NOTE 14. Segment Disclosures

The Company evaluates its business and allocates resources based on its reportable business segments: (i) SH NNN, (ii) SHOP, (iii) life science and (iv) medical office. 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. The Company has non-reportable segments that are comprised primarily of the Company’s debt investments, hospital properties and U.K. care homes. The accounting policies of the segments are the same as those described under Summary of Significant Accounting Policies (see Note 2). During the year ended December 31, 2016, 17 SH NNN facilities were transitioned to a RIDEA structure (reported in the Company’s SHOP segment). There were no intersegment sales or transfers during the years ended December 31, 2015 and 2014. The Company evaluates performance based upon: (i) property net operating income from continuing operations (“NOI”) and (ii) adjusted NOI (cash NOI) of the combined consolidated and unconsolidated 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.

The following tables summarize information for the reportable segments (in thousands):

For the year ended December 31, 2016:


					Life		Medical		Other		Corporate
Segments	SH NNN		SHOP		Science		Office		Non-reportable		Non-segment		Total
Rental revenues(1)	$	423,118	$	686,822	$	358,537	$	446,280	$	125,729	$	—	$	2,040,486
HCP share of unconsolidated JV revenues		—		204,591		7,599		1,996		1,618		—		215,804
Less:
Operating expenses		(6,710)		(480,870)		(72,478)		(173,687)		(4,654)		—		(738,399)
HCP share of unconsolidated JV operating expenses		—		(166,791)		(1,601)		(595)		(48)		—		(169,035)
NOI		416,408		243,752		292,057		273,994		122,645		—		1,348,856
Non-cash adjustments to NOI(2)		(7,566)		20,076		(3,003)		(3,557)		(3,019)		—		2,931
Adjusted NOI		408,842		263,828		289,054		270,437		119,626		—		1,351,787
Addback non-cash adjustments		7,566		(20,076)		3,003		3,557		3,019		—		(2,931)
Interest income		—		—		—		—		88,808		—		88,808
Interest expense		(9,499)		(29,745)		(2,357)		(5,895)		(9,153)		(407,754)		(464,403)
Depreciation and amortization		(136,146)		(108,806)		(130,829)		(161,790)		(30,537)		—		(568,108)
General and administrative		—		—		—		—		—		(103,611)		(103,611)
Acquisition and pursuit costs		—		—		—		—		—		(9,821)		(9,821)
Gain on sales of real estate, net		48,744		675		49,042		8,333		57,904		—		164,698
Loss on debt extinguishments		—		—		—		—		—		(46,020)		(46,020)
Other income, net		—		—		—		—		—		3,654		3,654
Income tax expense		—		—		—		—		—		(4,473)		(4,473)
Less: HCP share of unconsolidated JV NOI		—		(37,800)		(5,998)		(1,401)		(1,570)		—		(46,769)
Equity income from unconsolidated joint ventures		—		4,226		2,927		3,350		857		—		11,360
Total discontinued operations		—		—		—		—		—		265,755		265,755
Net income (loss)	$	319,507	$	72,302	$	204,842	$	116,591	$	228,954	$	(302,270)	$	639,926

For the year ended December 31, 2015:


					Life		Medical		Other		Corporate
Segments	SH NNN		SHOP		Science		Office		Non-reportable		Non-segment		Total
Rental revenues(1)	$	428,269	$	518,264	$	342,984	$	415,351	$	123,437	$	—	$	1,828,305
HCP share of unconsolidated JV revenues		—		181,410		7,106		1,870		1,600		—		191,986
Less:														—
Operating expenses		(3,427)		(371,016)		(70,217)		(162,054)		(3,965)		—		(610,679)
HCP share of unconsolidated JV operating expenses		—		(151,962)		(1,612)		(612)		(73)		—		(154,259)
NOI		424,842		176,696		278,261		254,555		120,999		—		1,255,353
Non-cash adjustments to NOI(2)		(9,716)		34,045		(10,392)		(4,933)		(2,356)		—		6,648
Adjusted NOI		415,126		210,741		267,869		249,622		118,643		—		1,262,001
Addback non-cash adjustments		9,716		(34,045)		10,392		4,933		2,356		—		(6,648)
Interest income		—		—		—		—		112,184		—		112,184
Interest expense		(16,899)		(31,869)		(2,878)		(9,603)		(9,745)		(408,602)		(479,596)
Depreciation and amortization		(125,538)		(80,981)		(126,241)		(143,682)		(28,463)		—		(504,905)
General and administrative		—		—		—		—		—		(95,965)		(95,965)
Acquisition and pursuit costs		—		—		—		—		—		(27,309)		(27,309)
Impairments, net		—		—		—		—		(108,349)		—		(108,349)
Gain on sales of real estate, net		6,325		—		—		52		—		—		6,377
Other income, net		—		—		—		—		—		16,208		16,208
Income tax benefit		—		—		—		—		—		9,807		9,807
Less: HCP share of unconsolidated JV NOI		—		(29,448)		(5,494)		(1,258)		(1,527)		—		(37,727)
Equity (loss) income from unconsolidated joint ventures		—		(9,032)		2,718		12,904		—		—		6,590
Total discontinued operations		—		—		—		—		—		(699,086)		(699,086)
Net income (loss)	$	288,730	$	25,366	$	146,366	$	112,968	$	85,099	$	(1,204,947)	$	(546,418)

