percent)			3.50%
Increase in Rent, afterwards (as a percent)			3.00%
Period of extension of initial term of lease		5 years
Average lease term		16 years
Deferred lease obligation							525,000
Expected Annual Rent							19,000
Impairment charges related to investments in DFLs						$ 478,000		817,000
Federal and state built-in gain tax from assets sold											$ 2,000,000
Federal and state built-in gain tax from assets sold, term											10 years
Federal built-in gain tax from assets sold, federal term					5 years
State built-in gain from assets sold							49,000
Direct Financing Lease Tranche A [Member] | HCRMC
Net Investment in Direct Financing Leases
Deferred lease obligation							$ 275,000
Direct Financing Lease Rental Factor, first period (as a percent)							6.90%
Expected Annual Rent							$ 19,000
Direct Financing Lease Tranche B [Member] | HCRMC
Net Investment in Direct Financing Leases
Deferred lease obligation							$ 250,000
Direct Financing Lease Rental Factor, first period (as a percent)							3.00%
Direct Financing Lease Rental Factor, second period (as a percent)							4.00%
Direct Financing Lease Rental Factor, third period (as a percent)							5.00%
Direct Financing Lease Rental Factor, fourth period (as a percent)							6.00%
Direct Financing Leases
Net Investment in Direct Financing Leases
DFL income							$ 3,000		4,000
Cash payments received							4,000		5,000
Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases							385,656
Watch List Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases							5,471,554
Senior housing
Net Investment in Direct Financing Leases
Net investment in direct financing leases							$ 1,794,409
Percentage of DFL Portfolio							31.00%
Senior housing | Direct Financing Leases
Net Investment in Direct Financing Leases
Net investment in direct financing leases					$ 366,000		$ 364,000	366,000		366,000
Properties subject to direct financing leases | item															14
Senior housing | Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases							261,765
Senior housing | Watch List Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases							1,532,644
Post-acute/skilled
Net Investment in Direct Financing Leases
Net investment in direct financing leases							3,938,910
Number of Facilities | property			9
Acquisition of facility			$ 275,000				$ 275,000
Percentage of DFL Portfolio							67.00%
Post-acute/skilled | Watch List Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases							$ 3,938,910
Hospital
Net Investment in Direct Financing Leases
Net investment in direct financing leases							$ 123,891
Percentage of DFL Portfolio							2.00%
Hospital | Performing Loans
Net Investment in Direct Financing Leases
Net investment in direct financing leases							$ 123,891
HCRMC
Net Investment in Direct Financing Leases
Net investment in direct financing leases					5,200,000		5,100,000	5,200,000		5,200,000
Carrying value, equity method investments					$ 0			$ 0		$ 0
DFL accretion									21,000
DFL income							113,000		152,000
Cash payments received							$ 113,000		$ 131,000

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Loans Receivable (Details) $ in Thousands, £ in Millions	3 Months Ended
	Mar. 31, 2016 GBP (£)	Mar. 31, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 GBP (£)	Dec. 31, 2015 USD ($)
Loans Receivable:
Mezzanine			$ 657,235		$ 660,138
Mezzanine	£ 278		400,000	£ 273	403,000
Loans receivable, other			116,818		114,322
Unamortized premiums (discounts), fees and costs			(5,157)		(5,717)
Unamortized premiums (discounts), fees and costs	3		5,000	£ 4	5,000
Loans receivable, net			$ 768,896		768,743
Remaining commitments to fund development projects	£ 43	$ 62,000
Percentage of Loan Portfolio	100.00%		100.00%
Performing Loans
Loans Receivable:
Loans receivable, net			$ 768,896
Real Estate Secured
Loans Receivable:
Loans receivable, other			116,818		114,322
Unamortized premiums (discounts), fees and costs			826		961
Loans receivable, net			$ 117,644		115,283
Remaining commitments to fund development projects		$ 2,000
Percentage of Loan Portfolio	15.00%		15.00%
Real Estate Secured | Performing Loans
Loans Receivable:
Loans receivable, net			$ 117,644
Other Secured
Loans Receivable:
Mezzanine			657,235		660,138
Unamortized premiums (discounts), fees and costs			(5,983)		(6,678)
Loans receivable, net			$ 651,252		$ 653,460
Percentage of Loan Portfolio	85.00%		85.00%
Other Secured | Performing Loans
Loans Receivable:
Loans receivable, net			$ 651,252

