10-K 1 201110-K.htm FORM 10-K  

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2011

Commission File No. 1-8923

 

 

 

HEALTH CARE REIT, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

34-1096634

 

 

 

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

4500 Dorr Street, Toledo, Ohio

 

43615

 

 

 

(Address of principal executive office)

 

(Zip Code)

 

(419) 247-2800

(Registrant’s telephone number, including area code)  

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $1.00 par value

New York Stock Exchange

7.875% Series D Cumulative

Redeemable Preferred Stock, $1.00 par value

New York Stock Exchange

7.625% Series F Cumulative

Redeemable Preferred Stock, $1.00 par value

New York Stock Exchange

6.500% Series I Cumulative

Convertible Perpetual Preferred Stock, $1.00 par value

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:  None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  þ   No 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes    No  þ 

 

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 the filing requirements for at least the past 90 days.  Yes  þ   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 for such shorter period that the registrant was required to submit and post such files).  Yes  þ   No 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. 

 

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large accelerated filer þ  

 

Accelerated filer o  

 

Non-accelerated filer   o

(Do not check if a smaller reporting company)

 

Smaller reporting company o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No  þ 

 

The aggregate market value of the shares of voting common stock held by non-affiliates of the registrant, computed by reference to the closing sales price of such shares on the New York Stock Exchange as of the last business day of the registrant’s most recently completed second fiscal quarter was $9,247,925,006.

 

As of January 31, 2012, the registrant had 192,618,772 shares of common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant’s definitive proxy statement for the annual stockholders’ meeting to be held May 3, 2012, are incorporated by reference into Part III.

 


 

 

HEALTH CARE REIT, INC.

2011 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

 

 

 

Page

 

PART I

 

 

 

Item 1.

Business

3

Item 1A.

Risk Factors

25

Item 1B.

Unresolved Staff Comments

34

Item 2.

Properties

35

Item 3.

Legal Proceedings

37

 

 

 

 

PART II

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

37

Item 6.

Selected Financial Data

39

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

70

Item 8.

Financial Statements and Supplementary Data

71

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

101

Item 9A.

Controls and Procedures

101

Item 9B.

Other Information

102

 

 

 

 

PART III

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

103

Item 11.

Executive Compensation

103

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

103

Item 13.

Certain Relationships and Related Transactions and Director Independence

103

Item 14.

Principal Accounting Fees and Services

103

 

 

 

 

PART IV

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

104

 

 

 

 


 

 

PART I

 

Item 1.  Business 

 

General

 

Health Care REIT, Inc. is a real estate investment trust (“REIT”) that has been at the forefront of seniors housing and health care real estate since the company was founded in 1970.  We are an S&P 500 company headquartered in Toledo, Ohio and our portfolio spans the full spectrum of seniors housing and health care real estate, including seniors housing communities, skilled nursing/post-acute facilities, medical office buildings, inpatient and outpatient medical centers and life science facilities. Our capital programs, when combined with comprehensive planning, development and property management services, make us a single-source solution for acquiring, planning, developing, managing, repositioning and monetizing real estate assets.  More information is available on the Internet at www.hcreit.com.

 

Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in rental and interest income and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, customer and geographic location.

 

Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund operations, meet debt service obligations (both principal and interest), make dividend distributions and complete construction projects in process. We also continue to evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our unsecured line of credit arrangement, internally generated cash and the proceeds from sales of real property. Our investments generate cash from rent and interest receipts, resident fees and services and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under the unsecured line of credit arrangement, has historically been provided through a combination of public and private offerings of debt and equity securities and the incurrence or assumption of secured debt.

 

References herein to “we,” “us,” “our” or the “Company” refer to Health Care REIT, Inc. and its subsidiaries unless specifically noted otherwise.

 

Portfolio of Properties

 

The following table summarizes our portfolio as of December 31, 2011:

 

   

Investments

  

Percentage of

  

Number of

  

# Beds/Units

  

  

  

Investment per  

  

  

Type of Property  

(in thousands)

  

Investments

  

Properties

  

or Sq. Ft.

  

  

  

metric(1)

  

States

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Seniors housing triple-net  

$

 4,029,818 

  

28.1%

  

 282 

  

 25,133 

  

units

  

$

 163,293 

  

per unit  

  

39

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Skilled nursing/post-acute  

  

 3,527,468 

  

24.6%

  

 307 

  

 39,825 

  

beds

  

  

 89,997 

  

per bed  

  

28

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Seniors housing operating  

  

 2,792,088 

  

19.5%

  

 112 

  

 12,420 

  

units

  

  

 224,806 

  

per unit  

  

21

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Hospitals  

  

 911,482 

  

6.4%

  

 36 

  

 2,165 

  

beds

  

  

 421,007 

  

per bed  

  

17

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Medical office buildings(2)

  

 2,727,450 

  

19.0%

  

 193 

  

 11,276,994 

  

sq. ft.

  

  

 255 

  

per sq. ft.  

  

30

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Life science buildings(2)

  

 337,800 

  

2.4%

  

 7 

  

  

  

  

  

  

n/a

  

   

  

1

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Totals  

$

 14,326,106 

  

100.0%

  

 937 

  

  

  

  

  

  

  

  

   

  

46

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

(1) Investment per metric was computed by using the total committed investment amount of $14,609,005,000, which includes net real estate investments, our share of investments in unconsolidated entities and unfunded construction commitments for which initial funding has commenced which amounted to $13,942,350,000, $383,756,000 and $282,899,000, respectively.

(2) Includes our share of investments in unconsolidated entities. Please see Note 7 to our consolidated financial statements for additional information.

 

Property Types

 

We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our three business segments — seniors housing triple-net, seniors housing operating, and medical facilities. For additional information regarding business segments, see Note 17 to our consolidated financial statements.  The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 to our consolidated financial statements).  The following is a summary of our various property types.

 

3

 


 

 

Seniors Housing Triple-Net

 

Our seniors housing triple-net properties include independent living/continuing care retirement communities, assisted living facilities, Alzheimer’s/dementia facilities, skilled nursing/post-acute facilities and combinations thereof. We invest in seniors housing triple-net real estate primarily through acquisitions and development. Properties are primarily leased under triple-net leases and we are not involved in property management.  Our properties include stand-alone facilities that provide one level of service, combination facilities that provide multiple levels of service, and communities or campuses that provide a wide range of services.

 

Independent Living Facilities.  Independent living facilities are age-restricted, multifamily properties with central dining facilities that provide residents access to meals and other services such as housekeeping, linen service, transportation and social and recreational activities.

 

Continuing Care Retirement Communities.  Continuing care retirement communities include a combination of detached homes, an independent living facility, an assisted living facility and/or a skilled nursing facility on one campus. These communities are appealing to residents because there is no need for relocating when health and medical needs change. Resident payment plans vary, but can include entrance fees, condominium fees and rental fees. Many of these communities also charge monthly maintenance fees in exchange for a living unit, meals and some health services.

 

Assisted Living Facilities.  Assisted living facilities are state regulated rental properties that provide the same services as independent living facilities, but also provide supportive care from trained employees to residents who require assistance with activities of daily living, including management of medications, bathing, dressing, toileting, ambulating and eating.

 

Alzheimer’s/Dementia Care Facilities.  Certain assisted living facilities may include state licensed settings that specialize in caring for those afflicted with Alzheimer’s disease and/or other types of dementia.

 

Skilled Nursing/Post-Acute Facilities.  Skilled nursing/post-acute facilities are licensed daily rate or rental properties where the majority of individuals require 24-hour nursing and/or medical care. Generally, these properties are licensed for Medicaid and/or Medicare reimbursement and are subject to triple-net operating leases.  All facilities offer some level of rehabilitation services.  Some facilities offer rehabilitation units specializing in cardiac, orthopedic, dialysis, neurological or pulmonary rehabilitation, which focus on higher acuity patients.

 

     Our seniors housing triple-net segment accounted for 45%, 57% and 67% of total revenues (including discontinued operations and our pro rata share of unconsolidated entities) for the years ended December 31, 2011, 2010 and 2009, respectively.  We lease 150 facilities to Genesis HealthCare, LLC pursuant to a long-term, triple-net master lease.  In addition to rent, the master lease requires Genesis to pay all operating costs, utilities, real estate taxes, insurance, building repairs, maintenance costs and all obligations under the ground leases.  All obligations under the master lease have been guaranteed by FC-GEN Operations Investment, LLC.  For the year ended December 31, 2011, our lease with Genesis accounted for approximately 26% of our seniors housing triple-net segment revenues and 12% of our total revenues.

 

Seniors Housing Operating

 

Our seniors housing operating properties include independent living facilities, assisted living facilities, Alzheimer’s facilities and combinations thereof.  Descriptions of these facility types are provided above under Seniors Housing Triple-Net.  We invest in seniors housing operating real estate primarily through acquisitions. Properties are primarily held in consolidated entities with operating partners, structured to take advantage of the REIT Investment Diversification Act of 2007 (“RIDEA”).  Our properties include stand-alone facilities that provide one level of service, combination facilities that provide multiple levels of service, and communities or campuses that provide a wide range of services.

 

     Our seniors housing operating segment accounted for 31%, 7% and 0% of total revenues (including discontinued operations and our pro rata share of unconsolidated entities) for the years ended December 31, 2011, 2010 and 2009, respectively.  We have partnerships with Merrill Gardens LLC, Benchmark Senior Living, LLC and Silverado Senior Living, Inc. to own and operate portfolios of 48, 34 and 19 facilities, respectively.  In each instance, our partner provides management services to the properties pursuant to an incentive-based management contract.  We rely on our partners to effectively and efficiently manage these properties.  The following table provides information about our seniors housing operating concentration for the year ended December 31, 2011:

 

Partner                                                                                   % of Segment Revenues                    % of Total Revenues

Merrill Gardens LLC                                                                           34%                                                        11%

Benchmark Senior Living, LLC                                                        36%                                                        11%

Silverado Senior Living, Inc.                                                             21%                                                        6%

 

4

 


 

 

 

Medical Facilities

 

Our medical facilities include medical office buildings, hospitals and life science buildings.  Our medical office buildings are typically leased to multiple tenants and generally require a certain level of property management. Our hospital investments are typically structured similar to our seniors housing triple-net investments.  Our life science investments represent investments in an unconsolidated joint venture entity (see Note 7 to our consolidated financial statements).

 

Medical Office Buildings.  The medical office building portfolio consists of health care related buildings that include physician offices, ambulatory surgery centers, diagnostic facilities, outpatient services and/or labs. Our portfolio has a strong affiliation with health systems: Approximately 87% of our medical office building portfolio is affiliated with health systems by having buildings on hospital campuses or serving as satellite locations for the health system and their physicians.

 

Hospitals.  Our hospitals generally include acute care hospitals, inpatient rehabilitation hospitals, and long-term acute care hospitals. Acute care hospitals provide a wide range of inpatient and outpatient services, including, but not limited to, surgery, rehabilitation, therapy and clinical laboratories. Inpatient rehabilitation hospitals provide inpatient services for patients with intensive rehabilitation needs. Long-term acute care hospitals provide inpatient services for patients with complex medical conditions that require more intensive care, monitoring or emergency support than is available in most skilled nursing facilities.

 

Life Science Buildings.  The life science building portfolio consists of laboratory and office facilities specifically designed and constructed for use by biotechnology and pharmaceutical companies.  These facilities, located adjacent to The Massachusetts Institute of Technology, which is a well established market known for pharmaceutical and biotechnology research, are similar to commercial office buildings with advanced HVAC, ventilation, electrical and mechanical systems.

 

     Our medical facilities segment accounted for 24%, 35% and 33% of total revenues (including discontinued operations and our pro rata share of unconsolidated entities) for the years ended December 31, 2011, 2010 and 2009, respectively.

 

Investments

 

We invest in seniors housing and health care real estate primarily through acquisitions and developments. For additional information regarding acquisition and development activity, please see Note 3 to our consolidated financial statements.  We diversify our investment portfolio by property type, customer and geographic location. In determining whether to invest in a property, we focus on the following: (1) the experience of the obligor’s management team; (2) the historical and projected financial and operational performance of the property; (3) the credit of the obligor; (4) the security for the lease or loan; (5) the real estate attributes of the building and its location; and (6) the capital committed to the property by the obligor. We conduct market research and analysis for all potential investments. In addition, we review the value of all properties, the interest rates and covenant requirements of any facility-level debt to be assumed by us at the time of the acquisition and the anticipated sources of repayment of any of the obligor’s existing debt that is not to be assumed by us at the time of the acquisition.

 

We monitor our investments through a variety of methods determined by the type of property. Our asset management process for seniors housing triple-net properties generally includes review of monthly financial statements and other operating data for each property, periodic review of obligor creditworthiness, periodic property inspections and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division actively manages and monitors the medical office building portfolio with a comprehensive process including tenant relations, tenant lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs and market conditions among other things. In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends and risks.

 

Through asset management and research, we evaluate the operating environment in each property’s market to determine whether payment risk is likely to increase. When we identify unacceptable levels of payment risk, we seek to mitigate, eliminate or transfer the risk. We categorize the risk as obligor, property or market risk. For obligor risk, we typically find a substitute operator/tenant to run the property. For property risk, we usually work with the operator/tenant to institute property-level management changes to address the risk. Finally, for market risk, we often encourage an obligor to change its capital structure, including refinancing the property or raising additional equity. Through these asset management and research efforts, we are generally able to intervene at an early stage to address payment risk, and in so doing, support both the collectability of revenue and the value of our investment.

 

Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders.

 

 

 

5

 


 

 

Investment Types

 

Real Property.  Our properties are primarily comprised of land, building, improvements and related rights.  Our hospitals and seniors housing triple-net properties are generally leased to operators under long-term operating leases.  The leases generally have a fixed contractual term of 12 to 15 years and contain one or more five to 15-year renewal options. Certain of our leases also contain purchase options.  Most of our rents are received under triple-net leases requiring the operator to pay rent and all additional charges incurred in the operation of the leased property. The tenants are required to repair, rebuild and maintain the leased properties. Substantially all of these operating leases are designed with either fixed or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.

 

At December 31, 2011, approximately 93% of our hospitals and seniors housing triple-net properties were subject to master leases. A master lease is a lease of multiple properties to one tenant entity under a single lease agreement. From time to time, we may acquire additional properties that are then leased to the tenant under the master lease. The tenant is required to make one monthly payment that represents rent on all the properties that are subject to the master lease. Typically, the master lease tenant can exercise its right to purchase the properties or to renew the master lease only with respect to all leased properties at the same time. This bundling feature benefits us because the tenant cannot limit the purchase or renewal to the better performing properties and terminate the leasing arrangement with respect to the poorer performing properties. This spreads our risk among the entire group of properties within the master lease. The bundling feature should provide a similar advantage if the master lease tenant is in bankruptcy. Subject to certain restrictions, a debtor in bankruptcy has the right to assume or reject each of its leases. It is our intent that a tenant in bankruptcy would be required to assume or reject the master lease as a whole, rather than deciding on a property by property basis.

 

Our medical office building portfolio is primarily self-managed and consists principally of multi-tenant properties leased to health care providers. Our leases have favorable lease terms that typically include fixed increasers and some form of operating expense reimbursement by the tenant. As of December 31, 2011, 86.6% of our portfolio included leases with full pass through, 11.6% with a partial expense reimbursement (modified gross) and 1.8% with no expense reimbursement (gross). Our medical office building leases are non-cancellable operating leases that have a weighted average remaining term of 8.4 years at December 31, 2011 and are often credit enhanced by guaranties and/or letters of credit.

 

Construction.  We currently provide for the construction of properties for tenants generally as part of long-term operating leases. We capitalize certain interest costs associated with funds used to pay for the construction of properties owned by us. The amount capitalized is based upon the amount advanced during the construction period using the rate of interest that approximates our cost of financing. Our interest expense is reduced by the amount capitalized. We also typically charge a transaction fee at the commencement of construction which we defer and amortize to income over the term of the resulting lease. The construction period commences upon funding and terminates upon the earlier of the completion of the applicable property or the end of a specified period. During the construction period, we advance funds to the tenants in accordance with agreed upon terms and conditions which require, among other things, periodic site visits by a Company representative. During the construction period, we generally require an additional credit enhancement in the form of payment and performance bonds and/or completion guaranties. At December 31, 2011, we had outstanding construction investments of $189,502,000 and were committed to providing additional funds of approximately $282,899,000 to complete construction for investment properties.

 

Real Estate Loans.  Our real estate loans are typically structured to provide us with interest income, principal amortization and transaction fees and are generally secured by a first, second or third mortgage lien, leasehold mortgage, corporate guaranties and/or personal guaranties. At December 31, 2011, we had outstanding real estate loans of $292,507,000. The interest yield averaged approximately 9% per annum on our outstanding real estate loan balances. Our yield on real estate loans depends upon a number of factors, including the stated interest rate, average principal amount outstanding during the term of the loan and any interest rate adjustments. The real estate loans outstanding at December 31, 2011 are generally subject to three to 20-year terms with principal amortization schedules and/or balloon payments of the outstanding principal balances at the end of the term. Typically, real estate loans are cross-defaulted and cross-collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of our wholly-owned subsidiaries and joint venture entities that we control, through voting rights or other means. All material intercompany transactions and balances have been eliminated in consolidation.

 

At inception of the joint venture transactions, we identify entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is the primary beneficiary of its operations. A variable interest entity is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity's activities without additional subordinated financial support. We consolidate investments in VIEs when we are determined to be the primary beneficiary.  Accounting Standards

6

 


 

 

Codification (“ASC”) 810 requires enterprises to perform a qualitative approach to determining whether or not a VIE will need to be consolidated on a continuous basis. This evaluation is based on an enterprise’s ability to direct and influence the activities of a variable interest entity that most significantly impact that entity’s economic performance.

 

For investments in joint ventures, we evaluate the type of rights held by the limited partner(s), which may preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the limited partnership. The assessment of limited partners' rights and their impact on the presumption of control over a limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners, (ii) the sole general partner increases or decreases its ownership in the limited partnership interests, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. We similarly evaluate the rights of managing members of limited liability companies.

 

Investments in Unconsolidated Entities

 

Investments in less than majority owned entities where our interests represent a general partnership interest but substantive participating rights or substantive kick-out rights have been granted to the limited partners, or where our interests do not represent the general partnership interest and we do not control the major operating and financial policies of the entity, are reported under the equity method of accounting. Under the equity method of accounting, our share of the investee’s earnings or losses is included in our consolidated results of operations. To the extent that our cost basis is different from the basis reflected at the entity level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in our share of equity in earnings of the entity.  The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the entity interest or the estimated fair value of the assets prior to the sale of interests in the entity. Other equity investments include an investment in available-for-sale securities and an investment in a private company where we do not have the ability to exercise influence over the company, so the investment is accounted for under the cost method. These equity investments represented a minimal ownership interest in these companies. We evaluate our equity method investments for impairment based upon a comparison of the estimated fair value of the equity method investment to its carrying value. When we determine a decline in the estimated fair value of such an investment below its carrying value is other-than-temporary, an impairment is recorded.

 

Borrowing Policies

 

We utilize a combination of debt and equity to fund investments. Our debt and equity levels are determined by management to maintain a conservative credit profile. Generally, we intend to issue unsecured, fixed rate public debt with long-term maturities to approximate the maturities on our leases and loans. For short-term purposes, we may borrow on our unsecured line of credit arrangement. We replace these borrowings with long-term capital such as senior unsecured notes, common stock or preferred stock. When terms are deemed favorable, we may invest in properties subject to existing mortgage indebtedness. In addition, we may obtain secured financing for unleveraged properties in which we have invested or may refinance properties acquired on a leveraged basis. In our agreements with our lenders, we are subject to restrictions with respect to secured and unsecured indebtedness.

 

Competition

 

We compete with other real estate investment trusts, real estate partnerships, private equity and hedge fund investors, banks, insurance companies, finance/investment companies, government-sponsored agencies, taxable and tax-exempt bond funds, health care operators, developers and other investors in the acquisition, development, leasing and financing of health care and seniors housing properties. Some of our competitors are larger with greater resources and lower costs of capital than us. Increased competition inhibits our ability to identify and successfully complete investments. We compete for investments based on a number of factors including rates, financings offered, underwriting criteria and reputation. Our ability to successfully compete is also impacted by economic and population trends, availability of acceptable investment opportunities, our ability to negotiate beneficial investment terms, availability and cost of capital, construction and renovation costs and new and existing laws and regulations.

 

The operators/tenants of our properties compete on a local and regional basis with operators/tenants of properties that provide comparable services. Operators/tenants compete for patients and residents based on a number of factors including quality of care, reputation, physical appearance of properties, services offered, family preferences, physicians, staff and price. We also face competition from other health care facilities for tenants, such as physicians and other health care providers that provide comparable facilities and services.

 

For additional information on the risks associated with our business, please see “Item 1A — Risk Factors” of this Annual Report on Form 10-K.

 

Employees

 

As of December 31, 2011, we had 308 employees.

 

 

7

 


 

 

Customer Concentrations

 

The following table summarizes certain information about our customer concentrations as of December 31, 2011 (dollars in thousands):

 

  

   

  

Number of

  

Total  

  

Percent of  

Concentration by investment:(1)

  

Properties

  

Investment(2)

  

 Investment(3)

  

Genesis HealthCare, LLC  

  

150

  

$

 2,466,243  

  

18%  

  

Merrill Gardens, LLC  

  

48

  

  

 1,132,399  

  

8%  

  

Benchmark Senior Living, LLC  

  

35

  

  

 883,681  

  

6%  

  

Brandywine Senior Living, LLC  

  

24

  

  

 719,509  

  

5%  

  

Senior Living Communities, LLC  

  

12

  

  

 604,079  

  

4%  

  

Remaining portfolio  

  

655

  

  

 8,136,439  

  

59%  

  

Totals  

  

924

  

$

 13,942,350  

  

100%  

_____________________

(1)     Merrill Gardens and Benchmark are in our seniors housing operating segment whereas the other top five customers are in our senior housing triple-net segment.

(2)     Excludes our share of investments in unconsolidated entities.  Please see Note 7 for additional information.

(3)     Investments with our top five customers comprised 32% of total investments at December 31, 2010.

  

Certain Government Regulations

 

Health Law Matters — Generally

 

Typically, operators of seniors housing facilities do not receive significant funding from government programs and are largely subject to state laws, as opposed to federal laws. Operators of skilled nursing facilities and hospitals do receive significant funding from government programs, and these facilities are subject to the federal and state laws that regulate the type and quality of the medical and/or nursing care provided, ancillary services (e.g., respiratory, occupational, physical and infusion therapies), qualifications of the administrative personnel and nursing staff, the adequacy of the physical plant and equipment, reimbursement and rate setting and operating policies.  In addition, as described below, operators of these facilities are subject to extensive laws and regulations pertaining to health care fraud and abuse, including, but not limited to, the Federal Anti-kickback Statute, the Federal Stark Law, and the Federal False Claims Act, as well as comparable state law counterparts.  Hospitals, physician group practice clinics, and other health care providers that operate in our portfolio are subject to extensive federal, state, and local licensure, registration, certification, and inspection laws, regulations, and industry standards. Our tenants’ failure to comply with any of these, and other, laws could result in loss of accreditation; denial of reimbursement; imposition of fines; suspension, decertification, or exclusion from federal and state health care programs; loss of license; or closure of the facility.

 

Licensing and Certification

 

The primary regulations that affect seniors housing facilities with assisted living are state licensing and registration laws. In granting and renewing these licenses, the state regulatory agencies consider numerous factors relating to a property’s physical plant and operations including, but not limited to, admission and discharge standards, staffing, and training. A decision to grant or renew a license is also affected by a property owner’s record with respect to patient and consumer rights, medication guidelines, and rules.  Certain of the seniors housing facilities mortgaged to or owned by us may require the resident to pay an entrance or upfront fee, a portion of which may be refundable.  These entrance fee communities are subject to significant state regulatory oversight, including, for example, oversight of each facility’s financial condition; establishment and monitoring of reserve requirements, and other financial restrictions; the right of residents to cancel their contracts within a specified period of time; lien rights in favor of residents; restrictions on change of ownership; and similar matters.  Such oversight, and the rights of residents within these entrance fee communities, may have an effect on the revenue or operations of the operators of such facilities, and, therefore, may adversely affect us.

 

Certain health care facilities are subject to a variety of licensure and certificate of need (“CON”) laws and regulations.  Where applicable, CON laws generally require, among other requirements, that a facility demonstrate the need for (1) constructing a new facility, (2) adding beds or expanding an existing facility, (3) investing in major capital equipment or adding new services, (4) changing the ownership or control of an existing licensed facility, or (5) terminating services that have been previously approved through the CON process.  Certain state CON laws and regulations may restrict the ability of operators to add new properties or expand an existing facility’s size or services. In addition, CON laws may constrain the ability of an operator to transfer responsibility for operating a particular facility to a new operator.  If we have to replace a property operator who is excluded from participating in a federal or state health care program (as discussed below), our ability to replace the operator may be affected by a particular state’s CON laws, regulations, and applicable guidance governing changes in provider control.

 

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With respect to licensure, generally our skilled nursing facilities and acute care facilities are required to be licensed and certified for participation in Medicare, Medicaid, and other federal health care programs.  This generally requires license renewals and compliance surveys on an annual or bi-annual basis. The failure of our operators to maintain or renew any required license or regulatory approval as well as the failure of our operators to correct serious deficiencies identified in a compliance survey could require those operators to discontinue operations at a property.  In addition, if a property is found to be out of compliance with Medicare, Medicaid, or other health care program conditions of participation, the property operator may be excluded from participating in those government health care programs.  Any such occurrence may impair an operators’ ability to meet their financial obligations to us.  If we have to replace an excluded property operator, our ability to replace the operator may be affected by federal and state laws, regulations, and applicable guidance governing changes in provider control. This may result in payment delays, an inability to find a replacement operator, a significant working capital commitment from us to a new operator or other difficulties.

 

Reimbursement

 

Seniors Housing Facilities.  Approximately 53% of our overall revenues for the year ended December 31, 2011 were attributable to seniors housing facilities.  The majority of the revenues received by the operators of our seniors housing facilities are from private pay sources. The remaining revenue source is primarily Medicaid under certain waiver programs. As a part of the Omnibus Budget Reconciliation Act (“OBRA”) of 1981, Congress established a waiver program enabling some states to offer Medicaid reimbursement to assisted living providers as an alternative to institutional long-term care services. The provisions of OBRA and the subsequent OBRA Acts of 1987 and 1990 permit states to seek a waiver from typical Medicaid requirements to develop cost-effective alternatives to long-term care, including Medicaid payments for assisted living and home health. As of December 31, 2011, seven of our 38 seniors housing operators received Medicaid reimbursement pursuant to Medicaid waiver programs. For the twelve months ended September 30, 2011, approximately 5% of the revenues at our seniors housing facilities were from Medicaid reimbursement. There can be no guarantee that a state Medicaid program operating pursuant to a waiver will be able to maintain its waiver status.

 

Rates paid by self-pay residents are set by the facilities and are determined by local market conditions and operating costs. Generally, facilities receive a higher payment per day for a private pay resident than for a Medicaid beneficiary who requires a comparable level of care. The level of Medicaid reimbursement varies from state to state.  Thus, the revenues generated by operators of our assisted living facilities may be adversely affected by payor mix, acuity level, changes in Medicaid eligibility, and reimbursement levels.  In addition, a state could lose its Medicaid waiver and no longer be permitted to utilize Medicaid dollars to reimburse for assisted living services. Changes in revenues could in turn have a material adverse effect on an operator’s ability to meet its obligations to us.

 

Skilled Nursing Facilities and Hospitals.  Skilled nursing facilities and hospitals typically receive most of their revenues from the Medicare and Medicaid programs, with the balance representing reimbursement payments from private payors, including private insurers.  Consequently, changes in federal or state reimbursement policies may also adversely affect an operator’s ability to cover its expenses, including our rent or debt service. Skilled nursing facilities and hospitals are subject to periodic pre- and post-payment reviews, and other audits by federal and state authorities.  A review or audit of a property operator’s claims could result in recoupments, denials, or delay of payments in the future, which could have a material adverse effect on the operator’s ability to meet its financial obligations to us.  Due to the significant judgments and estimates inherent in payor settlement accounting, no assurance can be given as to the adequacy of any reserves maintained by our property operators to cover potential adjustments to reimbursements, or to cover settlements made to payors.  In fact, in December 2010, the Department of Health and Human Services Office of Inspector General (“OIG”) released a report focusing on skilled nursing facilities’ billing practices for Medicare Part A payments, and found that between 2006-2008 skilled nursing facilities increasingly billed for higher paying Resource Utilization Groups (“RUGs”), the payment classification mechanism for the Medicare program, even though beneficiary characteristics remained largely unchanged.  In particular, from 2006 to 2008, OIG found that the percentage of RUGs for ultra high therapy increased from 17% to 28%, despite the fact that beneficiaries’ ages and diagnoses at admission were largely unchanged during that time period. As a result of the recent attention on skilled nursing billing practices and ongoing government pressure to reduce spending by government health care programs, government health care programs have reduced RUG payments that may be made to skilled nursing facilities for 2012 as discussed in further detail below, and, as a result, an operator’s ability to meet its financial obligations to us may be impaired.  Further reductions in such payments may significantly impair an operator’s ability to meet its financial obligations to us.

 

Medicare Reimbursement and Skilled Nursing Facilities.  For the twelve months ended September 30, 2011, approximately 32% of the revenues at our skilled nursing facilities (which comprised 22% of our overall revenues for the year ended December 31, 2011) were paid by Medicare. Skilled nursing facilities are reimbursed under the Medicare Skilled Nursing Facility Prospective Payment System (“SNF PPS”). There is a risk that some skilled nursing facilities’ costs will exceed the fixed payments under the SNF PPS, and there is also a risk that payments under the SNF PPS may be set below the costs to provide certain items and services, which could result in immediate financial difficulties for skilled nursing facilities, and could cause operators to seek bankruptcy protection. Skilled nursing facilities have faced these types of difficulties since the implementation of the SNF PPS.

 

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The Centers for Medicare & Medicaid Services (“CMS”), an agency of the U.S. Department of Health and Human Services (“HHS”), made a negative payment update for skilled nursing facilities for fiscal year 2012.  For fiscal year 2012, skilled nursing facilities received an 11.1% decrease, or $3.87 billion, in RUG payments, resulting from a 2.7% market basket update less a 1% multi-factor productivity adjustment and a 12.6% reduction, or $4.47 billion, to recalibrate the RUGs-IV therapy payment rates. CMS announced that the reasons for this rate reduction were to correct for the unintended spike in payment levels, particularly those associated with higher paying RUGs, and to align reimbursement with cost. In addition, on November 21, 2011, the Joint Select Committee on Deficit Reduction, which was created by the Budget Control Act of 2011, concluded its work, and issued a statement that it was not able to make a bipartisan agreement, thus triggering the sequestration process.  The sequestration process will result in spending reductions starting in 2013, including Medicare cuts.  

 

In addition, Section 5008 of the Deficit Reduction Act of 2005 directed the Secretary of HHS to conduct a Post Acute Care Payment Reform Demonstration (“PAC-PRD”) program, for a three year period, beginning January 1, 2008, to assess the costs and outcomes of patients discharged from hospitals in a variety of post-acute care settings, including skilled nursing facilities. The demonstration program’s results and recommendations were reported to Congress in a January 2012 report.  The results and recommendations could lead to future changes in Medicare coverage, reimbursement, and reporting requirements for post-acute care. 

 

The Balanced Budget Act of 1997 mandated caps on Medicare reimbursement for certain therapy services. However, Congress imposed various moratoriums on the implementation of those caps. For 2012, the annual payment cap of $1,880 per patient applies to occupational therapy and a separate $1,880 cap applies to speech and physical therapy. Congress has permitted patients exceeding the cap to obtain additional Medicare coverage through a waiver program if the therapy is deemed medically necessary. The waiver program was historically extended and was most recently extended through February 29, 2012 by the Temporary Payroll Tax Cut Continuation Act of 2011.

 

If the exception expires, patients will need to use private funds to pay for the cost of therapy above the caps.  If patients are unable to satisfy their out-of-pocket cost responsibility to reimburse an operator for services rendered, the operator’s ability to meet its financial obligations to us could be adversely impacted.

 

Medicare Reimbursement and Hospitals.  For the twelve months ended September 30, 2011, approximately 52% of the revenues at our hospitals (which comprised 5% of our overall revenues for the year ended December 31, 2011) were from Medicare reimbursements. Hospitals, generally, are reimbursed by Medicare under the Hospital Inpatient Prospective Payment System (“PPS”), the Hospital Outpatient Prospective Payment System (“OPPS”), the Long Term Care Hospital Prospective Payment System (“LTCH PPS”), or the Inpatient Rehabilitation Facility Prospective Payment System (“IRF PPS”). Acute care hospitals provide a wide range of inpatient and outpatient services including, but not limited to, surgery, rehabilitation, therapy, and clinical laboratory services. Long-term acute care hospitals provide inpatient services for patients with medical conditions that are often complex and that require more intensive care, monitoring or emergency support than that available in most skilled nursing facilities. Inpatient rehabilitation facilities provide intensive rehabilitation services in an inpatient setting for patients requiring at least three hours of rehabilitation services a day.

 

With respect to Medicare’s PPS for regular hospitals, reimbursement for inpatient services is made on the basis of a fixed, prospective rate, based on the principal diagnosis of the patient.  Hospitals may be at risk to the extent that their costs in treating a specific case exceed the fixed payment amount. The diagnosis related group (“DRG”) reimbursement system was updated in 2008 to expand the number of DRGs from 538 to 745 in order to better distinguish more severe conditions. One additional DRG was added in 2009, for a new total of 746. In some cases, a hospital might be able to qualify for an outlier payment if the hospital’s losses exceed a threshold.

 

President Obama’s proposed budget for fiscal year 2013, which begins October 1, 2012, was released on February 13, 2012 and has the potential to further impact Medicare reimbursement rates by proposing to cut Medicare reimbursement to a host of providers, including hospitals, home health agencies, and nursing homes.  These proposals, if implemented, could adversely affect our operators and tenants.

 

Medicaid Reimbursement.  Medicaid is a major payor source for residents in our skilled nursing facilities and hospitals. For the twelve months ended September 30, 2011, approximately 48% of the revenues of our skilled nursing facilities and 11% of the revenues of our hospitals were attributable to Medicaid reimbursement payments. The federal and state governments share responsibility for financing Medicaid. The federal matching rate, known as the Federal Medical Assistance Percentage (“FMAP”), varies by state based on relative per capita income, but is at least 50% in all states. On average, Medicaid is the largest component of total state spending, representing approximately 21% of total state spending. The percentage of Medicaid dollars used for long-term care varies from state to state, due in part to different ratios of elderly population and eligibility requirements. Within certain federal guidelines, states have a fairly wide range of discretion to determine eligibility and reimbursement methodology.  Many states reimburse long-term care facilities using fixed daily rates, which are applied prospectively based on patient acuity and the historical

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costs incurred in providing patient care. Reasonable costs typically include allowances for staffing, administrative and general expenses, property, and equipment (e.g., real estate taxes, depreciation and fair rental).

 

In most states, Medicaid does not fully reimburse the cost of providing skilled nursing services. Certain states are attempting to slow the rate of growth in Medicaid expenditures by freezing rates or restricting eligibility and benefits. As of the beginning of state fiscal year 2011, states in which we have skilled nursing property investments held rates flat on average for the year. Our skilled nursing portfolio’s average Medicaid rate will likely vary throughout the year as states continue to make interim changes to their budgets and Medicaid funding. In addition, Medicaid reimbursement rates may decline if revenues in a particular state are not sufficient to fund budgeted expenditures.  President Obama’s proposed fiscal year budget for 2013, released on February 13, 2012, includes a proposal to place new limits on state provider taxes that are used to pay the state share of Medicaid and has the potential to further impact Medicaid reimbursement rates.  The President’s budget includes a proposal to phase down the Medicaid provider tax, a tax paid by health care providers to help fund state Medicaid programs, beginning with a reduction from the current law level of 6.0% to 4.5% in fiscal year 2015.  The President’s budget also includes a proposal to replace the Federal matching rate for state Medicaid and the Children’s Health Insurance Program with a single matching rate specific to each state.  If the President’s proposals are implemented, the various state Medicaid programs will receive less funds, which could adversely affect our operators and tenants.

 

The Medicare Part D drug benefit became effective January 1, 2006. Since that date, low-income Medicare beneficiaries (eligible for both Medicare and full Medicaid benefits), including those nursing home residents who are dually eligible for both programs, may enroll and receive outpatient prescription drugs under Medicare, not Medicaid. Medicare Part D has resulted in increased administrative responsibilities for nursing home operators because enrollment in Medicare Part D is voluntary and residents must choose between multiple prescription drug plans.  Operators may also experience increased expenses to the extent that a particular drug prescribed to a patient is not listed on the Medicare Part D drug plan formulary for the plan in which the patient is enrolled.

 

The reimbursement methodologies applied to health care facilities continue to evolve.  Federal and state authorities have considered and may seek to implement new or modified reimbursement methodologies that may negatively impact health care property operations.  The impact of any such changes, if implemented, may result in a material adverse effect on our skilled nursing and hospital property operations. No assurance can be given that current revenue sources or levels will be maintained.  Accordingly, there can be no assurance that payments under a government health care program are currently, or will be in the future, sufficient to fully reimburse the property operators for their operating and capital expenses.  As a result, an operator’s ability to meet its financial obligations to us could be adversely impacted.

 

Finally, the Patient Protection and Affordable Care Act (“PPACA”) and the Health Care and Education Reconciliation Act of 2010, which amends the PPACA (collectively, the “Health Reform Laws”) (further discussed below) may have a significant impact on Medicare, Medicaid, other federal health care programs, and private insurers, which impact the reimbursement amounts received by skilled nursing facilities and other health care providers. The Health Reform Laws could have a substantial and material adverse effect on all parties directly or indirectly involved in the health care system.

 

Other Related Laws

 

Skilled nursing facilities and hospitals (and seniors housing facilities that receive Medicaid payments) are subject to federal, state, and local laws, regulations, and applicable guidance that govern the operations and financial and other arrangements that may be entered into by health care providers. Certain of these laws prohibit direct or indirect payments of any kind for the purpose of inducing or encouraging the referral of patients for medical products or services reimbursable by government health care programs. Other laws require providers to furnish only medically necessary services and submit to the government valid and accurate statements for each service. Still, other laws require providers to comply with a variety of safety, health and other requirements relating to the condition of the licensed property and the quality of care provided.  Sanctions for violations of these laws, regulations, and other applicable guidance may include, but are not limited to, criminal and/or civil penalties and fines, loss of licensure, immediate termination of government payments, and exclusion from any government health care program. In certain circumstances, violation of these rules (such as those prohibiting abusive and fraudulent behavior) with respect to one property may subject other facilities under common control or ownership to sanctions, including exclusion from participation in the Medicare and Medicaid programs, as well as other government health care programs.  In the ordinary course of its business, a property operator is regularly subjected to inquiries, investigations, and audits by the federal and state agencies that oversee these laws and regulations.

 

All health care providers, including, but not limited to skilled nursing facilities and hospitals (and seniors housing facilities that receives Medicaid payments) are also subject to the Federal Anti-kickback Statute, which generally prohibits persons from offering, providing, soliciting, or receiving remuneration to induce either the referral of an individual or the furnishing of a good or service for which payment may be made under a federal health care program, such as Medicare or Medicaid. Skilled nursing facilities and hospitals are also subject to the Federal Ethics in Patient Referral Act of 1989, commonly referred to as the Stark Law. The Stark Law generally prohibits the submission of claims to Medicare for payment if the claim results from a physician referral for certain designated services and the physician has a financial relationship with the health service provider that does not qualify under one of

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the exceptions for a financial relationship under the Stark Law. Similar prohibitions on physician self-referrals and submission of claims apply to state Medicaid programs. Further, health care providers, including, but not limited to, skilled nursing facilities and hospitals (and seniors housing facilities that receive Medicaid payments), are subject to substantial financial penalties under the Civil Monetary Penalties Act and the Federal False Claims Act and, in particular, actions under the Federal False Claims Act’s “whistleblower” provisions. Private enforcement of health care fraud has increased due in large part to amendments to the Federal False Claims Act that encourage private individuals to sue on behalf of the government. These whistleblower suits brought by private individuals, known as qui tam actions, may be filed by almost anyone, including present and former patients, nurses and other employees.  Such whistleblower actions have been brought against nursing facilities on the basis of the alleged failure of the nursing facility to meet applicable regulations relating to its operations.  Significantly, if a claim is successfully adjudicated, the Federal False Claims Act provides for treble damages up to $11,000 per claim.  

 

Prosecutions, investigations, or whistleblower actions could have a material adverse effect on a property operator’s liquidity, financial condition, and operations, which could adversely affect the ability of the operator to meet its financial obligations to us.  Finally, various state false claim act and anti-kickback laws may also apply to each property operator. Violation of any of the foregoing statutes can result in criminal and/or civil penalties that could have a material adverse effect on the ability of an operator to meet its financial obligations to us.

 

Other legislative developments, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), have greatly expanded the definition of health care fraud and related offenses and broadened its scope to include private health care plans in addition to government payors. Congress also has greatly increased funding for the Department of Justice, Federal Bureau of Investigation and the Office of the Inspector General of the Department of Health and Human Services to audit, investigate and prosecute suspected health care fraud.  Moreover, a significant portion of the billions in health care fraud recoveries over the past several years has also been returned to government agencies to further fund their fraud investigation and prosecution efforts.

 

Additionally, other HIPAA provisions and regulations provide for communication of health information through standard electronic transaction formats and for the privacy and security of health information. In order to comply with the regulations, health care providers often must undertake significant operational and technical implementation efforts.  Operators also may face significant financial exposure if they fail to maintain the privacy and security of medical records and other personal health information about individuals. The Health Information Technology for Economic and Clinical Health (“HITECH”) Act, passed in February 2009, strengthened the HHS Secretary’s authority to impose civil money penalties for HIPAA violations occurring after February 18, 2009. HITECH directs the HHS Secretary to provide for periodic audits to ensure covered entities and their business associates (as that term is defined under HIPAA) comply with the applicable HITECH requirements, increasing the likelihood that a HIPAA violation will result in an enforcement action. CMS issued an interim Final Rule which conformed HIPAA enforcement regulations to the HITECH Act, increasing the maximum penalty for multiple violations of a single requirement or prohibition to $1.5 million.  Higher penalties may accrue for violations of multiple requirements or prohibitions.  HIPAA violations are also potentially subject to criminal penalties.

 

In November 2002, CMS began an ongoing national Nursing Home Quality Initiative (“NHQI”). Under this initiative, historical survey information, the NHQI Pilot Evaluation Report and the NHQI Overview is made available to the public on-line. The NHQI website provides consumer and provider information regarding the quality of care in nursing homes. The data allows consumers, providers, states, and researchers to compare quality information that shows how well nursing homes are caring for their residents’ physical and clinical needs. The posted nursing home quality measures come from resident assessment data that nursing homes routinely collect on the residents at specified intervals during their stay. If the operators of nursing facilities are unable to achieve quality of care ratings that are comparable or superior to those of their competitors, they may lose market share to other facilities, reducing their revenues and adversely impacting their ability to make rental payments.

 

Finally, government investigations and enforcement actions brought against the health care industry have increased dramatically over the past several years and are expected to continue. Some of these enforcement actions represent novel legal theories and expansions in the application of the Federal False Claims Act. The costs for an operator of a health care property associated with both defending such enforcement actions and the undertakings in settling these actions can be substantial and could have a material adverse effect on the ability of an operator to meet its obligations to us.

 

Taxation

 

Federal Income Tax Considerations

 

The following summary of the taxation of the Company and the material federal tax consequences to the holders of our debt and equity securities is for general information only and is not tax advice. This summary does not address all aspects of taxation that may be relevant to certain types of holders of stock or securities (including, but not limited to, insurance companies, tax-exempt entities, financial institutions or broker-dealers, persons holding shares of common stock as part of a hedging, integrated conversion, or

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constructive sale transaction or a straddle, traders in securities that use a mark-to-market method of accounting for their securities, investors in pass-through entities and foreign corporations and persons who are not citizens or residents of the United States).

 

This summary does not discuss all of the aspects of U.S. federal income taxation that may be relevant to you in light of your particular investment or other circumstances. In addition, this summary does not discuss any state or local income taxation or foreign income taxation or other tax consequences. This summary is based on current U.S. federal income tax law. Subsequent developments in U.S. federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal income tax consequences of purchasing, owning and disposing of our securities as set forth in this summary. Before you purchase our securities, you should consult your own tax advisor regarding the particular U.S. federal, state, local, foreign and other tax consequences of acquiring, owning and selling our securities.

 

General

 

We elected to be taxed as a real estate investment trust (a “REIT”) commencing with our first taxable year. We intend to continue to operate in such a manner as to qualify as a REIT, but there is no guarantee that we will qualify or remain qualified as a REIT for subsequent years. Qualification and taxation as a REIT depends upon our ability to meet a variety of qualification tests imposed under federal income tax law with respect to income, assets, distribution level and diversity of share ownership as discussed below under “— Qualification as a REIT.” There can be no assurance that we will be owned and organized and will operate in a manner so as to qualify or remain qualified.

 

In any year in which we qualify as a REIT, in general, we will not be subject to federal income tax on that portion of our REIT taxable income or capital gain that is distributed to stockholders. We may, however, be subject to tax at normal corporate rates on any taxable income or capital gain not distributed. If we elect to retain and pay income tax on our net long-term capital gain, stockholders are required to include their proportionate share of our undistributed long-term capital gain in income, but they will receive a refundable credit for their share of any taxes paid by us on such gain.

 

Despite the REIT election, we may be subject to federal income and excise tax as follows:

 

•     To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates;

 

•     We may be subject to the “alternative minimum tax” (the “AMT”) on certain tax preference items to the extent that the AMT exceeds our regular tax;

 

•     If we have net income from the sale or other disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, such income will be taxed at the highest corporate rate;

 

•     Any net income from prohibited transactions (which are, in general, sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than dispositions of foreclosure property and dispositions of property due to an involuntary conversion) will be subject to a 100% tax;

 

•     If we fail to satisfy either the 75% or 95% gross income tests (as discussed below), but nonetheless maintain our qualification as a REIT because certain other requirements are met, we will be subject to a 100% tax on an amount equal to (1) the gross income attributable to the greater of (i) 75% of our gross income over the amount of qualifying gross income for purposes of the 75% gross income test (discussed below) or (ii) 95% of our gross income over the amount of qualifying gross income for purposes of the 95% gross income test (discussed below) multiplied by (2) a fraction intended to reflect our profitability;

 

•     If we fail to distribute during each year at least the sum of (1) 85% of our REIT ordinary income for the year, (2) 95% of our REIT capital gain net income for such year (other than capital gain that we elect to retain and pay tax on) and (3) any undistributed taxable income from preceding periods, we will be subject to a 4% excise tax on the excess of such required distribution over amounts actually distributed; and

 

•     We will be subject to a 100% tax on the amount of any rents from real property, deductions or excess interest paid to us by any of our “taxable REIT subsidiaries” that would be reduced through reallocation under certain federal income tax principles in order to more clearly reflect income of the taxable REIT subsidiary. See “— Qualification as a REIT — Investments in Taxable REIT Subsidiaries.”

 

•     We may be subject to the corporate “alternative minimum tax” on any items of tax preference, including any deductions of net operating losses.

 

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If we acquire any assets from a corporation, which is or has been a “C” corporation, in a carryover basis transaction, we could be liable for specified liabilities that are inherited from the “C” corporation. A “C” corporation is generally defined as a corporation that is required to pay full corporate level federal income tax. If we recognize gain on the disposition of the assets during the ten-year period beginning on the date on which the assets were acquired by us, then, to the extent of the assets’ “built-in gain” (i.e., the excess of the fair market value of the asset over the adjusted tax basis in the asset, in each case determined as of the beginning of the ten-year period), we will be subject to tax on the gain at the highest regular corporate rate applicable. The results described in this paragraph with respect to the recognition of built-in gain assume that the built-in gain assets, at the time the built-in gain assets were subject to a conversion transaction (either where a “C” corporation elected REIT status or a REIT acquired the assets from a “C” corporation), were not treated as sold to an unrelated party and gain recognized.  For the twelve months ending December 31, 2011, we acquired 135 assets with built-in gain that could be subject to built-in gains tax if disposed of prior to December 2021.  For those properties that are subject to the built-in-gains tax, if triggered by a sale within the ten-year period beginning on the date on which the properties were acquired by us, then the potential amount of built-in-gains tax will be an additional factor when considering a possible sale of the properties.  See Note 18 to our consolidated financial statements for additional information regarding the built-in gains tax.

 

Qualification as a REIT

 

A REIT is defined as a corporation, trust or association:

 

(1)     which is managed by one or more trustees or directors;

 

(2)     the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest;

 

(3)     which would be taxable as a domestic corporation but for the federal income tax law relating to REITs;

 

(4)     which is neither a financial institution nor an insurance company;

 

(5)     the beneficial ownership of which is held by 100 or more persons in each taxable year of the REIT except for its first taxable year;

 

(6)     not more than 50% in value of the outstanding stock of which is owned during the last half of each taxable year, excluding its first taxable year, directly or indirectly, by or for five or fewer individuals (which includes certain entities) (the “Five or Fewer Requirement”); and

 

(7)     which meets certain income and asset tests described below.

 

Conditions (1) to (4), inclusive, must be met during the entire taxable year and condition (5) must be met during at least 335 days of a taxable year of 12 months or during a proportionate part of a taxable year of less than 12 months. For purposes of conditions (5) and (6), pension funds and certain other tax-exempt entities are treated as individuals, subject to a “look-through” exception in the case of condition (6).

 

Based on publicly available information, we believe we have satisfied the share ownership requirements set forth in (5) and (6) above. In addition, Article VI of our by-laws provides for restrictions regarding ownership and transfer of shares. These restrictions are intended to assist us in continuing to satisfy the share ownership requirements described in (5) and (6) above. These restrictions, however, may not ensure that we will, in all cases, be able to satisfy the share ownership requirements described in (5) and (6) above.

 

We have complied with, and will continue to comply with, regulatory rules to send annual letters to certain of our stockholders requesting information regarding the actual ownership of our stock. If, despite sending the annual letters, we do not know, or after exercising reasonable diligence would not have known, whether we failed to meet the Five or Fewer Requirement, we will be treated as having met the Five or Fewer Requirement. If we fail to comply with these regulatory rules, we will be subject to a monetary penalty. If our failure to comply was due to intentional disregard of the requirement, the penalty would be increased. However, if our failure to comply were due to reasonable cause and not willful neglect, no penalty would be imposed.

 

We may own a number of properties through wholly owned subsidiaries. A corporation will qualify as a “qualified REIT subsidiary” if 100% of its stock is owned by a REIT, and the REIT does not elect to treat the subsidiary as a taxable REIT subsidiary. A “qualified REIT subsidiary” will not be treated as a separate corporation, and all assets, liabilities and items of income, deductions and credits of a “qualified REIT subsidiary” will be treated as assets, liabilities and items (as the case may be) of the REIT. A “qualified REIT subsidiary” is not subject to federal income tax, and our ownership of the voting stock of a qualified REIT subsidiary will not violate the restrictions against ownership of securities of any one issuer which constitute more than 10% of the value or total voting power of such issuer or more than 5% of the value of our total assets, as described below under “— Asset Tests.”

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If we invest in a partnership, a limited liability company or a trust taxed as a partnership or as a disregarded entity, we will be deemed to own a proportionate share of the partnership’s, limited liability company’s or trust’s assets. Likewise, we will be treated as receiving our share of the income and loss of the partnership, limited liability company or trust, and the gross income will retain the same character in our hands as it has in the hands of the partnership, limited liability company or trust. These “look-through” rules apply for purposes of the income tests and assets tests described below.

 

Income Tests.  There are two separate percentage tests relating to our sources of gross income that we must satisfy for each taxable year.

 

•     At least 75% of our gross income (excluding gross income from certain sales of property held primarily for sale) must be directly or indirectly derived each taxable year from “rents from real property,” other income from investments relating to real property or mortgages on real property or certain income from qualified temporary investments.

 

•     At least 95% of our gross income (excluding gross income from certain sales of property held primarily for sale) must be directly or indirectly derived each taxable year from any of the sources qualifying for the 75% gross income test and from dividends (including dividends from taxable REIT subsidiaries) and interest.

 

As to transactions entered into in taxable years beginning after October 22, 2004, any of our income from a “clearly identified” hedging transaction that is entered into by us in the normal course of business, directly or indirectly, to manage the risk of interest rate movements, price changes or currency fluctuations with respect to borrowings or obligations incurred or to be incurred by us, or such other risks that are prescribed by the Internal Revenue Service, is excluded from the 95% gross income test.

 

For transactions entered into after July 30, 2008, any of our income from a “clearly identified” hedging transaction that is entered into by us in the normal course of business, directly or indirectly, to manage the risk of interest rate movements, price changes or currency fluctuations with respect to borrowings or obligations incurred or to be incurred by us is excluded from the 95% and 75% gross income tests.

 

For transactions entered into after July 30, 2008, any of our income from a “clearly identified” hedging transaction entered into by us primarily to manage risk of currency fluctuations with respect to any item of income or gain that is included in gross income in the 95% and 75% gross income tests is excluded from the 95% and 75% gross income tests.

 

In general, a hedging transaction is “clearly identified” if (1) the transaction is identified as a hedging transaction before the end of the day on which it is entered into and (2) the items or risks being hedged are identified “substantially contemporaneously” with the hedging transaction. An identification is not substantially contemporaneous if it is made more than 35 days after entering into the hedging transaction.

 

As to gains and items of income recognized after July 30, 2008, “passive foreign exchange gain” for any taxable year will not constitute gross income for purposes of the 95% gross income test and “real estate foreign exchange gain” for any taxable year will not constitute gross income for purposes of the 75% gross income test. Real estate foreign exchange gain is foreign currency gain (as defined in Internal Revenue Code section 988(b)(1)) which is attributable to: (i) any qualifying item of income or gain for purposes of the 75% gross income test; (ii) the acquisition or ownership of obligations secured by mortgages on real property or interests in real property; or (iii) becoming or being the obligor under obligations secured by mortgages on real property or on interests in real property. Real estate foreign exchange gain also includes Internal Revenue Code section 987 gain attributable to a qualified business unit (a “QBU”) of a REIT if the QBU itself meets the 75% income test for the taxable year and the 75% asset test at the close of each quarter that the REIT has directly or indirectly held the QBU. Real estate foreign exchange gain also includes any other foreign currency gain as determined by the Secretary of the Treasury. Passive foreign exchange gain includes all real estate foreign exchange gain and foreign currency gain which is attributable to: (i) any qualifying item of income or gain for purposes of the 95% gross income test; (ii) the acquisition or ownership of obligations; (iii) becoming or being the obligor under obligations; and (iv) any other foreign currency gain as determined by the Secretary of the Treasury.

 

Generally, other than income from “clearly identified” hedging transactions entered into by us in the normal course of business, any foreign currency gain derived by us from dealing, or engaging in substantial and regular trading, in securities will constitute gross income which does not qualify under the 95% or 75% gross income tests.

 

Rents received by us will qualify as “rents from real property” for purposes of satisfying the gross income tests for a REIT only if several conditions are met:

 

•     The amount of rent must not be based in whole or in part on the income or profits of any person, although rents generally will not be excluded merely because they are based on a fixed percentage or percentages of receipts or sales.

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•     Rents received from a tenant will not qualify as rents from real property if the REIT, or an owner of 10% or more of the REIT, also directly or constructively owns 10% or more of the tenant, unless the tenant is our taxable REIT subsidiary and certain other requirements are met with respect to the real property being rented.

 

•     If rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as “rents from real property.”

 

•     For rents to qualify as rents from real property, we generally must not furnish or render services to tenants, other than through a taxable REIT subsidiary or an “independent contractor” from whom we derive no income, except that we may directly provide services that are “usually or customarily rendered” in the geographic area in which the property is located in connection with the rental of real property for occupancy only, or are not otherwise considered “rendered to the occupant for his convenience.”

 

•     For taxable years beginning after July 30, 2008, the REIT may lease qualified health care properties” on an arm’s-length basis to a taxable REIT subsidiary if the property is operated on behalf of such subsidiary by a person who qualifies as an “independent contractor” and who is, or is related to a person who is, actively engaged in the trade or business of operating health care facilities for any person unrelated to us or our taxable REIT subsidiary, an “eligible independent contractor. Generally, the rent that the REIT receives from the taxable REIT subsidiary will be treated as “rents from real property.”  A “qualified health care property” includes any real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which is operated by a provider of such services which is eligible for participation in the Medicare program with respect to such facility.

 

A REIT is permitted to render a de minimis amount of impermissible services to tenants and still treat amounts received with respect to that property as rent from real property. The amount received or accrued by the REIT during the taxable year for the impermissible services with respect to a property may not exceed 1% of all amounts received or accrued by the REIT directly or indirectly from the property. The amount received for any service or management operation for this purpose shall be deemed to be not less than 150% of the direct cost of the REIT in furnishing or rendering the service or providing the management or operation. Furthermore, impermissible services may be furnished to tenants by a taxable REIT subsidiary subject to certain conditions, and we may still treat rents received with respect to the property as rent from real property.

 

The term “interest” generally does not include any amount if the determination of the amount depends in whole or in part on the income or profits of any person, although an amount generally will not be excluded from the term “interest” solely by reason of being based on a fixed percentage of receipts or sales.

 

If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for such year if we are eligible for relief.  These relief provisions generally will be available if (1) following our identification of the failure, we file a schedule for such taxable year describing each item of our gross income, and (2) the failure to meet such tests was due to reasonable cause and not due to willful neglect.

 

It is not now possible to determine the circumstances under which we may be entitled to the benefit of these relief provisions. If these relief provisions apply, a 100% tax is imposed on an amount equal to (a) the gross income attributable to (1) 75% of our gross income over the amount of qualifying gross income for purposes of the 75% income test and (2) 95% of our gross income over the amount of qualifying gross income for purposes of the 95% income test, multiplied by (b) a fraction intended to reflect our profitability.

 

The Secretary of the Treasury is given broad authority to determine whether particular items of income or gain qualify or not under the 75% and 95% gross income tests, or are to be excluded from the measure of gross income for such purposes.

 

Asset Tests.  Within 30 days after the close of each quarter of our taxable year, we must also satisfy several tests relating to the nature and diversification of our assets determined in accordance with generally accepted accounting principles. At least 75% of the value of our total assets must be represented by real estate assets, cash, cash items (including receivables arising in the ordinary course of our operation), government securities and qualified temporary investments. Although the remaining 25% of our assets generally may be invested without restriction, we are prohibited from owning securities representing more than 10% of either the vote (the “10% vote test”) or value (the “10% value test”) of the outstanding securities of any issuer other than a qualified REIT subsidiary, another REIT or a taxable REIT subsidiary. Further, no more than 25% of the total assets may be represented by securities of one or more taxable REIT subsidiaries (the “25% asset test”) and no more than 5% of the value of our total assets may be represented by securities of any non-governmental issuer other than a qualified REIT subsidiary (the “5% asset test”), another REIT or a taxable REIT subsidiary. Each of the 10% vote test, the 10% value test and the 25% and 5% asset tests must be satisfied at the end of each

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quarter. There are special rules which provide relief if the value related tests are not satisfied due to changes in the value of the assets of a REIT.

 

Certain items are excluded from the 10% value test, including: (1) straight debt securities of an issuer (including straight debt that provides certain contingent payments); (2) any loan to an individual or an estate; (3) any rental agreement described in Section 467 of the Internal Revenue Code, other than with a “related person”; (4) any obligation to pay rents from real property; (5) certain securities issued by a state or any subdivision thereof, the District of Columbia, a foreign government, or any political subdivision thereof, or the Commonwealth of Puerto Rico; (6) any security issued by a REIT; and (7) any other arrangement that, as determined by the Secretary of the Treasury, is excepted from the definition of security (“excluded securities”). Special rules apply to straight debt securities issued by corporations and entities taxable as partnerships for federal income tax purposes. If a REIT, or its taxable REIT subsidiary, holds (1) straight debt securities of a corporate or partnership issuer and (2) securities of such issuer that are not excluded securities and have an aggregate value greater than 1% of such issuer’s outstanding securities, the straight debt securities will be included in the 10% value test.

 

A REIT’s interest as a partner in a partnership is not treated as a security for purposes of applying the 10% value test to securities issued by the partnership. Further, any debt instrument issued by a partnership will not be a security for purposes of applying the 10% value test (1) to the extent of the REIT’s interest as a partner in the partnership and (2) if at least 75% of the partnership’s gross income (excluding gross income from prohibited transactions) would qualify for the 75% gross income test.  For purposes of the 10% value test, a REIT’s interest in a partnership’s assets is determined by the REIT’s proportionate interest in any securities issued by the partnership (other than the excluded securities described in the preceding paragraph).

 

For taxable years beginning after July 30, 2008, if the REIT or its QBU uses a foreign currency as its functional currency, the term “cash” includes such foreign currency, but only to the extent such foreign currency is (i) held for use in the normal course of the activities of the REIT or QBU which give rise to items of income or gain that are included in the 95% and 75% gross income tests or are directly related to acquiring or holding assets qualifying under the 75% asset test, and (ii) not held in connection with dealing or engaging in substantial and regular trading in securities.

 

With respect to corrections of failures as to violations of the 10% vote test, the 10% value test or the 5% asset test, a REIT may avoid disqualification as a REIT by disposing of sufficient assets to cure a violation that does not exceed the lesser of 1% of the REIT’s assets at the end of the relevant quarter or $10,000,000, provided that the disposition occurs within six months following the last day of the quarter in which the REIT first identified the assets. For violations of any of the REIT asset tests due to reasonable cause and not willful neglect that exceed the thresholds described in the preceding sentence, a REIT can avoid disqualification as a REIT after the close of a taxable quarter by taking certain steps, including disposition of sufficient assets within the six month period described above to meet the applicable asset test, paying a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets during the period of time that the assets were held as non-qualifying assets and filing a schedule with the Internal Revenue Service that describes the non-qualifying assets.

 

Investments in Taxable REIT Subsidiaries.   REITs may own more than 10% of the voting power and value of securities in taxable REIT subsidiaries. We and any taxable corporate entity in which we own an interest are allowed to jointly elect to treat such entity as a “taxable REIT subsidiary.”

 

Certain of our subsidiaries have elected to be treated as a taxable REIT subsidiary. Taxable REIT subsidiaries are subject to full corporate level federal taxation on their earnings but are permitted to engage in certain types of activities that cannot be performed directly by REITs without jeopardizing their REIT status. Our taxable REIT subsidiaries will attempt to minimize the amount of these taxes, but there can be no assurance whether or the extent to which measures taken to minimize taxes will be successful. To the extent our taxable REIT subsidiaries are required to pay federal, state or local taxes, the cash available for distribution as dividends to us from our taxable REIT subsidiaries will be reduced.

 

The amount of interest on related-party debt that a taxable REIT subsidiary may deduct is limited. Further, a 100% tax applies to any interest payments by a taxable REIT subsidiary to its affiliated REIT to the extent the interest rate is not commercially reasonable. A taxable REIT subsidiary is permitted to deduct interest payments to unrelated parties without any of these restrictions.

 

The Internal Revenue Service may reallocate costs between a REIT and its taxable REIT subsidiary where there is a lack of arm’s-length dealing between the parties. Any deductible expenses allocated away from a taxable REIT subsidiary would increase its tax liability. Further, any amount by which a REIT understates its deductions and overstates those of its taxable REIT subsidiary will, subject to certain exceptions, be subject to a 100% tax. Additional taxable REIT subsidiary elections may be made in the future for additional entities in which we own an interest.

 

Annual Distribution Requirements.  In order to avoid being taxed as a regular corporation, we are required to make distributions (other than capital gain distributions) to our stockholders which qualify for the dividends paid deduction in an amount at least equal to (1) the sum of (i) 90% of our “REIT taxable income” (computed without regard to the dividends paid deduction and our net capital gain) and (ii) 90% of the after-tax net income, if any, from foreclosure property, minus (2) a portion of certain items of non-cash income. These distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before

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we timely file our tax return for that year and if paid on or before the first regular distribution payment after such declaration. The amount distributed must not be preferential. This means that every stockholder of the class of stock to which a distribution is made must be treated the same as every other stockholder of that class, and no class of stock may be treated otherwise than in accordance with its dividend rights as a class. To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates. Finally, as discussed above, we may be subject to an excise tax if we fail to meet certain other distribution requirements. We intend to make timely distributions sufficient to satisfy these annual distribution requirements.

 

It is possible that, from time to time, we may not have sufficient cash or other liquid assets to meet the 90% distribution requirement, or to distribute such greater amount as may be necessary to avoid income and excise taxation, due to, among other things, (1) timing differences between (i) the actual receipt of income and actual payment of deductible expenses and (ii) the inclusion of income and deduction of expenses in arriving at our taxable income, or (2) the payment of severance benefits that may not be deductible to us. In the event that timing differences occur, we may find it necessary to arrange for borrowings or, if possible, pay dividends in the form of taxable stock dividends in order to meet the distribution requirement.

 

Under certain circumstances, in the event of a deficiency determined by the Internal Revenue Service, we may be able to rectify a resulting failure to meet the distribution requirement for a year by paying “deficiency dividends” to stockholders in a later year, which may be included in our deduction for distributions paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends; however, we will be required to pay applicable penalties and interest based upon the amount of any deduction taken for deficiency dividend distributions.

 

The Internal Revenue Service issued Revenue Procedure 2008-68, which provided temporary relief to publicly traded REITs seeking to preserve liquidity by electing cash/stock dividends. Under Revenue Procedure 2008-68, a REIT may treat the entire dividend, including the stock portion, as a taxable dividend distribution, thereby qualifying for the dividends-paid deduction, provided certain requirements are satisfied. The cash portion of the dividend may be as low as 10%. Revenue Procedure 2008-68, as amplified by Revenue Procedure 2010-12, applies to dividends declared on or before December 31, 2012, and with respect to a taxable year ending on or before December 31, 2011.

 

Failure to Qualify as a REIT

 

If we fail to qualify for taxation as a REIT in any taxable year, we will be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. Distributions to stockholders in any year in which we fail to qualify as a REIT will not be deductible nor will any particular amount of distributions be required to be made in any year. All distributions to stockholders will be taxable as ordinary income to the extent of current and accumulated earnings and profits allocable to these distributions and, subject to certain limitations, will be eligible for the dividends received deduction for corporate stockholders. Unless entitled to relief under specific statutory provisions, we also will be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost. It is not possible to state whether in all circumstances we would be entitled to statutory relief. Failure to qualify for even one year could result in our need to incur indebtedness or liquidate investments in order to pay potentially significant resulting tax liabilities.

 

In addition to the relief described above under “— Income Tests” and “— Asset Tests,” relief is available in the event that we violate a provision of the Internal Revenue Code that would result in our failure to qualify as a REIT if: (1) the violation is due to reasonable cause and not due to willful neglect; (2) we pay a penalty of $50,000 for each failure to satisfy the provision; and (3) the violation does not include a violation described under “— Income Tests” or “— Asset Tests” above. It is not now possible to determine the circumstances under which we may be entitled to the benefit of these relief provisions.

 

Federal Income Taxation of Holders of Our Stock

 

Treatment of Taxable U.S. Stockholders.  The following summary applies to you only if you are a “U.S. stockholder.” A “U.S. stockholder” is a holder of shares of stock who, for United States federal income tax purposes, is:

 

•     a citizen or resident of the United States;

 

•     a corporation, partnership or other entity classified as a corporation or partnership for these purposes, created or organized in or under the laws of the United States or of any political subdivision of the United States, including any state;

 

•     an estate, the income of which is subject to United States federal income taxation regardless of its source; or

 

•     a trust, if, in general, a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to control all of the trust’s substantial decisions.

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So long as we qualify for taxation as a REIT, distributions on shares of our stock made out of the current or accumulated earnings and profits allocable to these distributions (and not designated as capital gain dividends) will be includable as ordinary income for federal income tax purposes. None of these distributions will be eligible for the dividends received deduction for U.S. corporate stockholders.

 

Generally, for taxable years ending after May 6, 2003 through December 31, 2012, the maximum marginal rate of tax payable by individuals on dividends received from corporations that are subject to a corporate level of tax is 15%. Except in limited circumstances, this tax rate will not apply to dividends paid to you by us on our shares, because generally we are not subject to federal income tax on the portion of our REIT taxable income or capital gains distributed to our stockholders. The reduced maximum federal income tax rate will apply to that portion, if any, of dividends received by you with respect to our shares that are attributable to: (1) dividends received by us from non-REIT corporations or other taxable REIT subsidiaries; (2) income from the prior year with respect to which we were required to pay federal corporate income tax during the prior year (if, for example, we did not distribute 100% of our REIT taxable income for the prior year); or (3) the amount of any earnings and profits that were distributed by us and accumulated in a non-REIT year.

 

Distributions that are designated as capital gain dividends will be taxed as long-term capital gains (to the extent they do not exceed our actual net capital gain for the taxable year), without regard to the period for which you held our stock. However, if you are a corporation, you may be required to treat a portion of some capital gain dividends as ordinary income.

 

If we elect to retain and pay income tax on any net long-term capital gain, you would include in income, as long-term capital gain, your proportionate share of this net long-term capital gain. You would also receive a refundable tax credit for your proportionate share of the tax paid by us on such retained capital gains, and you would have an increase in the basis of your shares of our stock in an amount equal to your includable capital gains less your share of the tax deemed paid.

 

You may not include in your federal income tax return any of our net operating losses or capital losses. Federal income tax rules may also require that certain minimum tax adjustments and preferences be apportioned to you. In addition, any distribution declared by us in October, November or December of any year on a specified date in any such month shall be treated as both paid by us and received by you on December 31 of that year, provided that the distribution is actually paid by us no later than January 31 of the following year.

 

We will be treated as having sufficient earnings and profits to treat as a dividend any distribution up to the amount required to be distributed in order to avoid imposition of the 4% excise tax discussed under “— General” and “— Qualification as a REIT — Annual Distribution Requirements” above. As a result, you may be required to treat as taxable dividends certain distributions that would otherwise result in a tax-free return of capital. Moreover, any “deficiency dividend” will be treated as a dividend (an ordinary dividend or a capital gain dividend, as the case may be), regardless of our earnings and profits. Any other distributions in excess of current or accumulated earnings and profits will not be taxable to you to the extent these distributions do not exceed the adjusted tax basis of your shares of our stock. You will be required to reduce the tax basis of your shares of our stock by the amount of these distributions until the basis has been reduced to zero, after which these distributions will be taxable as capital gain, if the shares of our stock are held as capital assets. The tax basis as so reduced will be used in computing the capital gain or loss, if any, realized upon sale of the shares of our stock. Any loss upon a sale or exchange of shares of our stock which were held for six months or less (after application of certain holding period rules) will generally be treated as a long-term capital loss to the extent you previously received capital gain distributions with respect to these shares of our stock.

 

Upon the sale or exchange of any shares of our stock to or with a person other than us or a sale or exchange of all shares of our stock (whether actually or constructively owned) with us, you will generally recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange and your adjusted tax basis in these shares of our stock. This gain will be capital gain if you held these shares of our stock as a capital asset.

 

If we redeem any of your shares in us, the treatment can only be determined on the basis of particular facts at the time of redemption. In general, you will recognize gain or loss (as opposed to dividend income) equal to the difference between the amount received by you in the redemption and your adjusted tax basis in your shares redeemed if such redemption: (1) results in a “complete termination” of your interest in all classes of our equity securities; (2) is a “substantially disproportionate redemption”; or (3) is “not essentially equivalent to a dividend” with respect to you. In applying these tests, you must take into account your ownership of all classes of our equity securities (e.g., common stock, preferred stock, depositary shares and warrants). You also must take into account any equity securities that are considered to be constructively owned by you.

