10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 1-9028

NATIONWIDE HEALTH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)	95-3997619 (I.R.S. Employer Identification No.)
610 Newport Center Drive, Suite 1150 Newport Beach, California (Address of principal executive offices)	92660 (Zip Code)

Registrant’s telephone number, including area code: (949) 718-4400

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.10 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 o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes o     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 such filing requirements for the past 90 days.  Yes þ     No o

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 o     No o

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 to this Form 10-K.  o

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. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

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

As of June 30, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $2,662,290,000 based on the closing sale price as reported on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at February 16, 2010
Common Stock, $0.10 par value per share	117,422,270 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of Stockholders to be held on May 4, 2010 (Proxy Statement)	Part III

NATIONWIDE HEALTH PROPERTIES, INC.

Form 10-K

December 31, 2009

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business		1
	Item 1A.	Risk Factors		15
	Item 1B.	Unresolved Staff Comments		32
	Item 2.	Properties		32
	Item 3.	Legal Proceedings		32
	Item 4.	Submission of Matters to a Vote of Security Holders		33
PART II
	Item 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		33
	Item 6.	Selected Financial Data		35
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		55
	Item 8.	Financial Statements and Supplementary Data		57
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		120
	Item 9A.	Controls and Procedures		120
PART III
	Item 9B.	Other Information		122
	Item 10.	Directors, Executive Officers and Corporate Governance		122
	Item 11.	Executive Compensation		122
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		122
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		122
	Item 14.	Principal Accountant Fees and Services		122
PART IV
	Item 15.	Exhibits and Financial Statement Schedules		123
		Signatures		127
EX-10.24
EX-10.25
EX-12
EX-21
EX-23.1
EX-31
EX-32

PART I

Item 1.   Business.

General

Nationwide Health Properties, Inc., a Maryland corporation incorporated on October 14, 1985, is a real estate investment trust (“REIT”) that invests primarily in senior housing, long-term care properties and medical office buildings. Whenever we refer herein to “NHP” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. and its subsidiaries, unless the context otherwise requires.

Our operations are organized into two segments — triple-net leases and multi-tenant leases. In the triple-net leases segment, we invest in healthcare related properties and lease the facilities to unaffiliated tenants under “triple-net” and generally “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, we invest in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). As of December 31, 2009, the multi-tenant leases segment was comprised exclusively of medical office buildings. We did not invest in multi-tenant leases prior to 2006. In addition, but to a much lesser extent because we view the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, we extend mortgage loans and other financing to tenants. For the twelve months ended December 31, 2009, approximately 93% of our revenues are derived from our leases, with the remaining 7% from our mortgage loans and other financing activities.

As of December 31, 2009, we had investments in 576 healthcare facilities and one land parcel located in 43 states, consisting of:

Consolidated facilities:

•  251 assisted and independent living facilities;

•  167 skilled nursing facilities;

•  10 continuing care retirement communities;

•  7 specialty hospitals;

•  19 triple-net medical office buildings, one of which is operated by a consolidated joint venture; and

•  60 multi-tenant medical office buildings, 15 of which are operated by consolidated joint ventures.

Unconsolidated facilities:

•  19 assisted and independent living facilities;

•  14 skilled nursing facilities;

•  2 medical office buildings; and

•  1 continuing care retirement community.

Mortgage loans secured by:

•  16 skilled nursing facilities;

•  9 assisted and independent living facilities;

•  1 medical office building; and

•  1 land parcel.

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As of December 31, 2009, our directly owned facilities, other than our multi-tenant medical office buildings, most of which are operated by our consolidated joint ventures, were operated by 83 different healthcare providers, including the following publicly traded companies:

	Number of
	Facilities
	Operated
•  Assisted Living Concepts, Inc.		4
•  Brookdale Senior Living, Inc.		96
•  Emeritus Corporation		6
•  Extendicare, Inc.		1
•  HEALTHSOUTH Corporation		2
•  Kindred Healthcare, Inc.		1
•  Sun Healthcare Group, Inc.		4

Two of our triple-net lease tenants, Brookdale Senior Living, Inc. (“Brookdale”) and Hearthstone Senior Services, L.P. (“Hearthstone”) each accounted for more than 10% of our revenues at December 31, 2009, and both may account for more than 10% of our revenues in 2010.

The following table summarizes our top five tenants, the number of facilities each operates and the percentage of our revenues received from each of these tenants as of the end of 2009, as adjusted for facilities acquired and disposed of during 2009:

	Number of					Average
	Facilities		Percentage of			Remaining Lease
Tenant	Operated		Revenue			Term (Years)
Brookdale Senior Living, Inc.		96		15.2	%		7.7
Hearthstone Senior Services, L.P.		32		10.8	%		11.5
Wingate Healthcare, Inc.		18		6.1	%		10.2
Beverly Enterprises		28		4.3	%		4.7
Atria Senior Living Group		9		3.7	%		10.0

Our leases have fixed initial rent amounts and generally contain annual escalators. Many of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. Such revenue increases are recognized over the lease term as the related contingencies are met. However, if the Consumer Price Index starts trending negatively again as it did for most of 2009, we are likely to see much less, if any, internal growth from these rent escalators as long as deflationary conditions continue. We assess the collectability of our rent receivables, and we reserve against the receivable balances for any amounts that may not be recovered.

Our triple-net leased facilities are generally leased under triple-net leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. Approximately 84% of these facilities are leased under master leases. In addition, the majority of these leases contain cross-collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and grouped purchase options. Leases covering 456 facilities are backed by security deposits consisting of irrevocable letters of credit or cash totaling $71.3 million. Leases covering 340 facilities contain provisions for property tax impounds, and leases covering 207 facilities contain provisions for capital expenditure impounds. Our multi-tenant facilities generally have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants).

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2009 Highlights and Recent Developments

Investing Activities

•  On October 5, 2009, we reached an agreement in principle with Pacific Medical Buildings LLC to acquire three medical office buildings, the 55.05% interest that we do not already own in one of our unconsolidated joint ventures, which owns two medical office buildings, and majority ownership interests in two joint ventures that will each own one medical office building, including one of the two remaining development properties under our 2008 Contribution Agreement with Pacific Medical Buildings LLC and certain of its affiliates, as amended. The acquisitions are subject to customary due diligence and the negotiation and implementation of definitive agreements, as well as the receipt of a variety of third party approvals. We also agreed to modifications to our 2008 development agreement. As of February 1, 2010, we acquired the medical office building that served as collateral for our $47.5 million mortgage loan to a related party. Additionally, we acquired a majority ownership interest in a joint venture which owns one medical office building, amended and restated our 2008 development agreement and amended our agreement with PMB Pomona LLC to provide for the future acquisition by NHP/PMB L.P. of a medical office building currently in development.

•  During 2009, we funded $34.4 million in expansions, construction and capital improvements at certain facilities in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project. We also funded, directly and through our medical office building joint ventures, $4.0 million in capital and tenant improvements at certain multi-tenant medical office buildings.

•  On August 21, 2009, we acquired the noncontrolling interests held by The Broe Companies (“Broe”) in two consolidated joint ventures we had with them for $4.3 million, including a cash payment of $3.9 million. As a result of this acquisition, we now have direct ownership of the 36 multi-tenant medical office buildings previously owned by the joint ventures.

•  In 2008, we agreed to extend to PMB LLC a $10.0 million line of credit at an interest rate equal to LIBOR plus 175 basis points to fund certain costs of PMB LLC with respect to the proposed development of multi-tenant medical office buildings. During 2009, we funded $3.2 million under the line of credit.

•  In 2008, we entered into an agreement with PMB Pomona LLC to acquire a medical office building currently in development for $37.5 million upon completion which was amended as of February 1, 2010 to provide for the future acquisition of the medical office building by NHP/PMB L.P. In April 2009, we entered into an agreement with PMB LLC, the manager of PMB Pomona LLC, to extend up to $3.0 million of funding at an interest rate of 7.25%, which is secured by 100% of the membership interests in PMB Pomona LLC, and funded $1.6 million during 2009.

•  In February 2009, we entered into an agreement with Brookdale under which we became a lender with an original commitment of $8.8 million ($2.9 million at December 31, 2009) under their original $230.0 million revolving loan facility ($75.0 million at December 31, 2009), which is scheduled to mature on August 31, 2010. During 2009, we funded $7.5 million which was repaid prior to December 31, 2009.

•  During 2009, we also funded $3.4 million on other existing mortgage and other loans, and we received payments of $5.2 million, including the prepayment of one mortgage loan totaling $3.7 million.

•  During 2009, we sold five skilled nursing facilities and one assisted living facility for net cash proceeds of $43.5 million that resulted in a total gain of $23.9 million which is included on our consolidated income statements in gain on sale of facilities in discontinued operations.

Financing Activities

•  On March 12, 2009, our credit rating from Fitch Ratings was upgraded to BBB from BBB-, and on April 1, 2009, our credit rating from Moody’s was upgraded to Baa2 from Baa3. As a result, the spread over LIBOR

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for our $700.0 million revolving unsecured senior credit facility decreased from 0.85% to 0.70%. At December 31, 2009, there was no balance outstanding on the credit facility.

•  During 2009, we repaid at maturity $32.0 million of senior notes with a weighted average interest rate of 7.76%, and $2.6 million of senior notes with an interest rate of 6.90% and final maturity in 2037 were put to us for payment. Also during 2009, we retired $30.0 million of senior notes with an interest rate of 6.25% due in February 2013 for $25.4 million, resulting in a net gain of $4.6 million which is reflected on our consolidated income statements as gain on debt extinguishment, net.

•  During 2009, prior to our acquisition of Broe’s interests in two consolidated joint ventures we had with them, an additional $6.9 million was funded on existing loans secured by a portion of the Broe medical office building joint venture portfolios, and one of the joint ventures exercised the first of two available 12-month extension options on a $32.9 million loan that was scheduled to mature in April 2009 and refinanced one additional $6.4 million loan that was scheduled to mature in February 2009, extending its maturity to February 2012.

•  During 2009, we prepaid $2.7 million of fixed rate secured debt with an interest rate of 8.75%, and we made payments of $7.9 million on other notes and bonds payable.

•  During 2009, we issued and sold approximately 9,537,000 shares of common stock under our at-the-market equity offering program at a weighted average price of $30.34 per share, resulting in net proceeds of approximately $286.3 million after sales agent fees. We entered into new sales agreements, each dated January 15, 2010, to sell up to an aggregate of 5,000,000 shares of our common stock from time to time.

•  During 2009, we issued approximately 1,083,000 shares of common stock under our dividend reinvestment and stock purchase plan at a weighted average price of $28.27 per share, resulting in net proceeds of approximately $30.6 million.

•  On January 18, 2010, we redeemed all outstanding shares of our 7.75% Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”) at a redemption price per share of $103.875 plus an amount equal to accumulated and unpaid dividends thereon to the redemption date ($0.3875), for a total redemption price of $104.2625 per share, payable only in cash. As a result of the redemption, each share of Series B Preferred Stock was convertible until January 14, 2010 into 4.5150 shares of common stock. During that time, 512,727 shares were converted into approximately 2,315,000 shares of common stock. On January 18, 2010, we redeemed the 917 shares that remained outstanding at a redemption price of $104.2625 per share.

•  During 2009, we paid $187.8 million, or $1.76 per common share, in dividends to our common stockholders. On February 9, 2010, our board of directors declared a quarterly cash dividend of $0.44 per share of common stock. This dividend will be paid on March 5, 2010 to stockholders of record on February 19, 2010.

•  On January 15, 2010, we filed a new shelf registration statement with the Securities and Exchange Commission (“SEC”) under which we may issue securities including debt, convertible debt, common and preferred stock and warrants to purchase any of these securities. Our existing shelf registration statement was set to expire in May 2010.

Taxation

We believe we have operated in such a manner as to qualify for taxation as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and we intend to continue to operate in such a manner. If we qualify for taxation as a REIT, we will generally not be subject to federal corporate income taxes on our net income that is currently distributed to stockholders. This treatment substantially eliminates the “double taxation”, that is, at the corporate and stockholder levels, that usually results from investment in the stock of a corporation. Please see the risk factors found under the heading “Risks Related to Our Taxation as a REIT” under the caption “Risk Factors” for more information.

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Objectives and Policies

We are organized to invest in income-producing healthcare related facilities. At December 31, 2009, we had investments in 576 facilities located in 43 states, and we plan to invest in additional healthcare properties in the United States. Other than potentially utilizing joint ventures, we do not intend to invest in securities of, or interests in, persons engaged in real estate activities or to invest in securities of other issuers for the purpose of exercising control.

In evaluating potential investments, we consider such factors as:

•  The geographic area, type of property and demographic profile;

•  The location, construction quality, condition and design of the property;

•  The expertise and reputation of the operator;

•  The current and anticipated cash flow and its adequacy to meet operational needs and lease obligations;

•  Whether the anticipated rent provides a competitive market return to NHP;

•  The potential for capital appreciation;

•  The tax laws related to real estate investment trusts;

•  The regulatory and reimbursement environment in which the properties operate;

•  Occupancy and demand for similar healthcare facilities in the same or nearby communities; and

•  An appropriate mix between private and government sponsored patients.

There are no limitations on the percentage of our total assets that may be invested in any one property. The Investment Committee of the board of directors or the board of directors may establish limitations as it deems appropriate from time to time. No limits have been set on the number of properties in which we will seek to invest or on the concentration of investments in any one facility type or any geographic area. From time to time we may sell properties; however, we do not intend to engage in the purchase and sale, or turnover, of investments. We acquire our investments primarily for long-term income.

At December 31, 2009, we had one series of preferred stock with a liquidation preference totaling $51.4 million and $1.0 billion of indebtedness that is senior to our common stock. On January 18, 2010, we redeemed all outstanding shares of our preferred stock. We may, in the future, issue additional debt or equity securities that will be senior to our common stock.

In certain circumstances, we may make mortgage loans with respect to certain facilities secured by those facilities. At December 31, 2009, we held 14 mortgage loans secured by 16 skilled nursing facilities, nine assisted and independent living facilities, one medical office building and one land parcel. There are no limitations on the number or the amount of mortgages that may be placed on any one piece of property.

We may incur additional indebtedness when, in the opinion of our management and board of directors, it is advisable. For short-term purposes, we, from time to time, negotiate lines of credit or arrange for other short-term borrowings from banks or others. We arrange for long-term borrowings through public offerings or private placements to institutional investors.

In addition, we may incur additional mortgage indebtedness on real estate which we have acquired through purchase, foreclosure or otherwise. We may invest in properties subject to existing loans or secured by mortgages, deeds of trust or similar liens on the properties. We also may obtain non-recourse or other mortgage financing on unleveraged properties in which we have invested or may refinance properties acquired on a leveraged basis.

We will not, without the approval of a majority of the disinterested directors, acquire from or sell to any director, officer or employee of NHP or any affiliate thereof, as the case may be, any of our assets or other property. We provide to our stockholders annual reports containing audited financial statements and quarterly reports containing unaudited information, which are available upon request.

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We do not have plans to underwrite securities of other issuers.

The policies set forth herein have been established by our board of directors and may be changed without stockholder approval.

Properties

Of the 576 facilities in which we have investments, as of December 31, 2009, we have direct ownership of:

•  251 assisted and independent living facilities;

•  167 skilled nursing facilities;

•  10 continuing care retirement communities;

•  7 specialty hospitals;

•  19 triple-net medical office buildings of which one is operated by a consolidated joint venture; and

•  60 multi-tenant medical office buildings, 15 of which are operated by consolidated joint ventures.

We also have indirect ownership of 36 facilities through our unconsolidated joint ventures and have mortgage loans secured by 26 facilities and one land parcel.

Our operations are organized into two segments — triple-net leases and multi-tenant leases. In the triple-net leases segment, we invest in healthcare related properties and lease the facilities to unaffiliated tenants under “triple-net” and generally “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, we invest in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). As of December 31, 2009, the multi-tenant leases segment was comprised exclusively of medical office buildings. See “Note 21—Segment Information” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information about our business segments.

Triple-net Leases

Our triple-net leases segment includes investments in the following types of facilities:

Senior Housing/Assisted and Independent Living Facilities

Assisted and independent living facilities offer studio, one bedroom and two bedroom apartments on a month-to-month basis primarily to elderly individuals, including those with Alzheimer’s or related dementia, with various levels of assistance requirements. Assisted and independent living residents are provided meals and eat in a central dining area; assisted living residents may also be assisted with some daily living activities with programs and services that allow residents certain conveniences and make it possible for them to live as independently as possible; staff is also available when residents need assistance and for group activities. Services provided to residents who require more assistance with daily living activities, but who do not require the constant supervision skilled nursing facilities provide, include personal supervision and assistance with eating, bathing, grooming and administering medication. Charges for room, board and services are generally paid from private sources.

Long-Term Care/Skilled Nursing Facilities

Skilled nursing facilities provide rehabilitative, restorative, skilled nursing and medical treatment for patients and residents who do not require the high-technology, care-intensive, high-cost setting of an acute care or rehabilitative hospital. Treatment programs include physical, occupational, speech, respiratory and other therapeutic programs, including sub-acute clinical protocols such as wound care and intravenous drug treatment.

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Continuing Care Retirement Communities

Continuing care retirement communities provide a broad continuum of care. At the most basic level, independent living residents might receive meal service, maid service or other services as part of their monthly rent. Services which aid in everyday living are provided to other residents, much like in an assisted living facility. At the far end of the spectrum, skilled nursing, rehabilitation and medical treatment are provided to residents who need those services. This type of facility consists of independent living units, dedicated assisted living units and licensed skilled nursing beds on one campus.

Specialty Hospitals

Specialty hospitals provide specialized medical services and treatment rather than the broad spectrum offered by regular hospitals. The specialty hospitals in which we have invested are focused on rehabilitation, long-term acute care or children’s care.

Medical Office Buildings

Medical office buildings usually house several different unrelated medical practices, although they can be associated with a large single-specialty or multi-specialty group. Tenants include physicians, dentists, psychologists, therapists and other healthcare providers, with space devoted to patient examination and treatment, diagnostic imaging, outpatient surgery and other outpatient services. Medical office buildings are generally classified as being either “on campus”, meaning on or near an acute care hospital campus, or “off campus”.

The following table sets forth certain information regarding our owned triple-net leased facilities as of December 31, 2009:

							Gross
	Number of		Number of		Square		Real Estate
Facility Location	Facilities		Beds/Units(1)		Footage(1)		Investment		2009 NOI(2)
							(Dollars in thousands)
Senior Housing/Assisted and Independent Living Facilities:
Alabama		7		590		—	$	46,245	$	4,199
Arizona		3		277		—		28,172		2,635
Arkansas		1		32		—		2,151		233
California		17		2,079		—		140,302		19,528
Colorado		3		529		—		45,598		5,730
Connecticut		2		234		—		32,786		3,212
Florida		17		1,285		—		103,833		10,268
Georgia		3		343		—		21,835		1,923
Indiana		7		340		—		31,805		3,833
Kansas		6		277		—		16,418		1,736
Maryland		1		65		—		5,632		459
Massachusetts		1		98		—		18,903		1,092
Michigan		13		775		—		84,333		8,583
Minnesota		10		343		—		38,721		3,501
Mississippi		1		52		—		4,682		413
Missouri		4		76		—		1,905		126
Nevada		2		154		—		13,616		1,393
New Jersey		2		104		—		7,616		1,057
New Mexico		1		116		—		23,427		2,038
New York		3		406		—		44,266		5,130
North Carolina		10		970		—		108,775		9,399

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							Gross
	Number of		Number of		Square		Real Estate
Facility Location	Facilities		Beds/Units(1)		Footage(1)		Investment		2009 NOI(2)
							(Dollars in thousands)
North Dakota		1		48		—		6,302		487
Ohio		12		869		—		89,301		8,851
Oklahoma		4		229		—		22,802		2,141
Oregon		6		409		—		30,118		3,345
Pennsylvania		8		618		—		27,738		2,706
Rhode Island		3		272		—		30,294		2,797
South Carolina		3		117		—		8,357		591
South Dakota		4		182		—		21,258		1,947
Tennessee		14		1,301		—		125,984		9,565
Texas		28		2,512		—		291,379		26,826
Virginia		1		74		—		11,210		1,110
Washington		10		927		—		71,041		7,837
West Virginia		1		65		—		6,480		545
Wisconsin		42		2,167		—		180,384		16,854
Subtotals		251		18,935		—		1,743,669		172,090
Long-Term Care/Skilled Nursing Facilities:
Arkansas		9		945		—		38,582		4,217
California		3		340		—		10,444		2,226
Connecticut		3		351		—		17,318		1,813
Florida		4		530		—		15,321		1,718
Georgia		1		100		—		4,342		376
Idaho		1		64		—		792		238
Illinois		2		210		—		5,549		622
Indiana		21		1,938		—		91,057		8,006
Kansas		6		417		—		11,311		1,269
Maryland		3		445		—		17,802		2,599
Massachusetts		15		2,079		—		182,084		16,557
Minnesota		3		510		—		27,825		2,412
Mississippi		1		120		—		4,467		500
Missouri		12		1,089		—		51,237		5,425
Nevada		1		125		—		4,389		769
New York		3		440		—		58,471		5,020
North Carolina		1		150		—		2,360		363
Ohio		5		733		—		28,456		3,029
Oklahoma		5		235		—		9,121		817
Pennsylvania		3		240		—		14,032		1,798
South Carolina		4		602		—		36,696		3,325
Tennessee		5		519		—		22,003		2,553
Texas		29		3,353		—		107,819		13,055
Utah		1		65		—		2,793		320
Virginia		6		779		—		31,732		3,916

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							Gross
	Number of		Number of		Square		Real Estate
Facility Location	Facilities		Beds/Units(1)		Footage(1)		Investment		2009 NOI(2)
							(Dollars in thousands)
Washington		7		680		—		44,605		5,186
West Virginia		4		326		—		15,144		2,075
Wisconsin		7		672		—		30,268		3,365
Wyoming		2		217		—		11,987		1,188
Subtotals		167		18,274		—		898,007		94,757
Continuing Care Retirement Communities:
Arizona		1		228		—		12,887		1,589
Colorado		1		119		—		3,116		424
Florida		1		225		—		12,043		747
Maine		3		550		—		39,341		3,498
Massachusetts		1		171		—		14,655		1,556
Oklahoma		1		193		—		8,718		614
Tennessee		1		84		—		3,178		411
Texas		1		354		—		30,870		3,655
Subtotals		10		1,924		—		124,808		12,493
Specialty Hospitals:
Arizona		2		110		—		17,071		2,874
California		2		75		—		39,307		3,781
Texas		3		119		—		19,820		1,994
Subtotals		7		304		—		76,198		8,649
Medical Office Buildings:
Alabama		1		—		61,219		16,706		1,133
California		1		—		67,000		22,188		1,735
Florida		9		—		80,940		35,544		2,769
Indiana		4		—		55,814		15,725		1,198
Maryland		1		—		5,400		1,717		134
Michigan		2		—		17,190		5,655		440
Texas		1		—		149,450		22,952		359
Subtotals		19		—		437,013		120,487		7,768
Total Owned Triple-Net Leased Facilities		454		39,437		437,013	$	2,963,169	$	295,757

(1)

Assisted and independent living facilities are measured in units; continuing care retirement communities are measured in beds and units; skilled nursing facilities and specialty hospitals are measured by bed count; and medical office buildings are measured by square footage.

(2)

Net operating income (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of our facilities. We define NOI for our triple-net leases segment as rent revenues. For our multi-tenant leases segment, we define NOI as revenues minus medical office building operating expenses. In some cases, revenue for medical office buildings includes expense reimbursements for common area maintenance charges. NOI excludes interest expense and amortization of deferred financing costs, depreciation and amortization expense, general and administrative expense and discontinued operations. We present NOI as

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it effectively presents our portfolio on a “net” rent basis and provides relevant and useful information as it measures the operating performance at the facility level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. Furthermore, we believe that NOI provides investors relevant and useful information because it measures the operating performance of our real estate at the property level on an unleveraged basis. We believe that net income is the GAAP measure that is most directly comparable to NOI. However, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as presented above may not be comparable to other REITs or companies as their definitions of NOI may differ from ours. See Note 21 to our consolidated financial statements for a reconciliation of net income to NOI.

In the triple-net leases segment, facilities are leased to single tenants. Revenues are received by us directly from the tenants in accordance with the lease terms which generally provide for annual rent escalators and transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. While occupancy information is relevant to the operations of the tenant, our revenues are not directly impacted by occupancy levels at the triple-net leased facilities. The following table sets forth certain information regarding average rents for triple-net leased facilities owned by us as of December 31, 2009:

	2009							2008
	Average		Average					Average		Average
	Annualized		Annualized					Annualized		Annualized
	Rent per		Rent per		Occupancy			Rent per		Rent per		Occupancy
	Bed/Unit		Square Foot		Percentage(1)			Bed/Unit		Square Foot		Percentage(1)
Senior Housing/Assisted and Independent Living Facilities	$	9,088	$	—		83.0	%	$	9,528	$	—		84.3	%
Long-Term Care/Skilled Nursing Facilities		5,185		—		81.0	%		4,754		—		82.2	%
Continuing Care Retirement Communities		6,493		—		89.0	%		6,373		—		88.0	%
Specialty Hospitals		28,451		—		69.7	%		27,060		—		75.3	%
Medical Office Buildings		—		17.78		100.0	%		—		11.01		100.0	%

(1) Represents occupancy as reported by the respective tenants.

The following table sets forth certain information regarding lease expirations for our owned triple-net leased facilities as of December 31, 2009:

	Assisted &																Total Owned
	Independent				Skilled Nursing				Continuing Care				Other Triple-Net				Triple-Net
	Minimum		Number of		Minimum		Number of		Minimum		Number of		Minimum		Number of		Minimum		Number of
	Rent		Facilities		Rent		Facilities		Rent		Facilities		Rent		Facilities		Rent		Facilities
	(Dollars in thousands)
2010	$	5,037		6	$	5,843		11	$	837		1	$	—		—	$	11,717		18
2011		147		1		7,819		21		—		—		—		—		7,966		22
2012		8,518		8		5,232		8		1,602		1		1,845		1		17,197		18
2013		12,112		11		6,383		13		411		1		—		—		18,906		25
2014		10,003		16		4,576		6		5,868		3		—		—		20,447		25
2015		1,936		4		5,708		8		—		—		3,311		1		10,955		13
2016		12,013		10		14,615		26		—		—		5,156		6		31,784		42
2017		2,580		9		5,356		15		—		—		1,976		1		9,912		25
2018		1,510		2		3,085		8		—		—		—		—		4,595		10
2019		551		1		—		—		—		—		1,133		1		1,684		2
Thereafter		116,644		183		36,836		51		4,266		4		4,643		16		162,389		254
	$	171,051		251	$	95,453		167	$	12,984		10	$	18,064		26	$	297,552		454

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Multi-Tenant Leases

As of December 31, 2009, our multi-tenant leases segment was comprised exclusively of medical office buildings.