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Loans Receivable - Other Secured Loans (Details) $ in Thousands	1 Months Ended							3 Months Ended	12 Months Ended
	Dec. 31, 2015 GBP (£)	Sep. 30, 2015 GBP (£) property	Apr. 30, 2015 GBP (£) property	Feb. 28, 2015 GBP (£)	Feb. 28, 2015 USD ($)	Nov. 30, 2014 GBP (£) property item	Nov. 30, 2014 USD ($) property item	Mar. 31, 2016 USD ($) property	Dec. 31, 2015 GBP (£)	Dec. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)	May. 31, 2015 USD ($)	Feb. 28, 2015 USD ($)	Jun. 30, 2013 USD ($)	Jul. 31, 2012 USD ($)	Jun. 30, 2012 GBP (£)
Loans Receivable:
Loans receivable, other								$ 116,818			$ 114,322
Amount draw on the revolving line of credit facility								422,897
Loan amount outstanding								$ 810,313			397,432
NHP[Member]
Loans Receivable:
Number of facilities | property						273	273
Number of beds acquired | item						12,500	12,500
HC-One Facility
Loans Receivable:
Number of facilities | property			36
Loan facility maximum				£ 502,000,000		£ 395,000,000							$ 795,000
Amount draw on the revolving line of credit facility						£ 363,000,000	$ 574,000
Term of facility						5 years	5 years
Increase in loan facility		£ 11,000,000		£ 108,000,000	$ 164,000
Amount of facility converted into sale-leaseback transaction | £			£ 174,000,000
Paydowns received | £		£ 34,000,000
Non-call period shortened		17 months
Number of properties spinoff into a separate joint venture | property		36						36
Term to retain security over the spinoff properties		2 years
Cash payments received from borrower									£ 34,000,000	$ 52,000
Loan amount outstanding								$ 395,000
Tandem Health Care Loan
Loans Receivable:
Loan facility maximum															$ 205,000
Loans receivable, other								$ 256,000
Loan receivable, interest rate payable (as a percent)								11.50%
Loan receivable subordinated to senior mortgage debt								$ 380,000
Tandem Health Care Loan - First Tranche
Loans Receivable:
Loans receivable, other															$ 100,000
Loan receivable, interest rate payable (as a percent)								12.00%
Tandem Health Care Loan - Second Tranche
Loans Receivable:
Loans receivable, other														$ 102,000
Loan receivable, interest rate payable (as a percent)								14.00%
Tandem Health Care Loan Third Tranche [Member]
Loans Receivable:
Loans receivable, other												$ 50,000
Loan receivable, interest rate payable (as a percent)								6.00%
Tandem Health Care Loan Fourth Tranche [Member]
Loans Receivable:
Loans receivable, other												$ 5,000
Loan receivable, interest rate payable (as a percent)								6.00%
Four Seasons
Loans Receivable:
Marketable debt security, par value	£ 28,000,000								28,000,000		$ 42,000					£ 138,500,000
Marketable debt security, issued and outstanding | £	£ 40,000,000								£ 40,000,000
Four Seasons | LIBOR
Loans Receivable:
Loan, basis spread on variable rate	6.00%

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Investments in and Advances to Unconsolidated Joint Ventures - Equity Method Investments (Details) $ in Thousands	1 Months Ended			3 Months Ended
	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)	Mar. 31, 2016 USD ($) item	Mar. 30, 2015
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures	$ 605,244			$ 608,665
Number of unconsolidated joint ventures | item				4
CCRC JV | Senior housing
Company owned interests in entities, accounted under equity method:
Number of unconsolidated joint ventures | item				2
CCRC JV | Senior housing
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 462,545
Investment ownership percentage				49.00%
HCRMC
Company owned interests in entities, accounted under equity method:
Other than temporary impairment charge	$ 19,000	$ 27,000	$ 36,000
HCRMC | Post-acute/skilled
Company owned interests in entities, accounted under equity method:
Investment ownership percentage				9.00%
MBK JV and MBK Development JV | Senior housing
Company owned interests in entities, accounted under equity method:
Number of unconsolidated joint ventures | item				2
MBK JV | Senior housing
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 43,384
Investment ownership percentage				50.00%	50.00%
MBK Development JV | Senior housing
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 2,470
Investment ownership percentage				50.00%
HCP Ventures III, LLC | Medical office
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 9,342
Investment ownership percentage				30.00%
HCP Ventures IV | Hospital and medical office segments
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 7,236
Investment ownership percentage				20.00%
HCP Life Science | Life science
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 68,688
Number of unconsolidated joint ventures | item				3
HCP Life Science | Life science | Minimum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage				50.00%
HCP Life Science | Life science | Maximum
Company owned interests in entities, accounted under equity method:
Investment ownership percentage				63.00%
Torrey Pines Science Center, LP | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage				50.00%
Britannia Biotech Gateway, LP | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage				55.00%
LASDK, LP | Life science
Company owned interests in entities, accounted under equity method:
Investment ownership percentage				63.00%
Vintage Park Development JV | Senior housing
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 8,593
Investment ownership percentage				85.00%
Suburban Properties, LLC | Medical office
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 4,614
Investment ownership percentage				67.00%
K&Y | Post-acute/skilled
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 1,270
Investment ownership percentage				80.00%
Advances to unconsolidated joint ventures, net
Company owned interests in entities, accounted under equity method:
Investments in and advances to unconsolidated joint ventures				$ 523

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Investments in and Advances to Unconsolidated Joint Ventures - Combined Financial Information for the unconsolidated joint ventures(Details) $ in Thousands			1 Months Ended			3 Months Ended
	Sep. 25, 2015 USD ($) item	Mar. 30, 2015 USD ($) property	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)	Mar. 31, 2016 USD ($) property	Mar. 31, 2015 USD ($) property
Summarized combined financial information for equity method investments:
Real estate, net			$ 4,470,249			$ 4,471,115
Goodwill and other assets, net			4,935,343			4,921,705
Assets held for sale			94,866			70,584
Total assets			9,500,458			9,463,404
Capital lease obligations and mortgage debt			6,575,531			6,526,878
Accounts payable			1,111,350			1,147,155
Liabilities and mortgage debt held for sale			6,318			4,941
Other partners' capital			1,163,501			1,140,381
HCP's capital			643,758			644,049
Total liabilities and partners' capital			9,500,458			9,463,404
Combined basis difference						35,000
Total revenues						1,089,911	$ 1,146,468
Income (loss) from discontinued operations						1,997	(2,650)
Net (loss) income						(12,014)	9,783
HCP's share of earnings						(908)	13,601
Fees earned by HCP						91	460
Distributions received by HCP						$ 6,925	2,181
MBK Development JV
Subsequent Events
Payment to acquire land	$ 3,000
Number of units to be built | item	74
HCRMC
Subsequent Events
Other than temporary impairment charge			$ 19,000	$ 27,000	$ 36,000
HCRMC | Post-acute/skilled
Summarized combined financial information for equity method investments:
Recharacterized DFL income to equity income							$ 16,000
Subsequent Events
Investment ownership percentage						9.00%
MBK JV
Subsequent Events
Debt related to retirement communities or properties contributed		$ 78,000
MBK JV | Senior housing
Subsequent Events
Investment ownership percentage		50.00%				50.00%
Cash contributed		$ 27,000
Number of retirement communities | property							3
MBK JV | Senior housing | MBK
Subsequent Events
Number of retirement communities contributed to joint venture | property		3				3
Fair value of retirement communities or properties contributed		$ 126,000