 

If, as a result of a redemption by us of your shares, you no longer own (either actually or constructively) any of our equity securities or only own (actually and constructively) an insubstantial percentage of our equity securities, then it is probable that the redemption of your shares would be considered “not essentially equivalent to a dividend” and, thus, would result in gain or loss to you. However,

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whether a distribution is “not essentially equivalent to a dividend” depends on all of the facts and circumstances, and if you rely on any of these tests at the time of redemption, you should consult your tax advisor to determine their application to the particular situation.

 

Generally, if the redemption does not meet the tests described above, then the proceeds received by you from the redemption of your shares will be treated as a distribution taxable as a dividend to the extent of the allocable portion of current or accumulated earnings and profits. If the redemption is taxed as a dividend, your adjusted tax basis in the redeemed shares will be transferred to any other shareholdings in us that you own. If you own no other shareholdings in us, under certain circumstances, such basis may be transferred to a related person, or it may be lost entirely.

 

Gain from the sale or exchange of our shares held for more than one year is generally taxed at a maximum long-term capital gain rate of 15% through 2012 in the case of stockholders who are individuals and 35% in the case of stockholders that are corporations.  Pursuant to Internal Revenue Service guidance, we may classify portions of our capital gain dividends as gains eligible for the long-term capital gains rate or as gain taxable to individual stockholders at a maximum rate of 25%.  Capital losses recognized by a stockholder upon the disposition of our shares held for more than one year at the time of disposition will be considered long term capital losses, and are generally available only to offset capital gain income of the stockholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year).

 

On March 30, 2010, the President signed into law the Health Care and Education Reconciliation Act of 2010, which requires U.S. stockholders who meet certain requirements and are individuals, estates or certain trusts to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of stock for taxable years beginning after December 31, 2012. U.S. stockholders should consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of shares of our stock.

 

Treatment of Tax-Exempt U.S. Stockholders.  Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts (“Exempt Organizations”), generally are exempt from federal income taxation. However, they are subject to taxation on their unrelated business taxable income (“UBTI”). The Internal Revenue Service has issued a published revenue ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute UBTI, provided that the shares of the REIT are not otherwise used in an unrelated trade or business of the exempt employee pension trust. Based on this ruling, amounts distributed by us to Exempt Organizations generally should not constitute UBTI. However, if an Exempt Organization finances its acquisition of the shares of our stock with debt, a portion of its income from us will constitute UBTI pursuant to the “debt financed property” rules. Likewise, a portion of the Exempt Organization’s income from us would constitute UBTI if we held a residual interest in a real estate mortgage investment conduit.

 

In addition, in certain circumstances, a pension trust that owns more than 10% of our stock is required to treat a percentage of our dividends as UBTI. This rule applies to a pension trust holding more than 10% of our stock only if: (1) the percentage of our income that is UBTI (determined as if we were a pension trust) is at least 5%; (2) we qualify as a REIT by reason of the modification of the Five or Fewer Requirement that allows beneficiaries of the pension trust to be treated as holding shares in proportion to their actuarial interests in the pension trust; and (3) either (i) one pension trust owns more than 25% of the value of our stock, or (ii) a group of pension trusts individually holding more than 10% of the value of our stock collectively own more than 50% of the value of our stock.

 

Backup Withholding and Information Reporting.  Under certain circumstances, you may be subject to backup withholding at applicable rates on payments made with respect to, or cash proceeds of a sale or exchange of, shares of our stock. Backup withholding will apply only if you: (1) fail to provide a correct taxpayer identification number, which if you are an individual, is ordinarily your social security number; (2) furnish an incorrect taxpayer identification number; (3) are notified by the Internal Revenue Service that you have failed to properly report payments of interest or dividends; or (4) fail to certify, under penalties of perjury, that you have furnished a correct taxpayer identification number and that the Internal Revenue Service has not notified you that you are subject to backup withholding.

 

Backup withholding will not apply with respect to payments made to certain exempt recipients, such as corporations and tax-exempt organizations. You should consult with a tax advisor regarding qualification for exemption from backup withholding, and the procedure for obtaining an exemption. Backup withholding is not an additional tax. Rather, the amount of any backup withholding with respect to a payment to a stockholder will be allowed as a credit against such stockholder’s United States federal income tax liability and may entitle such stockholder to a refund, provided that the required information is provided to the Internal Revenue Service. In addition, withholding a portion of capital gain distributions made to stockholders may be required for stockholders who fail to certify their non-foreign status.

 

Taxation of Foreign Stockholders.  The following summary applies to you only if you are a foreign person. The federal taxation of foreign persons is a highly complex matter that may be affected by many considerations.

 

Except as discussed below, distributions to you of cash generated by our real estate operations in the form of ordinary dividends, but not by the sale or exchange of our capital assets, generally will be subject to U.S. withholding tax at a rate of 30%, unless an applicable tax treaty reduces that tax and you file with us the required form evidencing the lower rate.

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In general, you will be subject to United States federal income tax on a graduated rate basis rather than withholding with respect to your investment in our stock if such investment is “effectively connected” with your conduct of a trade or business in the United States. A corporate foreign stockholder that receives income that is, or is treated as, effectively connected with a United States trade or business may also be subject to the branch profits tax, which is payable in addition to regular United States corporate income tax. The following discussion will apply to foreign stockholders whose investment in us is not so effectively connected. We expect to withhold United States income tax, as described below, on the gross amount of any distributions paid to you unless (1) you file an Internal Revenue Service Form W-8ECI with us claiming that the distribution is “effectively connected” or (2) certain other exceptions apply.

 

Distributions by us that are attributable to gain from the sale or exchange of a United States real property interest will be taxed to you under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) as if these distributions were gains “effectively connected” with a United States trade or business. Accordingly, you will be taxed at the normal capital gain rates applicable to a U.S. stockholder on these amounts, subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals. Distributions subject to FIRPTA may also be subject to a branch profits tax in the hands of a corporate foreign stockholder that is not entitled to treaty exemption.

 

We will be required to withhold from distributions subject to FIRPTA, and remit to the Internal Revenue Service, 35% of designated capital gain dividends, or, if greater, 35% of the amount of any distributions that could be designated as capital gain dividends. In addition, if we designate prior distributions as capital gain dividends, subsequent distributions, up to the amount of the prior distributions not withheld against, will be treated as capital gain dividends for purposes of withholding.

 

Any capital gain dividend with respect to any class of stock that is “regularly traded” on an established securities market will be treated as an ordinary dividend if the foreign stockholder did not own more than 5% of such class of stock at any time during the taxable year. Foreign stockholders generally will not be required to report distributions received from us on U.S. federal income tax returns and all distributions treated as dividends for U.S. federal income tax purposes (including any such capital gain dividends) will be subject to a 30% U.S. withholding tax (unless reduced under an applicable income tax treaty) as discussed above. In addition, the branch profits tax will not apply to such distributions.

 

Unless our shares constitute a “United States real property interest” within the meaning of FIRPTA or are effectively connected with a U.S. trade or business, a sale of our shares by you generally will not be subject to United States taxation. Our shares will not constitute a United States real property interest if we qualify as a “domestically controlled REIT.” We believe that we, and expect to continue to, qualify as a domestically controlled REIT. A domestically controlled REIT is a REIT in which at all times during a specified testing period less than 50% in value of its shares is held directly or indirectly by foreign stockholders. However, if you are a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions apply, you will be subject to a 30% tax on such capital gains. In any event, a purchaser of our shares from you will not be required under FIRPTA to withhold on the purchase price if the purchased shares are “regularly traded” on an established securities market or if we are a domestically controlled REIT. Otherwise, under FIRPTA, the purchaser may be required to withhold 10% of the purchase price and remit such amount to the Internal Revenue Service.

 

Backup withholding tax and information reporting will generally not apply to distributions paid to you outside the United States that are treated as: (1) dividends to which the 30% or lower treaty rate withholding tax discussed above applies; (2) capital gains dividends; or (3) distributions attributable to gain from the sale or exchange by us of U.S. real property interests. Payment of the proceeds of a sale of stock within the United States or conducted through certain U.S. related financial intermediaries is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that he or she is not a U.S. person (and the payor does not have actual knowledge that the beneficial owner is a U.S. person) or otherwise established an exemption. You may obtain a refund of any amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service.

 

Recently enacted legislation will impose U.S. withholding tax at a rate of 30% after December 31, 2013 on dividends in respect of, and after December 31, 2014 on gross proceeds from the sale of, shares of our stock held by or through certain foreign financial institutions (including investment funds), unless such institution enters into an agreement with the Secretary of the Treasury to report, on an annual basis, information with respect to shares in the institution held by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons, and to withhold on certain payments. Accordingly, the entity through which shares of stock is held will affect the determination of whether such withholding is required. Similarly, dividends in respect of, and gross proceeds from the sale of, shares of our stock held by an investor that is a non-financial non-U.S. entity will be subject to withholding at a rate of 30%, unless such entity either (i) certifies to us that such entity does not have any "substantial United States owners" or (ii) provides certain information regarding the entity's "substantial United States owners," which we will in turn provide to the Secretary of the Treasury. If payment of withholding taxes is required, stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. withholding taxes with respect to such dividends and proceeds will be required to seek a refund from the Internal Revenue Service to obtain the benefit of such exemption or reduction.  We will not pay any additional amounts to any stockholders in

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respect of any amounts withheld. Foreign persons are encouraged to consult with their tax advisors regarding the possible implications of the legislation on their investment in shares of our stock.

 

U.S. Federal Income Taxation of Holders of Depositary Shares

 

Owners of our depositary shares will be treated as if you were owners of the series of preferred stock represented by the depositary shares. Thus, you will be required to take into account the income and deductions to which you would be entitled if you were a holder of the underlying series of preferred stock.

 

Conversion or Exchange of Shares for Preferred Stock.  No gain or loss will be recognized upon the withdrawal of preferred stock in exchange for depositary shares and the tax basis of each share of preferred stock will, upon exchange, be the same as the aggregate tax basis of the depositary shares exchanged. If you held your depositary shares as a capital asset at the time of the exchange for shares of preferred stock, the holding period for your shares of preferred stock will include the period during which you owned the depositary shares.

 

U.S. Federal Income and Estate Taxation of Holders of Our Debt Securities

 

The following is a general summary of the United States federal income tax consequences and, in the case that you are a holder that is a non-U.S. holder, as defined below, the United States federal estate tax consequences, of purchasing, owning and disposing of debt securities periodically offered under one or more indentures (the “notes”). This summary assumes that you hold the notes as capital assets. This summary applies to you only if you are the initial holder of the notes and you acquire the notes for a price equal to the issue price of the notes. The issue price of the notes is the first price at which a substantial amount of the notes is sold other than to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. In addition, this summary does not consider any foreign, state, local or other tax laws that may be applicable to us or a purchaser of the notes.

 

U.S. Holders

 

The following summary applies to you only if you are a U.S. holder, as defined below.

 

Definition of a U.S. Holder.  A “U.S. holder” is a beneficial owner of a note or notes that is for United States federal income tax purposes:

 

•     a citizen or resident of the United States;

 

•     a corporation, partnership or other entity classified as a corporation or partnership for these purposes, created or organized in or under the laws of the United States or of any political subdivision of the United States, including any state;

 

•     an estate, the income of which is subject to United States federal income taxation regardless of its source; or

 

•     a trust, if, in general, a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to control all of the trust’s substantial decisions.

 

Payments of Interest.  Stated interest on the notes generally will be taxed as ordinary interest income from domestic sources at the time it is paid or accrues in accordance with your method of accounting for tax purposes.

 

Sale, Exchange or Other Disposition of Notes.  The adjusted tax basis in your note acquired at a premium will generally be your cost. You generally will recognize taxable gain or loss when you sell or otherwise dispose of your notes equal to the difference, if any, between:

 

•     the amount realized on the sale or other disposition, less any amount attributable to any accrued interest, which will be taxable in the manner described under “— Payments of Interest” above; and

 

•     your adjusted tax basis in the notes.

 

Your gain or loss generally will be capital gain or loss. This capital gain or loss will be long-term capital gain or loss if at the time of the sale or other disposition you have held the notes for more than one year. Subject to limited exceptions, your capital losses cannot be used to offset your ordinary income.

 

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Backup Withholding and Information Reporting.  In general, “backup withholding” may apply to any payments made to you of principal and interest on your note, and to payment of the proceeds of a sale or other disposition of your note before maturity, if you are a non-corporate U.S. holder and: (1) fail to provide a correct taxpayer identification number, which if you are an individual, is ordinarily your social security number; (2) furnish an incorrect taxpayer identification number; (3) are notified by the Internal Revenue Service that you have failed to properly report payments of interest or dividends; or (4) fail to certify, under penalties of perjury, that you have furnished a correct taxpayer identification number and that the Internal Revenue Service has not notified you that you are subject to backup withholding.

 

The amount of any reportable payments, including interest, made to you (unless you are an exempt recipient) and the amount of tax withheld, if any, with respect to such payments will be reported to you and to the Internal Revenue Service for each calendar year. You should consult your tax advisor regarding your qualification for an exemption from backup withholding and the procedures for obtaining such an exemption, if applicable. The backup withholding tax is not an additional tax and will be credited against your U.S. federal income tax liability, provided that correct information is provided to the Internal Revenue Service.

 

Non-U.S. Holders

 

The following summary applies to you if you are a beneficial owner of a note and are not a U.S. holder, as defined above (a “non-U.S. holder”).

 

Special rules may apply to certain non-U.S. holders such as “controlled foreign corporations,” “passive foreign investment companies” and “foreign personal holding companies.” Such entities are encouraged to consult their tax advisors to determine the United States federal, state, local and other tax consequences that may be relevant to them.

 

U.S. Federal Withholding Tax.  Subject to the discussion below, U.S. federal withholding tax will not apply to payments by us or our paying agent, in its capacity as such, of principal and interest on your notes under the “portfolio interest” exception of the Internal Revenue Code, provided that:

 

•     you do not, directly or indirectly, actually or constructively, own 10% or more of the total combined voting power of all classes of our stock entitled to vote;

 

•     you are not (1) a controlled foreign corporation for U.S. federal income tax purposes that is related, directly or indirectly, to us through sufficient stock ownership, as provided in the Internal Revenue Code, or (2) a bank receiving interest described in Section 881(c)(3)(A) of the Internal Revenue Code;

 

•     such interest is not effectively connected with your conduct of a U.S. trade or business; and

 

•     you provide a signed written statement, under penalties of perjury, which can reliably be related to you, certifying that you are not a U.S. person within the meaning of the Internal Revenue Code and providing your name and address to:

 

•     us or our paying agent; or

 

•     a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business and holds your notes on your behalf and that certifies to us or our paying agent under penalties of perjury that it, or the bank or financial institution between it and you, has received from you your signed, written statement and provides us or our paying agent with a copy of such statement.

 

Treasury regulations provide that:

 

•     if you are a foreign partnership, the certification requirement will generally apply to your partners, and you will be required to provide certain information;

 

•     if you are a foreign trust, the certification requirement will generally be applied to you or your beneficial owners depending on whether you are a “foreign complex trust,” “foreign simple trust,” or “foreign grantor trust” as defined in the Treasury regulations; and

 

•     look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts.

 

If you are a foreign partnership or a foreign trust, you should consult your own tax advisor regarding your status under these Treasury regulations and the certification requirements applicable to you.

 

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If you cannot satisfy the portfolio interest requirements described above, payments of interest will be subject to the 30% United States withholding tax, unless you provide us with a properly executed (1) Internal Revenue Service Form W-8BEN claiming an exemption from or reduction in withholding under the benefit of an applicable treaty or (2) Internal Revenue Service Form W-8ECI stating that interest paid on the note is not subject to withholding tax because it is effectively connected with your conduct of a trade or business in the United States. Alternative documentation may be applicable in certain circumstances.

 

If you are engaged in a trade or business in the United States and interest on a note is effectively connected with the conduct of that trade or business, you will be required to pay United States federal income tax on that interest on a net income basis (although you will be exempt from the 30% withholding tax provided the certification requirement described above is met) in the same manner as if you were a U.S. person, except as otherwise provided by an applicable tax treaty. If you are a foreign corporation, you may be required to pay a branch profits tax on the earnings and profits that are effectively connected to the conduct of your trade or business in the United States.

 

Recently enacted legislation generally will impose U.S. withholding tax at a 30% rate on payments of interest (including original issue discount) and proceeds of sale in respect of debt instruments to certain non-U.S. holders if certain additional disclosure requirements related to U.S. ownership of such non-U.S. holders or certain U.S. accounts maintained by such non-U.S. holders at foreign financial institutions are not satisfied. However, the withholding tax will not be imposed on payments pursuant to debt or other obligations outstanding as of March 18, 2012.  If payment of withholding taxes is required, non-U.S. holders that are otherwise eligible for an exemption from, or reduction of, U.S. withholding taxes with respect to such distributions and proceeds of a sale of such notes will be entitled to seek a refund from the Internal Revenue Service (“IRS”) to obtain the benefit of such exemption or reduction. We will not pay any additional amounts to non-U.S. holders in respect of any amounts withheld. These new withholding rules are generally effective with respect to payments of interest made after December 31, 2013 and with respect to proceeds of sales received after December 31, 2014.

 

Sale, Exchange or other Disposition of Notes.  You generally will not have to pay U.S. federal income tax on any gain or income realized from the sale, redemption, retirement at maturity or other disposition of your notes, unless:

 

•     in the case of gain, you are an individual who is present in the United States for 183 days or more during the taxable year of the sale or other disposition of your notes, and specific other conditions are met;

 

•     you are subject to tax provisions applicable to certain United States expatriates; or

 

•     the gain is effectively connected with your conduct of a U.S. trade or business.

 

If you are engaged in a trade or business in the United States, and gain with respect to your notes is effectively connected with the conduct of that trade or business, you generally will be subject to U.S. income tax on a net basis on the gain. In addition, if you are a foreign corporation, you may be subject to a branch profits tax on your effectively connected earnings and profits for the taxable year, as adjusted for certain items.

 

U.S. Federal Estate Tax.  If you are an individual and are not a U.S. citizen or a resident of the United States, as specially defined for U.S. federal estate tax purposes, at the time of your death, your notes will generally not be subject to the U.S. federal estate tax, unless, at the time of your death (1) you owned actually or constructively 10% or more of the total combined voting power of all our classes of stock entitled to vote, or (2) interest on the notes is effectively connected with your conduct of a U.S. trade or business.

 

Backup Withholding and Information Reporting.  Backup withholding will not apply to payments of principal or interest made by us or our paying agent, in its capacity as such, to you if you have provided the required certification that you are a non-U.S. holder as described in “— U.S. Federal Withholding Tax” above, and provided that neither we nor our paying agent have actual knowledge that you are a U.S. holder, as described in “— U.S. Holders” above. We or our paying agent may, however, report payments of interest on the notes.

 

The gross proceeds from the disposition of your notes may be subject to information reporting and backup withholding tax. If you sell your notes outside the United States through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then the U.S. backup withholding and information reporting requirements generally will not apply to that payment. However, U.S. information reporting, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if you sell your notes through a non-U.S. office of a broker that:

 

•     is a U.S. person, as defined in the Internal Revenue Code;

 

•     derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States;

 

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•     is a “controlled foreign corporation” for U.S. federal income tax purposes; or

 

•     is a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons who in the aggregate hold more than 50% of the income or capital interests in the partnership, or the foreign partnership is engaged in a U.S. trade or business, unless the broker has documentary evidence in its files that you are a non-U.S. person and certain other conditions are met or you otherwise establish an exemption. If you receive payments of the proceeds of a sale of your notes to or through a U.S. office of a broker, the payment is subject to both U.S. backup withholding and information reporting unless you provide a Form W-8BEN certifying that you are a non-U.S. person or you otherwise establish an exemption.

 

You should consult your own tax advisor regarding application of backup withholding in your particular circumstance and the availability of and procedure for obtaining an exemption from backup withholding. Any amounts withheld under the backup withholding rules from a payment to you will be allowed as a refund or credit against your U.S. federal income tax liability, provided the required information is furnished to the Internal Revenue Service.

 

U.S. Federal Income and Estate Taxation of Holders of Our Warrants

 

Exercise of Warrants.  You will not generally recognize gain or loss upon the exercise of a warrant. Your basis in the debt securities, preferred stock, depositary shares or common stock, as the case may be, received upon the exercise of the warrant will be equal to the sum of your adjusted tax basis in the warrant and the exercise price paid. Your holding period in the debt securities, preferred stock, depositary shares or common stock, as the case may be, received upon the exercise of the warrant will not include the period during which the warrant was held by you.

 

Expiration of Warrants.  Upon the expiration of a warrant, you will recognize a capital loss in an amount equal to your adjusted tax basis in the warrant.

 

Sale or Exchange of Warrants.  Upon the sale or exchange of a warrant to a person other than us, you will recognize gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and your adjusted tax basis in the warrant. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the warrant was held for more than one year. Upon the sale of the warrant to us, the Internal Revenue Service may argue that you should recognize ordinary income on the sale. You are advised to consult your own tax advisors as to the consequences of a sale of a warrant to us.

 

Potential Legislation or Other Actions Affecting Tax Consequences

 

Current and prospective securities holders should recognize that the present federal income tax treatment of an investment in us may be modified by legislative, judicial or administrative action at any time and that any such action may affect investments and commitments previously made. The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the Treasury Department, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes. Revisions in federal tax laws and interpretations of these laws could adversely affect the tax consequences of an investment in us.

 

State, Local and Foreign Taxes

 

We, and holders of our debt and equity securities, may be subject to state, local or foreign taxation in various jurisdictions, including those in which we or they transact business, own property or reside. It should be noted that we own properties located in a number of state, local and foreign jurisdictions, and may be required to file tax returns in some or all of those jurisdictions. The state, local or foreign tax treatment of us and holders of our debt and equity securities may not conform to the U.S. federal income tax consequences discussed above. Consequently, you are urged to consult your advisor regarding the application and effect of state, local and foreign tax laws with respect to any investment in our securities.

 

Internet Access to Our SEC Filings

 

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as well as our proxy statements and other materials that are filed with, or furnished to, the Securities and Exchange Commission are made available, free of charge, on the Internet at www.hcreit.com, as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission.

 

Item 1A.  Risk Factors

 

Forward-Looking Statements and Risk Factors

 

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This section discusses the most significant factors that affect our business, operations and financial condition. It does not describe all risks and uncertainties applicable to us, our industry or ownership of our securities. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are not material, actually occur, we could be materially adversely affected. In that event, the value of our securities could decline.

 

This Annual Report on Form 10-K and the documents incorporated by reference contain statements that constitute “forward-looking statements” as that term is defined in the federal securities laws. These forward-looking statements include, but are not limited to, those regarding:

 

•     the possible expansion of our portfolio;

 

•     the sale of properties;

 

•     the performance of our operators/tenants and properties;

 

•     our ability to enter into agreements with new viable tenants for vacant space or for properties that we take back from financially troubled tenants, if any;

 

•     our occupancy rates;

 

•     our ability to acquire, develop and/or manage properties;

 

•     our ability to make distributions to stockholders;

 

•     our policies and plans regarding investments, financings and other matters;

 

•     our ability to successfully manage the risks associated with international expansion and operations;

 

•     our tax status as a real estate investment trust;

 

•     our critical accounting policies;

 

•     our ability to appropriately balance the use of debt and equity;

 

•     our ability to access capital markets or other sources of funds; and

 

•     our ability to meet our earnings guidance.

 

When we use words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions, we are making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our expected results may not be achieved, and actual results may differ materially from our expectations. This may be a result of various factors, including, but not limited to:

 

•     the status of the economy;

 

•     the status of capital markets, including availability and cost of capital;

 

•     issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance;

 

•     changes in financing terms;

 

•     competition within the health care, seniors housing and life science industries;

 

•     negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans;

 

•     our ability to transition or sell facilities with profitable results;

 

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•     the failure to make new investments as and when anticipated;

 

•     acts of God affecting our properties;

 

•     our ability to re-lease space at similar rates as vacancies occur;

 

•     our ability to timely reinvest sale proceeds at similar rates to assets sold;

 

•     operator/tenant or joint venture partner bankruptcies or insolvencies;

 

•     the cooperation of joint venture partners;

 

•     government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements;

 

•     regulatory approval and market acceptance of the products and technologies of life science tenants;

 

•     liability or contract claims by or against operators/tenants;

 

•     unanticipated difficulties and/or expenditures relating to future acquisitions;

 

•     environmental laws affecting our properties;

 

•     changes in rules or practices governing our financial reporting;

 

•     the movement of U.S. and Canadian exchange rates;

 

•     other legal and operational matters, including REIT qualification and key management personnel recruitment and retention; and

 

•     the risks described below:

 

Risk factors related to our operators’ revenues and expenses

 

Our operators’ revenues are primarily driven by occupancy, Medicare and Medicaid reimbursement, if applicable, and private pay rates. Expenses for these facilities are primarily driven by the costs of labor, food, utilities, taxes, insurance and rent or debt service. Revenues from government reimbursement have, and may continue to, come under pressure due to reimbursement cuts and state budget shortfalls. Operating costs continue to increase for our operators. To the extent that any decrease in revenues and/or any increase in operating expenses result in a property not generating enough cash to make payments to us, the credit of our operator and the value of other collateral would have to be relied upon.

 

The continued weakened economy may have an adverse effect on our operators and tenants, including their ability to access credit or maintain occupancy rates. If the operations, cash flows or financial condition of our operators are materially adversely impacted by economic conditions, our revenue and operations may be adversely affected.

 

Increased competition may affect our operators’ ability to meet their obligations to us 

 

The operators of our properties compete on a local and regional basis with operators of properties and other health care providers that provide comparable services. We cannot be certain that the operators of all of our facilities will be able to achieve and maintain occupancy and rate levels that will enable them to meet all of their obligations to us. Our operators are expected to encounter increased competition in the future that could limit their ability to attract residents or expand their businesses.

 

Risk factors related to obligor bankruptcies

 

We are exposed to the risk that our obligors may not be able to meet the rent, principal and interest or other payments due us, which may result in an obligor bankruptcy or insolvency, or that an obligor might become subject to bankruptcy or insolvency proceedings for other reasons. Although our operating lease agreements provide us with the right to evict a tenant, demand immediate payment of rent and exercise other remedies, and our loans provide us with the right to terminate any funding obligation, demand immediate repayment of principal and unpaid interest, foreclose on the collateral and exercise other remedies, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. An obligor in bankruptcy or subject to insolvency

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proceedings may be able to limit or delay our ability to collect unpaid rent in the case of a lease or to receive unpaid principal and interest in the case of a loan, and to exercise other rights and remedies.

 

We may be required to fund certain expenses (e.g., real estate taxes and maintenance) to preserve the value of an investment property, avoid the imposition of liens on a property and/or transition a property to a new tenant. In some instances, we have terminated our lease with a tenant and relet the property to another tenant. In some of those situations, we have provided working capital loans to and limited indemnification of the new obligor. If we cannot transition a leased property to a new tenant, we may take possession of that property, which may expose us to certain successor liabilities. Should such events occur, our revenue and operating cash flow may be adversely affected.

 

Transfers of health care facilities may require regulatory approvals and these facilities may not have efficient alternative uses

 

Transfers of health care facilities to successor operators frequently are subject to regulatory approvals or notifications, including, but not limited to, change of ownership approvals under certificate of need (“CON”) or determination of need laws, state licensure laws and Medicare and Medicaid provider arrangements, that are not required for transfers of other types of real estate. The replacement of a health care facility operator could be delayed by the approval process of any federal, state or local agency necessary for the transfer of the facility or the replacement of the operator licensed to manage the facility. Alternatively, given the specialized nature of our facilities, we may be required to spend substantial time and funds to adapt these properties to other uses. If we are unable to timely transfer properties to successor operators or find efficient alternative uses, our revenue and operations may be adversely affected.

 

Risk factors related to government regulations

 

Our obligors’ businesses are affected by government reimbursement and private payor rates. To the extent that an operator/tenant receives a significant portion of its revenues from government payors, primarily Medicare and Medicaid, such revenues may be subject to statutory and regulatory changes, retroactive rate adjustments, recovery of program overpayments or set-offs, administrative rulings, policy interpretations, payment or other delays by fiscal intermediaries or carriers, government funding restrictions (at a program level or with respect to specific facilities) and interruption or delays in payments due to any ongoing government investigations and audits at such property. In recent years, government payors have frozen or reduced payments to health care providers due to budgetary pressures. Health care reimbursement will likely continue to be of paramount importance to federal and state authorities. We cannot make any assessment as to the ultimate timing or effect any future legislative reforms may have on the financial condition of our obligors and properties. There can be no assurance that adequate reimbursement levels will be available for services provided by any property operator, whether the property receives reimbursement from Medicare, Medicaid or private payors. Significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on an obligor’s liquidity, financial condition and results of operations, which could adversely affect the ability of an obligor to meet its obligations to us. See “Item 1 — Business — Certain Government Regulations — Reimbursement” above.

 

Our operators and tenants generally are subject to extensive federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards.  Our operators’ or tenants’ failure to comply with any of these laws, regulations, or standards could result in loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from federal and state health care programs, loss of license or closure of the facility. Such actions may have an effect on our operators’ or tenants’ ability to make lease payments to us and, therefore, adversely impact us. See “Item 1 — Business — Certain Government Regulations — Other Related Laws” above.

 

Many of our properties may require a license, registration, and/or CON to operate. Failure to obtain a license, registration, or CON, or loss of a required license, registration, or CON would prevent a facility from operating in the manner intended by the operators or tenants. These events could materially adversely affect our operators’ or tenants’ ability to make rent payments to us.  State and local laws also may regulate the expansion, including the addition of new beds or services or acquisition of medical equipment, and the construction or renovation of health care facilities, by requiring a CON or other similar approval from a state agency. See “Item 1 — Business — Certain Government Regulations — Licensing and Certification” above.

 

The American Recovery and Reinvestment Act of 2009 (“ARRA”), which was signed into law on February 17, 2009, provided $87 billion in additional federal Medicaid funding for states’ Medicaid expenditures between October 1, 2008 and December 31, 2010.  On August 10, 2010, the President signed into law H.R. 1586, which mandated a six-month extension of the increase in federal Medicaid funding for states through June 30, 2011, although the enhanced federal Medicaid funding was scaled back for the first two quarters of 2011. Under both the ARRA and H.R. 1586, states meeting certain eligibility requirements temporarily received additional money in the form of an increase in the federal medical assistance percentage (“FMAP”). Thus, for a limited period of time, the share of Medicaid costs that were paid for by the federal government went up, and each state’s share went down.  No similar extension of increased matching has been offered since June 30, 2011, and states’ FMAP rates have returned to levels comparable to pre-ARRA rates. We cannot predict whether states are, or will remain, eligible to receive the additional federal Medicaid funding, or whether the

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states will have sufficient funds for their Medicaid programs. We also cannot predict the impact that such broad-based, far-reaching legislation will have on the U.S. economy or our business.

 

Risk factors related to liability claims and insurance costs

 

In recent years, skilled nursing and seniors housing operators have experienced substantial increases in both the number and size of patient care liability claims. As a result, general and professional liability costs have increased in some markets. General and professional liability insurance coverage may be restricted or very costly, which may adversely affect the property operators’ future operations, cash flows and financial condition, and may have a material adverse effect on the property operators’ ability to meet their obligations to us.

 

Risk factors related to acquisitions

 

We are exposed to the risk that some of our acquisitions may not prove to be successful. We could encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities, and acquired properties might require significant management attention that would otherwise be devoted to our ongoing business. If we agree to provide construction funding to an operator/tenant and the project is not completed, we may need to take steps to ensure completion of the project. Moreover, if we issue equity securities or incur additional debt, or both, to finance future acquisitions, it may reduce our per share financial results. These costs may negatively affect our results of operations.

 

Unfavorable resolution of pending and future litigation matters and disputes could have a material adverse effect on our financial condition.

 

From time to time, we may be directly involved in a number of legal proceedings, lawsuits and other claims. We may also be named as defendants in lawsuits allegedly arising out of our actions or the actions of our operators/tenants or managers in which such operators/tenants or managers have agreed to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses. An unfavorable resolution of pending or future litigation may have a material adverse effect on our business, results of operations and financial condition. Regardless of its outcome, litigation may result in substantial costs and expenses and significantly divert the attention of management. There can be no assurance that we will be able to prevail in, or achieve a favorable settlement of, pending or future litigation. In addition, pending litigation or future litigation, government proceedings or environmental matters could lead to increased costs or interruption of our normal business operations.

 

Risk factors related to joint ventures

 

We have entered into, and may continue in the future to enter into, partnerships or joint ventures with other persons or entities. Joint venture investments involve risks that may not be present with other methods of ownership, including the possibility that our partner might become insolvent, refuse to make capital contributions when due or otherwise fail to meet its obligations, which may result in certain liabilities to us for guarantees and other commitments; that our partner might at any time have economic or other business interests or goals that are or become inconsistent with our interests or goals; that we could become engaged in a dispute with our partner, which could require us to expend additional resources to resolve such disputes and could have an adverse impact on the operations and profitability of the joint venture; and that our partner may be in a position to take action or withhold consent contrary to our instructions or requests. In addition, our ability to transfer our interest in a joint venture to a third party may be restricted. In some instances, we and/or our partner may have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partner’s interest may be limited if we do not have sufficient cash, available borrowing capacity or other capital resources. In such event, we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it. Joint ventures may require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition or financing of a property.

 

Risk factors related to our seniors housing operating properties

 

We are exposed to various operational risks with respect to our seniors housing operating properties that may increase our costs or adversely affect our ability to generate revenues.  These risks include fluctuations in occupancy, Medicare and Medicaid reimbursement, if applicable, and private pay rates; economic conditions; competition; federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards; the availability and increases in cost of general and professional liability insurance coverage; state regulation and rights of residents related to entrance fees; the availability and increases in cost of labor (as a result of unionization or otherwise).  Any one or a combination of these factors may adversely affect our revenue and operations.

 

29

 


 

 

Risk factors related to life science facilities

 

Our tenants in the life science industry face high levels of regulation, expense and uncertainty that may adversely affect their ability to make payments to us. Research, development and clinical testing of products and technologies can be very expensive and sources of funds may not be available to our life sciences tenants in the future. The products and technologies that are developed and manufactured by our life science tenants may require regulatory approval prior to being made, marketed, sold and used. The regulatory process can be costly, long and unpredictable. Even after a tenant gains regulatory approval and market acceptance, the product still presents regulatory and liability risks, such as safety concerns, competition from new products and eventually the expiration of patent protection. These factors may affect the ability of our life sciences tenants to make timely payments to us, which may adversely affect our revenue and operations.

 

Risk factors related to indebtedness

 

Permanent financing for our investments is typically provided through a combination of public and private offerings of debt and equity securities and the incurrence or assumption of secured debt. The incurrence or assumption of indebtedness may cause us to become more leveraged, which could (1) require us to dedicate a greater portion of our cash flow to the payment of debt service, (2) make us more vulnerable to a downturn in the economy, (3) limit our ability to obtain additional financing, or (4) negatively affect our credit ratings or outlook by one or more of the rating agencies.

 

Our debt agreements contain various covenants, restrictions and events of default. Among other things, these provisions require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. Breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness, in addition to any other indebtedness cross-defaulted against such instruments. These defaults could have a material adverse impact on our business, results of operations and financial condition.

 

Risk factors related to our credit ratings

 

We plan to manage the Company to maintain a capital structure consistent with our current profile, but there can be no assurance that we will be able to maintain our current credit ratings. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

 

Risk factors related to interest rate swaps

 

We enter into interest rate swap agreements from time to time to manage some of our exposure to interest rate volatility. These swap agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective in reducing our exposure to changes in interest rates. When we use forward-starting interest rate swaps, there is a risk that we will not complete the long-term borrowing against which the swap is intended to hedge. If such events occur, our results of operations may be adversely affected.

 

Risk factors related to environmental laws

 

Under various federal and state laws, owners or operators of real estate may be required to respond to the presence or release of hazardous substances on the property and may be held liable for property damage, personal injuries or penalties that result from environmental contamination or exposure to hazardous substances. We may become liable to reimburse the government for damages and costs it incurs in connection with the contamination. Generally, such liability attaches to a person based on the person’s relationship to the property. Our tenants or borrowers are primarily responsible for the condition of the property. Moreover, we review environmental site assessments of the properties that we own or encumber prior to taking an interest in them. Those assessments are designed to meet the “all appropriate inquiry” standard, which we believe qualifies us for the innocent purchaser defense if environmental liabilities arise. Based upon such assessments, we do not believe that any of our properties are subject to material environmental contamination. However, environmental liabilities may be present in our properties and we may incur costs to remediate contamination, which could have a material adverse effect on our business or financial condition or the business or financial condition of our obligors.

 

Risk factors related to facilities that require entrance fees

 

Certain of our seniors housing facilities require the payment of an upfront entrance fee by the resident, a portion of which may be refundable by the operator. Some of these facilities are subject to substantial oversight by state regulators relating to these funds. As a result of this oversight, residents of these facilities may have a variety of rights, including, for example, the right to cancel their

30

 


 

 

contracts within a specified period of time and certain lien rights. The oversight and rights of residents within these facilities may have an effect on the revenue or operations of the operators of such facilities and therefore may negatively impact us.

 

Risk factors related to facilities under construction or development

 

At any given time, we may be in the process of constructing one or more new facilities that ultimately will require a CON and license before they can be utilized by the operator for their intended use. The operator also may need to obtain Medicare and Medicaid certification and enter into Medicare and Medicaid provider agreements and/or third party payor contracts. In the event that the operator is unable to obtain the necessary CON, licensure, certification, provider agreements or contracts after the completion of construction, there is a risk that we will not be able to earn any revenues on the facility until either the initial operator obtains a license or certification to operate the new facility and the necessary provider agreements or contracts or we find and contract with a new operator that is able to obtain a license to operate the facility for its intended use and the necessary provider agreements or contracts.

 

In connection with our renovation, redevelopment, development and related construction activities, we may be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations. These factors could result in increased costs or our abandonment of these projects. In addition, we may not be able to obtain financing on favorable terms, which may render us unable to proceed with our development activities, and we may not be able to complete construction and lease-up of a property on schedule, which could result in increased debt service expense or construction costs.

 

Additionally, the time frame required for development, construction and lease-up of these properties means that we may have to wait years for significant cash returns. Because we are required to make cash distributions to our stockholders, if the cash flow from operations or refinancing is not sufficient, we may be forced to borrow additional money to fund such distributions. Newly developed and acquired properties may not produce the cash flow that we expect, which could adversely affect our overall financial performance.

 

In deciding whether to acquire or develop a particular property, we make assumptions regarding the expected future performance of that property. In particular, we estimate the return on our investment based on expected occupancy and rental rates. If our financial projections with respect to a new property are inaccurate, and the property is unable to achieve the expected occupancy and rental rates, it may fail to perform as we expected in analyzing our investment. Our estimate of the costs of repositioning or redeveloping an acquired property may prove to be inaccurate, which may result in our failure to meet our profitability goals. Additionally, we may acquire new properties that are not fully leased, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property.

 

We do not know if our tenants will renew their existing leases, and if they do not, we may be unable to lease the properties on as favorable terms, or at all

 

We cannot predict whether our tenants will renew existing leases at the end of their lease terms, which expire at various times. If these leases are not renewed, we would be required to find other tenants to occupy those properties or sell them. There can be no assurance that we would be able to identify suitable replacement tenants or enter into leases with new tenants on terms as favorable to us as the current leases or that we would be able to lease those properties at all.

 

Our ownership of properties through ground leases exposes us to the loss of such properties upon breach or termination of the ground leases

 

We have acquired an interest in certain of our properties by acquiring a leasehold interest in the property on which the building is located, and we may acquire additional properties in the future through the purchase of interests in ground leases. As the lessee under a ground lease, we are exposed to the possibility of losing the property upon termination of the ground lease or an earlier breach of the ground lease by us.

 

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties

 

Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our properties in response to changes in economic and other conditions will be limited. No assurances can be given that we will recognize full value for any property that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations. In addition, we are exposed to the risks inherent in concentrating investments in real estate, and in particular, the seniors housing and health care industries. A downturn in the real estate industry could adversely affect the value of our properties and our ability to sell properties for a price or on terms acceptable to us.

 

Risk factors related to reinvestment of sale proceeds

31

 


 

 

 

From time to time, we will have cash available from (1) the proceeds of sales of our securities, (2) principal payments on our loans receivable and (3) the sale of properties, including non-elective dispositions, under the terms of master leases or similar financial support arrangements. In order to maintain current revenues and continue generating attractive returns, we expect to re-invest these proceeds in a timely manner. We compete for real estate investments with a broad variety of potential investors. This competition for attractive investments may negatively affect our ability to make timely investments on terms acceptable to us.

 

Failure to properly manage our rapid growth could distract our management or increase our expenses

 

We have experienced rapid growth and development in a relatively short period of time and expect to continue this rapid growth in the future. This growth has resulted in increased levels of responsibility for our management. Future property acquisitions could place significant additional demands on, and require us to expand, our management, resources and personnel. Our failure to manage any such rapid growth effectively could harm our business and, in particular, our financial condition, results of operations and cash flows, which could negatively affect our ability to make distributions to stockholders. Our growth could also increase our capital requirements, which may require us to issue potentially dilutive equity securities and incur additional debt.

 

Ownership of property outside the United States may subject us to different or greater risks than those associated with our domestic operations

 

International development, ownership, and operating activities involve risks that are different from those we face with respect to our domestic properties and operations.  These risks include, but are not limited to, any international currency gain recognized with respect to changes in exchange rates may not qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify and maintain our status as a REIT; challenges with respect to the repatriation of foreign earnings and cash; changes in foreign political, regulatory, and economic conditions, including regionally, nationally, and locally; challenges in managing international operations; challenges of complying with a wide variety of foreign laws and regulations, including those relating to real estate, corporate governance, operations, taxes, employment and legal proceedings; foreign ownership restrictions with respect to operations in countries; differences in lending practices and the willingness of domestic or foreign lenders to provide financing; regional or country-specific business cycles and economic instability; and changes in applicable laws and regulations in the United States that affect foreign operations.  If we are unable to successfully manage the risks associated with international expansion and operations, our results of operations and financial condition may be adversely affected.

 

Risk factors related to changes in currency exchange rates

 

As we expand our operations internationally, currency exchange rate fluctuations could affect our results of operations and financial position.  We expect to generate an increasing portion of our revenue and expenses in such foreign currencies as the Canadian dollar.  Although we may enter into foreign exchange agreements with financial institutions and/or obtain local currency mortgage debt in order to reduce our exposure to fluctuations in the value of foreign currencies, we cannot assure you that foreign currency fluctuations will not have a material adverse effect on us.

 

We might fail to qualify or remain qualified as a REIT

 

We intend to operate as a REIT under the Internal Revenue Code and believe we have and will continue to operate in such a manner. If we lose our status as a REIT, we will face serious income tax consequences that will substantially reduce the funds available for satisfying our obligations and for distribution to our stockholders because:

 

•     we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

 

•     we could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and

 

•     unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified.

 

Since REIT qualification requires us to meet a number of complex requirements, it is possible that we may fail to fulfill them, and if we do, our earnings will be reduced by the amount of U.S. federal and other income taxes owed. A reduction in our earnings would affect the amount we could distribute to our stockholders. If we do not qualify as a REIT, we would not be required to make distributions to stockholders since a non-REIT is not required to pay dividends to stockholders in order to maintain REIT status or avoid an excise tax. See “Item 1 — Business — Taxation — Federal Income Tax Considerations” for a discussion of the provisions of the Internal Revenue Code that apply to us and the effects of failure to qualify as a REIT.

 

32

 


 

 

In addition, if we fail to qualify as a REIT, all distributions to stockholders would continue to be treated as dividends to the extent of our current and accumulated earnings and profits, although corporate stockholders may be eligible for the dividends received deduction, and individual stockholders may be eligible for taxation at the rates generally applicable to long-term capital gains (currently at a maximum rate of 15%) with respect to distributions.

 

As a result of all these factors, our failure to qualify as a REIT also could impair our ability to implement our business strategy and would adversely affect the value of our common stock.

 

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to remain qualified as a REIT. Although we believe that we qualify as a REIT, we cannot assure you that we will continue to qualify or remain qualified as a REIT for U.S. federal income tax purposes. See “Item 1 — Business — Taxation — Federal Income Tax Considerations” included in this Annual Report on Form 10-K.

 

The 90% annual distribution requirement will decrease our liquidity and may limit our ability to engage in otherwise beneficial transactions

 

To comply with the 90% distribution requirement applicable to REITs and to avoid the nondeductible excise tax, we must make distributions to our stockholders. See “Item 1 — Business — Taxation — Federal Income Tax Considerations — Qualification as a REIT — Annual Distribution Requirements” included in this Annual Report on Form 10-K. Although we anticipate that we generally will have sufficient cash or liquid assets to enable us to satisfy the REIT distribution requirement, it is possible that, from time to time, we may not have sufficient cash or other liquid assets to meet the 90% distribution requirement, or we may decide to retain cash or distribute such greater amount as may be necessary to avoid income and excise taxation. This may be due to timing differences between the actual receipt of income and actual payment of deductible expenses, on the one hand, and the inclusion of that income and deduction of those expenses in arriving at our taxable income, on the other hand. In addition, non-deductible expenses such as principal amortization or repayments or capital expenditures in excess of non-cash deductions may cause us to fail to have sufficient cash or liquid assets to enable us to satisfy the 90% distribution requirement. In the event that timing differences occur, or we deem it appropriate to retain cash, we may borrow funds, issue additional equity securities (although we cannot assure you that we will be able to do so), pay taxable stock dividends, if possible, distribute other property or securities or engage in another transaction intended to enable us to meet the REIT distribution requirements. This may require us to raise additional capital to meet our obligations.

 

The amount of additional indebtedness we may incur is limited by the terms of our line of credit arrangement and the indentures governing our senior unsecured notes. In addition, adverse economic conditions may impact the availability of additional funds or could cause the terms on which we are able to borrow additional funds to become unfavorable. In those circumstances, we may be required to raise additional equity in the capital markets. Our access to capital depends upon a number of factors over which we have little or no control, including rising interest rates, inflation and other general market conditions and the market’s perception of our growth potential and our current and potential future earnings and cash distributions and the market price of the shares of our capital stock. We cannot assure you that we will be able to raise the capital necessary to make future investments or to meet our obligations and commitments as they mature.

 

The lease of qualified health care properties to a taxable REIT subsidiary is subject to special requirements

 

We lease certain qualified health care properties we acquire to taxable REIT subsidiaries (or limited liability companies of which the taxable REIT subsidiaries are members), which lessees contract with managers (or related parties) to manage the health care operations at these properties.  The rents from this taxable REIT subsidiary lessee structure are treated as qualifying rents from real property if (1) they are paid pursuant to an arms-length lease of a qualified health care property with a taxable REIT subsidiary and (2) the manager qualifies as an eligible independent contractor.  If any of these conditions are not satisfied, then the rents will not be qualifying rents.  See “Item 1 — Business — Taxation — Federal Income Tax Considerations — Qualification as a REIT — Income Tests.”

 

If certain sale-leaseback transactions are not characterized by the Internal Revenue Service as “true leases,” we may be subject to adverse tax consequences

 

We have purchased certain properties and leased them back to the sellers of such properties, and we may enter similar transactions in the future. We intend for any such sale-leaseback transaction to be structured in such a manner that the lease will be characterized as a “true lease,” thereby allowing us to be treated as the owner of the property for U.S. federal income tax purposes. However, depending on the terms of any specific transaction, the Internal Revenue Service might take the position that the transaction is not a “true lease” but is more properly treated in some other manner. In the event any sale-leaseback transaction is challenged and successfully re-characterized by the Internal Revenue Service, we would not be entitled to claim the deductions for depreciation and cost recovery generally available to an owner of property. Furthermore, if a sale-leaseback transaction were so re-characterized, we

33

 


 

 

might fail to satisfy the REIT asset tests or income tests and, consequently, could lose our REIT status effective with the year of re-characterization.  See “Item 1 — Business — Taxation — Federal Income Tax Considerations — Qualification as a REIT — Asset Tests” and “— Income Tests.” Alternatively, the amount of our REIT taxable income could be recalculated, which may cause us to fail to meet the REIT annual distribution requirements for a taxable year.  See “Item 1 — Business — Taxation — Federal Income Tax Considerations — Qualification as a REIT — Annual Distribution Requirements.”

 

Other risk factors

 

We are also subject to other risks. First, our certificate of incorporation and by-laws contain anti-takeover provisions (restrictions on share ownership and transfer and super majority stockholder approval requirements for business combinations) that could make it more difficult for or even prevent a third party from acquiring us without the approval of our incumbent Board of Directors. Provisions and agreements that inhibit or discourage takeover attempts could reduce the market value of our common stock.

 

Additionally, we are dependent on key personnel. Although we have entered into employment agreements with our executive officers, losing any one of them could, at least temporarily, have an adverse impact on our operations. We believe that losing more than one could have a material adverse impact on our business.

 

Item 1B.  Unresolved Staff Comments

None.

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Item 2.  Properties 

 

We own our corporate headquarters located at 4500 Dorr Street, Toledo, Ohio 43615. We also own corporate offices in Tennessee, lease corporate offices in Florida and California and have ground leases relating to certain of our properties. The following table sets forth certain information regarding the properties that comprise our consolidated real property and real estate loan investments as of December 31, 2011 (dollars in thousands):

 

  

  

  

Seniors Housing Triple-Net  

  

  

  

  

  

  

  

  

  

Property Location

  

Number of Properties(2)

  

Total Investment

  

Annualized Income(1)

  

  

  

  

  

  

  

  

  

  

Alabama

  

 1  

  

$

 2,733 

  

$

 378  

  

  

  

  

  

  

  

  

  

  

Arizona

  

 4  

  

  

 21,029 

  

  

 2,318  

  

  

  

  

  

  

  

  

  

  

California

  

 5  

  

  

 44,296 

  

  

 9,768  

  

  

  

  

  

  

  

  

  

  

Colorado

  

 6  

  

  

 97,493 

  

  

 11,279  

  

  

  

  

  

  

  

  

  

  

Connecticut

  

 23  

  

  

 225,515 

  

  

 23,539  

  

  

  

  

  

  

  

  

  

  

Delaware

  

 9  

  

  

 152,039 

  

  

 14,474  

  

  

  

  

  

  

  

  

  

  

Florida

  

 53  

  

  

 533,093 

  

  

 50,338  

  

  

  

  

  

  

  

  

  

  

Georgia

  

 3  

  

  

 75,319 

  

  

 5,849  

  

  

  

  

  

  

  

  

  

  

Idaho

  

 4  

  

  

 38,119 

  

  

 5,426  

  

  

  

  

  

  

  

  

  

  

Illinois

  

 9  

  

  

 161,360 

  

  

 14,818  

  

  

  

  

  

  

  

  

  

  

Indiana

  

 18  

  

  

 256,037 

  

  

 26,087  

  

  

  

  

  

  

  

  

  

  

Iowa

  

 1  

  

  

 8,800 

  

  

 957  

  

  

  

  

  

  

  

  

  

  

Kansas

  

 5  

  

  

 110,092 

  

  

 9,201  

  

  

  

  

  

  

  

  

  

  

Kentucky

  

 11  

  

  

 57,902 

  

  

 8,275  

  

  

  

  

  

  

  

  

  

  

Louisiana

  

 1  

  

  

 5,411 

  

  

 1,396  

  

  

  

  

  

  

  

  

  

  

Maryland

  

 22  

  

  

 336,982 

  

  

 26,808  

  

  

  

  

  

  

  

  

  

  

Massachusetts

  

 35  

  

  

 468,485 

  

  

 52,241  

  

  

  

  

  

  

  

  

  

  

Michigan

  

 8  

  

  

 106,596 

  

  

 8,210  

  

  

  

  

  

  

  

  

  

  

Minnesota

  

 3  

  

  

 35,392 

  

  

 2,823  

  

  

  

  

  

  

  

  

  

  

Mississippi

  

 6  

  

  

 51,507 

  

  

 5,703  

  

  

  

  

  

  

  

  

  

  

Missouri

  

 3  

  

  

 26,597 

  

  

 2,025  

  

  

  

  

  

  

  

  

  

  

Montana

  

 3  

  

  

 12,542 

  

  

 2,010  

  

  

  

  

  

  

  

  

  

  

Nebraska

  

 4  

  

  

 38,215 

  

  

 4,088  

  

  

  

  

  

  

  

  

  

  

Nevada

  

 4  

  

  

 79,611 

  

  

 9,666  

  

  

  

  

  

  

  

  

  

  

New Hampshire

  

 13  

  

  

 192,468 

  

  

 18,931  

  

  

  

  

  

  

  

  

  

  

New Jersey

  

 52  

  

  

 1,150,170 

  

  

 92,993  

  

  

  

  

  

  

  

  

  

  

New York

  

 6  

  

  

 165,329 

  

  

 15,742  

  

  

  

  

  

  

  

  

  

  

North Carolina

  

 44  

  

  

 196,495 

  

  

 27,892  

  

  

  

  

  

  

  

  

  

  

Ohio

  

 32  

  

  

 366,441 

  

  

 32,551  

  

  

  

  

  

  

  

  

  

  

Oklahoma

  

 14  

  

  

 50,420 

  

  

 6,476  

  

  

  

  

  

  

  

  

  

  

Oregon

  

 2  

  

  

 7,174 

  

  

 1,854  

  

  

  

  

  

  

  

  

  

  

Pennsylvania

  

 44  

  

  

 763,939 

  

  

 72,392  

  

  

  

  

  

  

  

  

  

  

Rhode Island

  

 3  

  

  

 48,814 

  

  

 4,804  

  

  

  

  

  

  

  

  

  

  

South Carolina

  

 8  

  

  

 248,563 

  

  

 17,191  

  

  

  

  

  

  

  

  

  

  

Tennessee

  

 25  

  

  

 201,574 

  

  

 28,837  

  

  

  

  

  

  

  

  

  

  

Texas

  

 43  

  

  

 391,219 

  

  

 43,111  

  

  

  

  

  

  

  

  

  

  

Utah

  

 1  

  

  

 6,353 

  

  

 875  

  

  

  

  

  

  

  

  

  

  

Vermont

  

 2  

  

  

 28,418 

  

  

 2,798  

  

  

  

  

  

  

  

  

  

  

Virginia

  

 16  

  

  

 129,459 

  

  

 14,794  

  

  

  

  

  

  

  

  

  

  

Washington

  

 6  

  

  

 107,972 

  

  

 11,044  

  

  

  

  

  

  

  

  

  

  

West Virginia

  

 24  

  

  

 406,133 

  

  

 39,342  

  

  

  

  

  

  

  

  

  

  

Wisconsin

  

 13  

  

  

 151,183 

  

  

 15,261  

  

  

  

  

  

  

  

  

  

  

Total

  

 589  

  

$

7,557,287

  

$

744,564  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

(1) Reflects annualized recent month of resident fees and services, contract rate of interest for loans, annual straight-line rent for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectibility reserves if applicable.

  

  

(2) Excludes unconsolidated entities.

  

35

 


 

 

 

  

  

  

Seniors Housing Operating  

  

Medical Facilities  

Property Location

  

Number of Properties(2)

  

Total Investment

  

Annualized Income(1)

  

Number of Properties(2)

  

Total Investment

  

Annualized Income(1)

  

Alabama

  

 2  

  

$

 18,357 

  

$

 5,160  

  

 4  

  

$

 37,302 

  

$

 4,732  

  

Alaska

  

 -   

  

  

 - 

  

  

 -   

  

 1  

  

  

 25,594 

  

  

 3,468  

  

Arizona

  

 2  

  

  

 14,371 

  

  

 9,001  

  

 5  

  

  

 89,874 

  

  

 10,846  

  

Arkansas

  

 -   

  

  

 - 

  

  

 -   

  

 1  

  

  

 29,784 

  

  

 2,642  

  

California

  

 33  

  

  

 796,594 

  

  

 173,320  

  

 16  

  

  

 520,589 

  

  

 59,672  

  

Colorado

  

 -   

  

  

 - 

  

  

 -   

  

 1  

  

  

 6,218 

  

  

 610  

  

Connecticut

  

 14  

  

  

 361,558 

  

  

 100,681  

  

 -   

  

  

 - 

  

  

 -   

  

Florida

  

 1  

  

  

 6,904 

  

  

 3,819  

  

 38  

  

  

 473,760 

  

  

 41,877  

  

Georgia

  

 2  

  

  

 13,961 

  

  

 7,301  

  

 12  

  

  

 151,262 

  

  

 17,291  

  

Idaho

  

 -   

  

  

 - 

  

  

 -   

  

 1  

  

  

 21,977 

  

  

 2,616  

  

Illinois

  

 1  

  

  

 68,514 

  

  

 9,209  

  

 3  

  

  

 14,672 

  

  

 526  

  

Indiana

  

 -   

  

  

 - 

  

  

 -   

  

 5  

  

  

 82,379 

  

  

 9,021  

  

Iowa

  

 1  

  

  

 36,952 

  

  

 4,995  

  

 -   

  

  

 - 

  

  

 -   

  

Kansas

  

 -   

  

  

 - 

  

  

 -   

  

 5  

  

  

 47,516 

  

  

 6,023  

  

Kentucky

  

 -   

  

  

 - 

  

  

 -   

  

 1  

  

  

 28,248 

  

  

 4,366  

  

Louisiana

  

 -   

  

  

 - 

  

  

 -   

  

 2  

  

  

 20,806 

  

  

 1,789  

  

Maine

  

 1  

  

  

 26,536 

  

  

 5,386  

  

 1  

  

  

 25,393 

  

  

 2,590  

  

Massachusetts

  

 13  

  

  

 331,365 

  

  

 77,882  

  

 2  

  

  

 11,363 

  

  

 -   

  

Minnesota

  

 -   

  

  

 - 

  

  

 -   

  

 4  

  

  

 85,347 

  

  

 10,560  

  

Missouri

  

 2  

  

  

 74,130 

  

  

 8,285  

  

 6  

  

  

 162,604 

  

  

 12,931  

  

Nebraska

  

 -   

  

  

 - 

  

  

 -   

  

 3  

  

  

 154,578 

  

  

 17,608  

  

Nevada

  

 2  

  

  

 36,336 

  

  

 8,075  

  

 10  

  

  

 127,064 

  

  

 10,417  

  

New Hampshire

  

 2  

  

  

 52,589 

  

  

 11,358  

  

 -   

  

  

 - 

  

  

 -   

  

New Jersey

  

 -   

  

  

 - 

  

  

 -   

  

 8  

  

  

 219,231 

  

  

 17,446  

  

New Mexico

  

 1  

  

  

 20,801 

  

  

 1,315  

  

 3  

  

  

 40,280 

  

  

 3,934  

  

New York

  

 -   

  

  

 - 

  

  

 -   

  

 8  

  

  

 90,353 

  

  

 9,257  

  

North Carolina

  

 -   

  

  

 - 

  

  

 -   

  

 9  

  

  

 32,268 

  

  

 1,803  

  

Ohio

  

 2  

  

  

 88,614 

  

  

 7,604  

  

 5  

  

  

 56,882 

  

  

 8,923  

  

Oklahoma

  

 2  

  

  

 42,182 

  

  

 2,333  

  

 3  

  

  

 21,562 

  

  

 2,335  

  

Pennsylvania

  

 -   

  

  

 - 

  

  

 -   

  

 1  

  

  

 17,848 

  

  

 10,469  

  

Rhode Island

  

 3  

  

  

 78,910 

  

  

 23,114  

  

 -   

  

  

 - 

  

  

 -   

  

South Carolina

  

 -   

  

  

 - 

  

  

 -   

  

 1  

  

  

 8,907 

  

  

 1,128  

  

Tennessee

  

 -   

  

  

 - 

  

  

 -   

  

 8  

  

  

 99,543 

  

  

 10,663  

  

Texas

  

 8  

  

  

 112,445 

  

  

 37,342  

  

 30  

  

  

 430,539 

  

  

 43,116  

  

Utah

  

 1  

  

  

 18,951 

  

  

 8,392  

  

 -   

  

  

 - 

  

  

 -   

  

Vermont

  

 1  

  

  

 30,024 

  

  

 6,451  

  

 -   

  

  

 - 

  

  

 -   

  

Virginia

  

 -   

  

  

 - 

  

  

 -   

  

 3  

  

  

 40,846 

  

  

 3,996  

  

Washington

  

 18  

  

  

 561,994 

  

  

 78,088  

  

 4  

  

  

 104,206 

  

  

 7,513  

  

Wisconsin

  

 -   

  

  

 - 

  

  

 -   

  

 19  

  

  

 314,178 

  

  

 29,862  

  

Total

  

 112  

  

$

2,792,088

  

$

589,109  

  

 223  

  

$

3,592,975

  

$

370,028  

  

  

  

   

  

  

  

  

  

   

  

   

  

  

  

  

  

   

  

  

  

   

  

  

  

  

  

   

  

   

  

  

  

  

  

   

  

(1) Reflects annualized recent month of resident fees and services, contract rate of interest for loans, annual straight-line rent for leases with fixed escalators or annual cash rent for leases with contingent escalators, net of collectibility reserves if applicable.  

  

(2) Excludes unconsolidated entities.  

36

 


 

 

 

The following table sets forth occupancy and average annualized income for these property types:

 

  

  

Occupancy(1)

  

Average Annualized Income(2)

  

  

  

  

2011

  

2010  

  

2011

  

2010  

  

  

Seniors housing triple net

  

88.2%

  

88.9%  

  

$

 14,428 

  

$

 16,241  

  

per unit

Skilled nursing/post-acute

  

88.0%

  

84.9%  

  

  

 9,583 

  

  

 6,519  

  

per bed

Seniors housing operating

  

90.1%

  

91.9%  

  

  

 47,432 

  

  

 30,458  

  

per unit

Hospitals

  

59.0%

  

62.9%  

  

  

 43,929 

  

  

 30,951  

  

per bed

Medical office buildings

  

93.4%

  

93.1%  

  

  

 24 

  

  

 20  

  

per sq. ft.

  

  

  

  

   

  

  

  

  

  

   

  

  

  

  

  

  

   

  

  

  

  

  

   

  

  

(1) Medical office building occupancy represents the percentage of total rentable square feet leased and occupied (including month-to-month and holdover leases and excluding terminations and discontinued operations) as of December 31. Occupancy for seniors housing operating represents occupancy as of December 31.  Occupancy for other properties represents average quarterly operating occupancy based on the quarters ended September 30 and excludes properties that are unstabilized, closed or for which data is not available or meaningful. The Company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy for properties other than medical office buildings and has not independently verified the information.

(2) Average annualized income represents annualized income divided by total beds, units or square feet.

 

The following table sets forth information regarding lease expirations for certain portions of our portfolio as of December 31, 2011 (dollars in thousands):

 

  

   

  

  

Expiration Year

  

   

  

  

2012

  

  

2013

  

  

2014

  

  

2015

  

  

2016

  

  

2017

  

  

2018

  

  

2019

  

  

2020

  

  

2021

  

  

Thereafter

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Properties  

  

  

17

  

  

25

  

  

17

  

  

2

  

  

-

  

  

37

  

  

51

  

  

33

  

  

46

  

  

58

  

  

303

  

Base rent(1)

  

$

13,382

  

$

52,944

  

$

27,423

  

$

2,026

  

$

-

  

$

16,923

  

$

36,823

  

$

28,397

  

$

40,482

  

$

61,317

  

$

418,794

  

% of base rent  

  

  

1.9%

  

  

7.6%

  

  

3.9%

  

  

0.3%

  

  

0.0%

  

  

2.4%

  

  

5.3%

  

  

4.1%

  

  

5.8%

  

  

8.8%

  

  

60.0%

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Hospitals:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Properties  

  

  

-

  

  

-

  

  

-

  

  

-

  

  

-

  

  

3

  

  

-

  

  

-

  

  

5

  

  

-

  

  

28

  

Base rent(1)

  

$

-

  

$

-

  

$

-

  

$

-

  

$

-

  

$

2,350

  

$

  

  

$

-

  

$

5,959

  

$

-

  

$

72,653

  

% of base rent  

  

  

0.0%

  

  

0.0%

  

  

0.0%

  

  

0.0%

  

  

0.0%

  

  

2.9%

  

  

0.0%

  

  

0.0%

  

  

7.4%

  

  

0.0%

  

  

89.7%

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Medical office buildings:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Square feet  

  

  

600,231

  

  

508,617

  

  

551,737

  

  

463,525

  

  

841,189

  

  

671,729

  

  

413,574

  

  

538,893

  

  

416,013

  

  

694,015

  

  

4,107,804

  

Base rent(1)

  

$

15,083

  

$

11,621

  

$

11,647

  

$

10,023

  

$

19,302

  

$

15,500

  

$

9,151

  

$

12,765

  

$

11,036

  

$

16,170

  

$

87,791

  

% of base rent  

  

  

6.9%

  

  

5.3%

  

  

5.3%

  

  

4.6%

  

  

8.8%

  

  

7.0%

  

  

4.2%

  

  

5.8%

  

  

5.0%

  

  

7.3%

  

  

39.9%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(1) The most recent monthly base rent including straight line for leases with fixed escalators or annual cash rents with contingent escalators.  Base rent does not include tenant recoveries or amortization of above and below market lease intangibles.

 

Item 3.  Legal Proceedings

 

From time to time, there are various legal proceedings pending to which we are a party or to which some of our properties are subject arising in the normal course of business. We do not believe that the ultimate resolution of these proceedings will have a material adverse effect on our consolidated financial position or results of operations.

 

PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

There were 5,030 stockholders of record as of January 31, 2012. The following table sets forth, for the periods indicated, the high and low prices of our common stock on the New York Stock Exchange, as reported on the Composite Tape, and common dividends paid per share:

37

 


 

 

 

  

  

  

Sales Price

  

Dividends

  

  

  

High

  

Low

  

Paid

2011

  

  

  

  

  

  

  

  

  

  

First Quarter

  

$

 52.74 

  

$

 46.75 

  

$

 0.690 

  

Second Quarter

  

  

 55.21 

  

  

 49.79 

  

  

 0.715 

  

Third Quarter

  

  

 54.63 

  

  

 41.03 

  

  

 0.715 

  

Fourth Quarter

  

  

 55.17 

  

  

 43.65 

  

  

 0.715 

  

  

  

  

  

  

  

  

  

  

  

2010

  

  

  

  

  

  

  

  

  

  

First Quarter

  

$

 46.79 

  

$

 39.82 

  

$

 0.680 

  

Second Quarter

  

  

 46.44 

  

  

 38.42 

  

  

 0.690 

  

Third Quarter

  

  

 48.54 

  

  

 40.85 

  

  

 0.690 

  

Fourth Quarter

  

  

 52.06 

  

  

 44.07 

  

  

 0.690 

 

Our Board of Directors has approved a new quarterly cash dividend rate of $0.74 per share of common stock per quarter, commencing with the February 2012 dividend. The declaration and payment of quarterly dividends remains subject to the review and approval of the Board of Directors.

 

Stockholder Return Performance Presentation

 

Set forth below is a line graph comparing the yearly percentage change and the cumulative total stockholder return on our shares of common stock against the cumulative total return of the S & P Composite-500 Stock Index and the FTSE NAREIT Equity Index. As of December 31, 2011, 120 companies comprised the FTSE NAREIT Equity Index. The Index consists of REITs identified by NAREIT as equity (those REITs which have at least 75% of their investments in real property). Upon written request sent to the Senior Vice President-Administration and Corporate Secretary, Health Care REIT, Inc., 4500 Dorr Street, Toledo, Ohio, 43615-4040, we will provide stockholders with the names of the component issuers. The data are based on the closing prices as of December 31 for each of the five years. 2006 equals $100 and dividends are assumed to be reinvested.

 

 

 

 

12/31/06

12/31/07

12/31/08

12/31/09

12/31/10

12/31/11

S & P 500

100.0

105.49

66.46

84.05

96.71

98.76

Health Care REIT, Inc. 

100.0

109.65

109.98

124.12

141.91

172.09

FTSE NAREIT Equity

100.0

84.31

52.50

67.20

85.98

93.10

 

Except to the extent that we specifically incorporate this information by reference, the foregoing Stockholder Return Performance Presentation shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended. This information shall not otherwise be deemed filed under such acts.

38

 


 

 

Item 6.  Selected Financial Data

 

The following selected financial data for the five years ended December 31, 2011 are derived from our audited consolidated financial statements (in thousands, except per share data):

 

  

   

  

Year Ended December 31,

  

   

  

2007

  

2008

  

2009

  

2010

  

2011

Operating Data  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Revenues(1)

  

$

 392,988 

  

$

 483,010 

  

$

 523,288 

  

$

 657,297 

  

$

 1,421,162 

Expenses:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Interest expense(1)

  

  

 120,210 

  

  

 119,279 

  

  

 96,856 

  

  

 151,296 

  

  

 318,395 

  

Depreciation and amortization(1)

  

  

 109,668 

  

  

 127,992 

  

  

 140,692 

  

  

 186,963 

  

  

 418,406 

  

Property operating expenses(1)

  

  

 32,494 

  

  

 39,648 

  

  

 42,501 

  

  

 79,293 

  

  

 379,476 

  

General and administrative(1)

  

  

 37,465 

  

  

 47,193 

  

  

 49,691 

  

  

 54,626 

  

  

 77,201 

  

Transaction costs  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 46,660 

  

  

 70,224 

  

Provision for loan losses  

  

  

 - 

  

  

 94 

  

  

 23,261 

  

  

 29,684 

  

  

 2,010 

  

Realized loss on derivatives  

  

  

 - 

  

  

 23,393 

  

  

 - 

  

  

 - 

  

  

 - 

  

Loss (gain) on extinguishment of debt  

  

  

 (1,081) 

  

  

 (2,094) 

  

  

 25,107 

  

  

 34,171 

  

  

 (979) 

Total expenses  

  

  

 298,756 

  

  

 355,505 

  

  

 378,108 

  

  

 582,693 

  

  

 1,264,733 

Income from continuing operations before income taxes and income from unconsolidated entities  

  

  

 94,232 

  

  

 127,505 

  

  

 145,180 

  

  

 74,604 

  

  

 156,429 

Income tax expense  

  

  

 (188) 

  

  

 (1,306) 

  

  

 (168) 

  

  

 (364) 

  

  

 (1,388) 

Income from unconsolidated entities  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 6,673 

  

  

 5,772 

Income from continuing operations  

  

  

 94,044 

  

  

 126,199 

  

  

 145,012 

  

  

 80,913 

  

  

 160,813 

Income from discontinued operations, net(1)

  

  

 44,549 

  

  

 157,226 

  

  

 47,915 

  

  

 47,971 

  

  

 51,903 

Net income  

  

  

 138,593 

  

  

 283,425 

  

  

 192,927 

  

  

 128,884 

  

  

 212,716 

Preferred stock dividends  

  

  

 25,130 

  

  

 23,201 

  

  

 22,079 

  

  

 21,645 

  

  

 60,502 

Net income (loss) attributable to noncontrolling interests  

  

  

 238 

  

  

 126 

  

  

 (342) 

  

  

 357 

  

  

 (4,894) 

Net income attributable to common stockholders  

  

$

 113,225 

  

$

 260,098 

  

$

 171,190 

  

$

 106,882 

  

$

 157,108 

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Other Data  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Average number of common shares outstanding:

  

Basic  

  

  

 78,861 

  

  

 93,732 

  

  

 114,207 

  

  

 127,656 

  

  

 173,741 

  

Diluted  

  

  

 79,409 

  

  

 94,309 

  

  

 114,612 

  

  

 128,208 

  

  

 174,401 

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Per Share Data  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Basic:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations attributable to common stockholders  

  

$

 0.87 

  

$

 1.10 

  

$

 1.08 

  

$

 0.46 

  

$

 0.61 

  

Discontinued operations, net  

  

  

 0.56 

  

  

 1.68 

  

  

 0.42 

  

  

 0.38 

  

  

 0.30 

  

Net income attributable to common stockholders *  

  

$

 1.44 

  

$

 2.77 

  

$

 1.50 

  

$

 0.84 

  

$

 0.90 

Diluted:  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations attributable to common stockholders  

  

$

 0.86 

  

$

 1.09 

  

$

 1.08 

  

$

 0.46 

  

$

 0.60 

  

Discontinued operations, net  

  

  

 0.56 

  

  

 1.67 

  

  

 0.42 

  

  

 0.37 

  

  

 0.30 

  

Net income attributable to common stockholders *  

  

$

 1.43 

  

$

 2.76 

  

$

 1.49 

  

$

 0.83 

  

$

 0.90 

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Cash distributions per common share  

  

$

 2.2791 

  

$

 2.70 

  

$

 2.72 

  

$

 2.74 

  

$

 2.835 

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

* Amounts may not sum due to rounding

(1) We have reclassified the income and expenses attributable to properties sold prior to or held for sale at December 31, 2011, to discontinued operations for all periods presented. See Note 5 to our audited consolidated financial statements.