The following table sets forth certain information regarding our owned multi-tenant leased facilities as of December 31, 2009:

	Number of		Square		Occupancy			Gross Real Estate		2009 NOI
Facility Location	Facilities		Footage		Percentage			Investment		(1)
								(Dollars in thousands)
Medical Office Buildings:
California		6		340,868		96.6	%	$	113,424	$	8,845
Florida		1		37,266		61.7	%		6,365		185
Georgia		3		123,294		88.9	%		7,638		954
Illinois		12		383,058		86.8	%		36,354		5,393
Louisiana		8		384,588		87.8	%		24,384		2,837
Missouri		7		404,227		93.9	%		45,360		4,922
Nevada		2		145,637		84.0	%		39,023		3,101
Ohio		1		66,776		83.2	%		11,463		679
Oregon		1		104,856		87.3	%		31,105		2,140
South Carolina		2		109,704		76.7	%		13,187		1,174
Tennessee		1		57,280		88.1	%		3,982		603
Texas		6		144,702		66.0	%		7,760		341
Virginia		3		65,315		80.4	%		5,715		506
Washington		7		366,483		99.2	%		97,711		7,733
Total Owned Multi-Tenant Leased Facilities		60		2,734,054		88.8	%	$	443,471	$	39,413

(1) Net operating income (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of our facilities. We define NOI for our triple-net leases segment as rent revenues. For our multi-tenant leases segment, we define NOI as revenues minus medical office building operating expenses. In some cases, revenue for medical office buildings includes expense reimbursements for common area maintenance charges. NOI excludes interest expense and amortization of deferred financing costs, depreciation and amortization expense, general and administrative expense and discontinued operations. We present NOI as it effectively presents our portfolio on a “net” rent basis and provides relevant and useful information as it measures the operating performance at the facility level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. Furthermore, we believe that NOI provides investors relevant and useful information because it measures the operating performance of our real estate at the property level on an unleveraged basis. We believe that net income is the GAAP measure that is most directly comparable to NOI. However, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as presented above may not be comparable to other REITs or companies as their definitions of NOI may differ from ours. See Note 21 to our consolidated financial statements for a reconciliation of net income to NOI.

Average occupancy for our owned multi-tenant medical office buildings was 88.8% and 90.2% at December 31, 2009 and 2008, respectively. Average annualized revenue per square foot for our multi-tenant leased medical office buildings owned as of December 31, 2009 was $24.99 and $22.02 for 2009 and 2008, respectively.

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The following table sets forth certain information regarding lease expirations for our owned multi-tenant leased facilities as of December 31, 2009:

	Minimum		Square
	Rent		Feet
	(In thousands)
2009	$	9,551		463,422
2010		5,679		281,798
2011		5,580		265,064
2012		2,905		135,090
2013		4,440		179,546
2014		2,442		113,993
2015		2,542		115,624
2016		7,345		378,710
2017		1,549		57,207
2018		3,527		140,185
Thereafter		6,864		296,613
	$	52,424		2,427,252

Competition

We generally compete with other REITs, including HCP, Inc., Health Care REIT, Inc., Healthcare Realty Trust Incorporated, Senior Housing Properties Trust and Ventas, Inc., real estate partnerships, healthcare providers and other investors, including, but not limited to, banks, insurance companies, pension funds, government sponsored entities, including the Department of Housing and Urban Development, Fannie Mae and Freddie Mac, and opportunity funds, in the acquisition, leasing and financing of healthcare facilities. The tenants that operate our healthcare facilities compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for patients and residents based on quality of care, reputation, physical appearance of facilities, price, services offered, family preferences, physicians, staff and location. Our medical office buildings compete with other medical office buildings in their surrounding areas for tenants, including physicians, dentists, psychologists, therapists and other healthcare providers.

Regulation

Payments for healthcare services provided by the tenants of our facilities are received principally from four sources: private funds; Medicaid, a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government; Medicare, a federal health insurance program for the aged, certain chronically disabled individuals, and persons with end-stage renal disease; and health and other insurance plans. While assisted and independent living facilities and medical office building tenants generally receive private funds, government revenue sources are the primary source of funding for most skilled nursing facilities and specialty hospitals and are subject to statutory and regulatory changes, administrative rulings, and government funding restrictions, all of which may materially increase or decrease the rates of payment to skilled nursing facilities and specialty hospitals and in some cases, the amount of additional rents payable to us under our leases. There is no assurance that payments under such programs will remain at levels comparable to the present levels or be sufficient to cover all the operating and fixed costs allocable to Medicaid and Medicare patients. Decreases in reimbursement levels could have an adverse impact on the revenues of the tenants of our skilled nursing facilities and specialty hospitals, which could in turn adversely impact their ability to make their monthly lease or debt payments to us. Changes in reimbursement levels have very little impact on our assisted and independent living facilities because virtually all of their revenues are paid from private funds.

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During 2009, payments for healthcare services provided by the tenants of our facilities were received from the following sources:

	Percentage of
	Tenants’ Revenue
Medicare		10	%
Medicaid		17	%
Private sources — health and other insurance plans		73	%

There exist various federal and state laws and regulations prohibiting fraud and abuse by healthcare providers, including those governing reimbursements under Medicaid and Medicare as well as referrals and financial relationships. Federal and state governments are devoting increasing attention to anti-fraud initiatives. Our tenants may not comply with these current or future regulations, which could affect their ability to operate or to continue to make lease or mortgage payments.

Healthcare facilities in which we invest are also generally subject to federal, state and local licensure statutes and regulations and statutes which may require regulatory approval, in the form of a certificate of need (“CON”), prior to the addition or construction of new beds, the addition of services or certain capital expenditures. CON requirements generally apply to skilled nursing facilities and specialty hospitals. CON requirements are not uniform throughout the United States and are subject to change. In addition, some states have staffing and other regulatory requirements. We cannot predict the impact of regulatory changes with respect to licensure and CONs on the operations of our tenants.

Various federal, regional and state laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management. We are not aware of any such existing requirements that we believe will have a material impact on our current operations. However, future requirements could increase the costs of maintaining or improving our existing properties or developing new properties.

Executive Officers of the Company

The table below sets forth the name, position and age of each executive officer of the Company. Each executive officer is appointed by the board of directors, serves at its pleasure and holds office until a successor is appointed, or until the earliest of death, resignation or removal. There is no “family relationship” among any of the named executive officers or with any director. All information is given as of February 17, 2010:

Name	Position	Age
Douglas M. Pasquale	Chairman of the Board and President and Chief Executive Officer		55
Donald D. Bradley	Executive Vice President and Chief Investment Officer		54
Abdo H. Khoury	Executive Vice President and Chief Financial and Portfolio Officer		60

Douglas M. Pasquale — Chairman of the Board of Directors since May 2009 and President and Chief Executive Officer since April 2004. Mr. Pasquale was Executive Vice President and Chief Operating Officer from November 2003 to April 2004 and a director since November 2003. Mr. Pasquale served as the Chairman and Chief Executive Officer of ARV Assisted Living, Inc. (“ARV”), an operator of assisted living facilities, from December 1999 to September 2003. From April 2003 to September 2003, Mr. Pasquale concurrently served as President and Chief Executive Officer of Atria Senior Living Group. From March 1999 to December 1999, Mr. Pasquale served as the President and Chief Executive Officer at ARV, and he served as the President and Chief Operating Officer at ARV from June 1998 to March 1999. Previously, Mr. Pasquale served as President and Chief Executive Officer of Richfield Hospitality Services, Inc. and Regal Hotels International-North America, a hotel ownership and hotel management company, from 1996 to 1998, and as its Chief Financial Officer from 1994 to 1996. Mr. Pasquale is a member of the Executive Board of the American Seniors Housing Association (“ASHA”) and is a director of Alexander & Baldwin, Inc. and Matson Navigation Company, Inc., a director of Terreno Realty Corporation and a member of the Board of Trustees of the Newport Harbor Nautical Museum.

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Donald D. Bradley — Executive Vice President since March 2008 and Chief Investment Officer since July 2004. Mr. Bradley was a Senior Vice President from March 2001 to February 2008 and the General Counsel from March 2001 to June 2004. From January 2000 to February 2001, Mr. Bradley was engaged in various personal interests. Mr. Bradley was formerly the General Counsel of Furon Company, a NYSE-listed international, high performance polymer manufacturer from 1990 to December 1999. Previously, Mr. Bradley served as a Special Counsel of O’Melveny & Myers LLP, an international law firm with which he had been associated since 1982. Mr. Bradley is a member of the Executive Board of ASHA.

Abdo H. Khoury — Executive Vice President since March 2008 and Chief Financial and Portfolio Officer since July 2005. Mr. Khoury was a Senior Vice President from July 2005 to February 2008 and Chief Portfolio Officer from August 2004 to June 2005. Mr. Khoury served as the Executive Vice President of Operations of Atria Senior Living Group (formerly ARV Assisted Living, Inc.) from June 2003 to March 2004. From January 2001 to May 2003, Mr. Khoury served as President of ARV and he served as Chief Financial Officer at ARV from March 1999 to January 2001. From October 1997 to February 1999, Mr. Khoury served as President of the Apartment Division at ARV. From January 1991 to September 1997, Mr. Khoury ran Financial Performance Group, a business and financial consulting firm located in Newport Beach, California.

Employees

As of February 17, 2010, we had 36 employees.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports required by Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are electronically filed with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our annual, quarterly and current reports and amendments to reports are also available, free of charge, on our website at www.nhp-reit.com, as soon as reasonably practicable after those reports are available on the SEC’s website. These materials, together with our Governance Principles, Director Committee Charters and Business Code of Conduct & Ethics referenced below, are available in print to any stockholder who requests them in writing by contacting:

Nationwide Health Properties, Inc.
610 Newport Center Drive, Suite 1150
Newport Beach, California 92660
Attention: Abdo H. Khoury

Availability of Governance Principles and Board of Director Committee Charters

Our board of directors has adopted charters for its Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Investment Committee. Our board of directors has also adopted Governance Principles. The Governance Principles and each of the charters are available on our website at www.nhp-reit.com.

Business Code of Conduct & Ethics

Our board of directors has adopted a Business Code of Conduct & Ethics, which applies to all employees, including our chief executive officer, chief financial and portfolio officer, chief investment officer, vice presidents and directors. The Business Code of Conduct & Ethics is posted on our website at www.nhp-reit.com. Our Audit Committee must approve any waivers of the Business Code of Conduct & Ethics. We presently intend to disclose any amendments and waivers, if any, of the Business Code of Conduct & Ethics on our website; however, if we

14

change our intention, we will file any amendments or waivers with a current report on Form 8-K. There have been no waivers of the Business Code of Conduct & Ethics.

Item 1A.   Risk Factors.

Generally speaking, the risks facing our company fall into three categories: risks associated with the operations of our tenants, risks related to our operations and risks related to our taxation as a REIT. You should carefully consider the risks and uncertainties described below before making an investment decision in our company. These risks and uncertainties are not the only ones facing us, and there may be additional matters that we are unaware of or that we currently consider immaterial. All of these could adversely affect our business, financial condition, results of operations and cash flows and, thus, the value of an investment in our company.

RISKS RELATING TO OUR TENANTS

Our financial position could be weakened and our ability to make distributions could be limited if any of our major tenants were unable to meet their obligations to us or failed to renew or extend their relationship with us as their lease terms expire or their mortgages mature, or if we were unable to lease or re-lease our facilities or make mortgage loans on economically favorable terms. We have no operational control over our tenants. There may end up being more serious tenant financial problems that lead to more extensive restructurings or tenant disruptions than we currently expect. This could be unique to a particular tenant or it could be more industry wide, such as further federal or state governmental reimbursement reductions in the case of our skilled nursing facilities as governments work through their budget deficits, continuing reduced occupancies or slow lease-ups for our assisted and independent living facilities or medical office buildings due to general economic and other factors and increases in insurance premiums, labor and other expenses. These adverse developments could arise due to a number of factors, including those listed below.

The global financial crisis has adversely impacted the financial condition of our tenants, which could impair our tenants’ ability to meet their obligations to us.

The U.S. recently experienced the longest recession since the Great Depression. While there are current signs of a strengthening and stabilizing economy, there are continued concerns about the uncertainty over whether our economy will again be adversely impacted by inflation, deflation or stagflation and the systemic impact of rising unemployment, energy costs, geopolitical issues, the availability and cost of capital, the U.S. mortgage market and a declining real estate market in the U.S., resulting in a return to increased market volatility and diminished expectations for the U.S. economy.

The specific impact this may have on each of our businesses is described below:

•  Senior Housing. The combination of a weak economy, sustained weak housing market and rising unemployment (the “Economic Factors”) has put downward pressure on occupancies and operating margins for senior housing, a trend that we expect to continue until these factors fully abate. Since the principal competitor for senior housing is the home, the Economic Factors have intensified this competition and in turn, challenged occupancies. In particular, the sustained weak housing markets have put particular pressure on independent living facility occupancies as more seniors delay or forego moving into such facilities, while the weak economy and rising unemployment have put particular pressure on occupancies at more need-based assisted living and Alzheimer facilities as costs become prohibitive, causing seniors to go without the necessary assistance and care or causing unemployed, or in some cases working, adults to become caregivers to their senior family members for a period of time. We also believe that our tenants already have implemented prudent cost reductions, and further rent increases will be incrementally more difficult on beleaguered consumers. Therefore, without stabilization or increases in occupancies, it will be difficult for our senior housing tenants to prevent margin erosion over time which could adversely impact their operations and financial condition and their ability to continue to meet their obligations to us.

•  Long-Term Care/Skilled Nursing. Skilled nursing occupancies have been less impacted by the Economic Factors since the services provided are primarily driven by a significant need. However, the impact of

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increasing pressure on federal and state government reimbursement from the current economic turmoil and any potential healthcare reform legislation remains uncertain. The ultimate outcome of either of these factors could adversely affect the operations and financial condition of our skilled nursing tenants and their ability to continue to meet their obligations to us.

•  Medical Office. While the medical office sector currently remains generally healthy, the Economic Factors, particularly rising unemployment and cuts in corporate benefits, will likely have unfavorable implications. Consumers faced with limited financial resources and reduced or eliminated insurance coverage will likely choose to forego elective procedures and may defer or forego prescribed procedures. Over time, this could adversely affect the operations and financial condition of our medical office building tenants and their ability to continue to meet their obligations to us.

This difficult operating environment has adversely impacted the financial condition of our tenants. If these recent economic conditions continue or do not fully abate, our tenants may be unable to meet their obligations to us, and our business could be adversely affected.

The bankruptcy, insolvency or financial deterioration of our tenants could significantly delay our ability to collect unpaid rents or require us to find new operators for rejected facilities.

We are exposed to the risk that our tenants may not be able to meet their obligations, which may result in their bankruptcy or insolvency. This risk is more pronounced during weak economic conditions, such as those we are currently experiencing. Although our leases and loans provide us the right to evict a tenant, demand immediate repayment and other remedies, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization. A tenant in bankruptcy may be able to restrict our ability to collect unpaid rent and interest during the bankruptcy proceeding.

•  Leases. If one of our lessees seeks bankruptcy protection, the lessee can either assume or reject the lease. Generally, the lessee is required to make rent payments to us during its bankruptcy until it rejects the lease. If the lessee assumes the lease, the court cannot change the rental amount or any other lease provision that could financially impact us. However, if the lessee rejects the lease, the facility would be returned to us. In that event, if we were able to re-lease the facility to a new tenant only on unfavorable terms or after a significant delay, we could lose some or all of the associated revenue from that facility for an extended period of time.

•  Mortgage Loans. If a tenant defaults under one of our mortgage loans, we may have to foreclose on the mortgage or protect our interest by acquiring title to a property and thereafter make substantial improvements or repairs in order to maximize the facility’s investment potential. Tenants may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against an enforcement and/or bring claims for lender liability in response to actions to enforce mortgage obligations. If a tenant seeks bankruptcy protection, the automatic stay of the federal bankruptcy law would preclude us from enforcing foreclosure or other remedies against the tenant unless relief is obtained from the court. In addition, a tenant would not be required to make principal and interest payments while an automatic stay was in effect. High “loan to value” ratios or declines in the value of the facility may prevent us from realizing an amount equal to our mortgage loan upon foreclosure.

The receipt of liquidation proceeds or the replacement of a tenant that has defaulted on its lease or loan could be delayed by the approval process of any federal, state or local agency necessary for the replacement of the tenant licensed to manage the facility. In some instances, we may take possession of a property that exposes us to successor liabilities and operating risks. These events, if they were to occur, could reduce our revenue and operating cash flow.

In addition, many of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in the caption “Other assets” on our consolidated balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. We assess the collectability of the straight-line rent that is expected to be collected

16

in a future period, and, depending on circumstances, we provide a reserve against the straight-line rent for a portion, up to its full value, that we estimate may not be recoverable. The balance of straight-line rent receivables at December 31, 2009, net of allowances was $27.5 million. To the extent any of the tenants under these leases become unable to pay the contracted cash rent, we may be required to write down the straight-line rent receivable from those tenants, which would reduce our net income.

Our tenants may be affected by the financial deterioration, insolvency and/or bankruptcy of other significant operators in the healthcare industry.

Certain companies in the healthcare industry, including some key senior housing operators, none of which are currently our tenants, are experiencing considerable financial, legal and/or regulatory difficulties which have resulted or may result in financial deterioration and, in some cases, insolvency and/or bankruptcy. The adverse effects on these companies could have a significant impact on the industry as a whole, including but not limited to negative public perception by investors, lenders and consumers. As a result, our tenants could experience the damaging financial effects of a weakened industry driven by negative industry headlines, ultimately making them unable to meet their obligations to us, and our business could be adversely affected.

Operators that fail to comply with governmental reimbursement programs such as Medicare or Medicaid, licensing and certification requirements, fraud and abuse regulations or new legislative developments may be unable to meet their obligations to us.

Our tenants are subject to numerous federal, state and local laws and regulations that are subject to frequent and substantial changes (sometimes applied retroactively) resulting from legislation, adoption of rules and regulations, and administrative and judicial interpretations of existing law. The ultimate timing or effect of these changes cannot be predicted. These changes may have a dramatic effect on our tenants’ costs of doing business and the amount of reimbursement by both government and other third-party payors. The failure of any of our tenants to comply with these laws, requirements and regulations could adversely affect their ability to meet their obligations to us. In particular:

•  Medicare, Medicaid and Private Payor Reimbursement. Our tenants who operate skilled nursing facilities and specialty hospitals derive a significant portion of their revenue from governmentally-funded reimbursement programs, such as Medicare and Medicaid. Failure to maintain certification and accreditation in these programs would result in a significant loss of funding from them. Moreover, federal and state governments have adopted and continue to consider various reform proposals to control and reduce healthcare costs. Governmental concern regarding healthcare costs and their budgetary impact may result in significant reductions in payment to healthcare facilities, and future reimbursement rates for either governmental or private payors may not be sufficient to cover cost increases in providing services to patients. In many instances, revenues from Medicaid programs are already insufficient to cover the actual costs incurred in providing care to those patients. Many of the states where our tenants reside report budget deficits that put future Medicaid funding at risk and may limit or decrease the number of Medicaid beds available to patients in the near future as well as in the long term. In addition, reimbursement from private payors has, in many cases, effectively been reduced to levels approaching those of government payors. Loss of certification or accreditation, or any changes in reimbursement policies that reduce reimbursement to levels that are insufficient to cover the cost of providing patient care, could adversely impact our tenants’ operations and financial condition, potentially jeopardizing their ability to meet their obligations to us.

•  Licensing and Certification. Our tenants and facilities are generally subject to regulatory and licensing requirements of federal, state and local authorities and are periodically audited by such authorities to confirm compliance. Failure to obtain licensure or loss of licensure would prevent a facility, or in some cases, potentially all of a tenant’s facilities in a state, from operating. Our skilled nursing facilities and specialty hospitals generally require governmental approval, often in the form of a certificate of need that generally varies by state and is subject to change, prior to the addition or construction of new beds, the addition of services or certain capital expenditures. Some of our facilities may not be able to satisfy current and future regulatory requirements, and for this reason, may be unable to continue operating in the future. In such event, our revenues from those facilities could be reduced or eliminated for an extended period of time. State

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licensing, as well as Medicare and Medicaid laws require operators of nursing homes and assisted living facilities to comply with extensive standards governing operations, including federal conditions of participation and state operating regulations. Federal and state agencies administering those laws regularly inspect our facilities and investigate complaints. Our tenants and their managers receive notices of potential sanctions and remedies from time to time, and such sanctions have been imposed from time to time on facilities operated by them. If they are unable to cure deficiencies which have been identified or which are identified in the future, such sanctions may be imposed, and if imposed, may adversely affect our tenants’ ability to operate, financial condition and ability to meet their obligations to us.

•  Fraud and Abuse Laws and Regulations. There are various extremely complex federal and state laws and regulations governing a wide array of business referrals, relationships and arrangements that prohibit fraud by healthcare providers. These laws include (i) civil and criminal laws that prohibit filing false claims or making false statements to receive payment or certification under Medicare and Medicaid, or failing to refund overpayments or improper payments, (ii) certain federal and state anti-remuneration and fee-splitting laws (including, in the case of certain states, laws that extend to arrangements that do not involve items or services reimbursable under Medicare or Medicaid), such as the federal healthcare Anti-Kickback Statute and federal self-referral law (also known as the “Stark law”), which govern various types of financial arrangements among healthcare providers and others who may be in a position to refer or recommend patients to these providers, (iii) the Civil Monetary Penalties law, which may be imposed by the U.S. Department of Health and Human Services (“HHS”) for certain fraudulent acts, (iv) federal and state patient privacy laws, such as the privacy and security provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and (v) certain state laws that prohibit the corporate practice of medicine. Many states have also adopted or are considering legislation to increase patient protections, such as criminal background checks on care providers and minimum staffing levels. Governments are devoting increasing attention and resources to anti-fraud initiatives against healthcare providers. In addition, certain laws, such as the Federal False Claims Act, allow for individuals to bring qui tam (or whistleblower) actions on behalf of the government for violations of fraud and abuse laws. These qui tam actions may be filed by present and former patients, nurses or other employees or other third parties. The HIPAA and the Balanced Budget Act of 1997 expand the penalties for healthcare fraud, including broader provisions for the exclusion of providers from the Medicare and Medicaid programs. Further, under anti-fraud demonstration projects such as Operation Restore Trust, the Office of Inspector General of HHS, in cooperation with other federal and state agencies, has focused and may continue to focus on the activities of skilled nursing facilities in certain states in which we have properties. The violation of any of these regulations by a tenant may result in the imposition of criminal or civil fines or other penalties (including exclusion from the Medicare and Medicaid programs) that could jeopardize that tenant’s ability to meet their obligations to us or to continue operating its facility.

•  Legislative Developments. Each year, legislative proposals are introduced or proposed in Congress, and in some state legislatures, that would effect major changes in the healthcare system, nationally or at the state level. We cannot predict whether any proposals will be adopted or, if adopted, what effect, if any, these proposals would have on our tenants and, thus, our business.

Two of the operators of our facilities each account for more than 10% of our revenues. If these operators experience financial difficulties, or otherwise fail to make payments to us, our revenues may significantly decline.

At December 31, 2009, Brookdale Senior Living, Inc. (“Brookdale”) and Hearthstone Senior Services, L.P. (“Hearthstone”) accounted for 15.2% and 10.8%, respectively, of our revenues. We cannot assure you that Brookdale or Hearthstone will have sufficient assets, income or access to financing to enable it to satisfy its obligations to us. Any failure by Brookdale or Hearthstone to effectively conduct its operations could have a material adverse effect on its business reputation or on its ability to attract and retain patients and residents in its properties, which would affect their ability to continue to meet their obligations to us.

Hearthstone agreed to pay over the initial 15-year term of its lease “Supplemental Rent” equal to a specified percentage of Hearthstone’s annual gross revenue. In accordance with the lease, payment of Supplemental Rent of

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$1.6 million for the first 24 months of the lease was deferred until June 2008, when it became payable in 12 monthly installments, and Supplemental Rent from June 2008 was to be paid quarterly starting in September 2008. Hearthstone has failed to pay the deferred Supplemental Rent of $133,000 per month and the current Supplemental Rent of approximately $373,000 due quarterly starting in September 2008.

In July 2009, the Hearthstone lease terms were modified to (i) convert the annual Base Rent escalator to a fixed 3%, (ii) defer payment of the Supplemental Rent through December 31, 2011, (iii) tighten restrictions on distributions until such time as Hearthstone achieves and sustains defined rent coverage levels, (iv) provide for transfer of ownership of Hearthstone to us in the event of certain major events of default and (v) put in place certain bankruptcy protections and enhanced oversight rights for us.

Although we have a $6.0 million letter of credit that secures Hearthstone’s current payment obligations to us (which we have not yet drawn on), it is possible that the letter of credit may not be sufficient to compensate us for any additional future payment obligations that may arise under the modified lease agreement.

The failure or inability of Brookdale and/or Hearthstone to pay their obligations to us could materially reduce our revenues and net income, which could in turn reduce the amount of dividends we pay and cause our stock price to decline.

We may be unable to find another tenant for our properties if we have to replace Brookdale, Hearthstone or any of our other tenants.

We may have to find another tenant for the properties covered by one or more of our master lease agreements with Brookdale or Hearthstone or any of our other tenants upon the expiration of the terms of the applicable lease or upon a default by any such tenants. During any period that we are attempting to locate one or more tenants, there could be a decrease or cessation of rental payments on those properties. We cannot assure you that Brookdale or Hearthstone or any of our other tenants will elect to renew their respective leases with us upon expiration of the terms thereof, nor can we assure you that we will be able to locate another suitable tenant or, if we are successful in locating such a tenant, that the rental payments from that new tenant would not be significantly less than the existing rental payments. Our ability to locate another suitable tenant may be significantly delayed or limited by various state licensing, receivership, certificate of need or other laws, as well as by Medicare and Medicaid change-of-ownership rules. We also may incur substantial additional expenses in connection with any such licensing, receivership or change-of-ownership proceedings. Any such delays, limitations and expenses could materially delay or impact our ability to collect rent, to obtain possession of leased properties or otherwise to exercise remedies for tenant default and could have an adverse effect on our business.

Because of the unique and specific improvements required for healthcare facilities, we may be required to incur substantial development and renovation costs to make certain of our properties suitable for other tenants, which could materially adversely affect our business, results of operations and financial condition.

Healthcare facilities are typically highly customized and may not be easily adapted to non-healthcare-related uses. The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, are costly and often times tenant-specific. A new or replacement tenant may require different features in a property, depending on that tenant’s particular operations. If a current tenant is unable to pay rent and vacates a property, we may incur substantial expenditures to modify a property before we are able to re-lease the space to another tenant. Also, if the property needs to be renovated to accommodate multiple tenants, we may incur substantial expenditures before we are able to re-lease the space. Consequently, our properties may not be suitable for lease to traditional office or other healthcare tenants without significant expenditures or renovations, which costs may adversely affect our business, results of operations and financial condition.