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Intangibles (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Intangibles
Gross intangible lease assets	$ 988	$ 984
Intangible assets, accumulated depreciation and amortization	403	380
Gross intangible lease liabilities	156	156
Intangible liabilities, accumulated depreciation and amortization	$ 103	$ 100

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Other Assets (Details) $ in Thousands	1 Months Ended				3 Months Ended	12 Months Ended
	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2012 GBP (£)	Jun. 30, 2012 USD ($)	Mar. 31, 2016 USD ($) item	Dec. 31, 2015 GBP (£)	Dec. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
Other assets
Straight-line rent receivables, net of allowance of $33,012 and $33,648, respectively					$ 377,464			$ 370,296
Allowance on straight-line rent receivables					33,012			33,648
Marketable debt securities, net					100,915			102,958
Leasing costs and inducements, net					157,443			158,708
Goodwill					50,346			50,346
Other					131,111			119,965
Total other assets					817,279			802,273
Loans receivables					768,896			768,743
Four Seasons Health Care Ltd
Other assets
Other-than-temporary impairment on securities	$ 70,000	$ 42,000
Debt Instrument, Face Amount | £			£ 175,000,000
Four Seasons
Other assets
Marketable debt securities, net					$ 83,000	£ 58,000,000		85,000
Marketable debt security, par value			138,500,000			28,000,000		42,000
Marketable debt security, issued and outstanding | £						40,000,000
Purchase of debt securities			£ 136,800,000	$ 215,000
Portion of debt held, as a percent.			79.00%	79.00%
Interest payment received						£ 8,000,000	$ 13,000
Annual interest rate (as a percent)					12.25%
Brookdale JV
Other assets
Loans receivables					$ 5,000			$ 9,000
Number of installments | item					8

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Debt (Details) £ in Millions							3 Months Ended
	Feb. 01, 2016 USD ($)	Dec. 01, 2015 USD ($)	Jun. 08, 2015 USD ($)	May. 20, 2015 USD ($)	Mar. 01, 2015 USD ($)	Jan. 21, 2015 USD ($)	Mar. 31, 2016 USD ($)	Mar. 31, 2016 GBP (£) item	Mar. 31, 2016 USD ($) item	Jan. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument
Bank line of credit									$ 810,313,000		$ 397,432,000
Senior unsecured notes									8,623,376,000		9,120,107,000
Total debt before discount, net									10,918,709,000
Discounts, net									(77,994,000)
Debt instruments, carrying amount									10,840,715,000
Other debt									95,229,000		$ 94,445,000
Debt maturing in 2016
Debt Instrument
2016 (Nine months)									838,430,000
Debt maturing in 2017
Debt Instrument
2017									1,331,891,000
Debt maturing in 2018
Debt Instrument
2018									1,416,896,000
Debt maturing in 2019
Debt Instrument
2019									768,322,000
Debt maturing in 2020
Debt Instrument
2020									802,078,000
Thereafter
Debt Instrument
Thereafter									$ 5,761,092,000
Line of Credit and Term Loan
Debt Instrument
Debt instrument, covenant debt to assets (as a percent)								60.00%	60.00%
Debt instrument, covenant secured debt to assets (as a percent)								30.00%	30.00%
Debt instrument, covenant unsecured debt to unencumbered assets (as a percent)								60.00%	60.00%
Debt instrument, covenant minimum fixed charge coverage ratio								1.5	1.5
Bank Line of Credit
Debt Instrument
Line of credit facility, maximum borrowing capacity									$ 2,000,000,000
Debt instrument, variable rate basis							LIBOR
Length of debt instrument extension period							1 year
Debt instrument, basis spread on variable rate (as a percent)							0.925%
Debt instrument, facility fee (as a percent)							0.15%
Line of credit facility additional aggregate amount, maximum							$ 500,000,000
Bank line of credit									$ 810,000,000
Weighted-average interest rate (as a percent)								1.68%	1.68%
Debt instrument, covenant net worth									$ 9,500,000,000
Line of credit, portion denominated in GBP								£ 275	395,000,000
Total debt before discount, net									810,313,000
Debt instruments, carrying amount									810,313,000
Bank Line of Credit | Debt maturing in 2018
Debt Instrument
2018									810,313,000
Term loans
Debt Instrument
2016 (Nine months) | £								£ 357
2019										$ 357,000,000
Total debt before discount, net									513,188,000
Discounts, net									(1,451,000)
Debt instruments, carrying amount									511,737,000
Term loans | Debt maturing in 2016
Debt Instrument
2016 (Nine months)									196,938,000
Term loans | Debt maturing in 2019
Debt Instrument
2019									$ 316,250,000
Senior Unsecured Notes
Debt Instrument
Weighted-average interest rate (as a percent)								4.72%	4.72%
Senior unsecured notes									$ 8,700,000,000
Total debt before discount, net									8,700,000,000
Discounts, net									(76,624,000)
Debt instruments, carrying amount									$ 8,623,376,000
Weighted-average maturity							6 years
Senior Unsecured Notes | Minimum
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)								2.79%	2.79%
Senior Unsecured Notes | Maximum
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)								6.88%	6.88%
Senior Unsecured Notes | Debt maturing in 2016
Debt Instrument
2016 (Nine months)									$ 400,000,000
Senior Unsecured Notes | Debt maturing in 2017
Debt Instrument
2017									750,000,000
Senior Unsecured Notes | Debt maturing in 2018
Debt Instrument
2018									600,000,000
Senior Unsecured Notes | Debt maturing in 2019
Debt Instrument
2019									450,000,000
Senior Unsecured Notes | Debt maturing in 2020
Debt Instrument
2020									800,000,000
Senior Unsecured Notes | Thereafter
Debt Instrument
Thereafter									$ 5,700,000,000
Senior Unsecured, 3.40% notes due 2025
Debt Instrument
Debt Instrument, Face Amount						$ 600,000,000
Debt Instrument, Interest Rate, Stated Percentage (as a percent)						3.40%
Net proceeds from issuance of senior unsecured notes						$ 591,000,000
Senior Unsecured 4.0% notes due 2025
Debt Instrument
Debt Instrument, Face Amount				$ 750,000,000
Debt Instrument, Interest Rate, Stated Percentage (as a percent)				4.00%
Net proceeds from issuance of senior unsecured notes				$ 739,000,000
Senior Unsecured, 4.0% notes due 2022
Debt Instrument
Debt Instrument, Face Amount		$ 600,000,000
Debt Instrument, Interest Rate, Stated Percentage (as a percent)		4.00%
Net proceeds from issuance of senior unsecured notes		$ 594,000,000
Senior Unsecured Debt 3.75 Percent Incepted February 1 2016 [Member]
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)	3.75%
Repayment of senior unsecured notes	$ 500,000,000
Senior Unsecured Debt 6.0 Percent Incepted March 1, 2015
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)					6.00%
Repayment of senior unsecured notes					$ 200,000,000
Senior Unsecured Debt 7.07 Percent Incepted June 8, 2015 [Member]
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)			7.072%
Repayment of senior unsecured notes			$ 200,000,000
Mortgage Debt
Debt Instrument
Weighted-average interest rate (as a percent)								6.22%	6.22%
Number of healthcare facilities used to secure debt | item								56	56
Debt instrument, collateral, healthcare facilities carrying value									$ 1,100,000,000
Total debt before discount, net									895,208,000
Discounts, net									81,000
Debt instruments, carrying amount									$ 895,289,000
Weighted-average maturity							2 years
Mortgage Debt | Minimum
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)								3.11%	3.11%
Mortgage Debt | Maximum
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)								8.35%	8.35%
Mortgage Debt | Debt maturing in 2016
Debt Instrument
2016 (Nine months)									$ 241,492,000
Mortgage Debt | Debt maturing in 2017
Debt Instrument
2017									581,891,000
Mortgage Debt | Debt maturing in 2018
Debt Instrument
2018									6,583,000
Mortgage Debt | Debt maturing in 2019
Debt Instrument
2019									2,072,000
Mortgage Debt | Debt maturing in 2020
Debt Instrument
2020									2,078,000
Mortgage Debt | Thereafter
Debt Instrument
Thereafter									61,092,000
Non-interest Bearing Life Care Bonds
Debt Instrument
Other debt									$ 67,000,000
Number of CCRC issuing non-interest life care bonds | item								2	2
Number of facilities with non-interest bearing occupancy fee deposits | item								2	2
Demand Note
Debt Instrument
Debt Instrument, Interest Rate, Stated Percentage (as a percent)								4.50%	4.50%
Other debt									$ 28,000,000