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

December 31,

Balance Sheet Data  

  

  

2007

  

  

2008

  

  

2009

  

  

2010

  

  

2011

  

Net real estate investments  

  

$

 5,012,620 

  

$

 5,854,179 

  

$

 6,080,620 

  

$

 8,590,833 

  

$

 13,942,350 

  

Total assets  

  

  

 5,219,240 

  

  

 6,215,031 

  

  

 6,367,186 

  

  

 9,451,734 

  

  

 14,924,606 

  

Total long-term obligations  

  

  

 2,683,760 

  

  

 2,847,676 

  

  

 2,414,022 

  

  

 4,469,736 

  

  

 7,240,752 

  

Total liabilities  

  

  

 2,784,289 

  

  

 2,976,746 

  

  

 2,559,735 

  

  

 4,714,081 

  

  

 7,612,309 

  

Total preferred stock  

  

  

 330,243 

  

  

 289,929 

  

  

 288,683 

  

  

 291,667 

  

  

 1,010,417 

  

Total equity  

  

  

 2,434,951 

  

  

 3,238,285 

  

  

 3,807,451 

  

  

 4,733,100 

  

  

 7,278,647 

39

 


 

 

     The following discussion and analysis is based primarily on the consolidated financial statements of Health Care REIT, Inc. for the periods presented and should be read together with the notes thereto contained in this Annual Report on Form 10-K. Other important factors are identified in “Item 1 — Business” and “Item 1A — Risk Factors” above.

Executive Summary

Company Overview

     Health Care REIT, Inc. is a real estate investment trust (“REIT”) that has been at the forefront of seniors housing and health care real estate since the company was founded in 1970.  We are an S&P 500 company headquartered in Toledo, Ohio and our portfolio spans the full spectrum of seniors housing and health care real estate, including seniors housing communities, skilled nursing facilities, medical office buildings, inpatient and outpatient medical centers and life science facilities. Our capital programs, when combined with comprehensive planning, development and property management services, make us a single-source solution for acquiring, planning, developing, managing, repositioning and monetizing real estate assets.  The following table summarizes our portfolio as of December 31, 2011:

 

   

Investments

  

Percentage of

  

Number of

  

# Beds/Units

  

  

  

Investment per  

  

  

Type of Property  

(in thousands)

  

Investments

  

Properties

  

or Sq. Ft.

  

  

  

metric(1)

  

States

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Seniors housing triple-net  

$

 4,029,818 

  

28.1%

  

 282 

  

 25,133 

  

units

  

$

 163,293 

  

per unit  

  

39

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Skilled nursing/post-acute  

  

 3,527,468 

  

24.6%

  

 307 

  

 39,825 

  

beds

  

  

 89,997 

  

per bed  

  

28

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Seniors housing operating  

  

 2,792,088 

  

19.5%

  

 112 

  

 12,420 

  

units

  

  

 224,806 

  

per unit  

  

21

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Hospitals  

  

 911,482 

  

6.4%

  

 36 

  

 2,165 

  

beds

  

  

 421,007 

  

per bed  

  

17

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Medical office buildings(2)

  

 2,727,450 

  

19.0%

  

 193 

  

 11,276,994 

  

sq. ft.

  

  

 255 

  

per sq. ft.  

  

30

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Life science buildings(2)

  

 337,800 

  

2.4%

  

 7 

  

  

  

  

  

  

n/a

  

   

  

1

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

Totals  

$

 14,326,106 

  

100.0%

  

 937 

  

  

  

  

  

  

  

  

   

  

46

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

(1) Investment per metric was computed by using the total committed investment amount of $14,609,005,000, which includes net real estate investments, our share of investments in unconsolidated entities and unfunded construction commitments for which initial funding has commenced which amounted to $13,942,350,000, $383,756,000 and $282,899,000, respectively.

(2) Includes our share of investments in unconsolidated entities. Please see Note 7 to our consolidated financial statements for additional information.

 

Health Care Industry

 

     The demand for health care services, and consequently health care properties, is projected to reach unprecedented levels in the near future.  The Centers for Medicare and Medicaid Services (“CMS”) projects that national health expenditures will rise to $3.5 trillion in 2015 or 18.2% of gross domestic product (“GDP”).  The average annual growth in national health expenditures for 2009 through 2019 is expected to be 6.3%, which is 0.2% faster than pre-health care reform estimates.

 

     While demographics are the primary driver of demand, economic conditions and availability of services contribute to health care service utilization rates.  We believe the health care property market may be less susceptible to fluctuations and economic downturns relative to other property sectors.  Investor interest in the market remains strong, especially in specific sectors such as medical office buildings, regardless of the current stringent lending environment.  As a REIT, we believe we are situated to benefit from any turbulence in the capital markets due to our access to capital.

 

     The total U.S. population is projected to increase by 20.4% through 2030.  The elderly population aged 65 and over is projected to increase by 79.2% through 2030.  The elderly are an important component of health care utilization, especially independent living services, assisted living services, skilled nursing services, inpatient and outpatient hospital services and physician ambulatory care.  Most health care services are provided within a health care facility such as a hospital, a physician’s office or a seniors housing facility.  Therefore, we believe there will be continued demand for companies, such as ours, with expertise in health care real estate.

 

     The following chart illustrates the projected increase in the elderly population aged 65 and over:

 

40

 


 

 

     Source: U.S. Census Bureau

 

     Health care real estate investment opportunities tend to increase as demand for health care services increases.  We recognize the need for health care real estate as it correlates to health care service demand.  Health care providers require real estate to house their businesses and expand their services.  We believe that investment opportunities in health care real estate will continue to be present due to:

·         The specialized nature of the industry;

·         The projected population growth combined with stable or increasing health care utilization rates, which ensures demand; and

·         The on-going merger and acquisition activity.

 

Health Reform Laws

 

     On March 23, 2010, the President signed into law the PPACA and the Health Care and Education Reconciliation Act of 2010, which amends the PPACA (collectively, the “Health Reform Laws”). The Health Reform Laws contain various provisions that may directly impact us or the operators and tenants of our properties. Some provisions of the Health Reform Laws may have a positive impact on our operators’ or tenants’ revenues, by, for example, increasing coverage of uninsured individuals, while others may have a negative impact on the reimbursement of our operators or tenants by, for example, altering the market basket adjustments for certain types of health care facilities. The Health Reform Laws also enhance certain fraud and abuse penalty provisions that could apply to our operators and tenants, in the event of one or more violations of the federal health care regulatory laws. In addition, there are provisions that impact the health coverage that we and our operators and tenants provide to our respective employees. We cannot predict whether the existing Health Reform Laws, or future health care reform legislation or regulatory changes, will have a material impact on our operators’ or tenants’ property or business. If the operations, cash flows or financial condition of our operators and tenants are materially adversely impacted by the Health Reform Laws or future legislation, our revenue and operations may be adversely affected as well. Further, on February 2, 2011, the U.S. Senate refused to pass an overhaul repeal of the Health Reform Laws, and the focus has now shifted to attempts to repeal or amend individual sections of the Health Reform Laws. Further, federal courts are also considering, and in some cases have ruled on, the legality of the Health Reform Laws.  The United States Supreme Court has agreed to review the constitutionality of the Health Reform Laws and will hear arguments beginning March 26, 2012.  We cannot predict whether any of these attempts to repeal or amend the Health Reform Laws will be successful, nor can we predict the impact that such a repeal or amendment would have on our operators and tenants.

 

     Impact to Reimbursement of the Operators and Tenants of Our Properties. The Health Reform Laws provide for various changes to the reimbursement that our operators and tenants may receive. One such change is a reduction to the market basket adjustments for inpatient acute hospitals, long-term care hospitals, inpatient rehabilitation facilities, home health agencies, psychiatric hospitals, hospice care and outpatient hospitals. Beginning in 2010, the otherwise applicable percentage increase to the market basket for inpatient acute hospitals will decrease. Beginning in 2012, inpatient acute hospitals will also face a downward adjustment of the annual percentage increase to the market basket rate by a “productivity adjustment.” The productivity adjustment may cause the annual percentage increase to be less than zero, which would mean that inpatient acute hospitals could face payment rates for a fiscal year that are less than the payment rates for the preceding year.

 

     A similar productivity adjustment also applies to skilled nursing facilities beginning in 2012, which means that the payment rates for skilled nursing facilities may decrease from one year to the next. Long-term care hospitals have faced a specified percentage decrease in their annual update for discharges since 2010. Additionally, beginning in 2012, long-term care hospitals will be subject to

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

the productivity adjustments, which may decrease the federal payment rates for long-term care hospitals. Similar productivity adjustments and other adjustments to payment rates have applied to inpatient rehabilitation facilities, psychiatric hospitals and outpatient hospitals since 2010.

 

     The Health Reform Laws revise other reimbursement provisions that may affect our business. For example, the Health Reform Laws reduce states’ Medicaid disproportionate share hospital (“DSH”) allotments, starting in 2014 through 2020. These allotments would have provided additional funding for DSH hospitals that are operators or tenants of our properties, and thus, any reduction might negatively impact these operators or tenants.

 

     Additionally, beginning in fiscal year 2015, Medicare payments will decrease to hospitals for treatment associated with hospital acquired conditions. This decreased payment rate may negatively impact our operators or tenants. To account for excess readmissions, the Health Reform Laws also call for a reduction of 1% in payments for those hospitals with higher-than-average risk-adjusted readmission rates beginning October 1, 2012, 2% beginning in fiscal year 2014, and 3% from fiscal year 2015 onward.  These reductions in payments to our operators or tenants may affect their ability to make payments to us.

 

     PPACA additionally calls for the creation of the Independent Payment Advisory Board (the “Board”), which will be responsible for establishing payment polices, including recommendations in the event that Medicare costs exceed a certain threshold. Proposals for recommendations submitted by the Board prior to December 31, 2018 may not include recommendations that would reduce payments for hospitals, skilled nursing facilities, and physicians, among other providers, prior to December 31, 2019. The Health Reform Laws also create other mechanisms that could permit significant changes to payment. For example, PPACA establishes the Center for Medicare and Medicaid Innovation to test innovative payment and service delivery models to reduce program expenditures through the use of demonstration programs that can waive existing reimbursement methodologies. As another example, on November 2, 2011, CMS published the final rule implementing section 3022 of the PPACA, which contains provisions relating to Medicare payment to providers and suppliers participating in Accountable Care Organizations (“ACOs”) under the Medicare Shared Servings Program.  Under the program, Medicare will share a percentage of savings with ACOs that meet certain quality and saving requirements, thereby allowing providers to receive incentive payments in addition to their traditional fee-for-service payments. Under the program, more experienced providers may assume the risk of losses in exchange for greater potential rewards: ACOs may share up to 50% of the savings under the one-sided model and up to 60% of the savings under the two-sided model, depending on their quality and performance.  The amount of shared losses for which an ACO is liable in the two-sided model may not exceed the following percentages of its updated benchmark: 5% in the first performance year, 7.5% in the second year, and 10% in the third year.  These shared losses could affect the ability of ACO operators or tenants to meet their financial obligations to us.  The Health Reform Laws also provide additional Medicaid funding to allow states to carry out mandated expansion of Medicaid coverage to certain financially-eligible individuals beginning in 2014, and also permits states to expand their Medicaid coverage to these individuals as early as April 1, 2010, if certain conditions are met.  The Health Reform Laws also extend certain payment rules related to long-term acute care hospitals found in the Medicare, Medicaid, and SCHIP Extension Act of 2007.

 

     Additionally, although the Health Reform Laws delayed until at least October 1, 2011, the implementation of the Resource Utilization Group, Version Four (“RUG-IV”), which revises the payment classification system for skilled nursing facilities, the Medicare and Medicaid Extenders Act of 2010 repealed this delay retroactively to October 1, 2010. The Health Reform Laws also extend certain payment rules related to long-term acute care hospitals found in the Medicare, Medicaid, and SCHIP Extension Act of 2007.

 

     Finally, many other changes resulting from the Health Reform Laws, or implementing regulations, or guidance may negatively impact our operators and tenants. We will continue to monitor and evaluate the Health Reform Laws and implementing regulations and guidance to determine other potential effects of the reform.

 

     Impact of Fraud and Abuse Provisions. The Health Reform Laws revise health care fraud and abuse provisions that will affect our operators and tenants. Specifically, PPACA allows for up to treble damages under the Federal False Claims Act for violations related to state-based health insurance exchanges authorized by the Health Reform Laws, which will be implemented beginning in 2014. The Health Reform Laws also impose new civil monetary penalties for false statements or actions that lead to delayed inspections, with penalties of up to $15,000 per day for failure to grant timely access and up to $50,000 for a knowing violation. Additionally, the PPACA requires certain entities – including providers, suppliers, Medicaid managed care organizations, Medicare Advantage organizations, and prescription drug program sponsors – to report and return overpayments to the appropriate payer by the later of (a) sixty (60) days after the date the overpayment was “identified,” or (b) the date that the “corresponding cost report” is due.  The entity also must notify the payer in writing of the reason for the overpayment. A violation of these requirements may result in criminal liability, civil liability under the FCA, and/or exclusion from the federal health care programs.  On February 14, 2012, CMS published a proposed rule implementing the PPACA requirement that health care providers and suppliers report and return self-identified overpayments by the later of 60 days after the date the overpayment was identified, or the date any corresponding cost report is due, if

42

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

applicable. The Health Reform Laws also amend the Federal Anti-Kickback Statute to state that any items or services “resulting from” a violation of the Anti-Kickback Statute constitutes a “false or fraudulent claim” under the Federal False Claims Act.  The Health Reform Laws also provide for additional funding to investigate and prosecute health care fraud and abuse. Accordingly, the increased penalties under PPACA for fraud and abuse violations may have a negative impact on our operators and tenants in the event that the government brings an enforcement action or subjects them to penalties.

 

     Further, as recently as February 2, 2011, CMS published final rulemaking to implement the enhanced provider and supplier screening provisions called for in the Health Reform Laws. Under the final rule, beginning March 25, 2011, all enrolling and participating providers and suppliers are assessed an annual administrative fee and are placed in one of three risk levels (limited, moderate, and high) based on an assessment of the individual’s or entity’s overall risk of fraud, waste and abuse. This rule also allows for the temporary suspension of Medicare payments to providers or suppliers in the event CMS receives credible information that an overpayment, fraud, or willful misrepresentation has occurred. The Health Reform Laws granted the Secretary of the Department of Health and Human Services significant discretionary authority to suspend, exclude, or impose fines on providers and suppliers based on the agency’s determination that such a provider or supplier is “high-risk,” and, as a result, this final rulemaking has the potential to materially adversely affect our operators and tenants who may be evaluated under the enhanced screening process.

 

     However, in light of the implementation of those PPACA provisions relating to Medicare payment to providers and suppliers participating in ACOs under the Medicare Shared Savings Program, on November 2, 2011, CMS and OIG jointly published the final rule establishing waivers of certain fraud and abuse laws to ACOs.  These waivers include automatic AKS, Stark, and CMP waivers that may be applied in certain situations and that will apply uniformly to each ACO, ACO participant, and ACO provider/supplier. Notably, the final rule states that CMS and OIG intend to closely monitor ACOs through June 2013 to ensure that these waivers are not causing “undesirable effects” and need to be narrowed to prevent fraud and abuse.

 

     Additionally, provisions of Title VI of PPACA are designed to increase transparency and program integrity by skilled nursing facilities, other nursing facilities and similar providers. Specifically, skilled nursing facilities and other providers and suppliers will be required to institute compliance and ethics programs. Additionally, PPACA makes it easier for consumers to file complaints against nursing homes by mandating that states establish complaint websites. The provisions calling for enhanced transparency will increase the administrative burden and costs on these providers.

 

     Impact to the Health Care Plans Offered to Our Employees. The Health Reform Laws affect employers that provide health plans to their employees. The new laws change the tax treatment of the Medicare Part D retiree drug subsidy and extend dependent coverage for dependents up to age 26, among other changes. We are evaluating our health care plans in light of these changes. These changes may affect our operators and tenants as well.

 

Medicare Program Reimbursement Changes

 

     In recent months, CMS released a number of proposed and final rulemakings that may potentially increase or decrease government reimbursement to our operators and tenants. To the extent that any of these rulemakings decrease government reimbursement to our operators and tenants, our revenue and operations may be indirectly, adversely affected.

 

     On August 1, 2011, CMS issued a final rule updating the long-term acute care hospital prospective payment system for fiscal year 2012. Among other things, the final rule increased payment rates for acute care hospitals by 1% and long-term care hospitals by 1.8%. In the rule, CMS included a negative 2%, rather than the proposed negative 3.15%, documentation and coding adjustment for long-term care hospitals. CMS also released a final rulemaking for the prospective payment system and consolidated billing for skilled nursing facilities for fiscal year 2012 on August 8, 2011, which included the 11.1%, or $3.87 billion, decrease in RUG payments made to skilled nursing facilities previously discussed.   CMS announced that the reasons for this rate reduction were to correct for the unintended spike in payment levels, particularly those associated with higher paying RUGs, and to align reimbursement with cost. As part of these changes, effective October, 1, 2011, all rate categories will be updated for the full market basket; increase of 2.7%, less a 1% productivity adjustment required by Section 3401(b) of the PPACA.

 

     CMS annually adjusts the Medicare Physician Fee Schedule payment rates based on an update formula that includes application of the Sustainable Growth Rate (“SGR”). On November 1, 2011, CMS published the calendar year 2012 Physician Fee Schedule final rule with comment period. Most notably, the final rule calls for a negative 27.4% update for 2012 under the statutory SGR formula.  In February 2012, Congress passed the Middle Class Tax Relief and Job Creation Act of 2012, which blocks the cut through the end of 2012 Also discussed in the final rule are at least two initiatives that could negatively impact the reimbursement levels received by our operators and tenants. CMS is expanding its multiple procedure payment reduction policy to the professional interpretation of advance imaging services to recognize the overlapping activities that go into valuing these services.  In addition, the rule finalizes quality and cost measures that will be used in establishing a new value-based modifier that would adjust physician payments based on whether

43

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

they are providing higher quality and more efficient care.  The PPACA requires CMS to begin making payment adjustments to certain physicians and physician groups on January 1, 2015, and to apply the modifier to all physicians by January 1, 2017.  The rule finalizes calendar year 2013 as the initial performance year for purposes of adjusting payments in calendar year 2015.

 

     Additionally, on November 1, 2011, CMS published a final rule with comment period for outpatient care hospitals and ambulatory surgical centers. CMS estimates that the cumulative effect of all changes to payment rates for calendar year 2012 will have a positive effect, resulting in a 1.9% estimated increase in Medicare payments to providers paid under the HOPPS. As required by PPACA, the rule also provides for a payment adjustment for designated cancer hospitals, resulting in an expected increase in payments to cancer hospitals by 11.3%, and increases payment rates to ambulatory surgical centers by 1.6%.

 

     Finally, on November 21, 2011, the Joint Select Committee on Deficit Reduction, which was created by the Budget Control Act of 2011, concluded its work, and issued a statement that it was not able to make a bipartisan agreement, thus triggering the sequestration process.  The sequestration process will result in spending reductions starting in 2013, including Medicare cuts.  Such cuts could affect government reimbursement to our operators and tenants.

 

Economic Outlook

     Economic fundamentals leading into 2012 have set a generally positive pace with U.S. Gross Domestic Product growth projected to pick up through the coming year. However, there are several important caveats to note as the world economy continues to face headwinds and risks weigh to the downside. Positive outlooks are conditional on fiscal policy in payroll taxes and unemployment insurance benefits and upon the easing of the European debt situation. A repeat of volatility experienced in 2011 is likely in 2012, as perceptions about the strength of the U.S. economy and the Euro zone will vary over time as events unfold.   However, this volatility has led to increased interest in the historically stable returns provided by healthcare real estate.

     As a consequence of this interest, significant debt and equity investment capital was available to our sector in 2011 resulting in a record year of acquisition activity.  We participated in this growth and continue to actively invest and pursue investment opportunities that meet our strategic underwriting criteria.  Our strategy has resulted in robust portfolio growth and strong returns for our shareholders. With further industry consolidation anticipated in 2012, we expect to continue to our success.  We believe the opportunities in which we invest will continue to generate consistent, reliable and growing cash flows for our shareholders, regardless of economic volatility.

 

Business Strategy

     Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in rental and interest income and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, customer and geographic location.

     Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, resident fees and services, and interest earned on outstanding loans receivable. These items represent our primary source of liquidity to fund distributions and are dependent upon our obligors’ continued ability to make contractual rent and interest payments to us. To the extent that our obligors experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property and operator/tenant. Our asset management process includes review of monthly financial statements for each property, periodic review of obligor credit, periodic property inspections and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends and risks. Through these asset management and research efforts, we are typically able to intervene at an early stage to address payment risk, and in so doing, support both the collectability of revenue and the value of our investment.

     In addition to our asset management and research efforts, we also structure our investments to help mitigate payment risk. Operating leases and loans are normally credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the obligor and its affiliates.

     For the year ended December 31, 2011, rental income, resident fees and services and interest income represented 65%, 32%, and 3% respectively, of total gross revenues (including revenues from discontinued operations). Substantially all of our operating leases are designed with either fixed or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases

44

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.

     Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund operations, meet debt service obligations (both principal and interest), make dividend distributions and complete construction projects in process.  We also anticipate evaluating opportunities to finance future investments.  New investments are generally funded from temporary borrowings under our unsecured line of credit arrangement, internally generated cash and the proceeds from sales of real property. Our investments generate cash from rent and interest receipts and principal payments on loans receivable. Permanent capital for future investments, which replaces funds drawn under the unsecured line of credit arrangement, has historically been provided through a combination of public and private offerings of debt and equity securities and the incurrence or assumption of secured debt.

     Our primary sources of cash include rent and interest receipts, resident fees and services, borrowings under the unsecured line of credit arrangement, public and private offerings of debt and equity securities, proceeds from the sales of real property and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including capital expenditures and construction advances), loan advances, property operating expenses and general and administrative expenses.

     Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. It is also possible that loan repayments or sales of real property may occur in the future. To the extent that loan repayments and real property sales exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any loan repayments and real property sales in new investments. To the extent that new investment requirements exceed our available cash on-hand, we expect to borrow under our unsecured line of credit arrangement. At December 31, 2011, we had $163,482,000 of cash and cash equivalents, $69,620,000 of restricted cash and $1,395,000,000 of available borrowing capacity under our primary unsecured line of credit arrangement.

 

Key Transactions in 2011

     We completed the following key transactions during the year ended December 31, 2011:

·         our Board of Directors increased the annual cash dividend to $2.96 per common share ($0.74 per share quarterly), as compared to $2.835 per common share for 2011, beginning in February 2012.  The dividend declared for the quarter ended December 31, 2011 represents the 163rd consecutive quarterly dividend payment;

·         we completed $5,986,262,000 of gross investments and had $351,701,000 of investment payoffs;

·         we completed a public offering of 28,750,000 shares of common stock with net proceeds of $1,358,543,000 in March;

·         we completed a public offering of 14,375,000 shares of 6.5% convertible preferred stock with net proceeds of $696,437,000 in March;

·         we issued $1,400,000,000 of senior unsecured notes due 2016 to 2041 bearing interest rates of 3.625% to 6.5% with net proceeds of $1,381,086,000 in March;

·         we extended our unsecured line of credit arrangement to July 2015 and expanded it to $2,000,000,000 in July 2011;

·         we completed a public offering of 12,650,000 shares of common stock with net proceeds of $606,595,000 in November; and

·         we announced plans to declassify the Board of Directors.

  

Key Performance Indicators, Trends and Uncertainties

     We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to operating performance, concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes.

     Operating Performance. We believe that net income attributable to common stockholders (“NICS”) is the most appropriate earnings measure. Other useful supplemental measures of our operating performance include funds from operations (“FFO”) and net operating income (“NOI”); however, these supplemental measures are not defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations of FFO and NOI. These earnings measures and their relative per share amounts are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands, except per share data):

45

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

  

  

   

  

Year Ended December 31,

  

  

   

  

2009

  

2010

  

2011

  

  

   

  

  

  

  

  

  

  

  

  

Net income attributable to common stockholders  

  

$

 171,190 

  

$

 106,882 

  

$

 157,108 

Funds from operations  

  

  

 316,977 

  

  

 280,022 

  

  

 524,902 

Net operating income(1)

  

  

 547,678 

  

  

 640,346 

  

  

 1,087,205 

  

  

   

  

  

  

  

  

  

  

  

  

Per share data (fully diluted):  

  

  

  

  

  

  

  

  

  

  

Net income attributable to common stockholders  

  

$

 1.49 

  

$

 0.83 

  

$

 0.90 

  

Funds from operations  

  

  

 2.77 

  

  

 2.18 

  

  

 3.01 

   

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

(1) Includes our share of net operating income from unconsolidated entities.

 

     Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to book capitalization and debt to market capitalization. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt. The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain compliance with our debt covenants. The coverage ratios are based on adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) which is discussed in further detail, and reconciled to net income, below in “Non-GAAP Financial Measures.” Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented:

 

  

  

  

  

Year Ended December 31,

  

  

  

  

2009

  

2010

  

2011

  

  

  

  

  

  

  

  

  

Debt to book capitalization ratio

  

39%

  

49%

  

50%

Debt to undepreciated book capitalization ratio

  

35%

  

45%

  

46%

Debt to market capitalization ratio

  

30%

  

38%

  

38%

  

  

  

  

  

  

  

  

  

Adjusted interest coverage ratio

  

3.78x

  

3.39x

  

3.02x

Adjusted fixed charge coverage ratio

  

3.09x

  

2.76x

  

2.37x

 

     Concentration Risk. We evaluate our concentration risk in terms of asset mix, investment mix, customer mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our investments that are real property. In order to qualify as an equity REIT, at least 75% of our real estate investments must be real property whereby each property, which includes the land, buildings, improvements, intangibles and related rights, is owned by us and leased to a tenant pursuant to a long-term operating lease. Investment mix measures the portion of our investments that relate to our various property types. Customer mix measures the portion of our investments that relate to our top five customers. Geographic mix measures the portion of our investments that relate to our top five states. The following table reflects our recent historical trends of concentration risk by investment balance for the periods presented:

46

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

  

  

   

  

December 31,

  

  

   

  

2009

  

2010

  

2011

  

  

   

  

  

  

  

  

  

Asset mix:  

  

  

  

  

  

  

  

Real property  

  

93%

  

91%

  

95%

  

Real estate loans receivable  

  

7%

  

5%

  

2%

  

Investments in unconsolidated entities  

  

0%

  

4%

  

3%

  

  

   

  

  

  

  

  

  

Investment mix:(1)

  

  

  

  

  

  

  

Seniors housing triple-net  

  

42%

  

37%

  

28%

  

Skilled nursing/post-acute  

  

25%

  

14%

  

25%

  

Seniors housing operating  

  

0%

  

12%

  

20%

  

Hospitals  

  

10%

  

9%

  

6%

  

Medical office buildings  

  

23%

  

24%

  

19%

  

Life science buildings  

  

0%

  

4%

  

2%

  

  

   

  

  

  

  

  

  

Customer mix:(1)

  

  

  

  

  

  

  

Genesis HealthCare, LLC  

  

  

  

  

  

17%

  

Merrill Gardens, LLC  

  

  

  

8%

  

8%

  

Benchmark Senior Living, LLC  

  

  

  

  

  

6%

  

Brandywine Senior Living, LLC  

  

  

  

7%

  

5%

  

Senior Living Communities, LLC  

  

7%

  

7%

  

4%

  

Senior Star Living  

  

  

  

5%

  

  

  

Brookdale Senior Living, Inc.  

  

5%

  

4%

  

  

  

Signature Health Care LLC  

  

5%

  

  

  

  

  

Emeritus Corporation  

  

4%

  

  

  

  

  

Life Care Centers of America, Inc,  

  

4%

  

  

  

  

  

Remaining customers  

  

75%

  

69%

  

60%

  

  

   

  

  

  

  

  

  

Geographic mix:(1)

  

  

  

  

  

  

  

New Jersey  

  

  

  

  

  

10%

  

California  

  

9%

  

10%

  

10%

  

Massachusetts  

  

7%

  

7%

  

8%

  

Florida  

  

12%

  

10%

  

7%

  

Texas  

  

11%

  

8%

  

7%

  

Washington  

  

  

  

6%

  

  

  

Ohio  

  

6%

  

  

  

  

  

Remaining states  

  

55%

  

59%

  

58%

  

  

   

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

(1) Includes our share of investments in unconsolidated entities.

 

     We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. Factors that may cause actual results to differ from expected results are described in more detail in “Forward-Looking Statements and Risk Factors” and other sections of this Annual Report on Form 10-K. Management regularly monitors economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends. Please refer to “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these risk factors.

 

Portfolio Update

     Net operating income. The primary performance measure for our properties is net operating income (“NOI”) as discussed below in “Non-GAAP Financial Measures.” The following table summarizes our net operating income for the periods indicated (in thousands):

47

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

  

  

   

  

Year Ended December 31,

  

  

   

  

2009

  

2010

  

2011

Net operating income:  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net  

  

$

 399,363 

  

$

 422,466 

  

$

 663,018 

  

Seniors housing operating  

  

  

-

  

  

 18,385 

  

  

 141,943 

  

Medical facilities(1)

  

  

 147,145 

  

  

 196,621 

  

  

 281,554 

  

Non-segment/corporate  

  

  

 1,170 

  

  

 2,874 

  

  

 690 

  

  

Net operating income  

  

$

 547,678 

  

$

 640,346 

  

$

 1,087,205 

  

  

   

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

(1) Includes our share of net operating income from unconsolidated entities.

 

     Payment coverage. Payment coverage of our triple-net customers continues to remain strong. Our overall payment coverage is at 1.91 times. The table below reflects our recent historical trends of portfolio coverage. Coverage data reflects the 12 months ended for the periods presented. Coverage represents the ratio of our customers’ earnings before interest, taxes, depreciation, amortization, rent and management fees to contractual rent or interest due us.

 

  

  

September 30, 2009

  

September 30, 2010

  

September 30, 2011

  

  

CBMF

  

CAMF

  

CBMF

  

CAMF

  

CBMF

  

CAMF

Seniors housing triple-net

  

1.51x

  

1.30x

  

1.54x

  

1.32x

  

1.38x

  

1.19x

Skilled nursing/post-acute

  

2.29x

  

1.69x

  

2.42x

  

1.79x

  

2.22x

  

1.71x

Hospitals

  

2.47x

  

2.14x

  

2.66x

  

2.33x

  

2.47x

  

2.13x

Weighted averages

  

2.01x

  

1.59x

  

2.12x

  

1.68x

  

1.91x

  

1.54x

 

Corporate Governance

     Maintaining investor confidence and trust has become increasingly important in today’s business environment. Our Board of Directors and management are strongly committed to policies and procedures that reflect the highest level of ethical business practices. Our corporate governance guidelines provide the framework for our business operations and emphasize our commitment to increase stockholder value while meeting all applicable legal requirements. The Board of Directors adopted and annually reviews its Corporate Governance Guidelines. These guidelines meet the listing standards adopted by the New York Stock Exchange and are available on the Internet at www.hcreit.com.

 

Liquidity and Capital Resources

Sources and Uses of Cash

     Our primary sources of cash include rent and interest receipts, resident fees and services, borrowings under the unsecured line of credit arrangement, public and private offerings of debt and equity securities, proceeds from the sales of real property and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including capital expenditures and construction advances), loan advances, property operating expenses and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below.

     The following is a summary of our sources and uses of cash flows (dollars in thousands):

 

  

  

Year Ended

  

One Year Change

  

Year Ended

  

One Year Change

  

Two Year Change

  

  

December 31, 2009

  

December 31, 2010

  

$

  

%

  

December 31, 2011

  

$

  

%

  

$

  

%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Cash and cash equivalents at beginning of period

  

$

 23,370 

  

$

 35,476 

  

$

 12,106 

  

52%

  

$

 131,570 

  

$

 96,094 

  

271%

  

$

 108,200 

  

463%

Cash provided from operating activities

  

  

 381,259 

  

  

 364,741 

  

  

 (16,518) 

  

-4%

  

  

 588,224 

  

  

 223,483 

  

61%

  

  

 206,965 

  

54%

Cash used in investing activities

  

  

 (270,060) 

  

  

 (2,312,039) 

  

  

 (2,041,979) 

  

756%

  

  

 (4,520,129) 

  

  

 (2,208,090) 

  

96%

  

  

 (4,250,069) 

  

1574%

Cash provided from (used in) financing activities

  

  

 (99,093) 

  

  

 2,043,392 

  

  

 2,142,485 

  

n/a

  

  

 3,963,817 

  

  

 1,920,425 

  

94%

  

  

 4,062,910 

  

n/a

Cash and cash equivalents at end of period

  

$

 35,476 

  

$

 131,570 

  

$

 96,094 

  

271%

  

$

 163,482 

  

$

 31,912 

  

24%

  

$

 128,006 

  

361%

 

     Operating Activities. The change in net cash provided from operating activities is primarily attributable to an increase in net income, excluding gains/losses on sales of properties, depreciation and amortization, transaction costs and debt extinguishment

48

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

charges. These items are discussed below in “Results of Operations.”  The following is a summary of our straight-line rent and above/below market lease amortization (dollars in thousands):

 

  

  

Year Ended

  

One Year Change

  

Year Ended

  

One Year Change

  

Two Year Change

  

  

December 31, 2009

  

December 31, 2010

  

$

  

%

  

December 31, 2011

  

$

  

%

  

$

  

%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Gross straight-line rental income

  

$

 19,415 

  

$

 14,717 

  

$

 (4,698) 

  

-24%

  

$

 41,068 

  

$

 26,351 

  

179%

  

$

 21,653 

  

112%

Cash receipts due to real property sales

  

  

 (4,422) 

  

  

 (1,341) 

  

  

 3,081 

  

-70%

  

  

 (815) 

  

  

 526 

  

-39%

  

  

 3,607 

  

-82%

Prepaid rent receipts

  

  

 (26,252) 

  

  

 (7,196) 

  

  

 19,056 

  

-73%

  

  

 (8,675) 

  

  

 (1,479) 

  

21%

  

  

 17,577 

  

-67%

Amortization related to above (below) market leases, net

  

  

 1,713 

  

  

 2,856 

  

  

 1,143 

  

67%

  

  

 2,507 

  

  

 (349) 

  

-12%

  

  

 794 

  

46%

  

  

$

 (9,546) 

  

$

 9,036 

  

$

 18,582 

  

n/a

  

$

 34,085 

  

$

 25,049 

  

277%

  

$

 43,631 

  

n/a

 

Gross straight-line rental income represents the non-cash difference between contractual cash rent due and the average rent recognized pursuant to U.S. GAAP for leases with fixed rental escalators, net of collectability reserves.  This amount is positive in the first half of a lease term (but declining every year due to annual increases in cash rent due) and is negative in the second half of a lease term.  The fluctuation in cash receipts due to real property sales is attributable to less significant straight-line rent receivable balances on properties sold during the current year. The fluctuation in prepaid rent receipts is primarily due to changes in prepaid rent received at certain construction projects.

Investing Activities.  The changes in net cash used in investing activities are primarily attributable to net changes in real property and real estate loans receivable.  The following is a summary of our investment and disposition activities (dollars in thousands):

 

  

  

  

Year Ended

  

  

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

  

  

  

Properties

  

Amount

  

Properties

  

Amount

  

Properties

  

Amount

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Real property acquisitions:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net

  

 1 

  

$

 11,650 

  

 46 

  

$

 1,028,529 

  

 184 

  

$

 3,320,664 

  

Seniors housing operating

  

 - 

  

  

-

  

 32 

  

  

 816,000 

  

 58 

  

  

 1,747,485 

  

Medical facilities

  

 2 

  

  

 56,023 

  

 36 

  

  

 626,414 

  

 35 

  

  

 610,843 

  

Land parcels

  

 - 

  

  

-

  

 1 

  

  

 4,300 

  

 3 

  

  

 19,084 

  

Total acquisitions

  

 3 

  

  

 67,673 

  

 115 

  

  

 2,475,243 

  

 280 

  

  

 5,698,076 

Less: Assumed debt

  

  

  

  

-

  

  

  

  

 (559,508) 

  

  

  

  

 (961,928) 

  

Assumed other items, net

  

  

  

  

-

  

  

  

  

 (208,314) 

  

  

  

  

 (210,411) 

Cash disbursed for acquisitions

  

  

  

  

 67,673 

  

  

  

  

 1,707,421 

  

  

  

  

 4,525,737 

Construction in progress additions

  

  

  

  

 492,897 

  

  

  

  

 306,832 

  

  

  

  

 301,604 

Capital improvements to existing properties

  

  

  

  

 38,389 

  

  

  

  

 59,923 

  

  

  

  

 77,781 

Total cash invested in real property

  

  

  

  

 598,959 

  

  

  

  

 2,074,176 

  

  

  

  

 4,905,122 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Real property dispositions:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net

  

 21 

  

  

 101,155 

  

 31 

  

  

 170,290 

  

 39 

  

  

 150,755 

  

Medical facilities

  

 15 

  

  

 85,558 

  

 7 

  

  

 14,092 

  

 3 

  

  

 35,295 

  

Total dispositions

  

 36 

  

  

 186,713 

  

 38 

  

  

 184,382 

  

 42 

  

  

 186,050 

Less: Gains (losses) on sales of real property

  

  

  

  

 43,394 

  

  

  

  

 36,115 

  

  

  

  

 61,160 

  

Seller financing on sales of real property

  

  

  

  

 (6,100) 

  

  

  

  

 (1,470) 

  

  

  

  

-

Proceeds from real property sales

  

  

  

  

 224,007 

  

  

  

  

 219,027 

  

  

  

  

 247,210 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Net cash investments in real property

  

 (33) 

  

$

 374,952 

  

 77 

  

$

 1,855,149 

  

 238 

  

$

 4,657,912 

49

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

Capitalization Rates

 

Capitalization rates for acquisitions represent annualized contractual or projected income to be received in cash divided by investment amounts.  Capitalization rates for dispositions represent annualized contractual income that was being received in cash at date of disposition divided by disposition cash proceeds.  For the year ended December 31, 2011, weighted-average capitalization rates for acquisitions and dispositions were as follows:

 

  

  

Acquisitions

  

Dispositions

Seniors housing triple-net

  

8.0%

  

6.8%

Seniors housing operating

  

6.8%

  

n/a

Medical facilities

  

7.4%

  

7.3%

 

  

  

  

Year Ended

  

  

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

  

  

  

Seniors

  

  

  

  

  

  

Seniors

  

  

  

  

  

  

Seniors

  

  

  

  

  

  

  

  

Housing

  

Medical

  

  

  

  

Housing

  

Medical

  

  

  

  

Housing

  

Medical

  

  

  

  

  

  

Triple-net

  

Facilities

  

Totals

  

Triple-net

  

Facilities

  

Totals

  

Triple-net

  

Facilities

  

Totals

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Advances on real estate loans receivable:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Investments in new loans

  

$

 20,036 

  

$

-

  

$

 20,036 

  

$

 9,742 

  

$

 41,644 

  

$

 51,386 

  

$

 18,541 

  

$

-

  

$

 18,541 

  

Draws on existing loans

  

  

 52,910 

  

  

 1,471 

  

  

 54,381 

  

  

 46,113 

  

  

 1,236 

  

  

 47,349 

  

  

 29,752 

  

  

 3,184 

  

  

 32,936 

  

   Sub-total

  

  

 72,946 

  

  

 1,471 

  

  

 74,417 

  

  

 55,855 

  

  

 42,880 

  

  

 98,735 

  

  

 48,293 

  

  

 3,184 

  

  

 51,477 

  

Less: Seller financing on property sales

  

  

-

  

  

-

  

  

-

  

  

-

  

  

 (1,470) 

  

  

 (1,470) 

  

  

-

  

  

-

  

  

-

  

Net cash advances on real estate loans

  

  

 72,946 

  

  

 1,471 

  

  

 74,417 

  

  

 55,855 

  

  

 41,410 

  

  

 97,265 

  

  

 48,293 

  

  

 3,184 

  

  

 51,477 

Receipts on real estate loans receivable:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Loan payoffs

  

  

 61,659 

  

  

 32,197 

  

  

 93,856 

  

  

 5,619 

  

  

 6,233 

  

  

 11,852 

  

  

 162,705 

  

  

 2,943 

  

  

 165,648 

  

Principal payments on loans

  

  

 15,890 

  

  

 2,033 

  

  

 17,923 

  

  

 24,203 

  

  

 7,440 

  

  

 31,643 

  

  

 17,856 

  

  

 5,307 

  

  

 23,163 

  

Total receipts on real estate loans

  

  

 77,549 

  

  

 34,230 

  

  

 111,779 

  

  

 29,822 

  

  

 13,673 

  

  

 43,495 

  

  

 180,561 

  

  

 8,250 

  

  

 188,811 

Net advances (receipts) on real estate loans

  

$

 (4,603) 

  

$

 (32,759) 

  

$

 (37,362) 

  

$

 26,033 

  

$

 27,737 

  

$

 53,770 

  

$

 (132,268) 

  

$

 (5,066) 

  

$

 (137,334) 

 

     The contributions to unconsolidated entities for the year ended December 31, 2010 primarily represent $174,692,000 and $21,321,000 of cash invested by us in the joint ventures with Forest City Enterprises and a national medical office building company, respectively.  The distributions by unconsolidated entities for the year ended December 31, 2011 primarily represent cash received for return of capital from those same joint ventures.  Please see Note 7 to our consolidated financial statements for additional information.  Changes in restricted cash represent net cash fundings to and disbursements from earnest money deposits and secured debt escrow accounts.

 

     Financing Activities. The changes in net cash provided from or used in financing activities are primarily attributable to changes related to our long-term debt arrangements, proceeds from the issuance of common and preferred stock and dividend payments.

 

     The changes in our senior unsecured notes are due to (i) the repayment of $3,000 of convertible senior unsecured notes in December 2011; (ii) the issuance of $400,000,000 of 3.625% senior unsecured notes due 2016, $600,000,000 of 5.25% senior unsecured notes due 2022 and $400,000,000 of 6.50% senior unsecured notes due 2041 in March 2011; (iii) the issuance of $494,403,000 of convertible senior unsecured notes in March and June 2010; (iv) the repurchase of $441,326,000 of convertible senior unsecured notes in March and June 2010; (v) the issuance of $450,000,000 of senior unsecured notes in April and June 2010; (vi) the issuance of $450,000,000 of senior unsecured notes in September 2010; (vii) the issuance of $450,000,000 of senior unsecured notes in November 2010; and (viii) the extinguishment of $183,147,000 of various senior unsecured notes in March and September 2009.  We recognized losses of $25,072,000 and $19,269,000 during the years ended December 31, 2010 and 2009, respectively, in connection with the aforementioned extinguishments.

 

     During the year ended December 31, 2011, we assumed 55 secured loans totaling $940,855,000 with an average rate of 4.85% secured by 55 properties.  Also during the year ended December 31, 2011, we issued 9 secured loans totaling $114,903,000 with a rate of 5.78%.  During the year ended December 31, 2011, we extinguished $55,317,000 of secured debt with an average rate of 5.95%

50

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

and recognized a gain of $979,000.  During the year ended December 31, 2010, we extinguished 35 secured debt loans totaling $194,493,000 with a weighted-average interest rate of 6.07% and recognized extinguishment losses of $9,099,000. Also during the year ended December 31, 2010, we issued $81,977,000 of secured debt loans at an average interest rate of 5.10%.  During the year ended December 31, 2009, we extinguished 20 secured debt loans totaling $81,715,000 with a weighted-average interest rate of 7.21% and recognized extinguishment losses of $5,838,000.

     We may repurchase, redeem or refinance convertible and non-convertible senior unsecured notes from time to time, taking advantage of favorable market conditions when available. We may purchase senior notes for cash through open market purchases, privately negotiated transactions, a tender offer or, in some cases, through the early redemption of such securities pursuant to their terms.   The non-convertible senior unsecured notes are redeemable at our option, at any time in whole or from time to time in part, at a redemption price equal to the sum of (1) the principal amount of the notes (or portion of such notes) being redeemed plus accrued and unpaid interest thereon up to the redemption date and (2) any “make-whole” amount due under the terms of the notes in connection with early redemptions.   We cannot redeem the 3.00% convertible senior unsecured notes due 2029 prior to December 1, 2014 or the 4.75% convertible senior unsecured notes due 2027 prior to July 15, 2012 unless such redemption is necessary to preserve our status as a REIT.   However, on or after December 1, 2014 or July 15, 2012 (as applicable), we may from time to time at our option redeem those notes, in whole or in part, for cash, at a redemption price equal to 100% of the principal amount of the notes we redeem, plus any accrued and unpaid interest to, but excluding, the redemption date.  Redemptions and repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

     In March 2011, we completed a public offering of 14,375,000 shares of 6.5% convertible preferred stock for net proceeds of $696,437,000.  The following is a summary of our common stock issuances for the years indicated (dollars in thousands, except average price):

 

  

  

Shares Issued

  

Average Price

  

Gross Proceeds

  

Net Proceeds

  

  

  

  

  

  

  

  

  

  

  

  

February 2009 public issuance

  

 5,816,870 

  

$

 36.85 

  

$

 214,352 

  

$

 210,880 

September 2009 public issuance

  

 9,200,000 

  

  

 40.40 

  

  

 371,680 

  

  

 356,554 

2009 Dividend reinvestment plan issuances

  

 1,499,497 

  

  

 37.22 

  

  

 55,818 

  

  

 55,818 

2009 Equity shelf program issuances

  

 1,952,600 

  

  

 40.69 

  

  

 79,447 

  

  

 77,605 

2009 Option exercises

  

 96,166 

  

  

 38.23 

  

  

 3,676 

  

  

 3,676 

2009 Totals

  

 18,565,133 

  

  

  

  

$

 724,973 

  

$

 704,533 

  

  

  

  

  

  

  

  

  

  

  

  

September 2010 public issuance

  

 9,200,000 

  

$

 45.75 

  

$

 420,900 

  

$

 403,921 

December 2010 public issuance

  

 11,500,000 

  

  

 43.75 

  

  

 503,125 

  

  

 482,448 

2010 Dividend reinvestment plan issuances

  

 1,957,364 

  

  

 43.95 

  

  

 86,034 

  

  

 86,034 

2010 Equity shelf program issuances

  

 431,082 

  

  

 44.94 

  

  

 19,371 

  

  

 19,013 

2010 Option exercises

  

 129,054 

  

  

 31.17 

  

  

 4,022 

  

  

 4,022 

2010 Totals

  

 23,217,500 

  

  

  

  

$

 1,033,452 

  

$

 995,438 

  

  

  

  

  

  

  

  

  

  

  

  

March 2011 public issuance

  

 28,750,000 

  

$

 49.25 

  

$

 1,415,938 

  

$

 1,358,543 

November 2011 public issuance

  

 12,650,000 

  

  

 50.00 

  

  

 632,500 

  

  

 606,595 

2011 Dividend reinvestment plan issuances

  

 2,534,707 

  

  

 48.44 

  

  

 122,794 

  

  

 121,846 

2011 Equity shelf program issuances

  

 848,620 

  

  

 50.53 

  

  

 42,888 

  

  

 41,982 

2011 Option exercises

  

 232,081 

  

  

 37.17 

  

  

 8,628 

  

  

 8,628 

2011 Totals

  

 45,015,408 

  

  

  

  

$

 2,222,748 

  

$

 2,137,594 

  

  

  

  

  

  

  

  

  

  

  

  

 

     In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income (including 100% of capital gains) to our stockholders. The increase in dividends is primarily attributable to an increase in our common shares outstanding. The following is a summary of our dividend payments (in thousands, except per share amounts):

51

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

  

  

Year Ended

  

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

  

  

Per Share

  

Amount

  

Per Share

  

Amount

  

Per Share

  

Amount

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Common Stock

  

$

 2.72000 

  

$

 311,760 

  

$

 2.74000 

  

$

 348,578 

  

$

 2.83500 

  

$

 483,746 

Series D Preferred Stock

  

  

 1.96875 

  

  

 7,875 

  

  

 1.96875 

  

  

 7,875 

  

  

 1.96875 

  

  

 7,875 

Series E Preferred Stock

  

  

 1.50000 

  

  

 112 

  

  

 1.12500 

  

  

 94 

  

  

 - 

  

  

-

Series F Preferred Stock

  

  

 1.90625 

  

  

 13,344 

  

  

 1.90625 

  

  

 13,344 

  

  

 1.90625 

  

  

 13,344 

Series G Preferred Stock

  

  

 1.87500 

  

  

 748 

  

  

 1.40640 

  

  

 332 

  

  

 - 

  

  

-

Series H Preferred Stock

  

  

 - 

  

  

-

  

  

 - 

  

  

-

  

  

 2.85840 

  

  

 1,000 

Series I Preferred Stock

  

  

 - 

  

  

-

  

  

 - 

  

  

-

  

  

 1.33159 

  

  

 38,283 

Totals

  

  

  

  

$

 333,839 

  

  

  

  

$

 370,223 

  

  

  

  

$

 544,248 

 

Off-Balance Sheet Arrangements

     During the year ended December 31, 2010, we entered into a joint venture investment with Forest City Enterprises (NYSE:FCE.A and FCE.B).  The portfolio is 100% leased and includes affiliates of investment grade pharmaceutical and research tenants such as Novartis, Genzyme, Millennium (a subsidiary of Takeda Pharmaceuticals), and Brigham and Women's Hospital. Forest City Enterprises self-developed the portfolio and will continue to manage it on behalf of the joint venture. The life science campus is part of a mixed-use project that includes a 210-room hotel, 674 residential units, a grocery store, restaurants and retail.  In connection with this transaction, we invested $174,692,000 of cash which is recorded as an investment in unconsolidated entities on the balance sheet.  Our share of the non-recourse secured debt assumed by the joint venture was approximately $156,729,000 with weighted-average interest rates of 7.1%.  In addition, at December 31, 2011, we had other investments in unconsolidated entities with our ownership ranging from 10% to 50%. Please see Note 7 to our consolidated financial statements for additional information.

     We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on the general trend in interest rates at the applicable dates, our perception of the future volatility of interest rates and our relative levels of variable rate debt and variable rate investments. Please see Note 11 to our consolidated financial statements for additional information.

     At December 31, 2011, we had five outstanding letter of credit obligations totaling $5,515,000 and expiring between 2012 and 2014. Please see Note 12 to our consolidated financial statements for additional information.

 

Contractual Obligations

     The following table summarizes our payment requirements under contractual obligations as of December 31, 2011 (in thousands):

 

   

  

Payments Due by Period

Contractual Obligations  

  

Total

  

2012

  

2013-2014

  

2015-2016

  

Thereafter

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Unsecured line of credit arrangements  

  

$

 610,000 

  

$

 5,000 

  

$

-

  

$

 605,000 

  

$

-

Senior unsecured notes(1)

  

  

 4,464,927 

  

  

 76,853 

  

  

 300,000 

  

  

 950,000 

  

  

 3,138,074 

Secured debt(1)

  

  

 2,298,553 

  

  

 162,116 

  

  

 550,527 

  

  

 429,210 

  

  

 1,156,700 

Contractual interest obligations  

  

  

 3,202,072 

  

  

 355,462 

  

  

 642,895 

  

  

 528,569 

  

  

 1,675,146 

Capital lease obligations  

  

  

 90,482 

  

  

 8,059 

  

  

 73,977 

  

  

 8,447 

  

  

-

Operating lease obligations  

  

  

 356,464 

  

  

 6,166 

  

  

 12,944 

  

  

 12,018 

  

  

 325,336 

Purchase obligations  

  

  

 340,369 

  

  

 195,384 

  

  

 110,290 

  

  

 34,695 

  

  

-

Other long-term liabilities  

  

  

 5,935 

  

  

-

  

  

 475 

  

  

 1,900 

  

  

 3,560 

Total contractual obligations  

  

$

 11,368,802 

  

$

 809,040 

  

$

 1,691,107 

  

$

 2,569,839 

  

$

 6,298,816 

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(1) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.

 

     At December 31, 2011, we had a $2,000,000,000 unsecured line of credit arrangement with a consortium of 31 banks with an option to upsize the facility by up to an additional $500,000,000 through an accordion feature, allowing for an aggregate commitment of up to $2,500,000,000.  The revolving credit facility is scheduled to expire July 27, 2015. Borrowings under the agreement are subject to interest payable in periods no longer than three months at either the agent bank’s prime rate of interest or the applicable margin over LIBOR interest rate, at our option (1.65% at December 31, 2011). The applicable margin is based on certain of our debt ratings and was 1.35% at December 31, 2011. In addition, we pay a facility fee annually to each bank based on the bank’s commitment amount. The facility fee depends on certain of our debt ratings and was 0.25% at December 31, 2011.  Principal is due

52

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

upon expiration of the agreement.  At December 31, 2011, we had $ 605,000,000 outstanding under the unsecured line of credit arrangement and $5,000,000 outstanding under an unsecured revolving demand note.  Contractual interest obligations of $35,690,000 are estimated based on the assumption that the balance of $610,000,000 at December 31, 2011 is constant until maturity at interest rates in effect at December 31, 2011.

     We have $4,464,927,000 of senior unsecured notes principal outstanding with fixed annual interest rates ranging from 3.00% to 8.00%, payable semi-annually. Total contractual interest obligations on senior unsecured notes totaled $2,397,250,533 at December 31, 2011. A total of $788,074,000 of our senior unsecured notes are convertible notes that also contain put features.  Please see Note 10 to our consolidated financial statements for additional information.

     We have consolidated secured debt with total outstanding principal of $2,108,384,000, collateralized by owned properties, with annual interest rates ranging from 1.22% to 10.00%, payable monthly. The carrying values of the properties securing the debt totaled $4,048,469,000 at December 31, 2011. Total contractual interest obligations on consolidated secured debt totaled $729,000,860 at December 31, 2011. Our share of non-recourse debt associated with unconsolidated entities (as reflected in the contractual obligations table above) is $190,169,000 at December 31, 2011.  Our share of contractual interest obligations on our unconsolidated entities’ secured debt is $40,131,000 at December 31, 2011.

     At December 31, 2011, we had operating lease obligations of $356,464,000 relating primarily to ground leases at certain of our properties and office space leases.

     Purchase obligations are comprised of unfunded construction commitments and contingent purchase obligations. At December 31, 2011, we had outstanding construction financings of $189,502,000 for leased properties and were committed to providing additional financing of approximately $282,899,000 to complete construction. At December 31, 2011, we had contingent purchase obligations totaling $57,470,000. These contingent purchase obligations relate to unfunded capital improvement obligations. Upon funding, amounts due from the tenant are increased to reflect the additional investment in the property.

     Other long-term liabilities relate to our Supplemental Executive Retirement Plan (“SERP”) and certain non-compete agreements. We have a SERP, a non-qualified defined benefit pension plan, which provides certain executive officers with supplemental deferred retirement benefits. The SERP provides an opportunity for participants to receive retirement benefits that cannot be paid under our tax-qualified plans because of the restrictions imposed by ERISA and the Internal Revenue Code of 1986, as amended. Benefits are based on compensation and length of service and the SERP is unfunded.  Benefit payments are expected to total $2,375,000 during the next five fiscal years and $3,560,000 thereafter. We use a December 31 measurement date for the SERP. The accrued liability on our balance sheet for the SERP was $5,623,000 and $4,066,000 at December 31, 2011 and December 31, 2010, respectively.

 

Capital Structure

     As of December 31, 2011, we had total equity of $7,278,647,000 and a total debt balance of $7,156,756,000, which represents a debt to total book capitalization ratio of 50%. Our ratio of debt to market capitalization was 38% at December 31, 2011. For the year ended December 31, 2011, our adjusted interest coverage ratio was 3.02x and our adjusted fixed charge coverage ratio was 2.37x. Also, at December 31, 2011, we had $163,482,000 of cash and cash equivalents, $69,620,000 of restricted cash and $1,395,000,000 of available borrowing capacity under our primary unsecured line of credit arrangement.

     Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2011, we were in compliance with all of the covenants under our debt agreements. Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings. However, under our unsecured line of credit arrangement, the ratings on our senior unsecured notes are used to determine the fees and interest charged.

     We plan to manage the company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

     On May 7, 2009, we filed an open-ended automatic or “universal” shelf registration statement with the Securities and Exchange Commission covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units. As of January 31, 2012, we had an effective registration statement on file in connection with our enhanced dividend reinvestment plan under which we may issue up to 10,000,000 shares of common stock. As of January 31, 2012, 5,876,205 shares of common stock remained available for issuance under this registration statement. We have entered into separate Equity Distribution Agreements with each of UBS Securities LLC, RBS Securities Inc., KeyBanc Capital Markets Inc. and Credit Agricole Securities (USA) Inc. relating to the offer and sale from time to time of up to $630,015,000 aggregate amount of our common stock

53

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

(“Equity Shelf Program”). As of January 31, 2012, we had $457,112,000 of remaining capacity under the Equity Shelf Program. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our unsecured line of credit arrangement.

 

Results of Operations

     Our primary sources of revenue include rent, resident fees and services, and interest. Our primary expenses include interest expense, depreciation and amortization, property operating expenses and general and administrative expenses. These revenues and expenses are reflected in our Consolidated Statements of Income and are discussed in further detail below. The following is a summary of our results of operations (dollars in thousands, except per share amounts):

 

  

  

  

Year Ended

  

One Year Change

  

Year Ended

  

One Year Change

  

Two Year Change

  

  

  

December 31, 2009

  

December 31, 2010

  

Amount

  

%

  

December 31, 2011

  

Amount

  

%

  

Amount

  

%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Net income attributable to common stockholders

  

$

 171,190 

  

$

 106,882 

  

$

 (64,308) 

  

-38%

  

$

 157,108 

  

$

 50,226 

  

47%

  

$

 (14,082) 

  

-8%

Funds from operations

  

  

 316,977 

  

  

 280,022 

  

  

 (36,955) 

  

-12%

  

  

 524,902 

  

  

 244,880 

  

87%

  

  

 207,925 

  

66%

Adjusted EBITDA

  

  

 525,791 

  

  

 568,429 

  

  

 42,638 

  

8%

  

  

 971,525 

  

  

 403,096 

  

71%

  

  

 445,734 

  

85%

Net operating income

  

  

 547,678 

  

  

 640,346 

  

  

 92,668 

  

17%

  

  

 1,087,205 

  

  

 446,859 

  

70%

  

  

 539,527 

  

99%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Per share data (fully diluted):

  

Net income attributable to common stockholders

  

$

 1.49 

  

$

 0.83 

  

$

 (0.66) 

  

-44%

  

$

 0.90 

  

$

 0.07 

  

8%

  

$

 (0.59) 

  

-40%

  

Funds from operations

  

  

 2.77 

  

  

 2.18 

  

  

 (0.59) 

  

-21%

  

  

 3.01 

  

  

 0.83 

  

38%

  

  

 0.24 

  

9%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Adjusted interest coverage ratio

  

  

3.78x

  

  

3.39x

  

  

-0.39x

  

-10%

  

  

3.02x

  

  

-0.37x

  

-11%

  

  

-0.76x

  

-20%

Adjusted fixed charge coverage ratio

  

  

3.09x

  

  

2.76x

  

  

-0.33x

  

-11%

  

  

2.37x

  

  

-0.39x

  

-14%

  

  

-0.72x

  

-23%

 

     The components of the changes in revenues, expenses and other items are discussed in detail below. The following is a summary of certain items that impact the results of operations for the year ended December 31, 2011:

          $12,194,000 ($0.07 per diluted share) of impairment charges;

          $2,010,000 ($0.01 per diluted share) of provisions for loan losses;

          $70,224,000 ($0.40 per diluted share) of transaction costs;

          $1,653,000 ($0.01 per diluted share) of held for sale hospital operating expenses;

          $979,000 ($0.01 per diluted share) of net gains on extinguishments of debt;

          $3,774,000 ($0.02 per diluted share) of additional other income related to a lease and loan termination; and

          $61,160,000 ($0.35 per diluted share) of gains on the sales of real property.

 

     The following is a summary of certain items that impact the results of operations for the year ended December 31, 2010:

          $3,853,000 ($0.03 per diluted share) of special stock compensation grants recognized as general and administrative expenses;

          $34,171,000 ($0.27 per diluted share) of net losses on extinguishments of debt;

          $947,000 ($0.01 per diluted share) of impairment charges;

          $29,684,000 ($0.23 per diluted share) of provisions for loan losses;

          $46,660,000 ($0.36 per diluted share) of transaction costs;

          $1,753,000 ($0.01 per diluted share) of held for sale hospital operating expenses;

          $1,000,000 ($0.01 per diluted share) of additional other income related to a lease termination; and

          $36,115,000 ($0.28 per diluted share) of gains on the sales of real property.

 

     The following is a summary of certain items that impact the results of operations for the year ended December 31, 2009:

          $3,909,000 ($0.03 per diluted share) of non-recurring general and administrative expenses;

          $25,107,000 ($0.22 per diluted share) of net losses on extinguishments of debt;

          $25,223,000 ($0.22 per diluted share) of impairment charges;

          $23,261,000 ($0.20 per diluted share) of provisions for loan losses;

          $8,059,000 ($0.07 per diluted share) of additional other income related to a lease termination;

          $2,400,000 ($0.02 per diluted share) of prepayment fees; and

          $43,394,000 ($0.38 per diluted share) of gains on the sales of real property.

 

     The increase in fully diluted average common shares outstanding is primarily the result of public common stock offerings and

54

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

common stock issuances pursuant to our DRIP and equity shelf program (“ESP”). The following table represents the changes in outstanding common stock for the period from January 1, 2009 to December 31, 2011 (in thousands):

 

  

  

  

Year Ended

  

  

  

  

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

  

Totals

Beginning balance

  

 104,704 

  

 123,385 

  

 147,097 

  

 104,704 

Public offerings

  

 15,017 

  

 20,700 

  

 41,400 

  

 77,117 

DRIP issuances

  

 1,499 

  

 1,957 

  

 2,534 

  

 5,990 

ESP issuances

  

 1,953 

  

 431 

  

 849 

  

 3,233 

Preferred stock conversions

  

 30 

  

 339 

  

 - 

  

 369 

Option exercises

  

 96 

  

 129 

  

 232 

  

 457 

Other, net

  

 86 

  

 156 

  

 163 

  

 405 

Ending balance

  

 123,385 

  

 147,097 

  

 192,275 

  

 192,275 

  

  

  

  

  

  

  

  

  

  

Average number of shares outstanding:

  

Basic

  

 114,207 

  

 127,656 

  

 173,741 

  

  

  

Diluted

  

 114,612 

  

 128,208 

  

 174,401 

  

  

 

     We evaluate our business and make resource allocations on our three business segments — seniors housing triple-net, seniors housing operating and medical facilities. Please see Note 17 to our consolidated financial statements for additional information.

55

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

Seniors Housing Triple-net

  

    The following is a summary of our results of operations for the seniors housing triple-net segment (dollars in thousands):

 

  

  

  

  

Year Ended

  

One Year Change

  

Year Ended

  

One Year Change

  

Two Year Change

  

  

  

  

December 31,

  

December 31,

  

  

  

  

  

  

December 31,

  

  

  

  

  

  

  

  

  

  

  

  

  

  

2009

  

2010

  

$

  

%

  

2011

  

$

  

%

  

$

  

%

Revenues:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Rental income

  

$

 308,650 

  

 $ 

 347,706 

  

 $ 

 39,056 

  

13%

  

 $ 

 612,617 

  

 $ 

 264,911 

  

76%

  

 $ 

 303,967 

  

98%

  

Interest income

  

  

 35,945 

  

  

 36,176 

  

  

 231 

  

1%

  

  

 34,068 

  

  

 (2,108) 

  

-6%

  

  

 (1,877) 

  

-5%

  

Other income

  

  

 2,909 

  

  

 3,385 

  

  

 476 

  

16%

  

  

 6,620 

  

  

 3,235 

  

96%

  

  

 3,711 

  

128%

  

Prepayment fees

  

  

 2,400 

  

  

 - 

  

  

 (2,400) 

  

-100%

  

  

 - 

  

  

 - 

  

n/a

  

  

 (2,400) 

  

-100%

  

  

  

  

  

 349,904 

  

  

 387,267 

  

  

 37,363 

  

11%

  

  

 653,305 

  

  

 266,038 

  

69%

  

  

 303,401 

  

87%

Expenses:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Interest expense

  

  

 2,879 

  

  

 7,780 

  

  

 4,901 

  

170%

  

  

 13,238 

  

  

 5,458 

  

70%

  

  

 10,359 

  

360%

  

Depreciation and amortization

  

  

 82,752 

  

  

 98,561 

  

  

 15,809 

  

19%

  

  

 175,625 

  

  

 77,064 

  

78%

  

  

 92,873 

  

112%

  

Transaction costs

  

  

-

  

  

 20,613 

  

  

 20,613 

  

n/a

  

  

 27,993 

  

  

 7,380 

  

36%

  

  

 27,993 

  

n/a

  

Loss (gain) on extinguishment of debt

  

  

 2,057 

  

  

 7,791 

  

  

 5,734 

  

279%

  

  

-

  

  

 (7,791) 

  

-100%

  

  

 (2,057) 

  

-100%

  

Provision for loan losses

  

  

 23,261 

  

  

 29,684 

  

  

 6,423 

  

28%

  

  

-

  

  

 (29,684) 

  

-100%

  

  

 (23,261) 

  

-100%

  

  

  

  

  

 110,949 

  

  

 164,429 

  

  

 53,480 

  

48%

  

  

 216,856 

  

  

 52,427 

  

32%

  

  

 105,907 

  

95%

Income from continuing operations before income taxes and income (loss) from unconsolidated entities

  

  

 238,955 

  

  

 222,838 

  

  

 (16,117) 

  

-7%

  

  

 436,449 

  

  

 213,611 

  

96%

  

  

 197,494 

  

83%

Income tax expense

  

  

 (607) 

  

  

-

  

  

 607 

  

-100%

  

  

 (143) 

  

  

 (143) 

  

n/a

  

  

 464 

  

-76%

Income (loss) from unconsolidated entities

  

  

 - 

  

  

 - 

  

  

 - 

  

n/a

  

  

 (9) 

  

  

 (9) 

  

n/a

  

  

 (9) 

  

n/a

Income from continuing operations

  

  

 238,348 

  

  

 222,838 

  

  

 (15,510) 

  

-7%

  

  

 436,297 

  

  

 213,459 

  

96%

  

  

 197,949 

  

83%

Discontinued operations:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Gain (loss) on sales of properties

  

  

 32,084 

  

  

 36,274 

  

  

 4,190 

  

13%

  

  

 59,108 

  

  

 22,834 

  

63%

  

  

 27,024 

  

84%

  

Impairment of assets

  

  

 - 

  

  

 - 

  

  

 - 

  

n/a

  

  

 (1,103) 

  

  

 (1,103) 

  

n/a

  

  

 (1,103) 

  

n/a

  

Income from discontinued operations, net

  

  

21,168

  

  

15,216

  

  

(5,952)

  

-28%

  

  

4,949

  

  

(10,267)

  

-67%

  

  

(16,219)

  

-77%

  

Discontinued operations, net

  

  

 53,252 

  

  

 51,490 

  

  

 (1,762) 

  

-3%

  

  

 62,954 

  

  

 11,464 

  

22%

  

  

 9,702 

  

18%

Net income

  

  

 291,600 

  

  

 274,328 

  

  

 (17,272) 

  

-6%

  

  

 499,251 

  

  

 224,923 

  

82%

  

  

 207,651 

  

71%

Less: Net income attributable to noncontrolling interests

  

  

 - 

  

  

 (18) 

  

  

 (18) 

  

n/a

  

  

 218 

  

  

 236 

  

-1311%

  

  

 218 

  

n/a

Net income attributable to common stockholders

  

$

 291,600 

  

$

 274,346 

  

$

 (17,254) 

  

-6%

  

$

 499,033 

  

$

 224,687 

  

82%

  

$

 207,433 

  

71%

 

The increase in rental income is primarily attributable to the acquisitions of new properties and the conversion of newly constructed seniors housing triple-net properties from which we receive rent. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties.  These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period.  If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase.  Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues.  Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income.  For the three months ended December 31, 2011, we had no lease renewals but we had 12 leases with rental rate increasers ranging from 0.25% to 0.41% in our seniors housing triple-net portfolio.

Interest expense for the years ended December 31, 2011, 2010 and 2009 represents $15,306,000, $15,111,000 and $12,622,000,

56

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

respectively, of secured debt interest expense offset by interest allocated to discontinued operations.  The change in secured debt interest expense is due to the net effect and timing of assumptions, extinguishments and principal amortizations.  The following is a summary of our seniors housing triple-net property secured debt principal activity (dollars in thousands):

 

  

  

Year Ended

  

Year Ended

  

Year Ended

  

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

  

  

  

  

  

Weighted Avg.

  

  

  

  

Weighted Avg.

  

  

  

  

Weighted Avg.

  

  

Amount

  

Interest Rate

  

Amount

  

Interest Rate

  

Amount

  

Interest Rate

Beginning balance

  

$

 94,234 

  

6.996%

  

$

 298,492 

  

5.998%

  

$

 172,862 

  

5.265%

Debt transferred

  

  

 - 

  

0.000%

  

  

 (131,214) 

  

6.100%

  

  

 - 

  

0.000%

Debt issued

  

  

 265,527 

  

5.982%

  

  

 81,977 

  

4.600%

  

  

 - 

  

0.000%

Debt assumed

  

  

 - 

  

0.000%

  

  

 78,794 

  

5.867%

  

  

 90,120 

  

4.819%

Debt extinguished

  

  

 (47,502) 

  

7.414%

  

  

 (150,982) 

  

5.924%

  

  

 - 

  

0.000%

Principal payments

  

  

 (13,767) 

  

7.640%

  

  

 (4,205) 

  

4.388%

  

  

 (3,982) 

  

5.556%

Ending balance

  

$

 298,492 

  

5.998%

  

$

 172,862 

  

5.265%

  

$

 259,000 

  

5.105%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Monthly averages

  

$

 205,549 

  

6.309%

  

$

 242,123 

  

5.663%

  

$

 234,392 

  

5.141%

 

Depreciation and amortization increased primarily as a result of new property acquisitions and the conversions of newly constructed investment properties. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.

Transaction costs for the year ended December 31, 2011 primarily represent costs incurred with the Genesis transaction (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 costs incurred in connection with other new property acquisitions.

During the year ended December 31, 2011, we sold 39 seniors housing triple-net properties for net gains of $59,108,000 as compared to 31 properties for net gains of $36,274,000 in 2010 and 21 properties for net gains of $32,084,000 in 2009.  At December 31, 2011, we had one seniors housing triple-net facility that satisfied the requirements for held for sale treatment.  We recognized an impairment loss of $1,102,000 on certain facilities as the fair value less estimated costs to sell exceeded our carrying value. The following illustrates the reclassification impact as a result of classifying the properties sold prior to or held for sale at December 31, 2011 as discontinued operations for the periods presented.  Please refer to Note 5 to our consolidated financial statements for further discussion.