For the year ended December 31, 2014:


					Life		Medical		Other		Corporate
Segments	SH NNN		SHOP		Science		Office		Non-reportable		Non-segment		Total
Rental revenues(1)	$	538,113	$	243,612	$	314,114	$	368,055	$	99,316	$	—	$	1,563,210
HCP share of unconsolidated JV revenues		—		57,740		6,888		1,825		—		—		66,453
Less:
Operating expenses		(3,629)		(163,650)		(63,080)		(147,144)		(3,791)		—		(381,294)
HCP share of unconsolidated JV operating expenses		—		(49,571)		(1,749)		(571)		—		—		(51,891)
NOI		534,484		88,131		256,173		222,165		95,525		—		1,196,478
Non-cash adjustments to NOI(2)		(66,474)		10,160		(10,375)		(1,291)		(805)		—		(68,785)
Adjusted NOI		468,010		98,291		245,798		220,874		94,720		—		1,127,693
Addback non-cash adjustments		66,474		(10,160)		10,375		1,291		805		—		68,785
Interest income		—		—		—		—		73,623		—		73,623
Interest expense		(32,866)		(31,648)		(3,141)		(9,396)		(4,441)		(358,250)		(439,742)
Depreciation and amortization		(158,881)		(42,153)		(111,552)		(124,141)		(18,284)		(5)		(455,016)
General and administrative		—		—		—		—		—		(81,765)		(81,765)
Acquisition and pursuit costs		—		—		—		—		—		(17,142)		(17,142)
Gain on sales of real estate, net		3,288		—		—		—		—		—		3,288
Other income, net		—		—		—		—		—		9,252		9,252
Income tax benefit		—		—		—		—		—		506		506
Less: HCP share of unconsolidated JV NOI		—		(8,169)		(5,139)		(1,254)		—		—		(14,562)
Equity (loss) income from unconsolidated joint ventures		—		(4,110)		2,834		(2,329)		—		—		(3,605)
Total discontinued operations		—		—		—		—		—		665,276		665,276
Net income	$	346,025	$	2,051	$	139,175	$	85,045	$	146,423	$	217,872	$	936,591

(1)

Represents rental and related revenues, tenant recoveries, resident fees and services, and income from DFLs.

(2)

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

The following table summarizes the Company’s revenues by segment (in thousands):


	Year Ended
	December 31,
Segments	2016		2015		2014
SH NNN	$	423,118	$	428,269	$	538,113
SHOP		686,822		518,264		243,612
Life science		358,537		342,984		314,114
Medical office		446,280		415,351		368,055
Other non-reportable segments		214,537		235,621		172,939
Total revenues	$	2,129,294	$	1,940,489	$	1,636,833

The following table summarizes the Company’s total assets by segment (in thousands):


	December 31,
Segments	2016		2015
SH NNN	$	3,871,720	$	5,092,443
SHOP		3,623,931		3,195,384
Life science		4,029,500		3,682,308
Medical office		3,737,939		3,436,884
Gross reportable segment assets		15,263,090		15,407,019
Accumulated depreciation and amortization		(2,900,060)		(2,704,425)
Net reportable segment assets		12,363,030		12,702,594
Other non-reportable segment assets		1,685,563		1,787,579
Assets held for sale and discontinued operations, net		927,866		5,654,326
Other non-segment assets		782,806		1,305,350
Total assets	$	15,759,265	$	21,449,849

As a result of a change in reportable segments, the Company allocated goodwill to the new reporting units using a relative fair value approach. The Company completed a goodwill impairment assessment for all reporting units immediately prior to the reallocation and determined that no impairment existed at September 30, 2016. Additionally, the Company completed the required annual impairment test during the fourth quarter of 2016 and no impairment was recognized. At December 31, 2016, goodwill of $42 million was allocated to segment assets as follows: (i) SH NNN—$16 million, (ii) SHOP—$9 million, (iii) medical office—$11 million and (iv) other—$6 million. At December 31, 2015, goodwill of $47 million was allocated to segment assets as follows: (i) SH NNN—$21 million, (ii) SHOP—$9 million, (iii) medical office—$11 million and (iv) other—$6 million.