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Equity (Details) $ / shares in Units, shares in Thousands, $ in Thousands			3 Months Ended
	Apr. 27, 2016 $ / shares	Jan. 28, 2016 $ / shares	Mar. 31, 2016 USD ($) item $ / shares shares	Mar. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2015 USD ($)
Equity
Dividends declared per common share (in dollars per share) | $ / shares	$ 0.575	$ 0.575	$ 0.575	$ 0.565
Company's common stock issuances
Repurchase of common stock			$ 3,628	$ 6,096
Accumulated Other Comprehensive Loss
Cumulative foreign currency translation adjustment			(20,222)		$ (19,485)
Unrealized losses on cash flow hedges, net			(8,103)		(7,582)
Supplemental Executive Retirement Plan minimum liability			(3,341)		(3,411)
Unrealized (losses) gains on available for sale securities			(7)		8
Total accumulated other comprehensive loss			(31,673)		(30,470)
Noncontrolling interests
DownREIT unit, carrying value			$ 181,468		$ 185,608
Common Stock
Company's common stock issuances
Dividend Reinvestment and Stock Purchase Plan (in shares) | shares			1,081	829
Conversion of DownREIT units (in shares) | shares			99	38
Exercise of stock options (in shares) | shares			111	811
Vesting of restricted stock units (in shares) | shares			248	288
Repurchase of common stock			$ 102	$ 128
Noncontrolling Interests
Noncontrolling interests
Non-managing members DownREIT units outstanding | item			4,000,000
Number of DownREIT LLCs | item			5
DownREIT unit, carrying value			$ 181,000
DownREIT unit, fair value			$ 191,000