 

  

  

  

Year Ended December 31,

  

  

  

2009

  

2010

  

2011

  

  

  

  

  

  

  

  

  

  

  

Rental income

  

$

 49,459 

  

$

 35,198 

  

$

 9,713 

Expenses:

  

  

  

  

  

  

  

  

  

  

Interest expense

  

  

 9,743 

  

  

 7,331 

  

  

 2,068 

  

Provision for depreciation

  

  

 18,548 

  

  

 12,651 

  

  

 2,696 

Income (loss) from discontinued operations, net

  

$

 21,168 

  

$

 15,216 

  

$

 4,949 

 

     We recorded $23,261,000 of provision for loan losses during the year ended December 31, 2009. This amount includes the write-off of loans totaling $25,578,000 primarily relating to certain early stage seniors housing operators offset by a net reduction in the allowance for loan losses of $2,457,000.  We recorded $29,684,000 of provision for loan losses during the year ended December 31, 2010. This amount includes the write-off of loans totaling $33,591,000 primarily related to certain early stage seniors housing and CCRC development projects.  This was offset by a net reduction of the allowance balance by $3,907,000.  We did not record any provision for loan loss or have any loan write-offs for seniors housing triple-net investments during the year ended December 31, 2011. The provision for loan losses is related to our critical accounting estimate for the allowance for loan losses and is discussed in “Critical Accounting Policies.”

 

     During the year ended December 31, 2011 a portion of our seniors housing triple-net properties were formed through partnership interests. Net income attributable to noncontrolling interests for the year ended December 31, 2011 represents our partners share of net income (loss) relating to those properties. In connection with a seniors housing triple-net partnership, we also acquired a minority interest in a separate unconsolidated entity. This investment is reflected as an investment in unconsolidated entities on our consolidated balance sheet. Accordingly, our proportionate share of net income (loss) is reflected as income (loss) from unconsolidated entities on our consolidated income statement.

57

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

Seniors Housing Operating

As discussed in Note 3 to our consolidated financial statements, we completed the acquisition of three additional seniors housing operating partnerships and added certain properties to existing partnerships during the year ended December 31, 2011. The results of operations for these partnerships have been included in our consolidated results of operations from the dates of acquisition. The seniors housing operating partnerships were formed using the structure authorized by the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”).  When considering new partnerships utilizing the RIDEA structure, we look for opportunities with best-in-class operators with a strong seasoned leadership team, high-quality real estate in attractive markets, growth potential above the standard rent escalators in our triple-net lease seniors housing portfolio, and alignment of economic interests with our operating partner.  Our seniors housing operating partnerships offer us the opportunity for external growth because we have the right to fund future seniors housing investment opportunities sourced by our operating partners. There were no seniors housing operating segment investments prior to September 1, 2010.  The following is a summary of our seniors housing operating results of operations (dollars in thousands):

 

  

  

  

Year Ended

  

One Year Change

  

  

  

  

December 31,

  

December 31,

  

  

  

  

  

  

  

  

  

  

2010

  

  

2011

  

$

  

%

Revenues:

  

  

  

  

  

  

  

  

  

  

  

  

Resident fees and services

  

$

 51,006 

  

$

 456,085 

  

$

 405,079 

  

794%

Expenses:

  

  

  

  

  

  

  

  

  

  

  

  

Interest expense

  

  

 7,794 

  

  

 46,342 

  

  

 38,548 

  

495%

  

Property operating expenses

  

  

 32,621 

  

  

 314,142 

  

  

 281,521 

  

863%

  

Depreciation and amortization

  

  

 15,504 

  

  

 138,192 

  

  

 122,688 

  

791%

  

Transaction costs

  

  

 20,936 

  

  

 36,328 

  

  

 15,392 

  

74%

  

Loss (gain) on extinguishment of debt

  

  

 - 

  

  

 (979) 

  

  

 (979) 

  

n/a

  

  

  

  

  

 76,855 

  

  

 534,025 

  

  

 457,170 

  

595%

Income from continuing operations before income from unconsolidated entities

  

  

 (25,849) 

  

  

 (77,940) 

  

  

 (52,091) 

  

202%

Income tax expense

  

  

 (229) 

  

  

 - 

  

  

 229 

  

n/a

Income from unconsolidated entities

  

  

 - 

  

  

 (1,531) 

  

  

 (1,531) 

  

n/a

Net income

  

  

 (26,078) 

  

  

 (79,471) 

  

  

 (53,393) 

  

205%

Less: Net income attributable to noncontrolling interests

  

  

 (1,656) 

  

  

 (6,006) 

  

  

 (4,350) 

  

263%

Net income attributable to common stockholders

  

$

 (24,422) 

  

$

 (73,465) 

  

$

 (49,043) 

  

201%

 

     The fluctuation in revenues, expenses and other items is primarily due to the timing of transactions.  Amounts for the year ended December 31, 2010 primarily represent four months of activity for our original Merrill Gardens partnership.  Amounts for the year ended December 31, 2011 represent a full year of activity for the original Merrill Gardens partnership plus amounts related to all subsequent RIDEA partnerships.  Please refer to Note 3 to our consolidated financial statements for additional information.  The following is a summary of our seniors housing operating property secured debt principal activity (dollars in thousands):

 

  

  

Year Ended

  

Year Ended

  

  

December 31, 2010

  

December 31, 2011

  

  

  

  

  

Weighted Avg.

  

  

  

  

Weighted Avg.

  

  

Amount

  

Interest Rate

  

Amount

  

Interest Rate

Beginning balance

  

$

 - 

  

0.000%

  

$

 487,706 

  

5.939%

Debt transferred

  

  

 131,214 

  

6.100%

  

  

 - 

  

0.000%

Debt issued

  

  

 75,179 

  

6.386%

  

  

 114,903 

  

5.779%

Debt assumed

  

  

 318,125 

  

5.855%

  

  

 780,955 

  

4.269%

Debt extinguished

  

  

 (35,017) 

  

6.723%

  

  

 (55,317) 

  

5.949%

Principal payments

  

  

 (1,795) 

  

6.165%

  

  

 (9,648) 

  

5.474%

Ending balance

  

$

 487,706 

  

5.939%

  

$

 1,318,599 

  

4.665%

  

  

  

  

  

  

  

  

  

  

  

Monthly averages

  

$

 350,259 

  

5.957%

  

$

 969,265 

  

5.679%

58

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

Medical Facilities

 

The following is a summary of our results of operations for the medical facilities segment (dollars in thousands):

 

  

  

  

  

Year Ended

  

One Year Change

  

Year Ended

  

One Year Change

  

Two Year Change

  

  

  

  

December 31,

  

December 31,

  

  

  

  

  

  

December 31,

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

2009

  

  

2010

  

$

  

%

  

  

2011

  

$

  

%

  

$

  

%

Revenues:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Rental income

  

$

 165,965 

  

$

 210,484 

  

$

 44,519 

  

27%

  

$

 300,095 

  

$

 89,611 

  

43%

  

$

 134,130 

  

81%

  

Interest income

  

  

 4,940 

  

  

 4,679 

  

  

 (261) 

  

-5%

  

  

 7,002 

  

  

 2,323 

  

50%

  

  

 2,062 

  

42%

  

Other income

  

  

 1,309 

  

  

 985 

  

  

 (324) 

  

-25%

  

  

 3,985 

  

  

 3,000 

  

305%

  

  

 2,676 

  

204%

  

  

  

  

  

 172,214 

  

  

 216,148 

  

  

 43,934 

  

26%

  

  

 311,082 

  

  

 94,934 

  

44%

  

  

 138,868 

  

81%

Expenses:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Interest expense

  

  

 17,411 

  

  

 22,593 

  

  

 5,182 

  

30%

  

  

 29,931 

  

  

 7,338 

  

32%

  

  

 12,520 

  

72%

  

Property operating expenses

  

  

 42,501 

  

  

 46,673 

  

  

 4,172 

  

10%

  

  

 65,334 

  

  

 18,661 

  

40%

  

  

 22,833 

  

54%

  

Depreciation and amortization

  

  

 57,941 

  

  

 72,896 

  

  

 14,955 

  

26%

  

  

 104,589 

  

  

 31,693 

  

43%

  

  

 46,648 

  

81%

  

Transaction costs

  

  

-

  

  

 5,112 

  

  

 5,112 

  

n/a

  

  

 5,903 

  

  

 791 

  

n/a

  

  

 5,903 

  

n/a

  

Loss (gain) on extinguishment of debt

  

  

 3,781 

  

  

 1,308 

  

  

 (2,473) 

  

-65%

  

  

-

  

  

 (1,308) 

  

-100%

  

  

 (3,781) 

  

-100%

  

Provision for loan losses

  

  

-

  

  

-

  

  

-

  

n/a

  

  

 2,010 

  

  

 2,010 

  

n/a

  

  

 2,010 

  

n/a

  

  

  

  

  

 121,634 

  

  

 148,582 

  

  

 26,948 

  

22%

  

  

 207,767 

  

  

 59,185 

  

40%

  

  

 86,133 

  

71%

Income from continuing operations before income taxes and income from unconsolidated entities

  

  

 50,580 

  

  

 67,566 

  

  

 16,986 

  

34%

  

  

 103,315 

  

  

 35,749 

  

53%

  

  

 52,735 

  

104%

Income tax expense

  

  

 (233) 

  

  

 (77) 

  

  

 156 

  

-67%

  

  

 (361) 

  

  

 (284) 

  

369%

  

  

 (128) 

  

55%

Income from unconsolidated entities

  

  

-

  

  

 6,673 

  

  

 6,673 

  

n/a

  

  

 7,312 

  

  

 639 

  

n/a

  

  

 7,312 

  

n/a

Income from continuing operations

  

  

 50,347 

  

  

 74,162 

  

  

 23,815 

  

47%

  

  

 110,266 

  

  

 36,104 

  

49%

  

  

 59,919 

  

119%

Discontinued operations:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Gain (loss) on sales of properties

  

  

11,310

  

  

(159)

  

  

(11,469)

  

n/a

  

  

2,052

  

  

2,211

  

-1391%

  

  

(9,258)

  

-82%

  

Impairment of assets

  

  

(25,223)

  

  

(947)

  

  

24,276

  

-96%

  

  

(11,091)

  

  

(10,144)

  

1071%

  

  

14,132

  

-56%

  

Income (loss) from discontinued operations, net

  

  

8,577

  

  

(2,412)

  

  

(10,989)

  

n/a

  

  

(2,009)

  

  

403

  

-17%

  

  

(10,586)

  

-123%

  

Discontinued operations, net

  

  

 (5,336) 

  

  

 (3,518) 

  

  

 1,818 

  

-34%

  

  

 (11,048) 

  

  

 (7,530) 

  

214%

  

  

 (5,712) 

  

107%

Net income (loss)

  

  

 45,011 

  

  

 70,644 

  

  

 25,633 

  

57%

  

  

 99,218 

  

  

 28,574 

  

40%

  

  

 54,207 

  

120%

Less: Net income (loss) attributable to noncontrolling interests

  

  

 (342) 

  

  

 2,031 

  

  

 2,373 

  

n/a

  

  

 894 

  

  

 (1,137) 

  

-56%

  

  

 1,236 

  

-361%

Net income (loss) attributable to common stockholders

  

$

 45,353 

  

$

 68,613 

  

$

 23,260 

  

51%

  

$

 98,324 

  

$

 29,711 

  

43%

  

$

 52,971 

  

117%

 

The increase in rental income is primarily attributable to the acquisitions of new properties and the construction conversions of medical facilities from which we receive rent. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index.  These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period.  If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase.  Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues.  Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income.  For the three months ended December 31, 2011, our consolidated medical office building portfolio signed 55,562 square feet of new leases and 103,954 square feet of renewals.  The weighted average term of these leases was five years, with a rate of $23.06 per square foot and tenant improvement and lease commission costs of $10.53 per square foot.  Substantially all of these leases during the referenced quarter contain an annual fixed or contingent escalation rent structure ranging from the change in

59

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

CPI to 3%.  For the three months ended December 31, 2011, we had no lease renewals but we had two leases with rental rate increasers ranging from 0.25% to 0.50% in our hospital portfolio.

Interest income decreased from the prior period primarily due to a decline in outstanding balances for medical facility real estate loans.  Other income is attributable to third party management fee income.

Interest expense for the years ended December 31, 2011, 2010 and 2009 represents $31,467,000, $24,926,000 and $20,584,000, respectively, of secured debt interest expense offset by interest allocated to discontinued operations.  The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations.  The following is a summary of our medical facilities secured debt principal activity (dollars in thousands):

 

  

  

Year Ended

  

Year Ended

  

Year Ended

  

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

  

  

  

  

  

Weighted Avg.

  

  

  

  

Weighted Avg.

  

  

  

  

Weighted Avg.

  

  

Amount

  

Interest Rate

  

Amount

  

Interest Rate

  

Amount

  

Interest Rate

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Beginning balance

  

$

 354,146 

  

5.799%

  

$

 314,065 

  

5.677%

  

$

 463,477 

  

5.286%

Debt assumed

  

  

 - 

  

0.000%

  

  

 167,737 

  

6.637%

  

  

 69,779 

  

5.921%

Debt extinguished

  

  

 (34,213) 

  

6.933%

  

  

 (8,494) 

  

6.045%

  

  

 - 

  

0.000%

Principal payments

  

  

 (5,868) 

  

5.721%

  

  

 (9,831) 

  

6.279%

  

  

 (13,190) 

  

6.208%

Ending balance

  

$

 314,065 

  

5.677%

  

$

 463,477 

  

5.286%

  

$

 520,066 

  

5.981%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Monthly averages

  

$

 341,103 

  

5.764%

  

$

 458,196 

  

5.961%

  

$

 489,923 

  

6.179%

 

The increase in property operating expenses and depreciation and amortization is primarily attributable to acquisitions and construction conversions of new medical facilities for which we incur certain property operating expenses offset by property operating expenses associated with discontinued operations.

Transaction costs for the year ended December 31, 2011 represent costs incurred in connection with the acquisition of new properties.  Income tax expense is primarily related to third party management fee income.

We recorded $2,010,000 of provision for loan losses during the year ended December 31, 2011.  This amount includes the write-off of a loan totaling $3,286,000 primarily relating to a medical facility loan offset by a net reduction in the allowance for loan loss $1,276,000, resulting in an allowance for loan losses of $0 at December 31, 2011.

Income from unconsolidated entities for the year ended December 30, 2010 and 2011 includes our share of net income related to our joint venture investment with Forest City Enterprises.  Income from unconsolidated entities for the year ended December 31, 2011 also includes our share of net income related to certain unconsolidated property investments related to our strategic joint venture relationship with a national medical office building company.  See Note 7 to our consolidated financial statements for additional information.  The following is a summary of our pro rata net income from these investments for the year ended December 31, 2011 (in thousands):

 

  

Year Ended December 31,

  

  

One Year Change

  

2010

  

2011

  

  

$

  

%

Revenues

 $ 

 19,756 

  

 $ 

 23,626 

  

 $ 

 3,870 

  

20%

Operating expenses

  

 5,751 

  

  

 6,945 

  

  

 1,194 

  

21%

Net operating income

  

 14,005 

  

  

 16,681 

  

  

 2,676 

  

19%

Depreciation and amortization

  

 4,646 

  

  

 6,156 

  

  

 1,510 

  

33%

Interest expense

  

 4,228 

  

  

 5,829 

  

  

 1,601 

  

38%

Loss on extinguishment of debt

  

 - 

  

  

 355 

  

  

 355 

  

n/a

Asset management fee

  

 748 

  

  

 870 

  

  

 122 

  

16%

Net income

$

 4,383 

  

$

 3,471 

  

$

 (912) 

  

-21%

 

During the year ended December 31, 2009, we sold 15 medical facilities for net gains of $11,310,000.  At December 31, 2009, we had eight medical facilities held for sale and recorded an impairment charge of $25,223,000 to reduce the properties to their estimated fair values less costs to sell.  In determining the fair value of the held for sale properties, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected

60

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

operating income and published capitalization rates.  During the three months ended September 30, 2010, we recorded an impairment charge of $947,000 related to two of the held for sale medical facilities to adjust the carrying values to estimated fair values less costs to sell based on current sales price expectations.  During the year ended December 31, 2010, we sold seven of the held for sale medical facilities for net losses of $159,000.  At December 31, 2010, we had one medical facility held for sale. During the year ended December 31, 2011, we sold three medical facilities for net gains of $2,052,000.  At December 31, 2011, we had five medical facilities held for sale and we recorded an impairment charge of $6,791,000 to reduce the carrying values of certain properties to their estimated fair values less costs to sell.  The following illustrates the reclassification impact as a result of classifying medical facilities sold prior to or held for sale at December 31, 2011 as discontinued operations for the periods presented.  Please refer to Note 5 to our consolidated financial statements for further discussion.

 

  

  

  

Year Ended December 31,

  

  

  

2009

  

2010

  

2011

  

  

  

  

  

  

  

  

  

  

  

Rental income

  

$

 15,837 

  

$

 10,022 

  

$

 6,421 

Other income

  

  

 8,059 

  

  

-

  

  

-

Expenses:

  

  

  

  

  

  

  

  

  

  

Interest expense

  

  

 3,173 

  

  

 2,333 

  

  

 1,536 

  

Property operating expenses

  

  

 6,464 

  

  

 7,171 

  

  

 4,394 

  

Provision for depreciation

  

  

 5,682 

  

  

 2,930 

  

  

 2,503 

Income (loss) from discontinued operations, net

  

$

 8,577 

  

$

 (2,412) 

  

$

 (2,012) 

     Net income attributable to non-controlling interests primarily relates to certain properties that are consolidated in our operating results but where we have less than a 100% ownership interest.

     Non-Segment/Corporate

     The following is a summary of our results of operations for the non-segment/corporate activities (dollars in thousands):

 

  

  

  

Year Ended

  

One Year Change

  

Year Ended

  

One Year Change

  

Two Year Change

  

  

  

December 31, 2009

  

December 31, 2010

  

$

  

%

  

December 31, 2011

  

$

  

%

  

$

  

%

Revenues:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Other income

  

$

 1,170 

  

$

 2,874 

  

$

 1,704 

  

146%

  

$

 690 

  

$

 (2,184) 

  

-76%

  

$

 (480) 

  

-41%

Expenses:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Interest expense

  

  

 76,566 

  

  

 113,129 

  

  

 36,563 

  

48%

  

  

 228,884 

  

  

 115,755 

  

102%

  

  

 152,318 

  

199%

  

General and administrative

  

  

 49,691 

  

  

 54,626 

  

  

 4,935 

  

10%

  

  

 77,201 

  

  

 22,575 

  

41%

  

  

 27,510 

  

55%

  

Loss (gain) on extinguishments of debt

  

  

 19,269 

  

  

 25,072 

  

  

 5,803 

  

30%

  

  

-

  

  

 (25,072) 

  

-100%

  

  

 (19,269) 

  

n/a

  

  

  

  

 145,526 

  

  

 192,827 

  

  

 47,301 

  

33%

  

  

 306,085 

  

  

 113,258 

  

59%

  

  

 160,559 

  

110%

Loss from continuing operations before income taxes

  

  

 (144,356) 

  

  

 (189,953) 

  

  

 (45,597) 

  

32%

  

  

 (305,395) 

  

  

 (115,442) 

  

61%

  

  

 (161,039) 

  

112%

Income tax expense (benefit)

  

  

 672 

  

  

 (58) 

  

  

 (730) 

  

n/a

  

  

 (884) 

  

  

 (826) 

  

1424%

  

  

 (1,556) 

  

-232%

Net loss

  

  

 (143,684) 

  

  

 (190,011) 

  

  

 (46,327) 

  

32%

  

  

 (306,279) 

  

  

 (116,268) 

  

61%

  

  

 (162,595) 

  

113%

Preferred stock dividends

  

  

 22,079 

  

  

 21,645 

  

  

 (434) 

  

-2%

  

  

 60,502 

  

  

 38,857 

  

180%

  

  

 38,423 

  

174%

Net loss attributable to common stockholders

  

$

 (165,763) 

  

$

 (211,656) 

  

$

 (45,893) 

  

28%

  

$

 (366,781) 

  

$

 (155,125) 

  

73%

  

$

 (201,018) 

  

121%

 

     Other income primarily represents income from non-real estate activities such as interest earned on temporary investments of cash reserves.

     The following is a summary of our non-segment/corporate interest expense (dollars in thousands):

61

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

  

  

Year Ended

  

One Year Change

  

Year Ended

  

One Year Change

  

Two Year Change

  

  

December 31, 2009

  

December 31, 2010

  

$

  

%

  

December 31, 2011

  

$

  

%

  

$

  

%

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Senior unsecured notes

  

$

 106,347 

  

$

 122,492 

  

$

 16,145 

  

15%

  

$

 222,559 

  

$

 100,067 

  

82%

  

$

 116,212 

  

109%

Secured debt

  

  

 265 

  

  

 645 

  

  

 380 

  

n/a

  

  

 604 

  

  

 (41) 

  

-6%

  

  

 339 

  

n/a

Unsecured lines of credit

  

  

 4,629 

  

  

 3,974 

  

  

 (655) 

  

-14%

  

  

 7,917 

  

  

 3,943 

  

99%

  

  

 3,288 

  

71%

Capitalized interest

  

  

 (41,170) 

  

  

 (20,792) 

  

  

 20,378 

  

-49%

  

  

 (13,164) 

  

  

 7,628 

  

-37%

  

  

 28,006 

  

-68%

Interest SWAP savings

  

  

 (161) 

  

  

 (161) 

  

  

 - 

  

0%

  

  

 (161) 

  

  

 - 

  

0%

  

  

 - 

  

0%

Loan expense

  

  

 6,656 

  

  

 6,971 

  

  

 315 

  

5%

  

  

 11,129 

  

  

 4,158 

  

60%

  

  

 4,473 

  

67%

Totals

  

$

 76,566 

  

$

 113,129 

  

$

 36,563 

  

48%

  

$

 228,884 

  

$

 115,755 

  

102%

  

$

 152,318 

  

199%

 

The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments.  The following is a summary of our senior unsecured note principal activity (dollars in thousands):

 

   

  

Year Ended

  

Year Ended

  

Year Ended

   

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

   

  

  

  

  

Weighted Avg.

  

  

  

  

Weighted Avg.

  

  

  

  

Weighted Avg.

   

  

Amount

  

Interest Rate

  

Amount

  

Interest Rate

  

Amount

  

Interest Rate

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Beginning balance  

  

 $ 

 1,845,000 

  

5.782%

  

 $ 

 1,661,853 

  

5.557%

  

 $ 

 3,064,930 

  

5.129%

Debt issued  

  

  

 - 

  

0.000%

  

  

 1,844,403 

  

4.653%

  

  

 1,400,000 

  

5.143%

Debt extinguished(1)

  

  

 (183,147) 

  

7.823%

  

  

 (441,326) 

  

4.750%

  

  

 (3) 

  

4.750%

Ending balance  

  

 $ 

 1,661,853 

  

5.557%

  

 $ 

 3,064,930 

  

5.129%

  

 $ 

 4,464,927 

  

5.133%

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Monthly averages  

  

 $ 

 1,778,261 

  

5.713%

  

 $ 

 2,221,056 

  

5.263%

  

 $ 

 4,141,853 

  

5.133%

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(1) We recognized losses of $19,269,000, $25,072,000 and $0 in connection with the extinguishments for the years ended December 31, 2009, 2010 and 2011, respectively.

 

     We capitalize certain interest costs associated with funds used to finance the construction of properties owned directly by us. The amount capitalized is based upon the balances outstanding during the construction period using the rate of interest that approximates our cost of financing. Our interest expense is reduced by the amount capitalized.  Please see Note 11 to our consolidated financial statements for a discussion of our interest rate swap agreements and their impact on interest expense.  Loan expense represents the amortization of deferred loan costs incurred in connection with the issuance and amendments of debt. Loan expense is consistent for all years presented.  During the three months ended September 30, 2009, we completed a $10,750,000 first mortgage loan secured by a commercial real estate campus.  The 10-year debt has a fixed interest rate of 6.37%.  The change in interest expense on the unsecured line of credit arrangements is due primarily to the net effect and timing of draws, paydowns and variable interest rate changes.  The following is a summary of our unsecured line of credit arrangements (dollars in thousands):

 

  

  

  

Year Ended December 31,

  

  

  

2009

  

2010

  

2011

Balance outstanding at year end

  

$

 140,000 

  

$

 300,000 

  

$

 610,000 

Maximum amount outstanding at any month end

  

$

 559,000 

  

$

 560,000 

  

$

 710,000 

Average amount outstanding (total of daily

  

  

  

  

  

  

  

  

  

  

principal balances divided by days in period)

  

$

 241,463 

  

$

 268,762 

  

$

 240,104 

Weighted average interest rate (actual interest

  

  

  

  

  

  

  

  

  

  

expense divided by average borrowings outstanding)

  

  

1.92%

  

  

1.48%

  

  

1.51%

 

     General and administrative expenses as a percentage of consolidated revenues (including revenues from discontinued operations) for the years ended December 31, 2011, 2010 and 2009 were 5.37%, 7.78% and 8.33%, respectively.  The increase in general and administrative expenses is primarily related to costs associated with our initiatives to attract and retain appropriate personnel to achieve our business objectives.  The decline in percent of revenue is primarily related to the increasing revenue base as a result of our seniors housing operating partnerships.

     The change in preferred dividends is primarily attributable to preferred stock conversions into common stock. The following is a summary of our preferred stock activity (dollars in thousands):

62

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

  

  

Year Ended

  

Year Ended

  

Year Ended

  

  

December 31, 2009

  

December 31, 2010

  

December 31, 2011

  

  

  

  

Weighted Avg.

  

  

  

Weighted Avg.

  

  

  

Weighted Avg.

  

  

Shares

  

Dividend Rate

  

Shares

  

Dividend Rate

  

Shares

  

Dividend Rate

  

  

  

  

  

  

  

  

  

  

  

  

  

Beginning balance

  

 11,516,302 

  

7.696%

  

 11,474,093 

  

7.697%

  

 11,349,854 

  

7.663%

Shares issued

  

 - 

  

0.000%

  

 349,854 

  

6.000%

  

 14,375,000 

  

6.500%

Shares redeemed

  

 - 

  

0.000%

  

 (5,513) 

  

7.500%

  

 - 

  

0.000%

Shares converted

  

 (42,209) 

  

7.478%

  

 (468,580) 

  

7.262%

  

 - 

  

0.000%

Ending balance

  

 11,474,093 

  

7.697%

  

 11,349,854 

  

7.663%

  

 25,724,854 

  

7.013%

  

  

  

  

  

  

  

  

  

  

  

  

  

Monthly averages

  

 11,482,557 

  

7.697%

  

 11,321,886 

  

7.699%

  

 22,407,546 

  

7.089%

 

Non-GAAP Financial Measures

     We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider FFO to be a useful supplemental measure of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable assets, plus depreciation and amortization, and after adjustments for unconsolidated entities.

     Net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property level operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.

     EBITDA stands for earnings before interest, taxes, depreciation and amortization. We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations. We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred dividends. 

     A covenant in our line of credit arrangement contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy this covenant could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of this debt agreement and the financial covenant, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for stock-based compensation expense, provision for loan losses and gain/loss on extinguishment of debt. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends. Effective July 27, 2011, our covenant requires an adjusted fixed charge ratio of at least 1.50 times.

     Other than Adjusted EBITDA, our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA is used solely to determine our compliance with a financial covenant of our line of credit arrangement and is not being presented for use by investors for any other purpose. None of our supplemental measures represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies.

 

     The table below reflects the reconciliation of FFO to net income attributable to common stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. The provisions for depreciation and amortization include provisions for depreciation and amortization from discontinued operations. Noncontrolling interest amounts represent the noncontrolling interests’ share of

63

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

transaction costs and depreciation and amortization.  Unconsolidated entity amounts represent our share of unconsolidated entities’ depreciation and amortization.  Amounts are in thousands except for per share data.

 

  

  

  

Year Ended December 31,

FFO Reconciliation:

  

2009

  

2010

  

2011

Net income attributable to common stockholders

  

$

 171,190 

  

$

 106,882 

  

$

 157,108 

Depreciation and amortization

  

  

 164,923 

  

  

 202,543 

  

  

 423,605 

Impairment of assets

  

  

 25,223 

  

  

 947 

  

  

 12,194 

Loss (gain) on sales of properties

  

  

 (43,394) 

  

  

 (36,115) 

  

  

 (61,160) 

Noncontrolling interests

  

  

 (965) 

  

  

 (2,749) 

  

  

 (18,557) 

Unconsolidated entities

  

  

 - 

  

  

 8,514 

  

  

 11,712 

Funds from operations

  

$

 316,977 

  

$

 280,022 

  

$

 524,902 

  

  

  

  

  

  

  

  

  

  

  

Average common shares outstanding:

  

  

  

  

  

  

  

  

  

  

Basic

  

  

 114,207 

  

  

 127,656 

  

  

 173,741 

  

Diluted

  

  

 114,612 

  

  

 128,208 

  

  

 174,401 

  

  

  

  

  

  

  

  

  

  

  

Per share data:

  

  

  

  

  

  

  

  

  

Net income attributable to common stockholders

  

  

  

  

  

  

  

  

  

  

Basic

  

$

 1.50 

  

$

 0.84 

  

$

 0.90 

  

Diluted

  

  

 1.49 

  

  

 0.83 

  

  

 0.90 

  

  

  

  

  

  

  

  

  

  

  

Funds from operations

  

  

  

  

  

  

  

  

  

  

Basic

  

$

 2.78 

  

$

 2.19 

  

$

 3.02 

  

Diluted

  

  

 2.77 

  

  

 2.18 

  

  

 3.01 

 

     The table below reflects the reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Interest expense and the provisions for depreciation and amortization include discontinued operations. Dollars are in thousands.

 

  

  

  

Year Ended December 31,

Adjusted EBITDA Reconciliation:

  

2009

  

2010

  

2011

Net income

  

$

 192,927 

  

$

 128,884 

  

$

 212,716 

Interest expense

  

  

 109,772 

  

  

 160,960 

  

  

 321,998 

Income tax expense (benefit)

  

  

 168 

  

  

 364 

  

  

 1,388 

Depreciation and amortization

  

  

 164,923 

  

  

 202,543 

  

  

 423,605 

Stock-based compensation expense

  

  

 9,633 

  

  

 11,823 

  

  

 10,786 

Provision for loan losses

  

  

 23,261 

  

  

 29,684 

  

  

 2,010 

Loss (gain) on extinguishment of debt

  

  

 25,107 

  

  

 34,171 

  

  

 (979) 

Adjusted EBITDA

  

$

 525,791 

  

$

 568,429 

  

$

 971,524 

  

  

  

  

  

  

  

  

  

  

  

Adjusted Interest Coverage Ratio:

  

  

  

  

  

  

  

  

  

Interest expense

  

$

 109,772 

  

$

 160,960 

  

$

 321,998 

Capitalized interest

  

  

 41,170 

  

  

 20,792 

  

  

 13,164 

Non-cash interest expense

  

  

 (11,898) 

  

  

 (13,945) 

  

  

 (13,905) 

  

Total interest

  

  

 139,044 

  

  

 167,807 

  

  

 321,257 

Adjusted EBITDA

  

$

 525,791 

  

$

 568,429 

  

$

 971,524 

  

Adjusted interest coverage ratio

  

  

3.78x

  

  

3.39x

  

  

3.02x

  

  

  

  

  

  

  

  

  

  

  

Adjusted Fixed Charge Coverage Ratio:

  

  

  

  

  

  

  

  

  

Interest expense

  

$

 109,772 

  

$

 160,960 

  

$

 321,998 

Capitalized interest

  

  

 41,170 

  

  

 20,792 

  

  

 13,164 

Non-cash interest expense

  

  

 (11,898) 

  

  

 (13,945) 

  

  

 (13,905) 

Secured debt principal payments

  

  

 9,292 

  

  

 16,652 

  

  

 27,804 

Preferred dividends

  

  

 22,079 

  

  

 21,645 

  

  

 60,502 

  

Total fixed charges

  

  

 170,415 

  

  

 206,104 

  

  

 409,563 

Adjusted EBITDA

  

$

 525,791 

  

$

 568,429 

  

$

 971,524 

  

Adjusted fixed charge coverage ratio

  

  

3.09x

  

  

2.76x

  

  

2.37x

64

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

     The following tables reflect the reconciliation of NOI for the periods presented. All amounts include amounts from discontinued operations, if applicable. Our share of revenues and expenses from unconsolidated entities are included in medical facilities. Amounts are in thousands.

 

  

  

  

  

  

Year Ended December 31,

NOI Reconciliation:

  

2009

  

2010

  

2011

Total revenues:

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net:

  

  

  

  

  

  

  

  

  

  

  

Rental income:

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net

  

$

 190,684 

  

$

 220,383 

  

$

 306,810 

  

  

  

Skilled nursing/post-acute

  

  

 167,426 

  

  

 162,521 

  

  

 315,520 

  

  

  

   Sub-total

  

  

 358,110 

  

  

 382,904 

  

  

 622,330 

  

  

Interest income

  

  

 35,944 

  

  

 36,176 

  

  

 34,068 

  

  

Other income

  

  

 5,308 

  

  

 3,386 

  

  

 6,620 

  

  

  

Total seniors housing triple-net

  

  

 399,362 

  

  

 422,466 

  

  

 663,018 

  

Seniors housing operating:

  

  

  

  

  

  

  

  

  

  

  

Resident fees and services

  

  

 - 

  

  

 51,006 

  

  

 456,085 

  

Medical facilities:

  

  

  

  

  

  

  

  

  

  

  

Rental income

  

  

  

  

  

  

  

  

  

  

  

  

Hospitals

  

  

 44,967 

  

  

 50,071 

  

  

 70,022 

  

  

  

Medical office buildings

  

  

 136,834 

  

  

 170,435 

  

  

 241,159 

  

  

  

Life science buildings

  

  

 - 

  

  

 34,002 

  

  

 43,429 

  

  

  

   Sub-total

  

  

 181,801 

  

  

 254,508 

  

  

 354,610 

  

  

Interest income

  

  

 4,941 

  

  

 4,679 

  

  

 7,002 

  

  

Other income

  

  

 9,369 

  

  

 985 

  

  

 3,985 

  

  

  

Total medical facilities revenues

  

  

 196,111 

  

  

 260,172 

  

  

 365,597 

  

Corporate other income

  

  

 1,170 

  

  

 2,874 

  

  

 690 

  

  

  

Total revenues

  

  

 596,643 

  

  

 736,518 

  

  

 1,485,390 

Property operating expenses:

  

  

  

  

  

  

  

  

  

  

Seniors housing operating

  

  

 - 

  

  

 32,621 

  

  

 314,142 

  

Medical facilities:

  

  

  

  

  

  

  

  

  

  

  

Hospitals

  

  

 - 

  

  

 1,753 

  

  

 1,871 

  

  

Medical office buildings

  

  

 48,965 

  

  

 52,091 

  

  

 69,021 

  

  

Life science buildings

  

  

 - 

  

  

 9,707 

  

  

 13,151 

  

  

  

   Sub-total

  

  

 48,965 

  

  

 63,551 

  

  

 84,043 

  

  

  

Total property operating expenses

  

  

 48,965 

  

  

 96,172 

  

  

 398,185 

Net operating income:

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net

  

  

 399,362 

  

  

 422,466 

  

  

 663,018 

  

Seniors housing operating

  

  

 - 

  

  

 18,385 

  

  

 141,943 

  

Medical facilities

  

  

 147,146 

  

  

 196,621 

  

  

 281,554 

  

Non-segment/corporate

  

  

 1,170 

  

  

 2,874 

  

  

 690 

  

  

  

Net operating income

  

$

 547,678 

  

$

 640,346 

  

$

 1,087,205 

65

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions.  Management considers accounting estimates or assumptions critical if:

·         the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and

·         the impact of the estimates and assumptions on financial condition or operating performance is material.

Management has discussed the development and selection of its critical accounting policies with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to them.  Management believes the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate and are not reasonably likely to change in the future.  However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change.  If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition.  Please refer to Note 1 of our audited consolidated financial statements for further information on significant accounting policies that impact us. There were no material changes to these policies in 2011.

The following table presents information about our critical accounting policies, as well as the material assumptions used to develop each estimate:

 

Nature of Critical

Accounting Estimate

Assumptions/Approach

Used

Principles of Consolidation

The consolidated financial statements include our accounts, the accounts of our wholly-owned subsidiaries and the accounts of joint venture entities in which we own a majority voting interest with the ability to control operations and where no substantive participating rights or substantive kick out rights have been granted to the noncontrolling interests.  In addition, we consolidate those entities deemed to be variable interest entities in which we are determined to be the primary beneficiary. All material intercompany transactions and balances have been eliminated in consolidation.

 

We make judgments about which entities are VIEs based on an assessment of whether (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We make judgments with respect to our level of influence or control of an entity and whether we are (or are not) the primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, our ability to direct the activities that most significantly impact the entity's economic performance, our form of ownership interest, our representation on the entity's governing body, the size and seniority of our investment, our ability and the rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity, if applicable. Our ability to correctly assess our influence or control over an entity at inception of our involvement or on a continuous basis when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. If we perform a primary beneficiary analysis at a date other than at inception of the variable interest entity, our assumptions may be different and may result in the identification of a different primary beneficiary.

Income Taxes

As part of the process of preparing our consolidated financial statements, significant management judgment is required to evaluate our compliance with REIT requirements.

 

Our determinations are based on interpretation of tax laws, and our conclusions may have an impact on the income tax expense recognized. Adjustments to income tax expense may be required as a result of: (i) audits conducted by federal and state tax authorities, (ii) our ability to qualify as a REIT, (iii) the potential for built-in-gain recognized related to prior-tax-free acquisitions of C corporations, and (iv) changes in tax laws. Adjustments required in any given period are included in income.

     

66

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

Nature of Critical

Accounting Estimate

Assumptions/Approach

Used

 

Impairment of Long-Lived Assets

We review our long-lived assets for potential impairment in accordance with U.S. GAAP. An impairment charge must be recognized when the carrying value of a long-lived asset is not recoverable.  The carrying value is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.  If it is determined that a permanent impairment of a long-lived asset has occurred, the carrying value of the asset is reduced to its fair value and an impairment charge is recognized for the difference between the carrying value and the fair value.

 

 

The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if there are indicators of impairment.  These indicators may include anticipated operating losses at the property level, the tenant’s inability to make rent payments, a decision to dispose of an asset before the end of its estimated useful life and changes in the market that may permanently reduce the value of the property.  If indicators of impairment exist, then the undiscounted future cash flows from the most likely use of the property are compared to the current net book value.  This analysis requires us to determine if indicators of impairment exist and to estimate the most likely stream of cash flows to be generated from the property during the period the property is expected to be held. 

During the year ended December 31, 2011, we sold 42 properties, for net gains of $61,160,000.  At December 31, 2011, we had five medical facilities and one seniors housing triple-net facility that satisfied the requirements for held for sale treatment. During the twelve months ended December 31, 2011, we recorded impairment charges of $12,194,000 related to certain held for sale properties to adjust the carrying values to estimated fair values less costs to sell based on current sales price expectations.

 

Allowance for Loan Losses

We maintain an allowance for loan losses in accordance with U.S. GAAP.  The allowance for loan losses is maintained at a level believed adequate to absorb potential losses in our loans receivable.  The determination of the allowance is based on a quarterly evaluation of all outstanding loans.  If this evaluation indicates that there is a greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required.  A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement.  Consistent with this definition, all loans on non-accrual are deemed impaired.  To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status.

 

 

The determination of the allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments and principal. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying property.

As a result of our quarterly evaluations, we recorded $2,010,000 of provision for loan losses during the year ended December 31, 2011. This amount includes the write-off of loans totaling $3,286,000 primarily related to a hospital.  This was offset by a net reduction of the allowance balance by $1,276,000, resulting in an allowance for loan losses of $0 relating to real estate loans with outstanding balances of $6,244,000, all of which were on non-accrual status at December 31, 2011.

       

67

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

Nature of Critical

Accounting Estimate

Assumptions/Approach

Used

Revenue Recognition

Revenue is recorded in accordance with U.S. GAAP, which requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectability. If the collectability of revenue is determined incorrectly, the amount and timing of our reported revenue could be significantly affected. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially all of our operating leases contain fixed and/or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.  We recognize resident fees and services, other than move in fees, monthly as services are provided.  Move in fees and related costs are recognized on a straight-line basis over the term of the applicable lease agreement.  Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days’ notice. 

 

We evaluate the collectability of our revenues and related receivables on an on-going basis. We evaluate collectability based on assumptions and other considerations including, but not limited to, the certainty of payment, payment history, the financial strength of the investment’s underlying operations as measured by cash flows and payment coverages, the value of the underlying collateral and guaranties and current economic conditions.

If our evaluation indicates that collectability is not reasonably assured, we may place an investment on non-accrual or reserve against all or a portion of current income as an offset to revenue.

For the year ended December 31, 2011, we recognized $41,070,000 of interest income, $456,085,000 of resident fees and services, and $928,846,000 of rental income, including discontinued operations. For the year ended December 31, 2011, cash receipts on leases with deferred revenue provisions equaled $9,490,000 as compared to gross straight-line rental income recognized of $41,068,000. At December 31, 2011, our straight-line receivable balance was $119,555,000, net of reserves totaling $265,000. Also at December 31, 2011, we had real estate loans with outstanding balances of $6,244,000 on non-accrual status.

 

Fair Value of Derivative Instruments

The valuation of derivative instruments is accounted for in accordance with U.S. GAAP, which requires companies to record derivatives at fair market value on the balance sheet as assets or liabilities.

 

The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values for our derivatives are estimated by utilizing pricing models that consider forward yield curves and discount rates. Such amounts and their recognition are subject to significant estimates which may change in the future. At December 31, 2011, we participated in eight interest rate swap agreements which are reported at their fair value of $2,854,000 in other liabilities.

 

68

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

Nature of Critical

Accounting Estimate

Assumptions/Approach

Used

Business Combinations

Real property developed by us is recorded at cost, including the capitalization of construction period interest. The cost of real property acquired is allocated to net tangible and identifiable intangible assets based on their respective fair values. Tangible assets primarily consist of land, buildings and improvements. The remaining purchase price is allocated among identifiable intangible assets primarily consisting of the above or below market component of in-place leases and the value of in-place leases. The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant.

 

We make estimates as part of our allocation of the purchase price of acquisitions to the various components of the acquisition based upon the relative fair value of each component. The most significant components of our allocations are typically the allocation of fair value to the buildings as-if-vacant, land and in-place leases. In the case of the fair value of buildings and the allocation of value to land and other intangibles, our estimates of the values of these components will affect the amount of depreciation and amortization we record over the estimated useful life of the property acquired or the remaining lease term. In the case of the value of in-place leases, we make our best estimates based on our evaluation of the specific characteristics of each tenant's lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. Our assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in-place leases  

We compute depreciation and amortization on our properties using the straight-line method based on their estimated useful lives which range from 15 to 40 years for buildings and five to 15 years for improvements. Lives for intangibles are based on the remaining term of the underlying leases.  For the year ended December 31, 2011, we recorded $261,960,000, $62,789,000 and $98,856,000 as provisions for depreciation and amortization relating to buildings, improvements and intangibles, respectively, including amounts reclassified as discontinued operations. The average useful life of our buildings, improvements and intangibles was 38.5 years, 11.8 years and 2.7 years, respectively, for the year ended December 31, 2011.

 

 

Impact of Inflation

 

During the past three years, inflation has not significantly affected our earnings because of the moderate inflation rate. Additionally, our earnings are primarily long-term investments with fixed rates of return. These investments are mainly financed with a combination of equity, senior unsecured notes and borrowings under our unsecured line of credit arrangement. During inflationary periods, which generally are accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains moderate and long-term interest rates do not increase significantly, we believe that inflation will not impact the availability of equity and debt financing for us.

69

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Item 7A. 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. We seek to mitigate the effects of fluctuations in interest rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent possible. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to match our variable rate investments with comparable borrowings, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. This section is presented to provide a discussion of the risks associated with potential fluctuations in interest rates.

          We historically borrow on our unsecured line of credit arrangement to acquire, construct or make loans relating to health care and seniors housing properties. Then, as market conditions dictate, we will issue equity or long-term fixed rate debt to repay the borrowings under the unsecured line of credit arrangement.

          A change in interest rates will not affect the interest expense associated with our fixed rate debt. Interest rate changes, however, will affect the fair value of our fixed rate debt. Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable rate debt, equity or repaid by the sale of assets. To illustrate the impact of changes in the interest rate markets, we performed a sensitivity analysis on our fixed rate debt instruments whereby we modeled the change in net present values arising from a hypothetical 1% increase in interest rates to determine the instruments’ change in fair value. The following table summarizes the analysis performed as of the dates indicated (in thousands):

 

  

  

December 31, 2011

  

December 31, 2010

  

  

Principal

  

Change in

  

Principal

  

Change in

  

  

balance

  

fair value

  

balance

  

fair value

Senior unsecured notes

  

$

 4,464,927 

  

$

 (342,460) 

  

$

 3,064,930 

  

$

 (248,884) 

Secured debt

  

  

 1,693,283 

  

  

 (82,583) 

  

  

 1,030,070 

  

  

 (51,973) 

Totals

  

$

 6,158,210 

  

$

 (425,043) 

  

$

 4,095,000 

  

$

 (300,857) 

 

       As of December 31, 2011, we had eight interest rate swaps for a total aggregate notional amount of $135,445,000.  The swaps hedge interest payments associated with long-term LIBOR based borrowings and mature between December 31, 2012 and December 31, 2013.

       Our variable rate debt, including our unsecured line of credit arrangements, is reflected at fair value. At December 31, 2011, we had $610,000,000 outstanding related to our variable rate lines of credit and $415,101,000 outstanding related to our variable rate secured debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would result in increased annual interest expense of $10,251,000. At December 31, 2010, we had $300,000,000 outstanding related to our variable rate line of credit and $103,645,000 outstanding related to our variable rate secured debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would have resulted in increased annual interest expense of $4,036,000.

     We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings were completed under indentures or contractual agreements that limit the amount of indebtedness we may incur. Accordingly, in the event that we are unable to raise additional equity or borrow money because of these limitations, our ability to acquire additional properties may be limited.

     For additional information regarding fair values of financial instruments, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” and Note 16 to our audited consolidated financial statements.

70

 


 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Item 8.  Financial Statements and Supplementary Data

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Shareholders of Health Care REIT, Inc.

 

We have audited the accompanying consolidated balance sheets of Health Care REIT, Inc. as of December 31, 2011 and 2010, and the related consolidated statements of income, equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Health Care REIT, Inc. at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Health Care REIT, Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2012 expressed an unqualified opinion thereon.

 

                                    /s/  Ernst & Young LLP

 

Toledo, Ohio

February 17, 2012

71

 


 

  

  

  

  

  

  

  

December 31,

  

December 31,

  

  

  

  

  

  

2011

  

2010

Assets

  

(In thousands)

Real estate investments:

  

  

  

  

  

  

  

Real property owned:

  

  

  

  

  

  

  

  

Land and land improvements

  

$

 1,116,756 

  

$

 727,050 

  

  

Buildings and improvements

  

  

 13,073,747 

  

  

 7,627,132 

  

  

Acquired lease intangibles

  

  

 428,199 

  

  

 258,079 

  

  

Real property held for sale, net of accumulated depreciation

  

  

 36,115 

  

  

 23,441 

  

  

Construction in progress

  

  

 189,502 

  

  

 356,793 

  

  

  

Gross real property owned

  

  

 14,844,319 

  

  

 8,992,495 

  

  

Less accumulated depreciation and amortization

  

  

 (1,194,476) 

  

  

 (836,966) 

  

  

  

Net real property owned

  

  

 13,649,843 

  

  

 8,155,529 

  

Real estate loans receivable:

  

  

  

  

  

  

  

  

Real estate loans receivable

  

  

 292,507 

  

  

 436,580 

  

  

Less allowance for losses on loans receivable

  

  

-

  

  

 (1,276) 

  

  

  

Net real estate loans receivable

  

  

 292,507 

  

  

 435,304 

  

Net real estate investments

  

  

 13,942,350 

  

  

 8,590,833 

Other assets:

  

  

  

  

  

  

  

  

Investments in unconsolidated entities

  

  

 241,722 

  

  

 237,107 

  

  

Goodwill

  

  

 68,321 

  

  

 51,207 

  

  

Deferred loan expenses

  

  

 58,584 

  

  

 32,960 

  

  

Cash and cash equivalents

  

  

 163,482 

  

  

 131,570 

  

  

Restricted cash

  

  

 69,620 

  

  

 79,069 

  

  

Receivables and other assets

  

  

 380,527 

  

  

 328,988 

  

  

  

Total other assets

  

  

 982,256 

  

  

 860,901 

Total assets

  

$

 14,924,606 

  

$

 9,451,734 

  

  

  

  

  

  

  

  

  

  

  

Liabilities and equity

  

  

  

  

  

  

Liabilities:

  

  

  

  

  

  

  

  

Borrowings under unsecured line of credit arrangements

  

$

 610,000 

  

$

 300,000 

  

  

Senior unsecured notes

  

  

 4,434,107 

  

  

 3,034,949 

  

  

Secured debt

  

  

 2,112,649 

  

  

 1,125,906 

  

  

Capital lease obligations

  

  

 83,996 

  

  

 8,881 

  

  

Accrued expenses and other liabilities

  

  

 371,557 

  

  

 244,345 

Total liabilities

  

  

 7,612,309 

  

  

 4,714,081 

  

  

  

  

  

  

  

  

  

  

  

Redeemable noncontrolling interests

  

  

 33,650 

  

  

 4,553 

  

  

  

  

  

  

  

  

  

  

  

Equity:

  

  

  

  

  

  

  

  

Preferred stock

  

  

 1,010,417 

  

  

 291,667 

  

  

Common stock

  

  

 192,299 

  

  

 147,155 

  

  

Capital in excess of par value

  

  

 7,019,714 

  

  

 4,932,468 

  

  

Treasury stock

  

  

 (13,535) 

  

  

 (11,352) 

  

  

Cumulative net income

  

  

 1,893,806 

  

  

 1,676,196 

  

  

Cumulative dividends

  

  

 (2,972,129) 

  

  

 (2,427,881) 

  

  

Accumulated other comprehensive income (loss)

  

  

 (11,928) 

  

  

 (11,099) 

  

  

Other equity

  

  

 6,120 

  

  

 5,697 

  

  

  

Total Health Care REIT, Inc. stockholders’ equity

  

  

 7,124,764 

  

  

 4,602,851 

  

  

Noncontrolling interests

  

  

 153,883 

  

  

 130,249 

Total equity

  

  

 7,278,647 

  

  

 4,733,100 

Total liabilities and equity

  

$

 14,924,606 

  

$

 9,451,734 

 

See accompanying notes

72

 


 

  

  

  

   

  

Year Ended December 31,

  

  

   

  

2011

  

2010

  

2009

  

  

   

  

  

  

  

  

  

  

  

  

Revenues:  

  

  

  

  

  

  

  

  

  

  

Rental income  

  

$

 912,712 

  

$

 558,191 

  

$

 474,615 

  

Resident fees and services  

  

  

 456,085 

  

  

 51,006 

  

  

-

  

Interest income  

  

  

 41,070 

  

  

 40,855 

  

  

 40,885 

  

Other income  

  

  

 11,295 

  

  

 7,245 

  

  

 7,788 

  

  

Total revenues  

  

  

 1,421,162 

  

  

 657,297 

  

  

 523,288 

Expenses:  

  

  

  

  

  

  

  

  

  

  

Interest expense  

  

  

 318,395 

  

  

 151,296 

  

  

 96,856 

  

Property operating expenses  

  

  

 379,476 

  

  

 79,293 

  

  

 42,501 

  

Depreciation and amortization  

  

  

 418,406 

  

  

 186,963 

  

  

 140,692 

  

General and administrative  

  

  

 77,201 

  

  

 54,626 

  

  

 49,691 

  

Transaction costs  

  

  

 70,224 

  

  

 46,660 

  

  

-

  

Loss (gain) on extinguishment of debt  

  

  

 (979) 

  

  

 34,171 

  

  

 25,107 

  

Provision for loan losses  

  

  

 2,010 

  

  

 29,684 

  

  

 23,261 

  

  

Total expenses  

  

  

 1,264,733 

  

  

 582,693 

  

  

 378,108 

Income from continuing operations before income taxes  

  

  

  

  

  

  

  

  

  

  

and income from unconsolidated entities  

  

  

 156,429 

  

  

 74,604 

  

  

 145,180 

Income tax (expense) benefit  

  

  

 (1,388) 

  

  

 (364) 

  

  

 (168) 

Income from unconsolidated entities  

  

  

 5,772 

  

  

 6,673 

  

  

-

Income from continuing operations  

  

  

 160,813 

  

  

 80,913 

  

  

 145,012 

Discontinued operations:  

  

  

  

  

  

  

  

  

  

  

Gain (loss) on sales of properties  

  

  

 61,160 

  

  

 36,115 

  

  

 43,394 

  

Impairment of assets  

  

  

 (12,194) 

  

  

 (947) 

  

  

 (25,223) 

  

Income (loss) from discontinued operations, net  

  

  

 2,937 

  

  

 12,803 

  

  

 29,744 

  

  

Discontinued operations, net  

  

  

 51,903 

  

  

 47,971 

  

  

 47,915 

Net income  

  

  

 212,716 

  

  

 128,884 

  

  

 192,927 

Less:  Preferred stock dividends  

  

  

 60,502 

  

  

 21,645 

  

  

 22,079 

  

Net income (loss) attributable to noncontrolling interests(1)

  

  

 (4,894) 

  

  

 357 

  

  

 (342) 

Net income attributable to common stockholders  

  

$

 157,108 

  

$

 106,882 

  

$

 171,190 

  

  

   

  

  

  

  

  

  

  

  

  

Average number of common shares outstanding:  

  

  

  

  

  

  

  

  

  

  

Basic  

  

  

 173,741 

  

  

 127,656 

  

  

 114,207 

  

Diluted  

  

  

 174,401 

  

  

 128,208 

  

  

 114,612 

  

  

   

  

  

  

  

  

  

  

  

  

Earnings per share:  

  

  

  

  

  

  

  

  

  

  

Basic:  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations  

  

  

  

  

  

  

  

  

  

  

  

attributable to common stockholders  

  

$

 0.61 

  

$

 0.46 

  

$

 1.08 

  

Discontinued operations, net  

  

  

 0.30 

  

  

 0.38 

  

  

 0.42 

  

Net income attributable to common stockholders*  

  

$

 0.90 

  

$

 0.84 

  

$

 1.50 

  

  

   

  

  

  

  

  

  

  

  

  

  

Diluted:  

  

  

  

  

  

  

  

  

  

  

Income from continuing operations  

  

  

  

  

  

  

  

  

  

  

  

attributable to common stockholders  

  

$

 0.60 

  

$

 0.46 

  

$

 1.08 

  

Discontinued operations, net  

  

  

 0.30 

  

  

 0.37 

  

  

 0.42 

  

Net income attributable to common stockholders*  

  

$

 0.90 

  

$

 0.83 

  

$

 1.49 

   

  

  

  

  

  

  

  

  

  

 

* Amounts may not sum due to rounding

(1) Includes amounts attributable to redeemable noncontrolling interests

 

See accompanying notes

73

 


 

CONSOLIDATED BALANCE SHEETS

HEALTH CARE REIT, INC. AND SUBSIDIARIES

(in thousands)

  

  

  

  

  

  

  

  

  

  

  

  

Accumulated

  

  

  

  

  

  

  

  

  

  

  

  

  

Capital in

  

  

  

  

  

  

Other

  

  

  

  

  

  

  

  

  

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

  

  

  

  

  

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income

Equity

Interests

Total

Balances at December 31, 2008

$

 289,929 

  

 104,635 

  

 3,204,690 

  

 (5,145) 

  

 1,354,400 

  

 (1,723,819) 

  

 (1,113) 

  

 4,105 

  

 10,603 

$

 3,238,285 

Comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Net income

  

  

  

  

  

  

  

  

  

 193,269 

  

  

  

  

  

  

  

 (342) 

  

 192,927 

  

Other comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Unrealized gain (loss) on equity investments

  

  

  

  

  

  

  

  

  

  

  

  

  

 487 

  

  

  

  

  

 487 

  

  

Unrecognized SERP actuarial gain (loss)

  

  

  

  

  

  

  

  

  

  

  

  

  

 277 

  

  

  

  

  

 277 

  

  

Cash flow hedge activity

  

  

  

  

  

  

  

  

  

  

  

  

  

 (2,542) 

  

  

  

  

  

 (2,542) 

Total comprehensive income

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 191,149 

Contributions by noncontrolling interests

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 2,255 

  

 2,255 

Distributions to noncontrolling interests

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 (2,104) 

  

 (2,104) 

Amounts related to issuance of common stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

from dividend reinvestment and stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

incentive plans, net of forfeitures

  

  

  

 1,751 

  

 66,690 

  

 (2,474) 

  

  

  

  

  

  

  

 (930) 

  

  

  

 65,037 

Net proceeds from sale of common stock

  

  

  

 16,969 

  

 628,070 

  

  

  

  

  

  

  

  

  

  

  

  

  

 645,039 

Conversion of preferred stock

  

 (1,246) 

  

 30 

  

 1,216 

  

  

  

  

  

  

  

  

  

  

  

  

  

-

Option compensation expense

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 1,629 

  

  

  

 1,629 

Cash dividends paid:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Common stock cash dividends

  

  

  

  

  

  

  

  

  

  

  

 (311,760) 

  

  

  

  

  

  

  

 (311,760) 

  

Preferred stock cash dividends

  

  

  

  

  

  

  

  

  

  

  

 (22,079) 

  

  

  

  

  

  

  

 (22,079) 

Balances at December 31, 2009

  

 288,683 

  

 123,385 

  

 3,900,666 

  

 (7,619) 

  

 1,547,669 

  

 (2,057,658) 

  

 (2,891) 

  

 4,804 

  

 10,412 

  

 3,807,451 

Comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Net income

  

  

  

  

  

  

  

  

  

 128,527 

  

  

  

  

  

  

  

 357 

  

 128,884 

  

Other comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Unrealized gain (loss) on equity investments

  

  

  

  

  

  

  

  

  

  

  

  

  

 54 

  

  

  

  

  

 54 

  

  

Unrecognized SERP actuarial gain (loss)

  

  

  

  

  

  

  

  

  

  

  

  

  

 (199) 

  

  

  

  

  

 (199) 

  

  

Cash flow hedge activity

  

  

  

  

  

  

  

  

  

  

  

  

  

 (8,063) 

  

  

  

  

  

 (8,063) 

Total comprehensive income

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 120,676 

Contributions by noncontrolling interests

  

  

  

  

  

 43,640 

  

  

  

  

  

  

  

  

  

  

  

 122,781 

  

 166,421 

Distributions to noncontrolling interests

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 (3,301) 

  

 (3,301) 

Amounts related to issuance of common stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

from dividend reinvestment and stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

incentive plans, net of forfeitures

  

  

  

 2,300 

  

 97,696 

  

 (3,733) 

  

  

  

  

  

  

  

 (741) 

  

  

  

 95,522 

Net proceeds from sale of common stock

  

  

  

 21,131 

  

 884,255 

  

  

  

  

  

  

  

  

  

  

  

  

  

 905,386 

Equity component of convertible debt

  

  

  

  

  

 (9,689) 

  

  

  

  

  

  

  

  

  

  

  

  

  

 (9,689) 

Equity consideration in business combinations

  

 16,667 

  

  

  

 2,721 

  

  

  

  

  

  

  

  

  

  

  

  

  

 19,388 

Redemption of preferred stock

  

 (165) 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 (165) 

Conversion of preferred stock

  

 (13,518) 

  

 339 

  

 13,179 

  

  

  

  

  

  

  

  

  

  

  

  

  

-

Option compensation expense

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 1,634 

  

  

  

 1,634 

Cash dividends paid:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Common stock cash dividends

  

  

  

  

  

  

  

  

  

  

  

 (348,578) 

  

  

  

  

  

  

  

 (348,578) 

  

Preferred stock cash dividends

  

  

  

  

  

  

  

  

  

  

  

 (21,645) 

  

  

  

  

  

  

  

 (21,645) 

Balances at December 31, 2010

  

 291,667 

  

 147,155 

  

 4,932,468 

  

 (11,352) 

  

 1,676,196 

  

 (2,427,881) 

  

 (11,099) 

  

 5,697 

  

 130,249 

  

 4,733,100 

Comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Net income

  

  

  

  

  

  

  

  

  

 217,610 

  

  

  

  

  

  

  

 (3,591) 

  

 214,019 

  

Other comprehensive income:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Unrealized gain (loss) on equity investments

  

  

  

  

  

  

  

  

  

  

  

  

  

 (122) 

  

  

  

  

  

 (122) 

  

  

Unrecognized SERP actuarial gain (loss)

  

  

  

  

  

  

  

  

  

  

  

  

  

 (2,115) 

  

  

  

  

  

 (2,115) 

  

  

Cash flow hedge activity

  

  

  

  

  

  

  

  

  

  

  

  

  

 1,408 

  

  

  

  

  

 1,408 

Total comprehensive income

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 213,190 

Contributions by noncontrolling interests

  

  

  

  

  

 6,468 

  

  

  

  

  

  

  

  

  

  

  

 65,361 

  

 71,829 

Distributions to noncontrolling interests

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 (38,136) 

  

 (38,136) 

Amounts related to issuance of common stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

from dividend reinvestment and stock

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

incentive plans, net of forfeitures

  

  

  

 2,895 

  

 138,989 

  

 (2,183) 

  

  

  

  

  

  

  

 (1,494) 

  

  

  

 138,207 

Net proceeds from sale of common stock

  

  

  

 42,249 

  

 1,964,102 

  

  

  

  

  

  

  

  

  

  

  

  

  

 2,006,351 

Net proceeds from sale of preferred stock

  

 718,750 

  

  

  

 (22,313) 

  

  

  

  

  

  

  

  

  

  

  

  

  

 696,437 

Option compensation expense

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 1,917 

  

  

  

 1,917 

Cash dividends paid:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Common stock cash dividends

  

  

  

  

  

  

  

  

  

  

  

 (483,746) 

  

  

  

  

  

  

  

 (483,746) 

  

Preferred stock cash dividends

  

  

  

  

  

  

  

  

  

  

  

 (60,502) 

  

  

  

  

  

  

  

 (60,502) 

Balances at December 31, 2011

$

 1,010,417 

$

 192,299 

$

 7,019,714 

$

 (13,535) 

$

 1,893,806 

$

 (2,972,129) 

$

 (11,928) 

$

 6,120 

$

 153,883 

$

 7,278,647 

 

See accompanying notes

74

 


 

CONSOLIDATED STATEMENTS OF INCOME

HEALTH CARE REIT, INC. AND SUBSIDIARIES

  

  

  

   

  

Year Ended December 31,

  

  

  

   

  

2011

  

2010

  

2009

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

   

  

(In thousands)

Operating activities  

  

  

  

  

  

  

  

  

  

Net income  

  

$

 212,716 

  

$

 128,884 

  

$

 192,927 

Adjustments to reconcile net income to  

  

  

  

  

  

  

  

  

  

  

net cash provided from (used in) operating activities:  

  

  

  

  

  

  

  

  

  

  

  

Depreciation and amortization  

  

  

 423,605 

  

  

 202,543 

  

  

 164,923 

  

  

Other amortization expenses  

  

  

 16,851 

  

  

 17,169 

  

  

 15,412 

  

  

Provision for loan losses  

  

  

 2,010 

  

  

 29,684 

  

  

 23,261 

  

  

Impairment of assets  

  

  

 12,194 

  

  

 947 

  

  

 25,223 

  

  

Stock-based compensation expense  

  

  

 10,786 

  

  

 11,823 

  

  

 9,633 

  

  

Loss (gain) on extinguishment of debt  

  

  

 (979) 

  

  

 34,171 

  

  

 25,107 

  

  

Income from unconsolidated entities  

  

  

 (5,772) 

  

  

 (6,673) 

  

  

-

  

  

Rental income in excess of cash received  

  

  

 (31,578) 

  

  

 (6,594) 

  

  

 11,259 

  

  

Amortization related to above (below) market leases, net  

  

  

 (2,507) 

  

  

 (2,856) 

  

  

 (1,713) 

  

  

Loss (gain) on sales of properties  

  

  

 (61,160) 

  

  

 (36,115) 

  

  

 (43,394) 

  

  

Other income less than (in excess of) cash received  

  

  

-

  

  

-

  

  

 (5,000) 

  

  

Distributions by unconsolidated entities  

  

  

 6,149 

  

  

-

  

  

-

  

  

Increase (decrease) in accrued expenses and other liabilities  

  

  

 10,653 

  

  

 12,293 

  

  

 (311) 

  

  

Decrease (increase) in receivables and other assets  

  

  

 (4,744) 

  

  

 (20,535) 

  

  

 (36,068) 

Net cash provided from (used in) operating activities  

  

  

 588,224 

  

  

 364,741 

  

  

 381,259 

  

  

  

   

  

  

  

  

  

  

  

  

  

Investing activities  

  

  

  

  

  

  

  

  

  

  

Investment in real property, net of cash acquired  

  

  

 (4,905,122) 

  

  

 (2,074,176) 

  

  

 (598,959) 

  

Capitalized interest  

  

  

 (13,164) 

  

  

 (20,792) 

  

  

 (41,170) 

  

Investment in real estate loans receivable  

  

  

 (51,477) 

  

  

 (97,265) 

  

  

 (74,417) 

  

Other investments, net of payments  

  

  

 (22,986) 

  

  

 (133,894) 

  

  

 (22,133) 

  

Principal collected on real estate loans receivable  

  

  

 188,811 

  

  

 43,495 

  

  

 111,779 

  

Contributions to unconsolidated entities  

  

  

 (2,784) 

  

  

 (196,413) 

  

  

-

  

Distributions by unconsolidated entities  

  

  

 9,135 

  

  

 103 

  

  

-

  

Decrease (increase) in restricted cash  

  

  

 30,248 

  

  

 (52,124) 

  

  

 130,833 

  

Proceeds from sales of real property  

  

  

 247,210 

  

  

 219,027 

  

  

 224,007 

Net cash provided from (used in) investing activities  

  

  

 (4,520,129) 

  

  

 (2,312,039) 

  

  

 (270,060) 

  

  

  

   

  

  

  

  

  

  

  

  

  

Financing activities  

  

  

  

  

  

  

  

  

  

  

Net increase (decrease) under unsecured lines of credit arrangements  

  

  

 310,000 

  

  

 160,000 

  

  

 (430,000) 

  

Proceeds from issuance of senior unsecured notes  

  

  

 1,381,086 

  

  

 1,821,683 

  

  

-

  

Payments to extinguish senior unsecured notes  

  

  

 (3) 

  

  

 (495,542) 

  

  

 (201,048) 

  

Net proceeds from the issuance of secured debt  

  

  

 119,030 

  

  

 154,306 

  

  

 276,277 

  

Payments on secured debt  

  

  

 (85,111) 

  

  

 (217,711) 

  

  

 (107,736) 

  

Net proceeds from the issuance of common stock  

  

  

 2,137,594 

  

  

 995,438 

  

  

 704,533 

  

Net proceeds from the issuance of preferred stock  

  

  

 696,437 

  

  

-

  

  

-

  

Decrease (increase) in deferred loan expenses  

  

  

 (28,867) 

  

  

 (3,869) 

  

  

 (7,431) 

  

Contributions by noncontrolling interests(1)

  

  

 8,604 

  

  

 2,611 

  

  

 2,255 

  

Distributions to noncontrolling interests(1)

  

  

 (30,705) 

  

  

 (3,301) 

  

  

 (2,104) 

  

Cash distributions to stockholders  

  

  

 (544,248) 

  

  

 (370,223) 

  

  

 (333,839) 

Net cash provided from (used in) financing activities  

  

  

 3,963,817 

  

  

 2,043,392 

  

  

 (99,093) 

Increase (decrease) in cash and cash equivalents  

  

  

 31,912 

  

  

 96,094 

  

  

 12,106 

Cash and cash equivalents at beginning of period  

  

  

 131,570 

  

  

 35,476 

  

  

 23,370 

Cash and cash equivalents at end of period  

  

$

 163,482 

  

$

 131,570 

  

$

 35,476 

  

  

  

   

  

  

  

  

  

  

  

  

  

Supplemental cash flow information:  

  

  

  

  

  

  

  

  

  

  

Interest paid  

  

$

 285,884 

  

$

 156,207 

  

$

 143,697 

  

Income taxes paid  

  

  

 389 

  

  

 319 

  

  

 854 

 

(1)     Includes amounts attributable to redeemable noncontrolling interests.

 

See accompanying notes.

75

 


 

CONSOLIDATED STATEMENTS OF EQUITY

HEALTH CARE REIT, INC. AND SUBSIDIARIES

1. Business

 

     Health Care REIT, Inc., an S&P 500 company with headquarters in Toledo, Ohio, is an equity real estate investment trust (“REIT”) that invests in seniors housing and health care real estate. Our full service platform also offers property management and development services to our customers. As of December 31, 2011, our diversified portfolio consisted of 937 properties in 46 states. Founded in 1970, we were the first real estate investment trust to invest exclusively in health care facilities.

 

2. Accounting Policies and Related Matters

Principles of Consolidation

     The consolidated financial statements include the accounts of our wholly-owned subsidiaries and joint venture entities that we control, through voting rights or other means. All material intercompany transactions and balances have been eliminated in consolidation.

     At inception of joint venture transactions, we identify entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is the primary beneficiary of its operations. A variable interest entity is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity's activities without additional subordinated financial support. We consolidate investments in VIEs when we are determined to be the primary beneficiary.  ASC 810, Consolidations, requires enterprises to perform a qualitative approach to determining whether or not a VIE will need to be consolidated on a continuous basis. This evaluation is based on an enterprise’s ability to direct and influence the activities of a variable interest entity that most significantly impact that entity’s economic performance.

     For investments in joint ventures, we evaluate the type of rights held by the limited partner(s), which may preclude consolidation in circumstances in which the sole general partner would otherwise consolidate the limited partnership. The assessment of limited partners' rights and their impact on the presumption of control over a limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (i) there is a change to the terms or in the exercisability of the rights of the limited partners, (ii) the sole general partner increases or decreases its ownership in the limited partnership, or (iii) there is an increase or decrease in the number of outstanding limited partnership interests. We similarly evaluate the rights of managing members of limited liability companies.

Use of Estimates

     The preparation of the financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

     Revenue is recorded in accordance with U.S. GAAP, which requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectability. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially all of our operating leases contain either fixed or contingent escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.  Leases in our medical office building portfolio typically include some form of operating expense reimbursement by the tenant.  Certain payments made to operators are treated as lease incentives and amortized as a reduction of revenue over the lease term.  We recognize resident fees and services, other than move in fees, monthly as services are provided.  Move in fees and related costs are recognized on a straight-line basis over the term of the applicable lease agreement.  Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days’ notice.

Cash and Cash Equivalents

     Cash and cash equivalents consist of all highly liquid investments with an original maturity of three months or less.

Restricted Cash

     Restricted cash primarily consists of amounts held by lenders to provide future payments for real estate taxes, insurance, tenant and capital improvements and amounts held in escrow relating to acquisitions we are entitled to receive over a period of time as outlined in the escrow agreement.

76

 


 

CONSOLIDATED STATEMENTS OF CASH FLOWS

HEALTH CARE REIT, INC. AND SUBSIDIARIES

Deferred Loan Expenses

     Deferred loan expenses are costs incurred by us in connection with the issuance, assumption and amendments of debt arrangements. We amortize these costs over the term of the debt using the straight-line method, which approximates the effective interest method.