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If our tenants are unable or unwilling to incur capital expenditures to maintain and improve our properties, our properties may cease to be competitive and our results of operations would be adversely impacted.

Capital expenditures to maintain and improve our properties are generally incurred by our tenants. If our tenants fail to pay for such expenditures, we may incur substantial costs to maintain or improve our properties, which could adversely affect our liquidity. If we fail to make such capital expenditures, our properties may become less attractive to tenants and our results of operations could be adversely impacted. Although some of our leases provide for impound accounts to reduce the risk of a tenant failing to make the requisite capital expenditures, many of our leases do not provide for such impound accounts and, for those that do, such accounts may not always be sufficient to protect us from loss.

Our tenants are faced with significant potential litigation and rising insurance costs that not only affect their ability to obtain and maintain adequate liability and other insurance, but also may affect their ability to pay their lease or mortgage payments and fulfill their insurance, indemnification and other obligations to us.

In some states, advocacy groups have been created to monitor the quality of care at skilled nursing facilities and assisted and independent living facilities, and these groups have brought litigation against operators. Also, in several instances, private litigation by skilled nursing facility patients or assisted and independent living facility covered residents or their families has resulted in very large damage awards for alleged abuses. The effect of this litigation and potential litigation has been to materially increase the costs of monitoring and reporting quality of care compliance incurred by our tenants. In addition, the cost of liability and medical malpractice insurance has increased and may continue to increase so long as the present litigation environment continues. This has affected the ability of some of our tenants to obtain and maintain adequate liability and other insurance and, thus, manage their related risk exposure. In addition to being unable to fulfill their insurance, indemnification and other obligations to us under their leases and mortgages and thereby potentially exposing us to those risks, this could cause our tenants to be unable to meet their obligations to us, potentially decreasing our revenues and increasing our collection and litigation costs. Moreover, to the extent we are required to foreclose on the affected facilities, our revenues from those facilities could be reduced or eliminated for an extended period of time.

In addition, we may in some circumstances be named as a defendant in litigation involving the actions of our tenants. In previous years, we have been named as a defendant in lawsuits for wrongful death. Although we have no involvement in the activities of our tenants and our standard leases generally require our tenants to indemnify and carry insurance to cover us, in certain cases, a significant judgment against us in such litigation could exceed our and our tenants’ insurance coverage, which would require us to make payments to cover the judgment. We have purchased our own insurance as additional protection against such issues.

Increased competition has resulted in lower revenues for some operators and may affect their ability to meet their payment obligations to us.

The healthcare industry is highly competitive, and we expect that it may become more competitive in the future. Our tenants are competing with numerous other companies providing similar healthcare services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. In addition, past overbuilding in the assisted and independent living market caused a slow-down in the fill rate of newly constructed buildings and a reduction in the monthly rate many newly built and previously existing facilities were able to obtain for their services and adversely impacted the occupancy of mature properties. This in turn resulted in lower revenues for the operators of certain of our facilities and contributed to the financial difficulties of some operators. While we believe that overbuilt markets should reach stabilization in the next several years and are less of a problem today due to minimal development, 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 tenants are expected to encounter increased competition in the future, including through industry consolidation, that could limit their ability to attract residents or expand their businesses and therefore affect their ability to meet their obligations to us.

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Adverse trends in the healthcare industry may negatively affect our revenues and the values of our investments.

The healthcare industry is currently experiencing:

•  changing trends in the method of delivery of healthcare services;

•  increased expense for uninsured patients and uncompensated care;

•  increased competition among healthcare providers;

•  continuing pressure by private and governmental payors to contain costs and reimbursements while increasing patients’ access to healthcare services;

•  lower operating profit margins in an uncertain economy;

•  investment losses;

•  constrained availability of capital;

•  credit downgrades;

•  increased liability insurance expense; and

•  increased scrutiny and formal investigations by federal and state authorities.

These changes, among others, can adversely affect the operations and financial condition of our tenants, and our business could be adversely affected.

RISKS RELATING TO US AND OUR OPERATIONS

In addition to the tenant related risks discussed above, there are a number of risks directly associated with us and our operations.

We are subject to particular risks associated with real estate ownership, which could result in unanticipated losses or expenses.

Our business is subject to many risks that are associated with the ownership of real estate, including, among other things, the following:

•  general liability, property and casualty losses, some of which may be uninsured;

•  the inability to purchase or sell our assets rapidly to respond to changing economic conditions, due to the illiquid nature of real estate and the real estate market;

•  leases which are not renewed or are renewed at lower rental amounts at expiration;

•  the exercise of purchase options by operators resulting in a reduction of our rental revenue;

•  costs relating to maintenance and repair of our facilities and the need to make expenditures due to changes in governmental regulations, including the Americans with Disabilities Act;

•  environmental hazards created by prior owners or occupants, existing tenants, mortgagors or other persons for which we may be liable;

•  acts of God, earthquakes, wildfires, storms, floods and other natural disasters affecting our properties, some of which may be exacerbated in the future as a result of global climate changes; and

•  acts of terrorism affecting our properties.

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General economic conditions and other events or occurrences that affect areas in which our investments are geographically concentrated may impact our financial results.

At December 31, 2009, 42.3% of our triple-net lease rent was derived from facilities located in Texas (15.3%), California (9.7%), Wisconsin (6.7%), Massachusetts (6.5%) and Tennessee (4.1%). As a result of this geographic concentration, we are subject to increased exposure to adverse conditions affecting these markets, including general economic conditions, increased competition or decreased demand, changes in state-specific legislation, a downturn in the local healthcare industry, real estate conditions, terrorist attacks, earthquakes and wildfires and other natural disasters occurring in these regions, which could adversely affect our business.

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

We have acquired an interest in certain of our facilities by acquiring a leasehold interest in the property on which the building is located, and we may acquire additional facilities in the future through the purchase of interests in ground leases. As the lessee under a ground lease, we are subject to restrictions imposed by the lease terms, including potential limitations on the replacement of tenants, which could result in a decrease or cessation of rental payments to us. Additionally, we are exposed to the possibility of losing the facility upon termination of the ground lease or an earlier breach of the ground lease by us.

We have now, and may have in the future, exposure to contingent rent escalators and floating interest rates, both of which can have the effect of reducing our profitability.

We receive revenue primarily by leasing our assets under operating leases in which the rental rate is generally fixed with annual rent escalations, subject to certain limitations. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. If our tenants’ revenues do not increase as a result of the current weak economic conditions or other factors and/or the Consumer Price Index does not increase, our revenues may not increase.

Certain of our debt obligations are floating-rate obligations with interest rate and related payments that vary with the movement of LIBOR or other indexes. The generally fixed rate nature of our revenue and the variable rate nature of certain of our interest obligations create interest rate risk. If interest rates increase, it could have a negative effect on our profitability, and our lease and other revenue may become insufficient to meet our obligations.

We have now, and may have in the future, exposure related to our leases and loans secured by letters of credit, some of which are issued by banks that may be affected by the severely distressed housing and credit markets or other factors.

As of December 31, 2009, leases covering 456 facilities were secured by irrevocable letters of credit totaling $71.3 million. In the event that any of the tenants or borrowers related to these facilities become unable to meet their obligations, we are entitled to draw down on the letters of credit an amount equal to the earned and unpaid obligations. Our access to funds under the letters of credit is dependent on the ability of the issuing banks to meet their funding commitments. These banks might have incurred losses or might have reduced capital reserves as a result of their prior lending to other borrowers, their holdings of certain mortgage or other securities or losses they have sustained in connection with any other financial relationships, each of which may be affected by the general weakening of the U.S. economy and the increased financial instability of many borrowers. As a result, these banks might be or become capital constrained and might tighten their lending standards, or become insolvent. If they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from other borrowers within a short period of time, these banks might not be able to meet their funding commitments under our letters of credit. If an issuing bank has financial difficulties, we may be unable to draw down on a letter of credit, which could delay or reduce our ability to collect unpaid obligations and reduce our revenue and operating cash flow.

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Underinsured or uninsured losses and/or the failure of one or more of our insurance carriers could adversely impact our business.

We and our tenants insure against a wide range of risks through insurance with terms, conditions, limits and deductibles that we believe are adequate and appropriate given the relative risk and costs of such coverage. However, there is no assurance that this insurance will fully cover all potential losses, and there are certain exposures for which insurance is not purchased when it is deemed it is not economically feasible to do so. Underinsured or uninsured losses could decrease our anticipated revenues from a property and result in the loss of all or a portion of the capital we have invested in a property.

Additionally, if the recent global financial crisis were to affect the solvency of any carrier providing insurance to us or any of our tenants, it could result in their inability to make payments on insurance claims, which could have an adverse effect on our financial condition or that of our tenants. In addition, the failure of one or more insurance companies may increase the costs to renew existing insurance policies.

As owners of real estate, we are subject to environmental laws that expose us to the possibility of having to pay damages to the government and costs of remediation if there is contamination on our property.

Under various laws, owners of real estate may be required to investigate and clean up hazardous substances present at a property and may be held liable for property damage or personal injuries that result from environmental contamination. These laws also expose us to the possibility that we become liable to reimburse the government for damages and costs it incurs in connection with the contamination, regardless of whether we were aware of, or responsible for, the environmental contamination. We review environmental surveys of the facilities we own prior to their purchase. Based upon those surveys 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 that could have a material adverse effect on our business or financial condition.

We may recognize impairment charges or losses on the sale of certain facilities.

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment. For operating assets, if indicators of impairment exist, we compare the undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. If the sum of the future estimated undiscounted cash flows is higher than the current net book value, we would conclude no impairment exists. If the sum of the future estimated undiscounted cash flows is lower than its current net book value, we would recognize an impairment loss for the difference between the net book value of the asset and its estimated fair value which would reduce our net income. From time to time, we classify certain facilities, including unoccupied buildings and land parcels, as assets held for sale. To the extent we are unable to sell these properties for net book value, we may be required to take an impairment charge or loss on the sale, either of which would reduce our net income.

We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investment in an unconsolidated joint venture may exceed the fair value. If it is determined that a decline in the fair value of our investment in an unconsolidated joint venture is other-than-temporary and is below its carrying value, an impairment would be recorded which would reduce our net income.

We may face competitive risks related to reinvestment of sale proceeds.

From time to time, we will have cash available from (i) the proceeds of sales of our securities, (ii) principal payments on our loans receivable and (iii) the sale of properties, including non-elective dispositions, under the terms of master leases or similar financial support arrangements. In order to maintain our current financial results, we must re-invest these proceeds on a timely basis. 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. Delays in acquiring properties may negatively impact revenues and our ability to make distributions to stockholders.

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We rely on external sources of capital to fund future capital needs, and continued turbulence in financial markets could impair our ability to meet maturing commitments or make future investments necessary to grow our business.

In order to qualify as a REIT under the Internal Revenue Code, we are required, among other things, to distribute each year to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gain. Because of this distribution requirement, we will not be able to fund, from cash retained from operations, all future capital needs, including capital needs to satisfy or refinance maturing commitments and to make investments. As a result, we rely on external sources of capital. If we are unable to obtain needed capital at all or only on unfavorable terms from these sources, we might not be able to make the investments needed to grow our business, or to meet our obligations and commitments as they mature, which could negatively affect the ratings of our debt and even, in extreme circumstances, affect our ability to continue operations. 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 potential for future increases in earnings and cash distributions, as well as the market price of the shares of our capital stock.

Recent market and economic conditions have been unprecedented and challenging with tighter credit conditions and slow growth. While there are current signs of a strengthening and stabilizing economy and more liquid and attractive capital markets, there are continued concerns about the uncertainty over whether our economy will again be adversely impacted by inflation, deflation or stagflation, and the systemic impact of rising unemployment, energy costs, geopolitical issues, the availability and cost of capital, the U.S. mortgage market and a declining real estate market in the U.S., resulting in a return to illiquid credit markets and widening credit spreads. We had $700 million available under our credit facility at December 31, 2009, and we have no current reason to believe that we will be unable to access the facility in the future. However, continued concern about the stability of the markets generally and the strength of borrowers specifically has led many lenders and institutional investors to reduce and, in some cases, cease to provide, funding to borrowers. In addition, the banks that are parties to the credit facility might have incurred losses or might have reduced capital reserves as a result of their prior lending to other borrowers, their holdings of certain mortgage securities or their other financial relationships, in part because of the general weakening of the U.S. economy and the increased financial instability of many borrowers. As a result, these banks might be or become capital constrained and might tighten their lending standards, or become insolvent. If they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from other borrowers within a short period of time, these banks might not be able to meet their funding commitments under our credit facility. If we were unable to access our credit facility it could result in an adverse effect on our liquidity and financial condition.

At December 31, 2009, we had approximately $101.8 million of indebtedness that matures in 2010 and $378.5 million of indebtedness that matures in 2011. On February 9, 2010, we exercised a 12-month extension option on a $32.4 million loan that was scheduled to mature in April 2010. Additionally, some of our senior notes can be put to us prior to the stated maturity date. There are no such senior notes that we may be required to repay in 2010 or 2011. If these recent market conditions continue or do not fully abate, they may limit our ability to timely refinance maturing liabilities and access the capital markets to meet liquidity needs, resulting in a material adverse effect on our financial condition and results of operations.

Our plans for growth require regular access to the capital and credit markets. If capital is not available at an acceptable cost, it will significantly impair our ability to make future investments as acquisitions and development projects become difficult or impractical to pursue. Our potential capital sources include:

•  Equity Financing. As with other publicly-traded companies, the availability of equity capital will depend, in part, on the market price of our common stock which, in turn, will depend upon various market conditions that may change from time to time. Among the market conditions and other factors that may affect the market price of our common stock are:

•  the extent of investor interest;

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•  the reputation of REITs in general and the healthcare sector in particular and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;

•  our financial performance and that of our tenants;

•  the contents of analyst reports about us and the REIT industry;

•  general stock and bond market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions;

•  our failure to maintain or increase our dividend, which is dependent, to a large part, on growth of funds from operations which in turn depends upon increased revenues from existing investments, future investments and rental increases; and

•  other factors such as governmental regulatory action and changes in REIT tax laws.

The market value of the equity securities of a REIT is generally based upon the market’s perception of the REIT’s growth potential and its current and potential future earnings and cash distributions. Our failure to meet the market’s expectation with regard to future earnings and cash distributions likely would adversely affect the market price of our common stock.

•  Debt Financing/Leverage. Financing for our maturing commitments and future investments may be provided by borrowings under our bank line of credit, private or public offerings of debt, the assumption of secured indebtedness, mortgage financing on a portion of our owned portfolio or through joint ventures. We are subject to risks normally associated with debt financing, including the risks that our cash flow will be insufficient to service our debt or make distributions to our stockholders, that we will be unable to refinance existing indebtedness or that the terms of refinancing may not be as favorable as the terms of existing indebtedness or may include restrictive covenants that limit our flexibility in operating our business. If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds from other capital transactions, our cash flow may not be sufficient in all years to pay distributions to our stockholders and to repay all maturing debt. Furthermore, if prevailing interest rates, changes in our debt ratings, or other factors at the time of refinancing, result in higher interest rates upon refinancing, the interest expense relating to that refinanced indebtedness would increase, which could reduce our profitability and the amount of dividends we are able to pay. Moreover, additional debt financing increases the amount of our leverage. The degree of leverage could have important consequences to stockholders, including affecting our investment grade ratings, our ability to obtain additional financing in the future for working capital, capital expenditures, investments, development or other general corporate purposes and making us more vulnerable to a downturn in business or the economy generally.

•  Joint Ventures. We may develop or acquire properties in joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to the risks that:

•  our co-venturers or partners might at any time have economic or other business interests or goals that are inconsistent with our business interests or goals;

•   our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives (including actions that may be inconsistent with our REIT status);

•  our co-venturers or partners may have different objectives from us regarding the appropriate timing and pricing of any sale or refinancing of properties; and

•  our co-venturers or partners might become bankrupt or insolvent.

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Joint ventures require us to share decision-making authority with our co-venturers or partners, which limits our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval.

A downgrade of our credit rating could impair our ability to obtain additional debt financing on favorable terms, if at all, and significantly reduce the trading price of our common stock.

We currently have investment grade credit ratings of Baa2 from Moody’s Investors Service, BBB- from Standard & Poor’s Ratings Service and BBB from Fitch Ratings on our senior notes. If any of these rating agencies downgrade our credit rating, or place our rating under watch or review for possible downgrade, this could make it more difficult or expensive for us to obtain additional debt financing, and the trading price of our common stock will likely decline. Factors that may affect our credit rating include, among other things, our financial performance, our success in raising sufficient equity capital, adverse changes in our debt and fixed charge coverage ratios, our capital structure and level of indebtedness and pending or future changes in the regulatory framework applicable to our tenants and our industry. We cannot assure you that these credit agencies will not downgrade our credit rating in the future.

Our level of indebtedness may adversely affect our financial results.

As of December 31, 2009, we had total consolidated indebtedness of $1.4 billion and total assets of $3.6 billion. We expect to incur additional indebtedness in the future. The risks associated with financial leverage include:

•  increasing our sensitivity to general economic and industry conditions;

•  limiting our ability to obtain additional financing on favorable terms;

•  requiring a substantial portion of our cash flow to make interest and principal payments due on our indebtedness;

•  a possible downgrade of our credit rating; and

•  limiting our flexibility in planning for, or reacting to, changes in our business and industry.

Our debt instruments contain covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions.

Covenants under our credit facility and our senior notes may limit management’s discretion by restricting our ability to, among other things, incur additional debt, redeem our capital stock, enter into certain transactions with affiliates, pay dividends and make other distributions, make investments and other restricted payments and create liens. Any additional financing we may obtain could contain similar or more restrictive covenants. Our desire to comply with these covenants may in the future prevent us from taking certain actions that we would otherwise deem appropriate.

If the holders of our senior notes exercise their rights to require us to repurchase their securities, we may have to make substantial payments, incur additional debt or issue equity securities to finance the repurchase.

Some of our senior notes grant the holders the right to require us, on specified dates, to repurchase their securities at a price equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest. If the holders of these securities elect to require us to repurchase their securities, we may be required to make significant payments, which would adversely affect our liquidity. Alternatively, we could finance the repurchase through the issuance of additional debt securities, which may have terms that are not as favorable as the securities we are repurchasing, or equity securities, which would dilute the interests of our existing stockholders.

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The market price of our common stock has fluctuated and could fluctuate significantly.

Stock markets, in general, and stock prices of participants in the healthcare industry, in particular, have recently experienced significant levels of volatility. Continued market volatility may adversely affect the market price of our common stock. As with other publicly traded securities, the trading price of our common stock depends on several factors, many of which are beyond our control, including: general market and economic conditions; the effects of direct governmental action in financial markets; prevailing interest rates; the market for similar securities issued by other REITs; our credit rating; and our financial condition and results of operations.

A decision by any of our significant stockholders to sell a substantial amount of our common stock could depress our stock price. Based on filings with the SEC and shareholder reporting services, as of December 31, 2009, three of our stockholders owned at least five percent of our common stock and held an aggregate of approximately 23.5% of our common stock. A decision by any of these stockholders to sell a substantial amount of our common stock could depress the trading price of our common stock.

We may issue shares of preferred stock that will give holders of such shares rights that are senior to the rights of holders of our common stock or significant influence over our affairs, and their interests may differ from those of our other stockholders.

Our board of directors has the authority to designate and issue preferred stock that may have dividend, liquidation and other rights that are senior to those of our common stock. Holders of our preferred stock will be entitled to cumulative dividends before any dividends may be declared or set aside on our common stock. Upon our voluntary or involuntary liquidation, dissolution or winding up, before any payment is made to holders of our common stock, holders of our preferred stock will be entitled to receive a liquidation preference, plus any accumulated and unpaid distributions. This will reduce the remaining amount of our assets, if any, available to distribute to holders of our common stock. In addition, holders of our preferred stock may have the right to elect two additional directors to our board of directors if six quarterly preferred dividends are in arrears.

There is no assurance that we will make distributions in the future.

We intend to continue to pay quarterly distributions to our stockholders consistent with our historical practice. However, our ability to pay distributions will be adversely affected if any of the risks described herein occur. Our payment of distributions is subject to compliance with restrictions contained in our credit facility and our senior notes. All distributions are made at the discretion of our board of directors, and our future distributions will depend upon our earnings, our cash flows, our anticipated cash flows, our financial condition, maintenance of our REIT tax status and such other factors as our board of directors may deem relevant from time to time. There are no assurances of our ability to pay distributions in the future. In addition, our distributions in the past have included, and may in the future include, a return of capital.

We face risks associated with short-term liquid investments.

At times we have significant cash balances that we invest in various short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments may include (either directly or indirectly) obligations of the U.S. government or its agencies, obligations (including certificates of deposit) of banks, commercial paper, money market funds and other highly rated short-term securities. Investments in these securities and funds are not insured against loss of principal. Under certain circumstances, we may be required to redeem all or part of our investment, and our right to redeem some or all of our investment may be delayed or suspended. In addition, there is no guarantee that our investments in theses securities or funds will be redeemable at par value. A decline in the value of our investment or a delay or suspension of our right to redeem may have a material adverse effect on our results of operations or financial condition.

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Our growth to date has been in part dependent on acquisitions which may not be available in the future, and we cannot make any assurances that any future growth strategies will be successful or not expose us to additional risks.

Any future growth through acquisitions will be partially dependent upon our ability to identify and complete favorable transactions and will be subject to risks associated with acquisitions, including delays or failures in obtaining third party consents or approvals, the failure to achieve perceived benefits, unexpected costs or liabilities and potential litigation. To the extent that acquisitions are made in geographic markets in which we have not previously had a presence, we would be exposed to additional risks, including those associated with an inability to accurately evaluate local market conditions, a lack of business relationships in the area and an unfamiliarity with local governmental and other regulations.

A key component of our growth strategy includes efficient access to the capital and credit markets. In certain situations where the future availability of capital is uncertain, we may secure equity and/or debt financing without the ability to immediately deploy the capital to income producing investments. As a result, dilution of earnings and other per share financial measures could occur as a result of the issuance of additional shares of stock and/or increased interest expense.

Although we believe that we have been successful in the past, we can give no assurance that we would be able to successfully identify and complete favorable transactions and/or execute new growth strategies in the future.

Unforeseen costs associated with investments in new properties could reduce our profitability.

Our business strategy contemplates future investments that may not prove to be successful. For example, we might encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent and/or unknown liabilities with limited or no recourse, and newly-acquired properties might require significant management attention that would otherwise be devoted to our ongoing business. If we issue equity securities or incur additional debt or both to finance future investments, it may reduce our per share financial results and/or increase our leverage. If we pursue new development projects, such projects would be subject to numerous risks, including risks of construction delays or cost overruns that may increase project costs, and new project commencement risks such as receipt of zoning, occupancy and other required governmental approvals and permits. Moreover, if we agree to provide funding to enable healthcare operators to build, expand or renovate facilities on our properties and the project is not completed, we could be forced to become involved in the development to ensure completion or we could lose the property. These costs may negatively affect our results of operations.

Increasing consolidation at the operator or REIT level could increase competition and reduce our profitability.

Our business is highly competitive and it may become more competitive in the future. We compete with a number of healthcare REITs and other financing sources, some of which are larger and have a lower cost of capital than we do. If consolidation occurs at the REIT or operator level, it could result in fewer investment opportunities for us and/or reduced profitability on our investments.

Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, results of operations, financial condition and stock price.

Pursuant to the Sarbanes-Oxley Act of 2002, we are required to provide a report by management on our internal control over financial reporting, including management’s assessment of the effectiveness of such control. Changes to our business will necessitate ongoing changes to our internal control systems and processes. Internal control over financial reporting may not prevent or detect misstatements due to inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that the control may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience

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difficulties in their implementation, our business, results of operations and financial condition could be materially adversely affected, we could fail to meet our reporting obligations and there could be a decline in our stock price.

Compliance with changing government regulations may result in additional expenses.

Changing laws, regulations and standards, including those relating to corporate governance and public disclosure, new SEC regulations and New York Stock Exchange rules, may create uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to our business practices. Also, legislative or regulatory efforts that seek to reduce greenhouse gas emissions through “green” building codes could increase the costs of maintaining or improving our existing properties or developing new properties. We are committed to maintaining high standards of compliance with all applicable laws, regulations and standards. As a result, our efforts to comply with evolving laws, regulations and standards may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.

Our success depends in part on our ability to retain key personnel, and if we are not successful in succession planning for our senior management team our business could be adversely impacted.

We depend on the efforts of our executive officers, particularly our President and Chief Executive Officer, Mr. Douglas M. Pasquale and our Executive Vice Presidents, Mr. Donald D. Bradley and Mr. Abdo H. Khoury. The loss of the services of these persons or the limitation of their availability could have an adverse impact on our operations. Although we have entered into employment and/or security agreements with certain of these executive officers, these agreements may not assure their continued service. In addition, if we are unsuccessful in our succession planning efforts, the continuity of our business and results of operations could be adversely impacted in the event that we are unable to retain one or more of these officers.

Some of our directors are involved in other real estate activities and investments and, therefore, may have potential conflicts of interest with us.

From time to time, certain of our directors may own interests in other real estate related businesses and investments, and this may give rise to potential conflicts of interests. All directors, officers and employees must avoid conflicts of interest as prescribed by our Business Code of Conduct & Ethics and are required, on an annual basis, to certify their compliance with the requirements of the Business Code of Conduct & Ethics. No director shall participate in any decision by the board of directors or Audit Committee that in any way relates to a matter that gives rise to a conflict of interest, other than to provide the board of directors of Audit Committee with all relevant information relating to the matter. Related party transactions are disclosed in our consolidated financial statements.

Our charter and bylaws and the laws of the state of our incorporation contain provisions that may delay, defer or prevent a change in control or other transactions that could provide stockholders with the opportunity to realize a premium over the then-prevailing market price for our common stock.

In order to protect us against the risk of losing our REIT status for U.S. federal income tax purposes, our charter and bylaws prohibit (i) the beneficial ownership by any single person of more than 9.9% of the issued and outstanding shares of our stock, by value or number of shares, whichever is more restrictive, and (ii) any transfer that would result in beneficial ownership of our stock by fewer than 100 persons. We have the right to redeem shares acquired or held in excess of the ownership limit. In addition, if any acquisition of our common or preferred stock violates the 9.9% ownership limit, the subject shares are automatically transferred to a trust temporarily for the benefit of a charitable beneficiary and, ultimately, are transferred to a person whose ownership of the shares will not violate the ownership limit. Furthermore, where such transfer in trust would not prevent a violation of the ownership limits, the prohibited transfer is treated as void ab initio. The ownership limit may have the effect of delaying, deferring or preventing a change in control of our company and could adversely affect our stockholders’ ability to

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realize a premium over the market price for the shares of our common stock. Our board of directors has increased the ownership limit to 20% with respect to one of our stockholders, Cohen & Steers, Inc. (“Cohen & Steers”). Cohen & Steers beneficially owned 4.8 million of our shares, or approximately 4.2% of our common stock, as of December 31, 2009.