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Segment Disclosures - Summary Information for the Reportable Segments (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) item	Mar. 31, 2015 USD ($)
Segment reporting information, revenues
Number of reportable segments | item	5
Rental Revenues	$ 456,899	$ 472,056
Resident fees and services	165,763	105,013
Operating expenses	(176,955)	(132,031)
NOI	445,707	445,038
Non-cash adjustments to NOI	(7,402)	(29,185)
Adjusted (cash) NOI	438,305	415,853
Adjusted (cash) NOI from unconsolidated joint ventures	17,044	15,544
Interest Income	18,029	33,262
Portfolio Income	473,378	464,659
Addback non-cash adjustments	7,402	29,185
Investment management fee income	91	460
Interest expense	(122,062)	(116,780)
Depreciation and amortization	(141,322)	(114,522)
General and administrative expenses	(25,499)	(24,773)
Acquisition and pursuit costs	(2,475)	(3,390)
Impairments		(478,464)
Gain on sales of real estate		6,264
Other income, net	1,222	1,724
Income tax (expense) benefit	(53,038)	77
Equity loss in unconsolidated joint ventures, excluding adjusted (cash) NOI	(17,952)	(1,943)
Net income (loss)	119,745	(237,503)
Senior housing
Segment reporting information, revenues
Rental Revenues	128,897	127,382
Resident fees and services	165,763	105,013
Operating expenses	(116,136)	(75,510)
NOI	178,524	156,885
Non-cash adjustments to NOI	(5,956)	(6,413)
Adjusted (cash) NOI	172,568	150,472
Adjusted (cash) NOI from unconsolidated joint ventures	14,898	14,012
Interest Income	1,851	7,394
Portfolio Income	189,317	171,878
Post-acute/skilled
Segment reporting information, revenues
Rental Revenues	107,190	140,576
Operating expenses	(564)	(533)
NOI	106,626	140,043
Non-cash adjustments to NOI	(271)	(18,083)
Adjusted (cash) NOI	106,355	121,960
Adjusted (cash) NOI from unconsolidated joint ventures	404
Interest Income	16,178	25,868
Portfolio Income	122,937	147,828
Life science
Segment reporting information, revenues
Rental Revenues	88,948	83,551
Operating expenses	(16,743)	(16,699)
NOI	72,205	66,852
Non-cash adjustments to NOI	(673)	(3,075)
Adjusted (cash) NOI	71,532	63,777
Adjusted (cash) NOI from unconsolidated joint ventures	1,420	1,228
Portfolio Income	72,952	65,005
Medical office
Segment reporting information, revenues
Rental Revenues	108,994	98,305
Operating expenses	(42,313)	(38,252)
NOI	66,681	60,053
Non-cash adjustments to NOI	(805)	(1,866)
Adjusted (cash) NOI	65,876	58,187
Adjusted (cash) NOI from unconsolidated joint ventures	322	304
Portfolio Income	66,198	58,491
Hospital
Segment reporting information, revenues
Rental Revenues	22,870	22,242
Operating expenses	(1,199)	(1,037)
NOI	21,671	21,205
Non-cash adjustments to NOI	303	252
Adjusted (cash) NOI	21,974	21,457
Portfolio Income	$ 21,974	$ 21,457

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Segment Disclosures - Assets by Segment (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Segment Disclosure
Real estate assets held for sale, net		$ 311,243	$ 314,126
Total assets	[1]	21,199,927	21,449,849
Goodwill		50,346	50,346
Life science
Segment Disclosure
Real estate assets held for sale, net		43,000
Operating segment
Segment Disclosure
Gross assets		23,095,757	22,972,094
Accumulated depreciation and amortization		(3,059,436)	(2,941,568)
Total assets		20,036,321	20,030,526
Operating segment | Senior housing
Segment Disclosure
Gross assets		9,931,444	9,812,142
Goodwill		31,000	31,000
Operating segment | Post-acute/skilled
Segment Disclosure
Gross assets		5,111,794	5,162,947
Goodwill		3,000	3,000
Operating segment | Life science
Segment Disclosure
Gross assets		3,944,689	3,905,137
Operating segment | Medical office
Segment Disclosure
Gross assets		3,485,010	3,469,048
Goodwill		11,000	11,000
Operating segment | Hospital
Segment Disclosure
Gross assets		622,820	622,820
Goodwill		5,000	5,000
Other non-segment
Segment Disclosure
Total assets		$ 852,363	$ 1,105,197

[1] HCP, Inc.’s consolidated total assets and total liabilities at March 31, 2016 and December 31, 2015 include certain assets of variable interest entities (“VIEs”) that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at March 31, 2016 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $60 million; land $327 million; accumulated depreciation and amortization $567 million; investments in unconsolidated joint ventures $14 million; accounts receivable $18 million; cash $60 million; restricted cash $23 million; intangible assets, net $197 million; and other assets, net $66 million. Total assets at December 31, 2015 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $54 million; land $327 million; accumulated depreciation and amortization $537 million; investments in unconsolidated joint ventures $14 million; accounts receivable $19 million; cash $61 million; restricted cash $21 million; intangible assets, net $204 million; and other assets, net $63 million. Total liabilities at March 31, 2016 include VIE liabilities as follows: mortgage debt $573 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $23 million from VIEs. Total liabilities at December 31, 2015 include VIE liabilities as follows: mortgage debt $589 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $19 million. See Note 16 to the Consolidated Financial Statements for additional information.

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Earnings Per Common Share (Details) $ / shares in Units, shares in Thousands, $ in Thousands, item in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) item $ / shares shares	Mar. 31, 2015 USD ($) $ / shares shares
Numerator
Net income (loss) | $	$ 119,745	$ (237,503)
Noncontrolling interests’ share in earnings | $	(3,626)	(3,111)
Net income (loss) attributable to HCP, Inc. | $	116,119	(240,614)
Participating securities' share in earnings | $	(357)	(335)
Net income (loss) applicable to common shares | $	$ 115,762	$ (240,949)
Denominator
Basic weighted average common shares	466,074	460,880
Dilutive potential common shares	188
Diluted weighted average common shares	466,262	460,880
Earnings per common share:
Basic (in dollars per share) | $ / shares	$ 0.25	$ (0.52)
Diluted (in dollars per share) | $ / shares	$ 0.25	$ (0.52)
Common Stock Options
Earnings per common share:
Shares of anti-dilutive securities excluded from earnings per share calculation	1,400
Down REIT
Earnings per common share:
Shares of anti-dilutive securities excluded from earnings per share calculation	6,000
DownREIT LLCs, non-managing member units outstanding | item	4
Restricted Stock and Performance Restricted Stock Units
Earnings per common share:
Shares of anti-dilutive securities excluded from earnings per share calculation	700

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Supplemental cash flow information:
Interest paid, net of capitalized interest	$ 171,422	$ 168,165
Income taxes paid	1,213	383
Capitalized interest	3,128	1,698
Supplemental schedule of non-cash investing activities:
Accrued construction costs	56,972	32,236
Settlement of HCRMC Tranche A DRO as consideration for DFL acquisition	91,605
Tenant funded tenant improvements owned by HCP	9,178	572
Supplemental schedule of non-cash financing activities:
Vesting of restricted stock units	248	288
Conversion of non-managing member units into common stock	4,136	1,608
Noncontrolling interest issued in connection with real estate acquisitions		1,306
Other liabilities assumed with real estate acquisitions	1,200	626
Unrealized (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net	$ (705)	$ 2,334