Investments in Unconsolidated Entities

     Investments in less than majority owned entities where our interests represent a general partnership interest but substantive participating rights or substantive kick-out rights have been granted to the limited partners, or where our interests do not represent the general partnership interest and we do not control the major operating and financial policies of the entity, are reported under the equity method of accounting. Under the equity method of accounting, our share of the investee’s earnings or losses is included in our consolidated results of operations. To the extent that our cost basis is different from the basis reflected at the entity level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in our share of equity in earnings of the entity.  The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the entity interest or the estimated fair value of the assets prior to the sale of interests in the entity. Where we do not have the ability to exercise influence over the company, the investment is accounted for under the cost method.  These equity investments represented a minimal ownership interest in these companies.  We evaluate our equity method investments for impairment based upon a comparison of the estimated fair value of the equity method investment to its carrying value. When we determine a decline in the estimated fair value of such an investment below its carrying value is other-than-temporary, an impairment is recorded.

Redeemable Noncontrolling Interests

     Certain noncontrolling interests were redeemable at fair value at December 31, 2011 and 2010. Accordingly, we record the carrying amount of the noncontrolling interests at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interest’s share of net income or loss and its share of other comprehensive income or loss and dividends or (ii) the redemption value.  In accordance with ASC 810, the redeemable noncontrolling interests were classified outside of permanent equity, as a mezzanine item, in the balance sheet.

Real Property Owned

     Real property developed by us is recorded at cost, including the capitalization of construction period interest. Expenditures for repairs and maintenance are expensed as incurred.  Property acquisitions are accounted for as business combinations where we measure the assets acquired, liabilities (including assumed debt and contingencies) and any noncontrolling interests at their fair values on the acquisition date.  The cost of real property acquired, which represents substantially all of the purchase price, is allocated to net tangible and identifiable intangible assets based on their respective fair values. These properties are depreciated on a straight-line basis over their estimated useful lives which range from 15 to 40 years for buildings and 5 to 15 years for improvements. Tangible assets primarily consist of land, buildings and improvements.  We consider costs incurred in conjunction with re-leasing properties, including tenant improvements and lease commissions, to represent the acquisition of productive assets and, accordingly, such costs are reflected as investment activities in our statement of cash flows.

     The remaining purchase price is allocated among identifiable intangible assets primarily consisting of the above or below market component of in-place leases and the value of in-place leases. The value allocable to the above or below market component of the acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in acquired lease intangibles and below market leases are included in other liabilities in the balance sheet and are amortized to rental income over the remaining terms of the respective leases.

     The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.

     The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if facts and circumstances suggest that the assets may be impaired or that the depreciable life may need to be changed. We consider external factors relating to each asset and the existence of a master lease which may link the cash flows of an individual asset to a larger portfolio of assets leased to the same tenant. If these factors and the projected undiscounted cash flows of the asset over the remaining depreciation period indicate that the asset will not be recoverable, the carrying value is reduced to the estimated fair market value.  In addition, we are exposed to the risks inherent in concentrating investments in real estate, and in particular, the seniors housing and

77

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

health care industries. A downturn in the real estate industry could adversely affect the value of our properties and our ability to sell properties for a price or on terms acceptable to us.

Capitalization of Construction Period Interest

     We capitalize interest costs associated with funds used to finance the construction of properties owned directly by us. The amount capitalized is based upon the balance outstanding during the construction period using the rate of interest which approximates our cost of financing. We capitalized interest costs of $13,164,000, $20,792,000, and $41,170,000 during 2011, 2010 and 2009, respectively, related to construction of real property owned by us. Our interest expense reflected in the consolidated statements of income has been reduced by the amounts capitalized.

Gain on Sale of Assets

     We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our Consolidated Balance Sheets. Gains on assets sold are recognized using the full accrual method upon closing when (i) the collectability of the sales price is reasonably assured, (ii) we are not obligated to perform significant activities after the sale to earn the profit, (iii) we have received adequate initial investment from the purchaser and (iv) other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate.

Real Estate Loans Receivable

     Real estate loans receivable consist of mortgage loans and other real estate loans. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risks. The loans are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment of the partnership interest in, the related properties, corporate guaranties and/or personal guaranties.

Allowance for Losses on Loans Receivable

     The allowance for losses on loans receivable is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of these loans, including general economic conditions and estimated collectability of loan payments. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying collateral. If such factors indicate that there is greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed impaired. At December 31, 2011, we had loans with outstanding balances of $6,244,000 on non-accrual status ($9,691,000 at December 31, 2010). To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance.

Goodwill

    We account for goodwill in accordance with U.S. GAAP. Goodwill is tested annually for impairment and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount, including goodwill, exceeds the reporting unit’s fair value and the implied fair value of goodwill is less than the carrying amount of that goodwill.  We did not have any goodwill impairments for the years ended December 31, 2011 or 2010.

 Fair Value of Derivative Instruments

     The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values for our derivatives are estimated by utilizing pricing models that consider forward yield curves and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future. See Note 11 for additional information.

Federal Income Tax

     No provision has been made for federal income taxes since we have elected to be treated as a real estate investment trust under the applicable provisions of the Internal Revenue Code, and we believe that we have met the requirements for qualification as such for each taxable year. Our taxable REIT subsidiaries are subject to federal, state and local income taxes. See Note 18 for additional information.

Earnings Per Share

78

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

     Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding for the period adjusted for non-vested shares of restricted stock. The computation of diluted earnings per share is similar to basic earnings per share, except that the number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

New Accounting Standards

     In April 2011, FASB issued ASU No. 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. It provided additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption. The adoption of this ASU did not have a material impact on our consolidated financial position or results of operations.

     In September 2011, FASB issued ASU No. 2011-08, Testing for Goodwill Impairment. It allows companies the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  Companies would then only proceed to the existing two step impairment test if, after assessing the totality of the events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount.  The ASU is effective for annual and interim goodwill tests performed for fiscal years beginning after December 15, 2011 with early adoption permitted.  We have early adopted this ASU and applied it to our annual goodwill assessment performed on October 1, 2011.

     In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Statement of Comprehensive Income” (“ASU 2011-05”), which requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income.  ASU 2011-05 will only impact the company’s financial presentation as the company currently presents items of other comprehensive income in the statement of changes in equity.  ASU 2011-05 will be effective for our fiscal year beginning January 1, 2012.

Reclassifications

     Certain amounts in prior years have been reclassified to conform to current year presentation.

 

3. Real Property Acquisitions and Development

 

Genesis Acquisition

 

     On April 1, 2011, we completed the acquisition of substantially all of the real estate assets (147 properties) of privately-owned Genesis HealthCare Corporation.  The total purchase price of approximately $2,483,398,000 is comprised of $2,400,000,000 of cash consideration, the fair value of capital lease obligations assumed totaling approximately $75,144,000 and approximately $8,254,000 relating to uncertain tax positions that were assumed in the transaction (see Note 18 for further discussion on such tax positions and the related indemnification received).  The total purchase price has been allocated on a preliminary basis in the amounts of $144,091,000 to land and land improvements, $2,331,053,000 to buildings and improvements and $8,254,000 to receivables and other assets.  We funded the cash consideration and other associated costs of the acquisition primarily through the proceeds of the offerings of common stock, preferred stock and senior unsecured notes completed in March 2011.  Effective April 1, 2011, we began leasing the acquired facilities to Genesis pursuant to a master lease. In addition to rent, the triple-net master lease requires Genesis to pay all operating costs, utilities, real estate taxes, insurance, building repairs, maintenance costs and all obligations under the ground leases. All obligations under the master lease have been guaranteed by FC-GEN Operations Investment, LLC, which was spun-off by Genesis prior to closing the acquisition. The initial term is fifteen years. Genesis has one option to renew for an additional term of fifteen years. The master lease provides that the base rent for the first year is $198,000,000 and will increase at least 1.75% but no more than 3.50% (subject to CPI changes) for each of the years two through six during the initial term and at least 1.50% but no more than 3.00% per year thereafter (subject to CPI changes).  We are recognizing rental income based on the minimum rent escalators during the initial term.  These properties are reported in our seniors housing triple-net segment.

 

     The following unaudited pro forma consolidated results of operations have been prepared as if the Genesis acquisition had occurred as of January 1, 2010 based on the preliminary purchase price allocations discussed above.  Amounts are in thousands, except per share data:

79

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

  

  

Year Ended December 31,

  

  

  

2011

  

  

2010

Revenues

$

 1,476,769 

  

$

 879,726 

Income from continuing operations attributable to common stockholders

$

 121,317 

  

$

 93,193 

Income from continuing operations attributable to common stockholders per share:

  

  

  

  

  

  

Basic

$

 0.66 

  

$

 0.60 

  

Diluted

$

 0.66 

  

$

 0.59 

 

Strategic Medical Office Partnership

     On December 31, 2010, we formed a strategic partnership with a national medical office building company (“MOBJV”) whereby the partnership invested in 17 medical office properties.  We own a controlling interest in 11 properties and consolidate them.  Consolidation is based on a combination of ownership interest and control of operational decision-making authority.  We do not own a controlling interest in six properties and account for them under the equity method.  Our investment in the strategic partnership provides us access to health systems and includes development and property management resources.  The results of operations for this partnership have been included in our consolidated results of operations for 2011 and 2010 and are a component of our medical facilities segment.

     In conjunction with the formation of the partnership, we contributed $225,173,000 of cash, convertible preferred stock valued at $16,667,000, options valued at $2,721,000 and a note payable of $8,333,000 with an interest rate of 6%.  MOBJV contributed the properties to the partnership and the secured debt relating to these properties in exchange for their ownership interest in the partnership.  The partnership contains certain contingent consideration arrangements ranging from $0 to $35,008,000.  Amounts to be paid are contingent upon certain occupancy and development project performance thresholds.  Of this amount, we recognized $29,439,000 as an estimate of additional purchase consideration based on the probability amounts will be paid by the expiration date of the commitments.  Of the amount recognized, $12,500,000 is required to be settled in the Company’s common stock upon the achievement of certain performance thresholds.  The total purchase price for the assets acquired by the partnership has been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values in accordance with the Company’s accounting policies. Goodwill represents the estimated fair value of the future development pipeline expected to be generated. Cash flows from this future pipeline are expected to come from development activities and the ability to perform the management functions at the assets after the properties are developed.  The noncontrolling interest relating to the properties is also reflected at estimated fair value.  The weighted average useful life of the acquired intangibles was 26.2 years.  The following table presents the final allocation of the purchase price to assets and liabilities assumed, based on their estimated fair values (in thousands):

 

Land and land improvements

  

$

 10,240 

Buildings and improvements

  

  

 170,886 

Acquired lease intangibles

  

  

 41,519 

Investment in unconsolidated entity

  

  

 21,321 

Goodwill

  

  

 68,321 

Other acquired intangibles

  

  

 36,439 

Cash and cash equivalents

  

  

 3,873 

Restricted cash

  

  

 107 

Receivables and other assets

  

  

 5,390 

  

Total assets acquired

  

  

 358,096 

Secured debt

  

  

 61,664 

Below market lease intangibles

  

  

 4,188 

Accrued expenses and other liabilities

  

  

 36,835 

  

Total liabilities assumed

  

  

 102,687 

Redeemable noncontrolling interests

  

  

 10,848 

Preferred stock

  

  

 16,667 

Capital in excess of par

  

  

 2,721 

  

Net assets acquired

  

$

 225,173 

80

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Seniors Housing Operating Partnerships

    Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), for taxable years beginning after July 30, 2008, we may lease “qualified health care properties” on an arm’s-length basis to our taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor (“EIK”). A “qualified health care property” includes real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients. The “qualified health care properties” are operated by an EIK under a management agreement.  The lease agreement required under RIDEA between us and our TRS is eliminated for accounting purposes in consolidation.

     During 2010, we entered into two partnerships that were structured under RIDEA, and during 2011, we entered into three additional partnerships that were structured under RIDEA and added certain properties to existing RIDEA structured investments. Resident level rents and related operating expenses for these facilities are reported in the consolidated financial statements and are subject to federal taxes as the operations of such facilities are included in our TRS.  The results of all such partnerships and acquisitions have been included in our consolidated results of operations from the acquisition date and are a component of our senior housing operating segment.  Consolidation of all such partnerships is based on a combination of ownership interest and control of operational decision-making authority.  The weighted average useful life of the acquired intangibles was 2.4 years at December 31, 2011.

Merrill Gardens Partnership

     During the three months ended September 30, 2010, we completed the formation of our partnership with Merrill Gardens LLC to own and operate a portfolio of 38 combination seniors housing and care communities located primarily in West Coast markets. We own an 80% partnership interest and Merrill Gardens owns the remaining 20% interest and continues to manage the communities.  The partnership owns and operates 13 communities previously owned by us and 25 communities previously owned by Merrill Gardens. 

     In conjunction with the formation of the partnership, we contributed $254,885,000 of cash and the 13 properties previously owned by us, and the partnership assumed the secured debt relating to these properties.  Merrill Gardens contributed the remaining 25 properties to the partnership and the secured debt relating to these properties in exchange for their 20% interest in the partnership.  The 13 properties are recorded at their historical carrying values and the noncontrolling interest was established based on such values.  The difference between the fair value of the consideration received relating to these properties and the historical allocation of the 20% noncontrolling interest was recorded in capital in excess of par value.  During December 2011, the partnership acquired nine new communities previously owned by Merrill Gardens.   In conjunction with the transaction, we contributed $163,064,000 of cash in exchange for our 80% interest and  Merrill Gardens contributed the nine communities and the secured debt relating to these properties in exchange for their 20% interest.  The total purchase price for the communities acquired has been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values in accordance with our accounting policies.

Benchmark Partnership

     During March 2011, we completed the formation of our partnership with Benchmark Senior Living to own and operate a portfolio of 34 seniors housing communities located in New England. We own a 95% partnership interest and Benchmark owns the remaining 5% interest and continues to manage the communities. The 34 communities included in the partnership were previously owned by The GPT Group and Benchmark.  In conjunction with the formation of the partnership, we contributed $383,356,000 of cash. Benchmark contributed its interests in the 34 properties to the partnership and the secured debt relating to these properties in exchange for its 5% interest in the partnership. The total purchase price for the communities acquired has been allocated to the tangible and identifiable intangible assets and liabilities as well as the noncontrolling interests based upon their respective fair values in accordance with our accounting policies.

Other Partnerships

     During 2010 and 2011, in addition to the investments above, we invested through similar partnerships structured under RIDEA in nine and 21 properties, respectively.  Our ownership position in these partnerships ranges from 90% to 95% and all are consolidated by us in the financial statements.

     The following table presents the aggregated final purchase price allocations of the assets acquired and liabilities assumed for all seniors housing operating partnership transactions for the periods presented (in thousands):

81

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

  

  

  

Year Ended December 31,

  

  

  

  

2011

  

  

2010

Land and land improvements

  

$

 112,350 

  

$

 75,620 

Buildings and improvements

  

  

 1,512,764 

  

  

 686,911 

Acquired lease intangibles

  

  

 122,371 

  

  

 63,757 

Investment in unconsolidated entities

  

  

 14,960 

  

  

-

Cash and cash equivalents

  

  

 38,952 

  

  

 8,532 

Restricted cash

  

  

 20,699 

  

  

 5,899 

Receivables and other assets

  

  

 901 

  

  

 14,399 

  

Total assets acquired

  

  

 1,822,997 

  

  

 855,118 

Secured debt

  

  

 796,273 

  

  

 305,167 

Accrued expenses and other liabilities

  

  

 44,483 

  

  

 8,270 

  

Total liabilities assumed

  

  

 840,756 

  

  

 313,437 

Capital in excess of par

  

  

 6,017 

  

  

 43,641 

Noncontrolling interests

  

  

 69,984 

  

  

 107,774 

  

Net assets acquired

  

$

 906,240 

  

$

 390,266 

 

Real Property Investment Activity

     The following is a summary of our real property investment activity for the periods presented (in thousands):

 

  

   

  

Year Ended

  

   

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

Real property acquisitions:  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net  

  

$

 3,320,664 

  

$

 1,028,529 

  

$

 11,650 

  

Seniors housing operating  

  

  

 1,747,485 

  

  

 816,000 

  

  

-

  

Medical facilities(1)

  

  

 610,843 

  

  

 626,414 

  

  

 56,023 

  

Land parcels  

  

  

 19,084 

  

  

 4,300 

  

  

-

  

Total acquisitions  

  

  

 5,698,076 

  

  

 2,475,243 

  

  

 67,673 

Less: Assumed debt  

  

  

 (961,928) 

  

  

 (559,508) 

  

  

-

  

Assumed other items, net  

  

  

 (210,411) 

  

  

 (208,314) 

  

  

-

Cash disbursed for acquisitions  

  

  

 4,525,737 

  

  

 1,707,421 

  

  

 67,673 

Construction in progress additions:  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net  

  

  

 182,626 

  

  

 85,993 

  

  

 333,572 

  

Medical facilities  

  

  

 165,593 

  

  

 252,594 

  

  

 221,760 

  

Total construction in progress additions  

  

  

 348,219 

  

  

 338,587 

  

  

 555,332 

Less: Capitalized interest  

  

  

 (13,164) 

  

  

 (20,320) 

  

  

 (40,969) 

  

  Accruals(2)

  

  

 (33,451) 

  

  

 (11,435) 

  

  

 (21,466) 

Cash disbursed for construction in progress  

  

  

 301,604 

  

  

 306,832 

  

  

 492,897 

Capital improvements to existing properties  

  

  

 77,781 

  

  

 59,923 

  

  

 38,389 

Total cash invested in real property  

  

$

 4,905,122 

  

$

 2,074,176 

  

$

 598,959 

  

   

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

(1)

Includes $318,608,000 relating to acquisitions of 12 medical facilities that closed in the fourth quarter of 2011.  The allocation of the purchase price consideration is preliminary and subject to change.

(2)

Represents non-cash accruals for amounts to be paid in future periods relating to properties that converted in the period noted above.

 

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

82

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

  

  

  

Year Ended

  

  

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

  

Development projects:

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net

$

 114,161 

  

$

 273,034 

  

$

 550,504 

  

  

Medical facilities

  

 355,935 

  

  

 162,376 

  

  

 183,127 

  

  

Total development projects

  

 470,096 

  

  

 435,410 

  

  

 733,631 

  

Expansion projects

  

 45,414 

  

  

 3,216 

  

  

 4,288 

Total construction in progress conversions

$

 515,510 

  

$

 438,626 

  

$

 737,919 

 

Transaction costs for the year ended December 31, 2011 primarily represent costs incurred with the Genesis acquisition and seniors housing operating partnerships and medical facilities purchases (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 costs incurred in connection with the new property acquisitions.

 

At December 31, 2011, future minimum lease payments receivable under operating leases (excluding properties in our seniors housing operating partnerships and excluding any operating expense reimbursements) are as follows (in thousands):

 

2012

  

$

 931,680 

2013

  

  

 923,885 

2014

  

  

 876,401 

2015

  

  

 846,878 

2016

  

  

 836,858 

Thereafter

  

  

 6,163,444 

Totals

  

$

 10,579,146 

 

4. Real Estate Intangibles

 

     The following is a summary of our real estate intangibles, excluding those classified as held for sale, as of the dates indicated (dollars in thousands):

 

  

  

  

December 31, 2011

  

December 31, 2010

Assets:

  

  

  

  

  

  

  

In place lease intangibles

  

$

 332,645 

  

$

 182,030 

  

Above market tenant leases

  

  

 35,973 

  

  

 24,089 

  

Below market ground leases

  

  

 51,316 

  

  

 46,992 

  

Lease commissions

  

  

 8,265 

  

  

 4,968 

  

Gross historical cost

  

  

 428,199 

  

  

 258,079 

  

Accumulated amortization

  

  

 (148,380) 

  

  

 (49,145) 

  

Net book value

  

$

 279,819 

  

$

 208,934 

  

  

  

  

  

  

  

  

  

Weighted-average amortization period in years

  

  

17.0

  

  

18.2

  

  

  

  

  

  

  

  

Liabilities:

  

  

  

  

  

  

  

Below market tenant leases

  

$

 67,284 

  

$

 57,261 

  

Above market ground leases

  

  

 5,020 

  

  

 5,020 

  

Gross historical cost

  

  

 72,304 

  

  

 62,281 

  

Accumulated amortization

  

  

 (21,387) 

  

  

 (15,992) 

  

Net book value

  

$

 50,917 

  

$

 46,289 

  

  

  

  

  

  

  

  

  

Weighted-average amortization period in years

  

  

12.3

  

  

14.0

 

     The following is a summary of real estate intangible amortization for the periods presented (in thousands):

83

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

  

  

Year Ended December 31,

  

  

2011

  

2010

  

2009

Rental income related to above/below market tenant leases, net

  

$

 3,340 

  

$

 3,829 

  

$

 2,670 

Property operating expenses related to above/below market ground leases, net

  

  

 (1,161) 

  

  

 (1,049) 

  

  

 (1,052) 

Depreciation and amortization related to in place lease intangibles and lease commissions

  

  

 (98,856) 

  

  

 (18,298) 

  

  

 (9,722) 

 

     The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods presented (in thousands):

 

  

  

  

Assets

  

  

Liabilities

2012

  

$

 85,656 

  

$

 6,108 

2013

  

  

 34,209 

  

  

 5,549 

2014

  

  

 17,136 

  

  

 5,169 

2015

  

  

 14,897 

  

  

 4,330 

2016

  

  

 17,801 

  

  

 4,129 

Thereafter

  

  

 110,120 

  

  

 25,632 

Totals

  

$

 279,819 

  

$

 50,917 

 

5. Dispositions, Assets Held for Sale and Discontinued Operations

During the year ended December 31, 2009, we sold 36 properties for net gains of $43,394,000.  At December 31, 2009, we had two skilled nursing facilities and eight medical facilities held for sale and recorded an impairment charge of $25,223,000 to reduce the medical office buildings to their estimated fair values less costs to sell.  In determining the fair value of the held for sale properties, we used a combination of third party appraisals based on market comparable transactions, other market listings and asset quality as well as management calculations based on projected operating income and published capitalization rates.  During the year ended December 31, 2010, we sold 38 properties, including seven of the held for sale medical facilities, for net gains of $36,115,000.  At December 31, 2010, we had one medical facility and 16 seniors housing facilities that satisfied the requirements for held for sale treatment and such properties were properly recorded at the lesser of their estimated fair values less costs to sell or carrying values. During the year ended December 31, 2010, we recorded an impairment charge of $947,000 related to two of the held for sale medical facilities to adjust the carrying values to estimated fair values less costs to sell based on current sales price expectations.  During the year ended December 31, 2011, we sold 42 properties for net gains of $61,160,000.  At December 31, 2011, we had five medical facilities and one seniors housing triple-net facility that satisfied the requirements for held for sale treatment and such properties were properly recorded at the lesser of their estimated fair values less costs to sell or carrying values. During the year ended December 31, 2011, we recorded an impairment charge of $12,194,000 related to certain held for sale properties to adjust the carrying values to estimated fair values less costs to sell based on current sales price expectations.  The following is a summary of our real property disposition activity for the periods presented (in thousands):

 

  

  

  

Year Ended

  

  

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

Real property dispositions:

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net

  

$

 150,755 

  

$

 170,290 

  

$

 101,155 

  

Medical facilities

  

  

 35,295 

  

  

 14,092 

  

  

 85,558 

  

Total dispositions

  

  

 186,050 

  

  

 184,382 

  

  

 186,713 

Add: Gain (loss) on sales of real property

  

  

 61,160 

  

  

 36,115 

  

  

 43,394 

  

Seller financing on sales of real property

  

  

-

  

  

 (1,470) 

  

  

 (6,100) 

Proceeds from real property sales

  

$

 247,210 

  

$

 219,027 

  

$

 224,007 

 

We have reclassified the income and expenses attributable to all properties sold prior to or held for sale at December 31, 2011 to discontinued operations.  Expenses include an allocation of interest expense based on property carrying values and our weighted average cost of debt.  The following illustrates the reclassification impact as a result of classifying properties as discontinued operations for the periods presented (in thousands):

84

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

  

  

  

  

Year Ended December 31,

  

  

  

2011

  

2010

  

2009

Revenues:

  

  

  

  

  

  

  

  

  

  

Rental income

  

$

 16,134 

  

$

 45,219 

  

$

 65,296 

  

Other income

  

  

-

  

  

-

  

  

 8,059 

Expenses:

  

  

  

  

  

  

  

  

  

  

Interest expense

  

  

 3,604 

  

  

 9,664 

  

  

 12,916 

  

Property operating expenses

  

  

 4,394 

  

  

 7,172 

  

  

 6,464 

  

Provision for depreciation

  

  

 5,199 

  

  

 15,580 

  

  

 24,231 

Income (loss) from discontinued operations, net

  

$

 2,937 

  

$

 12,803 

  

$

 29,744 

 

6. Real Estate Loans Receivable

     The following is a summary of our real estate loans receivable (in thousands):

 

  

  

  

  

December 31,

  

  

  

2011

  

2010

Mortgage loans

  

$

 63,934 

  

$

 109,283 

Other real estate loans

  

  

 228,573 

  

  

 327,297 

Totals

  

$

 292,507 

  

$

 436,580 

 

     The following is a summary of our real estate loan activity for the periods presented (in thousands):

 

  

  

  

Year Ended

  

  

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

  

  

  

Seniors

  

  

  

  

  

  

Seniors

  

  

  

  

  

  

Seniors

  

  

  

  

  

  

  

  

Housing

  

Medical

  

  

  

  

Housing

  

Medical

  

  

  

  

Housing

  

Medical

  

  

  

  

  

  

Triple-net

  

Facilities

  

Totals

  

Triple-net

  

Facilities

  

Totals

  

Triple-net

  

Facilities

  

Totals

Advances on real estate loans receivable:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Investments in new loans

  

$

 18,541 

  

$

-

  

$

 18,541 

  

$

 9,742 

  

$

 41,644 

  

$

 51,386 

  

$

 20,036 

  

$

-

  

$

 20,036 

  

Draws on existing loans

  

  

 29,752 

  

  

 3,184 

  

  

 32,936 

  

  

 46,113 

  

  

 1,236 

  

  

 47,349 

  

  

 52,910 

  

  

 1,471 

  

  

 54,381 

  

   Sub-total

  

  

 48,293 

  

  

 3,184 

  

  

 51,477 

  

  

 55,855 

  

  

 42,880 

  

  

 98,735 

  

  

 72,946 

  

  

 1,471 

  

  

 74,417 

  

Less: Seller financing on property sales

  

  

-

  

  

-

  

  

-

  

  

-

  

  

 (1,470) 

  

  

 (1,470) 

  

  

-

  

  

-

  

  

-

  

Net cash advances on real estate loans

  

  

 48,293 

  

  

 3,184 

  

  

 51,477 

  

  

 55,855 

  

  

 41,410 

  

  

 97,265 

  

  

 72,946 

  

  

 1,471 

  

  

 74,417 

Receipts on real estate loans receivable:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Loan payoffs

  

  

 162,705 

  

  

 2,943 

  

  

 165,648 

  

  

 5,619 

  

  

 6,233 

  

  

 11,852 

  

  

 61,659 

  

  

 32,197 

  

  

 93,856 

  

Principal payments on loans

  

  

 17,856 

  

  

 5,307 

  

  

 23,163 

  

  

 24,203 

  

  

 7,440 

  

  

 31,643 

  

  

 15,890 

  

  

 2,033 

  

  

 17,923 

  

Total receipts on real estate loans

  

  

 180,561 

  

  

 8,250 

  

  

 188,811 

  

  

 29,822 

  

  

 13,673 

  

  

 43,495 

  

  

 77,549 

  

  

 34,230 

  

  

 111,779 

Net advances (receipts) on real estate loans

  

$

 (132,268) 

  

$

 (5,066) 

  

$

 (137,334) 

  

$

 26,033 

  

$

 27,737 

  

$

 53,770 

  

$

 (4,603) 

  

$

 (32,759) 

  

$

 (37,362) 

85

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

     The following is a summary of the allowance for losses on loans receivable for the periods presented (in thousands):

 

  

  

  

  

Year Ended December 31,

  

  

  

2011

  

2010

  

2009

Balance at beginning of  year

  

$

 1,276 

  

$

 5,183 

  

$

 7,500 

Provision for loan losses

  

  

 2,010 

  

  

 29,684 

  

  

 23,261 

Charge-offs

  

  

 (3,286) 

  

  

 (33,591) 

  

  

 (25,578) 

Balance at end of  year

  

$

 - 

  

$

 1,276 

  

$

 5,183 

 

As a result of our quarterly evaluations, we recorded $2,010,000 of provision for loan losses during the year ended December 31, 2011. This amount includes the write-off of a loan in the amount of $3,286,000 related to a hospital in Texas.  This was offset by a net reduction of the allowance balance by $1,276,000, resulting in an allowance for loan losses of $0 relating to real estate loans with outstanding balances of $6,244,000, all of which were on non-accrual status at December 31, 2011.

 

The following is a summary of our loan impairments (in thousands):

 

  

   

  

  

Year Ended December 31,

  

   

  

2011

  

2010

  

2009

Balance of impaired loans at end of  year  

  

$

 6,244 

  

$

 9,691 

  

$

 67,126 

Allowance for loan losses  

  

  

 - 

  

  

 1,276 

  

  

 5,183 

Balance of impaired loans not reserved  

  

$

 6,244 

  

$

 8,415 

  

$

 61,943 

Average impaired loans for the year  

  

$

 7,968 

  

$

 38,409 

  

$

 69,948 

Interest recognized on impaired loans(1)

  

  

 - 

  

  

 103 

  

  

 530 

   

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

(1) Represents interest recognized prior to placement on non-accrual status.

 

7. Investments in Unconsolidated Entities

     During the six months ended June 30, 2010, we entered into a joint venture investment with Forest City Enterprises (NYSE:FCE.A and FCE.B).  We acquired a 49% interest in a seven-building life science campus located in University Park in Cambridge, MA, which is immediately adjacent to the campus of the Massachusetts Institute of Technology. On February 22, 2010, six buildings were purchased and the seventh was purchased on June 30, 2010.  The portfolio is 100% leased.  In connection with these transactions, we invested $174,692,000 of cash which is recorded as an investment in unconsolidated entities on the balance sheet.  Our share of the non-recourse secured debt assumed by the joint venture was approximately $156,729,000 with weighted-average interest rates of 7.1%.  The results of operations for these properties have been included in our consolidated results of operations from the date of acquisition by the joint venture and are reflected in our income statement as income from unconsolidated entities.  The aggregate remaining unamortized basis difference of our investment in this joint venture of $6,379,000 at December 31, 2011 is primarily attributable to real estate and related intangible assets and will be amortized over the life of the related properties and included in the reported amount of income from unconsolidated entities.  In addition, at December 31, 2011, we had other investments in unconsolidated entities with our ownership ranging from 10% to 50%.

86

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

8. Customer Concentration

     The following table summarizes certain information about our customer concentration as of December 31, 2011 (dollars in thousands):

 

  

   

  

Number of

  

Total  

  

Percent of  

Concentration by investment:(1)

  

Properties

  

Investment(2)

  

 Investment(3)

  

Genesis HealthCare, LLC  

  

150

  

$

 2,466,243  

  

18%  

  

Merrill Gardens, LLC  

  

48

  

  

 1,132,399  

  

8%  

  

Benchmark Senior Living, LLC  

  

35

  

  

 883,681  

  

6%  

  

Brandywine Senior Living, LLC  

  

24

  

  

 719,509  

  

5%  

  

Senior Living Communities, LLC  

  

12

  

  

 604,079  

  

4%  

  

Remaining portfolio  

  

655

  

  

 8,136,439  

  

59%  

  

Totals  

  

924

  

$

 13,942,350  

  

100%  

_____________________

(1)     Merrill Gardens and Benchmark are in our seniors housing operating segment whereas the other top five customers are in our seniors housing triple-net segment.

(2)     Excludes our share of investments in unconsolidated entities.  Please see Note 7 for additional information.

(3)     Investments with our top five customers comprised 32% of total investments at December 31, 2010.

  

9. Borrowings Under Line of Credit Arrangement and Related Items

     At December 31, 2011, we had a $2,000,000,000 unsecured line of credit arrangement with a consortium of 31 banks with an option to upsize the facility by up to an additional $500,000,000 through an accordion feature, allowing for an aggregate commitment of up to $2,500,000,000.  The revolving credit facility is scheduled to expire July 27, 2015.  Borrowings under the agreement are subject to interest payable in periods no longer than three months at either the agent bank’s prime rate of interest or the applicable margin over LIBOR interest rate, at our option (1.65% at December 31, 2011). The applicable margin is based on certain of our debt ratings and was 1.35% at December 31, 2011. In addition, we pay a facility fee annually to each bank based on the bank’s commitment amount. The facility fee depends on certain of our debt ratings and was 0.25% at December 31, 2011.  Principal is due upon expiration of the agreement.  In addition, at December 31, 2011, we had a $5,000,000 unsecured revolving demand note outstanding and bearing interest at 1.34%.

     The following information relates to aggregate borrowings under the unsecured line of credit arrangements for the periods presented (dollars in thousands):

 

  

  

  

Year Ended December 31,

  

  

  

2011

  

2010

  

2009

Balance outstanding at year end

  

$

 610,000 

  

$

 300,000 

  

$

 140,000 

Maximum amount outstanding at any month end

  

$

 710,000 

  

$

 560,000 

  

$

 559,000 

Average amount outstanding (total of daily

  

  

  

  

  

  

  

  

  

  

principal balances divided by days in period)

  

$

 240,104 

  

$

 268,762 

  

$

 241,463 

Weighted average interest rate (actual interest

  

  

  

  

  

  

  

  

  

  

expense divided by average borrowings outstanding)

  

  

1.51%

  

  

1.48%

  

  

1.92%

 

10. Senior Unsecured Notes and Secured Debt

     We have $4,434,107,000 of senior unsecured notes with annual stated interest rates ranging from 3.00% to 8.00%. The carrying amounts of the senior unsecured notes represent the par value of $4,464,927,000 adjusted for any unamortized premiums or discounts and other basis adjustments related to hedging the debt with derivative instruments. See Note 11 for further discussion regarding derivative instruments.

     During the three months ended December 31, 2006, we issued $345,000,000 of 4.75% senior unsecured convertible notes due December 2026, generating net proceeds of $337,517,000. The notes are convertible, in certain circumstances, into cash and, if applicable, shares of common stock at an initial conversion rate of 20.8833 shares per $1,000 principal amount of notes, which represents an initial conversion price of $47.89 per share. In general, upon conversion, the holder of each note would receive, in respect of the conversion value of such note, cash up to the principal amount of such note and common stock for the note’s conversion value in excess of such principal amount. In addition, on each of December 1, 2011, December 1, 2016 and December 1, 2021, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest. During the three months ended March 31, 2009, we extinguished

87

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

$5,000,000 of these notes and recognized a gain of $446,000.  During the six months ended June 30, 2010, we extinguished $214,412,000 of these notes, recognized a loss of $8,837,000 and paid $18,552,000 to reacquire the equity component of convertible debt.  During the three months ended December 31, 2011, we purchased $3,000 of these notes from holders.  As of December 31, 2011, we had $125,585,000 of these notes outstanding.

In July 2007, we issued $400,000,000 of 4.75% senior unsecured convertible notes due July 2027, generating net proceeds of $388,943,000. The notes are convertible, in certain circumstances, into cash and, if applicable, shares of our common stock at an initial conversion rate of 20.0000 shares per $1,000 principal amount of notes, which represents an initial conversion price of $50.00 per share. In general, upon conversion, the holder of each note would receive, in respect of the conversion value of such note, cash up to the principal amount of such note and common stock for the note’s conversion value in excess of such principal amount. In addition, on each of July 15, 2012, July 15, 2017 and July 15, 2022, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest. During the three months ended March 31, 2009, we extinguished $5,000,000 of these notes and recognized a gain of $594,000.  During the six months ended June 30, 2010, we extinguished $226,914,000 of these notes, recognized a loss of $16,235,000 and paid $21,062,000 to reacquire the equity component of convertible debt.  As of December 31, 2011, we had $168,086,000 of these notes outstanding.

     During the twelve months ended December 31, 2010, we issued $494,403,000 of 3.00% senior unsecured convertible notes due December 2029, generating net proceeds of $486,084,000. The notes are convertible, in certain circumstances, into cash and, if applicable, shares of common stock at an initial conversion rate of 19.5064 shares per $1,000 principal amount of notes, which represents an initial conversion price of $51.27 per share. In general, upon conversion, the holder of each note would receive, in respect of the conversion value of such note, cash up to the principal amount of such note and common stock for the note’s conversion value in excess of such principal amount. In addition, on each of December 1, 2014, December 1, 2019 and December 1, 2024, holders may require us to purchase all or a portion of their notes at a purchase price in cash equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest. In connection with this issuance, we recognized $29,925,000 of equity component of convertible debt.

     During the year ended December 31, 2009, we extinguished $183,147,000 of senior unsecured notes with a weighted-average interest rate of 7.82% and recognized losses of $19,269,000.  During the three months ended June 30, 2010, we issued $450,000,000 of 6.125% senior unsecured notes due 2020 with net proceeds of $446,328,000.  During the three months ended September 30, 2010, we issued $450,000,000 of 4.70% senior unsecured notes due 2017 with net proceeds of $445,768,000.  During the three months ended December 31, 2010, we issued $450,000,000 of 4.95% senior unsecured notes due 2021 with net proceeds of $443,502,000.  During the three months ended March 31, 2011, we issued $400,000,000 of 3.625% senior unsecured notes due 2016, $600,000,000 of 5.25% senior unsecured notes due 2022 and $400,000,000 of 6.50% senior unsecured notes due 2041, generating net proceeds of $1,381,086,000.  

     We have secured debt totaling $2,112,649,000, collateralized by owned properties, with annual interest rates ranging from 1.22% to 10.00%. The carrying amounts of the secured debt represent the par value of $2,108,384,000 adjusted for any unamortized fair value adjustments.  The carrying values of the properties securing the debt totaled $4,048,469,000 at December 31, 2011. During the year ended December 31, 2009, we extinguished 20 secured debt loans totaling $81,715,000 with a weighted-average interest rate of 7.21% and recognized extinguishment losses of $5,838,000.  During the year ended December 31, 2010, we issued $157,156,000 of first mortgage loans principal with a rate of 5.45% secured by 15 properties.  During the year ended December 31, 2010, we assumed $564,657,000 of first mortgage loans principal with an average rate of 6.06% secured by 60 properties.  During the year ended December 31, 2010, we extinguished $194,493,000 of first mortgage loans principal with an average rate of 6.07% and recognized a loss of $9,099,000.  During the year ended December 31, 2011, we issued $114,903,000 of first mortgage loans principal with a rate of 5.78% secured by nine properties.  During the year ended December 31, 2011, we assumed $940,855,000 of first mortgage loans principal with an average rate of 4.85% secured by 55 properties.  During the year ended December 31, 2011, we extinguished $55,317,000 of first mortgage loans principal with an average rate of 5.95% and recognized a gain of $979,000.

     We adopted FASB Accounting Standards Codification (“ASC”) topic for Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“Convertible Debt Guidance”), effective January 1, 2009. It provides guidance on accounting for convertible debt that may be settled in cash upon conversion. It requires bifurcation of the convertible debt instrument into a debt component and an equity component. The value of the debt component is based upon the estimated fair value of a similar debt instrument without the conversion feature. The difference between the contractual principal on the debt and the value allocated to the debt is recorded as an equity component and represents the conversion feature of the instrument. The excess of the contractual principal amount of the debt over its estimated fair value is amortized to interest expense using the effective interest method over the period used to estimate the fair value.

     Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain certain

88

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2011, we were in compliance with all of the covenants under our debt agreements.

At December 31, 2011, the annual principal payments due on these debt obligations are as follows (in thousands):

 

  

  

Senior  

  

Secured  

  

  

  

  

  

Unsecured Notes(1)

  

Debt (1)

  

Totals

2012

  

$

 76,853  

  

$

 122,359  

  

$

 199,212 

2013

  

  

 300,000  

  

  

 292,735  

  

  

 592,735 

2014

  

  

-  

  

  

 203,767  

  

  

 203,767 

2015

  

  

 250,000  

  

  

 184,378  

  

  

 434,378 

2016

  

  

 700,000  

  

  

 190,255  

  

  

 890,255 

Thereafter

  

  

 3,138,074  

  

  

 1,114,890  

  

  

 4,252,964 

Totals

  

$

 4,464,927  

  

$

 2,108,384  

  

$

 6,573,311 

  

  

  

   

  

  

   

  

  

  

  

  

  

   

  

  

   

  

  

  

(1) Amounts represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.

 

11. Derivative Instruments

     We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to manage the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates.  Derivatives are recorded at fair value on the balance sheet as assets or liabilities.  The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments.  Fair values of our derivatives are estimated by pricing models that consider the forward yield curves and discount rates.  Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future.

     For instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”), and reclassified into earnings in the same period, or periods, during which the hedged transaction affects earnings.  Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in earnings.  Approximately $2,016,000 of losses, which are included in accumulated other comprehensive income (“AOCI”), are expected to be reclassified into earnings in the next 12 months.

     The following is a summary of the fair value of our derivative instruments (dollars in thousands):

 

  

  

Balance Sheet

  

Fair Value

  

  

Location

  

December 31, 2011

  

December 31, 2010

Cash flow hedge interest rate swaps

  

Other liabilities

  

$

$ 2,854

  

$

$ 482

                 

 

     The following presents the impact of derivative instruments on the statement of operations and OCI for the periods presented (dollars in thousands):

 

  

  

  

  

  

Year Ended

  

  

  

Location

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

Gain (loss) on interest rate swap recognized in

  

  

  

  

  

  

  

  

  

  

  

  

OCI (effective portion)

  

n/a

  

$

 3,189 

  

$

 (10,307) 

  

$

 (3,513) 

Gain (loss) reclassified from AOCI into

  

  

  

  

  

  

  

  

  

  

  

  

income (effective portion)

  

Interest expense

  

  

 1,781 

  

  

 (2,244) 

  

  

 (971) 

Gain (loss) recognized in income (ineffective portion

  

  

  

  

  

  

  

  

  

  

  

  

and amount excluded from effectiveness testing)

  

Realized loss

  

  

-

  

  

-

  

  

-

 

      As of December 31, 2011, we had eight interest rate swaps for a total aggregate notional amount of $135,445,000.  The swaps hedge interest payments associated with long-term LIBOR based borrowings and mature between December 31, 2012 and December 31, 2013.

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

12. Commitments and Contingencies

     At December 31, 2011, we had five outstanding letter of credit obligations totaling $5,515,000 and expiring between 2012 and 2014.

     At December 31, 2011, we had outstanding construction in process of $189,502,000 for leased properties and were committed to providing additional funds of approximately $282,899,000 to complete construction. At December 31, 2011, we had contingent purchase obligations totaling $57,470,000. These contingent purchase obligations relate to unfunded capital improvement obligations. Rents due from the tenant are increased to reflect the additional investment in the property.

     We evaluate our leases for operating versus capital lease treatment in accordance with ASC Topic 840 “Leases.”  A lease is classified as a capital lease if it provides for transfer of ownership of the leased asset at the end of the lease term, contains a bargain purchase option, has a lease term greater than 75% of the economic life of the leased asset, or if the net present value of the future minimum lease payments are in excess of 90% of the fair value of the leased asset. Certain leases contain bargain purchase options and have been classified as capital leases.  At December 31, 2011, we had operating lease obligations of $356,464,000 relating to certain ground leases and company office space. We incurred rental expense relating to company office space of $1,901,000, $1,280,000 and $1,138,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Regarding the ground leases, we have sublease agreements with certain of our operators that require the operators to reimburse us for our monthly operating lease obligations. At December 31, 2011, aggregate future minimum rentals to be received under these noncancelable subleases totaled $29,558,000.

     At December 31, 2011, future minimum lease payments due under operating and capital leases are as follows (in thousands):

 

  

  

Operating Leases

  

Capital Leases(1)

2012

  

$

 6,166 

  

$

 7,622  

2013

  

  

 6,442 

  

  

 73,003  

2014

  

  

 6,502 

  

  

 660  

2015

  

  

 6,016 

  

  

 8,425  

2016

  

  

 6,002 

  

  

-  

Thereafter

  

  

 325,336 

  

  

-  

Totals

  

$

 356,464 

  

$

 89,710  

  

  

  

  

  

  

   

  

  

  

  

  

  

   

(1) Amounts above represent principal and interest obligations under capital lease arrangements.  Related assets with a gross value of $345,815,000 and accumulated depreciation of $7,024,000 recorded in real property.  

 

13. Stockholders’ Equity

 

     The following is a summary of our stockholder’s equity capital accounts as of the dates indicated:

 

  

  

  

December 31, 2011

  

December 31, 2010

Preferred Stock, $1.00 par value:

  

  

  

  

  

Authorized shares

  

 50,000,000 

  

 50,000,000 

  

Issued shares

  

 25,724,854 

  

 11,349,854 

  

Outstanding shares

  

 25,724,854 

  

 11,349,854 

  

  

  

  

  

  

Common Stock, $1.00 par value:

  

  

  

  

  

Authorized shares

  

 400,000,000 

  

 225,000,000 

  

Issued shares

  

 192,604,918 

  

 147,381,191 

  

Outstanding shares

  

 192,275,248 

  

 147,097,381 

 

     Preferred Stock.  During the year ended 2009, certain holders of our Series G Cumulative Convertible Preferred Stock converted 41,600 shares into 29,771 shares of our common stock, leaving 399,713 of such shares outstanding at December 31, 2009.  During the nine months ended September 30, 2010, certain holders of our Series G Cumulative Convertible Preferred Stock converted 394,200 shares into 282,078 shares of our common stock, leaving 5,513 of such shares outstanding, which were redeemed by us on September 30, 2010.  During the three months ended September 30, 2010, the holder of our Series E Cumulative Convertible and Redeemable Preferred Stock converted 74,380 shares into 56,935 shares of our common stock, leaving no shares outstanding at December 31, 2011.

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

     In July 2003, we closed a public offering of 4,000,000 shares of 7.875% Series D Cumulative Redeemable Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, are redeemable by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, effective July 9, 2008.

     In September 2004, we closed a public offering of 7,000,000 shares of 7.625% Series F Cumulative Redeemable Preferred Stock. These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, are redeemable by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, effective September 14, 2009.

     During the three months ended December 31, 2010, we issued 349,854 shares of 6.00% Series H Cumulative Convertible and Redeemable Preferred Stock in connection with a business combination.  These shares have a liquidation value of $25.00 per share. Dividends are payable quarterly in arrears. The preferred stock, which has no stated maturity, may be redeemed by us at a redemption price of $25.00 per share, plus accrued and unpaid dividends on such shares to the redemption date, on or after December 31, 2015.  See Note 3 for additional information.

     During the three months ended March 31, 2011, we issued 14,375,000 of 6.50% Series I Cumulative Convertible Perpetual Preferred Stock.  These shares have a liquidation value of $50.00 per share.  Dividends are payable quarterly in arrears.  The preferred stock is not redeemable by us.  The preferred shares are convertible, at the holder’s option, into 0.8460 shares of common stock (equal to an initial conversion price of approximately $59.10).

 

     Common Stock. The following is a summary of our common stock issuances during the periods indicated (dollars in thousands, except per share amounts):

 

  

  

Shares Issued

  

  

Average Price

  

  

Gross Proceeds

  

  

Net Proceeds

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

February 2009 public issuance

  

 5,816,870 

  

$

 36.85 

  

$

 214,352 

  

$

 210,880 

September 2009 public issuance

  

 9,200,000 

  

  

 40.40 

  

  

 371,680 

  

  

 356,554 

2009 Dividend reinvestment plan issuances

  

 1,499,497 

  

  

 37.22 

  

  

 55,818 

  

  

 55,818 

2009 Equity shelf program issuances

  

 1,952,600 

  

  

 40.69 

  

  

 79,447 

  

  

 77,605 

2009 Option exercises

  

 96,166 

  

  

 38.23 

  

  

 3,676 

  

  

 3,676 

2009 Totals

  

 18,565,133 

  

  

  

  

$

 724,973 

  

$

 704,533 

  

  

  

  

  

  

  

  

  

  

  

  

September 2010 public issuance

  

 9,200,000 

  

$

 45.75 

  

$

 420,900 

  

$

 403,921 

December 2010 public issuance

  

 11,500,000 

  

  

 43.75 

  

  

 503,125 

  

  

 482,448 

2010 Dividend reinvestment plan issuances

  

 1,957,364 

  

  

 43.95 

  

  

 86,034 

  

  

 86,034 

2010 Equity shelf program issuances

  

 431,082 

  

  

 44.94 

  

  

 19,371 

  

  

 19,013 

2010 Option exercises

  

 129,054 

  

  

 31.17 

  

  

 4,022 

  

  

 4,022 

2010 Totals

  

 23,217,500 

  

  

  

  

$

 1,033,452 

  

$

 995,438 

  

  

  

  

  

  

  

  

  

  

  

  

March 2011 public issuance

  

 28,750,000 

  

$

 49.25 

  

$

 1,415,938 

  

$

 1,358,543 

November 2011 public issuance

  

 12,650,000 

  

  

 50.00 

  

  

 632,500 

  

  

 606,595 

2011 Dividend reinvestment plan issuances

  

 2,534,707 

  

  

 48.44 

  

  

 122,794 

  

  

 121,846 

2011 Equity shelf program issuances

  

 848,620 

  

  

 50.53 

  

  

 42,888 

  

  

 41,982 

2011 Option exercises

  

 232,081 

  

  

 37.17 

  

  

 8,628 

  

  

 8,628 

2011 Totals

  

 45,015,408 

  

  

  

  

$

 2,222,748 

  

$

 2,137,594 

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

     DividendsThe following is a summary of our dividend payments (dollars in thousands, except per share amounts):

 

  

  

Year Ended

  

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

  

  

Per Share

  

Amount

  

Per Share

  

Amount

  

Per Share

  

Amount

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Common Stock

  

$

 2.83500 

  

$

 483,746 

  

$

 2.74000 

  

$

 348,578 

  

$

 2.72000 

  

$

 311,760 

Series D Preferred Stock

  

  

 1.96875 

  

  

 7,875 

  

  

 1.96875 

  

  

 7,875 

  

  

 1.96875 

  

  

 7,875 

Series E Preferred Stock

  

  

 - 

  

  

-

  

  

 1.12500 

  

  

 94 

  

  

 1.50000 

  

  

 112 

Series F Preferred Stock

  

  

 1.90625 

  

  

 13,344 

  

  

 1.90625 

  

  

 13,344 

  

  

 1.90625 

  

  

 13,344 

Series G Preferred Stock

  

  

 - 

  

  

-

  

  

 1.40640 

  

  

 332 

  

  

 1.87500 

  

  

 748 

Series H Preferred Stock

  

  

 2.85840 

  

  

 1,000 

  

  

 - 

  

  

-

  

  

 - 

  

  

-

Series I Preferred Stock

  

  

 1.33159 

  

  

 38,283 

  

  

 - 

  

  

-

  

  

 - 

  

  

-

Totals

  

  

  

  

$

 544,248 

  

  

  

  

$

 370,223 

  

  

  

  

$

 333,839 

 

Comprehensive Income

 

     The following is a summary of accumulated other comprehensive income/(loss) as of the dates indicated (in thousands):

 

  

  

  

December 31, 2011

  

  

December 31, 2010

Unrecognized gains (losses) on cash flow hedges

  

$

 (8,561) 

  

$

 (9,969) 

Unrecognized gains (losses) on equity investments

  

  

 (619) 

  

  

 (497) 

Unrecognized actuarial gains (losses)

  

  

 (2,748) 

  

  

 (633) 

Totals

  

$

 (11,928) 

  

$

 (11,099) 

 

     The following is a summary of comprehensive income/(loss) for the periods indicated (in thousands):

 

  

   

  

Year Ended

  

   

  

December 31,

  

   

  

2011

  

2010

  

2009

Unrecognized gains (losses) on cash flow hedges  

  

$

 1,408 

  

$

 (8,063) 

  

$

 (2,542) 

Unrecognized gains (losses) on equity investments  

  

  

 (122) 

  

  

 54 

  

  

 487 

Unrecognized actuarial gains (losses)  

  

  

 (2,115) 

  

  

 (199) 

  

  

 277 

  

Total other comprehensive income (loss)  

  

  

 (829) 

  

  

 (8,208) 

  

  

 (1,778) 

Net income attributable to controlling interests  

  

  

 217,610 

  

  

 128,527 

  

  

 193,269 

  

Comprehensive income attributable to controlling interests  

  

  

 216,781 

  

  

 120,319 

  

  

 191,491 

Net and comprehensive income (loss) attributable to noncontrolling interests(1)

  

  

 (4,894) 

  

  

 357 

  

  

 (342) 

  

Total comprehensive income  

  

$

 211,887 

  

$

 120,676 

  

$

 191,149 

   

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

(1) Includes amounts attributable to redeemable noncontrolling interests.

 

Other Equity

     Other equity consists of accumulated option compensation expense, which represents the amount of amortized compensation costs related to stock options awarded to employees and directors. Expense, which is recognized as the options vest based on the market value at the date of the award, totaled $1,917,000, $1,634,000 and $1,629,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

 

14. Stock Incentive Plans

     Our Amended and Restated 2005 Long-Term Incentive Plan authorizes up to 6,200,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. The 2005 Plan replaced the 1995 Stock Incentive Plan and the Stock Plan for Non-Employee Directors. The options granted to officers and key employees under the 1995 Plan vested through 2010 and expire ten years from the date of grant. Our non-employee directors, officers and key employees are eligible to participate in the 2005 Plan. The 2005 Plan allows for the issuance of, among other things, stock options, restricted stock, deferred stock units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range from three years for

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

non-employee directors to five years for officers and key employees. Options expire ten years from the date of grant.

 

Valuation Assumptions

     The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted-average assumptions:

 

  

  

Year Ended

  

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

Dividend yield

  

5.74%

  

6.28%

  

7.35%

Expected volatility

  

34.80%

  

34.08%

  

29.40%

Risk-free interest rate

  

2.87%

  

3.23%

  

2.33%

Expected life (in years)

  

 7.0 

  

 7.0 

  

 7.0 

Weighted-average fair value

  

$9.60

  

$7.82

  

$4.38

 

     The dividend yield represented the dividend yield of our common stock on the dates of grant. Our computation of expected volatility was based on historical volatility. The risk-free interest rates used were the 7-year U.S. Treasury Notes yield on the date of grant. The expected life was based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations regarding future employee behavior.

 

Option Award Activity

     The following table summarizes information about stock option activity for the twelve months ended December 31, 2011:

 

  

  

Year Ended

  

  

December 31, 2011

  

December 31, 2010

  

December 31, 2009

  

  

Number of

  

Weighted

  

Number of

  

Weighted

  

Number of

  

Weighted

  

  

Shares

  

Average

  

Shares

  

Average

  

Shares

  

Average

Stock Options

  

(000's)

  

Exercise Price

  

(000's)

  

Exercise Price

  

(000's)

  

Exercise Price

Options at beginning of year

  

 1,207 

  

$

 39.45 

  

 1,062 

  

$

 37.71 

  

 817 

  

$

 38.29 

Options granted

  

 289 

  

  

 49.17 

  

 280 

  

  

 43.29 

  

 366 

  

  

 37.00 

Options exercised

  

 (232) 

  

  

 36.92 

  

 (129) 

  

  

 33.58 

  

 (96) 

  

  

 38.22 

Options terminated

  

 (12) 

  

  

 43.09 

  

 (6) 

  

  

 37.82 

  

 (25) 

  

  

 44.50 

Options at end of period

  

 1,252 

  

$

 42.12 

  

 1,207 

  

$

 39.45 

  

 1,062 

  

$

 37.71 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Options exercisable at end of period

  

 427 

  

$

 39.45 

  

 440 

  

$

 37.76 

  

 388 

  

$

 35.85 

Weighted average fair value of

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   options granted during the period

  

  

  

$

 9.60 

  

  

  

$

 7.82 

  

  

  

$

 4.38 

 

     The following table summarizes information about stock options outstanding at December 31, 2011:

 

  

  

Options Outstanding

  

Options Exercisable

  

  

Number

  

Weighted

  

Weighted Average

  

Number

  

Weighted

  

Weighted Average

  

  

Outstanding

  

Average

  

Remaining

  

Exercisable

  

Average

  

Remaining

Range of Per Share Exercise Prices

  

(thousands)

  

Exercise Price

  

Contract Life

  

(thousands)

  

Exercise Price

  

Contract Life

$20-$30

  

 20 

  

$

 25.82 

  

 1.0 

  

 20 

  

$

 25.82 

  

 1.0 

$30-$40

  

 390 

  

  

 36.75 

  

 5.9 

  

 179 

  

  

 36.46 

  

 4.5 

$40+

  

 842 

  

  

 44.99 

  

 7.5 

  

 228 

  

  

 42.96 

  

 6.1 

Totals

  

 1,252 

  

$

 42.12 

  

 6.9 

  

 427 

  

$

 39.45 

  

 5.2 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Aggregate intrinsic value

$

 15,528,000 

  

  

  

  

  

$

 6,439,000 

  

  

  

  

  

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the quoted price of our common stock for the options that were in-the-money at December 31, 2011.  During the years ended December 31, 2011, 2010 and 2009, the aggregate intrinsic value of options exercised under our stock incentive plans was $3,390,000, $1,798,000 and $737,000,

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

respectively (determined as of the date of option exercise).  Cash received from option exercises under our stock incentive plans was $8,628,000, $4,022,000 and $3,676,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

 

As of December 31, 2011, there was approximately $4,419,000 of total unrecognized compensation cost related to unvested stock options granted under our stock incentive plans.  That cost is expected to be recognized over a weighted average period of 4 years.  As of December 31, 2011, there was approximately $14,410,000 of total unrecognized compensation cost related to unvested restricted stock granted under our stock incentive plans.  That cost is expected to be recognized over a weighted average period of 3 years.

 

The following table summarizes information about non-vested stock incentive awards as of December 31, 2011 and changes for the twelve months ended December 31, 2011:

 

  

  

Stock Options

  

Restricted Stock

  

  

Number of

  

  

Weighted Average

  

Number of

  

Weighted Average

  

  

Shares

  

  

Grant Date

  

Shares

  

Grant Date

  

  

(000's)

  

  

Fair Value

  

(000's)

  

Fair Value

Non-vested at December 31, 2010

  

 768 

  

$

 6.19 

  

 420 

  

$

 41.09 

Vested

  

 (219) 

  

  

 6.12 

  

 (148) 

  

  

 41.90 

Granted

  

 289 

  

  

 9.60 

  

 245 

  

  

 49.20 

Terminated

  

 (13) 

  

  

 6.40 

  

 (9) 

  

  

 32.86 

Non-vested at December 31, 2011

  

 825 

  

$

 7.40 

  

 508 

  

$

 44.91 

 

We use the Black-Scholes-Merton option pricing model to estimate the value of stock option grants and expect to continue to use this acceptable option valuation model. We recognize compensation cost for share-based grants on a straight-line basis through the date the awards become fully vested or to the retirement eligible date, if sooner. Compensation cost totaled $10,786,000, $11,823,000 and $9,633,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

 

15. Earnings Per Share

     The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

 

  

  

  

Year Ended December 31,

  

  

  

2011

  

2010

  

2009

Numerator for basic and diluted earnings

  

  

  

  

  

  

  

  

  

  

per share - net income attributable to

  

  

  

  

  

  

  

  

  

  

common stockholders

  

$

 157,108 

  

$

 106,882 

  

$

 171,190 

  

  

  

  

  

  

  

  

  

  

  

Denominator for basic earnings per

  

  

  

  

  

  

  

  

  

  

share - weighted average shares

  

  

 173,741 

  

  

 127,656 

  

  

 114,207 

Effect of dilutive securities:

  

  

  

  

  

  

  

  

  

  

Employee stock options

  

  

 176 

  

  

 125 

  

  

-

  

Non-vested restricted shares

  

  

 246 

  

  

 420 

  

  

 405 

  

Convertible senior unsecured notes

  

  

 238 

  

  

 7 

  

  

-

Dilutive potential common shares

  

  

 660 

  

  

 552 

  

  

 405 

Denominator for diluted earnings per

  

  

  

  

  

  

  

  

  

  

share - adjusted weighted average shares

  

  

 174,401 

  

  

 128,208 

  

  

 114,612 

  

  

  

  

  

  

  

  

  

  

  

Basic earnings per share

  

$

 0.90 

  

$

 0.84 

  

$

 1.50 

Diluted earnings per share

  

$

 0.90 

  

$

 0.83 

  

$

 1.49 

 

The diluted earnings per share calculations exclude the dilutive effect of 0, 280,000 and 351,000 stock options for the years ended December 31, 2011, 2010 and 2009, respectively, because the exercise prices were more than the average market price. The outstanding convertible senior unsecured notes were not included in the 2009 calculations as the effect of the conversions into common stock was anti-dilutive for that period.  The Series H Cumulative Convertible and Redeemable Preferred Stock issued in 2010 was excluded from the calculations for 2010 and 2011 as the effect of the conversions was anti-dilutive.  The Series I

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Cumulative Convertible Perpetual Preferred Stock issued in 2011 was excluded from the calculations for 2011 as the effect of the conversions was anti-dilutive.

 

16. Disclosure about Fair Value of Financial Instruments

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

 

Mortgage Loans and Other Real Estate Loans Receivable — The fair value of mortgage loans and other real estate loans receivable is generally estimated by discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. 

 

Cash and Cash Equivalents — The carrying amount approximates fair value.

 

Available-for-sale Equity Investments — Available-for-sale equity investments are recorded at their fair value based on publicly available trading prices.

 

Borrowings Under Unsecured Lines of Credit Arrangements — The carrying amount of the unsecured line of credit arrangement approximates fair value because the borrowings are interest rate adjustable.

 

Senior Unsecured Notes — The fair value of the senior unsecured notes payable was estimated based on publicly available trading prices.

 

Secured Debt — The fair value of fixed rate secured debt is estimated by discounting the estimated future cash flows using the current rates at which similar loans would be made with similar credit ratings and for the same remaining maturities.  The carrying amount of variable rate secured debt approximates fair value because the borrowings are interest rate adjustable.

 

Interest Rate Swap Agreements — Interest rate swap agreements are recorded as assets or liabilities on the balance sheet at fair market value.  Fair market value is estimated by utilizing pricing models that consider forward yield curves and discount rates.

 

The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):

 

  

  

  

December 31, 2011

  

December 31, 2010

  

  

  

Carrying

  

Fair

  

Carrying

  

Fair

  

  

  

Amount

  

Value

  

Amount

  

Value

Financial Assets:

  

  

  

  

  

  

  

  

  

  

  

  

  

Mortgage loans receivable

  

$

 63,934 

  

$

 64,194 

  

$

 109,283 

  

$

 111,255 

  

Other real estate loans receivable

  

  

 228,573 

  

  

 231,308 

  

  

 327,297 

  

  

 333,003 

  

Available-for-sale equity investments

  

  

 980 

  

  

 980 

  

  

 1,103 

  

  

 1,103 

  

Cash and cash equivalents

  

  

 163,482 

  

  

 163,482 

  

  

 131,570 

  

  

 131,570 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Financial Liabilities:

  

  

  

  

  

  

  

  

  

  

  

  

  

Borrowings under unsecured lines of credit arrangements

  

$

 610,000 

  

$

 610,000 

  

$

 300,000 

  

$

 300,000 

  

Senior unsecured notes

  

  

 4,434,107 

  

  

 4,709,736 

  

  

 3,034,949 

  

  

 3,267,638 

  

Secured debt

  

  

 2,112,649 

  

  

 2,297,278 

  

  

 1,125,906 

  

  

 1,178,081 

  

Interest rate swap agreements

  

  

 2,854 

  

  

 2,854 

  

  

 482 

  

  

 482 

 

U.S. GAAP provides authoritative guidance for measuring and disclosing fair value measurements of assets and liabilities.  The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The guidance describes three levels of inputs that may be used to measure fair value:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  Interest rate swap agreements are valued using models that assume a hypothetical transaction to sell the asset or transfer the liability in the principal market for the asset or liability based on market data derived from interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment timing, loss severities, credit risks and default rates.

 

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Items Measured at Fair Value on a Recurring Basis

 

The market approach is utilized to measure fair value for our financial assets and liabilities reported at fair value on a recurring basis.  The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

 

   

  

Fair Value Measurements as of December 31, 2011

   

  

Total

  

Level 1

  

Level 2

  

Level 3

Available-for-sale equity investments(1)

  

$

 980 

  

$

 980 

  

$

-

  

$

-

Assets held for sale(2)

  

  

 36,115 

  

  

-

  

  

 36,115 

  

  

-

Interest rate swap agreements(3)

  

  

 (2,854) 

  

  

-

  

  

 (2,854) 

  

  

-

 Totals  

  

$

 34,241 

  

$

 980 

  

$

 33,261 

  

$

-

   

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

  

  

  

(1) Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date.

(2) Please see Note 5 for additional information.

(3) Please see Note 11 for additional information.

 

Items Measured at Fair Value on a Nonrecurring Basis

 

In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in our balance sheet that are measured at fair value on a nonrecurring basis.  As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets and liabilities that are measured at fair value on a nonrecurring basis include assets acquired and liabilities assumed in business combinations (see Note 3) and asset impairments (see Note 5 for impairments of real property and Note 6 for impairments of loans receivable). We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each of these fair value measurements generally reside within Level 3 of the fair value hierarchy. We estimate the fair value of real estate and related intangibles using the income approach and unobservable data such as net operating income and estimated capitalization and discount rates.  We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value.  We estimate the fair value of secured debt assumed in business combinations using current interest rates at which similar borrowings could be obtained on the transaction date.

 

17. Segment Reporting

     During the year ended December 31, 2011, we changed the name of our seniors housing and care segment to seniors housing triple-net. Additionally, we added a new seniors housing operating segment. There was no activity related to this segment prior to September 1, 2010. We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our three business segments: seniors housing triple-net, seniors housing operating and medical facilities. Our seniors housing triple-net properties include skilled nursing/post-acute facilities, assisted living facilities, independent living/continuing care retirement communities and combinations thereof. Under the seniors housing triple-net segment, we invest in seniors housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our seniors housing operating properties include assisted living facilities and independent living/continuing care retirement communities that are owned and/or operated through RIDEA partnership structures. Our primary medical facility properties include medical office buildings, hospitals and life science buildings. Our medical office buildings are typically leased to multiple tenants and generally require a certain level of property management. Our hospital

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

investments are structured similar to our seniors housing triple-net investments. Our life science investments represent investments in an unconsolidated entity (see Note 7 for additional information).  The accounting policies of the segments are the same as those described in the summary of significant accounting policies (in Note 2 to our audited consolidated financial statements). There are no intersegment sales or transfers. We evaluate performance based upon net operating income of the combined properties in each segment. Non-segment revenue consists mainly of interest income on non-real estate investments and other income. Non-segment assets consist of corporate assets including cash, deferred loan expenses and corporate offices and equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining net operating income.

     Summary information for the reportable segments during the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands and includes amounts from discontinued operations):

 

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Property

  

Net  

  

Real Estate

  

  

  

  

  

  

   

Rental

  

Resident Fees

  

Interest

  

Other

  

Total

  

Operating

  

Operating  

  

Depreciation/

  

Interest

  

Total

   

Income

  

and Services

  

Income

  

Income

  

Revenues

  

Expenses

  

Income(1)

  

Amortization

  

Expense

  

Assets

Year Ended December 31, 2011  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

Seniors housing triple-net  

$

 622,330 

  

$

-

  

$

 34,068 

  

$

 6,620 

  

$

 663,018 

  

$

-

  

$

 663,018  

  

$

 178,321 

  

$

 15,306 

  

$

 7,823,953 

Seniors housing operating  

  

-

  

  

 456,085 

  

  

-

  

  

-

  

  

 456,085 

  

  

 314,142 

  

  

 141,943  

  

  

 138,192 

  

  

 46,342 

  

  

 3,041,238 

Medical facilities(2)

  

 306,516 

  

  

-

  

  

 7,002 

  

  

 3,985 

  

  

 317,503 

  

  

 69,728 

  

  

 247,775  

  

  

 107,092 

  

  

 31,467 

  

  

 3,795,940 

Non-segment/Corporate  

  

-

  

  

-

  

  

-

  

  

 690 

  

  

 690 

  

  

-

  

  

 690  

  

  

-

  

  

 228,884 

  

  

 263,475 

   

$

 928,846 

  

$

 456,085 

  

$

 41,070 

  

$

 11,295 

  

$

 1,437,296 

  

$

 383,870 

  

$

 1,053,426  

  

$

 423,605 

  

$

 321,999 

  

$

 14,924,606 

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

Year Ended December 31, 2010  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

Seniors housing triple-net  

$

 382,904 

  

$

-

  

$

 36,176 

  

$

 3,386 

  

$

 422,466 

  

$

-

  

$

 422,466  

  

$

 111,213 

  

$

 15,111 

  

$

 4,756,896 

Seniors housing operating  

  

-

  

  

 51,006 

  

  

-

  

  

-

  

  

 51,006 

  

  

 32,621 

  

  

 18,385  

  

  

 15,504 

  

  

 7,794 

  

  

 1,080,416 

Medical facilities(2)

  

 220,506 

  

  

-

  

  

 4,679 

  

  

 985 

  

  

 226,170 

  

  

 53,844 

  

  

 172,326  

  

  

 75,826 

  

  

 24,926 

  

  

 3,389,441 

Non-segment/Corporate  

  

-

  

  

-

  

  

-

  

  

 2,874 

  

  

 2,874 

  

  

-

  

  

 2,874  

  

  

-

  

  

 113,129 

  

  

 224,981 

   

$

 603,410 

  

$

 51,006 

  

$

 40,855 

  

$

 7,245 

  

$

 702,516 

  

$

 86,465 

  

$

 616,051  

  

$

 202,543 

  

$

 160,960 

  

$

 9,451,734 

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

Year Ended December 31, 2009  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

Seniors housing triple-net  

$

 358,109 

  

$

-

  

$

 35,945 

  

$

 5,309 

  

$

 399,363 

  

$

-

  

$

 399,363  

  

$

 101,300 

  

$

 12,622 

  

  

  

Medical facilities  

  

 181,802 

  

  

-

  

  

 4,940 

  

  

 9,368 

  

  

 196,110 

  

  

 48,965 

  

  

 147,145  

  

  

 63,623 

  

  

 20,584 

  

  

  

Non-segment/Corporate  

  

-

  

  

-

  

  

-

  

  

 1,170 

  

  

 1,170 

  

  

-

  

  

 1,170  

  

  

-

  

  

 76,567 

  

  

  

   

$

 539,911 

  

$

-

  

$

 40,885 

  

$

 15,847 

  

$

 596,643 

  

$

 48,965 

  

$

 547,678  

  

$

 164,923 

  

$

 109,773 

  

  

  

______________________________________________

(1)     Net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property level operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. We believe NOI provides investors relevant and useful information because it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.

(2)     Excludes income and expense amounts related to our properties held in unconsolidated entities.  Please see Note 7 for additional information.

  

18. Income Taxes and Distributions

 

To qualify as a real estate investment trust for federal income tax purposes, at least 90% of taxable income (excluding 100% of net capital gains) must be distributed to stockholders. We distributed at least 100% of taxable income for the years ended December 31, 2011, 2010 and 2009.  Real estate investment trusts that do not distribute a certain amount of current year taxable income in the current year are also subject to a 4% federal excise tax. The main differences between undistributed net income for federal income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting purposes, basis differences in acquisitions, differing useful lives and depreciation and amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt expense for tax purposes.