Our charter authorizes us to issue additional shares of common stock and one or more series of preferred stock and to establish the preferences, rights and other terms of any series of preferred stock that we issue. Although our board of directors has no intention to do so at the present time, it could establish a series of preferred stock that could delay, defer or prevent a transaction or a change in control that might involve the payment of a premium over the market price for our common stock or otherwise be in the best interests of our stockholders.

In addition, the laws of our state of incorporation and the following provisions of our charter may delay, defer or prevent a transaction that may be in the best interests of our stockholders:

•  business combinations must be approved by 90% of the outstanding shares unless the transaction receives a unanimous vote or consent of our board of directors or is a combination solely with a wholly owned subsidiary; and

•  the classification of our board of directors into three groups, with each group of directors being elected for successive three-year terms, may delay any attempt to replace our board.

As a Maryland corporation, we are subject to provisions of the Maryland Business Combination Act (“MBCA”) and the Maryland Control Share Acquisition Act (“MCSA”). The MBCA may prohibit certain future acquirors of 10% or more of our stock (entitled to vote generally in the election of directors) and their affiliates from engaging in business combinations with us for a period of five years after such acquisition, and then only upon recommendation by the board of directors with (i) a stockholder vote of 80% of the votes entitled to be cast (including two-thirds of the stock not held by the acquiror and its affiliates) or (ii) if certain stringent fair price tests are met. The MCSA may cause acquirors of stock at levels in excess of 10%, 33% or 50% of the voting power of our stock to lose the voting rights of such stock unless voting rights are restored by vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes of stock held by the acquiring stockholder and our officers and employee directors.

RISKS RELATED TO OUR TAXATION AS A REIT

If we fail to remain qualified as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our stockholders.

We intend to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, there can be no assurance that the Internal Revenue Service (“IRS”) will not contend that our interests in subsidiaries or other issuers will not cause a violation of the REIT requirements.

If we were to fail to qualify as a REIT in any taxable year, we would be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to our stockholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of, and trading prices for, our common stock. Unless we were entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.

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Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to income from “qualified dividends” payable to domestic stockholders that are individuals, trusts and estates has been reduced by legislation to 15% through the end of 2010. Dividends payable by REITs, however, generally are not eligible for the reduced rates. Although this legislation does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, and state or local income, property and transfer taxes. For example, we have in the past acquired, and may in the future acquire, appreciated assets from a corporation that is not a REIT (i.e., a corporation taxable under subchapter C of the Internal Revenue Code) in a transaction in which we receive carry-over tax basis. If we subsequently dispose of those assets and recognize gain during the ten-year period following their acquisition, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable. In addition, in order to meet the REIT qualification requirements, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold some of our non-healthcare assets through taxable REIT subsidiaries, or TRSs, or other subsidiary corporations that will be subject to corporate-level income tax at regular rates. We will be subject to a 100% penalty tax on certain amounts if the economic arrangements among our tenants, our TRS and us are not comparable to similar arrangements among unrelated parties. Any of these taxes would decrease cash available for distribution to our stockholders.

Complying with REIT requirements with respect to our TRS limits our flexibility in operating or managing certain properties through our TRS.

A TRS may not directly or indirectly operate or manage a healthcare facility. For REIT qualification purposes, the definition of a “healthcare facility” means 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, immediately before the termination, expiration, default, or breach of the lease of or mortgage secured by such facility, was operated by a provider of such services which was eligible for participation in the Medicare program under Title XVIII of the Social Security Act with respect to such facility. If the IRS were to treat a subsidiary corporation of ours as directly or indirectly operating or managing a healthcare facility, such subsidiary would not qualify as a TRS, which could jeopardize our REIT qualification under the REIT gross asset tests.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities.

To qualify as a REIT for federal income tax purposes, we continually must satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. We may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source-of-income, asset-diversification or distribution requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments.

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Internal Revenue Code substantially limit our ability to hedge our liabilities. Any income from a hedging transaction we enter into to manage risk of interest rate changes or currency fluctuations with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of both the 75% and 95% gross income tests, if certain requirements are met. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result, we might have to limit our use of advantageous hedging techniques or implement those hedges through one of our domestic TRSs. This could

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increase the cost of our hedging activities because our domestic TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT.

The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal income tax rules that affect REITs are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could cause us to change our investments and commitments and affect the tax considerations of an investment in us.

Item 1B.   Unresolved Staff Comments.

None.

Item 2.   Properties.

See Item 1 for details.

Item 3.   Legal Proceedings.

From time to time, we are a party to various other legal proceedings, lawsuits and other claims (some of which may not be insured) that arise in the normal course of our business. Regardless of their merits, these matters may force us to expend significant financial resources. Except as described herein, we are not aware of any other legal proceedings or claims that we believe may have, individually or taken together, a material adverse effect on our business, results of operations or financial position. However, we are unable to predict the ultimate outcome of pending litigation and claims, and if our assessment of our liability with respect to these actions and claims is incorrect, such actions and claims could have a material adverse effect on our business, results of operations or financial position.

In late 2004 and early 2005, we were served with several lawsuits in connection with a fire at the Greenwood Healthcare Center in Hartford, Connecticut, that occurred on February 26, 2003. At the time of the fire, the Greenwood Healthcare Center was owned by us and leased to and operated by Lexington Healthcare Group. There were a total of 13 lawsuits arising from the fire. Those suits have been filed by representatives of patients who were either killed or injured in the fire. The lawsuits seek unspecified monetary damages. The complaints allege that the fire was set by a resident who had previously been diagnosed with depression. The complaints allege theories of negligent operation and premises liability against Lexington Healthcare, as operator, and us as owner. Lexington Healthcare has filed for bankruptcy. The matters have been consolidated into one action in the Connecticut Superior Court Complex Litigation Docket at the Judicial District at Hartford and are in various stages of discovery and motion practice. We have filed a motion for summary judgment with regard to certain pending claims and will be filing additional summary judgment motions for any remaining claims. Mediation was commenced with respect to most of the claims, and a settlement has been reached in 10 of the 13 pending claims within the limits of our commercial general liability insurance. We obtained a judgment of nonsuit in one case whereby it is now dismissed, and the two remaining claims will be subject to summary judgment motions and ongoing efforts at resolution. Summary judgment rulings are not expected until late 2010.

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Lexington Insurance, which potentially owes insurance coverage for these claims to us, has filed a lawsuit against us which seeks no monetary damages, but which does seek a court order limiting its insurance coverage obligations to us. We have filed a counterclaim against Lexington Insurance demanding additional insurance coverage from Lexington in amounts up to $10.0 million. The parties to that case, which is pending on the Complex Litigation Docket for the Judicial District of Hartford, filed cross-motions for summary judgment. Those motions were recently decided, resulting in a favorable outcome for us. The court’s ruling indicates $10.0 million in coverage is available from Lexington for the claims under the Professional Liability part of the Lexington policy. The court, however, declined to consider our counterclaim that there was an additional $10.0 million in coverage available to us under the comprehensive general liability part of the policy, ruling such a claim was premature. Lexington has appealed and filed post-judgment motions with the trial court. We have cross-appealed and filed our own post-judgment motions with the trial court in order to pursue the additional $10.0 million on the comprehensive general liability part of the policy. We do not expect the appeal to be resolved before the end of 2010.

We are being defended in the matter by our commercial general liability carrier. We believe that we have substantial defenses to the claims and that we have adequate insurance to cover the risks, should liability nonetheless be imposed. However, because the remaining claims are still in the process of discovery and motion practice, it is not possible to predict the ultimate outcome of these claims.

Item 4.   Submission of Matters to a Vote of Security Holders.

None.

PART II

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

Our common stock is listed on the New York Stock Exchange. It has been our policy to declare quarterly dividends to holders of our common stock in order to comply with applicable sections of the Internal Revenue Code governing real estate investment trusts. Set forth below are the high and low sales prices of our common stock from January 1, 2008 to December 31, 2009, as reported by the New York Stock Exchange and the cash dividends per share paid with respect to such periods. Future dividends will be declared and paid at the discretion of our board of directors and will depend upon cash generated by operating activities, our financial condition, relevant financing instruments, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our board of directors deems relevant. However, we currently expect to pay cash dividends in the future, comparable in amount to dividends recently paid.

		High		Low		Dividend
2009
	First quarter	$	28.81	$	18.16	$	0.44
	Second quarter		28.38		21.46		0.44
	Third quarter		33.79		24.23		0.44
	Fourth quarter		35.92		29.73		0.44
2008
	First quarter	$	35.50	$	28.07	$	0.44
	Second quarter		37.67		30.62		0.44
	Third quarter		39.99		30.44		0.44
	Fourth quarter		37.72		18.13		0.44

On February 9, 2010, our board of directors declared a quarterly cash dividend of $0.44 per share of common stock. This dividend will be paid on March 5, 2010 to stockholders of record on February 19, 2010.

As of February 11, 2010 there were approximately 1,557 holders of record of our common stock.

We currently maintain two equity compensation plans: the 1989 Stock Option Plan (the “1989 Plan”) and the 2005 Performance Incentive Plan (the “2005 Plan”). Each of these plans has been approved by our stockholders.

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The following table sets forth, for our equity compensation plans, the number of shares of common stock subject to outstanding options, warrants and rights (including restricted stock units and performance shares); the weighted-average exercise price of outstanding options, warrants and rights; and the number of shares remaining available for future award grants under the plans as of December 31, 2009:

Equity Compensation Plans

							Number of Securities
							Remaining Available for
							Future Issuance Under
	Number of Securities			Weighted-Average			Equity Compensation
	to be Issued Upon Exercise			Exercise Price of			Plans (Excluding
	of Outstanding Options,			Outstanding Options,			Securities Reflected in
	Warrants and Rights			Warrants and Rights			the First Column)
Equity compensation plans approved by security holders		1,769,876	(1)(2)	$	21.37	(3)		1,217,893	(4)
Equity compensation plans not approved by security holders		—			—			—
Total		1,769,876		$	21.37			1,217,893

(1)	Of these shares, 286,625 were subject to stock options then outstanding under the 1989 Plan. In addition, this number includes an aggregate of 1,483,251 shares that were subject to restricted stock units, performance shares, stock options and stock appreciation rights awards then outstanding under the 2005 Plan.
(2)	This number does not include an aggregate of 39,178 shares of unvested restricted stock then outstanding under the 2005 Plan.
(3)	This number reflects the weighted-average exercise price of outstanding stock options and has been calculated exclusive of restricted stock units, performance shares and stock appreciation rights outstanding under the 2005 Plan.
(4)	All of these shares were available for grant under the 2005 Plan. The shares available under the 2005 Plan are, subject to certain other limits under that plan, generally available for any type of award authorized under the 2005 Plan, including stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses and performance shares.

The following graph demonstrates the performance of the cumulative total return to the stockholders of our common stock during the previous five years in comparison to the cumulative total return on the National Association of Real Estate Investment Trusts (“NAREIT”) Equity Index and the Standard & Poor’s 500 Stock

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Index. The NAREIT Equity Index is comprised of all tax-qualified, equity oriented, real estate investment trusts listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ Global Market.

It should be noted that this graph represents historical stock performance and is not necessarily indicative of any future stock price performance.

Item 6.   Selected Financial Data.

The following table presents our selected financial data. Certain of this financial data has been derived from our audited financial statements included elsewhere in this Annual Report on Form 10-K and should be read in

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conjunction with those financial statements and accompanying notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Years Ended December 31,
	2009			2008			2007			2006			2005
	(In thousands, except per share data)
Operating Data:
Revenues	$	390,512		$	368,319		$	303,222		$	220,814		$	155,830
Income from continuing operations		125,194			106,761			130,368			51,107			31,796
Discontinued operations		23,864			161,246			93,878			134,049			38,145
Net income		149,058			268,007			224,246			185,156			69,941
Preferred stock dividends		(5,350	)		(7,637	)		(13,434	)		(15,163	)		(15,622	)
Preferred stock redemption charge		—			—			—			—			(795	)
Net income attributable to NHP common stockholders		143,040			260,501			211,024			170,414			53,524
Dividends paid on common stock		187,799			171,496			150,819			120,406			100,179
Per Share Data:
Diluted income from continuing operations attributable to NHP common stockholders	$	1.09		$	1.00		$	1.28		$	0.46		$	0.22
Diluted net income attributable to NHP common stockholders		1.31			2.63			2.31			2.19			0.78
Dividends paid on common stock		1.76			1.76			1.64			1.54			1.48
Balance Sheet Data:
Investments in real estate, net	$	3,031,383		$	3,124,229		$	2,961,442		$	2,583,515		$	1,786,075
Total assets		3,647,075			3,458,125			3,144,353			2,704,814			1,867,220
Borrowings under unsecured senior credit facility		—			—			41,000			139,000			224,000
Senior notes		991,633			1,056,233			1,166,500			887,500			570,225
Notes and bonds payable		431,456			435,199			340,150			355,411			236,278
NHP stockholders’ equity		2,033,099			1,760,667			1,482,693			1,243,809			781,032
Other Data:
Net cash provided by operating activities	$	247,414		$	243,838		$	220,886		$	171,932		$	148,313
Net cash used in investing activities	$	(2,447	)	$	(111,088	)	$	(375,364	)	$	(654,819	)	$	(139,552	)
Net cash provided by (used in) financing activities	$	55,061		$	(69,907	)	$	159,190		$	487,577		$	(7,229	)
Diluted weighted average shares outstanding		108,547			98,763			90,987			77,566			67,389
Reconciliation of Funds from Operations(1):
Net income	$	149,058		$	268,007		$	224,246		$	185,156		$	69,941
Net (income) loss attributable to noncontrolling interests		(668	)		131			212			421			—
Preferred stock dividends		(5,350	)		(7,637	)		(13,434	)		(15,163	)		(15,622	)
Preferred stock redemption charge		—			—			—			—			(795	)
Real estate related depreciation		123,666			118,603			100,340			77,714			56,670
Depreciation in income from unconsolidated joint ventures		5,209			4,768			1,703			—			246
Gain on sale of facilities		(23,908	)		(154,995	)		(118,114	)		(96,791	)		(4,908	)
Gain on sale of facilities from unconsolidated joint venture		—			—			—			—			(330	)
Funds from operations available to common stockholders	$	248,007		$	228,877		$	194,953		$	151,337		$	105,202

(1) We believe that funds from operations is an important non-GAAP supplemental measure of operating performance because it excludes the effect of depreciation and gains (losses) from sales of facilities (both

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of which are based on historical costs which may be of limited relevance in evaluating current performance). Additionally, funds from operations is used by us and widely used by industry analysts as a measure of operating performance for equity REITs. We therefore disclose funds from operations, although it is a measurement that is not defined by accounting principles generally accepted in the United States. We calculate funds from operations in accordance with the National Association of Real Estate Investment Trusts’ definition. Funds from operations does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.

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

Overview

To facilitate your review and understanding of this section of our report and the financial statements that follow, we are providing an overview of what management believes are the most important considerations for understanding our company and its business—the key factors that drive our business and the principal associated risks.

Who We Are

We are an investment grade rated (since 1994), publicly traded equity REIT that invests in senior housing, long-term care facilities and medical office buildings throughout the United States. We strive to maximize total stockholder return by growing our asset base through a conservative, long-term approach to real estate investments. The healthcare sector is relatively recession resistant and presents unique growth potential as evidenced by favorable aging demographic trends and increasing market penetration of a rapidly growing senior population. Led by the aging “baby boomer” generation, the growth potential within the healthcare real estate sector will be driven by the increased use of healthcare services and, in each case, the recognized need for additional and improved healthcare facilities and services. Our management team has extensive operating backgrounds in senior housing and long-term care that we believe provides us a competitive advantage in these sectors. In 2008, we established a full service medical office building platform comprised of a Class A portfolio of facilities backed by well regarded property management services and development capabilities.

What We Invest In

We invest passively in the following types of geographically diversified healthcare properties:

•  Senior Housing/Assisted and Independent Living Facilities (ALFs, ILFs and ALZs).   This primarily private pay-backed sector breaks down into three principal categories, each of which may be operated on a stand alone basis or combined with one or more of the others into a single facility or campus:

•  Assisted Living Facilities (ALFs) designed for frail seniors who can no longer live independently and instead need assistance with activities of daily living (such as feeding, dressing and bathing) but do not require round-the-clock skilled nursing care.

•  Independent Living Facilities (ILFs) designed for seniors who pay for some concierge-type services (e.g., meals, housekeeping, laundry, transportation, and social and recreational activities) but require little, if any, assistance with activities of daily living.

•  Alzheimer Facilities (ALZs) designed for those residents with significant cognitive impairment as a result of having Alzheimer’s or related dementia.

•  Long-Term Care/Skilled Nursing Facilities (SNFs).  This primarily government (Medicare and Medicaid) reimbursement backed sector consists of skilled nursing facilities designed for inpatient rehabilitative, restorative, skilled nursing and other medical treatment for residents who are medically stable and do not require the intensive care of an acute care or rehabilitative hospital.

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•  Continuing Care Retirement Communities (CCRCs).  These communities are designed to provide a continuum of care for residents as they age and their health deteriorates and typically combine on a defined campus integrated senior housing and long-term care facilities.

•  Medical Office Buildings (MOBs).  MOBs usually house several different unrelated medical practices, although they can be associated with a large single-specialty or multi-specialty group. MOB tenants include physicians, dentists, psychologists, therapists and other healthcare providers, with space devoted to patient examination and treatment, diagnostic imaging, outpatient surgery and other outpatient services. Since an MOB generally has several tenants under separate leases, they require day-to-day property management services that typically include rent collection from disparate tenants, re-marketing space as it becomes vacant and, for non-triple-net leases, responsibility for many of the MOB’s associated operating expenses (although many of these are, or can effectively be, passed through to the tenants as well). MOBs are generally classified as being either “on campus” or “off campus.”

•  On Campus MOBs typically are located on or immediately adjacent to an acute care hospital campus and are generally subject to a hospital ground lease. Its tenants are primarily doctors whose patients have been or will be treated at the hospital. The relationship with a vibrant hospital tends to create stronger tenant demand, generate higher rental rates, provide higher tenant retention and discourage competitive new supply as compared to most “off campus” MOBs that are unaffiliated with a healthcare system.

•  Off Campus MOBs have become more and more prevalent as healthcare has increasingly shifted from the inpatient model to the typically less expensive outpatient model. Instead of typically being subject to a hospital ground lease with operating and use restrictions limiting the owner’s control over the facility, including as a practical matter the ability to aggressively raise rents, owners of off campus MOBs typically have full ownership of the facility and control over all leasing and operating decisions. Further, those affiliated with a healthcare system may also enjoy many of the same advantages as an on campus facility.

How We Do It

Using a three-prong foundation that focuses on proactive capital management, active portfolio management and quality funds from operations (“FFO”) growth, we typically invest in senior housing facilities, long-term care facilities and medical office buildings as provided below.

•  Senior Housing and Long-Term Care Facilities (Including CCRCs).  We primarily make our investments in these properties passively by acquiring an ownership interest in facilities and leasing them to unaffiliated tenants under “triple-net” “master” leases that transfer the obligation for all facility operating costs (insurance, property taxes, utilities, maintenance, capital improvements, etc.) to the tenants. In addition, but to a much lesser extent because we view the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, we extend mortgage loans and other financing to tenants, generally at higher rates than we charge for rent on our owned facilities to compensate us for the additional risk.

•  Medical Office Buildings (MOBs).  We generally lease medical office buildings to multiple tenants under separate non-triple-net leases, where we are responsible for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants), and to single tenants under “triple-net” “master” leases like those referred to above. Until 2008, we primarily made our multi-tenant MOB investments in MOBs through joint ventures with specialists in this sector that would manage the venture and provide property management services. Since 2008, we have expanded our capabilities by executing on our strategic initiative to establish a full service MOB platform through a multi-faceted transaction with Pacific Medical Buildings LLC. We acquired from Pacific Medical Buildings LLC and certain of its affiliates interests in 12 Class A MOBs for $250.2 million in 2008 and two Class A MOBs for $89.1 million in February 2010. These MOBs comprise approximately 1 million square feet and are located in California (10), Nevada (2), Arizona (1) and Oregon (1). We also entered into an agreement pursuant to which we currently have the right, but not the obligation, to acquire up to approximately $1.3 billion of MOBs to be developed by PMB LLC through April 2019. Finally, we acquired from PMB a 50% interest in PMB Real Estate Services LLC (“PMBRES”), a full service property management company. PMBRES

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provides property and asset management services for 34 MOBs (2,546,000 square feet), 26 of which we own or have an ownership interest in.

How We Measure Our Progress — Funds from Operations and Total Stockholder Return

We believe that FFO is an important non-GAAP supplemental measure of operating performance because it excludes the effect of depreciation and gains (losses) from sales of facilities (both of which are based on historical costs which may be of limited relevance in evaluating current performance). Additionally, FFO is widely used by industry analysts as a measure of operating performance for equity REITs. We therefore discuss FFO, although it is a measurement that is not defined by accounting principles generally accepted in the United States. We calculate FFO in accordance with the NAREIT definition. FFO does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (it does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.

In addition to FFO, we also believe total stockholder return to be a significant measure of our progress. Total stockholder return means, with respect to the Company: (a) the change in the market price of its common stock (as quoted on the principal market on which it is traded) during the performance period plus reinvested dividends and other distributions paid with respect to the common stock during the performance period, divided by (b) the market price of the common stock at the beginning of the performance period.

What We Have Accomplished Over the Last Three Years

We have enjoyed numerous successes since the end of 2006, perhaps the most notable of which are as follows:

•  Investments.  We invested, directly and through our consolidated and unconsolidated joint ventures, $1.7 billion in the last three years, growing our gross investments in real estate 22% from $3.0 billion at the end of 2006 to $3.6 billion at the end of 2009. During this period, we strategically diversified our asset base through investments in an MOB platform and facilities representing 20% of our investments at the end of 2009. Coupled with our capital and portfolio management initiatives, over the past three years this growing asset base enabled us to accomplish the following:

•  Quality, Recurring FFO Growth — We increased our adjusted FFO per share over 15% from $1.93 per share in 2006 to $2.23 per share in 2009.

•  Growing Dividend — We increased our cash dividend 14% from $1.54 per share in 2006 to $1.76 per share in 2009.

•  Total Stockholder Return — According to Thomson Reuters, we provided 39% total stockholder return over the past three years compared to a 12% total stockholder return provided by the companies within the healthcare sector of the NAREIT Index, a negative 32% total stockholder return provided by the companies comprising the NAREIT Index and a negative 11% total stockholder return provided by the companies comprising the S&P 500 Index.

•  Capital — More Flexible and Diverse Structure and Conservative Balance Sheet.  Our overall capital goal has been to balance the debt and equity components of our capital structure, increase our sources of capital, enhance our credit statistics, preserve and strengthen our investment grade credit ratings (Moody’s Investors Service: Baa2, Standard & Poor’s Ratings Service: BBB- and Fitch Ratings: BBB) and continue to protect our dividend. In addition, in response to the crises in the capital and credit markets, in 2009, we improved our liquidity. We believe we have accomplished all of these goals, with the following items being particularly noteworthy over the past three years:

•  Conservative Leverage — We reduced our debt to equity ratio (on an undepreciated book basis) from 46.1% at the end of 2006 to 36.0% at the end of 2009, which ranked us at the top of all investment grade REITs (according to research provided by JP Morgan Securities and SNL Real Estate through November 2009).

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•  Multiple Capital Sources — We added the following to our existing $700 million credit facility and traditional marketed debt and equity capital sources:

•  At-the-Market Equity Offering — We implemented a program in 2006 under which we periodically issue equity with a targeted price greater than the volume weighted average price, subject to fees of under 2%. Over the past three years, we have issued approximately 22 million shares of common stock under this program, resulting in net proceeds of approximately $687 million.

•  Institutional Joint Venture Capital — We formed a joint venture in January 2007 with a state pension fund investor to provide an additional capital source. The joint venture has invested $552 million in assisted and independent living facilities, skilled nursing facilities and continuing care retirement communities, including $227 million in facilities acquired by the joint venture from us, and has an approved capacity to invest up to $975 million in these property types.

•  Asset Management Capital — In addition to the above sales to the institutional joint venture, in 2007, we sold 36 skilled nursing facilities primarily located in Texas with an average age of 35 years for $128 million (an 8.5% capitalization rate on our rent, resulting in a gain on sale of $60.1 million) and invested a total of $362 million at an average starting rate of 8.3% in newer skilled nursing facilities located in multiple states. In 2008, we sold to Emeritus senior housing assets previously leased to them for $305 million (a 6.1% capitalization rate on our rent, resulting in a gain on sale of $135.0 million) and retained the net proceeds to bolster our liquidity.

•  Enhanced Credit Statistics — We increased our adjusted fixed charge coverage from 2.51x at the end of 2006 to 3.45x at the end of 2009, which ranked us at the top of all investment grade REITs (according to research provided by JP Morgan Securities and SNL Real Estate through November 2009).

•  Enhanced Credit Ratings — In 2009, both Moody’s and Fitch upgraded us to Baa2 and BBB, respectively, and S&P (BBB-) changed our outlook from stable to positive.

•  Dividend Secure and Growing — We maintained our dividend coverage ratio (dividends per share divided by recurring diluted FFO per share) at about 80%, while our dividend increased 14%.

•  Maximized Liquidity — Retained $382 million in cash and full availability on our $700 million credit line at the end of 2009.

•  Portfolio Management — Implemented Sophisticated Program.  Since the end of 2006, we have continued to dramatically upgrade our portfolio management program by enhancing the proprietary software system we developed, adding four dedicated portfolio management personnel and proactively anticipating and responding to potential problem areas. We believe we now have one of the most sophisticated portfolio management programs in our industry.

Focus and Outlook for 2010

Consistent with the strengthening economy and capital markets, our strategic objective priority has shifted from liquidity preservation and balance sheet management to investment growth. Our financial strength allows flexibility to create and exploit growth opportunities related to our core acquisition business (assisted living, skilled nursing, medical office) as well as new development projects in healthcare real estate. With the cost and availability of credit becoming more attractive, coupled with our $382 million in cash and the full availability of our $700 million credit facility at the end of 2009, we believe we have adequate liquidity to address our business commitments over the next two years while also growing our business at a measured pace. Our plans for growth require efficient access to the capital and credit markets. So long as capital continues to be available at an acceptable cost, we expect to be able to make further investments through quality acquisitions and development projects.