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Variable Interest Entities (Details) $ in Thousands		3 Months Ended
	Jan. 01, 2016 USD ($) entity	Mar. 31, 2016 USD ($) property item	Dec. 31, 2015 USD ($) property	Aug. 29, 2014
Company's involvement with VIEs:
Number of unconsolidated joint ventures | item		4
Number of VIE borrowers with debt securities and loan | item		2
Number of joint ventures deconsolidated | entity	3
Cumulative-effect adjustment to cumulative dividends in excess of earnings	$ 500
Vintage Park Development JV
Company's involvement with VIEs:
Number of equity members without substantive interest | item		1
Unconsolidated Variable Interest Entities
Company's involvement with VIEs:
Number of properties leased | property		358
Number of VIE tenants | item		7
CCRC OpCo
Company's involvement with VIEs:
Joint Venture Ownership Percentage				49.00%
Maximum Loss Exposure		$ 230,275
Assets/liability type		Investments in unconsolidated joint ventures
Carrying amount		$ 230,275
Vintage Park Development JV
Company's involvement with VIEs:
Maximum Loss Exposure		$ 8,593
Assets/liability type		Investments in unconsolidated joint ventures
Carrying amount		$ 8,593
Ownership percentage (as a percent)		85.00%
VIE tenants-operating leases
Company's involvement with VIEs:
Number of properties leased | property		48
Maximum Loss Exposure		$ 9,952
Assets/liability type		Lease intangibles, net and straight-line rent receivables
Carrying amount		$ 9,952
HCRMC
Company's involvement with VIEs:
Number of properties leased | property			310
Maximum Loss Exposure		$ 5,107,180
Assets/liability type		Net investment in DFLs and investments in unconsolidated joint ventures
Carrying amount		$ 5,107,180
VIE tenants-DFLs
Company's involvement with VIEs:
Maximum Loss Exposure		$ 598,960
Assets/liability type		Net investment in DFLs
Carrying amount		$ 598,960
Four Seasons
Company's involvement with VIEs:
Maximum Loss Exposure		$ 124,108
Assets/liability type		Loans and marketable debt securities
Carrying amount		$ 124,108
CMBS and LLC investment
Company's involvement with VIEs:
Maximum Loss Exposure		$ 32,944
Assets/liability type		Marketable debt and cost method investments
Carrying amount		$ 32,944
Consolidated Variable Interest Entities | Accounting Standards Update ("ASU") 2015-02 - Consolidation | Adjustment
Company's involvement with VIEs:
Total assets			$ 543,000
Total liabilities			$ 651,000
RIDEA I
Company's involvement with VIEs:
Ownership percentage (as a percent)		90.00%
RIDEA II
Company's involvement with VIEs:
Ownership percentage (as a percent)		80.00%
RIDEA III
Company's involvement with VIEs:
Ownership percentage (as a percent)		90.00%
HCP Ventures V
Company's involvement with VIEs:
Ownership percentage (as a percent)		51.00%
Vintage Park Development JV
Company's involvement with VIEs:
Ownership percentage (as a percent)		90.00%
DownREIT Partnerships
Company's involvement with VIEs:
Number of controlling ownership interest entities as a managing member | item		5

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Concentration of Credit Risk (Details) $ in Thousands		3 Months Ended		12 Months Ended
		Mar. 31, 2016 USD ($) item	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Concentration of risk
Number of RIDEA joint ventures | item		4
Balance Sheets:
Real estate and other property, net		$ 12,065,135		$ 11,994,703
Cash and cash equivalents		94,665	$ 137,170	346,500	$ 183,810
Goodwill, intangible and other assets, net		817,279		802,273
Total assets	[1]	21,199,927		21,449,849
Accounts payable, accrued liabilities and other		433,144		436,239
Total equity		9,630,325	10,555,646	9,746,317	$ 10,997,099
Total liabilities and equity		21,199,927		21,449,849
Income Statements:
Revenues		640,782	610,791
Operating, general and administrative expense		(176,955)	(132,031)
Depreciation and amortization expense		(141,322)	(114,522)
Interest expense		(122,062)	(116,780)
Other income, net		1,222	7,988
Loss on disposal of assets			6,264
Income taxes		(53,038)	77
Net income (loss)		$ 119,745	(237,503)
Brookdale JV | Minimum
Income Statements:
Management fees as percentage of gross revenues		4.50%
Brookdale JV | Maximum
Income Statements:
Management fees as percentage of gross revenues		5.00%
HCRMC
Balance Sheets:
Real estate and other property, net		$ 2,611,800		2,628,500
Cash and cash equivalents		173,800		125,000
Goodwill, intangible and other assets, net		4,526,900		4,598,300
Total assets		7,312,500		7,351,800
Debt and financing obligations		5,783,800		5,836,400
Accounts payable, accrued liabilities and other		1,006,700		982,900
Total equity		522,000		532,500
Total liabilities and equity		7,312,500		$ 7,351,800
Income Statements:
Revenues		984,500	1,054,000
Operating, general and administrative expense		(857,200)	(897,900)
Depreciation and amortization expense		(32,500)	(35,900)
Interest expense		(115,100)	(100,300)
Other income, net		3,500	2,800
Loss on disposal of assets		3,300
(Loss) income from continuing operations before income tax expense		(13,500)	22,700
Income taxes		2,900	(10,100)
(Loss) income from continuing operations		(10,600)	12,600
Income from discontinued operations, net of taxes		100	1,100
Net income (loss)		(10,500)	13,700
Senior housing
Income Statements:
Operating, general and administrative expense		$ (116,136)	(75,510)
Senior housing | CCRC JV
Concentration of risk
Number of RIDEA joint ventures | item		2
Senior housing | Management and Accounting Services | Brookdale JV
Concentration of risk
Number of RIDEA joint ventures | item		15
Investments in Joint Ventures Senior Housing Facilities Number | item		108
Post-acute/skilled
Income Statements:
Operating, general and administrative expense		$ (564)	$ (533)
Management and Accounting Services | Brookdale JV | Minimum
Income Statements:
Management Agreement Number of Renewals | item		3
Management and Accounting Services | Brookdale JV | Maximum
Income Statements:
Management Agreement Number of Renewals | item		4
Management and Accounting Services | Senior housing | Brookdale JV
Income Statements:
Management agreement renewal term (in years)		5 years
Management and Accounting Services | Senior housing | Brookdale JV | Minimum
Income Statements:
Management agreement term (in years)		10 years
Management and Accounting Services | Senior housing | Brookdale JV | Maximum
Income Statements:
Management agreement term (in years)		15 years
Assets | Tenants and Operators | Senior housing | Brookdale JV
Concentration of risk
Concentration risk (as a percent)		27.00%		28.00%
Assets | Tenants and Operators | Senior housing | HCRMC
Concentration of risk
Concentration risk (as a percent)		12.00%		12.00%
Assets | Tenants and Operators | Post-acute/skilled | HCRMC
Concentration of risk
Concentration risk (as a percent)		77.00%		64.00%
Revenue | Tenants and Operators | Senior housing | Brookdale JV
Concentration of risk
Concentration risk (as a percent)		21.00%	25.00%
Revenue | Tenants and Operators | Senior housing | HCRMC
Concentration of risk
Concentration risk (as a percent)		6.00%	8.00%
Revenue | Tenants and Operators | Post-acute/skilled | HCRMC
Concentration of risk
Concentration risk (as a percent)		78.00%	80.00%