 

Cash distributions paid to common stockholders, for federal income tax purposes, are as follows:

 

  

  

  

  

Year Ended December 31,

  

  

  

  

2011

  

  

2010

  

  

2009

Per Share:

  

  

  

  

  

  

  

  

  

  

Ordinary income

  

$

 1.1472 

  

$

 0.7774 

  

$

 1.9865 

  

Return of capital

  

  

 1.4227 

  

  

 1.7408 

  

  

 0.4864 

  

Long-term capital gains

  

  

 0.1059 

  

  

 0.0190 

  

  

 - 

  

1250 gains

  

  

 0.1592 

  

  

 0.2028 

  

  

 0.2471 

  

Totals

  

$

 2.8350 

  

$

 2.7400 

  

$

 2.7200 

 

At December 31, 2011, we had U.S. federal tax losses from our taxable REIT subsidiaries (“TRS”) of $7,400,000, as well as apportioned state tax losses of $14,240,000 available for carryforward. Valuation allowances have been established for these assets based upon our assessment, as it is more likely than not that such assets may not be realized. During the year ended December 31,

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HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

2011, the federal tax valuation allowance declined by $10,306,000 due to current year utilization of net operating losses.  The U.S. federal and state tax loss carryforwards expire from 2012 through 2031.

 

Tax expense reflected in the financial statements primarily represents federal, state and local income taxes as well as amounts related to uncertain tax positions as discussed below.  As a result of certain acquisitions, we are subject to corporate level taxes for related asset dispositions for the period December 31, 2011 through December 31, 2021 (“built-in gains tax”). The amount of income potentially subject to this special corporate level tax is generally equal to (a) the excess of the fair value of the asset as of December 31, 2011 over its adjusted tax basis as of December 31, 2011, or (b) the actual amount of gain, whichever of (a) and (b) is lower. Some but not all gains recognized during this period of time could be offset by available net operating losses and capital loss carryforwards. We have not recorded a deferred tax liability as a result of the potential built-in gains tax based on our intentions with respect to such properties and available tax planning strategies.

 

Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), for taxable years beginning after July 30, 2008, the REIT may lease “qualified health care properties” on an arm’s-length basis to a TRS if the property is operated on behalf of such subsidiary by a person who qualifies as an “eligible independent contractor.” Generally, the rent received from the TRS will meet the related party rent exception and will be treated as “rents from real property.” A “qualified health care property” includes real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients.

 

Through December 31, 2011, we entered into five joint ventures that were structured under RIDEA.  Resident level rents and related operating expenses for these facilities are reported in the consolidated financial statements and are subject to federal taxes as the operations of such facilities are included in a TRS.  Certain net operating loss carryforwards could be utilized to offset taxable income in future years.

 

We apply the rules under ASC 740-10 in our Accounting for Uncertainty in Income Taxes for uncertain tax positions using a “more likely than not” recognition threshold for tax positions. Pursuant to these rules, we will initially recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits of the tax position, that such a position will be sustained upon examination by the relevant tax authorities. If the tax benefit meets the “more likely than not” threshold, the measurement of the tax benefit will be based on our estimate of the ultimate tax benefit to be sustained if audited by the taxing authority.

 

The entire balance of unrecognized tax benefits as of December 31, 2011 of $6,098,000 (exclusive of accrued interest and penalties) relates to the April 1, 2011 Genesis Acquisition discussed in further detail in Note 3 and is included in Accrued expenses and other liabilities on the consolidated balance sheet.  As a part of the Genesis Acquisition, we received a full indemnification from FC-GEN Operations Investment, LLC covering income taxes or other taxes as well as  interest and penalties relating to tax positions taken by FC-GEN Operations Investment, LLC prior to the acquisition.  Accordingly, an offsetting indemnification asset is recorded in receivables and other assets on the Consolidated Balance Sheet.  Such indemnification asset is reviewed for collectability periodically.

 

There were $149,000 of uncertain tax positions as of December 31, 2011 for which it is reasonably possible that the amount of unrecognized tax benefits would decrease during 2012.  Interest and penalties totaled $582,000 in expense for the year ended December 31, 2011 and were recorded as income tax expense in the consolidated statements of income with an offsetting amount recorded in other income relating to the increase in the indemnification asset. As of December 31, 2011, $2,738,000 of interest and penalties were accrued related to income taxes.

 

19. Retirement Arrangements

 

Under the retirement plan and trust (the “401(k) Plan”), eligible employees may make contributions, and we may make matching contributions and a profit sharing contribution. Our contributions to the 401(k) Plan totaled $1,558,000, $1,341,000 and $1,201,000 in 2011, 2010 and 2009, respectively.

 

We have a Supplemental Executive Retirement Plan (“SERP”), a non-qualified defined benefit pension plan, which provides one executive officer with supplemental deferred retirement benefits. The SERP provides an opportunity for the participant to receive retirement benefits that cannot be paid under our tax-qualified plans because of the restrictions imposed by ERISA and the Internal Revenue Code of 1986, as amended. Benefits are based on compensation and length of service and the SERP is unfunded. Benefit payments are expected to total $2,375,000 during the next five fiscal years and $3,560,000 thereafter. We use a December 31 measurement date for the SERP. The accrued liability on our balance sheet for the SERP was $5,623,000 at December 31, 2011 ($4,066,000 at December 31, 2010).

 

98

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The following tables provide a reconciliation of the changes in the SERP’s benefit obligations for the periods indicated (in thousands):

 

  

  

  

Year Ended December 31,

  

  

2011

  

2010

Reconciliation of benefit obligation:

  

  

  

  

  

  

Obligation at January 1

  

$

 4,066 

  

$

 3,287 

Service cost

  

  

 489 

  

  

 413 

Interest cost

  

  

 112 

  

  

 115 

Actuarial (gain) loss

  

  

 2,303 

  

  

 251 

Settlements

  

  

 (1,347) 

  

  

-

Obligation at December 31

  

$

 5,623 

  

$

 4,066 

 

We contributed $1,347,000 to the plan in connection with a settlement during the year ended December 31, 2011.  The following table shows the components of net periodic benefit costs for the periods indicated (in thousands):

 

  

  

  

Year Ended December 31,

  

  

2011

  

2010

Service cost

  

$

 489 

  

$

 413 

Interest cost

  

  

 112 

  

  

 115 

Net actuarial (gain) loss

  

  

 50 

  

  

 52 

Net periodic benefit cost

  

$

 651 

  

$

 580 

 

The following table provides information for the SERP, which has an accumulated benefit in excess of plan assets (in thousands):

 

  

  

  

December 31,

  

  

2011

  

2010

Projected benefit obligation

  

$

 5,623 

  

$

 4,066 

Accumulated benefit obligation

  

  

 3,307 

  

  

 2,938 

Fair value of assets

  

  

n/a

  

  

n/a

 

The following table reflects the weighted-average assumptions used to determine the benefit obligations and net periodic benefit cost for the SERP:

 

  

  

Benefit Obligations

  

Net Periodic Benefit Cost

  

  

December 31,

  

Year Ended December 31,

  

  

2011

  

2010

  

2011

  

2010

Discount rate

  

2.75%

  

3.50%

  

3.50%

  

3.50%

Rate of compensation increase

  

4.50%

  

4.50%

  

4.50%

  

4.50%

Expected long-term return on plan assets

  

n/a

  

n/a

  

n/a

  

n/a

99

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

20. Quarterly Results of Operations (Unaudited)

 

The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2011 and 2010 (in thousands, except per share data). The sum of individual quarterly amounts may not agree to the annual amounts included in the consolidated statements of income due to rounding.

 

  

   

  

Year Ended December 31, 2011  

  

   

  

1st Quarter

  

2nd Quarter

  

3rd Quarter(2)

  

4th Quarter(3)

Revenues - as reported  

  

$

 255,477 

  

$

 381,059 

  

$

 384,786  

  

$

 407,391  

Discontinued operations  

  

  

 (4,157) 

  

  

 (1,675) 

  

  

 (1,723)  

  

  

 -   

Revenues - as adjusted(1)

  

$

 251,320 

  

$

 379,384 

  

$

 383,063  

  

$

 407,391  

Net income (loss) attributable to common stockholders  

  

$

 23,372 

  

$

 69,847 

  

$

 36,607  

  

$

 27,282  

Net income (loss) attributable to common stockholders per share:  

  

  

  

  

  

  

  

  

   

  

  

   

  

Basic  

  

$

 0.15 

  

$

 0.40 

  

$

 0.21  

  

$

 0.15  

  

Diluted  

  

  

 0.15 

  

  

 0.39 

  

  

 0.21  

  

  

 0.15  

  

   

  

  

  

  

  

  

  

  

   

  

  

   

  

   

  

Year Ended December 31, 2010  

  

   

  

1st Quarter

  

2nd Quarter

  

3rd Quarter(4)

  

4th Quarter  

Revenues - as reported  

  

$

 152,759 

  

$

 163,131 

  

$

 176,146  

  

$

 202,456  

Discontinued operations  

  

  

 (11,361) 

  

  

 (10,992) 

  

  

 (8,809)  

  

  

 (6,033)  

Revenues - as adjusted(1)

  

$

 141,398 

  

$

 152,139 

  

$

 167,337  

  

$

 196,423  

Net income attributable to common stockholders  

  

$

 25,812 

  

$

 45,646 

  

$

 (4,563)  

  

$

 39,988  

Net income attributable to common stockholders per share:  

  

  

  

  

  

  

  

  

   

  

  

   

  

Basic  

  

$

 0.21 

  

$

 0.37 

  

$

 (0.04)  

  

$

 0.29  

  

Diluted  

  

  

 0.21 

  

  

 0.37 

  

  

 (0.04)  

  

  

 0.29  

   

  

  

  

  

  

  

  

  

   

  

  

   

  

   

  

  

  

  

  

  

  

  

   

  

  

   

(1) We have reclassified the income attributable to the properties sold prior to or held for sale at December 31, 2011 to discontinued operations. See Note 5.  

(2) The decreases in net income and amounts per share are primarily attributable to gains on sales of real estate totaling $30,224,000 for the second quarter as compared to $185,000 for the third quarter.  

(3) The decreases in net income and amounts per share are primarily attributable to impairment charges of $11,992,000.  

(4) The decreases in net income and amounts per share are primarily attributable to provisions for loan losses ($28,918,000) and transaction costs ($18,835,000).  

 

21. Subsequent Events

 

Chartwell.  On February 15, 2012, the company announced it will partner with Chartwell Seniors Housing Real Estate Investment Trust to own and operate a portfolio of 42 seniors housing and care communities located in Canada. The portfolio is being acquired for $925 million.  This transaction will be structured under RIDEA with 39 facilities owned 50% by us and 50% by Chartwell, and three facilities wholly owned by us.  Our $503 million investment will be through a combination of cash and the pro rata assumption of secured debt.  Chartwell will provide management services to the communities under an incentive-based management contract.

100

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

Not applicable.

 

Item 9A.  Controls and Procedures

 

Disclosure Controls and Procedures

 

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

 

Management’s Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011 based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in a report entitled Internal Control — Integrated Framework.  Based on this assessment, using the criteria above, management concluded that the Company’s system of internal control over financial reporting was effective as of December 31, 2011.

 

The independent registered public accounting firm of Ernst & Young LLP, as auditors of the Company’s consolidated financial statements, has issued an attestation report on the Company’s internal control over financial reporting.

 

Changes in Internal Control over Financial Reporting

 

No change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended) occurred during the fourth quarter of the one-year period covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

101

 


 

HEALTH CARE REIT, INC.

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

 

The Board of Directors and Shareholders of Health Care REIT, Inc.

 

We have audited Health Care REIT, Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Health Care REIT, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

In our opinion, Health Care REIT, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Health Care REIT, Inc. as of December 31, 2011 and 2010, and the related consolidated statements of income, equity, and cash flows for each of the three years in the period ended December 31, 2011 and our report dated February 17, 2012 expressed an unqualified opinion thereon.

 

       /s/  Ernst & Young LLP

 

Toledo, Ohio

February 17, 2012

 

Item 9B. Other Information

 

     None.

102

 


 

  

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance

 

The information required by this Item is incorporated herein by reference to the information under the headings “Election of Directors,” “Executive Officers,” “Board and Committees,” “Communications with the Board” and “Security Ownership of Directors and Management and Certain Beneficial Owners — Section 16(a) Compliance” in our definitive proxy statement, which will be filed with the Securities and Exchange Commission (“Commission”) prior to April 30, 2012.

 

We have adopted a Code of Business Conduct & Ethics that applies to our directors, officers and employees. The code is posted on the Internet at www.hcreit.com. Any amendment to, or waivers from, the code that relate to any officer or director of the Company will be promptly disclosed on the Internet at www.hcreit.com.

 

In addition, the Board has adopted charters for the Audit, Compensation and Nominating/Corporate Governance Committees. These charters are posted on the Internet at www.hcreit.com.

 

Item 11.  Executive Compensation

 

The information required by this Item is incorporated herein by reference to the information under the headings “Executive Compensation,” “Compensation Committee Report” and “Director Compensation” in our definitive proxy statement, which will be filed with the Commission prior to April 30, 2012.

 

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The information required by this Item is incorporated herein by reference to the information under the headings “Security Ownership of Directors and Management and Certain Beneficial Owners” and “Equity Compensation Plan Information” in our definitive proxy statement, which will be filed with the Commission prior to April 30, 2012.

 

Item 13.  Certain Relationships and Related Transactions and Director Independence 

 

The information required by this Item is incorporated herein by reference to the information under the headings “Board and Committees — Independence and Meetings” and “Certain Relationships and Related Transactions” in our definitive proxy statement, which will be filed with the Commission prior to April 30, 2012.

 

Item 14.  Principal Accounting Fees and Services

 

The information required by this Item is incorporated herein by reference to the information under the headings “Ratification of the Appointment of the Independent Registered Public Accounting Firm” and “Pre-Approval Policies and Procedures” in our definitive proxy statement, which will be filed with the Commission prior to April 30, 2012.

103

 


 

  

PART IV

 

Item 15. Exhibits and Financial Statement Schedules

 

(a) 1.           Our Consolidated Financial Statements are included in Part II, Item 8: 

 

Report of Independent Registered Public Accounting Firm

71

Consolidated Balance Sheets – December 31, 2011 and 2010

72

Consolidated Statements of  Income — Years ended  December 31, 2011, 2010 and  2009

73

Consolidated Statements of  Equity — Years ended  December 31, 2011, 2010 and  2009

74

Consolidated Statements of  Cash Flows — Years ended  December 31, 2011, 2010 and  2009

75

Notes to Consolidated Financial Statements

76

 

     2.            The following Financial Statement Schedules are included in Item 15(c): 

 

                    III – Real Estate and Accumulated Depreciation

                    IV – Mortgage Loans on Real Estate

 

     3.            Exhibit Index:                                                                                                                                 

 

The information required by this item is set forth on the Exhibit Index that follows the Financial Statement Schedules to this Annual Report on Form 10-K.

 

(b)           Exhibits: 

 

The exhibits listed on the Exhibit Index are either filed with this Form 10-K or incorporated by reference in accordance with Rule 12b-32 of the Securities Exchange Act of 1934.

 

(c)           Financial Statement Schedules:

 

Financial statement schedules are included on pages 106 through 120.

104

 


 

  

 

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 hereunto duly authorized.

 

                                                                                                     HEALTH CARE REIT, INC.

 

                                                                                                                   By: /s/   George L. Chapman                                         

                                                                                                                           Chairman, Chief Executive Officer, President and Director

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 17, 2012, by the following person on behalf of the Company and in the capacities indicated.

 

                    /s/  William C. Ballard, Jr.**                     

                                        /s/  Sharon M. Oster**                             

                      William C. Ballard, Jr., Director                       

                                        Sharon M. Oster, Director                             

 

 

                               /s/  Pier C. Borra**                               

                                        /s/  Jeffrey R. Otten**                             

                              Pier C. Borra, Director                               

                                        Jeffrey R. Otten, Director                             

 

 

                           /s/  Thomas J. Derosa**                           

                                      /s/  R. Scott Trumbull**                           

                         Thomas J. DeRosa, Director                         

                                       R. Scott Trumbull, Director                           

 

 

                        /s/  Jeffrey H. Donahue**                         

                                        /s/  George L. Chapman                            

                        Jeffrey H. Donahue, Director                         

                   George L. Chapman, Chairman, Chief Executive        

 

                                    Officer, President and Director                        

 

                                     (Principal Executive Officer)                          

 

 

                               /s/  Peter J. Grua**                                

                                          /s/  Scott A. ESTES**                               

                               Peter J. Grua, Director                               

                  Scott A. Estes, Executive Vice President and Chief       

 

                      Financial Officer (Principal Financial Officer)           

 

 

                             /s/  Fred S. Klipsch**                              

                                   /s/  Paul D. Nungester, Jr.**                       

                            Fred S. Klipsch, Director                             

                    Paul D. Nungester, Jr., Senior Vice President and         

 

                          Controller (Principal Accounting Officer)               

 

 

                           /s/  Daniel A. Decker**                           

**By:          /s/  George L. Chapman                                              

                           Daniel A. Decker, Director                           

                            George L. Chapman, Attorney-in-Fact                 

105

 


 

  

Health Care REIT, Inc.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2011

(Dollars in thousands)

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net:

Aboite Twp, IN  

  

$

 - 

  

$

 1,770 

  

$

 19,930 

  

$

 835 

  

$

 1,770 

  

$

 20,765 

  

$

 668 

  

2010

  

2008

Agawam, MA  

  

  

 - 

  

  

 880 

  

  

 16,112 

  

  

 2,134 

  

  

 880 

  

  

 18,246 

  

  

 4,690 

  

2002

  

1993

Agawam, MA  

  

  

 - 

  

  

 1,230 

  

  

 13,618 

  

  

 - 

  

  

 1,230 

  

  

 13,618 

  

  

 299 

  

2011

  

1975

Agawam, MA  

  

  

 - 

  

  

 930 

  

  

 15,304 

  

  

 - 

  

  

 930 

  

  

 15,304 

  

  

 326 

  

2011

  

1970

Agawam, MA  

  

  

 - 

  

  

 920 

  

  

 10,661 

  

  

 - 

  

  

 920 

  

  

 10,661 

  

  

 239 

  

2011

  

1985

Agawam, MA  

  

  

 - 

  

  

 920 

  

  

 10,562 

  

  

 - 

  

  

 920 

  

  

 10,562 

  

  

 236 

  

2011

  

1967

Akron, OH  

  

  

 - 

  

  

 290 

  

  

 8,219 

  

  

 491 

  

  

 290 

  

  

 8,710 

  

  

 1,559 

  

2005

  

1961

Akron, OH  

  

  

 - 

  

  

 630 

  

  

 7,535 

  

  

 184 

  

  

 630 

  

  

 7,719 

  

  

 1,195 

  

2006

  

1915

Alexandria, VA  

  

  

 - 

  

  

 1,330 

  

  

 7,820 

  

  

 - 

  

  

 1,330 

  

  

 7,820 

  

  

 688 

  

2008

  

1955

Alliance, OH  

  

  

 4,482 

  

  

 270 

  

  

 7,723 

  

  

 107 

  

  

 270 

  

  

 7,830 

  

  

 1,311 

  

2006

  

1982

Amarillo, TX  

  

  

 - 

  

  

 540 

  

  

 7,260 

  

  

 - 

  

  

 540 

  

  

 7,260 

  

  

 1,383 

  

2005

  

1986

Amelia Island, FL  

  

  

 - 

  

  

 3,290 

  

  

 24,310 

  

  

 19,131 

  

  

 3,290 

  

  

 43,441 

  

  

 5,335 

  

2005

  

1998

Ames, IA  

  

  

 - 

  

  

 330 

  

  

 8,871 

  

  

 - 

  

  

 330 

  

  

 8,870 

  

  

 400 

  

2010

  

1999

Anderson, SC  

  

  

 - 

  

  

 710 

  

  

 6,290 

  

  

 419 

  

  

 710 

  

  

 6,709 

  

  

 1,675 

  

2003

  

1986

Andover, MA  

  

  

 - 

  

  

 1,310 

  

  

 12,647 

  

  

 - 

  

  

 1,310 

  

  

 12,647 

  

  

 292 

  

2011

  

1985

Annapolis, MD  

  

  

 - 

  

  

 1,010 

  

  

 24,825 

  

  

 - 

  

  

 1,010 

  

  

 24,825 

  

  

 509 

  

2011

  

1993

Ansted, WV  

  

  

 - 

  

  

 240 

  

  

 14,113 

  

  

 - 

  

  

 240 

  

  

 14,113 

  

  

 284 

  

2011

  

1982

Asheboro, NC  

  

  

 - 

  

  

 290 

  

  

 5,032 

  

  

 165 

  

  

 290 

  

  

 5,197 

  

  

 1,194 

  

2003

  

1998

Asheville, NC  

  

  

 - 

  

  

 204 

  

  

 3,489 

  

  

 - 

  

  

 204 

  

  

 3,489 

  

  

 1,295 

  

1999

  

1999

Asheville, NC  

  

  

 - 

  

  

 280 

  

  

 1,955 

  

  

 351 

  

  

 280 

  

  

 2,306 

  

  

 596 

  

2003

  

1992

Aspen Hill, MD  

  

  

 - 

  

  

 - 

  

  

 9,008 

  

  

 - 

  

  

 - 

  

  

 9,008 

  

  

 206 

  

2011

  

1988

Atlanta, GA  

  

  

 - 

  

  

 460 

  

  

 5,540 

  

  

 190 

  

  

 460 

  

  

 5,730 

  

  

 1,156 

  

2005

  

1972

Auburndale, FL  

  

  

 - 

  

  

 750 

  

  

 5,950 

  

  

 304 

  

  

 750 

  

  

 6,254 

  

  

 1,179 

  

2005

  

1983

Aurora, CO  

  

  

 - 

  

  

 2,600 

  

  

 5,906 

  

  

 7,915 

  

  

 2,600 

  

  

 13,821 

  

  

 2,341 

  

2006

  

2006

Aurora, CO  

  

  

 - 

  

  

 2,440 

  

  

 28,172 

  

  

 - 

  

  

 2,440 

  

  

 28,172 

  

  

 3,263 

  

2006

  

2008

Aurora, OH  

  

  

 - 

  

  

 1,760 

  

  

 14,148 

  

  

 - 

  

  

 1,760 

  

  

 14,148 

  

  

 388 

  

2011

  

2002

Austin, TX  

  

  

 10,052 

  

  

 730 

  

  

 18,970 

  

  

 - 

  

  

 730 

  

  

 18,970 

  

  

 2,421 

  

2007

  

2006

Avon Lake, OH  

  

  

 - 

  

  

 790 

  

  

 10,421 

  

  

 - 

  

  

 790 

  

  

 10,421 

  

  

 297 

  

2011

  

2001

Avon, IN  

  

  

 - 

  

  

 1,830 

  

  

 14,470 

  

  

 - 

  

  

 1,830 

  

  

 14,470 

  

  

 681 

  

2010

  

2004

Ayer, MA  

  

  

 - 

  

  

 - 

  

  

 22,074 

  

  

 - 

  

  

 - 

  

  

 22,074 

  

  

 454 

  

2011

  

1988

Baltic, OH  

  

  

 3,672 

  

  

 50 

  

  

 8,709 

  

  

 189 

  

  

 50 

  

  

 8,898 

  

  

 1,460 

  

2006

  

1983

Baltimore, MD  

  

  

 - 

  

  

 1,350 

  

  

 14,884 

  

  

 - 

  

  

 1,350 

  

  

 14,884 

  

  

 322 

  

2011

  

1993

Baltimore, MD  

  

  

 - 

  

  

 900 

  

  

 5,039 

  

  

 - 

  

  

 900 

  

  

 5,039 

  

  

 129 

  

2011

  

1969

Barnum, MN  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

2011

  

2005

Bartlesville, OK  

  

  

 - 

  

  

 100 

  

  

 1,380 

  

  

 - 

  

  

 100 

  

  

 1,380 

  

  

 602 

  

1996

  

1995

Baytown, TX  

  

  

 9,428 

  

  

 450 

  

  

 6,150 

  

  

 - 

  

  

 450 

  

  

 6,150 

  

  

 1,700 

  

2002

  

2000

Baytown, TX  

  

  

 - 

  

  

 540 

  

  

 11,110 

  

  

 - 

  

  

 540 

  

  

 11,110 

  

  

 682 

  

2009

  

2008

Beachwood, OH  

  

  

 - 

  

  

 1,260 

  

  

 23,478 

  

  

 - 

  

  

 1,260 

  

  

 23,478 

  

  

 6,529 

  

2001

  

1990

Beattyville, KY  

  

  

 - 

  

  

 100 

  

  

 6,900 

  

  

 - 

  

  

 100 

  

  

 6,900 

  

  

 1,274 

  

2005

  

1972

Bedford, NH  

  

  

 - 

  

  

 2,250 

  

  

 28,831 

  

  

 - 

  

  

 2,250 

  

  

 28,831 

  

  

 589 

  

2011

  

1978

Bellevue, WI  

  

  

 - 

  

  

 1,740 

  

  

 18,260 

  

  

 571 

  

  

 1,740 

  

  

 18,831 

  

  

 2,706 

  

2006

  

2004

Benbrook, TX  

  

  

 - 

  

  

 1,550 

  

  

 13,553 

  

  

 - 

  

  

 1,550 

  

  

 13,553 

  

  

 236 

  

2011

  

2007

Bethel Park, PA  

  

  

 - 

  

  

 1,700 

  

  

 16,007 

  

  

 - 

  

  

 1,700 

  

  

 16,007 

  

  

 1,213 

  

2007

  

2009

Bluefield, VA  

  

  

 - 

  

  

 900 

  

  

 12,463 

  

  

 - 

  

  

 900 

  

  

 12,463 

  

  

 262 

  

2011

  

2005

Boise, ID  

  

  

 - 

  

  

 810 

  

  

 5,401 

  

  

 - 

  

  

 810 

  

  

 5,401 

  

  

 2,345 

  

1998

  

1966

Boonville, IN  

  

  

 - 

  

  

 190 

  

  

 5,510 

  

  

 - 

  

  

 190 

  

  

 5,510 

  

  

 1,499 

  

2002

  

2000

Boynton Beach, FL  

  

  

 - 

  

  

 980 

  

  

 8,112 

  

  

 - 

  

  

 980 

  

  

 8,112 

  

  

 1,734 

  

2004

  

1999

Bradenton, FL  

  

  

 - 

  

  

 252 

  

  

 3,298 

  

  

 - 

  

  

 252 

  

  

 3,298 

  

  

 1,455 

  

1996

  

1995

Braintree, MA  

  

  

 - 

  

  

 170 

  

  

 7,157 

  

  

 1,290 

  

  

 170 

  

  

 8,447 

  

  

 6,421 

  

1997

  

1968

Brandon, MS  

  

  

 - 

  

  

 1,220 

  

  

 10,241 

  

  

 - 

  

  

 1,220 

  

  

 10,241 

  

  

 327 

  

2010

  

1999

Bremerton, WA  

  

  

 - 

  

  

 390 

  

  

 2,210 

  

  

 144 

  

  

 390 

  

  

 2,354 

  

  

 303 

  

2006

  

1999

Bremerton, WA  

  

  

 - 

  

  

 830 

  

  

 10,420 

  

  

 150 

  

  

 830 

  

  

 10,570 

  

  

 323 

  

2010

  

1984

Brick, NJ  

  

  

 - 

  

  

 1,290 

  

  

 25,247 

  

  

 - 

  

  

 1,290 

  

  

 25,247 

  

  

 226 

  

2011

  

2000

Brick, NJ  

  

  

 - 

  

  

 1,170 

  

  

 17,372 

  

  

 61 

  

  

 1,176 

  

  

 17,427 

  

  

 451 

  

2010

  

1998

Brick, NJ(1)

  

  

 - 

  

  

 690 

  

  

 17,125 

  

  

 16 

  

  

 690 

  

  

 17,141 

  

  

 439 

  

2010

  

1999

Bridgewater, NJ  

  

  

 - 

  

  

 1,850 

  

  

 3,050 

  

  

 - 

  

  

 1,850 

  

  

 3,050 

  

  

 874 

  

2004

  

1970

Bridgewater, NJ  

  

  

 - 

  

  

 1,730 

  

  

 48,201 

  

  

 74 

  

  

 1,730 

  

  

 48,275 

  

  

 1,235 

  

2010

  

1999

Bridgewater, NJ  

  

  

 - 

  

  

 1,800 

  

  

 31,810 

  

  

 - 

  

  

 1,800 

  

  

 31,810 

  

  

 282 

  

2011

  

2001

Brighton, MA  

  

  

 - 

  

  

 240 

  

  

 3,859 

  

  

 2,126 

  

  

 240 

  

  

 5,985 

  

  

 1,142 

  

2005

  

1982

Broadview Heights, OH  

  

  

 - 

  

  

 920 

  

  

 12,400 

  

  

 2,388 

  

  

 920 

  

  

 14,788 

  

  

 3,539 

  

2001

  

1984

Brookline, MA  

  

  

 - 

  

  

 2,760 

  

  

 9,217 

  

  

 - 

  

  

 2,760 

  

  

 9,217 

  

  

 230 

  

2011

  

1984

Brooklyn Park, MD  

  

  

 - 

  

  

 1,290 

  

  

 16,329 

  

  

 - 

  

  

 1,290 

  

  

 16,329 

  

  

 347 

  

2011

  

1995

Bunnell, FL  

  

  

 - 

  

  

 260 

  

  

 7,118 

  

  

 - 

  

  

 260 

  

  

 7,118 

  

  

 1,610 

  

2004

  

1985

Burleson, TX  

  

  

 12,752 

  

  

 670 

  

  

 13,985 

  

  

 - 

  

  

 670 

  

  

 13,985 

  

  

 253 

  

2011

  

2006

Burlington, NC  

  

  

 - 

  

  

 280 

  

  

 4,297 

  

  

 707 

  

  

 280 

  

  

 5,004 

  

  

 1,133 

  

2003

  

2000

Burlington, NC  

  

  

 - 

  

  

 460 

  

  

 5,467 

  

  

 - 

  

  

 460 

  

  

 5,467 

  

  

 1,274 

  

2003

  

1997

Burlington, NJ  

  

  

 - 

  

  

 1,700 

  

  

 12,554 

  

  

 - 

  

  

 1,700 

  

  

 12,554 

  

  

 306 

  

2011

  

2005

Burlington, NJ  

  

  

 - 

  

  

 1,170 

  

  

 19,205 

  

  

 - 

  

  

 1,170 

  

  

 19,205 

  

  

 274 

  

2011

  

1994

Butler, AL  

  

  

 - 

  

  

 90 

  

  

 3,510 

  

  

 - 

  

  

 90 

  

  

 3,510 

  

  

 867 

  

2004

  

1960

106

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Butte, MT  

  

  

 - 

  

  

 550 

  

  

 3,957 

  

  

 43 

  

  

 550 

  

  

 4,000 

  

  

 1,223 

  

1998

  

1999

Byrdstown, TN  

  

  

 - 

  

  

 - 

  

  

 2,414 

  

  

 132 

  

  

 - 

  

  

 2,546 

  

  

 1,247 

  

2004

  

1982

Cambridge, MD  

  

  

 - 

  

  

 490 

  

  

 15,843 

  

  

 - 

  

  

 490 

  

  

 15,843 

  

  

 329 

  

2011

  

1990

Canton, MA  

  

  

 - 

  

  

 820 

  

  

 8,201 

  

  

 263 

  

  

 820 

  

  

 8,464 

  

  

 2,495 

  

2002

  

1993

Canton, OH  

  

  

 - 

  

  

 300 

  

  

 2,098 

  

  

 - 

  

  

 300 

  

  

 2,098 

  

  

 769 

  

1998

  

1998

Cape Coral, FL  

  

  

 - 

  

  

 530 

  

  

 3,281 

  

  

 - 

  

  

 530 

  

  

 3,281 

  

  

 897 

  

2002

  

2000

Carmel, IN  

  

  

 - 

  

  

 2,370 

  

  

 57,175 

  

  

 421 

  

  

 2,370 

  

  

 57,596 

  

  

 5,271 

  

2006

  

2007

Cary, NC  

  

  

 - 

  

  

 1,500 

  

  

 4,350 

  

  

 986 

  

  

 1,500 

  

  

 5,336 

  

  

 1,798 

  

1998

  

1996

Catonsville, MD  

  

  

 - 

  

  

 1,330 

  

  

 15,003 

  

  

 - 

  

  

 1,330 

  

  

 15,003 

  

  

 324 

  

2011

  

1973

Cedar Grove, NJ  

  

  

 - 

  

  

 1,830 

  

  

 10,939 

  

  

 - 

  

  

 1,830 

  

  

 10,939 

  

  

 244 

  

2011

  

1994

Cedar Grove, NJ  

  

  

 - 

  

  

 2,850 

  

  

 27,737 

  

  

 - 

  

  

 2,850 

  

  

 27,737 

  

  

 581 

  

2011

  

1970

Centreville, MD(1)

  

  

 - 

  

  

 600 

  

  

 14,602 

  

  

 - 

  

  

 600 

  

  

 14,602 

  

  

 312 

  

2011

  

1993

Chapel Hill, NC  

  

  

 - 

  

  

 354 

  

  

 2,646 

  

  

 783 

  

  

 354 

  

  

 3,429 

  

  

 893 

  

2002

  

1997

Charles Town, WV  

  

  

 - 

  

  

 230 

  

  

 22,834 

  

  

 - 

  

  

 230 

  

  

 22,834 

  

  

 454 

  

2011

  

1997

Charleston, WV  

  

  

 - 

  

  

 440 

  

  

 17,575 

  

  

 - 

  

  

 440 

  

  

 17,575 

  

  

 354 

  

2011

  

1998

Charleston, WV  

  

  

 - 

  

  

 410 

  

  

 5,430 

  

  

 - 

  

  

 410 

  

  

 5,430 

  

  

 123 

  

2011

  

1996

Chelmsford, MA  

  

  

 - 

  

  

 1,040 

  

  

 10,951 

  

  

 1,441 

  

  

 1,040 

  

  

 12,392 

  

  

 2,407 

  

2003

  

1997

Chickasha, OK  

  

  

 - 

  

  

 85 

  

  

 1,395 

  

  

 - 

  

  

 85 

  

  

 1,395 

  

  

 602 

  

1996

  

1996

Cincinnati, OH  

  

  

 - 

  

  

 2,060 

  

  

 109,388 

  

  

 350 

  

  

 2,060 

  

  

 109,738 

  

  

 4,195 

  

2007

  

2010

Cinnaminson, NJ  

  

  

 - 

  

  

 860 

  

  

 6,663 

  

  

 - 

  

  

 860 

  

  

 6,663 

  

  

 161 

  

2011

  

1986

Claremore, OK  

  

  

 - 

  

  

 155 

  

  

 1,428 

  

  

 - 

  

  

 155 

  

  

 1,428 

  

  

 597 

  

1996

  

1996

Clark Summit, PA  

  

  

 - 

  

  

 600 

  

  

 11,179 

  

  

 - 

  

  

 600 

  

  

 11,179 

  

  

 247 

  

2011

  

1985

Clarks Summit, PA  

  

  

 - 

  

  

 400 

  

  

 6,529 

  

  

 - 

  

  

 400 

  

  

 6,529 

  

  

 148 

  

2011

  

1997

Clarksville, TN  

  

  

 - 

  

  

 330 

  

  

 2,292 

  

  

 - 

  

  

 330 

  

  

 2,292 

  

  

 833 

  

1998

  

1998

Clearwater, FL  

  

  

 - 

  

  

 160 

  

  

 7,218 

  

  

 - 

  

  

 160 

  

  

 7,218 

  

  

 1,478 

  

2004

  

1961

Clearwater, FL  

  

  

 - 

  

  

 1,260 

  

  

 2,740 

  

  

 324 

  

  

 1,260 

  

  

 3,064 

  

  

 713 

  

2005

  

1983

Cleburne, TX  

  

  

 - 

  

  

 520 

  

  

 5,369 

  

  

 - 

  

  

 520 

  

  

 5,369 

  

  

 654 

  

2006

  

2007

Cleveland, TN  

  

  

 - 

  

  

 350 

  

  

 5,000 

  

  

 122 

  

  

 350 

  

  

 5,122 

  

  

 1,531 

  

2001

  

1987

Cloquet, MN  

  

  

 - 

  

  

 340 

  

  

 4,660 

  

  

 - 

  

  

 340 

  

  

 4,660 

  

  

 33 

  

2011

  

2009

Cloquet, MN  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 - 

  

2011

  

2002

Coeur d'Alene, ID  

  

  

 - 

  

  

 600 

  

  

 7,878 

  

  

 - 

  

  

 600 

  

  

 7,878 

  

  

 3,047 

  

1998

  

1996

Colchester, CT  

  

  

 - 

  

  

 980 

  

  

 4,860 

  

  

 - 

  

  

 980 

  

  

 4,860 

  

  

 132 

  

2011

  

1986

Colorado Springs, CO  

  

  

 - 

  

  

 310 

  

  

 6,290 

  

  

 - 

  

  

 310 

  

  

 6,290 

  

  

 1,273 

  

2005

  

1985

Colts Neck, NJ  

  

  

 - 

  

  

 780 

  

  

 14,733 

  

  

 99 

  

  

 783 

  

  

 14,829 

  

  

 388 

  

2010

  

2002

Columbia Heights, MN  

  

  

 - 

  

  

 825 

  

  

 14,175 

  

  

 - 

  

  

 825 

  

  

 14,175 

  

  

 94 

  

2011

  

2009

Columbia, SC  

  

  

 - 

  

  

 2,120 

  

  

 4,860 

  

  

 5,709 

  

  

 2,120 

  

  

 10,569 

  

  

 2,086 

  

2003

  

2000

Columbia, TN  

  

  

 - 

  

  

 341 

  

  

 2,295 

  

  

 - 

  

  

 341 

  

  

 2,295 

  

  

 846 

  

1999

  

1999

Columbia, TN  

  

  

 - 

  

  

 590 

  

  

 3,787 

  

  

 - 

  

  

 590 

  

  

 3,787 

  

  

 1,161 

  

2003

  

1974

Columbus, IN  

  

  

 - 

  

  

 610 

  

  

 3,190 

  

  

 - 

  

  

 610 

  

  

 3,190 

  

  

 147 

  

2010

  

1998

Columbus, IN  

  

  

 - 

  

  

 530 

  

  

 6,710 

  

  

 - 

  

  

 530 

  

  

 6,710 

  

  

 1,677 

  

2002

  

2001

Columbus, OH  

  

  

 - 

  

  

 530 

  

  

 5,170 

  

  

 8,300 

  

  

 1,070 

  

  

 12,930 

  

  

 2,170 

  

2005

  

1968

Columbus, OH  

  

  

 4,090 

  

  

 1,010 

  

  

 5,022 

  

  

 - 

  

  

 1,010 

  

  

 5,022 

  

  

 923 

  

2006

  

1983

Columbus, OH  

  

  

 - 

  

  

 1,010 

  

  

 4,931 

  

  

 13,620 

  

  

 1,860 

  

  

 17,701 

  

  

 2,900 

  

2006

  

1978

Concord, NC  

  

  

 - 

  

  

 550 

  

  

 3,921 

  

  

 55 

  

  

 550 

  

  

 3,976 

  

  

 1,027 

  

2003

  

1997

Concord, NH  

  

  

 - 

  

  

 780 

  

  

 18,423 

  

  

 - 

  

  

 780 

  

  

 18,423 

  

  

 371 

  

2011

  

1905

Concord, NH  

  

  

 - 

  

  

 1,760 

  

  

 43,179 

  

  

 - 

  

  

 1,760 

  

  

 43,179 

  

  

 867 

  

2011

  

1994

Concord, NH  

  

  

 - 

  

  

 720 

  

  

 3,041 

  

  

 - 

  

  

 720 

  

  

 3,041 

  

  

 79 

  

2011

  

1972

Conroe, TX  

  

  

 - 

  

  

 980 

  

  

 7,771 

  

  

 - 

  

  

 980 

  

  

 7,771 

  

  

 363 

  

2009

  

2010

Corpus Christi, TX  

  

  

 - 

  

  

 307 

  

  

 443 

  

  

 - 

  

  

 307 

  

  

 443 

  

  

 240 

  

2005

  

1985

Corpus Christi, TX  

  

  

 - 

  

  

 400 

  

  

 1,916 

  

  

 - 

  

  

 400 

  

  

 1,916 

  

  

 517 

  

2005

  

1985

Dade City, FL  

  

  

 - 

  

  

 250 

  

  

 7,150 

  

  

 - 

  

  

 250 

  

  

 7,150 

  

  

 1,520 

  

2004

  

1975

Daniels, WV  

  

  

 - 

  

  

 200 

  

  

 17,320 

  

  

 - 

  

  

 200 

  

  

 17,320 

  

  

 347 

  

2011

  

1986

Danville, VA  

  

  

 - 

  

  

 410 

  

  

 3,954 

  

  

 722 

  

  

 410 

  

  

 4,676 

  

  

 1,104 

  

2003

  

1998

Daytona Beach, FL  

  

  

 - 

  

  

 470 

  

  

 5,930 

  

  

 - 

  

  

 470 

  

  

 5,930 

  

  

 1,372 

  

2004

  

1986

Daytona Beach, FL  

  

  

 - 

  

  

 490 

  

  

 5,710 

  

  

 - 

  

  

 490 

  

  

 5,710 

  

  

 1,370 

  

2004

  

1961

DeBary, FL  

  

  

 - 

  

  

 440 

  

  

 7,460 

  

  

 - 

  

  

 440 

  

  

 7,460 

  

  

 1,578 

  

2004

  

1965

Dedham, MA  

  

  

 - 

  

  

 1,360 

  

  

 9,830 

  

  

 - 

  

  

 1,360 

  

  

 9,830 

  

  

 2,878 

  

2002

  

1996

DeForest, WI  

  

  

 - 

  

  

 250 

  

  

 5,350 

  

  

 354 

  

  

 250 

  

  

 5,704 

  

  

 690 

  

2007

  

2006

Defuniak Springs, FL  

  

  

 - 

  

  

 1,350 

  

  

 10,250 

  

  

 - 

  

  

 1,350 

  

  

 10,250 

  

  

 1,572 

  

2006

  

1980

DeLand, FL  

  

  

 - 

  

  

 220 

  

  

 7,080 

  

  

 - 

  

  

 220 

  

  

 7,080 

  

  

 1,511 

  

2004

  

1967

Denton, MD  

  

  

 - 

  

  

 390 

  

  

 4,010 

  

  

 206 

  

  

 390 

  

  

 4,216 

  

  

 1,183 

  

2003

  

1982

Denton, TX  

  

  

 - 

  

  

 1,760 

  

  

 8,305 

  

  

 - 

  

  

 1,760 

  

  

 8,305 

  

  

 21 

  

2010

  

2011

Denver, CO  

  

  

 - 

  

  

 2,530 

  

  

 9,514 

  

  

 - 

  

  

 2,530 

  

  

 9,514 

  

  

 1,684 

  

2005

  

1986

Denver, CO  

  

  

 - 

  

  

 3,650 

  

  

 14,906 

  

  

 1,605 

  

  

 3,650 

  

  

 16,511 

  

  

 2,134 

  

2006

  

1987

Denver, CO  

  

  

 - 

  

  

 2,076 

  

  

 13,594 

  

  

 - 

  

  

 2,076 

  

  

 13,594 

  

  

 784 

  

2007

  

2009

Dover, DE  

  

  

 - 

  

  

 400 

  

  

 7,717 

  

  

 - 

  

  

 400 

  

  

 7,717 

  

  

 170 

  

2011

  

1997

Dover, DE  

  

  

 - 

  

  

 600 

  

  

 22,266 

  

  

 - 

  

  

 600 

  

  

 22,266 

  

  

 456 

  

2011

  

2006

Drescher, PA  

  

  

 - 

  

  

 2,060 

  

  

 40,236 

  

  

 45 

  

  

 2,063 

  

  

 40,278 

  

  

 1,028 

  

2010

  

2001

Dundalk, MD(1)

  

  

 - 

  

  

 1,770 

  

  

 32,047 

  

  

 - 

  

  

 1,770 

  

  

 32,047 

  

  

 658 

  

2011

  

1988

Durham, NC  

  

  

 - 

  

  

 1,476 

  

  

 10,659 

  

  

 2,196 

  

  

 1,476 

  

  

 12,855 

  

  

 7,592 

  

1997

  

1999

East Brunswick, NJ  

  

  

 - 

  

  

 1,380 

  

  

 34,229 

  

  

 - 

  

  

 1,380 

  

  

 34,229 

  

  

 300 

  

2011

  

1998

East Norriston, PA  

  

  

 - 

  

  

 1,200 

  

  

 28,129 

  

  

 139 

  

  

 1,210 

  

  

 28,258 

  

  

 731 

  

2010

  

1988

Easton, MD  

  

  

 - 

  

  

 900 

  

  

 24,539 

  

  

 - 

  

  

 900 

  

  

 24,539 

  

  

 518 

  

2011

  

2006

Easton, PA  

  

  

 - 

  

  

 285 

  

  

 6,315 

  

  

 - 

  

  

 285 

  

  

 6,315 

  

  

 3,440 

  

1993

  

1959

Eatontown, NJ  

  

  

 - 

  

  

 1,190 

  

  

 23,358 

  

  

 - 

  

  

 1,190 

  

  

 23,358 

  

  

 489 

  

2011

  

1996

107

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Eden, NC  

  

  

 - 

  

  

 390 

  

  

 4,877 

  

  

 - 

  

  

 390 

  

  

 4,877 

  

  

 1,156 

  

2003

  

1998

El Paso, TX  

  

  

 - 

  

  

 539 

  

  

 8,961 

  

  

 232 

  

  

 539 

  

  

 9,193 

  

  

 1,725 

  

2005

  

1970

El Paso, TX  

  

  

 - 

  

  

 642 

  

  

 3,958 

  

  

 1,100 

  

  

 642 

  

  

 5,058 

  

  

 998 

  

2005

  

1969

Elizabeth City, NC  

  

  

 - 

  

  

 200 

  

  

 2,760 

  

  

 2,011 

  

  

 200 

  

  

 4,771 

  

  

 1,480 

  

1998

  

1999

Elizabethton, TN  

  

  

 - 

  

  

 310 

  

  

 4,604 

  

  

 336 

  

  

 310 

  

  

 4,940 

  

  

 1,514 

  

2001

  

1980

Englewood, NJ  

  

  

 - 

  

  

 930 

  

  

 4,514 

  

  

 - 

  

  

 930 

  

  

 4,514 

  

  

 104 

  

2011

  

1966

Englishtown, NJ  

  

  

 - 

  

  

 690 

  

  

 12,520 

  

  

 41 

  

  

 694 

  

  

 12,557 

  

  

 333 

  

2010

  

1997

Erin, TN  

  

  

 - 

  

  

 440 

  

  

 8,060 

  

  

 134 

  

  

 440 

  

  

 8,194 

  

  

 2,347 

  

2001

  

1981

Eugene, OR  

  

  

 - 

  

  

 300 

  

  

 5,316 

  

  

 - 

  

  

 300 

  

  

 5,316 

  

  

 2,207 

  

1998

  

1972

Everett, WA  

  

  

 - 

  

  

 1,400 

  

  

 5,476 

  

  

 - 

  

  

 1,400 

  

  

 5,476 

  

  

 1,906 

  

1999

  

1999

Fair Lawn, NJ  

  

  

 - 

  

  

 2,420 

  

  

 24,504 

  

  

 - 

  

  

 2,420 

  

  

 24,504 

  

  

 511 

  

2011

  

1962

Fairfield, CA  

  

  

 - 

  

  

 1,460 

  

  

 14,040 

  

  

 - 

  

  

 1,460 

  

  

 14,040 

  

  

 3,911 

  

2002

  

1998

Fairhaven, MA  

  

  

 - 

  

  

 770 

  

  

 6,230 

  

  

 - 

  

  

 770 

  

  

 6,230 

  

  

 1,282 

  

2004

  

1999

Fall River, MA  

  

  

 - 

  

  

 620 

  

  

 5,829 

  

  

 4,856 

  

  

 620 

  

  

 10,685 

  

  

 3,699 

  

1996

  

1973

Fall River, MA  

  

  

 - 

  

  

 920 

  

  

 34,715 

  

  

 - 

  

  

 920 

  

  

 34,715 

  

  

 710 

  

2011

  

1993

Fanwood, NJ  

  

  

 - 

  

  

 2,850 

  

  

 55,175 

  

  

 - 

  

  

 2,850 

  

  

 55,175 

  

  

 477 

  

2011

  

2004

Fayetteville, NY  

  

  

 - 

  

  

 410 

  

  

 3,962 

  

  

 500 

  

  

 410 

  

  

 4,462 

  

  

 1,193 

  

2001

  

1997

Findlay, OH  

  

  

 - 

  

  

 200 

  

  

 1,800 

  

  

 - 

  

  

 200 

  

  

 1,800 

  

  

 720 

  

1997

  

1997

Fishers, IN  

  

  

 - 

  

  

 1,500 

  

  

 14,500 

  

  

 - 

  

  

 1,500 

  

  

 14,500 

  

  

 682 

  

2010

  

2000

Florence, NJ  

  

  

 - 

  

  

 300 

  

  

 2,978 

  

  

 - 

  

  

 300 

  

  

 2,978 

  

  

 810 

  

2002

  

1999

Flourtown, PA  

  

  

 - 

  

  

 1,800 

  

  

 14,830 

  

  

 - 

  

  

 1,800 

  

  

 14,830 

  

  

 316 

  

2011

  

1986

Follansbee, WV  

  

  

 - 

  

  

 640 

  

  

 27,670 

  

  

 - 

  

  

 640 

  

  

 27,670 

  

  

 561 

  

2011

  

1998

Forest City, NC  

  

  

 - 

  

  

 320 

  

  

 4,497 

  

  

 - 

  

  

 320 

  

  

 4,497 

  

  

 1,076 

  

2003

  

1999

Fork Union, VA  

  

  

 - 

  

  

 310 

  

  

 2,490 

  

  

 60 

  

  

 310 

  

  

 2,550 

  

  

 245 

  

2008

  

1990

Fort Ashby, WV  

  

  

 - 

  

  

 330 

  

  

 19,566 

  

  

 - 

  

  

 330 

  

  

 19,566 

  

  

 389 

  

2011

  

1989

Fort Pierce, FL  

  

  

 - 

  

  

 440 

  

  

 3,560 

  

  

 211 

  

  

 440 

  

  

 3,771 

  

  

 711 

  

2005

  

1973

Franconia, NH  

  

  

 - 

  

  

 360 

  

  

 11,320 

  

  

 - 

  

  

 360 

  

  

 11,320 

  

  

 235 

  

2011

  

1991

Franklin, NH  

  

  

 - 

  

  

 430 

  

  

 15,210 

  

  

 - 

  

  

 430 

  

  

 15,210 

  

  

 313 

  

2011

  

1990

Fredericksburg, VA  

  

  

 - 

  

  

 1,000 

  

  

 20,000 

  

  

 1,119 

  

  

 1,000 

  

  

 21,119 

  

  

 3,579 

  

2005

  

1999

Fredericksburg, VA  

  

  

 - 

  

  

 590 

  

  

 28,611 

  

  

 - 

  

  

 590 

  

  

 28,611 

  

  

 575 

  

2011

  

1977

Gardner, MA  

  

  

 - 

  

  

 480 

  

  

 10,210 

  

  

 - 

  

  

 480 

  

  

 10,210 

  

  

 222 

  

2011

  

1991

Gastonia, NC  

  

  

 - 

  

  

 470 

  

  

 6,129 

  

  

 - 

  

  

 470 

  

  

 6,129 

  

  

 1,419 

  

2003

  

1998

Gastonia, NC  

  

  

 - 

  

  

 310 

  

  

 3,096 

  

  

 22 

  

  

 310 

  

  

 3,118 

  

  

 772 

  

2003

  

1994

Gastonia, NC  

  

  

 - 

  

  

 400 

  

  

 5,029 

  

  

 120 

  

  

 400 

  

  

 5,149 

  

  

 1,199 

  

2003

  

1996

Georgetown, TX  

  

  

 - 

  

  

 200 

  

  

 2,100 

  

  

 - 

  

  

 200 

  

  

 2,100 

  

  

 826 

  

1997

  

1997

Gettysburg, PA  

  

  

 - 

  

  

 590 

  

  

 8,913 

  

  

 - 

  

  

 590 

  

  

 8,913 

  

  

 204 

  

2011

  

1987

Glastonbury, CT  

  

  

 - 

  

  

 1,950 

  

  

 9,532 

  

  

 - 

  

  

 1,950 

  

  

 9,532 

  

  

 220 

  

2011

  

1966

Glen Mills, PA  

  

  

 - 

  

  

 690 

  

  

 9,110 

  

  

 - 

  

  

 690 

  

  

 9,110 

  

  

 200 

  

2011

  

1993

Glenside, PA  

  

  

 - 

  

  

 1,940 

  

  

 16,867 

  

  

 - 

  

  

 1,940 

  

  

 16,867 

  

  

 357 

  

2011

  

1979

Goochland, VA  

  

  

 - 

  

  

 350 

  

  

 3,697 

  

  

 - 

  

  

 350 

  

  

 3,697 

  

  

 354 

  

2008

  

1991

Goshen, IN  

  

  

 - 

  

  

 210 

  

  

 6,120 

  

  

 - 

  

  

 210 

  

  

 6,120 

  

  

 1,059 

  

2005

  

2006

Graceville, FL  

  

  

 - 

  

  

 150 

  

  

 13,000 

  

  

 - 

  

  

 150 

  

  

 13,000 

  

  

 1,939 

  

2006

  

1980

Grafton, WV  

  

  

 - 

  

  

 280 

  

  

 18,824 

  

  

 - 

  

  

 280 

  

  

 18,824 

  

  

 376 

  

2011

  

1989

Granbury, TX  

  

  

 22,500 

  

  

 2,040 

  

  

 30,670 

  

  

 - 

  

  

 2,040 

  

  

 30,670 

  

  

 548 

  

2011

  

2009

Grand Ledge, MI  

  

  

 8,356 

  

  

 1,150 

  

  

 16,286 

  

  

 - 

  

  

 1,150 

  

  

 16,286 

  

  

 454 

  

2010

  

1999

Grand Prairie, TX  

  

  

 - 

  

  

 574 

  

  

 3,426 

  

  

 - 

  

  

 574 

  

  

 3,426 

  

  

 790 

  

2005

  

1982

Granger, IN  

  

  

 - 

  

  

 1,670 

  

  

 21,280 

  

  

 1,127 

  

  

 1,670 

  

  

 22,407 

  

  

 710 

  

2010

  

2009

Greeneville, TN  

  

  

 - 

  

  

 400 

  

  

 8,290 

  

  

 409 

  

  

 400 

  

  

 8,699 

  

  

 1,868 

  

2004

  

1979

Greenfield, WI  

  

  

 - 

  

  

 600 

  

  

 6,626 

  

  

 328 

  

  

 600 

  

  

 6,954 

  

  

 807 

  

2006

  

2006

Greensboro, NC  

  

  

 - 

  

  

 330 

  

  

 2,970 

  

  

 554 

  

  

 330 

  

  

 3,524 

  

  

 853 

  

2003

  

1996

Greensboro, NC  

  

  

 - 

  

  

 560 

  

  

 5,507 

  

  

 1,013 

  

  

 560 

  

  

 6,520 

  

  

 1,565 

  

2003

  

1997

Greenville, NC  

  

  

 - 

  

  

 290 

  

  

 4,393 

  

  

 168 

  

  

 290 

  

  

 4,561 

  

  

 1,048 

  

2003

  

1998

Greenville, SC  

  

  

 - 

  

  

 310 

  

  

 4,750 

  

  

 - 

  

  

 310 

  

  

 4,750 

  

  

 1,013 

  

2004

  

1997

Greenville, SC  

  

  

 - 

  

  

 5,400 

  

  

 100,523 

  

  

 1,007 

  

  

 5,400 

  

  

 101,530 

  

  

 5,372 

  

2006

  

2009

Greenwood, IN  

  

  

 - 

  

  

 1,550 

  

  

 22,770 

  

  

 - 

  

  

 1,550 

  

  

 22,770 

  

  

 746 

  

2010

  

2007

Groton, CT  

  

  

 - 

  

  

 2,430 

  

  

 19,941 

  

  

 - 

  

  

 2,430 

  

  

 19,941 

  

  

 450 

  

2011

  

1975

Haddonfield, NJ  

  

  

 - 

  

  

 520 

  

  

 2,320 

  

  

 - 

  

  

 520 

  

  

 2,320 

  

  

 12 

  

2011

  

1953

Hamburg, PA  

  

  

 - 

  

  

 840 

  

  

 10,543 

  

  

 - 

  

  

 840 

  

  

 10,543 

  

  

 250 

  

2011

  

1995

Hamden, CT  

  

  

 - 

  

  

 1,470 

  

  

 4,530 

  

  

 - 

  

  

 1,470 

  

  

 4,530 

  

  

 1,475 

  

2002

  

1998

Hamilton, NJ  

  

  

 - 

  

  

 440 

  

  

 4,469 

  

  

 - 

  

  

 440 

  

  

 4,469 

  

  

 1,209 

  

2001

  

1998

Hanover, IN  

  

  

 - 

  

  

 210 

  

  

 4,430 

  

  

 - 

  

  

 210 

  

  

 4,430 

  

  

 978 

  

2004

  

2000

Harleysville, PA  

  

  

 - 

  

  

 960 

  

  

 11,355 

  

  

 - 

  

  

 960 

  

  

 11,355 

  

  

 785 

  

2008

  

2009

Harriman, TN  

  

  

 - 

  

  

 590 

  

  

 8,060 

  

  

 158 

  

  

 590 

  

  

 8,218 

  

  

 2,507 

  

2001

  

1972

Hatboro, PA  

  

  

 - 

  

  

 - 

  

  

 28,112 

  

  

 - 

  

  

 - 

  

  

 28,112 

  

  

 566 

  

2011

  

1996

Hattiesburg, MS  

  

  

 13,100 

  

  

 450 

  

  

 15,518 

  

  

 35 

  

  

 450 

  

  

 15,553 

  

  

 409 

  

2010

  

2009

Haverford, PA  

  

  

 - 

  

  

 1,880 

  

  

 33,993 

  

  

 85 

  

  

 1,880 

  

  

 34,078 

  

  

 871 

  

2010

  

2000

Hemet, CA  

  

  

 - 

  

  

 870 

  

  

 3,405 

  

  

 - 

  

  

 870 

  

  

 3,405 

  

  

 413 

  

2007

  

1996

Henderson, NV  

  

  

 - 

  

  

 380 

  

  

 9,220 

  

  

 65 

  

  

 380 

  

  

 9,285 

  

  

 3,161 

  

1998

  

1998

Henderson, NV  

  

  

 - 

  

  

 380 

  

  

 4,360 

  

  

 41 

  

  

 380 

  

  

 4,401 

  

  

 1,326 

  

1999

  

2000

Hermitage, TN  

  

  

 - 

  

  

 1,500 

  

  

 9,856 

  

  

 - 

  

  

 1,500 

  

  

 9,856 

  

  

 150 

  

2011

  

2006

Hickory, NC  

  

  

 - 

  

  

 290 

  

  

 987 

  

  

 232 

  

  

 290 

  

  

 1,219 

  

  

 395 

  

2003

  

1994

High Point, NC  

  

  

 - 

  

  

 560 

  

  

 4,443 

  

  

 793 

  

  

 560 

  

  

 5,236 

  

  

 1,242 

  

2003

  

2000

High Point, NC  

  

  

 - 

  

  

 370 

  

  

 2,185 

  

  

 410 

  

  

 370 

  

  

 2,595 

  

  

 659 

  

2003

  

1999

High Point, NC  

  

  

 - 

  

  

 330 

  

  

 3,395 

  

  

 28 

  

  

 330 

  

  

 3,423 

  

  

 819 

  

2003

  

1994

High Point, NC  

  

  

 - 

  

  

 430 

  

  

 4,143 

  

  

 - 

  

  

 430 

  

  

 4,143 

  

  

 982 

  

2003

  

1998

108

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Highlands Ranch, CO  

  

  

 - 

  

  

 940 

  

  

 3,721 

  

  

 - 

  

  

 940 

  

  

 3,721 

  

  

 1,027 

  

2002

  

1999

Hilliard, FL  

  

  

 - 

  

  

 150 

  

  

 6,990 

  

  

 - 

  

  

 150 

  

  

 6,990 

  

  

 2,665 

  

1999

  

1990

Hilltop, WV  

  

  

 - 

  

  

 480 

  

  

 25,355 

  

  

 - 

  

  

 480 

  

  

 25,355 

  

  

 514 

  

2011

  

1977

Homestead, FL  

  

  

 - 

  

  

 2,750 

  

  

 11,750 

  

  

 - 

  

  

 2,750 

  

  

 11,750 

  

  

 1,793 

  

2006

  

1994

Hopedale, MA  

  

  

 - 

  

  

 130 

  

  

 8,170 

  

  

 - 

  

  

 130 

  

  

 8,170 

  

  

 1,502 

  

2005

  

1999

Houston, TX  

  

  

 10,050 

  

  

 860 

  

  

 18,715 

  

  

 - 

  

  

 860 

  

  

 18,715 

  

  

 2,139 

  

2007

  

2006

Houston, TX  

  

  

 - 

  

  

 5,090 

  

  

 9,471 

  

  

 - 

  

  

 5,090 

  

  

 9,471 

  

  

 724 

  

2007

  

2009

Houston, TX  

  

  

 10,410 

  

  

 630 

  

  

 5,970 

  

  

 750 

  

  

 630 

  

  

 6,720 

  

  

 1,793 

  

2002

  

1995

Howell, NJ  

  

  

 10,528 

  

  

 1,050 

  

  

 21,703 

  

  

 36 

  

  

 1,050 

  

  

 21,739 

  

  

 567 

  

2010

  

2007

Huntington, WV  

  

  

 - 

  

  

 800 

  

  

 32,261 

  

  

 - 

  

  

 800 

  

  

 32,261 

  

  

 657 

  

2011

  

1988

Huron, OH  

  

  

 - 

  

  

 160 

  

  

 6,088 

  

  

 1,452 

  

  

 160 

  

  

 7,540 

  

  

 1,176 

  

2005

  

1983

Hurricane, WV  

  

  

 - 

  

  

 620 

  

  

 21,454 

  

  

 - 

  

  

 620 

  

  

 21,454 

  

  

 442 

  

2011

  

1986

Hutchinson, KS  

  

  

 - 

  

  

 600 

  

  

 10,590 

  

  

 - 

  

  

 600 

  

  

 10,590 

  

  

 2,034 

  

2004

  

1997

Indianapolis, IN  

  

  

 - 

  

  

 495 

  

  

 6,287 

  

  

 22,565 

  

  

 495 

  

  

 28,852 

  

  

 4,486 

  

2006

  

1981

Indianapolis, IN  

  

  

 - 

  

  

 255 

  

  

 2,473 

  

  

 12,123 

  

  

 255 

  

  

 14,596 

  

  

 2,079 

  

2006

  

1981

Jamestown, TN  

  

  

 - 

  

  

 - 

  

  

 6,707 

  

  

 - 

  

  

 - 

  

  

 6,707 

  

  

 3,465 

  

2004

  

1966

Jefferson, OH  

  

  

 - 

  

  

 80 

  

  

 9,120 

  

  

 - 

  

  

 80 

  

  

 9,120 

  

  

 1,589 

  

2006

  

1984

Kalida, OH  

  

  

 - 

  

  

 480 

  

  

 8,173 

  

  

 - 

  

  

 480 

  

  

 8,173 

  

  

 1,041 

  

2006

  

2007

Kalispell, MT  

  

  

 - 

  

  

 360 

  

  

 3,282 

  

  

 - 

  

  

 360 

  

  

 3,282 

  

  

 1,175 

  

1998

  

1998

Keene, NH  

  

  

 - 

  

  

 530 

  

  

 9,639 

  

  

 - 

  

  

 530 

  

  

 9,639 

  

  

 97 

  

2011

  

1980

Kenner, LA  

  

  

 - 

  

  

 1,100 

  

  

 10,036 

  

  

 328 

  

  

 1,100 

  

  

 10,364 

  

  

 6,054 

  

1998

  

2000

Kennett Square, PA  

  

  

 - 

  

  

 1,050 

  

  

 22,946 

  

  

 18 

  

  

 1,050 

  

  

 22,964 

  

  

 592 

  

2010

  

2008

Kenosha, WI  

  

  

 - 

  

  

 1,500 

  

  

 9,139 

  

  

 - 

  

  

 1,500 

  

  

 9,139 

  

  

 723 

  

2007

  

2009

Kent, WA  

  

  

 - 

  

  

 940 

  

  

 20,318 

  

  

 10,470 

  

  

 940 

  

  

 30,788 

  

  

 2,841 

  

2007

  

2000

Kirkland, WA  

  

  

 - 

  

  

 1,880 

  

  

 4,315 

  

  

 214 

  

  

 1,880 

  

  

 4,529 

  

  

 1,006 

  

2003

  

1996

Kissimmee, FL  

  

  

 - 

  

  

 230 

  

  

 3,854 

  

  

 - 

  

  

 230 

  

  

 3,854 

  

  

 819 

  

2004

  

1972

LaBelle, FL  

  

  

 - 

  

  

 60 

  

  

 4,946 

  

  

 - 

  

  

 60 

  

  

 4,946 

  

  

 1,141 

  

2004

  

1986

Laconia, NH  

  

  

 - 

  

  

 810 

  

  

 14,434 

  

  

 - 

  

  

 810 

  

  

 14,434 

  

  

 305 

  

2011

  

1968

Lake Havasu City, AZ  

  

  

 - 

  

  

 450 

  

  

 4,223 

  

  

 - 

  

  

 450 

  

  

 4,223 

  

  

 1,452 

  

1998

  

1999

Lake Havasu City, AZ  

  

  

 - 

  

  

 110 

  

  

 2,244 

  

  

 136 

  

  

 110 

  

  

 2,380 

  

  

 854 

  

1998

  

1994

Lake Placid, FL  

  

  

 - 

  

  

 150 

  

  

 12,850 

  

  

 - 

  

  

 150 

  

  

 12,850 

  

  

 2,791 

  

2004

  

1984

Lake Zurich, IL  

  

  

 - 

  

  

 1,470 

  

  

 9,830 

  

  

 - 

  

  

 1,470 

  

  

 9,830 

  

  

 197 

  

2011

  

2007

Lancaster, NH  

  

  

 - 

  

  

 430 

  

  

 15,804 

  

  

 - 

  

  

 430 

  

  

 15,804 

  

  

 324 

  

2011

  

1981

Lancaster, NH  

  

  

 - 

  

  

 160 

  

  

 434 

  

  

 - 

  

  

 160 

  

  

 434 

  

  

 18 

  

2011

  

1965

Lancaster, PA  

  

  

 - 

  

  

 890 

  

  

 7,623 

  

  

 - 

  

  

 890 

  

  

 7,623 

  

  

 180 

  

2011

  

1986

Langhorne, PA  

  

  

 - 

  

  

 1,350 

  

  

 24,881 

  

  

 - 

  

  

 1,350 

  

  

 24,881 

  

  

 524 

  

2011

  

2006

LaPlata, MD  

  

  

 - 

  

  

 700 

  

  

 19,068 

  

  

 - 

  

  

 700 

  

  

 19,068 

  

  

 402 

  

2011

  

1984

Lawrenceville, VA  

  

  

 - 

  

  

 170 

  

  

 4,780 

  

  

 - 

  

  

 170 

  

  

 4,780 

  

  

 441 

  

2008

  

1989

Lebanon, NH  

  

  

 - 

  

  

 550 

  

  

 20,138 

  

  

 - 

  

  

 550 

  

  

 20,138 

  

  

 413 

  

2011

  

2006

Lecanto, FL  

  

  

 - 

  

  

 200 

  

  

 6,900 

  

  

 - 

  

  

 200 

  

  

 6,900 

  

  

 1,412 

  

2004

  

1986

Lee, MA  

  

  

 - 

  

  

 290 

  

  

 18,135 

  

  

 926 

  

  

 290 

  

  

 19,061 

  

  

 5,058 

  

2002

  

1998

Lenoir, NC  

  

  

 - 

  

  

 190 

  

  

 3,748 

  

  

 641 

  

  

 190 

  

  

 4,389 

  

  

 1,036 

  

2003

  

1998

Leominster, MA  

  

  

 - 

  

  

 530 

  

  

 6,201 

  

  

 - 

  

  

 530 

  

  

 6,201 

  

  

 149 

  

2011

  

1966

Lewisburg, WV  

  

  

 - 

  

  

 260 

  

  

 3,699 

  

  

 - 

  

  

 260 

  

  

 3,699 

  

  

 90 

  

2011

  

1995

Lexington, NC  

  

  

 - 

  

  

 200 

  

  

 3,900 

  

  

 1,015 

  

  

 200 

  

  

 4,915 

  

  

 1,250 

  

2002

  

1997

Libertyville, IL  

  

  

 14,343 

  

  

 6,500 

  

  

 40,024 

  

  

 - 

  

  

 6,500 

  

  

 40,024 

  

  

 742 

  

2011

  

2001

Lincoln, NE  

  

  

 5,273 

  

  

 390 

  

  

 13,807 

  

  

 - 

  

  

 390 

  

  

 13,807 

  

  

 599 

  

2010

  

2000

Linwood, NJ  

  

  

 - 

  

  

 800 

  

  

 21,984 

  

  

 275 

  

  

 800 

  

  

 22,259 

  

  

 580 

  

2010

  

1997

Litchfield, CT  

  

  

 - 

  

  

 1,240 

  

  

 17,908 

  

  

 45 

  

  

 1,240 

  

  

 17,953 

  

  

 465 

  

2010

  

1998

Little Neck, NY  

  

  

 - 

  

  

 3,350 

  

  

 38,461 

  

  

 151 

  

  

 3,355 

  

  

 38,607 

  

  

 993 

  

2010

  

2000

Littleton, MA  

  

  

 - 

  

  

 1,240 

  

  

 2,910 

  

  

 - 

  

  

 1,240 

  

  

 2,910 

  

  

 968 

  

1996

  

1975

Loma Linda, CA  

  

  

 - 

  

  

 2,214 

  

  

 9,586 

  

  

 - 

  

  

 2,214 

  

  

 9,586 

  

  

 1,228 

  

2008

  

1976

Longview, TX  

  

  

 - 

  

  

 293 

  

  

 1,707 

  

  

 - 

  

  

 293 

  

  

 1,707 

  

  

 457 

  

2005

  

1971

Longview, TX  

  

  

 - 

  

  

 610 

  

  

 5,520 

  

  

 - 

  

  

 610 

  

  

 5,520 

  

  

 683 

  

2006

  

2007

Longwood, FL  

  

  

 - 

  

  

 480 

  

  

 7,520 

  

  

 - 

  

  

 480 

  

  

 7,520 

  

  

 1,628 

  

2004

  

1980

Longwood, FL  

  

  

 - 

  

  

 1,260 

  

  

 6,445 

  

  

 - 

  

  

 1,260 

  

  

 6,445 

  

  

 32 

  

2011

  

2011

Louisville, KY  

  

  

 - 

  

  

 490 

  

  

 10,010 

  

  

 - 

  

  

 490 

  

  

 10,010 

  

  

 2,297 

  

2005

  

1978

Louisville, KY  

  

  

 - 

  

  

 430 

  

  

 7,135 

  

  

 163 

  

  

 430 

  

  

 7,298 

  

  

 2,217 

  

2002

  

1974

Louisville, KY  

  

  

 - 

  

  

 350 

  

  

 4,675 

  

  

 109 

  

  

 350 

  

  

 4,784 

  

  

 1,485 

  

2002

  

1975

Lowell, MA  

  

  

 - 

  

  

 1,070 

  

  

 13,481 

  

  

 - 

  

  

 1,070 

  

  