In 2009, given the unprecedented disruptions to our economy in general and the capital markets in particular, generating meaningful growth in net income and FFO proved difficult. In 2010, we anticipate the early stages of a protracted economic recovery with more liquid and less volatile capital markets. If the economic recovery holds, our primary focus for 2010 will return to continuing to improve our net income and FFO on an absolute and per share basis and further diversifying and upgrading our portfolio, while also continuing to explore alternative capital

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sources, investment structures, joint ventures and property types that would enable us to compete more effectively in the markets in which we invest. If deflationary pressures continue to abate, we expect the rent escalators (generally between 1% and 3%) contained in many of our leases will be a source of meaningful “built in” internal net income and FFO growth. However, since most of these escalators are tied to annual increases in the Consumer Price Index, if that Index starts trending negatively again as it did for most of 2009, we are likely to see much less, if any, internal growth from these rent escalators as long as deflationary conditions continue. Investment growth appears possible as the unprecedented adverse capital markets and economic conditions and the resulting tighter credit conditions and slower growth that evolved in 2008 and continued through much of 2009 appear to be abating. However, there still exists a wide range of directly conflicting outcomes possible for 2010. A small misstep in Federal monetary policy could mean the difference between higher inflation and deflation. We could slip back into a recession, if our economic recovery loses steam. If a “double-dip” recession occurs, we could return to the environment we saw in 2008 and much of 2009 where the systemic impact of energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. contributed to increased market volatility and diminished expectations for the U.S. economy — any or all of which may make it more difficult for some or many of our tenants to pay their rent.

Our growth plans could be diminished, our financial position weakened and our ability to make distributions limited if we revert to an environment dominated by deteriorating general economic conditions or other factors leading to any of our major senior housing or other tenants being unable to meet their obligations to us. We have no operational control over our tenants. Serious tenant financial problems could lead to more extensive restructurings or tenant disruptions than we currently expect. This could be unique to a particular tenant or it could be industry related, such as continuing reduced occupancies for our assisted and independent living facilities due to severely distressed housing and credit markets, sustained unemployment or reduced federal or state governmental reimbursement levels in the case of our skilled nursing facilities with many states already facing severe budget deficits.

Notwithstanding the amplified uncertainty that exists in the economy and capital markets, our focus for 2010 will be to make quality, accretive investments in existing healthcare assets as well as new development projects when opportunities arise. Simultaneously, we intend to plan for a range of possible outcomes that exist for 2010 through conservative capital management, proactive portfolio management and relevant enterprise risk management. We will continue to closely monitor our liquidity, the capital and credit markets and the performance of our tenants, using our unique operating backgrounds to proactively identify and address potential problems that may develop.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in different presentation of our financial statements. On an ongoing basis, we evaluate our estimates and assumptions, including those that impact our most critical accounting policies. We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates. We believe the following are our most critical accounting estimates.

Principles of Consolidation

Our consolidated financial statements include the accounts of NHP, its wholly owned subsidiaries and its joint ventures that are controlled through voting rights or other means. We apply the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”), for arrangements with variable interest entities (“VIEs”) and would consolidate those VIEs where we are the primary beneficiary. All material intercompany accounts and transactions have been eliminated.

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Our judgment with respect to our level of influence or control of an entity and whether we are the primary beneficiary of a VIE involves the consideration of various factors including, but not limited to, the form of our ownership interest, our representation on the entity’s governing body, the size of our investment, estimates of future cash flows, our ability to participate in policy-making decisions and the rights of the other investors to participate in the decision-making process and to replace us as manager and/or liquidate the venture, if applicable. Our ability to correctly assess our influence or control over an entity or determine the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements.

We apply the provisions of ASC Topic 323, Investments — Equity Method and Joint Ventures, to investments in joint ventures. Investments in entities that we do not consolidate but for which we have the ability to exercise significant influence over operating and financial policies are reported under the equity method. Under the equity method of accounting, our share of the entity’s earnings or losses is included in our operating results.

Revenue Recognition

Rental income from operating leases is recognized in accordance with the provisions of ASC Topic 840, Leases, and ASC Topic 605, Revenue Recognition. Our leases generally contain annual escalators. Many of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. Recognizing income on a straight-line basis requires us to calculate the total non-contingent rent to be paid over the life of a lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in the caption “Other assets” on our consolidated balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. We assess the collectability of straight-line rents in accordance with the applicable accounting standards and our reserve policy and defer recognition of straight-line rent if its collectability is not reasonably assured. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. Such revenue increases are recognized as the related contingencies are met.

Our assessment of the collectability of straight-line rents is based on several factors, including the financial strength of the tenant and any guarantors, the historical operations and operating trends of the facility, the historical payment pattern of the tenant, the type of facility and whether we intend to continue to lease the facility to the current tenant, among others. If our evaluation of these factors indicates we may not receive the rent payments due in the future, we defer recognition of the straight-line rental income and, depending on the circumstances, we will provide a reserve against the previously recognized straight-line rent receivable asset for a portion, up to its full value, that we estimate may not be recoverable. If we change our assumptions or estimates regarding the collectability of future rent payments required by a lease, we may adjust our reserve to increase or reduce the rental revenue recognized, and/or to increase or reduce the reserve against the existing straight-line rent receivable balance.

We evaluate the collectability of the straight-line rent receivable balances on an ongoing basis and provide reserves against receivables we believe may not be fully recoverable. The ultimate amount of straight-line rent we realize could be less than amounts currently recorded.

Land, Buildings and Improvements and Depreciation and Useful Lives of Assets

We record properties at cost and use the straight-line method of depreciation for buildings and improvements over their estimated remaining useful lives of up to 40 years, generally 20 to 40 years depending on factors including building type, age, quality and location. We review and adjust useful lives periodically.

We allocate purchase prices of properties in accordance with the provisions of ASC Topic 805, Business Combinations (“ASC 805”), which require that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. ASC 805 also establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. Certain transaction costs that have historically been capitalized as acquisition costs are expensed for business combinations completed on or after

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January 1, 2009, which may have a significant impact on our future results of operations and financial position based on historical acquisition costs and activity levels.

The allocation of the cost between land, building and, if applicable, equipment and intangible assets and liabilities, and the determination of the useful life of a property are based on management’s estimates, which are based in part on independent appraisals or other consultants’ reports. For our triple-net leased facilities, the allocation is made as if the property were vacant, and a significant portion of the cost of each property is allocated to buildings. This amount generally approximates 90% of the total property value. Historically, we have generally acquired properties and simultaneously entered into a new market rate lease for the entire property with one tenant. For our multi-tenant medical office buildings, the percentage allocated to buildings may be substantially lower as allocations are made to assets such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets (collectively “intangible assets”) included on our consolidated balance sheets and/or below market tenant and ground lease intangible liabilities included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets.

We calculate depreciation and amortization on equipment and lease costs using the straight-line method based on estimated useful lives of up to five years or the lease term, whichever is appropriate. We amortize intangible assets and liabilities over the remaining lease terms of the respective leases to real estate amortization expense or medical office building operating rent, as appropriate. We review and adjust useful lives periodically. If we do not allocate appropriately between land and building or we incorrectly estimate the useful lives of our assets, our computation of depreciation and amortization will not appropriately reflect the usage of the assets over future periods. If we overestimate the useful life of an asset, the depreciation expense related to the asset will be understated, which could result in a loss if the asset is sold in the future.

Asset Impairment

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment in accordance with the provisions of ASC Topic 360, Property, Plant and Equipment (“ASC 360”). Indicators may include, among others, a tenant’s inability to make rent payments, operating losses or negative operating trends at the facility level, notification by a tenant that it will not renew its lease, or a decision to dispose of an asset or adverse changes in the fair value of any of our properties. For operating assets, if indicators of impairment exist, we compare the undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. The evaluation of the undiscounted cash flows from the expected use of the property is highly subjective and is based in part on various factors and assumptions, including, but not limited to, historical operating results, available market information and known trends and market/economic conditions that may affect the property, as well as, estimates of future operating income, occupancy, rental rates, leasing demand and competition. If the sum of the future estimated undiscounted cash flows is higher than the current net book value, we conclude no impairment exists. If the sum of the future estimated undiscounted cash flows is lower than its current net book value, we recognize an impairment loss for the difference between the net book value of the asset and its estimated fair value. To the extent we decide to sell an asset, we recognize an impairment loss if the current net book value of the asset exceeds its fair value less selling costs.

We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investment in an unconsolidated joint venture may exceed the fair value. If it is determined that a decline in the fair value of our investment in an unconsolidated joint venture is other-than-temporary and is below its carrying value, an impairment is recorded. The determination of the fair value of investments in unconsolidated joint ventures involves significant judgment. Our estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at market rates, general economic conditions and trends and other relevant factors.

The above analyses require us to determine whether there are indicators of impairment for individual assets or investments in unconsolidated joint ventures, to estimate the most likely stream of cash flows from operating assets and to determine the fair value of assets that are impaired or held for sale. If our assumptions, projections or estimates regarding an asset change in the future, we may have to record an impairment charge to reduce or further reduce the net book value of such individual asset or investment in unconsolidated joint venture.

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Collectability of Receivables

We evaluate the collectability of our rent, mortgage loans and other receivables on a regular basis based on factors including, among others, payment history, the financial strength of the borrower and any guarantors, the value of the underlying collateral, the operations and operating trends of the underlying collateral, if any, the asset type and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected. If our assumptions or estimates regarding the collectability of a receivable change in the future, we may have to record a reserve to reduce or further reduce the carrying value of the receivable.

Income Taxes

As part of the process of preparing our consolidated financial statements, significant management judgment is required to estimate 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, other than adjustments to income tax liabilities acquired in business combinations, which would be adjusted through goodwill.

Impact of New Accounting Pronouncements

In June 2009, the FASB updated ASC 810 to require ongoing analyses to determine whether an entity’s variable interest gives it a controlling financial interest in a variable interest entity (“VIE”), making it the primary beneficiary, based on whether the entity (i) has the power to direct activities of the VIE that most significantly impact its economic performance, including whether it has an implicit financial responsibility to ensure the VIE operates as designed, and (ii) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Enhanced disclosures regarding an entity’s involvement with variable interest entities are also required under the provisions of ASC 810. These requirements are effective January 1, 2010. The adoption of these requirements is not expected to have a material impact on our results of operations or financial position.

In January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures About Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 adds new requirements for disclosures of significant transfers into and out of Levels 1, 2 and 3 of the fair value hierarchy, the reasons for the transfers and the policy for determining when transfers are recognized. ASU 2010-06 also adds new requirements for disclosures about purchases, sales, issuances and settlements on a gross rather than net basis relating to the reconciliation of the beginning and ending balances of Level 3 recurring fair value measurements. It also clarifies the level of disaggregation to require disclosures by “class” rather than by “major category of assets and liabilities” and clarifies that a description of inputs and valuation techniques used to measure fair value is required for both recurring and nonrecurring fair value measurements classified as Level 2 or 3. ASU 2010-06 is effective January 1, 2010 except for the requirements to provide the Level 3 activity of purchases, sales, issuances and settlements on a gross basis which are effective January 1, 2011. The adoption of ASU 2010-06 is not expected to have a material impact on our results of operations or financial position.

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Operating Results

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

	2009			2008			$ Change			% Change
	(Dollars in thousands)
Revenue:
Triple-net lease rent	$	295,757		$	283,052		$	12,705			4	%
Medical office building operating rent		68,319			60,287			8,032			13	%
		364,076			343,339			20,737			6	%
Interest and other income		26,436			24,980			1,456			6	%
		390,512			368,319			22,193			6	%
Expenses:
Interest and amortization of deferred financing costs		93,630			101,045			(7,415	)		(7	)%
Depreciation and amortization		124,264			116,375			7,889			7	%
General and administrative		27,353			26,051			1,302			5	%
Acquisition costs		830			—			830			100	%
Medical office building operating expenses		28,906			26,631			2,275			9	%
		274,983			270,102			4,881			2	%
Operating income		115,529			98,217			17,312			18	%
Income from unconsolidated joint ventures		5,101			3,903			1,198			31	%
Gain on debt extinguishment, net		4,564			4,641			(77	)		(2	)%
Income from continuing operations		125,194			106,761			18,433			17	%
Discontinued operations:
Gains on sale of facilities, net		23,908			154,995			(131,087	)		(85	)%
(Loss) income from discontinued operations		(44	)		6,251			(6,295	)		(101	)%
		23,864			161,246			(137,382	)		(85	)%
Net income		149,058			268,007			(118,949	)		(44	)%
Net (income) loss attributable to noncontrolling interests		(668	)		131			(799	)		(610	)%
Net income attributable to NHP		148,390			268,138			(119,748	)		(45	)%
Preferred stock dividends		(5,350	)		(7,637	)		2,287			(30	)%
Net income attributable to NHP common stockholders	$	143,040		$	260,501		$	(117,461	)		(45	)%

Triple-net lease rental income increased $12.7 million, or 4%, in 2009 as compared to 2008. The increase was primarily due to rental income from 42 facilities acquired during 2008 and rent increases at existing facilities, offset in part by reserves and decreased straight-line rental income.

Medical office building operating rent increased $8.0 million, or 13%, in 2009 as compared to 2008. The increase was primarily due to operating rent from 10 multi-tenant medical office buildings acquired during 2008, including nine medical office buildings acquired through consolidated joint ventures.

Interest and other income increased $1.5 million, or 6%, in 2009 as compared to 2008. The increase was primarily due to six loans funded during 2008 and four loans funded during 2009, offset in part by lower short-term investment interest income resulting from lower interest rates and by loan repayments.

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Interest and amortization of deferred financing costs decreased $7.4 million, or 7%, in 2009 as compared to 2008. The decrease was primarily due to the repayment of $110.3 million of senior notes during 2008 and $64.6 million during 2009 and the repayment of the outstanding balance on our credit facility during 2008 using a portion of the net proceeds from the issuance of common stock and the sale of 23 assisted and independent living facilities to Emeritus, the tenant of the facilities, offset in part by the assumption of $120.8 million of secured debt during 2008 and the addition of $35.8 million and $6.9 million of secured debt in 2008 and 2009, respectively.

Depreciation and amortization increased $7.9 million, or 7%, in 2009 as compared to 2008. The increase was primarily due to the acquisition of 52 facilities during 2008, including 10 multi-tenant medical office buildings.

General and administrative expenses increased $1.3 million, or 5%, in 2009 as compared to 2008. The increase was primarily due to increased expenses for employee related costs, offset in part by a decrease in tax expense.

Acquisition costs represent costs related to acquisition transactions. Prior to January 1, 2009, these costs were capitalized. Acquisition costs were $0.8 million in 2009.

Medical office building operating expenses increased $2.3 million, or 9%, in 2009 as compared to 2008. The increase was primarily due to operating expenses from 10 multi-tenant medical office buildings acquired during 2008, including nine medical office buildings acquired through consolidated joint ventures.

Income from unconsolidated joint ventures increased $1.2 million, or 31%, in 2009 as compared to 2008. The increase was primarily due to increased income from our unconsolidated joint venture with a state pension fund investor, primarily resulting from a gain on debt extinguishment, and decreased losses from PMB Real Estate Services LLC (“PMBRES”), a full service property management company, in which we acquired a 50% interest in 2008 and income in 2009 as compared to a loss in 2008 from PMB SB 399-401 East Highland LLC (“PMB SB”), an entity that owns two multi-tenant medical office buildings, in which we acquired a 44.95% interest in 2008.

Gain on debt extinguishment represents the gains recognized in connection with the prepayment of $30.0 million and $49.7 million of senior notes in 2009 and 2008, respectively.

ASC 360 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. If we have a continuing investment, as in the sales to our unconsolidated joint venture with a state pension fund investor, the operating results remain in continuing operations. Discontinued operations income decreased $137.4 million in 2009 as compared to 2008. Discontinued operations income of $23.9 million for 2009 was comprised of gains on sale of $23.9 million and rental income of $0.8 million, offset in part by depreciation and amortization of $0.9 million. Discontinued operations income of $161.2 million for 2008 was comprised of gains on sale of $155.0 million and rental income of $10.0 million, offset in part by depreciation and amortization of $2.7 million and interest expense of $1.0 million. We expect to have future sales of facilities or reclassifications of facilities to assets held for sale, and the related income or loss would be included in discontinued operations unless the facilities were transferred to an entity in which we maintain an interest.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

	2008		2007		$ Change		% Change
	(Dollars in thousands)
Revenue:
Triple-net lease rent	$	283,052	$	265,895	$	17,157		6	%
Medical office building operating rent		60,287		16,061		44,226		275	%
		343,339		281,956		61,383		22	%
Interest and other income		24,980		21,266		3,714		17	%
		368,319		303,222		65,097		21	%

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	2008			2007			$ Change			% Change
	(Dollars in thousands)
Expenses:
Interest and amortization of deferred financing costs		101,045			97,639			3,406			3	%
Depreciation and amortization		116,375			89,986			26,389			29	%
General and administrative		26,051			24,636			1,415			6	%
Medical office building operating expenses		26,631			8,596			18,035			210	%
		270,102			220,857			49,245			22	%
Operating income		98,217			82,365			15,852			19	%
Income from unconsolidated joint ventures		3,903			1,958			1,945			99	%
Gain on debt extinguishment, net		4,641			—			4,641			100	%
Gain on sale of facilities to unconsolidated joint venture, net		—			46,045			(46,045	)		(100	)%
Income from continuing operations		106,761			130,368			(23,607	)		(18	)%
Discontinued operations:
Gains on sale of facilities, net		154,995			72,069			82,926			115	%
Income from discontinued operations		6,251			21,809			(15,558	)		(71	)%
		161,246			93,878			67,368			72	%
Net income		268,007			224,246			43,761			20	%
Net (income) loss attributable to noncontrolling interests		131			212			(81	)		(38	)%
Net income attributable to NHP		268,138			224,458			43,680			19	%
Preferred stock dividends		(7,637	)		(13,434	)		5,797			43	%
Net income attributable to NHP common stockholders	$	260,501		$	211,024		$	49,477			23	%

Triple-net lease rental income increased $17.2 million, or 7%, in 2008 as compared to 2007. The increase was primarily due to rental income from 81 facilities acquired in 2007, 42 facilities acquired during 2008, increased straight-line rental income recognized and rent increases at existing facilities, partially offset by decreased rental income related to 19 facilities that we sold to our unconsolidated joint venture with a state pension fund investor in 2007 and the recognition of $2.4 million of triple-net lease rental income related to non-recurring settlements of delinquent tenant obligations in 2007.

Medical office building operating rent increased $44.2 million, or 275%, in 2008 as compared to 2007. The increase was primarily due to operating rent from 30 multi-tenant medical office buildings acquired in 2007, including 22 medical office buildings acquired through consolidated joint ventures, and 10 multi-tenant medical office buildings acquired in 2008, including nine acquired through consolidated joint ventures.

Interest and other income increased $3.7 million, or 17%, in 2008 as compared to 2007. The increase was primarily due to two loans funded and four mortgage loans and five other loans acquired during 2007, six loans funded during 2008 and increased interest income resulting from a higher cash balance primarily due to asset sales, partially offset by loan repayments and the recognition of $1.3 million of other income related to non-recurring settlements of delinquent tenant obligations in 2007.

Interest and amortization of deferred financing costs increased $3.4 million, or 3%, in 2008 as compared to 2007. The increase was primarily due to borrowings to fund acquisitions in 2008 and 2007, including the issuance of $300 million of notes in October 2007, the assumption of $120.8 million of secured debt during 2008 and $55.7 million during 2007 and the addition of $35.8 million of secured debt in one of our consolidated joint ventures

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in 2008. These factors were partially offset by the repayment of the outstanding balance on our credit facility during 2008 using a portion of the net proceeds from the issuance of common stock and the sale of 23 assisted and independent living facilities to Emeritus, the tenant of the facilities, and interest savings from the repayment of $110.3 million of senior notes during 2008, the prepayment of $25.4 million of secured debt during 2007 and the transfer of $4.7 million of secured debt during 2007. In addition, $32.6 million of secured debt was transferred to the unconsolidated joint venture we have with a state pension fund investor in connection with our sale of the related facilities to the unconsolidated joint venture during 2007.

Depreciation and amortization increased $26.4 million, or 29%, in 2008 as compared to 2007. The increase was primarily due to the acquisition of 109 facilities in 2007, including 30 multi-tenant medical office buildings, and 52 facilities in 2008, including 10 multi-tenant medical office buildings, partially offset by decreased depreciation and amortization related to 19 facilities that we sold to our unconsolidated joint venture with a state pension fund investor in 2007.

General and administrative expenses increased $1.4 million, or 6%, in 2008 as compared to 2007. The increase was primarily due to increased expenses for third party advisors and employee related costs, offset by a decrease in insurance expense.

Medical office building operating expenses increased $18.0 million, or 210%, in 2008 as compared to 2007. The increase was primarily due to operating expenses from 30 multi-tenant medical office buildings acquired in 2007, including 22 medical office buildings acquired through consolidated joint ventures, and 10 multi-tenant medical office buildings acquired in 2008, including nine acquired through consolidated joint ventures.

Income from unconsolidated joint ventures increased $1.9 million, or 99%, in 2008 as compared to 2007. The increase was primarily due to the acquisition of 34 facilities in 2007 by our unconsolidated joint venture with a state pension fund investor, including 19 facilities acquired by the joint venture from us, partially offset by the acquisition in 2008 of a 50% interest in PMBRES and a 44.95% interest in PMB SB which both reported losses.

Gain on debt extinguishment represents the gain recognized in connection with the prepayment of $49.7 million of senior notes in 2008.

Gain on sale of facilities to unconsolidated joint venture represents 75% of the total gain related to the sale of facilities by us to our unconsolidated joint venture with a state pension fund investor in 2007. The other 25% of the gain, equating to our ownership share of the joint venture, was deferred and is included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets.

ASC 360 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. If we have a continuing investment, as in the sales to our unconsolidated joint venture with a state pension fund investor, the operating results remain in continuing operations. Discontinued operations income increased $67.4 million in 2008 as compared to 2007. Discontinued operations income of $161.2 million for 2008 was comprised of gains on sale of $155.0 million and rental income of $10.0 million, offset in part by depreciation and amortization of $2.7 million and interest expense of $1.0 million. Discontinued operations income of $93.9 million for 2007 was comprised of gains on sale of $72.1 million, rental income of $36.2 million and interest and other income of $0.6 million, offset in part by depreciation and amortization expense of $10.8 million and interest expense of $4.3 million. We expect to have future sales of facilities or reclassifications of facilities to assets held for sale, and the related income or loss would be included in discontinued operations unless the facilities were transferred to an entity in which we maintain an interest.

Other Factors That Affect Our Business

Leases and Mortgage Loans

Our leases and mortgages generally contain provisions under which rents or interest income increase with increases in facility revenues and/or increases in the Consumer Price Index. If facility revenues and/or the Consumer Price Index do not increase, our revenues may not increase. Rent levels under renewed leases will also

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impact revenues. Excluding multi-tenant medical office buildings, as of December 31, 2009, we had leases on 18 facilities expiring in 2010. Tenant purchase option exercises would decrease rental income. We believe our tenants may exercise purchase options on assets with option prices totaling approximately $38 million during 2010.

Acquisitions

We may make acquisitions during 2010, although we cannot predict the quantity or timing of any such acquisitions as we continue to be confronted with uncertainty surrounding the future of the capital markets and general economic conditions. If we make additional investments in facilities, depreciation and/or interest expense would also increase. We expect any such increases to be at least partially offset by associated rental or interest income. While additional investments in healthcare facilities would increase revenues, facility sales or mortgage repayments would serve to offset revenue increases and could reduce revenues.

Liquidity and Capital Resources

Operating Activities

Cash provided by operating activities during 2009 increased $3.3 million, or 1%, as compared to 2008. This was primarily due to revenue increases from our owned facilities and mortgage and other loans as a result of acquisitions, rent increases and funding of mortgage and other loans during 2008 and 2009 and increased intangible assets in 2008, offset in part by the payment of certain amounts included in the caption “Accounts payable and accrued liabilities” during 2009 and increased intangible lease liabilities related to our multi-tenant medical office buildings in 2008. There have been no significant changes in the underlying sources and uses of cash provided by operating activities.

Investing Activities

During 2009, we funded $34.4 million in expansions, construction and capital improvements at certain facilities in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project. At December 31, 2009, we had committed to fund additional expansions, construction and capital improvements of $111.3 million. Additionally, at December 31, 2009, we had committed to fund additional amounts under existing loan agreements of $14.0 million, including our commitments under the PMB LLC line of credit, PMB Pomona LLC loan and Brookdale revolving loan facility described below. During 2009, we also funded $0.5 million in capital and tenant improvements at certain multi-tenant medical office buildings.

On August 21, 2009, we acquired the noncontrolling interests held by The Broe Companies (“Broe”) in two consolidated joint ventures we had with them for $4.3 million, including a cash payment of $3.9 million, reducing the cost basis of the noncontrolling interests to zero at December 31, 2009. The purchase price exceeded the cost basis of the noncontrolling interests at the time of acquisition by $1.4 million which was recorded through capital in excess of par value. The cost basis of the noncontrolling interests in these joint ventures was $3.4 million at December 31, 2008. As a result of this acquisition, we now have direct ownership of the 36 multi-tenant medical office buildings previously owned by the joint ventures.

During 2009, prior to our acquisition of Broe’s interests, the two Broe medical office building joint ventures funded $1.9 million in capital and tenant improvements at certain facilities. During 2009, we funded $1.4 million in capital and tenant improvements at certain facilities through our medical office building joint venture with McShane Medical Office Properties, Inc.

In February 2008, we entered into an agreement (the “Contribution Agreement”) with Pacific Medical Buildings LLC and certain of its affiliates to acquire up to 18 medical office buildings, including six in development, for $747.6 million, including the assumption of approximately $282.6 million of mortgage financing. During 2008, NHP/PMB L.P. (“NHP/PMB”), a limited partnership that we formed in February 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC, acquired interests in nine of the 18 medical office buildings, including one property which is included in our triple-net leases segment and eight properties which are multi-tenant medical office buildings (one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB). During 2008, we also acquired one of the 18 medical office buildings directly

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(not through NHP/PMB). Pursuant to the Contribution Agreement, certain conditions must be met in order for us to be obligated to purchase the remaining medical office buildings. If all closing conditions are met with respect to any of the remaining medical office buildings, causing us to be obligated to purchase the same, we could choose to not complete such purchase by paying liquidated damages equal to 5% of such property’s total value. During 2009, we elected to terminate the Contribution Agreement with respect to six properties after the conditions for us to close on such properties were not satisfied.