[1] HCP, Inc.’s consolidated total assets and total liabilities at March 31, 2016 and December 31, 2015 include certain assets of variable interest entities (“VIEs”) that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at March 31, 2016 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $60 million; land $327 million; accumulated depreciation and amortization $567 million; investments in unconsolidated joint ventures $14 million; accounts receivable $18 million; cash $60 million; restricted cash $23 million; intangible assets, net $197 million; and other assets, net $66 million. Total assets at December 31, 2015 include VIE assets as follows: buildings and improvements $3.4 billion; development costs $54 million; land $327 million; accumulated depreciation and amortization $537 million; investments in unconsolidated joint ventures $14 million; accounts receivable $19 million; cash $61 million; restricted cash $21 million; intangible assets, net $204 million; and other assets, net $63 million. Total liabilities at March 31, 2016 include VIE liabilities as follows: mortgage debt $573 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $23 million from VIEs. Total liabilities at December 31, 2015 include VIE liabilities as follows: mortgage debt $589 million; intangible liabilities, net $10 million; accounts payable and accrued liabilities of $107 million and deferred revenue of $19 million. See Note 16 to the Consolidated Financial Statements for additional information.

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Fair Value Measurements - Recurring basis (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair value on a recurring basis | Level 1
Fair value assets and liabilities measured on recurring basis:
Marketable equity securities	$ 24
Fair value on a recurring basis | Level 2 | Interest-rate swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	7,384
Fair value on a recurring basis | Level 2 | Currency Swap
Fair value assets and liabilities measured on recurring basis:
Derivative assets	2,469
Fair value on a recurring basis | Level 3 | Warrants
Fair value assets and liabilities measured on recurring basis:
Derivative assets	16
Fair Value | Currency Swap
Fair value assets and liabilities measured on recurring basis:
Derivative assets	2,469	$ 1,551
Fair Value | Level 1
Fair value assets and liabilities measured on recurring basis:
Marketable equity securities	24	39
Fair Value | Level 2 | Interest-rate swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative assets		196
Derivative liabilities	7,384	6,251
Fair Value | Level 3 | Warrants
Fair value assets and liabilities measured on recurring basis:
Derivative assets	16	$ 55
Fair Value | Fair value on a recurring basis
Fair value assets and liabilities measured on recurring basis:
Marketable equity securities	24
Fair Value | Fair value on a recurring basis | Interest-rate swap contracts
Fair value assets and liabilities measured on recurring basis:
Derivative liabilities	7,384
Fair Value | Fair value on a recurring basis | Currency Swap
Fair value assets and liabilities measured on recurring basis:
Derivative assets	2,469
Fair Value | Fair value on a recurring basis | Warrants
Fair value assets and liabilities measured on recurring basis:
Derivative assets	$ 16

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Fair Value Measurements - Summary of the Carrying Amounts and Fair Values of the Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Summary of financial instruments
Bank line of credit	$ 810,313	$ 397,432
Senior unsecured notes	8,623,376	9,120,107
Mortgage debt	895,289	932,212
Other debt	95,229	94,445
Carrying Value
Summary of financial instruments
Loans receivable, net	768,896	768,743
Marketable debt securities	100,915	102,958
Marketable equity securities	24	39
Bank line of credit	810,313	397,432
Term loans	511,737	524,807
Senior unsecured notes	8,623,376	9,120,107
Mortgage debt	895,289	932,212
Other debt	95,229	94,445
Carrying Value | Warrants
Summary of financial instruments
Derivative assets	16	55
Carrying Value | Interest-rate swap contracts
Summary of financial instruments
Derivative assets		196
Derivative liabilities	(7,384)	6,251
Carrying Value | Currency Swap
Summary of financial instruments
Derivative assets	2,469	1,551
Fair Value | Level 1
Summary of financial instruments
Marketable equity securities	24	39
Senior unsecured notes	8,854,121	9,390,668
Fair Value | Level 2
Summary of financial instruments
Loans receivable, net	775,109	770,052
Marketable debt securities	100,915	102,958
Bank line of credit	810,313	397,432
Term loans	511,737	524,807
Mortgage debt	936,466	963,786
Other debt	95,229	94,445
Fair Value | Warrants | Level 3
Summary of financial instruments
Derivative assets	16	55
Fair Value | Interest-rate swap contracts | Level 2
Summary of financial instruments
Derivative assets		196
Derivative liabilities	7,384	6,251
Fair Value | Currency Swap
Summary of financial instruments
Derivative assets	$ 2,469	$ 1,551