 13,481 

  

  

 298 

  

2011

  

1975

Lowell, MA  

  

  

 - 

  

  

 680 

  

  

 3,378 

  

  

 - 

  

  

 680 

  

  

 3,378 

  

  

 91 

  

2011

  

1984

Lufkin, TX  

  

  

 - 

  

  

 343 

  

  

 1,184 

  

  

 - 

  

  

 343 

  

  

 1,184 

  

  

 460 

  

2005

  

1919

Lutherville, MD  

  

  

 - 

  

  

 1,100 

  

  

 19,786 

  

  

 - 

  

  

 1,100 

  

  

 19,786 

  

  

 407 

  

2011

  

1988

Macungie, PA  

  

  

 - 

  

  

 960 

  

  

 29,033 

  

  

 - 

  

  

 960 

  

  

 29,033 

  

  

 586 

  

2011

  

2006

Manahawkin, NJ  

  

  

 - 

  

  

 1,020 

  

  

 20,361 

  

  

 - 

  

  

 1,020 

  

  

 20,361 

  

  

 425 

  

2011

  

1999

Manalapan, NJ  

  

  

 - 

  

  

 900 

  

  

 22,624 

  

  

 - 

  

  

 900 

  

  

 22,624 

  

  

 199 

  

2011

  

2001

Manassas, VA  

  

  

 - 

  

  

 750 

  

  

 7,446 

  

  

 492 

  

  

 750 

  

  

 7,938 

  

  

 1,662 

  

2003

  

1996

Manchester, NH  

  

  

 - 

  

  

 340 

  

  

 4,360 

  

  

 259 

  

  

 340 

  

  

 4,619 

  

  

 811 

  

2005

  

1984

Mansfield, TX  

  

  

 - 

  

  

 660 

  

  

 5,251 

  

  

 - 

  

  

 660 

  

  

 5,251 

  

  

 657 

  

2006

  

2007

Marianna, FL  

  

  

 - 

  

  

 340 

  

  

 8,910 

  

  

 - 

  

  

 340 

  

  

 8,910 

  

  

 1,325 

  

2006

  

1997

Marlinton, WV  

  

  

 - 

  

  

 270 

  

  

 8,430 

  

  

 - 

  

  

 270 

  

  

 8,430 

  

  

 180 

  

2011

  

1987

Marmet, WV  

  

  

 - 

  

  

 540 

  

  

 26,483 

  

  

 - 

  

  

 540 

  

  

 26,483 

  

  

 527 

  

2011

  

2000

Martinsburg, WV  

  

  

 - 

  

  

 340 

  

  

 17,180 

  

  

 - 

  

  

 340 

  

  

 17,180 

  

  

 345 

  

2011

  

1987

Martinsville, VA  

  

  

 - 

  

  

 349 

  

  

 - 

  

  

 - 

  

  

 349 

  

  

 - 

  

  

 - 

  

2003

  

-

109

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Marysville, CA  

  

  

 - 

  

  

 450 

  

  

 4,172 

  

  

 44 

  

  

 450 

  

  

 4,216 

  

  

 1,294 

  

1998

  

1999

Matawan, NJ  

  

  

 - 

  

  

 190 

  

  

 15,549 

  

  

 - 

  

  

 190 

  

  

 15,549 

  

  

 312 

  

2011

  

1995

Matthews, NC  

  

  

 - 

  

  

 560 

  

  

 4,738 

  

  

 - 

  

  

 560 

  

  

 4,738 

  

  

 1,158 

  

2003

  

1998

McConnelsville, OH  

  

  

 - 

  

  

 190 

  

  

 7,060 

  

  

 - 

  

  

 190 

  

  

 7,060 

  

  

 277 

  

2010

  

1946

McHenry, IL  

  

  

 - 

  

  

 1,576 

  

  

 - 

  

  

 - 

  

  

 1,576 

  

  

 - 

  

  

 - 

  

2006

  

-

McHenry, IL  

  

  

 - 

  

  

 3,550 

  

  

 15,300 

  

  

 6,718 

  

  

 3,550 

  

  

 22,018 

  

  

 2,533 

  

2006

  

2004

McKinney, TX  

  

  

 - 

  

  

 1,570 

  

  

 7,389 

  

  

 - 

  

  

 1,570 

  

  

 7,389 

  

  

 377 

  

2009

  

2010

McMurray, PA  

  

  

 - 

  

  

 1,440 

  

  

 15,805 

  

  

 - 

  

  

 1,440 

  

  

 15,805 

  

  

 - 

  

2010

  

2011

Melbourne, FL  

  

  

 - 

  

  

 7,070 

  

  

 48,257 

  

  

 11,726 

  

  

 7,070 

  

  

 59,983 

  

  

 3,323 

  

2007

  

2009

Melville, NY  

  

  

 - 

  

  

 4,280 

  

  

 73,283 

  

  

 187 

  

  

 4,282 

  

  

 73,468 

  

  

 1,867 

  

2010

  

2001

Memphis, TN  

  

  

 - 

  

  

 940 

  

  

 5,963 

  

  

 - 

  

  

 940 

  

  

 5,963 

  

  

 1,535 

  

2004

  

1951

Memphis, TN  

  

  

 - 

  

  

 390 

  

  

 9,660 

  

  

 1,600 

  

  

 390 

  

  

 11,260 

  

  

 316 

  

2010

  

1981

Mendham, NJ  

  

  

 - 

  

  

 1,240 

  

  

 27,169 

  

  

 - 

  

  

 1,240 

  

  

 27,169 

  

  

 550 

  

2011

  

1993

Menomonee Falls, WI  

  

  

 - 

  

  

 1,020 

  

  

 6,984 

  

  

 - 

  

  

 1,020 

  

  

 6,984 

  

  

 793 

  

2006

  

2007

Mercerville, NJ  

  

  

 - 

  

  

 860 

  

  

 9,929 

  

  

 - 

  

  

 860 

  

  

 9,929 

  

  

 222 

  

2011

  

1975

Meriden, CT  

  

  

 - 

  

  

 1,300 

  

  

 1,472 

  

  

 - 

  

  

 1,300 

  

  

 1,472 

  

  

 68 

  

2011

  

1994

Merrillville, IN  

  

  

 - 

  

  

 643 

  

  

 7,084 

  

  

 3,526 

  

  

 643 

  

  

 10,610 

  

  

 5,601 

  

1997

  

1999

Merrillville, IN  

  

  

 - 

  

  

 1,080 

  

  

 3,413 

  

  

 - 

  

  

 1,080 

  

  

 3,413 

  

  

 49 

  

2010

  

2011

Middleburg Heights, OH  

  

  

 - 

  

  

 960 

  

  

 7,780 

  

  

 - 

  

  

 960 

  

  

 7,780 

  

  

 1,525 

  

2004

  

1998

Middleton, WI  

  

  

 - 

  

  

 420 

  

  

 4,006 

  

  

 600 

  

  

 420 

  

  

 4,606 

  

  

 1,109 

  

2001

  

1991

Middletown, RI  

  

  

 - 

  

  

 1,480 

  

  

 19,703 

  

  

 - 

  

  

 1,480 

  

  

 19,703 

  

  

 417 

  

2011

  

1975

Midland, MI  

  

  

 - 

  

  

 200 

  

  

 11,025 

  

  

 - 

  

  

 200 

  

  

 11,025 

  

  

 299 

  

2010

  

1994

Midwest City, OK  

  

  

 - 

  

  

 470 

  

  

 5,673 

  

  

 - 

  

  

 470 

  

  

 5,673 

  

  

 3,277 

  

1998

  

1958

Midwest City, OK  

  

  

 - 

  

  

 484 

  

  

 5,516 

  

  

 - 

  

  

 484 

  

  

 5,516 

  

  

 1,107 

  

2005

  

1987

Milford, DE  

  

  

 - 

  

  

 400 

  

  

 7,816 

  

  

 - 

  

  

 400 

  

  

 7,816 

  

  

 172 

  

2011

  

1997

Milford, DE  

  

  

 - 

  

  

 680 

  

  

 19,216 

  

  

 - 

  

  

 680 

  

  

 19,216 

  

  

 404 

  

2011

  

1994

Millersville, MD  

  

  

 - 

  

  

 680 

  

  

 1,020 

  

  

 - 

  

  

 680 

  

  

 1,020 

  

  

 31 

  

2011

  

1977

Millville, NJ  

  

  

 - 

  

  

 840 

  

  

 29,944 

  

  

 - 

  

  

 840 

  

  

 29,944 

  

  

 615 

  

2011

  

2006

Missoula, MT  

  

  

 - 

  

  

 550 

  

  

 7,490 

  

  

 - 

  

  

 550 

  

  

 7,490 

  

  

 1,291 

  

2005

  

1998

Monmouth Junction, NJ  

  

  

 - 

  

  

 720 

  

  

 6,209 

  

  

 - 

  

  

 720 

  

  

 6,209 

  

  

 146 

  

2011

  

1996

Monroe Twp, NJ  

  

  

 - 

  

  

 1,160 

  

  

 13,193 

  

  

 - 

  

  

 1,160 

  

  

 13,193 

  

  

 296 

  

2011

  

1996

Monroe, NC  

  

  

 - 

  

  

 470 

  

  

 3,681 

  

  

 648 

  

  

 470 

  

  

 4,329 

  

  

 1,048 

  

2003

  

2001

Monroe, NC  

  

  

 - 

  

  

 310 

  

  

 4,799 

  

  

 857 

  

  

 310 

  

  

 5,656 

  

  

 1,290 

  

2003

  

2000

Monroe, NC  

  

  

 - 

  

  

 450 

  

  

 4,021 

  

  

 114 

  

  

 450 

  

  

 4,135 

  

  

 997 

  

2003

  

1997

Monteagle, TN  

  

  

 - 

  

  

 310 

  

  

 3,318 

  

  

 - 

  

  

 310 

  

  

 3,318 

  

  

 945 

  

2003

  

1980

Monterey, TN  

  

  

 - 

  

  

 - 

  

  

 4,195 

  

  

 23 

  

  

 - 

  

  

 4,218 

  

  

 2,167 

  

2004

  

1977

Monticello, FL  

  

  

 - 

  

  

 140 

  

  

 4,471 

  

  

 - 

  

  

 140 

  

  

 4,471 

  

  

 1,061 

  

2004

  

1986

Montville, NJ  

  

  

 - 

  

  

 3,500 

  

  

 31,002 

  

  

 - 

  

  

 3,500 

  

  

 31,002 

  

  

 278 

  

2011

  

1997

Moorestown, NJ  

  

  

 - 

  

  

 2,060 

  

  

 51,628 

  

  

 109 

  

  

 2,062 

  

  

 51,735 

  

  

 1,328 

  

2010

  

2000

Morehead City, NC  

  

  

 - 

  

  

 200 

  

  

 3,104 

  

  

 1,648 

  

  

 200 

  

  

 4,752 

  

  

 1,481 

  

1999

  

1999

Morgantown, KY  

  

  

 - 

  

  

 380 

  

  

 3,705 

  

  

 7 

  

  

 380 

  

  

 3,712 

  

  

 998 

  

2003

  

1965

Morgantown, WV  

  

  

 - 

  

  

 1,830 

  

  

 20,541 

  

  

 - 

  

  

 1,830 

  

  

 20,541 

  

  

 443 

  

2011

  

2007

Morton Grove, IL  

  

  

 - 

  

  

 1,900 

  

  

 19,374 

  

  

 - 

  

  

 1,900 

  

  

 19,374 

  

  

 44 

  

2010

  

2011

Moss Point, MS  

  

  

 - 

  

  

 120 

  

  

 7,280 

  

  

 - 

  

  

 120 

  

  

 7,280 

  

  

 1,609 

  

2004

  

1933

Mount Airy, NC  

  

  

 - 

  

  

 270 

  

  

 6,430 

  

  

 128 

  

  

 270 

  

  

 6,558 

  

  

 1,025 

  

2005

  

1998

Mountain City, TN  

  

  

 - 

  

  

 220 

  

  

 5,896 

  

  

 660 

  

  

 220 

  

  

 6,556 

  

  

 3,263 

  

2001

  

1976

Mt. Vernon, WA  

  

  

 - 

  

  

 400 

  

  

 2,200 

  

  

 156 

  

  

 400 

  

  

 2,356 

  

  

 312 

  

2006

  

2001

Myrtle Beach, SC  

  

  

 - 

  

  

 6,890 

  

  

 41,526 

  

  

 10,640 

  

  

 6,890 

  

  

 52,166 

  

  

 2,887 

  

2007

  

2009

Nacogdoches, TX  

  

  

 - 

  

  

 390 

  

  

 5,754 

  

  

 - 

  

  

 390 

  

  

 5,754 

  

  

 702 

  

2006

  

2007

Naperville, IL  

  

  

 9,144 

  

  

 3,470 

  

  

 29,547 

  

  

 - 

  

  

 3,470 

  

  

 29,547 

  

  

 558 

  

2011

  

2001

Naples, FL  

  

  

 - 

  

  

 550 

  

  

 5,450 

  

  

 - 

  

  

 550 

  

  

 5,450 

  

  

 1,193 

  

2004

  

1968

Nashville, TN  

  

  

 - 

  

  

 4,910 

  

  

 29,590 

  

  

 - 

  

  

 4,910 

  

  

 29,590 

  

  

 2,775 

  

2008

  

2007

Naugatuck, CT  

  

  

 - 

  

  

 1,200 

  

  

 15,826 

  

  

 - 

  

  

 1,200 

  

  

 15,826 

  

  

 335 

  

2011

  

1980

Needham, MA  

  

  

 - 

  

  

 1,610 

  

  

 13,715 

  

  

 366 

  

  

 1,610 

  

  

 14,081 

  

  

 4,141 

  

2002

  

1994

Neenah, WI  

  

  

 - 

  

  

 630 

  

  

 15,120 

  

  

 - 

  

  

 630 

  

  

 15,120 

  

  

 633 

  

2010

  

1991

New Braunfels, TX  

  

  

 - 

  

  

 1,200 

  

  

 19,800 

  

  

 - 

  

  

 1,200 

  

  

 19,800 

  

  

 401 

  

2011

  

2009

New Haven, CT  

  

  

 - 

  

  

 160 

  

  

 4,778 

  

  

 1,789 

  

  

 160 

  

  

 6,567 

  

  

 2,100 

  

2006

  

1958

New Haven, IN  

  

  

 - 

  

  

 176 

  

  

 3,524 

  

  

 - 

  

  

 176 

  

  

 3,524 

  

  

 917 

  

2004

  

1981

Newark, DE  

  

  

 - 

  

  

 560 

  

  

 21,220 

  

  

 1,181 

  

  

 560 

  

  

 22,401 

  

  

 4,007 

  

2004

  

1998

Newburyport, MA  

  

  

 - 

  

  

 960 

  

  

 8,290 

  

  

 - 

  

  

 960 

  

  

 8,290 

  

  

 2,227 

  

2002

  

1999

Newport, VT  

  

  

 - 

  

  

 290 

  

  

 3,867 

  

  

 - 

  

  

 290 

  

  

 3,867 

  

  

 91 

  

2011

  

1986

Norman, OK  

  

  

 - 

  

  

 55 

  

  

 1,484 

  

  

 - 

  

  

 55 

  

  

 1,484 

  

  

 720 

  

1995

  

1995

Norristown, PA  

  

  

 - 

  

  

 1,200 

  

  

 19,488 

  

  

 - 

  

  

 1,200 

  

  

 19,488 

  

  

 404 

  

2011

  

1995

North Andover, MA  

  

  

 - 

  

  

 950 

  

  

 21,817 

  

  

 - 

  

  

 950 

  

  

 21,817 

  

  

 450 

  

2011

  

1977

North Andover, MA  

  

  

 - 

  

  

 1,070 

  

  

 17,341 

  

  

 - 

  

  

 1,070 

  

  

 17,341 

  

  

 370 

  

2011

  

1990

North Augusta, SC  

  

  

 - 

  

  

 332 

  

  

 2,558 

  

  

 - 

  

  

 332 

  

  

 2,558 

  

  

 930 

  

1999

  

1998

North Cape May, NJ  

  

  

 - 

  

  

 600 

  

  

 22,266 

  

  

 - 

  

  

 600 

  

  

 22,266 

  

  

 456 

  

2011

  

1995

North Miami, FL  

  

  

 - 

  

  

 430 

  

  

 3,918 

  

  

 - 

  

  

 430 

  

  

 3,918 

  

  

 1,137 

  

2004

  

1968

North Miami, FL  

  

  

 - 

  

  

 440 

  

  

 4,830 

  

  

 - 

  

  

 440 

  

  

 4,830 

  

  

 1,145 

  

2004

  

1963

Oak Hill, WV  

  

  

 - 

  

  

 240 

  

  

 24,506 

  

  

 - 

  

  

 240 

  

  

 24,506 

  

  

 486 

  

2011

  

2000

Oak Hill, WV  

  

  

 - 

  

  

 170 

  

  

 721 

  

  

 - 

  

  

 170 

  

  

 721 

  

  

 31 

  

2011

  

2001

Ocala, FL  

  

  

 - 

  

  

 1,340 

  

  

 10,564 

  

  

 - 

  

  

 1,340 

  

  

 10,564 

  

  

 674 

  

2008

  

2009

Ogden, UT  

  

  

 - 

  

  

 360 

  

  

 6,700 

  

  

 627 

  

  

 360 

  

  

 7,327 

  

  

 1,334 

  

2004

  

1998

Oklahoma City, OK  

  

  

 - 

  

  

 510 

  

  

 10,694 

  

  

 - 

  

  

 510 

  

  

 10,694 

  

  

 1,794 

  

1998

  

1979

Oklahoma City, OK  

  

  

 - 

  

  

 590 

  

  

 7,513 

  

  

 - 

  

  

 590 

  

  

 7,513 

  

  

 725 

  

2007

  

2008

110

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Oklahoma City, OK  

  

  

 - 

  

  

 760 

  

  

 7,017 

  

  

 - 

  

  

 760 

  

  

 7,017 

  

  

 563 

  

2007

  

2009

Omaha, NE  

  

  

 - 

  

  

 370 

  

  

 10,230 

  

  

 - 

  

  

 370 

  

  

 10,230 

  

  

 457 

  

2010

  

1998

Omaha, NE  

  

  

 4,544 

  

  

 380 

  

  

 8,864 

  

  

 - 

  

  

 380 

  

  

 8,864 

  

  

 405 

  

2010

  

1999

Oneonta, NY  

  

  

 - 

  

  

 80 

  

  

 5,020 

  

  

 - 

  

  

 80 

  

  

 5,020 

  

  

 552 

  

2007

  

1996

Ormond Beach, FL  

  

  

 - 

  

  

 - 

  

  

 2,739 

  

  

 73 

  

  

 - 

  

  

 2,812 

  

  

 1,354 

  

2002

  

1983

Orwigsburg, PA  

  

  

 - 

  

  

 650 

  

  

 20,632 

  

  

 - 

  

  

 650 

  

  

 20,632 

  

  

 429 

  

2011

  

1992

Oshkosh, WI  

  

  

 - 

  

  

 900 

  

  

 3,800 

  

  

 3,687 

  

  

 900 

  

  

 7,487 

  

  

 1,072 

  

2006

  

2005

Oshkosh, WI  

  

  

 - 

  

  

 400 

  

  

 23,237 

  

  

 - 

  

  

 400 

  

  

 23,237 

  

  

 1,818 

  

2007

  

2008

Overland Park, KS  

  

  

 - 

  

  

 1,120 

  

  

 8,360 

  

  

 - 

  

  

 1,120 

  

  

 8,360 

  

  

 1,511 

  

2005

  

1970

Overland Park, KS  

  

  

 - 

  

  

 3,730 

  

  

 27,076 

  

  

 340 

  

  

 3,730 

  

  

 27,416 

  

  

 1,542 

  

2008

  

2009

Overland Park, KS  

  

  

 - 

  

  

 4,500 

  

  

 29,105 

  

  

 6,386 

  

  

 4,500 

  

  

 35,491 

  

  

 945 

  

2010

  

1988

Owasso, OK  

  

  

 - 

  

  

 215 

  

  

 1,380 

  

  

 - 

  

  

 215 

  

  

 1,380 

  

  

 576 

  

1996

  

1996

Owensboro, KY  

  

  

 - 

  

  

 240 

  

  

 6,760 

  

  

 - 

  

  

 240 

  

  

 6,760 

  

  

 1,331 

  

1993

  

1966

Owensboro, KY  

  

  

 - 

  

  

 225 

  

  

 13,275 

  

  

 - 

  

  

 225 

  

  

 13,275 

  

  

 2,523 

  

2005

  

1964

Owenton, KY  

  

  

 - 

  

  

 100 

  

  

 2,400 

  

  

 - 

  

  

 100 

  

  

 2,400 

  

  

 561 

  

2005

  

1979

Oxford, MI  

  

  

 11,892 

  

  

 1,430 

  

  

 15,791 

  

  

 - 

  

  

 1,430 

  

  

 15,791 

  

  

 453 

  

2010

  

2001

Palestine, TX  

  

  

 - 

  

  

 180 

  

  

 4,320 

  

  

 1,300 

  

  

 180 

  

  

 5,620 

  

  

 735 

  

2006

  

2005

Palm Coast, FL  

  

  

 - 

  

  

 870 

  

  

 10,957 

  

  

 - 

  

  

 870 

  

  

 10,957 

  

  

 568 

  

2008

  

2010

Panama City Beach, FL  

  

  

 - 

  

  

 900 

  

  

 7,717 

  

  

 - 

  

  

 900 

  

  

 7,717 

  

  

 118 

  

2011

  

2005

Panama City, FL  

  

  

 - 

  

  

 300 

  

  

 9,200 

  

  

 - 

  

  

 300 

  

  

 9,200 

  

  

 2,004 

  

2004

  

1992

Paris, TX  

  

  

 - 

  

  

 490 

  

  

 5,452 

  

  

 - 

  

  

 490 

  

  

 5,452 

  

  

 1,877 

  

2005

  

2006

Parkersburg, WV  

  

  

 - 

  

  

 390 

  

  

 21,288 

  

  

 - 

  

  

 390 

  

  

 21,288 

  

  

 431 

  

2011

  

2006

Parkville, MD  

  

  

 - 

  

  

 1,350 

  

  

 16,071 

  

  

 - 

  

  

 1,350 

  

  

 16,071 

  

  

 344 

  

2011

  

1980

Parkville, MD  

  

  

 - 

  

  

 791 

  

  

 11,186 

  

  

 - 

  

  

 791 

  

  

 11,186 

  

  

 245 

  

2011

  

2007

Parkville, MD  

  

  

 - 

  

  

 1,100 

  

  

 11,768 

  

  

 - 

  

  

 1,100 

  

  

 11,768 

  

  

 256 

  

2011

  

1972

Pasadena, TX  

  

  

 10,073 

  

  

 720 

  

  

 24,080 

  

  

 - 

  

  

 720 

  

  

 24,080 

  

  

 3,027 

  

2007

  

2005

Paso Robles, CA  

  

  

 - 

  

  

 1,770 

  

  

 8,630 

  

  

 675 

  

  

 1,770 

  

  

 9,305 

  

  

 2,394 

  

2002

  

1998

Pawleys Island, SC  

  

  

 - 

  

  

 2,020 

  

  

 32,590 

  

  

 5,482 

  

  

 2,020 

  

  

 38,072 

  

  

 5,602 

  

2005

  

1997

Pennington, NJ  

  

  

 - 

  

  

 1,380 

  

  

 27,620 

  

  

 - 

  

  

 1,380 

  

  

 27,620 

  

  

 120 

  

2011

  

2000

Pennsauken, NJ  

  

  

 - 

  

  

 900 

  

  

 10,780 

  

  

 - 

  

  

 900 

  

  

 10,780 

  

  

 258 

  

2011

  

1985

Petoskey, MI  

  

  

 6,456 

  

  

 860 

  

  

 14,452 

  

  

 - 

  

  

 860 

  

  

 14,452 

  

  

 337 

  

2011

  

1997

Philadelphia, PA  

  

  

 - 

  

  

 2,700 

  

  

 25,709 

  

  

 - 

  

  

 2,700 

  

  

 25,709 

  

  

 540 

  

2011

  

1976

Philadelphia, PA  

  

  

 - 

  

  

 2,930 

  

  

 10,433 

  

  

 - 

  

  

 2,930 

  

  

 10,433 

  

  

 257 

  

2011

  

1999

Philadelphia, PA  

  

  

 - 

  

  

 540 

  

  

 11,239 

  

  

 - 

  

  

 540 

  

  

 11,239 

  

  

 228 

  

2011

  

1965

Philadelphia, PA  

  

  

 - 

  

  

 1,810 

  

  

 16,898 

  

  

 - 

  

  

 1,810 

  

  

 16,898 

  

  

 381 

  

2011

  

1972

Phillipsburg, NJ  

  

  

 - 

  

  

 800 

  

  

 21,175 

  

  

 - 

  

  

 800 

  

  

 21,175 

  

  

 448 

  

2011

  

1992

Phillipsburg, NJ  

  

  

 - 

  

  

 300 

  

  

 8,114 

  

  

 - 

  

  

 300 

  

  

 8,114 

  

  

 171 

  

2011

  

1905

Pigeon Forge, TN  

  

  

 - 

  

  

 320 

  

  

 4,180 

  

  

 117 

  

  

 320 

  

  

 4,297 

  

  

 1,373 

  

2001

  

1986

Pikesville, MD  

  

  

 - 

  

  

 450 

  

  

 10,750 

  

  

 - 

  

  

 450 

  

  

 10,750 

  

  

 1,423 

  

2007

  

1983

Pinehurst, NC  

  

  

 - 

  

  

 290 

  

  

 2,690 

  

  

 484 

  

  

 290 

  

  

 3,174 

  

  

 795 

  

2003

  

1998

Piqua, OH  

  

  

 - 

  

  

 204 

  

  

 1,885 

  

  

 - 

  

  

 204 

  

  

 1,885 

  

  

 710 

  

1997

  

1997

Pittsburgh, PA  

  

  

 - 

  

  

 1,750 

  

  

 8,572 

  

  

 115 

  

  

 1,750 

  

  

 8,687 

  

  

 1,654 

  

2005

  

1998

Plainview, NY  

  

  

 - 

  

  

 3,990 

  

  

 11,969 

  

  

 - 

  

  

 3,990 

  

  

 11,969 

  

  

 120 

  

2011

  

1999

Plano, TX  

  

  

 - 

  

  

 1,305 

  

  

 9,095 

  

  

 1,281 

  

  

 1,305 

  

  

 10,376 

  

  

 1,820 

  

2005

  

1977

Plattsmouth, NE  

  

  

 - 

  

  

 250 

  

  

 5,650 

  

  

 - 

  

  

 250 

  

  

 5,650 

  

  

 265 

  

2010

  

1999

Plymouth, MI  

  

  

 12,463 

  

  

 1,490 

  

  

 19,990 

  

  

 - 

  

  

 1,490 

  

  

 19,990 

  

  

 546 

  

2010

  

1972

Port St. Joe, FL  

  

  

 - 

  

  

 370 

  

  

 2,055 

  

  

 - 

  

  

 370 

  

  

 2,055 

  

  

 764 

  

2004

  

1982

Port St. Lucie, FL  

  

  

 - 

  

  

 8,700 

  

  

 47,230 

  

  

 2,969 

  

  

 8,700 

  

  

 50,199 

  

  

 2,223 

  

2008

  

2010

Post Falls, ID  

  

  

 - 

  

  

 2,700 

  

  

 14,217 

  

  

 2,181 

  

  

 2,700 

  

  

 16,398 

  

  

 1,383 

  

2007

  

2008

Pottsville, PA  

  

  

 - 

  

  

 950 

  

  

 26,964 

  

  

 - 

  

  

 950 

  

  

 26,964 

  

  

 566 

  

2011

  

1990

Princeton, NJ  

  

  

 - 

  

  

 1,730 

  

  

 30,888 

  

  

 - 

  

  

 1,730 

  

  

 30,888 

  

  

 133 

  

2011

  

2001

Prospect, CT  

  

  

 - 

  

  

 820 

  

  

 1,441 

  

  

 2,541 

  

  

 820 

  

  

 3,982 

  

  

 1,482 

  

2004

  

1970

Pueblo, CO  

  

  

 - 

  

  

 370 

  

  

 6,051 

  

  

 - 

  

  

 370 

  

  

 6,051 

  

  

 2,591 

  

1998

  

1989

Quakertown, PA  

  

  

 - 

  

  

 1,040 

  

  

 25,389 

  

  

 - 

  

  

 1,040 

  

  

 25,389 

  

  

 521 

  

2011

  

1980

Quincy, FL  

  

  

 - 

  

  

 200 

  

  

 5,333 

  

  

 - 

  

  

 200 

  

  

 5,333 

  

  

 1,276 

  

2004

  

1983

Quincy, MA  

  

  

 - 

  

  

 2,690 

  

  

 15,410 

  

  

 - 

  

  

 2,690 

  

  

 15,410 

  

  

 2,842 

  

2004

  

1999

Quitman, MS  

  

  

 - 

  

  

 60 

  

  

 10,340 

  

  

 - 

  

  

 60 

  

  

 10,340 

  

  

 2,151 

  

2004

  

1976

Raleigh, NC  

  

  

 - 

  

  

 10,000 

  

  

 - 

  

  

 - 

  

  

 10,000 

  

  

 - 

  

  

 - 

  

2008

  

-

Reading, PA  

  

  

 - 

  

  

 980 

  

  

 19,906 

  

  

 - 

  

  

 980 

  

  

 19,906 

  

  

 415 

  

2011

  

1994

Red Bank, NJ  

  

  

 - 

  

  

 1,050 

  

  

 21,275 

  

  

 - 

  

  

 1,050 

  

  

 21,275 

  

  

 187 

  

2011

  

1997

Rehoboth Beach, DE  

  

  

 - 

  

  

 960 

  

  

 24,248 

  

  

 61 

  

  

 961 

  

  

 24,308 

  

  

 630 

  

2010

  

1999

Reidsville, NC  

  

  

 - 

  

  

 170 

  

  

 3,830 

  

  

 857 

  

  

 170 

  

  

 4,687 

  

  

 1,207 

  

2002

  

1998

Reno, NV  

  

  

 - 

  

  

 1,060 

  

  

 11,440 

  

  

 604 

  

  

 1,060 

  

  

 12,044 

  

  

 2,245 

  

2004

  

1998

Richmond, VA  

  

  

 - 

  

  

 1,211 

  

  

 2,889 

  

  

 - 

  

  

 1,211 

  

  

 2,889 

  

  

 1,012 

  

2003

  

1995

Richmond, VA  

  

  

 - 

  

  

 760 

  

  

 12,640 

  

  

 - 

  

  

 760 

  

  

 12,640 

  

  

 1,708 

  

2007

  

1969

Ridgeland, MS  

  

  

 - 

  

  

 520 

  

  

 7,675 

  

  

 - 

  

  

 520 

  

  

 7,675 

  

  

 1,711 

  

2003

  

1997

Ridgely, TN  

  

  

 - 

  

  

 300 

  

  

 5,700 

  

  

 97 

  

  

 300 

  

  

 5,797 

  

  

 1,703 

  

2001

  

1990

Ridgewood, NJ  

  

  

 - 

  

  

 1,350 

  

  

 16,170 

  

  

 - 

  

  

 1,350 

  

  

 16,170 

  

  

 332 

  

2011

  

1971

Rockledge, FL  

  

  

 - 

  

  

 360 

  

  

 4,117 

  

  

 - 

  

  

 360 

  

  

 4,117 

  

  

 1,533 

  

2001

  

1970

Rockville Centre, NY  

  

  

 - 

  

  

 4,290 

  

  

 20,310 

  

  

 - 

  

  

 4,290 

  

  

 20,310 

  

  

 189 

  

2011

  

2002

Rockville, CT  

  

  

 - 

  

  

 1,500 

  

  

 4,835 

  

  

 - 

  

  

 1,500 

  

  

 4,835 

  

  

 137 

  

2011

  

1960

Rockwood, TN  

  

  

 - 

  

  

 500 

  

  

 7,116 

  

  

 741 

  

  

 500 

  

  

 7,857 

  

  

 2,301 

  

2001

  

1979

Rocky Hill, CT  

  

  

 - 

  

  

 1,460 

  

  

 7,040 

  

  

 - 

  

  

 1,460 

  

  

 7,040 

  

  

 2,076 

  

2002

  

1998

Rocky Hill, CT  

  

  

 - 

  

  

 1,090 

  

  

 6,710 

  

  

 1,500 

  

  

 1,090 

  

  

 8,210 

  

  

 1,623 

  

2003

  

1996

Rogersville, TN  

  

  

 - 

  

  

 350 

  

  

 3,278 

  

  

 - 

  

  

 350 

  

  

 3,278 

  

  

 937 

  

2003

  

1980

111

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Romeoville, IL  

  

  

 - 

  

  

 1,895 

  

  

 - 

  

  

 - 

  

  

 1,895 

  

  

 - 

  

  

 - 

  

2006

  

-

Royal Palm Beach, FL  

  

  

 - 

  

  

 980 

  

  

 8,320 

  

  

 - 

  

  

 980 

  

  

 8,320 

  

  

 1,854 

  

2004

  

1984

Rutland, VT  

  

  

 - 

  

  

 1,190 

  

  

 23,655 

  

  

 - 

  

  

 1,190 

  

  

 23,655 

  

  

 494 

  

2011

  

2006

Saint Simons Island, GA  

  

  

 - 

  

  

 6,440 

  

  

 50,060 

  

  

 996 

  

  

 6,440 

  

  

 51,056 

  

  

 4,510 

  

2008

  

2007

Salem, OR  

  

  

 - 

  

  

 449 

  

  

 5,172 

  

  

 - 

  

  

 449 

  

  

 5,172 

  

  

 1,856 

  

1999

  

1998

Salisbury, NC  

  

  

 - 

  

  

 370 

  

  

 5,697 

  

  

 168 

  

  

 370 

  

  

 5,865 

  

  

 1,352 

  

2003

  

1997

San Angelo, TX  

  

  

 - 

  

  

 260 

  

  

 8,800 

  

  

 - 

  

  

 260 

  

  

 8,800 

  

  

 1,689 

  

2004

  

1997

San Antonio, TX  

  

  

 - 

  

  

 6,120 

  

  

 28,169 

  

  

 - 

  

  

 6,120 

  

  

 28,169 

  

  

 199 

  

2010

  

2011

San Antonio, TX  

  

  

 10,882 

  

  

 560 

  

  

 7,315 

  

  

 - 

  

  

 560 

  

  

 7,315 

  

  

 2,038 

  

2002

  

2000

San Antonio, TX  

  

  

 10,030 

  

  

 640 

  

  

 13,360 

  

  

 - 

  

  

 640 

  

  

 13,360 

  

  

 1,755 

  

2007

  

2004

Sanatoga, PA  

  

  

 - 

  

  

 980 

  

  

 30,695 

  

  

 - 

  

  

 980 

  

  

 30,695 

  

  

 618 

  

2011

  

1993

Sarasota, FL  

  

  

 - 

  

  

 475 

  

  

 3,175 

  

  

 - 

  

  

 475 

  

  

 3,175 

  

  

 1,400 

  

1996

  

1995

Sarasota, FL  

  

  

 - 

  

  

 560 

  

  

 8,474 

  

  

 - 

  

  

 560 

  

  

 8,474 

  

  

 2,958 

  

1999

  

2000

Sarasota, FL  

  

  

 - 

  

  

 600 

  

  

 3,400 

  

  

 - 

  

  

 600 

  

  

 3,400 

  

  

 830 

  

2004

  

1982

Scituate, MA  

  

  

 - 

  

  

 1,740 

  

  

 10,640 

  

  

 - 

  

  

 1,740 

  

  

 10,640 

  

  

 1,780 

  

2005

  

1976

Scott Depot, WV  

  

  

 - 

  

  

 350 

  

  

 6,876 

  

  

 - 

  

  

 350 

  

  

 6,876 

  

  

 151 

  

2011

  

1995

Seaford, DE  

  

  

 - 

  

  

 720 

  

  

 14,029 

  

  

 - 

  

  

 720 

  

  

 14,029 

  

  

 308 

  

2011

  

1985

Selbyville, DE  

  

  

 - 

  

  

 750 

  

  

 25,912 

  

  

 44 

  

  

 764 

  

  

 25,943 

  

  

 675 

  

2010

  

2008

Seven Fields, PA  

  

  

 - 

  

  

 484 

  

  

 4,663 

  

  

 60 

  

  

 484 

  

  

 4,722 

  

  

 1,703 

  

1999

  

1999

Severna Park, MD(1)

  

  

 - 

  

  

 2,120 

  

  

 31,273 

  

  

 - 

  

  

 2,120 

  

  

 31,273 

  

  

 632 

  

2011

  

1994

Seville, OH  

  

  

 - 

  

  

 230 

  

  

 1,770 

  

  

 - 

  

  

 230 

  

  

 1,770 

  

  

 457 

  

2005

  

1981

Shawnee, OK  

  

  

 - 

  

  

 80 

  

  

 1,400 

  

  

 - 

  

  

 80 

  

  

 1,400 

  

  

 607 

  

1996

  

1995

Sheboygan, WI  

  

  

 - 

  

  

 80 

  

  

 5,320 

  

  

 3,774 

  

  

 80 

  

  

 9,094 

  

  

 903 

  

2006

  

2006

Shelby, MS  

  

  

 - 

  

  

 60 

  

  

 5,340 

  

  

 - 

  

  

 60 

  

  

 5,340 

  

  

 1,146 

  

2004

  

1979

Shelbyville, KY  

  

  

 - 

  

  

 630 

  

  

 3,870 

  

  

 - 

  

  

 630 

  

  

 3,870 

  

  

 744 

  

2005

  

1965

Shepherdstown, WV  

  

  

 - 

  

  

 250 

  

  

 13,806 

  

  

 - 

  

  

 250 

  

  

 13,806 

  

  

 279 

  

2011

  

2007

Sherman, TX  

  

  

 - 

  

  

 700 

  

  

 5,221 

  

  

 - 

  

  

 700 

  

  

 5,221 

  

  

 707 

  

2005

  

2006

Shillington, PA  

  

  

 - 

  

  

 1,020 

  

  

 19,569 

  

  

 - 

  

  

 1,020 

  

  

 19,569 

  

  

 410 

  

2011

  

1987

Shrewsbury, NJ  

  

  

 - 

  

  

 2,120 

  

  

 38,116 

  

  

 162 

  

  

 2,120 

  

  

 38,278 

  

  

 985 

  

2010

  

2000

Silvis, IL  

  

  

 - 

  

  

 880 

  

  

 16,420 

  

  

 - 

  

  

 880 

  

  

 16,420 

  

  

 588 

  

2010

  

2005

Sissonville, WV  

  

  

 - 

  

  

 600 

  

  

 23,948 

  

  

 - 

  

  

 600 

  

  

 23,948 

  

  

 488 

  

2011

  

2006

Sisterville, WV  

  

  

 - 

  

  

 200 

  

  

 5,400 

  

  

 - 

  

  

 200 

  

  

 5,400 

  

  

 123 

  

2011

  

1986

Smithfield, NC  

  

  

 - 

  

  

 290 

  

  

 5,680 

  

  

 - 

  

  

 290 

  

  

 5,680 

  

  

 1,328 

  

2003

  

1998

Somerset, MA  

  

  

 - 

  

  

 1,010 

  

  

 29,577 

  

  

 - 

  

  

 1,010 

  

  

 29,577 

  

  

 599 

  

2011

  

1998

South Boston, MA  

  

  

 - 

  

  

 385 

  

  

 2,002 

  

  

 5,218 

  

  

 385 

  

  

 7,220 

  

  

 2,642 

  

1995

  

1961

South Pittsburg, TN  

  

  

 - 

  

  

 430 

  

  

 5,628 

  

  

 - 

  

  

 430 

  

  

 5,628 

  

  

 1,370 

  

2004

  

1979

Southbury, CT  

  

  

 - 

  

  

 1,860 

  

  

 23,613 

  

  

 - 

  

  

 1,860 

  

  

 23,613 

  

  

 462 

  

2011

  

2001

Sparks, NV  

  

  

 - 

  

  

 3,700 

  

  

 46,526 

  

  

 - 

  

  

 3,700 

  

  

 46,526 

  

  

 3,058 

  

2007

  

2009

Spartanburg, SC  

  

  

 - 

  

  

 3,350 

  

  

 15,750 

  

  

 10,037 

  

  

 3,350 

  

  

 25,787 

  

  

 3,148 

  

2005

  

1997

Spencer, WV  

  

  

 - 

  

  

 190 

  

  

 8,810 

  

  

 - 

  

  

 190 

  

  

 8,810 

  

  

 185 

  

2011

  

1988

Spring City, TN  

  

  

 - 

  

  

 420 

  

  

 6,085 

  

  

 2,628 

  

  

 420 

  

  

 8,713 

  

  

 2,415 

  

2001

  

1987

Spring House, PA  

  

  

 - 

  

  

 900 

  

  

 10,780 

  

  

 - 

  

  

 900 

  

  

 10,780 

  

  

 240 

  

2011

  

1980

St. Charles, MD  

  

  

 - 

  

  

 580 

  

  

 15,555 

  

  

 - 

  

  

 580 

  

  

 15,555 

  

  

 328 

  

2011

  

1996

St. Louis, MO  

  

  

 - 

  

  

 750 

  

  

 6,030 

  

  

 - 

  

  

 750 

  

  

 6,030 

  

  

 1,610 

  

1995

  

1994

St. Louis, MO  

  

  

 - 

  

  

 1,890 

  

  

 12,165 

  

  

 - 

  

  

 1,890 

  

  

 12,165 

  

  

 375 

  

2010

  

1963

Starke, FL  

  

  

 - 

  

  

 120 

  

  

 10,180 

  

  

 - 

  

  

 120 

  

  

 10,180 

  

  

 2,199 

  

2004

  

1990

Statesville, NC  

  

  

 - 

  

  

 150 

  

  

 1,447 

  

  

 266 

  

  

 150 

  

  

 1,713 

  

  

 428 

  

2003

  

1990

Statesville, NC  

  

  

 - 

  

  

 310 

  

  

 6,183 

  

  

 8 

  

  

 310 

  

  

 6,191 

  

  

 1,397 

  

2003

  

1996

Statesville, NC  

  

  

 - 

  

  

 140 

  

  

 3,627 

  

  

 - 

  

  

 140 

  

  

 3,627 

  

  

 846 

  

2003

  

1999

Staunton, VA  

  

  

 - 

  

  

 310 

  

  

 11,090 

  

  

 - 

  

  

 310 

  

  

 11,090 

  

  

 1,514 

  

2007

  

1959

Stillwater, OK  

  

  

 - 

  

  

 80 

  

  

 1,400 

  

  

 - 

  

  

 80 

  

  

 1,400 

  

  

 610 

  

1995

  

1995

Stuart, FL  

  

  

 - 

  

  

 390 

  

  

 8,110 

  

  

 - 

  

  

 390 

  

  

 8,110 

  

  

 1,737 

  

2004

  

1985

Summit, NJ  

  

  

 9,413 

  

  

 3,080 

  

  

 14,152 

  

  

 - 

  

  

 3,080 

  

  

 14,152 

  

  

 265 

  

2011

  

2001

Swanton, OH  

  

  

 - 

  

  

 330 

  

  

 6,370 

  

  

 - 

  

  

 330 

  

  

 6,370 

  

  

 1,318 

  

2004

  

1950

Tampa, FL  

  

  

 - 

  

  

 830 

  

  

 6,370 

  

  

 - 

  

  

 830 

  

  

 6,370 

  

  

 1,699 

  

2004

  

1968

Texarkana, TX  

  

  

 - 

  

  

 192 

  

  

 1,403 

  

  

 - 

  

  

 192 

  

  

 1,403 

  

  

 585 

  

1996

  

1996

Thomasville, GA  

  

  

 - 

  

  

 530 

  

  

 13,899 

  

  

 - 

  

  

 530 

  

  

 13,899 

  

  

 205 

  

2011

  

2006

Tomball, TX  

  

  

 - 

  

  

 1,050 

  

  

 13,300 

  

  

 - 

  

  

 1,050 

  

  

 13,300 

  

  

 313 

  

2011

  

2001

Toms River, NJ  

  

  

 - 

  

  

 1,610 

  

  

 34,627 

  

  

 285 

  

  

 1,641 

  

  

 34,881 

  

  

 901 

  

2010

  

2005

Torrington, CT  

  

  

 - 

  

  

 360 

  

  

 1,261 

  

  

 1,292 

  

  

 360 

  

  

 2,553 

  

  

 851 

  

2004

  

1966

Towson, MD(1)

  

  

 - 

  

  

 1,180 

  

  

 13,280 

  

  

 - 

  

  

 1,180 

  

  

 13,280 

  

  

 286 

  

2011

  

1973

Troy, OH  

  

  

 - 

  

  

 200 

  

  

 2,000 

  

  

 4,254 

  

  

 200 

  

  

 6,254 

  

  

 1,000 

  

1997

  

1997

Troy, OH  

  

  

 - 

  

  

 470 

  

  

 16,730 

  

  

 - 

  

  

 470 

  

  

 16,730 

  

  

 3,332 

  

2004

  

1971

Trumbull, CT  

  

  

 14,164 

  

  

 4,440 

  

  

 43,384 

  

  

 - 

  

  

 4,440 

  

  

 43,384 

  

  

 775 

  

2011

  

2001

Tucson, AZ  

  

  

 - 

  

  

 930 

  

  

 13,399 

  

  

 - 

  

  

 930 

  

  

 13,399 

  

  

 2,308 

  

2005

  

1985

Tulsa, OK  

  

  

 - 

  

  

 1,390 

  

  

 7,110 

  

  

 - 

  

  

 1,390 

  

  

 7,110 

  

  

 343 

  

2010

  

1998

Twin Falls, ID  

  

  

 - 

  

  

 550 

  

  

 14,740 

  

  

 - 

  

  

 550 

  

  

 14,740 

  

  

 4,184 

  

2002

  

1991

Tyler, TX  

  

  

 - 

  

  

 650 

  

  

 5,268 

  

  

 - 

  

  

 650 

  

  

 5,268 

  

  

 654 

  

2006

  

2007

Uhrichsville, OH  

  

  

 - 

  

  

 24 

  

  

 6,716 

  

  

 - 

  

  

 24 

  

  

 6,716 

  

  

 1,116 

  

2006

  

1977

Uniontown, PA  

  

  

 - 

  

  

 310 

  

  

 6,817 

  

  

 - 

  

  

 310 

  

  

 6,817 

  

  

 147 

  

2011

  

1964

Valley Falls, RI  

  

  

 - 

  

  

 1,080 

  

  

 7,433 

  

  

 - 

  

  

 1,080 

  

  

 7,433 

  

  

 162 

  

2011

  

1975

Valparaiso, IN  

  

  

 - 

  

  

 112 

  

  

 2,558 

  

  

 - 

  

  

 112 

  

  

 2,558 

  

  

 761 

  

2001

  

1998

Valparaiso, IN  

  

  

 - 

  

  

 108 

  

  

 2,962 

  

  

 - 

  

  

 108 

  

  

 2,962 

  

  

 863 

  

2001

  

1999

Venice, FL  

  

  

 - 

  

  

 500 

  

  

 6,000 

  

  

 - 

  

  

 500 

  

  

 6,000 

  

  

 1,290 

  

2004

  

1987

Venice, FL  

  

  

 - 

  

  

 1,150 

  

  

 10,674 

  

  

 - 

  

  

 1,150 

  

  

 10,674 

  

  

 604 

  

2008

  

2009

112

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Vero Beach, FL  

  

  

 - 

  

  

 263 

  

  

 3,187 

  

  

 - 

  

  

 263 

  

  

 3,187 

  

  

 919 

  

2001

  

1999

Vero Beach, FL  

  

  

 - 

  

  

 297 

  

  

 3,263 

  

  

 - 

  

  

 297 

  

  

 3,263 

  

  

 950 

  

2001

  

1996

Vero Beach, FL  

  

  

 - 

  

  

 2,930 

  

  

 40,070 

  

  

 13,615 

  

  

 2,930 

  

  

 53,685 

  

  

 4,866 

  

2007

  

2003

Voorhees, NJ  

  

  

 - 

  

  

 1,800 

  

  

 37,299 

  

  

 - 

  

  

 1,800 

  

  

 37,299 

  

  

 776 

  

2011

  

1986

Voorhees, NJ(1)

  

  

 - 

  

  

 1,900 

  

  

 26,040 

  

  

 - 

  

  

 1,900 

  

  

 26,040 

  

  

 549 

  

2011

  

1993

W. Hartford, CT  

  

  

 - 

  

  

 2,650 

  

  

 5,980 

  

  

 - 

  

  

 2,650 

  

  

 5,980 

  

  

 1,316 

  

2004

  

1905

Waconia, MN  

  

  

 - 

  

  

 890 

  

  

 14,726 

  

  

 - 

  

  

 890 

  

  

 14,726 

  

  

 96 

  

2011

  

2005

Wake Forest, NC  

  

  

 - 

  

  

 200 

  

  

 3,003 

  

  

 1,742 

  

  

 200 

  

  

 4,745 

  

  

 1,529 

  

1998

  

1999

Wall, NJ  

  

  

 - 

  

  

 1,650 

  

  

 25,350 

  

  

 - 

  

  

 1,650 

  

  

 25,350 

  

  

 111 

  

2011

  

2003

Wallingford, CT  

  

  

 - 

  

  

 490 

  

  

 1,210 

  

  

 - 

  

  

 490 

  

  

 1,210 

  

  

 44 

  

2011

  

1962

Wareham, MA  

  

  

 - 

  

  

 875 

  

  

 10,313 

  

  

 1,701 

  

  

 875 

  

  

 12,014 

  

  

 3,283 

  

2002

  

1989

Warren, NJ  

  

  

 - 

  

  

 2,000 

  

  

 30,810 

  

  

 - 

  

  

 2,000 

  

  

 30,810 

  

  

 268 

  

2011

  

1999

Warren, OH  

  

  

 - 

  

  

 240 

  

  

 3,810 

  

  

 - 

  

  

 240 

  

  

 3,810 

  

  

 780 

  

2005

  

1973

Warwick, RI  

  

  

 - 

  

  

 1,530 

  

  

 18,564 

  

  

 - 

  

  

 1,530 

  

  

 18,564 

  

  

 397 

  

2011

  

1968

Watchung, NJ  

  

  

 - 

  

  

 1,920 

  

  

 24,880 

  

  

 - 

  

  

 1,920 

  

  

 24,880 

  

  

 108 

  

2011

  

2000

Waterbury, CT  

  

  

 - 

  

  

 370 

  

  

 2,166 

  

  

 1,927 

  

  

 370 

  

  

 4,093 

  

  

 1,198 

  

2006

  

1972

Waterford, CT  

  

  

 - 

  

  

 1,360 

  

  

 12,540 

  

  

 - 

  

  

 1,360 

  

  

 12,540 

  

  

 3,401 

  

2002

  

2000

Waukesha, WI  

  

  

 - 

  

  

 1,100 

  

  

 14,910 

  

  

 - 

  

  

 1,100 

  

  

 14,910 

  

  

 804 

  

2008

  

2009

Waxahachie, TX  

  

  

 - 

  

  

 650 

  

  

 5,763 

  

  

 - 

  

  

 650 

  

  

 5,763 

  

  

 569 

  

2007

  

2008

Weatherford, TX  

  

  

 - 

  

  

 660 

  

  

 5,261 

  

  

 - 

  

  

 660 

  

  

 5,261 

  

  

 658 

  

2006

  

2007

Webster, TX  

  

  

 9,585 

  

  

 360 

  

  

 5,940 

  

  

 - 

  

  

 360 

  

  

 5,940 

  

  

 1,648 

  

2002

  

2000

West Bend, WI  

  

  

 - 

  

  

 620 

  

  

 17,790 

  

  

 - 

  

  

 620 

  

  

 17,790 

  

  

 - 

  

2010

  

2011

West Chester, PA  

  

  

 - 

  

  

 1,350 

  

  

 29,237 

  

  

 - 

  

  

 1,350 

  

  

 29,237 

  

  

 606 

  

2011

  

1997

West Haven, CT  

  

  

 - 

  

  

 580 

  

  

 1,620 

  

  

 1,680 

  

  

 580 

  

  

 3,300 

  

  

 1,121 

  

2004

  

1971

West Orange, NJ  

  

  

 - 

  

  

 2,280 

  

  

 10,687 

  

  

 - 

  

  

 2,280 

  

  

 10,687 

  

  

 248 

  

2011

  

1994

West Worthington, OH  

  

  

 - 

  

  

 510 

  

  

 5,090 

  

  

 - 

  

  

 510 

  

  

 5,090 

  

  

 882 

  

2006

  

1980

Westerville, OH  

  

  

 - 

  

  

 740 

  

  

 8,287 

  

  

 2,736 

  

  

 740 

  

  

 11,023 

  

  

 5,877 

  

1998

  

2001

Westfield, NJ(1)

  

  

 - 

  

  

 2,270 

  

  

 16,589 

  

  

 - 

  

  

 2,270 

  

  

 16,589 

  

  

 382 

  

2011

  

1994

Westford, MA  

  

  

 - 

  

  

 920 

  

  

 13,829 

  

  

 - 

  

  

 920 

  

  

 13,829 

  

  

 298 

  

2011

  

1993

Westlake, OH  

  

  

 - 

  

  

 1,330 

  

  

 17,926 

  

  

 - 

  

  

 1,330 

  

  

 17,926 

  

  

 5,064 

  

2001

  

1985

Westlake, OH  

  

  

 - 

  

  

 571 

  

  

 5,411 

  

  

 - 

  

  

 571 

  

  

 5,411 

  

  

 2,241 

  

1998

  

1957

Westmoreland, TN  

  

  

 - 

  

  

 330 

  

  

 1,822 

  

  

 2,634 

  

  

 330 

  

  

 4,456 

  

  

 1,355 

  

2001

  

1994

White Lake, MI  

  

  

 10,917 

  

  

 2,920 

  

  

 20,179 

  

  

 - 

  

  

 2,920 

  

  

 20,179 

  

  

 563 

  

2010

  

2000

Whitemarsh, PA  

  

  

 - 

  

  

 2,310 

  

  

 6,190 

  

  

 1,923 

  

  

 2,310 

  

  

 8,113 

  

  

 1,501 

  

2005

  

1967

Wichita, KS  

  

  

 - 

  

  

 1,400 

  

  

 11,000 

  

  

 - 

  

  

 1,400 

  

  

 11,000 

  

  

 1,734 

  

2006

  

1997

Wilkes-Barre, PA  

  

  

 - 

  

  

 610 

  

  

 13,842 

  

  

 - 

  

  

 610 

  

  

 13,842 

  

  

 298 

  

2011

  

2007

Wilkes-Barre, PA  

  

  

 - 

  

  

 570 

  

  

 2,301 

  

  

 - 

  

  

 570 

  

  

 2,301 

  

  

 78 

  

2011

  

1992

Williamsburg, VA  

  

  

 - 

  

  

 1,360 

  

  

 7,440 

  

  

 - 

  

  

 1,360 

  

  

 7,440 

  

  

 1,019 

  

2007

  

1970

Williamsport, PA  

  

  

 - 

  

  

 300 

  

  

 4,946 

  

  

 - 

  

  

 300 

  

  

 4,946 

  

  

 112 

  

2011

  

1991

Williamsport, PA  

  

  

 - 

  

  

 620 

  

  

 8,487 

  

  

 - 

  

  

 620 

  

  

 8,487 

  

  

 198 

  

2011

  

1988

Williamstown, KY  

  

  

 - 

  

  

 70 

  

  

 6,430 

  

  

 - 

  

  

 70 

  

  

 6,430 

  

  

 1,234 

  

2005

  

1987

Willow Grove, PA  

  

  

 - 

  

  

 1,300 

  

  

 14,736 

  

  

 - 

  

  

 1,300 

  

  

 14,736 

  

  

 331 

  

2011

  

2007

Wilmington, DE  

  

  

 - 

  

  

 800 

  

  

 9,494 

  

  

 - 

  

  

 800 

  

  

 9,494 

  

  

 211 

  

2011

  

2007

Wilmington, NC  

  

  

 - 

  

  

 210 

  

  

 2,991 

  

  

 - 

  

  

 210 

  

  

 2,991 

  

  

 1,066 

  

1999

  

1999

Winchester, VA  

  

  

 - 

  

  

 640 

  

  

 1,510 

  

  

 - 

  

  

 640 

  

  

 1,510 

  

  

 168 

  

2008

  

1964

Windsor, CT  

  

  

 - 

  

  

 2,250 

  

  

 8,539 

  

  

 - 

  

  

 2,250 

  

  

 8,539 

  

  

 207 

  

2011

  

1969

Windsor, CT  

  

  

 - 

  

  

 1,800 

  

  

 600 

  

  

 - 

  

  

 1,800 

  

  

 600 

  

  

 38 

  

2011

  

1974

Winston-Salem, NC  

  

  

 - 

  

  

 360 

  

  

 2,514 

  

  

 459 

  

  

 360 

  

  

 2,973 

  

  

 718 

  

2003

  

1996

Winston-Salem, NC  

  

  

 - 

  

  

 5,700 

  

  

 13,550 

  

  

 11,716 

  

  

 5,700 

  

  

 25,266 

  

  

 3,418 

  

2005

  

1997

Woodbridge, VA  

  

  

 - 

  

  

 680 

  

  

 4,423 

  

  

 330 

  

  

 680 

  

  

 4,753 

  

  

 1,302 

  

2002

  

1977

Worcester, MA  

  

  

 - 

  

  

 3,500 

  

  

 54,099 

  

  

 - 

  

  

 3,500 

  

  

 54,099 

  

  

 2,897 

  

2007

  

2009

Worcester, MA  

  

  

 - 

  

  

 2,300 

  

  

 9,060 

  

  

 - 

  

  

 2,300 

  

  

 9,060 

  

  

 831 

  

2008

  

1993

Wyncote, PA  

  

  

 - 

  

  

 2,700 

  

  

 22,244 

  

  

 - 

  

  

 2,700 

  

  

 22,244 

  

  

 474 

  

2011

  

1992

Wyncote, PA  

  

  

 - 

  

  

 1,610 

  

  

 21,256 

  

  

 - 

  

  

 1,610 

  

  

 21,256 

  

  

 433 

  

2011

  

1992

Wyncote, PA  

  

  

 - 

  

  

 900 

  

  

 7,811 

  

  

 - 

  

  

 900 

  

  

 7,811 

  

  

 166 

  

2011

  

1999

Zionsville, IN  

  

  

 - 

  

  

 1,610 

  

  

 22,400 

  

  

 1,358 

  

  

 1,610 

  

  

 23,758 

  

  

 749 

  

2010

  

2009

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net total  

  

  

 258,600 

  

  

 575,231 

  

  

 6,992,506 

  

  

 293,078 

  

  

 576,701 

  

  

 7,284,115 

  

  

 642,910 

  

  

  

  

113

 


 

  

 

  

  

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description

  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing operating facilities:

Albuquerque, NM

  

  

$

 5,772 

  

$

 1,270 

  

$

 20,837 

  

$

 80 

  

$

 1,270 

  

$

 20,917 

  

$

 1,386 

  

2010

  

1984

Agawam, MA

  

  

  

 6,688 

  

  

 880 

  

  

 10,044 

  

  

 - 

  

  

 880 

  

  

 10,044 

  

  

 724 

  

2011

  

1996

Alhambra, CA

  

  

  

 3,047 

  

  

 600 

  

  

 6,305 

  

  

 - 

  

  

 600 

  

  

 6,305 

  

  

 382 

  

2011

  

2010

Albertville, AL

  

  

  

 2,088 

  

  

 170 

  

  

 6,203 

  

  

 116 

  

  

 170 

  

  

 6,319 

  

  

 490 

  

2010

  

1999

Apple Valley, CA

  

  

  

 11,126 

  

  

 480 

  

  

 16,639 

  

  

 66 

  

  

 480 

  

  

 16,705 

  

  

 1,651 

  

2010

  

1999

Atlanta, GA

  

  

  

 7,889 

  

  

 2,058 

  

  

 14,914 

  

  

 606 

  

  

 2,059 

  

  

 15,518 

  

  

 8,666 

  

1997

  

1999

Austin, TX

  

  

  

 19,550 

  

  

 880 

  

  

 9,520 

  

  

 512 

  

  

 880 

  

  

 10,032 

  

  

 3,529 

  

1999

  

1998

Avon, CT

  

  

  

 21,463 

  

  

 1,550 

  

  

 30,571 

  

  

 - 

  

  

 1,550 

  

  

 30,571 

  

  

 1,903 

  

2011

  

1998

Azusa, CA

  

  

  

 - 

  

  

 570 

  

  

 3,141 

  

  

 6,000 

  

  

 570 

  

  

 9,141 

  

  

 1,295 

  

1998

  

1988

Bellingham, WA

  

  

  

 8,979 

  

  

 1,500 

  

  

 19,861 

  

  

 59 

  

  

 1,500 

  

  

 19,920 

  

  

 1,836 

  

2010

  

1996

Belmont, CA

  

  

  

 - 

  

  

 3,000 

  

  

 23,526 

  

  

 - 

  

  

 3,000 

  

  

 23,526 

  

  

 398 

  

2011

  

1999

Brighton, MA

  

  

  

 - 

  

  

 2,100 

  

  

 14,616 

  

  

 - 

  

  

 2,100 

  

  

 14,616 

  

  

 920 

  

2011

  

1995

Brookfield, CT

  

  

  

 20,005 

  

  

 2,250 

  

  

 30,180 

  

  

 - 

  

  

 2,250 

  

  

 30,180 

  

  

 1,946 

  

2011

  

1999

Cardiff by the Sea, CA

  

  

  

 - 

  

  

 5,880 

  

  

 64,711 

  

  

 - 

  

  

 5,880 

  

  

 64,711 

  

  

 708 

  

2011

  

2009

North Chelmsford, MA

  

  

  

 11,972 

  

  

 880 

  

  

 18,478 

  

  

 - 

  

  

 880 

  

  

 18,478 

  

  

 1,118 

  

2011

  

1998

Concord, NH

  

  

  

 13,591 

  

  

 720 

  

  

 21,164 

  

  

 - 

  

  

 720 

  

  

 21,164 

  

  

 1,169 

  

2011

  

2010

Costa Mesa, CA

  

  

  

 - 

  

  

 2,050 

  

  

 19,969 

  

  

 - 

  

  

 2,050 

  

  

 19,969 

  

  

 1,749 

  

2011

  

2009

Citrus Heights, CA

  

  

  

 15,373 

  

  

 2,300 

  

  

 31,876 

  

  

 153 

  

  

 2,300 

  

  

 32,029 

  

  

 2,960 

  

2010

  

1997

Centerville, MA

  

  

  

 17,763 

  

  

 1,300 

  

  

 27,357 

  

  

 - 

  

  

 1,300 

  

  

 27,357 

  

  

 1,588 

  

2011

  

2010

Dallas, TX

  

  

  

 - 

  

  

 1,080 

  

  

 9,655 

  

  

 - 

  

  

 1,080 

  

  

 9,655 

  

  

 614 

  

2011

  

2009

Danvers, MA

  

  

  

 9,621 

  

  

 1,120 

  

  

 14,557 

  

  

 - 

  

  

 1,120 

  

  

 14,557 

  

  

 1,004 

  

2011

  

2000

Davenport, IA

  

  

  

 - 

  

  

 1,403 

  

  

 35,893 

  

  

 1,805 

  

  

 1,403 

  

  

 37,699 

  

  

 2,149 

  

2006

  

2009

Dublin, OH

  

  

  

 19,181 

  

  

 1,680 

  

  

 43,423 

  

  

 196 

  

  

 1,680 

  

  

 43,619 

  

  

 2,225 

  

2010

  

1990

Encinitas, CA

  

  

  

 - 

  

  

 1,460 

  

  

 7,721 

  

  

 163 

  

  

 1,460 

  

  

 7,884 

  

  

 2,595 

  

2000

  

2000

Escondido, CA

  

  

  

 13,471 

  

  

 1,520 

  

  

 24,024 

  

  

 - 

  

  

 1,520 

  

  

 24,024 

  

  

 1,633 

  

2011

  

2008

East Haven, CT

  

  

  

 23,577 

  

  

 2,660 

  

  

 35,533 

  

  

 - 

  

  

 2,660 

  

  

 35,533 

  

  

 2,266 

  

2011

  

2000

Florence, AL

  

  

  

 7,342 

  

  

 353 

  

  

 13,049 

  

  

 125 

  

  

 350 

  

  

 13,177 

  

  

 1,168 

  

2010

  

1999

Fremont, CA

  

  

  

 20,028 

  

  

 3,400 

  

  

 25,300 

  

  

 1,527 

  

  

 3,400 

  

  

 26,827 

  

  

 4,183 

  

2005

  

1987

Gig Harbor, WA

  

  

  

 5,967 

  

  

 1,560 

  

  

 15,947 

  

  

 52 

  

  

 1,560 

  

  

 15,999 

  

  

 1,434 

  

2010

  

1994

Gilroy, CA

  

  

  

 - 

  

  

 760 

  

  

 13,880 

  

  

 23,860 

  

  

 760 

  

  

 37,740 

  

  

 4,044 

  

2006

  

2007

Gardnerville, NV

  

  

  

 12,943 

  

  

 1,143 

  

  

 10,831 

  

  

 653 

  

  

 1,144 

  

  

 11,482 

  

  

 6,832 

  

1998

  

1999

Hemet, CA

  

  

  

 13,550 

  

  

 1,890 

  

  

 28,606 

  

  

 146 

  

  

 1,890 

  

  

 28,752 

  

  

 2,820 

  

2010

  

1988

Hemet, CA

  

  

  

 - 

  

  

 430 

  

  

 9,630 

  

  

 384 

  

  

 430 

  

  

 10,014 

  

  

 598 

  

2010

  

1988

Hamden, CT

  

  

  

 15,710 

  

  

 1,460 

  

  

 24,093 

  

  

 - 

  

  

 1,460 

  

  

 24,093 

  

  

 1,602 

  

2011

  

1999

Henderson, NV

  

  

  

 15,709 

  

  

 880 

  

  

 29,809 

  

  

 - 

  

  

 880 

  

  

 29,809 

  

  

 148 

  

2011

  

2009

Houston, TX

  

  

  

 8,326 

  

  

 960 

  

  

 27,598 

  

  

 - 

  

  

 960 

  

  

 27,598 

  

  

 1,797 

  

2011

  

2009

Irving, TX

  

  

  

 - 

  

  

 1,030 

  

  

 6,823 

  

  

 595 

  

  

 1,030 

  

  

 7,418 

  

  

 652 

  

2007

  

2008

Kingwood, TX

  

  

  

 3,329 

  

  

 480 

  

  

 9,777 

  

  

 - 

  

  

 480 

  

  

 9,777 

  

  

 658 

  

2011

  

1998

Kennewick, WA

  

  

  

 9,010 

  

  

 1,820 

  

  

 27,991 

  

  

 91 

  

  

 1,820 

  

  

 28,082 

  

  

 2,646 

  

2010

  

1994

Kansas City, MO

  

  

  

 5,911 

  

  

 1,820 

  

  

 34,898 

  

  

 331 

  

  

 1,820 

  

  

 35,229 

  

  

 2,236 

  

2010

  

1980

Kansas City, MO

  

  

  

 7,250 

  

  

 1,930 

  

  

 39,997 

  

  

 78 

  

  

 1,930 

  

  

 40,075 

  

  

 2,688 

  

2010

  

1986

Kirkland, WA

  

  

  

 34,000 

  

  

 3,450 

  

  

 38,709 

  

  

 - 

  

  

 3,450 

  

  

 38,709 

  

  

 201 

  

2011

  

2009

Lancaster, CA

  

  

  

 10,378 

  

  

 700 

  

  

 15,295 

  

  

 83 

  

  

 700 

  

  

 15,378 

  

  

 1,621 

  

2010

  

1999

Los Angeles, CA

  

  

  

 - 

  

  

 - 

  

  

 11,430 

  

  

 357 

  

  

 - 

  

  

 11,787 

  

  

 579 

  

2008

  

2008

Los Angeles, CA

  

  

  

 - 

  

  

 - 

  

  

 114,438 

  

  

 - 

  

  

 - 

  

  

 114,438 

  

  

 1,172 

  

2011

  

2009

Mansfield, MA

  

  

  

 37,918 

  

  

 3,320 

  

  

 57,011 

  

  

 - 

  

  

 3,320 

  

  

 57,011 

  

  

 2,763 

  

2011

  

1998

Mansfield, MA

  

  

  

-

  

  

-

  

  

 - 

  

  

 - 

  

  

-

  

  

 - 

  

  

 - 

  

2011

  

1998

Manteca, CA

  

  

  

 6,358 

  

  

 1,300 

  

  

 12,125 

  

  

 1,361 

  

  

 1,300 

  

  

 13,486 

  

  

 2,138 

  

2005

  

1985

Meriden, CT

  

  

  

 9,903 

  

  

 1,500 

  

  

 14,874 

  

  

 - 

  

  

 1,500 

  

  

 14,874 

  

  

 1,272 

  

2011

  

2001

Mesa, AZ

  

  

  

 6,279 

  

  

 950 

  

  

 9,087 

  

  

 486 

  

  

 950 

  

  

 9,573 

  

  

 2,914 

  

1999

  

2000

Milford, CT

  

  

  

 12,656 

  

  

 3,210 

  

  

 17,364 

  

  

 - 

  

  

 3,210 

  

  

 17,364 

  

  

 1,171 

  

2011

  

1999

Middletown, CT

  

  

  

 15,756 

  

  

 1,430 

  

  

 24,242 

  

  

 - 

  

  

 1,430 

  

  

 24,242 

  

  

 1,659 

  

2011

  

1999

Middletown, RI

  

  

  

 16,729 

  

  

 2,480 

  

  

 24,628 

  

  

 - 

  

  

 2,480 

  

  

 24,628 

  

  

 1,612 

  

2011

  

2008

Mill Creek, WA

  

  

  

 30,259 

  

  

 10,150 

  

  

 60,274 

  

  

 282 

  

  

 10,150 

  

  

 60,556 

  

  

 5,360 

  

2010

  

1998

Monroe, WA

  

  

  

 14,167 

  

  

 2,560 

  

  

 34,460 

  

  

 185 

  

  

 2,560 

  

  

 34,645 

  

  

 3,107 

  

2010

  

1994

Marysville, WA

  

  

  

 4,711 

  

  

 620 

  

  

 4,780 

  

  

 276 

  

  

 620 

  

  

 5,056 

  

  

 1,082 

  

2003

  

1998

Mystic, CT

  

  

  

 12,072 

  

  

 1,400 

  

  

 18,274 

  

  

 - 

  

  

 1,400 

  

  

 18,274 

  

  

 1,274 

  

2011

  

2001

North Andover, MA

  

  

  

 22,890 

  

  

 1,960 

  

  

 34,976 

  

  

 - 

  

  

 1,960 

  

  

 34,976 

  

  

 2,055 

  

2011

  

1995

Newton, MA

  

  

  

 28,400 

  

  

 2,250 

  

  

 43,614 

  

  

 - 

  

  

 2,250 

  

  

 43,614 

  

  

 2,536 

  

2011

  

1996

Newton, MA

  

  

  

 10,758 

  

  

 2,500 

  

  

 30,681 

  

  

 - 

  

  

 2,500 

  

  

 30,681 

  

  

 1,829 

  

2011

  

1996

Newton, MA

  

  

  

 17,564 

  

  

 3,360 

  

  

 25,099 

  

  

 - 

  

  

 3,360 

  

  

 25,099 

  

  

 1,683 

  

2011

  

1994

Niantic, CT

  

  

  

 16,855 

  

  

 1,320 

  

  

 25,986 

  

  

 - 

  

  

 1,320 

  

  

 25,986 

  

  