On June 1, 2009, we entered into an amendment to the Contribution Agreement that provides NHP/PMB with a right of first offer with respect to four of the six properties that were eliminated from the Contribution Agreement, as well as the two remaining development properties (if they are not acquired by NHP/PMB under the Contribution Agreement). In addition, as a result of the elimination of the six properties described above, under the Contribution Agreement, NHP/PMB became obligated to pay $3.0 million (the “Current Premium Adjustment”), of which $2.7 million was payable to Pacific Medical Buildings LLC, 50% in cash and 50% in shares of our common stock (46,077 shares valued at $29.00 per share). The portion of the Current Premium Adjustment not payable to Pacific Medical Buildings LLC was paid in the form of $0.2 million in cash and the issuance of 2,551 additional Class A limited partnership units in NHP/PMB (“OP Units”) with an aggregate cost basis of $0.1 million. As a result of the cash and stock paid with respect to the Current Premium Adjustment, we received an additional 6,481 Class B limited partnership units in NHP/PMB. Under the Contribution Agreement, if the agreement is terminated with respect to the two remaining development properties, NHP/PMB will become obligated to pay approximately $4.8 million (the “Future Premium Adjustment”), of which approximately $4.3 million would be payable to Pacific Medical Buildings LLC, 50% in cash and 50% in shares of our common stock (valued at the then-market price, but not less than $29.00 per share or greater than $33.00 per share). As of December 31, 2008, we had accrued $7.8 million with respect to the Current Premium Adjustment and the Future Premium Adjustment, and $4.9 million remains accrued at December 31, 2009.

Additionally, we entered into another agreement with NHP/PMB, PMB LLC and PMBRES pursuant to which we or NHP/PMB currently have the right, but not the obligation, to acquire up to approximately $1.3 billion (increased from $1.0 billion) of multi-tenant medical office buildings developed by PMB LLC through April 2019 (extended from April 2016). The total value of this agreement was increased and the expiration date of this agreement was extended as a result of the termination of the Contribution Agreement described above with respect to six properties after the conditions for us to close on such properties were not satisfied.

On October 5, 2009, we reached an agreement in principle with Pacific Medical Buildings LLC to acquire three medical office buildings, the 55.05% interest that we do not already own in PMB SB, which owns two medical office buildings, and majority ownership interests in two joint ventures that will each own one medical office building, including one of the two remaining development properties under the Contribution Agreement. The acquisitions are subject to customary due diligence and the negotiation and implementation of definitive agreements, as well as the receipt of a variety of third party approvals. We also agreed to modifications to our development agreement with NHP/PMB, PMB LLC and PMBRES.

As of February 1, 2010, we entered into an amendment to the Contribution Agreement which reinstated one of the six properties that were previously eliminated from the Contribution Agreement and acquired such medical office building per the terms of the amendment. As a result of such acquisition, we retired our $47.5 million mortgage loan to a related party. Additionally, we acquired a majority ownership interest in a joint venture which owns one medical office building, amended and restated our development agreement with NHP/PMB, PMB LLC and PMBRES and amended our agreement with PMB Pomona LLC to provide for the future acquisition by NHP/PMB of a medical office building currently in development. In connection with these transactions, NHP/PMB entered into a Third Amendment to the Amended and Restated Agreement of Limited Partnership, which, among other things, authorized NHP/PMB to acquire properties affiliated with Pacific Medical Buildings LLC Pursuant to agreements other than the Contribution Agreement.

During 2009, NHP/PMB funded $0.2 million in capital and tenant improvements at certain facilities.

In 2008, under the terms of an agreement with PMB LLC, we agreed to extend to PMB LLC a $10.0 million line of credit at an interest rate equal to LIBOR plus 175 basis points to fund certain costs of PMB LLC with respect

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to the proposed development of multi-tenant medical office buildings. During 2009, we funded $3.2 million under the line of credit.

In 2008, we entered into an agreement with PMB Pomona LLC to acquire a medical office building currently in development for $37.5 million upon completion which was amended as of February 1, 2010 to provide for the future acquisition of the medical office building by NHP/PMB. In April 2009, we entered into an agreement with PMB LLC, the manager of PMB Pomona LLC, to extend up to $3.0 million of funding at an interest rate of 7.25%, which is secured by 100% of the membership interests in PMB Pomona LLC, and funded $1.6 million during 2009.

In February 2009, we entered into an agreement with one of our triple-net tenants, Brookdale Senior Living, Inc., under which we became a lender with an original commitment of $8.8 million ($2.9 million at December 31, 2009) under their original $230.0 million revolving loan facility ($75.0 million at December 31, 2009), which is scheduled to mature on August 31, 2010 (see Note 4 to our consolidated financial statements). During 2009, we funded $7.5 million which was repaid prior to December 31, 2009.

During 2009, we also funded $3.4 million on other existing mortgage and other loans.

During 2009, one mortgage loan totaling $3.7 million (including $0.7 million funded during 2009) was prepaid, and we received payments of $1.5 million on other mortgage and other loans.

During 2009, we sold five skilled nursing facilities and one assisted living facility for net cash proceeds of $43.5 million that resulted in a total gain of $23.9 million which is included on our consolidated income statements in gains on sale of facilities in discontinued operations.

During 2009, we made contributions of $2.1 million and $0.1 million to our unconsolidated joint venture with a state pension fund investor and PMBRES, respectively. During 2009, we received distributions of $2.3 million and $0.3 million from our unconsolidated joint venture with a state pension fund investor and PMB SB, respectively.

Financing Activities

At December 31, 2009 and December 31, 2008, we had $700.0 million available under our $700.0 million revolving unsecured senior credit facility. At our option, borrowings under the credit facility bear interest at the prime rate (3.25% at December 31, 2009) or applicable LIBOR plus 0.70% (0.95% at December 31, 2009). On March 12, 2009, our credit rating from Fitch Ratings was upgraded to BBB from BBB-, and on April 1, 2009, our credit rating from Moody’s was upgraded to Baa2 from Baa3. As a result, the spread over LIBOR decreased from 0.85% to 0.70%. We pay a facility fee of 0.15% per annum on the total commitment under the agreement. The credit facility expires on December 15, 2010. The maturity date may be extended by one additional year at our discretion.

Our credit facility requires us to maintain, among other things, the financial covenants detailed below:

Covenant	Requirement			Actual
	(Dollar amounts in thousands)
Minimum net asset value	$	820,000		$	3,071,146
Maximum total indebtedness to capitalization value		60	%		33	%
Minimum fixed charge coverage ratio		1.75			3.15
Maximum secured indebtedness ratio		30	%		11	%
Maximum unencumbered asset value ratio		60	%		30	%

•  Minimum net asset value — generally calculated by applying stated capitalization rates to EBITDA (earnings before interest, taxes, depreciation and amortization) by asset type to determine capitalization value and subtracting total indebtedness from the capitalization value.

•  Maximum total indebtedness to capitalization value — comparison of total indebtedness to capitalization value (see above).

•  Minimum fixed charge coverage ratio — comparison of EBITDA (see above) to fixed charges which include interest expense, deferred finance cost amortization, debt principal payments and preferred dividends.

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•  Maximum secured indebtedness ratio — comparison of total secured indebtedness to capitalization value (see above).

•  Maximum unencumbered asset value ratio — comparison of total unsecured indebtedness to unencumbered asset capitalization value, generally calculated by applying stated capitalization rates to EBITDA (see above) from unencumbered assets by asset type.

Our credit facility allows us to exceed the 60% requirements, up to a maximum of 65%, on the maximum total indebtedness to capitalization value and maximum unencumbered asset value ratio for up to two consecutive fiscal quarters. As of December 31, 2009, we were in compliance with all of the above covenants, and we expect to remain in compliance throughout 2010. We estimate that, as of December 31, 2009, we could have borrowed up to $2.3 billion of additional debt, and incurred additional annual interest expense of up to $90.0 million, and remained in compliance with our existing debt covenants.

During 2009, we repaid at maturity $32.0 million of senior notes with a weighted average interest rate of 7.76%, and $2.6 million of senior notes with an interest rate of 6.90% and final maturity in 2037 were put to us for payment. Also during 2009, we retired $30.0 million of senior notes with an interest rate of 6.25% due in February 2013 for $25.4 million, resulting in a net gain of $4.6 million which is reflected on our consolidated income statements as gain on debt extinguishment, net. The payments were funded by cash on hand.

We anticipate repaying senior notes at or prior to maturity with a combination of proceeds from borrowings on our credit facility and cash on hand. Borrowings on our credit facility could be repaid by potential asset sales or the repayment of mortgage loans receivable, the potential issuance of debt or equity securities under the shelf registration statement discussed below or cash from operations. Our senior notes have been investment grade rated since 1994. Our credit ratings at December 31, 2009 were Baa2 from Moody’s Investors Service, BBB- from Standard & Poor’s Ratings Services and BBB from Fitch Ratings.

During 2009, prior to our acquisition of Broe’s interests in two consolidated joint ventures we had with them, an additional $6.9 million was funded on existing loans secured by a portion of the Broe medical office building joint venture portfolios, and one of the joint ventures exercised the first of two available 12-month extension options on a $32.9 million loan that was scheduled to mature in April 2009 and refinanced one additional $6.4 million loan that was scheduled to mature in February 2009, extending its maturity to February 2012.

During 2009, we prepaid $2.7 million of fixed rate secured debt with an interest rate of 8.75%, and we made payments of $7.9 million on other notes and bonds payable.

During 2009, prior to our acquisition of Broe’s interests, cash distributions of $0.5 million were made to the noncontrolling interests in the two Broe medical office building joint ventures. During 2009, cash distributions of $0.1 million, $0.3 million and $0.9 million were made to the noncontrolling interests in the medical office building joint venture we have with McShane, the medical office building joint venture consolidated by NHP/PMB and the noncontrolling interests in five partnerships that we consolidate, respectively. Also during 2009, cash distributions of $3.1 million were made to NHP/PMB OP unitholders.

We enter into sales agreements from time to time with agents to sell shares of our common stock through an at-the-market equity offering program. During 2009, we issued and sold approximately 9,537,000 shares of common stock at a weighted average price of $30.34 per share, resulting in net proceeds of approximately $286.3 million after sales agent fees. At December 31, 2009, approximately 463,000 shares of common stock were available to be sold pursuant to our at-the-market equity offering program. From January 1, 2010 to February 16, 2010, we issued and sold approximately 635,000 shares at a weighted average price of $35.03 per share. We entered into new sales agreements, each dated January 15, 2010, to sell up to an aggregate of 5,000,000 shares of our common stock from time to time.

We sponsor a dividend reinvestment and stock purchase plan that enables existing stockholders to purchase additional shares of common stock by automatically reinvesting all or part of the cash dividends paid on their shares of common stock. Prior to November 27, 2009, the plan also allowed investors to acquire shares of our common stock for cash, subject to certain limitations, including a maximum monthly investment of $10,000, at a discount ranging from 0% to 5%, determined by us from time to time in accordance with the plan. The discount during 2009 was 2%. During 2009, we issued approximately 1,083,000 shares of common stock at an average price of $28.27 per

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share, resulting in net proceeds of approximately $30.6 million. At December 31, 2009, we had approximately 495,000 shares of common stock available for issuance under our dividend reinvestment and stock purchase plan.

We paid $5.3 million, or $7.75 per preferred share, in dividends to our 7.75% Series B Convertible preferred stockholders during 2009. On January 18, 2010, we redeemed all outstanding shares of our 7.75% Series B Cumulative Convertible Preferred Stock. We paid $187.8 million, or $1.76 per common share, in dividends to our common stockholders during 2009. We expect that this common stock dividend policy will continue, but it is subject to regular review by our board of directors. Common stock dividends are paid at the discretion of our board of directors and are dependent upon various factors, including our future earnings, our financial condition and liquidity, our capital requirements and applicable legal and contractual restrictions. On February 9, 2010, our board of directors declared a quarterly cash dividend of $0.44 per share of common stock. This dividend will be paid on March 5, 2010 to stockholders of record on February 19, 2010.

At December 31, 2009, we had a shelf registration statement on file with the Securities and Exchange Commission (“SEC”) under which we may issue securities including debt, convertible debt, common and preferred stock and warrants to purchase any of these securities. On January 15, 2010, we filed a new shelf registration statement with the SEC under which we may issue securities including debt, convertible debt, common and preferred stock and warrants to purchase any of these securities. Our existing shelf registration statement was set to expire in May 2010.

Assuming certain conditions are met under our Contribution Agreement with Pacific Medical Buildings LLC and certain of its affiliates and/or we close on the transactions contemplated by our agreement in principle with Pacific Medical Buildings LLC, we would expect to finance the acquisitions of the buildings subject to the Contribution Agreement with a combination of assumed debt, the issuance of OP Units, contributions from our joint venture partners, cash on hand and borrowings under our credit facility.

Financing for other future investments and for the repayment of the obligations and commitments noted above may be provided by cash on hand, borrowings under our credit facility discussed above, the sale of debt or equity securities in private placements or public offerings, which may be made under the shelf registration statement discussed above or under new registration statements, proceeds from asset sales or mortgage loan receivable payoffs, the assumption of secured indebtedness, or mortgage financing on a portion of our owned portfolio or through joint ventures.

We invest in various short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments may include (either directly or indirectly) obligations of the U.S. government or its agencies, obligations (including certificates of deposit) of banks, commercial paper, money market funds and other highly rated short-term securities. We monitor our investments on a daily basis and do not believe our cash and cash equivalents are exposed to any material risk of loss. However, given the recent market volatility, there can be no assurances that future losses of principal will not occur.

Recent market and economic conditions have been unprecedented and challenging with tighter credit conditions and slow growth. While there are current signs of a strengthening and stabilizing economy and more liquid and attractive capital markets, there are continued concerns about the uncertainty over whether our economy will again be adversely impacted by inflation, deflation or stagflation, and the systemic impact of rising unemployment, energy costs, geopolitical issues, the availability and cost of capital, the U.S. mortgage market and a declining real estate market in the U.S., resulting in a return to illiquid credit markets and widening credit spreads. We had $700 million available under our credit facility at December 31, 2009, and we have no current reason to believe that we will be unable to access the facility in the future. However, continued concern about the stability of the markets generally and the strength of borrowers specifically has led many lenders and institutional investors to reduce and, in some cases, cease to provide, funding to borrowers. If we were unable to access our credit facility, it could result in an adverse effect on our liquidity and financial condition. In addition, continued turbulence in market conditions may adversely affect the liquidity and financial condition of our tenants.

At December 31, 2009, we had approximately $101.8 million of indebtedness that matures in 2010. On February 9, 2010, we exercised a 12-month extension option on a $32.4 million loan that was scheduled to mature in April 2010. Additionally, some of our senior notes can be put to us prior to the stated maturity date; however, there are no such senior notes that we may be required to repay in 2010 or 2011. If these recent market conditions continue or do not fully abate, they may limit our ability, and the ability of our tenants, to timely refinance maturing liabilities

53

and access the capital markets to meet liquidity needs, resulting in a material adverse effect on our financial condition and results of operations. Additionally, certain of our debt obligations are floating-rate obligations with interest rate and related payments that vary with the movement of LIBOR or other indexes. If the recent market turbulence continues, there could be a rise in interest rates which could reduce our profitability or adversely affect our ability to meet our obligations.

Our plans for growth require regular access to the capital and credit markets. If capital is not available at an acceptable cost, it will significantly impair our ability to make future investments as acquisitions and development projects become difficult or impractical to pursue.

We anticipate the possible sale of certain facilities, primarily due to purchase option exercises. In addition, mortgage loans receivable might be prepaid. In the event that there are facility sales or mortgage loan receivable repayments in excess of new investments, revenues may decrease. We anticipate using the proceeds from any facility sales or mortgage loans receivable repayments to provide capital for future investments, to reduce any outstanding balance on our credit facility or to repay other borrowings as they mature. Any such reduction in debt levels would result in reduced interest expense that we believe would partially offset any decrease in revenues. We believe the combination of cash on hand, the ability to draw on our $700.0 million credit facility and the ability to sell securities under the shelf registration statement, as well as our unconsolidated joint venture with a state pension fund investor, provide sufficient liquidity and financing capability to finance anticipated future investments, maintain our current dividend level and repay borrowings at or prior to their maturity, for at least the next 12 months.

Off-Balance Sheet Arrangements

The only off-balance sheet financing arrangements that we currently utilize are the unconsolidated joint ventures discussed in Note 6 to our consolidated financial statements. Except in limited circumstances, our risk of loss is limited to our investment carrying amount.

Contractual Obligations and Cash Requirements

As of December 31, 2009, our contractual obligations are as follows:

	2010		2011 -2012		2013 -2014		Thereafter		Total
	(In thousands)
Contractual Obligations:
Long-term debt	$	107,962	$	505,558	$	336,115	$	473,454	$	1,423,089
Interest expense	$	84,645	$	117,850	$	61,629	$	200,983	$	465,107
Ground leases	$	1,211	$	2,469	$	2,571	$	77,994	$	84,245
Operating leases	$	556	$	643	$	—	$	—	$	1,199
Commitments:
Capital expenditures	$	41,111	$	69,714	$	—	$	472	$	111,297

The long-term debt amount shown above includes our senior notes and our notes and bonds payable. On February 9, 2010, we exercised a 12-month extension option on a $32.4 million loan that was scheduled to mature in April 2010.

Interest expense shown above is estimated assuming the interest rates in effect at December 31, 2009 remain constant for the $108.4 million of floating rate notes and bonds payable. Maturities of our senior notes range from 2011 to 2038 (although certain notes may be put back to us at their face amount at the option of the holder at earlier dates) and maturities of our notes and bonds payable range from 2010 to 2037.

Statement Regarding Forward-Looking Disclosure

Certain information contained in this report includes statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are not statements of

54

historical facts. These statements may be identified, without limitation, by the use of forward-looking terminology such as “may,” “will,” “anticipates,” “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. All forward-looking statements included in this report are based on information available to us on the date hereof. These statements speak only as of the date hereof and we assume no obligation to update such forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements. Risks and uncertainties associated with our business include (without limitation) the following:

•  deterioration in the operating results or financial condition, including bankruptcies, of our tenants;

•  non-payment or late payment of rent, interest or loan principal amounts by our tenants;

•  our reliance on two tenants for a significant percentage of our revenues;

•  occupancy levels at certain facilities;

•  our level of indebtedness;

•  changes in the ratings of our debt securities;

•  maintaining compliance with our debt covenants;

•  access to the capital markets and the cost and availability of capital;

•  the effect of proposed healthcare reform legislation or government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs;

•  the general distress of the healthcare industry;

•  increasing competition in our business sector;

•  the effect of economic and market conditions and changes in interest rates;

•  the amount and yield of any additional investments;

•  risks associated with acquisitions, including our ability to identify and complete favorable transactions, delays or failures in obtaining third party consents or approvals, the failure to achieve perceived benefits, unexpected costs or liabilities and potential litigation;

•  the ability of our tenants to pay contractual rent and/or interest escalations in future periods;

•  the ability of our tenants to obtain and maintain adequate liability and other insurance;

•  our ability to attract new tenants for certain facilities;

•  our ability to sell certain facilities for their book value;

•  our ability to retain key personnel;

•  potential liability under environmental laws;

•  the possibility that we could be required to repurchase some of our senior notes;

•  changes in or inadvertent violations of tax laws and regulations and other factors that can affect our status as a real estate investment trust; and

•  the risk factors set forth under the caption “Risk Factors” in Item 1A and other factors discussed from time to time in our news releases, public statements and/or filings with the SEC, including any subsequent quarterly reports on Form 10-Q.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks related to fluctuations in interest rates on our mortgage loans receivable and debt. We may hold derivative instruments to manage our exposure to these risks, and all derivative instruments are matched against specific debt obligations. Readers are cautioned that many of the statements contained in these

55

paragraphs are forward-looking and should be read in conjunction with our disclosures under the heading “Statement Regarding Forward-Looking Disclosure” set forth above.

We provide mortgage loans to tenants of healthcare facilities as part of our normal operations, which generally have fixed rates, and all mortgage loans receivable are treated as fixed rate notes in the table and analysis below.

We utilize debt financing primarily for the purpose of making additional investments in healthcare facilities. Historically, we have made short-term borrowings on our credit facility to fund our acquisitions until market conditions were appropriate, based on management’s judgment, to issue stock or fixed rate debt to provide long-term financing.

At our option, borrowings under our credit facility bear interest at the prime rate (3.25% at December 31, 2009) or applicable LIBOR plus 0.70% (0.95% at December 31, 2009). On March 12, 2009, our credit rating from Fitch Ratings was upgraded to BBB from BBB-, and on April 1, 2009, our credit rating from Moody’s was upgraded to Baa2 from Baa3. As a result, the spread over LIBOR decreased from 0.85% to 0.70%. At December 31, 2009 and December 31, 2008, we did not have any borrowings under our credit facility. Additionally, a portion of our secured debt has variable rates.

For fixed rate debt, changes in interest rates generally affect the fair market value, but do not impact earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value, but do affect the future earnings and cash flows. We generally cannot prepay fixed rate debt prior to maturity. Therefore, interest rate risk and changes in fair market value should not have a significant impact on the fixed rate debt until we would be required to refinance such debt. Any future interest rate increases will increase the cost of borrowings on our credit facility and any borrowings to refinance long-term debt as it matures or to finance future acquisitions. Holding the variable rate debt balance at December 31, 2009 constant, each one percentage point increase in interest rates would result in an increase in interest expense for the coming year of approximately $1.1 million.

The table below details the principal amounts and the average interest rates for the mortgage loans receivable and debt for each category based on the final maturity dates as of December 31, 2009. Certain of the mortgage loans receivable and certain items in the various categories of debt require periodic principal payments prior to the final maturity date. The fair value estimates for the mortgage loans receivable are based on the estimates of management and on rates currently prevailing for comparable loans. The fair market value estimates for debt securities are based on discounting future cash flows utilizing rates we would expect to pay for debt of a similar type and remaining maturity.

	Maturity Date
																			Total Book
	2010			2011			2012			2013			2014			Thereafter			Value			Fair Value
	(Dollars in thousands)
Assets
Mortgage loans receivable(1)	$	73,758		$	28,329		$	—		$	16,352		$	—		$	39,675		$	177,452		$	176,254
Average interest rate		9.22	%		10.25	%		—			9.00	%		—			10.14	%		9.61	%
Liabilities
Debt
Fixed rate	$	69,423		$	343,870		$	108,361		$	309,137		$	22,277		$	461,589		$	1,314,657		$	1,359,481
Average interest rate		5.92	%		6.52	%		7.97	%		6.21	%		5.96	%		6.07	%		6.37	%
Variable rate	$	32,371		$	34,600		$	15,991		$	—		$	—		$	25,470		$	108,432		$	108,431
Average interest rate		2.13	%		4.75	%		4.64	%		—			—			1.45	%		3.18	%
Unsecured senior credit facility	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Average interest rate		—			—			—			—			—			—			—

(1) Total book value of mortgage loans excludes deferred gains and discounts of $19.3 million.

Any future interest rate increases will increase the cost of borrowings on our credit facility and any borrowings to refinance long-term debt as it matures or to finance future acquisitions.

56

Item 8.   Financial Statements and Supplementary Data.

	Page
Report of Independent Registered Public Accounting Firm		58
Consolidated Balance Sheets		59
Consolidated Income Statements		60
Consolidated Statements of Stockholders’ Equity		61
Consolidated Statements of Cash Flows		62
Notes to Consolidated Financial Statements		63
Schedule III Real Estate and Accumulated Depreciation		100

57

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Nationwide Health Properties, Inc.

We have audited the accompanying consolidated balance sheets of Nationwide Health Properties, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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 Nationwide Health Properties, Inc. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nationwide Health Properties, Inc.’s internal control over financial reporting as of December 31, 2009, 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, 2010 expressed an unqualified opinion thereon.

/s/  ERNST & YOUNG LLP

Irvine, California

February 17, 2010

58

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2009			2008
	(In thousands, except share information)
ASSETS
Investments in real estate
Land	$	318,457		$	320,394
Buildings and improvements		3,088,183			3,079,819
		3,406,640			3,400,213
Less accumulated depreciation		(585,294	)		(490,112	)
		2,821,346			2,910,101
Mortgage loans receivable, net		110,613			112,399
Mortgage loan receivable from related party		47,500			47,500
Investment in unconsolidated joint ventures		51,924			54,299
		3,031,383			3,124,299
Cash and cash equivalents		382,278			82,250
Receivables, net		6,605			6,066
Asset held for sale		—			4,542
Intangible assets		93,657			109,434
Other assets		133,152			131,534
	$	3,647,075		$	3,458,125
LIABILITIES AND EQUITY
Unsecured senior credit facility	$	—		$	—
Senior notes		991,633			1,056,233
Notes and bonds payable		431,456			435,199
Accounts payable and accrued liabilities		132,915			144,566
Total liabilities		1,556,004			1,635,998
Redeemable OP unitholder interests		57,335			56,778
Commitments and contingencies
Equity:
NHP stockholders’ equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized;
7.750% Series B Convertible, 513,644 and 749,184 shares issued and outstanding at December 31, 2009 and 2008, respectively, stated at liquidation preference of $100 per share		51,364			74,918
Common stock $0.10 par value; 200,000,000 shares authorized; issued and outstanding: 114,320,786 and 102,279,940 as of December 31, 2009 and 2008, respectively		11,432			10,228
Capital in excess of par value		2,128,843			1,786,193
Cumulative net income		1,705,279			1,556,889
Accumulated other comprehensive (loss) income		(823	)		1,846
Cumulative dividends		(1,862,996	)		(1,669,407	)
Total NHP stockholders’ equity		2,033,099			1,760,667
Noncontrolling interests		637			4,682
Total equity		2,033,736			1,765,349
	$	3,647,075		$	3,458,125

See accompanying notes.

59

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED INCOME STATEMENTS

	Years Ended December 31,
	2009			2008			2007
	(In thousands, except per share amounts)
Revenue:
Triple-net lease rent	$	295,757		$	283,052		$	265,895
Medical office building operating rent		68,319			60,287			16,061
		364,076			343,339			281,956
Interest and other income		26,436			24,980			21,266
		390,512			368,319			303,222
Expenses:
Interest and amortization of deferred financing costs		93,630			101,045			97,639
Depreciation and amortization		124,264			116,375			89,986
General and administrative		27,353			26,051			24,636
Acquisition costs		830			—			—
Medical office building operating expenses		28,906			26,631			8,596
		274,983			270,102			220,857
Operating income		115,529			98,217			82,365
Income from unconsolidated joint ventures		5,101			3,903			1,958
Gain on debt extinguishment, net		4,564			4,641			—
Gain on sale of facilities to unconsolidated joint venture, net		—			—			46,045
Income from continuing operations		125,194			106,761			130,368
Discontinued operations:
Gain on sale of facilities, net		23,908			154,995			72,069
(Loss) income from discontinued operations		(44	)		6,251			21,809
		23,864			161,246			93,878
Net income		149,058			268,007			224,246
Net (income) loss attributable to noncontrolling interests		(668	)		131			212
Net income attributable to NHP		148,390			268,138			224,458
Preferred stock dividends		(5,350	)		(7,637	)		(13,434	)
Net income attributable to NHP common stockholders	$	143,040		$	260,501		$	211,024
Basic earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.11		$	1.01		$	1.28
Discontinued operations attributable to NHP common stockholders		0.23			1.66			1.04
Net income attributable to NHP common stockholders	$	1.34		$	2.67		$	2.32
Basic weighted average shares outstanding		106,329			97,246			90,625
Diluted earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.09		$	1.00		$	1.28
Discontinued operations attributable to NHP common stockholders		0.22			1.63			1.03
Net income attributable to NHP common stockholders	$	1.31		$	2.63		$	2.31
Diluted weighted average shares outstanding		108,547			98,763			90,987

See accompanying notes.