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Derivative Financial Instruments (Details) £ in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)	Mar. 31, 2016 GBP (£) item	Mar. 31, 2016 USD ($) item
Derivative
Gains or losses recorded to accumulated other comprehensive loss reclassified to earnings	$ 0
Reclassification out of Accumulated Other Comprehensive Income
Effects of Change in Interest Rates
Reclassification of unrealized gains into other income (expense), ineffectiveness	100
Interest rate swap, entered in July 2005, maturity in July 2020
Effects of Change in Interest Rates
+50 Basis Points	1,066
-50 Basis Points	(773)
+100 Basis Points	1,986
-100 Basis Points	(1,692)
Interest rate swap, entered in July 2005, maturity in July 2020 | BMA Swap Index
Derivative
Notional amount			$ 45,600
Fair value of hedge, liabilities			$ (5,487)
Interest rate swap, entered in July 2005, maturity in July 2020 | Cash flow hedge
Derivative
Number of interest-rate swap contracts | item		3	3
Interest rate swap, entered in July 2005, maturity in July 2020 | Cash flow hedge | BMA Swap Index
Derivative
Fixed Rate/Buy Amount (as a percent)		3.82%	3.82%
Interest rate swap, entered in November 2008, maturity in October 2016
Effects of Change in Interest Rates
+50 Basis Points	67
-50 Basis Points	(68)
+100 Basis Points	135
-100 Basis Points	(135)
Interest rate swap, entered in November 2008, maturity in October 2016 | LIBOR
Derivative
Notional amount			$ 24,900
Fair value of hedge, liabilities			$ (532)
Interest rate swap, entered in November 2008, maturity in October 2016 | Cash flow hedge | LIBOR
Derivative
Fixed Rate/Buy Amount (as a percent)		5.95%	5.95%
Floating/Exchange Rate Index, percentage		1.50%	1.50%
Interest rate swap, entered in July 2012, maturity in June 2016
Effects of Change in Interest Rates
+50 Basis Points	209
-50 Basis Points	(200)
+100 Basis Points	417
-100 Basis Points	(401)
Interest rate swap, entered in July 2012, maturity in June 2016 | GBP LIBOR
Derivative
Notional amount | £		£ 137,000
Fair value of hedge, liabilities			$ (29)
Interest rate swap, entered in July 2012, maturity in June 2016 | Cash flow hedge
Derivative
Buy (sell) amount | £		£ 7,200
Interest rate swap, entered in July 2012, maturity in June 2016 | Cash flow hedge | GBP LIBOR
Derivative
Fixed Rate/Buy Amount (as a percent)		1.81%	1.81%
Floating/Exchange Rate Index, percentage		1.20%	1.20%
Interest rate swap, entered in January 2015, maturity in October 2017
Effects of Change in Interest Rates
+50 Basis Points	2,486
-50 Basis Points	(2,494)
+100 Basis Points	4,976
-100 Basis Points	(4,984)
Interest rate swap, entered in January 2015, maturity in October 2017 | GBP LIBOR
Derivative
Notional amount | £		£ 220,000
Fair value of hedge, liabilities			$ (1,336)
Interest rate swap, entered in January 2015, maturity in October 2017 | Cash flow hedge
Derivative
Exchange rate GBP/USD		1.5149	1.5149
Interest rate swap, entered in January 2015, maturity in October 2017 | Cash flow hedge | GBP LIBOR
Derivative
Fixed Rate/Buy Amount (as a percent)		1.79%	1.79%
Floating/Exchange Rate Index, percentage		0.975%	0.975%
Currency swap, entered in July 2012, maturity in June 2016
Derivative
Notional amount | £		£ 7,200
Fair value of foreign currency derivative instruments not designated as hedging instruments, assets			$ 964
Effects of Change in Interest Rates
+50 Basis Points	(47)
-50 Basis Points	57
+100 Basis Points	(99)
-100 Basis Points	109
Currency swap, entered in July 2012, maturity in June 2016 | Cash flow hedge
Derivative
Semi annual buy (sell) amount			$ 11,400
Exchange rate GBP/USD		1.5695	1.5695
Currency swap, entered in January 2015, maturity in October 2017
Derivative
Notional amount | £		£ 20,000
Fair value of foreign currency hedge, assets			$ 1,505
Effects of Change in Interest Rates
+50 Basis Points	(72)
-50 Basis Points	216
+100 Basis Points	(215)
-100 Basis Points	$ 360
Currency swap, entered in January 2015, maturity in October 2017 | Cash flow hedge
Derivative
Buy (sell) amount | £		£ 1,000
Monthly buy (sell) amount			$ 30,300

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Subsequent Events (Details) $ in Thousands	1 Months Ended	3 Months Ended
	May. 31, 2016 USD ($) facility property	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
Subsequent Events
Loans receivable, net		$ 768,896		$ 768,743
Payments to Acquire Notes Receivable		$ 117,282	$ 176,504
Subsequent event
Subsequent Events
Number of facility sales expected to close | facility	17
Subsequent event | RIDEA II
Subsequent Events
Cash proceeds	$ 109,000
Note receivable	$ 636,000
Subsequent event | HCP/CPA/Brookdale JV
Subsequent Events
Investment ownership percentage	40.00%
SpinCo | Subsequent event
Subsequent Events
Number of properties intended to spin off | property	338
HCP/CPA JV | Subsequent event
Subsequent Events
Investment ownership percentage	50.10%
An investor group led by Columbia Pacific Advisors, LLC [Member] | HCP/CPA JV | Subsequent event
Subsequent Events
Investment ownership percentage	49.90%