 1,623 

  

2011

  

2001

Naples, FL

  

  

  

 - 

  

  

 1,716 

  

  

 17,306 

  

  

 1,588 

  

  

 1,716 

  

  

 18,894 

  

  

 13,706 

  

1997

  

1999

Olympia, WA

  

  

  

 7,197 

  

  

 550 

  

  

 16,689 

  

  

 164 

  

  

 550 

  

  

 16,853 

  

  

 1,533 

  

2010

  

1995

Oceanside, CA

  

  

  

 13,369 

  

  

 2,160 

  

  

 18,352 

  

  

 - 

  

  

 2,160 

  

  

 18,352 

  

  

 138 

  

2011

  

2005

Plano, TX

  

  

  

 4,335 

  

  

 840 

  

  

 8,538 

  

  

 - 

  

  

 840 

  

  

 8,538 

  

  

 733 

  

2011

  

1996

Providence, RI

  

  

  

 18,433 

  

  

 2,600 

  

  

 27,546 

  

  

 - 

  

  

 2,600 

  

  

 27,546 

  

  

 1,977 

  

2011

  

1998

Puyallup, WA

  

  

  

 11,706 

  

  

 1,150 

  

  

 20,776 

  

  

 169 

  

  

 1,150 

  

  

 20,945 

  

  

 2,085 

  

2010

  

1985

Quincy, MA

  

  

  

 8,551 

  

  

 1,350 

  

  

 12,584 

  

  

 - 

  

  

 1,350 

  

  

 12,584 

  

  

 907 

  

2011

  

1998

Redondo Beach, CA

  

  

  

 6,154 

  

  

 - 

  

  

 9,556 

  

  

 - 

  

  

 - 

  

  

 9,556 

  

  

 765 

  

2011

  

2009

Rocky Hill, CT

  

  

  

 10,531 

  

  

 810 

  

  

 16,351 

  

  

 - 

  

  

 810 

  

  

 16,351 

  

  

 1,104 

  

2011

  

2000

Romeoville, IL

  

  

  

 - 

  

  

 854 

  

  

 12,646 

  

  

 58,314 

  

  

 6,100 

  

  

 65,714 

  

  

 3,300 

  

2006

  

2010

Renton, WA

  

  

  

 22,855 

  

  

 3,080 

  

  

 51,824 

  

  

 - 

  

  

 3,080 

  

  

 51,824 

  

  

 260 

  

2011

  

2007

Rohnert Park, CA

  

  

  

 14,086 

  

  

 6,500 

  

  

 18,700 

  

  

 1,367 

  

  

 6,500 

  

  

 20,067 

  

  

 3,152 

  

2005

  

1985

Roswell, GA

  

  

  

 8,100 

  

  

 1,107 

  

  

 9,627 

  

  

 420 

  

  

 1,107 

  

  

 10,047 

  

  

 6,105 

  

1997

  

1999

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description

  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

Sacramento, CA

  

  

  

 10,596 

  

  

 940 

  

  

 14,781 

  

  

 38 

  

  

 940 

  

  

 14,819 

  

  

 1,473 

  

2010

  

1978

Salem, NH

  

  

  

 20,915 

  

  

 980 

  

  

 32,721 

  

  

 - 

  

  

 980 

  

  

 32,721 

  

  

 1,827 

  

2011

  

2000

San Ramon, CA

  

  

  

 9,598 

  

  

 2,430 

  

  

 17,488 

  

  

 16 

  

  

 2,430 

  

  

 17,504 

  

  

 1,624 

  

2010

  

1989

Scottsdale, AZ

  

  

  

 - 

  

  

 2,500 

  

  

 3,890 

  

  

 796 

  

  

 2,500 

  

  

 4,686 

  

  

 424 

  

2008

  

1999

San Diego, CA

  

  

  

 15,879 

  

  

 4,200 

  

  

 30,707 

  

  

 - 

  

  

 4,200 

  

  

 30,707 

  

  

 68 

  

2011

  

2011

Seattle, WA

  

  

  

 7,838 

  

  

 5,190 

  

  

 9,350 

  

  

 99 

  

  

 5,190 

  

  

 9,449 

  

  

 1,573 

  

2010

  

1962

Seattle, WA

  

  

  

 7,795 

  

  

 3,420 

  

  

 15,555 

  

  

 27 

  

  

 3,420 

  

  

 15,582 

  

  

 1,777 

  

2010

  

2000

Seattle, WA

  

  

  

 9,398 

  

  

 2,630 

  

  

 10,257 

  

  

 25 

  

  

 2,630 

  

  

 10,282 

  

  

 1,255 

  

2010

  

2003

Seattle, WA

  

  

  

 29,205 

  

  

 10,670 

  

  

 37,291 

  

  

 78 

  

  

 10,670 

  

  

 37,369 

  

  

 3,683 

  

2010

  

2005

Seattle, WA

  

  

  

 48,540 

  

  

 6,790 

  

  

 85,369 

  

  

 - 

  

  

 6,790 

  

  

 85,369 

  

  

 407 

  

2011

  

2009

Shelburne, VT

  

  

  

 19,706 

  

  

 720 

  

  

 31,041 

  

  

 - 

  

  

 720 

  

  

 31,041 

  

  

 1,737 

  

2011

  

1988

San Juan Capistrano, CA

  

  

  

 - 

  

  

 1,390 

  

  

 6,942 

  

  

 75 

  

  

 1,390 

  

  

 7,017 

  

  

 2,051 

  

2000

  

2001

Salt Lake City, UT

  

  

  

 - 

  

  

 1,360 

  

  

 19,691 

  

  

 - 

  

  

 1,360 

  

  

 19,691 

  

  

 2,100 

  

2011

  

2008

San Jose, CA

  

  

  

 23,422 

  

  

 2,850 

  

  

 35,098 

  

  

 - 

  

  

 2,850 

  

  

 35,098 

  

  

 203 

  

2011

  

2009

Sonoma, CA

  

  

  

 15,238 

  

  

 1,100 

  

  

 18,400 

  

  

 1,146 

  

  

 1,100 

  

  

 19,546 

  

  

 3,056 

  

2005

  

1988

Stanwood, WA

  

  

  

 10,196 

  

  

 2,260 

  

  

 28,474 

  

  

 74 

  

  

 2,260 

  

  

 28,548 

  

  

 2,755 

  

2010

  

1998

Santa Maria, CA

  

  

  

 30,564 

  

  

 6,050 

  

  

 50,658 

  

  

 - 

  

  

 6,050 

  

  

 50,658 

  

  

 287 

  

2011

  

2001

Stockton, CA

  

  

  

 3,050 

  

  

 2,280 

  

  

 5,983 

  

  

 107 

  

  

 2,280 

  

  

 6,090 

  

  

 765 

  

2010

  

1988

Sugar Land, TX

  

  

  

 5,904 

  

  

 960 

  

  

 31,423 

  

  

 - 

  

  

 960 

  

  

 31,423 

  

  

 2,268 

  

2011

  

1996

South Windsor, CT

  

  

  

 19,888 

  

  

 3,000 

  

  

 29,295 

  

  

 - 

  

  

 3,000 

  

  

 29,295 

  

  

 1,989 

  

2011

  

1999

Tacoma, WA

  

  

  

 19,390 

  

  

 2,400 

  

  

 35,053 

  

  

 - 

  

  

 2,400 

  

  

 35,053 

  

  

 176 

  

2011

  

2008

Toledo, OH

  

  

  

 16,609 

  

  

 2,040 

  

  

 47,129 

  

  

 92 

  

  

 2,040 

  

  

 47,221 

  

  

 3,721 

  

2010

  

1985

Trumbull, CT

  

  

  

 25,078 

  

  

 2,850 

  

  

 37,685 

  

  

 - 

  

  

 2,850 

  

  

 37,685 

  

  

 2,321 

  

2011

  

1998

Tustin, CA

  

  

  

 7,090 

  

  

 840 

  

  

 15,299 

  

  

 - 

  

  

 840 

  

  

 15,299 

  

  

 900 

  

2011

  

2007

Tulsa, OK

  

  

  

 6,467 

  

  

 1,330 

  

  

 21,285 

  

  

 174 

  

  

 1,330 

  

  

 21,459 

  

  

 1,509 

  

2010

  

1986

Tulsa, OK

  

  

  

 8,452 

  

  

 1,500 

  

  

 20,861 

  

  

 54 

  

  

 1,500 

  

  

 20,915 

  

  

 1,514 

  

2010

  

1984

Vacaville, CA

  

  

  

 14,485 

  

  

 900 

  

  

 17,100 

  

  

 1,185 

  

  

 900 

  

  

 18,285 

  

  

 2,892 

  

2005

  

1986

Vancouver, WA

  

  

  

 12,173 

  

  

 1,820 

  

  

 19,042 

  

  

 73 

  

  

 1,820 

  

  

 19,115 

  

  

 1,944 

  

2010

  

2006

Vallejo, CA

  

  

  

 14,501 

  

  

 4,000 

  

  

 18,000 

  

  

 1,536 

  

  

 4,000 

  

  

 19,536 

  

  

 3,045 

  

2005

  

1989

Vallejo, CA

  

  

  

 7,628 

  

  

 2,330 

  

  

 15,407 

  

  

 24 

  

  

 2,330 

  

  

 15,431 

  

  

 1,776 

  

2010

  

1990

Warwick, RI

  

  

  

 16,567 

  

  

 2,400 

  

  

 24,635 

  

  

 - 

  

  

 2,400 

  

  

 24,635 

  

  

 1,790 

  

2011

  

1998

Waterbury, CT

  

  

  

 25,825 

  

  

 2,460 

  

  

 39,547 

  

  

 - 

  

  

 2,460 

  

  

 39,547 

  

  

 2,568 

  

2011

  

2001

The Woodlands, TX

  

  

  

 2,678 

  

  

 480 

  

  

 12,379 

  

  

 - 

  

  

 480 

  

  

 12,379 

  

  

 834 

  

2011

  

2010

Whittier, CA

  

  

  

 11,931 

  

  

 4,470 

  

  

 22,151 

  

  

 97 

  

  

 4,470 

  

  

 22,248 

  

  

 2,392 

  

2010

  

1988

Wilbraham, MA

  

  

  

 11,221 

  

  

 660 

  

  

 17,639 

  

  

 - 

  

  

 660 

  

  

 17,639 

  

  

 1,198 

  

2011

  

2000

Woodbridge, CT

  

  

  

 9,399 

  

  

 1,370 

  

  

 14,219 

  

  

 - 

  

  

 1,370 

  

  

 14,219 

  

  

 1,225 

  

2011

  

1998

Worcester, MA

  

  

  

 14,005 

  

  

 1,140 

  

  

 21,664 

  

  

 - 

  

  

 1,140 

  

  

 21,664 

  

  

 1,449 

  

2011

  

1999

Yarmouth, ME

  

  

  

 17,415 

  

  

 450 

  

  

 27,711 

  

  

 - 

  

  

 450 

  

  

 27,711 

  

  

 1,625 

  

2011

  

2010

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing operating total

  

  

  

 1,317,849 

  

  

 223,614 

  

  

 2,678,007 

  

  

 108,366 

  

  

 228,859 

  

  

 2,781,126 

  

  

 218,031 

  

  

  

  

114

 


 

  

 

  

  

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description

  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Medical facilities:

Akron, OH

  

  

$

 - 

  

$

 300 

  

$

 20,200 

  

$

 - 

  

$

 300 

  

$

 20,200 

  

$

 1,057 

  

2009

  

2008

Alpharetta, GA

  

  

  

 - 

  

  

 233 

  

  

 18,205 

  

  

 - 

  

  

 233 

  

  

 18,205 

  

  

 42 

  

2011

  

1993

Alpharetta, GA

  

  

  

 - 

  

  

 498 

  

  

 32,729 

  

  

 - 

  

  

 498 

  

  

 32,729 

  

  

 60 

  

2011

  

1999

Alpharetta, GA

  

  

  

 - 

  

  

 417 

  

  

 14,406 

  

  

 - 

  

  

 417 

  

  

 14,406 

  

  

 - 

  

2011

  

2003

Alpharetta, GA

  

  

  

 - 

  

  

 1,700 

  

  

 163 

  

  

 - 

  

  

 1,700 

  

  

 163 

  

  

 - 

  

2011

  

  

Alpharetta, GA

  

  

  

 - 

  

  

 628 

  

  

 16,063 

  

  

 - 

  

  

 628 

  

  

 16,063 

  

  

 - 

  

2011

  

2007

Amarillo, TX

  

  

  

 - 

  

  

 72 

  

  

 11,928 

  

  

 1,400 

  

  

 72 

  

  

 13,328 

  

  

 2,139 

  

2005

  

1986

Arcadia, CA

  

  

  

 9,941 

  

  

 5,408 

  

  

 23,219 

  

  

 1,354 

  

  

 5,618 

  

  

 24,362 

  

  

 4,399 

  

2006

  

1984

Atlanta, GA

  

  

  

 - 

  

  

 4,931 

  

  

 18,720 

  

  

 2,123 

  

  

 5,293 

  

  

 20,480 

  

  

 4,509 

  

2006

  

1992

Bartlett, TN

  

  

  

 8,349 

  

  

 187 

  

  

 15,015 

  

  

 748 

  

  

 187 

  

  

 15,763 

  

  

 2,801 

  

2007

  

2004

Bellaire, TX

  

  

  

 - 

  

  

 4,551 

  

  

 46,105 

  

  

 - 

  

  

 4,551 

  

  

 46,105 

  

  

 6,577 

  

2006

  

2005

Bellaire, TX

  

  

  

 - 

  

  

 2,972 

  

  

 33,445 

  

  

 1,601 

  

  

 2,972 

  

  

 35,046 

  

  

 5,677 

  

2006

  

2005

Bellevue, NE

  

  

  

 - 

  

  

 - 

  

  

 15,833 

  

  

 519 

  

  

 - 

  

  

 16,352 

  

  

 907 

  

2010

  

2010

Bellevue, NE

  

  

  

 - 

  

  

 4,500 

  

  

 109,719 

  

  

 - 

  

  

 4,500 

  

  

 109,719 

  

  

 4,363 

  

2008

  

2010

Bellingham, MA

  

  

  

 - 

  

  

 9,270 

  

  

 - 

  

  

 - 

  

  

 9,270 

  

  

 - 

  

  

 - 

  

2010

  

-

Birmingham, AL

  

  

  

 - 

  

  

 52 

  

  

 9,950 

  

  

 - 

  

  

 52 

  

  

 9,950 

  

  

 1,898 

  

2006

  

1971

Birmingham, AL

  

  

  

 - 

  

  

 124 

  

  

 12,238 

  

  

 - 

  

  

 124 

  

  

 12,238 

  

  

 2,206 

  

2006

  

1985

Birmingham, AL

  

  

  

 - 

  

  

 476 

  

  

 18,994 

  

  

 - 

  

  

 476 

  

  

 18,994 

  

  

 3,100 

  

2006

  

1989

Boardman, OH

  

  

  

 - 

  

  

 80 

  

  

 11,787 

  

  

 - 

  

  

 80 

  

  

 11,787 

  

  

 601 

  

2010

  

2007

Boardman, OH

  

  

  

 - 

  

  

 1,200 

  

  

 12,800 

  

  

 - 

  

  

 1,200 

  

  

 12,800 

  

  

 1,292 

  

2008

  

2008

Boca Raton, FL

  

  

  

 13,520 

  

  

 109 

  

  

 34,002 

  

  

 1,548 

  

  

 124 

  

  

 35,535 

  

  

 6,255 

  

2006

  

1995

Boerne, TX

  

  

  

 - 

  

  

 50 

  

  

 13,463 

  

  

 - 

  

  

 50 

  

  

 13,463 

  

  

 28 

  

2011

  

2007

Bowling Green, KY

  

  

  

 - 

  

  

 3,800 

  

  

 26,700 

  

  

 143 

  

  

 3,800 

  

  

 26,843 

  

  

 2,395 

  

2008

  

1992

Boynton Beach, FL

  

  

  

 4,507 

  

  

 2,048 

  

  

 7,692 

  

  

 204 

  

  

 2,048 

  

  

 7,896 

  

  

 1,855 

  

2006

  

1995

Boynton Beach, FL

  

  

  

 4,043 

  

  

 2,048 

  

  

 7,403 

  

  

 732 

  

  

 2,048 

  

  

 8,134 

  

  

 1,506 

  

2006

  

1997

Boynton Beach, FL

  

  

  

 10,187 

  

  

 109 

  

  

 11,235 

  

  

 1,009 

  

  

 117 

  

  

 12,236 

  

  

 2,053 

  

2007

  

1996

Bridgeton, MO

  

  

  

 - 

  

  

 - 

  

  

 30,221 

  

  

 - 

  

  

 - 

  

  

 30,221 

  

  

 - 

  

2011

  

2011

Bridgeton, MO

  

  

  

 11,649 

  

  

 450 

  

  

 21,221 

  

  

 2 

  

  

 450 

  

  

 21,223 

  

  

 1,209 

  

2010

  

2006

Burleson, TX

  

  

  

 - 

  

  

 10 

  

  

 11,619 

  

  

 - 

  

  

 10 

  

  

 11,619 

  

  

 319 

  

2011

  

2007

Carmel, IN

  

  

  

 - 

  

  

 2,280 

  

  

 18,820 

  

  

 - 

  

  

 2,280 

  

  

 18,820 

  

  

 560 

  

2011

  

2005

Carmel, IN

  

  

  

 - 

  

  

 2,152 

  

  

 18,591 

  

  

 - 

  

  

 2,152 

  

  

 18,591 

  

  

 323 

  

2011

  

2007

Cedar Grove, WI

  

  

  

 - 

  

  

 113 

  

  

 618 

  

  

 - 

  

  

 113 

  

  

 618 

  

  

 41 

  

2010

  

1986

Claremore, OK

  

  

  

 8,238 

  

  

 132 

  

  

 12,829 

  

  

 270 

  

  

 132 

  

  

 13,099 

  

  

 2,346 

  

2007

  

2005

Clarkson Valley, MO

  

  

  

 - 

  

  

 - 

  

  

 - 

  

  

 35,592 

  

  

 - 

  

  

 35,592 

  

  

 2,287 

  

2009

  

2010

Coral Springs, FL

  

  

  

 - 

  

  

 1,598 

  

  

 10,627 

  

  

 797 

  

  

 1,636 

  

  

 11,385 

  

  

 2,515 

  

2006

  

1993

Corpus Christi, TX

  

  

  

 - 

  

  

 77 

  

  

 3,923 

  

  

 - 

  

  

 77 

  

  

 3,923 

  

  

 772 

  

2005

  

1968

Dade City, FL

  

  

  

 - 

  

  

 1,211 

  

  

 5,511 

  

  

 - 

  

  

 1,211 

  

  

 5,511 

  

  

 83 

  

2011

  

1998

Dallas, TX

  

  

  

 15,212 

  

  

 137 

  

  

 28,690 

  

  

 592 

  

  

 137 

  

  

 29,282 

  

  

 5,268 

  

2006

  

1995

Dayton, OH

  

  

  

 - 

  

  

 730 

  

  

 6,515 

  

  

 - 

  

  

 730 

  

  

 6,515 

  

  

 171 

  

2011

  

1988

Deerfield Beach, FL

  

  

  

 3,873 

  

  

 2,408 

  

  

 7,482 

  

  

 - 

  

  

 2,408 

  

  

 7,482 

  

  

 146 

  

2011

  

2001

Delray Beach, FL

  

  

  

 - 

  

  

 1,882 

  

  

 34,767 

  

  

 4,288 

  

  

 1,941 

  

  

 38,996 

  

  

 7,722 

  

2006

  

1985

Denton, TX

  

  

  

 12,152 

  

  

 - 

  

  

 19,407 

  

  

 610 

  

  

 - 

  

  

 20,017 

  

  

 2,874 

  

2007

  

2005

Durham, NC

  

  

  

 - 

  

  

 5,350 

  

  

 9,320 

  

  

 - 

  

  

 5,350 

  

  

 9,320 

  

  

 2,867 

  

2006

  

1980

Edina, MN

  

  

  

 5,667 

  

  

 310 

  

  

 15,132 

  

  

 - 

  

  

 310 

  

  

 15,132 

  

  

 661 

  

2010

  

2003

El Paso, TX

  

  

  

 10,193 

  

  

 677 

  

  

 17,075 

  

  

 1,098 

  

  

 677 

  

  

 18,173 

  

  

 3,545 

  

2006

  

1997

El Paso, TX

  

  

  

 - 

  

  

 600 

  

  

 6,700 

  

  

 - 

  

  

 600 

  

  

 6,700 

  

  

 656 

  

2008

  

2003

El Paso, TX

  

  

  

 - 

  

  

 112 

  

  

 15,888 

  

  

 162 

  

  

 112 

  

  

 16,050 

  

  

 2,671 

  

2005

  

1994

El Paso, TX

  

  

  

 - 

  

  

 2,400 

  

  

 32,800 

  

  

 424 

  

  

 2,400 

  

  

 33,224 

  

  

 4,070 

  

2008

  

2003

Everett, WA

  

  

  

 - 

  

  

 4,842 

  

  

 26,010 

  

  

 - 

  

  

 4,842 

  

  

 26,010 

  

  

 834 

  

2010

  

2011

Fayetteville, GA

  

  

  

 3,262 

  

  

 959 

  

  

 7,540 

  

  

 592 

  

  

 986 

  

  

 8,104 

  

  

 1,577 

  

2006

  

1999

Fort Wayne, IN

  

  

  

 - 

  

  

 170 

  

  

 8,232 

  

  

 - 

  

  

 170 

  

  

 8,232 

  

  

 963 

  

2006

  

2006

Fort Worth, TX

  

  

  

 - 

  

  

 450 

  

  

 13,615 

  

  

 - 

  

  

 450 

  

  

 13,615 

  

  

 277 

  

2010

  

2011

Franklin, TN

  

  

  

 - 

  

  

 2,338 

  

  

 12,138 

  

  

 709 

  

  

 2,338 

  

  

 12,847 

  

  

 2,308 

  

2007

  

1988

Franklin, WI

  

  

  

 8,021 

  

  

 6,872 

  

  

 7,550 

  

  

 - 

  

  

 6,872 

  

  

 7,550 

  

  

 531 

  

2010

  

1984

Fresno, CA

  

  

  

 - 

  

  

 2,500 

  

  

 35,800 

  

  

 118 

  

  

 2,500 

  

  

 35,918 

  

  

 3,211 

  

2008

  

1991

Frisco, TX

  

  

  

 9,057 

  

  

 - 

  

  

 18,635 

  

  

 60 

  

  

 - 

  

  

 18,695 

  

  

 3,134 

  

2007

  

2004

Frisco, TX

  

  

  

 - 

  

  

 - 

  

  

 15,309 

  

  

 1,380 

  

  

 - 

  

  

 16,689 

  

  

 2,919 

  

2007

  

2004

Gallatin, TN

  

  

  

 - 

  

  

 20 

  

  

 19,432 

  

  

 - 

  

  

 20 

  

  

 19,432 

  

  

 1,416 

  

2010

  

1997

Germantown, TN

  

  

  

 - 

  

  

 3,049 

  

  

 12,456 

  

  

 562 

  

  

 3,049 

  

  

 13,017 

  

  

 2,264 

  

2006

  

2002

Glendale, CA

  

  

  

 8,126 

  

  

 37 

  

  

 18,398 

  

  

 4 

  

  

 37 

  

  

 18,402 

  

  

 3,092 

  

2007

  

2002

Greeley, CO

  

  

  

 - 

  

  

 877 

  

  

 6,707 

  

  

 - 

  

  

 877 

  

  

 6,707 

  

  

 1,366 

  

2007

  

1997

Green Bay, WI

  

  

  

 9,590 

  

  

 - 

  

  

 14,891 

  

  

 - 

  

  

 - 

  

  

 14,891 

  

  

 925 

  

2010

  

2002

Green Bay, WI

  

  

  

 - 

  

  

 - 

  

  

 20,098 

  

  

 - 

  

  

 - 

  

  

 20,098 

  

  

 1,225 

  

2010

  

2002

Green Bay, WI

  

  

  

 - 

  

  

 - 

  

  

 11,696 

  

  

 - 

  

  

 - 

  

  

 11,696 

  

  

 990 

  

2011

  

2002

Greeneville, TN

  

  

  

 - 

  

  

 970 

  

  

 10,032 

  

  

 - 

  

  

 970 

  

  

 10,032 

  

  

 478 

  

2010

  

2005

Houston, TX

  

  

  

 - 

  

  

 10,395 

  

  

 - 

  

  

 - 

  

  

 10,395 

  

  

 - 

  

  

 - 

  

2011

  

  

Jupiter, FL

  

  

  

 7,106 

  

  

 2,252 

  

  

 11,415 

  

  

 73 

  

  

 2,252 

  

  

 11,488 

  

  

 2,443 

  

2006

  

2001

Jupiter, FL

  

  

  

 4,422 

  

  

 - 

  

  

 5,858 

  

  

 2,868 

  

  

 2,825 

  

  

 5,901 

  

  

 1,218 

  

2007

  

2004

Kenosha, WI

  

  

  

 9,886 

  

  

 - 

  

  

 18,058 

  

  

 - 

  

  

 - 

  

  

 18,058 

  

  

 1,098 

  

2010

  

1993

Killeen, TX

  

  

  

 - 

  

  

 760 

  

  

 22,667 

  

  

 - 

  

  

 760 

  

  

 22,667 

  

  

 1,000 

  

2010

  

2010

Lafayette, LA

  

  

  

 - 

  

  

 1,928 

  

  

 10,483 

  

  

 25 

  

  

 1,928 

  

  

 10,509 

  

  

 2,034 

  

2006

  

1993

Lake St Louis, MO

  

  

  

 - 

  

  

 240 

  

  

 11,937 

  

  

 1,947 

  

  

 240 

  

  

 13,884 

  

  

 664 

  

2010

  

2008

Lakeway, TX

  

  

  

 - 

  

  

 5,484 

  

  

 24,886 

  

  

 - 

  

  

 5,484 

  

  

 24,886 

  

  

 53 

  

2007

  

2011

Lakeway, TX

  

  

  

 - 

  

  

 2,801 

  

  

 - 

  

  

 - 

  

  

 2,801 

  

  

 - 

  

  

 - 

  

2007

  

-

Lakewood, CA

  

  

  

 - 

  

  

 146 

  

  

 14,885 

  

  

 859 

  

  

 146 

  

  

 15,744 

  

  

 2,616 

  

2006

  

1993

Las Vegas, NV

  

  

  

 5,923 

  

  

 74 

  

  

 15,287 

  

  

 321 

  

  

 74 

  

  

 15,608 

  

  

 3,212 

  

2006

  

2000

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description

  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

Las Vegas, NV

  

  

  

 - 

  

  

 952 

  

  

 9,618 

  

  

 - 

  

  

 952 

  

  

 9,618 

  

  

 1,504 

  

2006

  

1991

Las Vegas, NV

  

  

  

 - 

  

  

 1,006 

  

  

 10,255 

  

  

 - 

  

  

 1,006 

  

  

 10,255 

  

  

 1,644 

  

2006

  

1991

Las Vegas, NV

  

  

  

 - 

  

  

 3,182 

  

  

 17,200 

  

  

 - 

  

  

 3,182 

  

  

 17,200 

  

  

 2,947 

  

2006

  

1995

Las Vegas, NV

  

  

  

 - 

  

  

 1,595 

  

  

 17,902 

  

  

 - 

  

  

 1,595 

  

  

 17,902 

  

  

 2,854 

  

2006

  

1982

Las Vegas, NV

  

  

  

 - 

  

  

 2,319 

  

  

 4,612 

  

  

 607 

  

  

 2,319 

  

  

 5,218 

  

  

 972 

  

2006

  

1991

Las Vegas, NV

  

  

  

 3,025 

  

  

 - 

  

  

 6,921 

  

  

 499 

  

  

 433 

  

  

 6,987 

  

  

 1,282 

  

2007

  

1997

Las Vegas, NV

  

  

  

 - 

  

  

 6,127 

  

  

 - 

  

  

 - 

  

  

 6,127 

  

  

 - 

  

  

 - 

  

2007

  

-

Las Vegas, NV

  

  

  

 - 

  

  

 580 

  

  

 23,420 

  

  

 - 

  

  

 580 

  

  

 23,420 

  

  

 209 

  

2011

  

2002

Lawrenceville, GA

  

  

  

 - 

  

  

 2,279 

  

  

 10,732 

  

  

 121 

  

  

 2,305 

  

  

 10,827 

  

  

 2,132 

  

2006

  

2001

Lawrenceville, GA

  

  

  

 - 

  

  

 1,054 

  

  

 4,974 

  

  

 92 

  

  

 1,077 

  

  

 5,044 

  

  

 1,030 

  

2006

  

2002

Lenexa, KS

  

  

  

 12,177 

  

  

 540 

  

  

 16,013 

  

  

 1,730 

  

  

 540 

  

  

 17,743 

  

  

 860 

  

2010

  

2008

Lincoln, NE

  

  

  

 10,962 

  

  

 1,420 

  

  

 29,692 

  

  

 - 

  

  

 1,420 

  

  

 29,692 

  

  

 1,835 

  

2010

  

2003

Los Alamitos, CA

  

  

  

 16,067 

  

  

 - 

  

  

 18,635 

  

  

 383 

  

  

 39 

  

  

 18,979 

  

  

 3,158 

  

2007

  

2003

Los Gatos, CA

  

  

  

 - 

  

  

 488 

  

  

 22,386 

  

  

 1,055 

  

  

 488 

  

  

 23,440 

  

  

 4,561 

  

2006

  

1993

Loxahatchee, FL

  

  

  

 - 

  

  

 1,637 

  

  

 5,048 

  

  

 786 

  

  

 1,652 

  

  

 5,819 

  

  

 1,007 

  

2006

  

1997

Loxahatchee, FL

  

  

  

 - 

  

  

 1,340 

  

  

 6,509 

  

  

 33 

  

  

 1,345 

  

  

 6,537 

  

  

 1,257 

  

2006

  

1993

Loxahatchee, FL

  

  

  

 2,651 

  

  

 1,553 

  

  

 4,694 

  

  

 554 

  

  

 1,567 

  

  

 5,234 

  

  

 913 

  

2006

  

1994

Malabar, FL

  

  

  

 - 

  

  

 5,000 

  

  

 12,000 

  

  

 - 

  

  

 5,000 

  

  

 12,000 

  

  

 300 

  

2010

  

2008

Marinette, WI

  

  

  

 7,949 

  

  

 - 

  

  

 13,538 

  

  

 - 

  

  

 - 

  

  

 13,538 

  

  

 991 

  

2010

  

2002

Marlton, NJ

  

  

  

 - 

  

  

 - 

  

  

 38,300 

  

  

 207 

  

  

 - 

  

  

 38,507 

  

  

 3,435 

  

2008

  

1994

Mechanicsburg, PA

  

  

  

 - 

  

  

 1,350 

  

  

 16,650 

  

  

 - 

  

  

 1,350 

  

  

 16,650 

  

  

 152 

  

2011

  

1976

Melbourne, FL

  

  

  

 - 

  

  

 7,000 

  

  

 69,000 

  

  

 - 

  

  

 7,000 

  

  

 69,000 

  

  

 1,725 

  

2010

  

2009

Melbourne, FL

  

  

  

 - 

  

  

 1,400 

  

  

 24,400 

  

  

 - 

  

  

 1,400 

  

  

 24,400 

  

  

 610 

  

2010

  

2003

Melbourne, FL

  

  

  

 - 

  

  

 600 

  

  

 9,400 

  

  

 - 

  

  

 600 

  

  

 9,400 

  

  

 235 

  

2010

  

1986

Melbourne, FL

  

  

  

 - 

  

  

 367 

  

  

 458 

  

  

 - 

  

  

 367 

  

  

 458 

  

  

 10 

  

2011

  

1979

Merced, CA

  

  

  

 - 

  

  

 - 

  

  

 13,772 

  

  

 927 

  

  

 - 

  

  

 14,699 

  

  

 942 

  

2009

  

2010

Meridian, ID

  

  

  

 - 

  

  

 3,600 

  

  

 20,802 

  

  

 251 

  

  

 3,600 

  

  

 21,053 

  

  

 2,676 

  

2006

  

2008

Merriam, KS

  

  

  

 - 

  

  

 176 

  

  

 7,189 

  

  

 - 

  

  

 176 

  

  

 7,189 

  

  

 629 

  

2011

  

1972

Merriam, KS

  

  

  

 - 

  

  

 81 

  

  

 3,122 

  

  

 - 

  

  

 81 

  

  

 3,122 

  

  

 105 

  

2011

  

1980

Merriam, KS

  

  

  

 - 

  

  

 336 

  

  

 13,605 

  

  

 - 

  

  

 336 

  

  

 13,605 

  

  

 770 

  

2011

  

1977

Merriam, KS

  

  

  

 15,637 

  

  

 182 

  

  

 7,393 

  

  

 - 

  

  

 182 

  

  

 7,393 

  

  

 488 

  

2011

  

1985

Merrillville, IN

  

  

  

 - 

  

  

 - 

  

  

 22,134 

  

  

 - 

  

  

 - 

  

  

 22,134 

  

  

 2,327 

  

2008

  

2006

Merrillville, IN

  

  

  

 - 

  

  

 700 

  

  

 11,699 

  

  

 154 

  

  

 700 

  

  

 11,853 

  

  

 1,159 

  

2007

  

2008

Mesa, AZ

  

  

  

 - 

  

  

 1,558 

  

  

 9,561 

  

  

 268 

  

  

 1,558 

  

  

 9,829 

  

  

 1,985 

  

2008

  

1989

Middletown, NY

  

  

  

 - 

  

  

 1,756 

  

  

 20,364 

  

  

 568 

  

  

 1,756 

  

  

 20,932 

  

  

 5,148 

  

2006

  

1998

Midwest City, OK

  

  

  

 - 

  

  

 146 

  

  

 3,854 

  

  

 - 

  

  

 146 

  

  

 3,854 

  

  

 739 

  

2005

  

1996

Milwaukee, WI

  

  

  

 4,874 

  

  

 540 

  

  

 8,457 

  

  

 - 

  

  

 540 

  

  

 8,457 

  

  

 556 

  

2010

  

1930

Milwaukee, WI

  

  

  

 6,904 

  

  

 1,425 

  

  

 11,520 

  

  

 - 

  

  

 1,425 

  

  

 11,520 

  

  

 988 

  

2010

  

1962

Milwaukee, WI

  

  

  

 1,659 

  

  

 922 

  

  

 2,185 

  

  

 - 

  

  

 922 

  

  

 2,185 

  

  

 234 

  

2010

  

1958

Milwaukee, WI

  

  

  

 24,416 

  

  

 - 

  

  

 44,535 

  

  

 - 

  

  

 - 

  

  

 44,535 

  

  

 2,650 

  

2010

  

1983

Morrow, GA

  

  

  

 - 

  

  

 818 

  

  

 8,064 

  

  

 184 

  

  

 834 

  

  

 8,232 

  

  

 1,617 

  

2007

  

1990

Mount Juliet, TN

  

  

  

 4,849 

  

  

 1,566 

  

  

 11,697 

  

  

 554 

  

  

 1,566 

  

  

 12,251 

  

  

 2,180 

  

2007

  

2005

Murrieta, CA

  

  

  

 - 

  

  

 - 

  

  

 46,520 

  

  

 - 

  

  

 - 

  

  

 46,520 

  

  

 1,682 

  

2010

  

2011

Murrieta, CA

  

  

  

 - 

  

  

 8,800 

  

  

 202,412 

  

  

 - 

  

  

 8,800 

  

  

 202,412 

  

  

 3,333 

  

2008

  

2010

Muskego, WI

  

  

  

 1,727 

  

  

 964 

  

  

 2,159 

  

  

 - 

  

  

 964 

  

  

 2,159 

  

  

 131 

  

2010

  

1993

Nashville , TN

  

  

  

 - 

  

  

 1,806 

  

  

 7,165 

  

  

 988 

  

  

 1,806 

  

  

 8,153 

  

  

 1,890 

  

2006

  

1986

Nashville, TN

  

  

  

 - 

  

  

 4,300 

  

  

 - 

  

  

 7,148 

  

  

 11,448 

  

  

 - 

  

  

 - 

  

2010

  

-

New Berlin, WI

  

  

  

 6,630 

  

  

 3,739 

  

  

 8,290 

  

  

 - 

  

  

 3,739 

  

  

 8,290 

  

  

 547 

  

2010

  

1993

Niagara Falls, NY

  

  

  

 - 

  

  

 1,145 

  

  

 10,574 

  

  

 - 

  

  

 1,145 

  

  

 10,574 

  

  

 2,324 

  

2007

  

1990

Niagara Falls, NY

  

  

  

 - 

  

  

 388 

  

  

 7,870 

  

  

 - 

  

  

 388 

  

  

 7,870 

  

  

 1,243 

  

2007

  

2004

Orange Village, OH

  

  

  

 - 

  

  

 610 

  

  

 7,419 

  

  

 55 

  

  

 610 

  

  

 7,473 

  

  

 1,693 

  

2007

  

1985

Oro Valley, AZ

  

  

  

 15,586 

  

  

 89 

  

  

 18,339 

  

  

 546 

  

  

 89 

  

  

 18,885 

  

  

 3,070 

  

2007

  

2004

Oshkosh, WI

  

  

  

 - 

  

  

 - 

  

  

 18,339 

  

  

 - 

  

  

 - 

  

  

 18,339 

  

  

 1,107 

  

2010

  

2000

Oshkosh, WI

  

  

  

 9,834 

  

  

 - 

  

  

 15,881 

  

  

 - 

  

  

 - 

  

  

 15,881 

  

  

 949 

  

2010

  

2000

Palm Springs , CA

  

  

  

 - 

  

  

 365 

  

  

 12,396 

  

  

 1,021 

  

  

 365 

  

  

 13,417 

  

  

 2,486 

  

2006

  

1998

Palm Springs, FL

  

  

  

 2,717 

  

  

 739 

  

  

 4,066 

  

  

 53 

  

  

 739 

  

  

 4,119 

  

  

 864 

  

2006

  

1993

Palm Springs, FL

  

  

  

 - 

  

  

 1,182 

  

  

 7,765 

  

  

 81 

  

  

 1,182 

  

  

 7,846 

  

  

 1,699 

  

2006

  

1997

Palmer, AK

  

  

  

 19,478 

  

  

 - 

  

  

 29,705 

  

  

 628 

  

  

 217 

  

  

 30,116 

  

  

 4,739 

  

2007

  

2006

Pearland, TX

  

  

  

 - 

  

  

 781 

  

  

 5,517 

  

  

 54 

  

  

 781 

  

  

 5,570 

  

  

 1,136 

  

2006

  

2000

Pearland, TX

  

  

  

 29,700 

  

  

 948 

  

  

 4,556 

  

  

 105 

  

  

 948 

  

  

 4,661 

  

  

 893 

  

2006

  

2002

Pewaukee, WI

  

  

  

 - 

  

  

 4,700 

  

  

 20,669 

  

  

 - 

  

  

 4,700 

  

  

 20,669 

  

  

 3,066 

  

2007

  

2007

Phoenix, AZ

  

  

  

 - 

  

  

 1,149 

  

  

 48,018 

  

  

 9,537 

  

  

 1,149 

  

  

 57,556 

  

  

 9,101 

  

2006

  

1998

Pineville, NC

  

  

  

 - 

  

  

 961 

  

  

 6,974 

  

  

 1,604 

  

  

 1,069 

  

  

 8,470 

  

  

 1,467 

  

2006

  

1988

Plano, TX

  

  

  

 - 

  

  

 5,423 

  

  

 20,752 

  

  

 18 

  

  

 5,423 

  

  

 20,770 

  

  

 4,487 

  

2008

  

2007

Plano, TX

  

  

  

 - 

  

  

 195 

  

  

 14,805 

  

  

 500 

  

  

 195 

  

  

 15,305 

  

  

 2,528 

  

2005

  

1995

Plantation, FL

  

  

  

 9,615 

  

  

 8,563 

  

  

 10,666 

  

  

 2,037 

  

  

 8,575 

  

  

 12,691 

  

  

 3,186 

  

2006

  

1997

Plantation, FL

  

  

  

 8,945 

  

  

 8,848 

  

  

 9,262 

  

  

 172 

  

  

 8,896 

  

  

 9,385 

  

  

 4,411 

  

2006

  

1996

Plymouth, WI

  

  

  

 1,722 

  

  

 1,250 

  

  

 1,870 

  

  

 - 

  

  

 1,250 

  

  

 1,870 

  

  

 138 

  

2010

  

1991

Portland, ME

  

  

  

 15,963 

  

  

 - 

  

  

 25,500 

  

  

 - 

  

  

 - 

  

  

 25,500 

  

  

 107 

  

2011

  

2008

Raleigh, NC

  

  

  

 - 

  

  

 1,486 

  

  

 11,200 

  

  

 - 

  

  

 1,486 

  

  

 11,200 

  

  

 292 

  

2011

  

2007

Redmond, WA

  

  

  

 - 

  

  

 5,015 

  

  

 26,697 

  

  

 - 

  

  

 5,015 

  

  

 26,697 

  

  

 1,025 

  

2010

  

2011

115

 


 

  

 

   

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Rolla, MO  

  

  

 - 

  

  

 1,931 

  

  

 48,224 

  

  

 - 

  

  

 1,931 

  

  

 48,224 

  

  

 95 

  

2011

  

2009

Roswell, NM  

  

  

 1,921 

  

  

 - 

  

  

 5,900 

  

  

 - 

  

  

 - 

  

  

 5,900 

  

  

 - 

  

2011

  

2004

Roswell, NM  

  

  

 5,358 

  

  

 - 

  

  

 16,500 

  

  

 - 

  

  

 - 

  

  

 16,500 

  

  

 - 

  

2011

  

2006

Roswell, NM  

  

  

 - 

  

  

 - 

  

  

 17,880 

  

  

 - 

  

  

 - 

  

  

 17,880 

  

  

 - 

  

2011

  

2009

Ruston, LA  

  

  

 - 

  

  

 710 

  

  

 9,790 

  

  

 - 

  

  

 710 

  

  

 9,790 

  

  

 97 

  

2011

  

1988

Sacramento, CA  

  

  

 - 

  

  

 866 

  

  

 12,756 

  

  

 785 

  

  

 866 

  

  

 13,540 

  

  

 2,255 

  

2006

  

1990

San Antonio, TX  

  

  

 - 

  

  

 2,050 

  

  

 16,251 

  

  

 1,473 

  

  

 2,050 

  

  

 17,724 

  

  

 4,636 

  

2006

  

1999

San Antonio, TX  

  

  

 - 

  

  

 - 

  

  

 17,303 

  

  

 - 

  

  

 - 

  

  

 17,303 

  

  

 3,061 

  

2007

  

2007

San Bernardino, CA  

  

  

 - 

  

  

 3,700 

  

  

 14,300 

  

  

 462 

  

  

 3,700 

  

  

 14,762 

  

  

 1,243 

  

2008

  

1993

San Diego, CA  

  

  

 - 

  

  

 - 

  

  

 22,003 

  

  

 1,464 

  

  

 - 

  

  

 23,467 

  

  

 1,897 

  

2008

  

1992

Sarasota, FL  

  

  

 - 

  

  

 3,360 

  

  

 19,140 

  

  

 - 

  

  

 3,360 

  

  

 19,140 

  

  

 168 

  

2011

  

2006

Seattle, WA  

  

  

 - 

  

  

 4,410 

  

  

 35,787 

  

  

 - 

  

  

 4,410 

  

  

 35,787 

  

  

 1,439 

  

2010

  

2010

Sewell, NJ  

  

  

 - 

  

  

 - 

  

  

 53,360 

  

  

 4,149 

  

  

 - 

  

  

 57,509 

  

  

 5,653 

  

2007

  

2009

Shakopee, MN  

  

  

 7,090 

  

  

 420 

  

  

 11,360 

  

  

 8 

  

  

 420 

  

  

 11,368 

  

  

 556 

  

2010

  

1996

Shakopee, MN  

  

  

 12,065 

  

  

 640 

  

  

 18,089 

  

  

 - 

  

  

 640 

  

  

 18,089 

  

  

 626 

  

2010

  

2007

Sheboygan, WI  

  

  

 1,768 

  

  

 1,012 

  

  

 2,216 

  

  

 - 

  

  

 1,012 

  

  

 2,216 

  

  

 166 

  

2010

  

1958

Somerville, NJ  

  

  

 - 

  

  

 3,400 

  

  

 22,244 

  

  

 2 

  

  

 3,400 

  

  

 22,246 

  

  

 1,901 

  

2008

  

2007

St. Louis, MO  

  

  

 7,433 

  

  

 - 

  

  

 17,247 

  

  

 1,101 

  

  

 336 

  

  

 18,012 

  

  

 3,254 

  

2007

  

2001

St. Paul, MN  

  

  

 26,460 

  

  

 2,681 

  

  

 39,507 

  

  

 - 

  

  

 2,681 

  

  

 39,507 

  

  

 959 

  

2011

  

2007

Stafford, VA  

  

  

 - 

  

  

 - 

  

  

 11,260 

  

  

 304 

  

  

 - 

  

  

 11,564 

  

  

 910 

  

2008

  

2009

Suffern, NY  

  

  

 - 

  

  

 622 

  

  

 35,220 

  

  

 - 

  

  

 622 

  

  

 35,220 

  

  

 74 

  

2011

  

2007

Suffolk, VA  

  

  

 - 

  

  

 1,530 

  

  

 10,979 

  

  

 154 

  

  

 1,530 

  

  

 11,133 

  

  

 914 

  

2010

  

2007

Summit, WI  

  

  

 - 

  

  

 2,899 

  

  

 87,666 

  

  

 - 

  

  

 2,899 

  

  

 87,666 

  

  

 8,277 

  

2008

  

2009

Tallahassee, FL  

  

  

 - 

  

  

 - 

  

  

 14,719 

  

  

 - 

  

  

 - 

  

  

 14,719 

  

  

 566 

  

2010

  

2011

Tampa, FL  

  

  

 - 

  

  

 4,319 

  

  

 12,234 

  

  

 - 

  

  

 4,319 

  

  

 12,234 

  

  

 158 

  

2011

  

2003

Tomball, TX  

  

  

 - 

  

  

 1,404 

  

  

 5,071 

  

  

 638 

  

  

 1,404 

  

  

 5,709 

  

  

 1,443 

  

2006

  

1982

Trussville, AL  

  

  

 - 

  

  

 1,336 

  

  

 2,177 

  

  

 139 

  

  

 1,351 

  

  

 2,301 

  

  

 980 

  

2006

  

1990

Tucson, AZ  

  

  

 - 

  

  

 1,302 

  

  

 4,925 

  

  

 541 

  

  

 1,302 

  

  

 5,466 

  

  

 1,080 

  

2008

  

1995

Tulsa, OK  

  

  

 - 

  

  

 3,003 

  

  

 6,025 

  

  

 20 

  

  

 3,003 

  

  

 6,045 

  

  

 1,631 

  

2006

  

1992

Van Nuys, CA  

  

  

 - 

  

  

 - 

  

  

 36,187 

  

  

 - 

  

  

 - 

  

  

 36,187 

  

  

 2,187 

  

2009

  

1991

Viera, FL  

  

  

 - 

  

  

 1,600 

  

  

 10,600 

  

  

 - 

  

  

 1,600 

  

  

 10,600 

  

  

 265 

  

2010

  

1998

Virginia Beach, VA  

  

  

 - 

  

  

 827 

  

  

 18,289 

  

  

 - 

  

  

 827 

  

  

 18,289 

  

  

 673 

  

2011

  

2007

Voorhees, NJ  

  

  

 - 

  

  

 6,404 

  

  

 24,251 

  

  

 1,248 

  

  

 6,404 

  

  

 25,499 

  

  

 4,038 

  

2006

  

1997

Webster, TX  

  

  

 - 

  

  

 360 

  

  

 5,940 

  

  

 8,178 

  

  

 2,418 

  

  

 12,060 

  

  

 2,549 

  

2006

  

1991

Wellington , FL  

  

  

 6,197 

  

  

 - 

  

  

 13,697 

  

  

 497 

  

  

 388 

  

  

 13,806 

  

  

 2,178 

  

2007

  

2003

Wellington, FL  

  

  

 6,909 

  

  

 107 

  

  

 16,933 

  

  

 226 

  

  

 107 

  

  

 17,158 

  

  

 2,710 

  

2006

  

2000

West Allis, WI  

  

  

 2,379 

  

  

 1,106 

  

  

 3,309 

  

  

 - 

  

  

 1,106 

  

  

 3,309 

  

  

 295 

  

2010

  

1961

West Palm Beach, FL  

  

  

 6,819 

  

  

 628 

  

  

 14,740 

  

  

 121 

  

  

 628 

  

  

 14,861 

  

  

 2,774 

  

2006

  

1993

West Palm Beach, FL  

  

  

 6,293 

  

  

 610 

  

  

 14,618 

  

  

 115 

  

  

 610 

  

  

 14,733 

  

  

 3,365 

  

2006

  

1991

West Seneca, NY  

  

  

 12,357 

  

  

 917 

  

  

 22,435 

  

  

 1,296 

  

  

 1,447 

  

  

 23,201 

  

  

 4,013 

  

2007

  

1990

Yorkville, IL  

  

  

 - 

  

  

 1,419 

  

  

 2,816 

  

  

 73 

  

  

 1,419 

  

  

 2,889 

  

  

 782 

  

2006

  

1980

Zephyrhills, FL  

  

  

 - 

  

  

 3,875 

  

  

 23,907 

  

  

 - 

  

  

 3,875 

  

  

 23,907 

  

  

 299 

  

2011

  

1993

   

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Medical facilities total  

  

  

 519,055 

  

  

 296,220 

  

  

 3,330,098 

  

  

 121,590 

  

  

 311,196 

  

  

 3,436,705 

  

  

 333,535 

  

  

  

  

 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

  

  

  

  

Description

  

  

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

Year Acquired

  

Year Built

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Assets held for sale:

Austell, GA

  

  

$

 - 

  

$

 2,223 

  

$

 5,582 

  

$

 - 

  

$

 2,223 

  

$

 5,582 

  

$

 - 

  

2006

  

1999

Boynton Beach, FL

  

  

  

 10,187 

  

  

 214 

  

  

 5,611 

  

  

 - 

  

  

 214 

  

  

 5,611 

  

  

 - 

  

2007

  

2004

Chicago, IL

  

  

  

 - 

  

  

 - 

  

  

 1,250 

  

  

 - 

  

  

 - 

  

  

 1,250 

  

  

 - 

  

2002

  

1979

Okatie, SC

  

  

  

 - 

  

  

 171 

  

  

 8,736 

  

  

 - 

  

  

 171 

  

  

 8,736 

  

  

 - 

  

2007

  

1998

Norwalk, CT

  

  

  

 - 

  

  

 410 

  

  

 2,640 

  

  

 - 

  

  

 410 

  

  

 2,640 

  

  

 - 

  

2004

  

1998

Tempe, AZ

  

  

  

 - 

  

  

 - 

  

  

 9,277 

  

  

 - 

  

  

 - 

  

  

 9,277 

  

  

 - 

  

2007

  

1971

Assets held for sale total

  

  

  

 10,187 

  

  

 3,018 

  

  

 33,097 

  

  

 - 

  

  

 3,018 

  

  

 33,097 

  

  

 - 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(1) Represents real property asset associated with a capital lease.

  

  

  

  

  

  

  

  

  

  

  

  

  

116

 


 

  

 

  

  

  

  

  

Initial Cost to Company

  

  

  

  

  

Gross Amount at Which Carried at Close of Period

Segment

  

Encumbrances

  

  

Land

  

  

Buildings & Improvements

  

  

 Cost Capitalized Subsequent to Acquisition

  

  

Land

  

  

Buildings & Improvements

  

  

Accumulated Depreciation

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Seniors housing triple-net

$

 258,600 

  

$

 575,231 

  

$

 6,992,506 

  

$

 293,078 

  

$

 576,701 

  

$

 7,284,115 

  

$

 642,910 

Seniors housing operating

  

 1,317,849 

  

  

 223,614 

  

  

 2,678,007 

  

  

 108,366 

  

  

 228,859 

  

  

 2,781,126 

  

  

 218,031 

Medical facilities

  

 519,055 

  

  

 296,220 

  

  

 3,330,098 

  

  

 121,590 

  

  

 311,196 

  

  

 3,436,705 

  

  

 333,535 

Construction in progress

  

 - 

  

  

 - 

  

  

 189,502 

  

  

 - 

  

  

 - 

  

  

 189,502 

  

  

 - 

Total continuing operating properties

  

 2,095,504 

  

  

 1,095,065 

  

  

 13,190,113 

  

  

 523,034 

  

  

 1,116,756 

  

  

 13,691,448 

  

  

 1,194,476 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Assets held for sale

  

 10,187 

  

  

 3,018 

  

  

 33,097 

  

  

 - 

  

  

 3,018 

  

  

 33,097 

  

  

 - 

Total investments in real property owned

  

 2,105,691 

  

  

 1,098,083 

  

  

 13,223,210 

  

  

 523,034 

  

  

 1,119,774 

  

  

 13,724,545 

  

  

 1,194,476 

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

 

  

  

  

   

  

  

Year Ended December 31,

  

  

  

   

  

  

2011

  

  

2010

  

  

2009

  

  

  

   

  

  

  

  

  

  

  

  

  

Reconciliation of real property:  

  

  

(in thousands)

  

Investment in real estate:  

  

  

  

  

  

  

  

  

  

  

  

Balance at beginning of year  

  

$

 8,992,495 

  

$

 6,336,291 

  

$

 5,979,575 

  

  

Additions:  

  

  

  

  

  

  

  

  

  

  

  

  

Acquisitions  

  

  

 4,525,737 

  

  

 1,707,421 

  

  

 67,673 

  

  

  

Improvements  

  

  

 426,000 

  

  

 398,510 

  

  

 590,394 

  

  

  

Conversions from loans receivable  

  

  

 - 

  

  

 10,070 

  

  

 - 

  

  

  

Assumed other items, net  

  

  

 210,411 

  

  

 208,314 

  

  

 - 

  

  

  

Assumed debt  

  

  

 961,928 

  

  

 559,508 

  

  

 - 

  

  

  

Purchase price adjustments  

  

  

 - 

  

  

 - 

  

  

 665 

  

  

Total additions  

  

  

 6,124,076 

  

  

 2,883,823 

  

  

 658,732 

  

  

Deductions:  

  

  

  

  

  

  

  

  

  

  

  

  

Cost of real estate sold  

  

  

 (250,047) 

  

  

 (216,300) 

  

  

 (260,956) 

  

  

  

Reclassification of accumulated depreciation and amortization for assets held for sale  

  

  

 (10,011) 

  

  

 (10,372) 

  

  

 (15,837) 

  

  

  

Impairment of assets  

  

  

 (12,194) 

  

  

 (947) 

  

  

 (25,223) 

  

  

Total deductions  

  

  

 (272,252) 

  

  

 (227,619) 

  

  

 (302,016) 

  

  

Balance at end of year(2)

  

$

 14,844,319 

  

$

 8,992,495 

  

$

 6,336,291 

  

  

  

   

  

  

  

  

  

  

  

  

  

  

Accumulated depreciation:  

  

  

  

  

  

  

  

  

  

  

  

Balance at beginning of year  

  

$

 836,966 

  

$

 677,851 

  

$

 600,781 

  

  

Additions:  

  

  

  

  

  

  

  

  

  

  

  

  

Depreciation and amortization expenses  

  

  

 423,605 

  

  

 202,543 

  

  

 164,923 

  

  

  

Amortization of above market leases  

  

  

 6,409 

  

  

 2,524 

  

  

 2,061 

  

  

Total additions  

  

  

 430,014 

  

  

 205,067 

  

  

 166,984 

  

  

Deductions:  

  

  

  

  

  

  

  

  

  

  

  

  

Sale of properties  

  

  

 (63,997) 

  

  

 (31,919) 

  

  

 (74,244) 

  

  

  

Reclassification of accumulated depreciation and amortization for assets held for sale  

  

  

 (8,507) 

  

  

 (14,033) 

  

  

 (15,670) 

  

  

Total deductions  

  

  

 (72,504) 

  

  

 (45,952) 

  

  

 (89,914) 

  

  

Balance at end of year  

  

$

 1,194,476 

  

$

 836,966 

  

$

 677,851 

   

  

  

  

  

  

  

  

  

  

  

  

  

   

  

  

  

  

  

  

  

  

  

(2) The aggregate cost for tax purposes for real property equals $13,604,448,000, $8,802,656,000 and $6,378,056,000 at December 31, 2011, 2010 and 2009, respectively.

117

 


 

  

 

Health Care REIT, Inc.

Schedule IV - Mortgage Loans on Real Estate

December 31, 2011

  

  

  

  

  

  

  

  

  

(in thousands)

  

Description

  

Interest Rate

  

Final Maturity Date

  

Monthly Payment Terms

  

  

Prior Liens

  

  

Face Amount of Mortgages

  

  

Carrying Amount of Mortgages

  

  

Principal Amount of Loans Subject to Delinquent Principal or Interest

  

First mortgage relating to one hospital in California

  

8.42%

  

12/01/17

  

$122,722

  

$

 - 

  

$

 17,500 

  

$

 17,500 

  

$

 - 

  

First mortgage relating to one hospital in California

  

9.89%

  

06/01/20

  

$153,140

  

  

 - 

  

  

 17,500 

  

  

 13,906 

  

  

 - 

  

First mortgage relating to one seniors housing facility in North Carolina

  

7.86%

  

04/30/15

  

$51,384

  

  

 - 

  

  

 7,000 

  

  

 6,637 

  

  

 - 

  

First mortgage relating to one medical office building in Georgia

  

6.50%

  

10/01/14

  

$38,556

  

  

 - 

  

  

 6,100 

  

  

 6,083 

  

  

 - 

  

First mortgage relating to one hospital in California

  

9.63%

  

01/14/14

  

$156,038

  

  

 - 

  

  

 8,045 

  

  

 1,834 

  

  

 - 

  

First mortgage relating to one seniors housing facility in Arizona

  

3.55%

  

01/01/13

  

$12,511

  

  

 - 

  

  

 4,500 

  

  

 4,151 

  

  

 4,151 

  

 

First mortgage relating to one senior housing facility in Texas

  

10.00%

  

09/01/12

  

$21,957

  

  

 - 

  

  

 2,635 

  

  

 2,635 

  

  

 - 

  

Two first mortgages relating to one medical office building in Georgia and one senior housing facility in Massachusetts

  

From 8.11% to 12.00%

  

From 1/1/12 to 10/1/14

  

From $773 to $2,000

  

  

 - 

  

  

 1,000 

  

  

 316 

  

  

 - 

  

Second mortgage relating to one hospital in California

  

9.48%

  

10/31/13

  

$138,048

  

  

 13,906 

  

  

 13,000 

  

  

 2,778 

  

  

 - 

  

Second mortgage relating to one seniors housing facility in Wisconsin

  

15.21%

  

01/15/15

  

$41,250

  

  

 7,792 

  

  

 3,300 

  

  

 3,300 

  

  

 - 

  

Second mortgage relating to one senior housing facility in New Hampshire

  

12.17%

  

10/01/16

  

$13,945

  

  

 670 

  

  

 3,235 

  

  

 2,701 

  

  

 - 

  

Second mortgage relating to one hospital in Massachusetts

  

12.17%

  

06/30/10

  

$16,900

  

  

 4,100 

  

  

 2,243 

  

  

 2,093 

  

  

 2,093 

  

Totals

  

  

  

  

  

  

  

$

 26,468 

  

$

 86,058 

  

$

 63,934 

  

$

 6,244 

  

 

  

  

  

  

  

Year Ended December 31,

  

  

  

  

  

2011

  

  

2010

  

  

2009

Reconciliation of mortgage loans:

  

  

(in thousands)

  

Balance at beginning of year

  

$

 109,283 

  

$

 74,517 

  

$

 137,292 

  

Additions:

  

  

  

  

  

  

  

  

  

  

  

New mortgage loans

  

  

 11,286 

  

  

 73,439 

  

  

 9,456 

  

Total additions

  

  

 11,286 

  

  

 73,439 

  

  

 9,456 

  

Deductions:

  

  

  

  

  

  

  

  

  

  

  

Collections of principal

  

  

 (50,579) 

  

  

 (10,540) 

  

  

 (54,696) 

  

  

Conversions to real property

  

  

 (4,000) 

  

  

 (10,070) 

  

  

 - 

  

  

Charge-offs

  

  

 - 

  

  

 (18,063) 

  

  

 (17,535) 

  

  

Reclass to other real estate loans

  

  

 (2,056) 

  

  

 - 

  

  

 - 

  

Total deductions

  

  

 (56,635) 

  

  

 (38,673) 

  

  

 (72,231) 

  

Balance at end of year

  

$

 63,934 

  

$

 109,283 

  

$

 74,517 

  

  

  

  

  

  

  

  

  

  

118

 


 

  

EXHIBIT INDEX

 

1.1(a)     Form of Equity Distribution Agreement, dated as of November 12, 2010, entered into by and between the Company and each of UBS Securities LLC, RBS Securities Inc., KeyBanc Capital Markets Inc. and Credit Agricole Securities (USA) Inc. (filed with the Commission as Exhibit 1.1 to the Company’s Form 8-K filed November 15, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

1.1(b)     Form of Amendment No. 1, dated September 1, 2011, to the Equity Distribution Agreements entered into by and between the Company and each of UBS Securities LLC, RBS Securities Inc., KeyBanc Capital Markets Inc. and Credit Agricole Securities (USA) Inc. (filed with the Commission as Exhibit 1.1 to the Company’s Form 8-K filed September 8, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(a)     Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(b)     Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series A, of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(c)      Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(d)     Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed June 13, 2003 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(e)      Certificate of Designation of 7 7/8% Series D Cumulative Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A/A filed July 8, 2003 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(f)      Certificate of Designation of 7 5/8% Series F Cumulative Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 2.5 to the Company’s Form 8-A filed September 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(g)      Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.9 to the Company’s Form 10-Q filed August 9, 2007 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(h)     Certificate of Change of Location of Registered Office and of Registered Agent of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-Q filed August 6, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(i)       Certificate of Designation of 6% Series H Cumulative Convertible and Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-Q filed May 10, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(j)      Certificate of Designation of 6.50% Series I Cumulative Convertible Perpetual Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed March 7, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

3.1(k)     Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed May 10, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

119

 


 

  

3.2          Fourth Amended and Restated By-Laws of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed November 1, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(a)     Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 9, 2002 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(b)     Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 9, 2002 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(c)      Amendment No. 1, dated March 12, 2003, to Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed March 14, 2003 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(d)     Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 24, 2003 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(e)      Amendment No. 1, dated September 16, 2003, to Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.4 to the Company’s Form 8-K filed September 24, 2003 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(f)      Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed October 30, 2003 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(g)      Amendment No. 1, dated September 13, 2004, to Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A., as successor to Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed September 13, 2004 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(h)     Supplemental Indenture No. 4, dated as of April 27, 2005, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed April 28, 2005 (File No. 001-08923), and incorporated herein by reference thereto).

4.1(i)       Supplemental Indenture No. 5, dated as of November 30, 2005, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed November 30, 2005 (File No. 001-08923), and incorporated herein by reference thereto).

4.2(a)     Indenture, dated as of November 20, 2006, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto).

4.2(b)     Supplemental Indenture No. 1, dated as of November 20, 2006, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed November 20, 2006 (File No. 001-08923), and incorporated herein by reference thereto).

4.2(c)      Supplemental Indenture No. 2, dated as of July 20, 2007, between the Company and The Bank of New York Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed July 20, 2007 (File No. 001-08923), and incorporated herein by reference thereto).

120

 


 

  

4.3(a)     Indenture, dated as of March 15, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed March 15, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

4.3(b)     Supplemental Indenture No. 1, dated as of March 15, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed March 15, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

4.3(c)      Amendment No. 1 to Supplemental Indenture No. 1, dated as of June 18, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.3 to the Company’s Form 8-K filed June 18, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

4.3(d)     Supplemental Indenture No. 2, dated as of April 7, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed April 7, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

4.3(e)      Amendment No. 1 to Supplemental Indenture No. 2, dated as of June 8, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.3 to the Company’s Form 8-K filed June 8, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

4.3(f)      Supplemental Indenture No. 3, dated as of September 10, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 13, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

4.3(g)      Supplemental Indenture No. 4, dated as of November 16, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed November 16, 2010 (File No. 001-08923), and incorporated herein by reference thereto).

4.3(h)     Supplemental Indenture No. 5, dated as of March 14, 2011, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed March 14, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

4.4          Form of Indenture for Senior Subordinated Debt Securities (filed with the Commission as Exhibit 4.9 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto).

4.5          Form of Indenture for Junior Subordinated Debt Securities (filed with the Commission as Exhibit 4.10 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto).

10.1        Fifth Amended and Restated Loan Agreement, dated as of July 27, 2011, by and among the Company, the banks signatory thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as joint lead arrangers and joint book managers, KeyBanc Capital Markets Inc., as a joint lead arranger, Deutsche Bank Securities Inc., as a joint lead arranger and documentation agent, KeyBank National Association, as administrative agent, and Bank of America, N.A. and JPMorgan Chase Bank, N.A., as co-syndication agents (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed August 2, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

10.2        Equity Purchase Agreement, dated as of February 28, 2011, by and among the Company, FC-GEN Investment, LLC and FC-GEN Operations Investment, LLC (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed February 28, 2011 (File No. 001-08923), and incorporated herein by reference thereto).

10.3        Health Care REIT, Inc. Interest Rate & Currency Risk Management Policy adopted on May 6, 2004 (filed with the Commission as Exhibit 10.6 to the Company’s Form 10-Q filed July 23, 2004 (File No. 001-08923), and incorporated herein by reference thereto).

10.4(a)   The 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Appendix II to the Company’s Proxy Statement for the 1995 Annual Meeting of Stockholders, filed September 29, 1995 (File No. 001-08923), and incorporated herein by reference thereto).*

121

 


 

  

10.4(b)   First Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 4.2 to the Company’s Form S-8 (File No. 333-40771) filed November 21, 1997, and incorporated herein by reference thereto).*

10.4(c)   Second Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 4.3 to the Company’s Form S-8 (File No. 333-73916) filed November 21, 2001, and incorporated herein by reference thereto).*

10.4(d)   Third Amendment to the 1995 Stock Incentive Plan of Health Care REIT, Inc. (filed with the Commission as Exhibit 10.15 to the Company’s Form 10-K filed March 12, 2004 (File No. 001-08923), and incorporated herein by reference thereto).*

10.4(e)   Form of Stock Option Agreement for Executive Officers under the 1995 Stock Incentive Plan (filed with the Commission as Exhibit 10.17 to the Company’s Form 10-K filed March 16, 2005 (File No. 001-08923), and incorporated herein by reference thereto).*

10.5(a)   Stock Plan for Non-Employee Directors of Health Care REIT, Inc. (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto).*

10.5(b)   First Amendment to the Stock Plan for Non-Employee Directors of Health Care REIT, Inc. effective April 21, 1998 (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed May 10, 2004 (File No. 001-08923), and incorporated herein by reference thereto).*

10.5(c)   Form of Stock Option Agreement under the Stock Plan for Non-Employee Directors (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q/A filed October 27, 2004 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(a)   Amended and Restated Health Care REIT, Inc. 2005 Long-Term Incentive Plan (filed with the Commission as Appendix A to the Company’s Proxy Statement for the 2009 Annual Meeting of Stockholders, filed March 25, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(b)   Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.18 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(c)   Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.6 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(d)   Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.8 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(e)   Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.19 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(f)    Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.7 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(g)   Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.9 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(h)   Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.20 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*

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10.6(i)    Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(j)    Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.21 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(k)   Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(l)    Form of Restricted Stock Agreement for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.22 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(m)  Form of Restricted Stock Agreement for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.23 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(n)   Form of Restricted Stock Agreement for the Chief Executive Officer under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(o)   Form of Restricted Stock Agreement for Executive Officers under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(p)   Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.24 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(q)   Form of Amendment to Deferred Stock Unit Grant Agreements for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.10 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(r)    Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.11 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.6(s)    Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.5 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*

10.7        Fifth Amended and Restated Employment Agreement, dated December 2, 2010, by and between the Company and George L. Chapman (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed December 8, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*

10.8        Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Scott A. Estes (filed with the Commission as Exhibit 10.4 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.9        Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Charles J. Herman, Jr. (filed with the Commission as Exhibit 10.3 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

 


 

  

10.10      Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Jeffrey H. Miller (filed with the Commission as Exhibit 10.8 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.11      Employment Agreement, dated January 19, 2009, between the Company and John T. Thomas (filed with the Commission as Exhibit 10.10 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.12      Third Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Erin C. Ibele (filed with the Commission as Exhibit 10.11 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.13      Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Daniel R. Loftus (filed with the Commission as Exhibit 10.12 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.14      Amended and Restated Consulting Agreement, dated December 29, 2008, between the Company and Fred S. Klipsch (filed with the Commission as Exhibit 10.5 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.15      Amended and Restated Consulting Agreement, dated December 29, 2008, between the Company and Frederick L. Farrar (filed with the Commission as Exhibit 10.14 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.16      Amended and Restated Health Care REIT, Inc. Supplemental Executive Retirement Plan, dated December 29, 2008 (filed with the Commission as Exhibit 10.12 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*

10.17      Form of Indemnification Agreement between the Company and each director, executive officer and officer of the Company (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed February 18, 2005 (File No. 001-08923), and incorporated herein by reference thereto).*

10.18      Summary of Director Compensation (filed with the Commission as Exhibit 10.17 to the Company’s Form 10-K filed February 25, 2011 (File No. 001-08923), and incorporated herein by reference thereto).*

12           Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited).

14           Code of Business Conduct and Ethics (filed with the Commission as Exhibit 14 to the Company’s Form 10-K filed March 12, 2004 (File No. 001-08923), and incorporated herein by reference thereto).

21           Subsidiaries of the Company.

23           Consent of Ernst & Young LLP, independent registered public accounting firm.

24.1        Power of Attorney executed by William C. Ballard, Jr. (Director).

24.2        Power of Attorney executed by Pier C. Borra (Director).

24.3        Power of Attorney executed by Daniel A. Decker (Director).

24.4        Power of Attorney executed by Thomas J. DeRosa (Director).

24.5        Power of Attorney executed by Jeffrey H. Donahue (Director).

24.6        Power of Attorney executed by Peter J. Grua (Director).

24.7        Power of Attorney executed by Fred S. Klipsch (Director).

 


 

  

24.8        Power of Attorney executed by Sharon M. Oster (Director).

24.9        Power of Attorney executed by Jeffrey R. Otten (Director).

24.10      Power of Attorney executed by R. Scott Trumbull (Director).

24.11      Power of Attorney executed by George L. Chapman (Director, Chairman of the Board, Chief Executive Officer and President and Principal Executive Officer).

24.12      Power of Attorney executed by Scott A. Estes (Executive Vice President and Chief Financial Officer and Principal Financial Officer).

24.13      Power of Attorney executed by Paul D. Nungester, Jr. (Senior Vice President and Controller and Principal Accounting Officer).

31.1        Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2        Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1        Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer.

32.2        Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer.

101.INS     XBRL Instance Document**

101.SCH   XBRL Taxonomy Extension Schema Document**

101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document**

101.LAB   XBRL Taxonomy Extension Label Linkbase Document**

101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document**

101.DEF    XBRL Taxonomy Extension Definition Linkbase Document**

                           

 

*

 

Management Contract or Compensatory Plan or Arrangement.

**

 

Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2011 and 2010, (ii) the Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009, (iii) the Consolidated Statements of Equity for the years ended December 31, 2011, 2010 and 2009, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009, (v) the Notes to Consolidated Financial Statements, (vi) Schedule III – Real Estate and Accumulated Depreciation and (vii) Schedule IV – Mortgage Loans on Real Estate.

 

 

 

 

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.