60

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

	NHP Stockholders’ Equity
																Accumulated
																Other
											Capital in					Comprehensive
	Preferred Stock						Common stock				Excess of			Cumulative		(Loss)			Cumulative			Noncontrolling			Total
	Shares			Amount			Shares		Amount		par Value			Net Income		Income			Dividends			Interests			Equity
	(In thousands)
Balances at December 31, 2006		1,965		$	196,499			86,238	$	8,624	$	1,298,703		$	1,064,293	$	1,231		$	(1,325,541	)	$	1,265		$	1,245,074
Comprehensive income:
Net income		—			—			—		—		—			224,458		—			—			(212	)		224,246
Gain on Treasury lock agreements		—			—			—		—		—			—		1,557			—			—			1,557
Amortization of gain on Treasury lock agreements		—			—			—		—		—			—		(279	)		—			—			(279	)
Defined benefit pension plan net actuarial gain		—			—			—		—		—			—		52			—			—			52
Comprehensive income																										225,576
Redemption of preferred stock		(901	)		(90,049	)		—		—		—			—		—			—			—			(90,049	)
Conversion of preferred stock		—			(5	)		—		5		—			—		—			—			—			—
Issuance of common stock, net		—			—			8,568		852		261,813			—		—			—			—			262,665
Amortization of stock-based compensation		—			—			—		—		4,733			—		—			—			—			4,733
Preferred dividends		—			—			—		—		—			—		—			(13,434	)		—			(13,434	)
Common dividends		—			—			—		—		—			—		—			(150,819	)		—			(150,819	)
Contributions from noncontrolling interests		—			—			—		—		—			—		—			—			5,210			5,210
Distributions to noncontrolling interests		—			—			—		—		—			—		—			—			(97	)		(97	)
Balances at December 31, 2007		1,064			106,445			94,806		9,481		1,565,249			1,288,751		2,561			(1,489,794	)		6,166			1,488,859
Comprehensive income:
Net income		—			—			—		—		—			268,138		—			—			(131	)		268,007
Amortization of gain on Treasury lock agreements		—			—			—		—		—			—		(511	)		—			—			(511	)
Defined benefit pension plan net actuarial gain		—			—			—		—		—			—		(204	)		—			—			(204	)
Comprehensive income																										267,292
Conversion of preferred stock		(315	)		(31,527	)		1,406		140		31,387			—		—			—			—			—
Issuance of common stock, net		—			—			6,068		607		183,757			—		—			—			—			184,364
Amortization of stock-based compensation		—			—			—		—		5,800			—		—			—			—			5,800
Preferred dividends		—			—			—		—		—			—		—			(7,637	)		—			(7,637	)
Common dividends		—			—			—		—		—			—		—			(171,976	)		—			(171,976	)
Contributions from noncontrolling interests		—			—			—		—		—			—		—			—			620			620
Distributions to noncontrolling interests		—			—			—		—		—			—		—			—			(1,973	)		(1,973	)
Balances at December 31, 2008		749			74,918			102,280		10,228		1,786,193			1,556,889		1,846			(1,669,407	)		4,682			1,765,349
Comprehensive income:
Net income		—			—			—		—		—			148,390		—			—			668			149,058
Amortization of gain on Treasury lock agreements		—			—			—		—		—			—		(610	)		—			—			(610	)
Pro rata share of accumulated other comprehensive loss from unconsolidated joint venture		—			—			—		—		—			—		(2,051	)		—			—			(2,051	)
Defined benefit pension plan net actuarial loss		—			—			—		—		—			—		(8	)		—			—			(8	)
Comprehensive income																										146,389
Conversion of preferred stock		(235	)		(23,554	)		1,061		106		23,448			—		—			—			—			—
Issuance of common stock, net		—			—			10,980		1,098		323,124			—		—			—			—			324,222
Amortization of stock-based compensation		—			—			—		—		7,007			—		—			—			—			7,007
Preferred dividends		—			—			—		—		—			—		—			(5,350	)		—			(5,350	)
Common dividends		—			—			—		—		—			—		—			(188,239	)		—			(188,239	)
Adjust redeemable OP unitholder interests to current redemption value		—			—			—		—		(9,523	)		—		—			—			—			(9,523	)
Purchase of noncontrolling interests		—			—			—		—		(1,406	)		—		—			—			(2,831	)		(4,237	)
Distributions to noncontrolling interests		—			—			—		—		—			—		—			—			(1,882	)		(1,882	)
Balances at December 31, 2009		514		$	51,364			114,321	$	11,432	$	2,128,843		$	1,705,279	$	(823	)	$	(1,862,996	)	$	637		$	2,033,736

See accompanying notes.

61

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2009			2008			2007
				(In thousands)
Cash flows from operating activities:
Net income	$	149,058		$	268,007		$	224,246
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		125,129			119,107			100,794
Stock-based compensation		7,007			5,800			4,733
Gain on sale of facilities, net		(23,908	)		(154,995	)		(118,114	)
Gain on debt extinguishment, net		(4,564	)		(4,641	)		—
Amortization of deferred financing costs		2,515			2,662			2,523
Mortgage and other loan premium amortization		49			145			391
Straight-line rent		(6,355	)		(10,263	)		(2,886	)
Equity in earnings from unconsolidated joint ventures		(974	)		37			(440	)
Distributions of income from unconsolidated joint ventures		987			236			440
Changes in operating assets and liabilities:
Receivables		(445	)		(2,258	)		3,761
Intangible and other assets		4,081			(5,872	)		(2,943	)
Accounts payable and accrued liabilities		(5,435	)		25,873			8,381
Net cash provided by operating activities		247,145			243,838			220,886
Cash flows from investing activities:
Acquisition of real estate and related assets and liabilities		(38,796	)		(325,216	)		(670,522	)
Proceeds from sale of real estate facilities		43,533			288,639			314,066
Investment in mortgage and other loans receivable		(15,738	)		(91,357	)		(48,083	)
Principal payments on mortgage and other loans receivable		12,691			18,781			36,480
Purchase of noncontrolling interests		(3,937	)		—			—
Contributions to unconsolidated joint ventures		(2,244	)		(6,678	)		(34,023	)
Distributions from unconsolidated joint ventures		2,591			4,743			26,718
Net cash used in investing activities		(1,900	)		(111,088	)		(375,364	)
Cash flows from financing activities:
Borrowings under unsecured senior credit facility		—			169,000			1,009,000
Repayment of borrowings under unsecured senior credit facility		—			(210,000	)		(1,107,000	)
Issuance of senior notes		—			—			297,323
Repayments of senior notes		(60,036	)		(105,626	)		(21,000	)
Settlement of cash flow hedges		—			—			1,610
Issuance of notes and bonds payable		6,862			36,461			911
Principal payments on notes and bonds payable		(10,605	)		(18,522	)		(34,542	)
Issuance of common stock, net		316,729			183,819			261,756
Repurchase of preferred stock		—			—			(90,049	)
Contributions from noncontrolling interests		—			620			5,210
Contributions from redeemable OP unitholders		—			58,435			—
Distributions to noncontrolling interests		(1,777	)		(1,973	)		(97	)
Distributions to redeemable OP unitholders		(3,102	)		(1,506	)		—
Dividends paid		(193,149	)		(179,133	)		(163,482	)
Payment of deferred financing costs		(139	)		(1,482	)		(450	)
Net cash provided by (used in) financing activities		54,783			(69,907	)		159,190
Increase in cash and cash equivalents		300,028			62,843			4,712
Cash and cash equivalents, beginning of year		82,250			19,407			14,695
Cash and cash equivalents, end of year	$	382,278		$	82,250		$	19,407
Supplemental schedule of cash flow information:
Non-cash investing activity — foreclosure of facility securing mortgage loan receivable	$	—		$	2,945		$	7,664
Non-cash financing activities:
Adjust redeemable OP unitholder interests to current redemption value	$	9,523		$	—		$	—
Conversion of redeemable OP units to common stock	$	6,077		$	—		$	—
Conversion of preferred stock to common stock	$	23,554		$	31,527		$	5
Interest paid	$	92,038		$	98,028		$	96,234

See accompanying notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009

1.   Organization

Nationwide Health Properties, Inc., a Maryland corporation, is a real estate investment trust (“REIT”) that invests in healthcare related real estate, primarily senior housing, long-term care properties and medical office buildings. Whenever we refer herein to “NHP” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. and its subsidiaries, unless the context otherwise requires.

We primarily make our investments by acquiring an ownership interest in senior housing and long-term care facilities and leasing them to unaffiliated tenants under “triple-net” “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. We also invest in medical office buildings which are not generally subject to “triple-net” leases and generally have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). Some of the medical office buildings are subject to “triple-net” leases. In addition, but to a much lesser extent because we view the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, we extend mortgage loans and other financing to operators. For the twelve months ended December 31, 2009, approximately 93% of our revenues were derived from leases, with the remaining 7% from mortgage loans, other financing activities and other miscellaneous income.

We believe we have operated in such a manner as to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). We intend to continue to qualify as such and therefore distribute at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding capital gain) to our stockholders. If we qualify for taxation as a REIT, and we distribute 100% of our taxable income to our stockholders, we will generally not be subject to U.S. federal income taxes on our income that is distributed to stockholders. Accordingly, no provision has been made for federal income taxes.

As of December 31, 2009, we had investments in 576 healthcare facilities and one land parcel located in 43 states, consisting of:

Consolidated facilities:

•  251 assisted and independent living facilities;

•  167 skilled nursing facilities;

•  10 continuing care retirement communities;

•  7 specialty hospitals;

•  19 triple-net medical office buildings, one of which is operated by a consolidated joint venture (see Note 5); and

•  60 multi-tenant medical office buildings, 15 of which are operated by consolidated joint ventures (see Note 5).

Unconsolidated facilities:

•  19 assisted and independent living facilities;

•  14 skilled nursing facilities;

•  2 medical office buildings; and

•  1 continuing care retirement community.

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December 31, 2009

Mortgage loans secured by:

•  16 skilled nursing facilities;

•  9 assisted and independent living facilities;

•  1 medical office building; and

•  1 land parcel.

As of December 31, 2009, our directly owned facilities, other than our multi-tenant medical office buildings, were operated by 83 different healthcare providers, including the following publicly traded companies:

	Number of
	Facilities
	Operated
•  Assisted Living Concepts, Inc.		4
•  Brookdale Senior Living, Inc.		96
•  Emeritus Corporation		6
•  Extendicare, Inc.		1
•  HEALTHSOUTH Corporation		2
•  Kindred Healthcare, Inc.		1
•  Sun Healthcare Group, Inc.		4

Two of our triple-net lease tenants each accounted for more than 10% of our revenues at December 31, 2009, as follows:

•  Brookdale Senior Living, Inc.	15.2	%
•  Hearthstone Senior Services, L.P.	10.8	%

2.   Summary of Significant Accounting Policies

Basis of Presentation

Certain items in prior period financial statements have been reclassified to conform to current year presentation, including those required by the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant and Equipment (“ASC 360”), which require the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest to be removed from income from continuing operations and reported as discontinued operations for all periods presented.

On January 1, 2009, we adopted the provisions of ASC Topic 810, Consolidation (“ASC 810”), which require noncontrolling interests to be reported within the equity section of the consolidated balance sheets, and amounts attributable to controlling and noncontrolling interests to be reported separately in the consolidated income statements and consolidated statement of equity. The adoption of these provisions did not impact earnings per share attributable to our common stockholders.

We have evaluated events subsequent to December 31, 2009 through February 17, 2010, the date we filed this Form 10-K with the Securities and Exchange Commission, for their impact on our consolidated financial statements.

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December 31, 2009

Principles of Consolidation

The consolidated financial statements include our accounts, the accounts of our wholly owned subsidiaries and the accounts of our joint ventures that are controlled through voting rights or other means. We apply the provisions of ASC 810 for arrangements with variable interest entities (“VIEs”) and would consolidate those VIEs where we are the primary beneficiary. All material intercompany accounts and transactions have been eliminated.

Our judgment with respect to our level of influence or control of an entity and whether we are the primary beneficiary of a VIE involves the consideration of various factors including, but not limited to, the form of our ownership interest, our representation on the entity’s governing body, the size of our investment, estimates of future cash flows, our ability to participate in policy-making decisions and the rights of the other investors to participate in the decision-making process and to replace us as manager and/or liquidate the venture, if applicable. Our ability to correctly assess our influence or control over an entity or determine the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements.

We apply the provisions of ASC Topic 323, Investments — Equity Method and Joint Ventures (“ASC 323”), to investments in joint ventures. Investments in entities that we do not consolidate but for which we have the ability to exercise significant influence over operating and financial policies are reported under the equity method. Under the equity method of accounting, our share of the entity’s earnings or losses is included in our operating results.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Revenue Recognition

Rental income from operating leases is recognized in accordance with the provisions of ASC Topic 840, Leases, and ASC Topic 605, Revenue Recognition. Our leases generally contain annual escalators. Many of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. Recognizing income on a straight-line basis requires us to calculate the total non-contingent rent to be paid over the life of a lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in the caption “Other assets” on our consolidated balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. Such revenue increases are recognized as the related contingencies are met.

We assess the collectability of straight-line rents in accordance with the applicable accounting standards and our reserve policy and defer recognition of straight-line rent if its collectability is not reasonably assured. Our assessment of the collectability of straight-line rents is based on several factors, including the financial strength of the tenant and any guarantors, the historical operations and operating trends of the facility, the historical payment pattern of the tenant, the type of facility and whether we intend to continue to lease the facility to the current tenant, among others. If our evaluation of these factors indicates we may not receive the rent payments due in the future, we defer recognition of the straight-line rental income and, depending on the circumstances, we will provide a reserve against the previously recognized straight-line rent receivable asset for a portion, up to its full value, that we estimate may not be recoverable. If we change our assumptions or estimates regarding the collectability of future

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December 31, 2009

rent payments required by a lease, we may adjust our reserve to increase or reduce the rental revenue recognized, and/or to increase or reduce the reserve against the existing straight-line rent receivable balance.

We recorded $6.4 million of revenues in excess of cash received during 2009, $10.3 million of revenues in excess of cash received during 2008 and $2.9 million of revenues in excess of cash received during 2007. We had straight-line rent receivables recorded under the caption “Other assets” on our consolidated balance sheets of $27.5 million at December 31, 2009 and $21.2 million at December 31, 2008, net of reserves of $108.3 million and $90.7 million, respectively. We evaluate the collectability of the straight-line rent receivable balances on an ongoing basis and provide reserves against receivables we believe may not be fully recoverable. The ultimate amount of straight-line rent we realize could be less than amounts currently recorded.

Gain on Sale of Facilities

We recognize sales of facilities only upon closing. Payments received from purchasers prior to closing are recorded as deposits. Gains on facilities sold are recognized using the full accrual method upon closing when the requirements of gain recognition on sale of real estate under the provisions of ASC 360 are met, including: the collectability of the sales price is reasonably assured; we have received adequate initial investment from the buyer; we are not obligated to perform significant activities after the sale to earn the gain; and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy these requirements. Gains on facilities sold to unconsolidated joint ventures in which we maintain an ownership interest are included in income from continuing operations, and the portion of the gain representing our retained ownership interest in the joint venture is deferred and included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets. We had $15.3 million of such deferred gains at December 31, 2009 and December 31, 2008. All other gains are included in discontinued operations.

Asset Impairment

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment in accordance with the provisions of ASC 360. Indicators may include, among others, a tenant’s inability to make rent payments, operating losses or negative operating trends at the facility level, notification by a tenant that it will not renew its lease, or a decision to dispose of an asset or adverse changes in the fair value of any of our properties. For operating assets, if indicators of impairment exist, we compare the undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. The evaluation of the undiscounted cash flows from the expected use of the property is highly subjective and is based in part on various factors and assumptions, including, but not limited to, historical operating results, available market information and known trends and market/economic conditions that may affect the property, as well as, estimates of future operating income, occupancy, rental rates, leasing demand and competition. If the sum of the future estimated undiscounted cash flows is higher than the current net book value, we conclude no impairment exists. If the sum of the future estimated undiscounted cash flows is lower than its current net book value, we recognize an impairment loss for the difference between the net book value of the asset and its estimated fair value. To the extent we decide to sell an asset, we recognize an impairment loss if the current net book value of the asset exceeds its fair value less selling costs.

We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investment in an unconsolidated joint venture may exceed the fair value. If it is determined that a decline in the fair value of our investment in an unconsolidated joint venture is other-than-temporary and is below its carrying value, an impairment is recorded. The determination of the fair value of investments in unconsolidated joint ventures involves significant judgment. Our estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at market rates, general economic conditions and trends and other relevant factors.

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December 31, 2009

The above analyses require us to determine whether there are indicators of impairment for individual assets or investments in unconsolidated joint ventures, to estimate the most likely stream of cash flows from operating assets and to determine the fair value of assets that are impaired or held for sale. If our assumptions, projections or estimates regarding an asset change in the future, we may have to record an impairment charge to reduce or further reduce the net book value of such individual asset or investment in unconsolidated joint venture.

No impairment charges were recorded during 2009, 2008 or 2007.

Collectability of Receivables

We evaluate the collectability of our rent, mortgage loans and other receivables on a regular basis based on factors including, among others, payment history, the financial strength of the borrower and any guarantors, the value of the underlying collateral, the operations and operating trends of the underlying collateral, if any, the asset type and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected. We had reserves included in the caption “Receivables, net” on our consolidated balance sheets of $12.7 million at December 31, 2009 and $5.4 million at December 31, 2008.

Accounting for Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation (“ASC 718”), which require stock-based compensation awards to be valued at the fair value on the date of grant and amortized as an expense over the vesting period and require any dividend equivalents earned to be treated as dividends for financial reporting purposes. Net income reflects stock-based compensation expense of $7.0 million in 2009, $5.8 million in 2008 and $4.7 million in 2007.

Land, Buildings and Improvements and Depreciation and Useful Lives of Assets

We record properties at cost and use the straight-line method of depreciation for buildings and improvements over their estimated remaining useful lives of up to 40 years, generally 20 to 40 years depending on factors including building type, age, quality and location. We review and adjust useful lives periodically. Depreciation expense from continuing operations was $108.9 million in 2009, $103.9 million in 2008 and $85.0 million in 2007.

We allocate purchase prices of properties in accordance with the provisions of ASC Topic 805, Business Combinations (“ASC 805”), which require that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. ASC 805 also establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. Certain transaction costs that have historically been capitalized as acquisition costs are expensed for business combinations completed on or after January 1, 2009, which may have a significant impact on our future results of operations and financial position based on historical acquisition costs and activity levels. No business combinations were completed during 2009. We incurred $0.8 million of acquisition costs during 2009.

The allocation of the cost between land, building and, if applicable, equipment and intangible assets and liabilities, and the determination of the useful life of a property are based on management’s estimates, which are based in part on independent appraisals or other consultants’ reports. For our triple-net leased facilities, the allocation is made as if the property were vacant, and a significant portion of the cost of each property is allocated to buildings. This amount generally approximates 90% of the total property value. Historically, we have generally acquired properties and simultaneously entered into a new market rate lease for the entire property with one tenant.

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December 31, 2009

For our multi-tenant medical office buildings, the percentage allocated to buildings may be substantially lower as allocations are made to assets such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets (collectively “intangible assets”) included on our consolidated balance sheets and/or below market tenant and ground lease intangible liabilities included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets.

We calculate depreciation and amortization on equipment and lease costs using the straight-line method based on estimated useful lives of up to five years or the lease term, whichever is appropriate. We amortize intangible assets and liabilities over the remaining lease terms of the respective leases to real estate amortization expense or medical office building operating rent, as appropriate. We review and adjust useful lives periodically.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments with original maturities of three months or less when purchased.

Derivatives

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We endeavor to limit these risks by following established risk management policies, procedures and strategies, including, on occasion, the use of derivative instruments. We do not use derivative instruments for trading or speculative purposes.

Derivative instruments are recorded on our consolidated balance sheet as assets or liabilities based on each instrument’s fair value. Changes in the fair value of derivative instruments are recognized currently in earnings, unless the derivative instrument meets the criteria for hedge accounting contained in ASC Topic 815, Derivatives and Hedging (“ASC 815”). If the derivative instruments meet the criteria for a cash flow hedge, the gains and losses recognized upon changes in the fair value of the derivative instrument are recorded in other comprehensive income. Gains and losses on a cash flow hedge are reclassified into earnings when the forecasted transaction affects earnings. A contract that is designated as a hedge of an anticipated transaction which is no longer likely to occur is immediately recognized in earnings.

For investments in entities reported under the equity method of accounting, we record our pro rata share of the entity’s derivative instruments’ fair value, other comprehensive income or loss and gains and losses determined in accordance with ASC 323 and ASC 815 as applicable.

Segment Reporting

We report our consolidated financial statements in accordance with the provisions of ASC Topic 280, Segment Reporting. We operate in two segments based on our investment and leasing activities: triple-net leases and multi-tenant leases (see Note 21).

Redeemable Limited Partnership Unitholder Interests

NHP/PMB L.P. (“NHP/PMB”) is a limited partnership that we formed in February 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC (see Note 5). We consolidate NHP/PMB consistent with the provisions of ASC 810, as our wholly owned subsidiary is the general partner and exercises control. As of December 31, 2009 and December 31, 2008, third party investors owned 1,629,752 and 1,829,562 Class A limited partnership units in NHP/PMB (“OP Units”), respectively, which represented 53.9% and 60.7% of the total units outstanding at December 31, 2009 and December 31, 2008, respectively. After a one year holding period, the OP Units are exchangeable for cash or, at our option, shares of our common stock, initially on a one-for-one basis. We have entered into a registration rights agreement with the holders of the OP Units which, subject to the terms and

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December 31, 2009

conditions set forth therein, obligates us to register the shares of common stock that we may issue in exchange for such OP Units. Since we are obligated to register the shares, the redeemable OP unitholder interests are classified outside of permanent equity on our consolidated balance sheets. During 2009, 202,361 OP Units were exchanged for 202,361 shares of our common stock. We applied the provisions of ASC Topic 480, Distinguishing Liabilities from Equity, to reflect the redeemable OP unitholder interests at the greater of cost or fair value. At December 31, 2009, the fair value of the OP Units exceeded the cost by $9.5 million, and the adjustment was recorded through capital in excess of par value. The value of the redeemable OP unitholder interests was $57.3 million and $56.8 million at December 31, 2009 and December 31, 2008, respectively.

Noncontrolling Interests

NHP/PMB has a 50% interest in one multi-tenant medical office building through a joint venture which is consolidated by NHP/PMB. The cost basis of the noncontrolling interest for this joint venture was $1.4 million and $0.5 million at December 31, 2009 and December 31, 2008, respectively.

On August 21, 2009, we acquired the noncontrolling interests held by The Broe Companies (“Broe”) in two consolidated joint ventures we had with them for $4.3 million (see Note 5), reducing the cost basis of the noncontrolling interests to zero at December 31, 2009. The purchase price exceeded the cost basis of the noncontrolling interests at the time of acquisition by $1.4 million which was recorded through capital in excess of par value. The cost basis of the noncontrolling interests in these joint ventures was $3.4 million at December 31, 2008.

We have a consolidated joint venture with McShane Medical Office Properties, Inc. (“McShane”) that invests in multi-tenant medical office buildings (see Note 5). The cost basis of the noncontrolling interest for this joint venture was $0.7 million and $0.8 million at December 31, 2009 and December 31, 2008, respectively.

We also have five partnerships in which we have equity interests, ranging from 51% to 81%, in three assisted and independent living facilities, one skilled nursing facility and one specialty hospital. We consolidate the partnerships in our consolidated financial statements. The noncontrolling interests in these partnerships had a negative cost basis totaling $1.5 million at December 31, 2009.

Fair Value

We apply the provisions of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) to our financial assets and liabilities measured at fair value on a recurring basis and to our nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also specifies a three-level hierarchy of valuation techniques based upon whether the inputs reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect our own assumptions of market participant valuation (unobservable inputs) and requires the use of observable inputs if such data is available without undue cost and effort. The hierarchy is as follows:

•  Level 1 — quoted prices for identical instruments in active markets.

•  Level 2 — observable inputs other than Level 1 inputs, including quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and other derived valuations with significant inputs or value drivers that are observable or can be corroborated by observable inputs in active markets.

•  Level 3 — unobservable inputs or derived valuations with significant inputs or value drivers that are unobservable.

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December 31, 2009

Fair value measurements at December 31, 2009 are as follow:

	Fair Value			Level 1			Level 2		Level 3
	(In thousands)
Financial assets	$	4,534		$	4,534		$	—	$	—
Financial liabilities		(4,534	)		(4,534	)		—		—
Redeemable OP unitholder interests		57,335			—			57,335		—
	$	57,335		$	—		$	57,335	$	—

The provisions of ASC Topic 825, Financial Instruments, which provide companies with an option to report selected financial assets and liabilities at fair value and establish presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities became effective January 1, 2008. We have not elected to apply the fair value option to any specific financial assets or liabilities.

The carrying amount of cash and cash equivalents approximates fair value because of the short maturities of these instruments. The fair value of mortgage and other loans receivable are based upon discounting future cash flows utilizing rates based on management estimates and rates currently prevailing for comparable loans. The fair value of long-term debt is estimated based on discounting future cash flows utilizing current rates offered to us for debt of a similar type and remaining maturity.

The table below details the fair values and book values for mortgage and other loans receivable and the components of long-term debt at December 31, 2009. These fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of these financial instruments.

	Book Value		Fair Value
	(In thousands)
Mortgage loans receivable	$	177,452	$	176,254
Other loans receivable	$	72,755	$	64,209
Unsecured senior credit facility	$	—	$	—
Senior notes	$	991,633	$	1,043,547
Notes and bonds payable	$	431,456	$	424,365

Earnings per Share (EPS)

Basic EPS is computed by dividing income from continuing operations available to common stockholders by the weighted average common shares outstanding. Income from continuing operations available to common stockholders is calculated by deducting amounts attributable to noncontrolling interests, amounts attributable to participating securities and dividends declared on preferred stock from income from continuing operations.

On January 1, 2009, we adopted certain provisions of ASC Topic 260, Earnings per Share, which require that the two-class method of computing basic earnings per share be applied when there are unvested share-based payment awards that contain rights to nonforfeitable dividends outstanding during a reporting period. These participating securities share in undistributed earnings with common shareholders for purposes of calculating basic earnings per share. Upon adoption, the presentation of all prior period EPS data was adjusted retrospectively with no material impact.

