Real Property Acquisitions and Development

The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their relative fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs. Transaction costs related to asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in “Other expenses” on our Consolidated Statements of Comprehensive Income. Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries.

Acquisition of Quality Care Properties

On July 26, 2018, we completed the acquisition of Quality Care Properties Inc. ("QCP"), with QCP shareholders receiving $20.75 of cash for each share of QCP common stock and all existing QCP debt was repaid upon closing. Prior to the acquisition, ProMedica Health System ("ProMedica") completed the acquisition of HCR ManorCare. Immediately following the acquisition of QCP, we formed an 80/20 joint venture with ProMedica to own the real estate associated with the 218 seniors housing properties leased to ProMedica under a lease agreement with the following key terms: (i) 15-year absolute triple-net master lease with three five-year renewal options; (ii) initial annual cash rent of $179 million with a year one escalator of 1.375% and 2.75% annual escalators thereafter; and (iii) full corporate guarantee of ProMedica. Additionally, we acquired 59 seniors housing properties classified as held for sale and leased to ProMedica under a non-yielding lease, 12 seniors housing properties and one surgery center classified as held for sale and leased to operators under existing triple-net leases, 14 seniors housing properties leased to operators under existing triple-net leases and one multi-tenant medical office building leased to various tenants.

We drew on a $1.0 billion term loan facility to fund a portion of the acquisition cash consideration and other related expenses. The term loan facility matures two years from the closing. In addition to the term loan facility draw, we drew on our unsecured credit facility described in Note 9, in order to fund the acquisition. The aggregate consideration to acquire the QCP shares and repay outstanding QCP debt was approximately $3.5 billion.

We concluded that the QCP acquisition met the definition of an asset acquisition under ASU No. 2017-01, "Clarifying the Definition of a Business". The following table presents the purchase price calculation and the allocation to assets acquired and liabilities assumed based upon their relative fair value:



(In thousands)
Land and land improvements		$	417,983
Buildings and improvements		2,249,803
Acquired lease intangibles		15,512
Real property held for sale		418,297
Cash and cash equivalents		381,913
Restricted cash		4,981
Receivables and other assets		1,322
	Total assets acquired	3,489,811
Accrued expenses and other liabilities		(13,199		)
	Total liabilities assumed	(13,199		)
Noncontrolling interests		(512,741		)
	Net assets acquired	$	2,963,871

Net assets acquired in the QCP acquisition detailed above are included in the respective segment tables below.

Triple-net Activity



		Nine Months Ended
(In thousands)		September 30, 2018			September 30, 2017
Land and land improvements		$	413,588		$	31,948
Buildings and improvements		2,239,422			206,910
Acquired lease intangibles		12,383			—
Real property held for sale		396,265			—
Receivables and other assets		1,322			—
	Total assets acquired⁽¹⁾	3,062,980			238,858
Accrued expenses and other liabilities		(13,199		)	(21,236		)
	Total liabilities assumed	(13,199		)	(21,236		)
Noncontrolling interests		(512,741		)	(7,275		)
Non-cash acquisition related activity⁽²⁾		—			(54,901		)
	Cash disbursed for acquisitions	2,537,040			155,446
Construction in progress additions		49,619			106,186
Less:	Capitalized interest	(1,932		)	(3,886		)
	Foreign currency translation	180			(656		)
Cash disbursed for construction in progress		47,867			101,644
Capital improvements to existing properties		6,766			17,873
	Total cash invested in real property, net of cash acquired	$	2,591,673		$	274,963

⁽¹⁾ Excludes $386,894,000 of unrestricted and restricted cash acquired during the nine months ended September 30, 2018.

⁽²⁾ For the nine months ended September 30, 2017, $54,901,000 is related to the acquisition of assets previously financed as a real estate loan receivable.

Seniors Housing Operating Activity



		Nine Months Ended
(In thousands)		September 30, 2018			September 30, 2017
Land and land improvements		$	47,865		$	31,006
Building and improvements		535,436			384,522
Acquired lease intangibles		68,084			48,197
Receivables and other assets		1,255			3,164
	Total assets acquired⁽¹⁾	652,640			466,889
Secured debt		(89,973		)	—
Accrued expenses and other liabilities		(14,686		)	(43,364		)
	Total liabilities assumed	(104,659		)	(43,364		)
Noncontrolling interests		(9,818		)	(4,701		)
Non-cash acquisition related activity⁽²⁾		—			(59,065		)
	Cash disbursed for acquisitions	538,163			359,759
Construction in progress additions		28,222			65,282
Less:	Capitalized interest	(2,608		)	(5,996		)
	Foreign currency translation	2,151			(6,218		)
Cash disbursed for construction in progress		27,765			53,068
Capital improvements to existing properties		127,274			110,372
	Total cash invested in real property, net of cash acquired	$	693,202		$	523,199

⁽¹⁾ Excludes $2,442,000 and $6,273,000 of unrestricted and restricted cash acquired during the nine months ended September 30, 2018 and 2017, respectively.

⁽²⁾ Includes $6,349,000 related to the acquisition of assets previously financed as real estate loans receivable and $51,097,000 previously financed as an investment in an unconsolidated entity during the nine months ended September 30, 2017.

Outpatient Medical Activity



		Nine Months Ended
(In thousands)		September 30, 2018			September 30, 2017
Land and land improvements		$	18,496		$	25,060
Buildings and improvements		79,205			62,336
Acquired lease intangibles		11,271			8,397
Real property held for sale		22,032			—
Receivables and other assets		6			3
	Total assets acquired⁽¹⁾	131,010			95,796
Secured debt		(14,769		)	(25,709		)
Accrued expenses and other liabilities		(910		)	(2,210		)
	Total liabilities assumed	(15,679		)	(27,919		)
Noncontrolling interests		—			(9,080		)
	Cash disbursed for acquisitions	115,331			58,797
Construction in progress additions		16,733			33,495
Less:	Capitalized interest	(1,817		)	(1,847		)
	Accruals⁽²⁾	(2,402		)	11,708
Cash disbursed for construction in progress		12,514			43,356
Capital improvements to existing properties		39,595			30,897
	Total cash invested in real property	$	167,440		$	133,050

⁽¹⁾ Excludes $2,244,000 and $0 of unrestricted and restricted cash acquired during the nine months ended September 30, 2018 and 2017, respectively.

⁽²⁾ Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the current period.

Construction Activity

The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented (in thousands):



	Nine Months Ended
	September 30, 2018		September 30, 2017
Development projects:
Triple-net	$	90,055	$	283,472
Seniors housing operating	86,931		3,634
Outpatient medical	11,358		63,036
Total development projects	188,344		350,142
Expansion projects	8,879		10,336
Total construction in progress conversions	$	197,223	$	360,478