Real Estate Transactions

Dispositions of Real Estate

Held for Sale

At June 30, 2018, 25 SHOP facilities, 11 senior housing triple-net facilities, four life science facilities and one undeveloped life science land parcel were classified as held for sale, with an aggregate carrying value of $693 million, primarily comprised of real estate assets of $652 million, net of accumulated depreciation of $184 million. At December 31, 2017, two senior housing triple-net facilities, four life science facilities and six SHOP facilities were classified as held for sale, with an aggregate carrying value of $417 million, primarily comprised of real estate assets of $393 million, net of accumulated depreciation of $93 million. Liabilities of assets held for sale is primarily comprised of intangible and other liabilities at both June 30, 2018 and December 31, 2017.

RIDEA II Sale Transaction

In January 2017, the Company completed the contribution of its ownership interest in RIDEA II to an unconsolidated JV owned by HCP and an investor group led by Columbia Pacific Advisors, LLC (“CPA”) (the “HCP/CPA JV”). Also in January 2017, RIDEA II was recapitalized with $602 million of debt, of which $360 million was provided by a third-party and $242 million was provided by HCP. In return for both transaction elements, the Company received combined proceeds of $480 million from the HCP/CPA JV and $242 million in loans receivable and retained an approximately 40% ownership interest in RIDEA II. This transaction resulted in the Company deconsolidating the net assets of RIDEA II and recognizing a net gain on sale of $99 million. Refer to Note 2 for the impact of adopting the Revenue ASUs on January 1, 2018 to the Company’s partial sale of RIDEA II in the first quarter of 2017.

On November 1, 2017, the Company entered into a definitive agreement with an investor group led by CPA to sell its remaining 40% ownership interest in RIDEA II for $90 million and cause CPA to refinance the Company’s $242 million of loans receivable from RIDEA II. The Company completed the transaction in June 2018, resulting in proceeds of $332 million. The Company no longer holds an economic interest in RIDEA II.

U.K. Portfolio

In June 2018, the Company closed on the previously announced joint venture with an institutional investor (the “U.K. JV”) through which the Company sold a 51% interest in substantially all United Kingdom (“U.K.”) assets previously owned by the Company (the “U.K. Portfolio”) based on a total value of £382 million ($507 million). The Company retained a 49% noncontrolling interest in the joint venture and received total proceeds of $402 million, including proceeds from the refinancing of the Company’s previously held intercompany loans. Upon closing the U.K. JV, the Company deconsolidated the U.K. Portfolio, recognized its retained noncontrolling interest investment at fair value ($105 million) and recognized a gain on sale of $11 million, net of $17 million of cumulative foreign currency translation reclassified from other comprehensive income (see Note 18 for the reclassification impact of the Company’s hedge of its net investment in the U.K.). The U.K. JV provides numerous mechanisms by which the joint venture partner can acquire the Company’s remaining interest in the U.K. JV. The fair value of the Company’s retained noncontrolling interest investment is based on Level 2 measurements within the fair value hierarchy.

Although the U.K. JV closed on June 29, 2018, the Company was unable to access the proceeds held in escrow until July 2, 2018. As such, at June 30, 2018, the Company held a $402 million receivable from the escrow agent. On July 2, 2018, the Company received the full amount of proceeds in satisfaction of the receivable. The U.K. JV transaction is therefore treated as a non-cash transaction on the consolidated statement of cash flows for the six months ended June 30, 2018.

Additionally, the Company is marketing for sale its remaining £11 million development loan to Maria Mallaband Care Group (“MMCG”). Upon sale, the Company’s only remaining investment in the U.K. will be its noncontrolling interest investment in the U.K. JV.

2018 Dispositions

In January 2018, the Company sold two SHOP assets for $35 million, resulting in gain on sales of $21 million (includes asset sales to Brookdale as discussed in Note 3 above).

In April 2018, the Company sold four SHOP assets and two senior housing triple-net assets for $266 million, resulting in gain on sales of $26 million (includes asset sales to Brookdale as discussed in Note 3 above).

In June 2018, the Company sold four SHOP assets for $38 million, resulting in no material gain or loss on sales.

In July 2018, the Company sold four life science assets in South San Francisco and four SHOP assets for $288 million and expects to recognize gain on sales of approximately $80 million during the third quarter of 2018.

2017 Dispositions

In January 2017, the Company sold four life science facilities in Salt Lake City, Utah for $76 million, resulting in a gain on sales of $45 million.

In March 2017, the Company sold 64 senior housing triple-net assets, previously under triple-net leases with Brookdale, for $1.125 billion to affiliates of Blackstone Real Estate Partners VIII, L.P., resulting in a gain on sale of $170 million.

In April 2017, the Company sold a land parcel in San Diego, California for $27 million and one life science building in San Diego, California for $5 million, resulting in total gain on sales of $1 million.

In August 2017, the Company sold two senior housing triple-net facilities for $15 million, resulting in gain on sales of $5 million.

In October 2017, the Company sold two senior housing triple-net facilities for $12 million, resulting in gain on sales of $7 million.

In November 2017, the Company sold one medical office building (“MOB”) for $11 million and one SHOP facility for $24 million, resulting in gain on sales of $29 million.

In December 2017, the Company sold three SHOP facilities for $17 million and two MOBs for $3 million, resulting in loss on sales of $2 million.

Investments in Real Estate

During the six months ended June 30, 2018, the Company acquired development rights on a land parcel in the Boston suburb of Lexington, Massachusetts for $21 million. The Company commenced a life science development on the land in 2018.

During the year ended December 31, 2017, the Company acquired 20 properties, the impact of which is summarized in the following table:



	Consideration				Assets Acquired
Segment	Cash Paid		Liabilities Assumed		Real Estate		Net Intangibles
SHOP	$	44,258	$	797	$	37,940	$	7,115
Life science	315,255		3,524		305,760		13,019
Medical office	201,240		1,104		184,115		18,229
	$	560,753	$	5,425	$	527,815	$	38,363

MOB JV

In July 2018, the Company and Morgan Stanley Real Estate Investment (“MSREI”) entered into definitive agreements to form a joint venture to own a portfolio of MOBs. To form the joint venture, MSREI expects to contribute cash and HCP expects to contribute nine wholly-owned MOBs (the “Contributed Assets”). The Contributed Assets are primarily located in Texas and Florida and are valued at approximately $320 million. The joint venture intends to use the cash contributed by MSREI to acquire an additional portfolio of MOBs in Greenville, South Carolina. Concurrent with acquiring the additional MOBs, the joint venture will enter into 10-year leases with an anchor tenant on each MOB, which will account for approximately 94% of the total leasable space in the portfolio. The Company expects to acquire the portfolio in South Carolina and enter into the new leases during the second half of 2018.

Impairments of Real Estate

During the second quarter 2018, in conjunction with classifying two underperforming SHOP portfolios as held for sale (13 assets total), the Company concluded that the assets were impaired and wrote-down the carrying value of the assets to each asset’s respective fair value less estimated costs to sell. Accordingly, the Company recognized a $6 million impairment charge during the second quarter of 2018. The fair value of the assets is based on contracted sales prices which are considered to be Level 2 measurements within the fair value hierarchy.

Additionally, during the second quarter 2018, in conjunction with classifying an undeveloped life science land parcel as held for sale, the Company concluded that the land was impaired and wrote-down its carrying value to fair value less estimated costs to sell. Accordingly, the Company recognized an $8 million impairment charge during the second quarter of 2018. The fair value of the asset is based on contracted sales prices which are considered to be Level 2 measurements within the fair value hierarchy.