Diluted EPS includes the effect of any potential shares outstanding, which for us is comprised of dilutive stock options, other share-settled compensation plans and, if the effect is dilutive, 7.75% Series B Convertible Preferred Stock and/or limited partnership units in NHP/PMB. The dilutive effect of stock options and other share-settled compensation plans that do not contain rights to nonforfeitable dividends is calculated using the treasury stock

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December 31, 2009

method with an offset from expected proceeds upon exercise of the stock options and unrecognized compensation expense.

Impact of New Accounting Pronouncements

In June 2009, the FASB updated ASC 810 to require ongoing analyses to determine whether an entity’s variable interest gives it a controlling financial interest in a variable interest entity (“VIE”), making it the primary beneficiary, based on whether the entity (i) has the power to direct activities of the VIE that most significantly impact its economic performance, including whether it has an implicit financial responsibility to ensure the VIE operates as designed, and (ii) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Enhanced disclosures regarding an entity’s involvement with variable interest entities are also required under the provisions of ASC 810. These requirements are effective January 1, 2010. The adoption of these requirements is not expected to have a material impact on our results of operations or financial position.

In January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures About Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 adds new requirements for disclosures of significant transfers into and out of Levels 1, 2 and 3 of the fair value hierarchy, the reasons for the transfers and the policy for determining when transfers are recognized. ASU 2010-06 also adds new requirements for disclosures about purchases, sales, issuances and settlements on a gross rather than net basis relating to the reconciliation of the beginning and ending balances of Level 3 recurring fair value measurements. It also clarifies the level of disaggregation to require disclosures by “class” rather than by “major category of assets and liabilities” and clarifies that a description of inputs and valuation techniques used to measure fair value is required for both recurring and nonrecurring fair value measurements classified as Level 2 or 3. ASU 2010-06 is effective January 1, 2010 except for the requirements to provide the Level 3 activity of purchases, sales, issuances and settlements on a gross basis which are effective January 1, 2011. The adoption of ASU 2010-06 is not expected to have a material impact on our results of operations or financial position.

3.   Real Estate Properties

At December 31, 2009, we had direct ownership of:

•  251 assisted and independent living facilities;

•  167 skilled nursing facilities;

•  10 continuing care retirement communities;

•  7 specialty hospitals;

•  19 triple-net medical office buildings, one of which is operated by a consolidated joint venture (see Note 5); and

•  60 multi-tenant medical office buildings, 15 of which are operated by consolidated joint ventures (see Note 5).

We lease our owned senior housing and long-term care facilities and certain medical office buildings to single tenants under “triple-net,” and in most cases, “master” leases that are accounted for as operating leases. These leases generally have an initial term of up to 21 years and generally have two or more multiple-year renewal options. As of December 31, 2009, approximately 84% of these facilities were leased under master leases. In addition, the majority of these leases contain cross-collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and grouped purchase options. As of December 31, 2009, leases covering 456 facilities were backed by security deposits consisting of irrevocable letters of credit or cash totaling $71.3 million.

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December 31, 2009

Under terms of the leases, the tenant is responsible for all maintenance, repairs, taxes, insurance and capital expenditures on the leased properties. As of December 31, 2009, leases covering 340 facilities contained provisions for property tax impounds, and leases covering 207 facilities contained provisions for capital expenditure impounds. We generally lease medical office buildings to multiple tenants under separate non-triple-net leases, where we are responsible for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). However, some of the medical office buildings are subject to triple-net leases, where the lessees are responsible for the associated operating expenses. No individual property owned by us is material to us as a whole.

The following table lists our owned real estate properties as of December 31, 2009:

							Total Real				Notes and
	Number of				Buildings and		Estate		Accumulated		Bonds
Type	Facilities		Land		Improvements		Investment		Depreciation		Payable
	(Dollar amounts in thousands)
Assisted and independent living facilities		251	$	159,668	$	1,584,001	$	1,743,669	$	274,932	$	186,366
Skilled nursing facilities		167		82,219		815,788		898,007		230,856		14,379
Continuing care retirement communities		10		8,612		116,196		124,808		29,219		—
Specialty hospitals		7		6,114		70,084		76,198		17,235		—
Medical office buildings — triple-net		19		24,426		96,061		120,487		5,968		29,872
Medical office buildings — multi-tenant		60		37,418		406,053		443,471		27,084		200,839
Total		514	$	318,457	$	3,088,183	$	3,406,640	$	585,294	$	431,456

Future minimum rentals on non-cancelable leases, including medical office building leases, as of December 31, 2009 are as follows:

Year	Rentals
	(In thousands)
2010	$	339,446
2011		322,349
2012		304,447
2013		277,387
2014		257,287
Thereafter		1,511,794

On August 21, 2009, we acquired the remaining outside interests in the two consolidated joint ventures we had with Broe for $4.3 million (see Note 5). As a result of this acquisition, we now have direct ownership of the 36 multi-tenant medical office buildings located in nine states previously owned by the joint ventures.

During 2009, we funded $34.4 million in expansions, construction and capital improvements at certain facilities in our triple-net leases segment in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project. At December 31, 2009, we had committed to fund additional expansions, construction and capital improvements of $111.3 million.

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December 31, 2009

During 2009, we sold five skilled nursing facilities, none of which had been previously transferred to assets held for sale, for a gross purchase price of $23.3 million that resulted in a total gain of $9.5 million which is included in gain on sale of facilities in discontinued operations.

During 2008, we acquired 18 assisted and independent living facilities, 11 skilled nursing facilities and 12 medical office buildings subject to triple-net master leases in 12 separate transactions for an aggregate investment of $163.0 million. We also acquired, from entities affiliated with PMB, one multi-tenant medical office building for $14.7 million and, through NHP/PMB, one triple-net medical office building and eight multi-tenant medical office buildings (one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB) for $232.2 million (see Note 5). We also acquired, from an entity affiliated with PMB, a 44.95% investment in two multi-tenant medical office buildings for $3.5 million through PMB SB 399-401 East Highland LLC (“PMB SB”), an unconsolidated joint venture (see Note 6). We acquired one multi-tenant medical office building through our consolidated joint venture with McShane for $2.0 million (see Note 5).

During 2008, we acquired, out of bankruptcy, title to one skilled nursing facility securing a previously impaired mortgage loan with a net book value of $2.9 million which approximated our estimate of fair value of the facility and was allocated to land and building (see Note 4). Subsequent to acquiring title to the facility, we entered into a lease for this facility with a third party who was one of our existing tenants.

During 2008, we also funded $43.4 million in expansions, construction and capital improvements at certain facilities in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project.

During 2008, we transferred 24 assisted and independent living facilities and one skilled nursing facility to assets held for sale (see Note 7).

During 2008, we sold three assisted and independent living facilities and one skilled nursing facility, each not previously transferred to assets held for sale, for a gross purchase price of $31.9 million. The sales resulted in a total gain of $17.6 million that is included in gain on sale of facilities in discontinued operations. We provided financing of $2.5 million for one of the sold properties which was subsequently paid off in September 2008.

No impairment charges were recorded on our real estate properties during 2009, 2008 or 2007.

4.   Mortgage Loans Receivable

At December 31, 2009, we held 14 mortgage loans receivable secured by 16 skilled nursing facilities, nine assisted and independent living facilities, one medical office building and one land parcel. In addition, we held one mortgage loan receivable secured by the skilled nursing portion of a continuing care retirement community that for facility count purposes is accounted for in the real estate properties above as a continuing care retirement community and therefore is not counted as a separate facility here.

At December 31, 2009, the mortgage loans receivable had an aggregate principal balance of $177.5 million and are reflected in our consolidated balance sheets net of aggregate deferred gains and discounts totaling $19.3 million, with individual outstanding balances ranging from $0.6 million to $47.5 million and maturities

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December 31, 2009

ranging from 2010 to 2024. The principal balances of mortgage loans receivable as of December 31, 2009 mature as follows:

Year	Maturities
	(In thousands)
2010	$	88,261
2011		33,550
2012		606
2013		17,166
2014		668
Thereafter		37,201
		177,452
Less: deferred gains and discounts		(19,339	)
		158,113
Less: mortgage loan receivable from related party		(47,500	)
	$	110,613

The following table lists our mortgage loans receivable at December 31, 2009:

										Original
						Final		Estimated		Face		Carrying
	Number of		Interest			Maturity		Balloon		Amount of		Amount of
Location of Facilities	Facilities		Rate			Date		Payment(1)		Mortgages		Mortgages
	(Dollar amounts in thousands)
Skilled Nursing Facilities:
California		4		13.00	%		12/10	$	18,786	$	18,786	$	8,885
Florida		1		11.37	%		05/17		4,996		5,409		5,334
Florida		1		9.75	%		12/18		5,358		5,630		5,483
Illinois		1		9.00	%		01/24		—		9,500		7,301
Indiana		1		10.20	%		06/13		6,750		6,750		6,750
Kansas		2		11.58	%		01/13		1,148		1,148		595
Louisiana		1		10.89	%		04/15		2,453		3,850		3,153
Michigan		4		12.61	%		06/10		6,646		6,671		6,647
Pennsylvania		1		10.82	%		06/17		9,903		9,903		9,903
Subtotals		16							56,040		67,647		54,051

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December 31, 2009

										Original
						Final		Estimated		Face		Carrying
	Number of		Interest			Maturity		Balloon		Amount of		Amount of
Location of Facilities	Facilities		Rate			Date		Payment(1)		Mortgages		Mortgages
	(Dollar amounts in thousands)
Assisted and Independent Living Facilities:
Delaware		1		10.25	%		06/11		5,280		5,280		4,533
Florida		1		9.00	%		11/10		6,220		6,220		4,415
Louisiana		1		10.25	%		06/11		7,260		7,260		6,232
Massachusetts		1		9.52	%		06/23		8,500		8,500		8,500
Ohio		1		10.25	%		06/11		6,270		6,270		5,382
Tennessee		1		9.00	%		11/10		3,252		3,252		2,308
Tennessee		1		10.25	%		06/11		5,280		5,280		4,533
Virginia		1		9.00	%		11/10		4,665		4,665		3,311
Virginia		1		10.25	%		06/11		8,910		8,910		7,649
Subtotals		9							55,637		55,637		46,863
Continuing Care Retirement Community:
Florida		—		7.94	%		11/13		8,739		9,200		9,007
Subtotals		—							8,739		9,200		9,007
Medical Office Building:
California		1		7.75	%		08/10		47,500		47,500		47,500
Subtotals		1							47,500		47,500		47,500
Land Parcel:
Texas		—		9.00	%		09/10		692		692		692
Subtotals		—							692		692		692
Total		26						$	168,608	$	180,676	$	158,113

(1) Certain mortgage loans receivable require monthly principal and interest payments at level amounts over life to maturity and others require monthly interest only payments until maturity. Some mortgage loans receivable have interest rates which periodically adjust, but cannot decrease, which results in varying principal and interest payments over the life of the loan, in which case the balloon payments reflected are an estimate. Most mortgage loans receivable require a prepayment penalty based on a percentage of principal outstanding or a penalty based upon a calculation maintaining the yield we would have earned if prepayment had not occurred.

In February 2009, we entered into an agreement with one of our triple-net tenants, Brookdale Senior Living, Inc. (“Brookdale”), under which we became a lender with an initial commitment of $8.8 million under their $230.0 million revolving loan facility, which is scheduled to mature on August 31, 2010 (“Brookdale Credit Facility”). On June 1, 2009, the Brookdale Credit Facility was amended to, among other things, eliminate the requirement for certain mandatory prepayments and reduce the total revolving loan facility to $75.0 million, thus reducing our commitment to $2.9 million.

At Brookdale’s option, borrowings generally bear interest at either applicable LIBOR (subject to a stated minimum rate) plus 7.0% or the greater of (i) the prime rate or (ii) the Federal Funds rate plus 0.5%, plus a margin of 7.0%. Pursuant to the terms of the agreement, Brookdale is required to pay certain fees. The revolving loan facility

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December 31, 2009

is secured by, among other things, certain real property and related personal property owned by Brookdale and equity interests in certain of Brookdale’s subsidiaries. During 2009, we funded $7.5 million which was subsequently repaid. At December 31, 2009, there was no balance outstanding.

During 2009, we also funded an additional $2.5 million on existing mortgage loans.

During 2009, one mortgage loan totaling $3.7 million (including $0.7 million funded during 2009) was prepaid.

During 2008, we funded one mortgage loan secured by one skilled nursing facility in the amount of $6.8 million and one mortgage loan secured by one medical office building in the amount of $47.5 million to a related party. We also funded an additional $0.8 million on existing mortgage loans.

During 2008, two mortgage loans secured by two assisted and independent living facilities totaling $8.9 million were repaid at maturity and one mortgage loan secured by two skilled nursing facilities was prepaid in the amount of $4.2 million.

During 2008, we acquired, out of bankruptcy, title to one skilled nursing facility securing a previously impaired mortgage loan with a net book value of $2.9 million which approximated our estimate of fair value of the facility and was allocated to land and building. Concurrent with acquiring title to the facility, we entered into a lease for this facility with a third party who was one of our existing tenants.

We recognize interest income on impaired loans to the extent our estimate of the fair value of the collateral is sufficient to support the balance of the loans, other receivables and all related accrued interest. Once the total of the loans, other receivables and all related accrued interest is equal to our estimate of the fair value of the collateral, we recognize interest income on a cash basis. We provide reserves against impaired loans to the extent our total investment exceeds our estimate of the fair value of the loan collateral.

The following table summarizes the changes in mortgage loans receivable, net during 2009 and 2008:

	2009			2008
	(In thousands)
Balance at January 1	$	159,899		$	121,694
New mortgage loans		7,461			54,250
Additional fundings on existing mortgage loans		2,521			780
Amortization of premium		(58	)		(111	)
Collection of principal		(11,710	)		(13,769	)
Acquisition of title to facilities previously securing mortgage loans		—			(2,945	)
Balance at December 31	$	158,113		$	159,899

As of February 1, 2010, we acquired as intended the medical office building which served as collateral for our $47.5 million mortgage loan to a related party (see Notes 23 and 25).

5.   Medical Office Building Joint Ventures

NHP/Broe, LLC and NHP/Broe II, LLC

In December 2005 and February 2007, we entered into two joint ventures with Broe called NHP/Broe, LLC (“Broe I”) and NHP/Broe II, LLC (“Broe II”), respectively, to invest in multi-tenant medical office buildings. On August 21, 2009, we acquired the noncontrolling interests in these joint ventures held by Broe for $4.3 million. As a result of this acquisition, we now have direct ownership of the 36 multi-tenant medical office buildings located in

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December 31, 2009

nine states previously owned by Broe I and Broe II. Activity subsequent to August 21, 2009 related to these facilities is included in our consolidated activity for wholly owned real estate properties (see Note 3).

Prior to our acquisition of Broe’s interests, we held 90% and 95% equity interests in Broe I and Broe II, respectively, and Broe held 10% and 5% equity interests in Broe I and Broe II, respectively. Broe was the managing member of Broe I and Broe II, but we consolidated both joint ventures in our consolidated financial statements. The accounting policies of the joint ventures were consistent with our accounting policies. Cash distributions from Broe I and Broe II were made in accordance with the members’ ownership interests until specified returns were achieved. As the specified returns were achieved, Broe received an increasing percentage of the cash distributions from the joint ventures.

During the period from January 1, 2009 through August 21, 2009, Broe I and Broe II funded $1.5 million and $0.4 million, respectively, in capital and tenant improvements at certain facilities.

During the period from January 1, 2009 through August 21, 2009, Broe I exercised the first of two available 12-month extension options on a $32.9 million loan that was scheduled to mature in April 2009 and refinanced one additional $6.4 million loan that was scheduled to mature in February 2009, extending its maturity to February 2012.

During the period from January 1, 2009 through August 21, 2009, an additional $6.6 million was funded on an existing loan secured by a portion of the Broe II portfolio, resulting in distributions of $6.3 million and $0.3 million to us and to Broe, respectively.

During the period from January 1, 2009 through August 21, 2009, operating cash distributions from Broe I of $0.9 million and $0.1 million were made to us and to Broe, respectively, and operating cash distributions from Broe II of $1.7 million and $0.1 million were made to us and to Broe, respectively.

During 2008, Broe I and Broe II funded $1.7 million and $0.2 million, respectively, in capital and tenant improvements at certain facilities.

During 2008, the Broe II joint venture placed $35.8 million of secured debt on a portion of its portfolio.

During 2008, the Broe I joint venture sold one multi-tenant medical office building for $0.4 million. The sale resulted in a gain of $0.1 million which is included in gain on sale of facilities in discontinued operations.

During 2008, operating cash distributions from Broe I of $1.0 million were made to us, and operating cash distributions from Broe II of $3.7 million and $0.2 million were made to us and to Broe, respectively. No operating cash distributions from Broe I were made to Broe during 2008.

All intercompany balances with Broe I and Broe II have been eliminated for purposes of our consolidated financial statements.

McShane/NHP JV, LLC

In December 2007, we entered into a joint venture with McShane called McShane/NHP JV, LLC (“McShane/NHP”) to invest in multi-tenant medical office buildings. We hold a 95% equity interest in the venture and McShane holds a 5% equity interest. McShane is the managing member of McShane/NHP, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies.

Cash distributions from McShane/NHP are made in accordance with the members’ ownership interests until specified returns are achieved. As the specified returns are achieved, McShane will receive an increasing percentage of the cash distributions from the joint venture. During 2009, operating cash distributions from McShane/NHP of $0.9 million and $0.1 million were made to us and to McShane, respectively.

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December 31, 2009

At December 31, 2009, McShane/NHP owned seven multi-tenant medical office buildings located in one state.

During 2009, McShane/NHP funded $1.4 million in capital and tenant improvements at certain facilities.

During 2008, McShane/NHP acquired the final multi-tenant medical office building of a seven building portfolio. The purchase price for the final building totaled $2.0 million, of which $1.8 million was allocated to real estate with the remaining $0.2 million allocated to other assets and liabilities. The other six multi-tenant medical office buildings were acquired in December 2007 for a purchase price of $46.5 million, of which $42.6 million was allocated to real estate with the remaining $3.9 million allocated to other assets and liabilities. The total portfolio acquisition was originally financed with a bridge loan from us of $31.2 million and capital contributions of $16.0 million and $0.8 million from us and McShane, respectively.

During 2008, McShane/NHP funded $0.2 million in capital and tenant improvements at certain facilities.

During 2008, operating cash distributions from McShane/NHP of $0.9 million and $48,000 were made to us and to McShane, respectively.

All intercompany balances with McShane/NHP have been eliminated for purposes of our consolidated financial statements.

NHP/PMB L.P.

In February 2008, we entered into an agreement (the “Contribution Agreement”) with Pacific Medical Buildings LLC and certain of its affiliates to acquire up to 18 medical office buildings, including six in development, for $747.6 million, including the assumption of approximately $282.6 million of mortgage financing. Under the Contribution Agreement, in 2008, NHP/PMB acquired interests in nine of the 18 medical office buildings, including one property which is included in our triple-net leases segment and eight properties which are multi-tenant medical office buildings (one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB). During 2008, we also acquired one of the 18 medical office buildings directly (not through NHP/PMB). Pursuant to the Contribution Agreement, certain conditions must be met in order for us to be obligated to purchase the remaining medical office buildings. If all closing conditions are met with respect to any of the remaining medical office buildings, causing us to be obligated to purchase the same, we could choose to not complete such purchase by paying liquidated damages equal to 5% of such property’s total value. During 2009, we elected to terminate the Contribution Agreement with respect to six properties after the conditions for us to close on such properties were not satisfied.

On June 1, 2009, we entered into an amendment to the Contribution Agreement that provides NHP/PMB with a right of first offer with respect to four of the six properties that were eliminated from the Contribution Agreement, as well as the two remaining development properties (if they are not acquired by NHP/PMB under the Contribution Agreement). In addition, as a result of the elimination of the six properties described above, under the Contribution Agreement, NHP/PMB became obligated to pay $3.0 million (the “Current Premium Adjustment”), of which $2.7 million was payable to Pacific Medical Buildings LLC, 50% in cash and 50% in shares of our common stock (46,077 shares valued at $29.00 per share). The portion of the Current Premium Adjustment not payable to Pacific Medical Buildings LLC was paid in the form of $0.2 million in cash and the issuance of 2,551 additional OP Units with an aggregate cost basis of $0.1 million. As a result of the cash and stock paid with respect to the Current Premium Adjustment, we received an additional 6,481 Class B limited partnership units in NHP/PMB. Under the Contribution Agreement, if the agreement is terminated with respect to the two remaining development properties, NHP/PMB will become obligated to pay approximately $4.8 million (the “Future Premium Adjustment”), of which approximately $4.3 million would be payable to Pacific Medical Buildings LLC, 50% in cash and 50% in shares of our common stock (valued at the then-market price, but not less than $29.00 per share or greater than $33.00 per share). As of December 31, 2008, we had accrued $7.8 million with respect to the Current Premium Adjustment and the Future Premium Adjustment, and $4.9 million remains accrued at December 31, 2009.

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December 31, 2009

Under the terms of the Contribution Agreement, a portion of the consideration for the multi-tenant medical office buildings is to be paid in the form of OP Units. After a one-year holding period, the OP Units are exchangeable for cash or, at our option, shares of our common stock, initially on a one-for-one basis. During 2009, 202,361 OP Units were converted into 202,361 shares of our common stock. At December 31, 2009, 1,627,201 of the remaining OP Units had been outstanding for one year or longer and were exchangeable for cash of $57.2 million. During 2009 and 2008, cash distributions from NHP/PMB of $3.1 million and $1.5 million, respectively, were made to OP unitholders.

Additionally, we entered into an agreement with NHP/PMB, PMB LLC and PMB Real Estate Services LLC (“PMBRES”) (see Note 6) pursuant to which we or NHP/PMB currently have the right, but not the obligation, to acquire up to approximately $1.3 billion (increased from $1.0 billion) of multi-tenant medical office buildings developed by PMB LLC through April 2019 (extended from April 2016). The total value of this agreement was increased and the expiration date of this agreement was extended as a result of the termination of the Contribution Agreement described above with respect to six properties after the conditions for us to close on such properties were not satisfied.

On October 5, 2009, we reached an agreement in principle with Pacific Medical Buildings LLC to acquire three medical office buildings, the 55.05% interest that we do not already own in PMB SB 399-401 East Highland LLC (“PMB SB”), which owns two medical office buildings (see Note 6), and majority ownership interests in two joint ventures that will each own one medical office building, including one of the two remaining development properties under the Contribution Agreement. The acquisitions are subject to customary due diligence and the negotiation and implementation of definitive agreements, as well as the receipt of a variety of third party approvals. We also agreed to modifications to our development agreement with NHP/PMB, PMB LLC and PMBRES.

As of February 1, 2010 (see Note 25), we entered into an amendment to the Contribution Agreement which reinstated one of the six properties that were previously eliminated from the Contribution Agreement and acquired such medical office building per the terms of the amendment. As a result of such acquisition, we retired our $47.5 million mortgage loan to a related party to which such acquired medical office building had served as collateral (see Note 23). Additionally, we acquired a majority ownership interest in a joint venture which owns one medical office building, amended and restated our development agreement with NHP/PMB, PMB LLC and PMBRES and amended our agreement with PMB Pomona LLC to provide for the future acquisition by NHP/PMB of a medical office building currently in development. In connection with these transactions, NHP/PMB entered into a Third Amendment to the Amended and Restated Agreement of Limited Partnership, which, among other things, authorized NHP/PMB to acquire properties affiliated with Pacific Medical Buildings LLC pursuant to agreements other than the Contribution Agreement.

During 2009, NHP/PMB funded $0.2 million in capital and tenant improvements at certain facilities.

All intercompany balances with NHP/PMB have been eliminated for purposes of our consolidated financial statements.

6.   Investment in Unconsolidated Joint Ventures

State Pension Fund Investor

In January 2007, we entered into a joint venture with a state pension fund investor. The purpose of the joint venture is to acquire and develop assisted living, independent living and skilled nursing facilities. We manage and own 25% of the joint venture, which will fund its investments with approximately 40% equity contributions and 60% debt. The original approved investment target was $475.0 million, but we exceeded that amount in 2007, and the total potential investment amount has been increased to $975.0 million. The financial statements of the joint venture are not consolidated in our financial statements as our joint venture partner has substantive participating rights, and accordingly our investment is accounted for using the equity method.

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December 31, 2009

At December 31, 2009, the joint venture owned 19 assisted and independent living facilities, 14 skilled nursing facilities and one continuing care retirement community located in nine states.

During 2009, the joint venture retired three loans totaling $8.8 million with a weighted average rate of 6.37%, secured by six facilities, for $7.5 million, resulting in a net gain of $1.3 million which is reflected as gain on debt extinguishment, net on the joint venture’s income statements. In connection with the debt retirement, we made contributions of $1.9 million to the joint venture.

During 2008, the joint venture placed $10.0 million of mortgage financing on one assisted and independent living facility resulting in cash distributions of $7.5 million and $2.5 million to our joint venture partner and us, respectively.

During 2008, the joint venture entered into an interest rate swap contract that is designated as hedging the variability of expected cash flows related to variable rate debt placed on a portion of its portfolio. The cash flow hedge has a fixed rate of 4.235%, a notional amount of $126.1 million and expires on January 1, 2015. The fair value of this contract at December 31, 2009 and 2008 was $8.2 million and $14.4 million, respectively, which is included in accrued liabilities on the joint venture’s balance sheet.

During 2008, the joint venture exercised a purchase option of $21.8 million on one assisted and independent living facility and one skilled nursing facility which it previously had leasehold interests in. In connection with the purchase option exercise, the joint venture assumed $19.5 million of mortgage financing.

During 2009 and 2008, we made additional contributions of $0.2 million and $1.9 million, respectively, to the joint venture. Cash distributions from the joint venture are made in accordance with the members’ ownership interests until specified returns are achieved. As the specified returns are achieved, we will receive an increasing percentage of the cash distributions from the joint venture. During 2009 and 2008, we received additional distributions of $2.3 million and $2.2 million, respectively, from the joint venture. In addition to our share of the income, we receive a monthly management fee calculated as a percentage of the equity investment in the joint venture. This fee is included in our income from unconsolidated joint ventures and in the general and administrative expenses on the joint venture’s income statement. During 2009, we earned management fees of $4.1 million, and our share of the net income was $1.0 million. During 2008, we earned management fees of $3.9 million, and our share of the net income was $0.2 million. During 2007, we earned management fees of $1.5 million, and our share of the net income was $0.4 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2009

The unaudited condensed balance sheet and income statement for the joint venture below present its financial position as of December 31, 2009 and 2008 and its results of operations for the years ended December 31, 2009, 2008 and 2007.

BALANCE SHEET

	2009			2008
	(In thousands)
ASSETS
Real estate properties:
Land	$	38,892		$	38,892
Building and improvements		532,470			525,214
		571,362			564,106
Less accumulated depreciation		(42,878	)		(24,138	)
		528,484			539,968
Cash and cash equivalents		3,689			3,216
Other assets		6,823			6,009
	$	538,996		$	549,193
LIABILITIES AND EQUITY
Notes and bonds payable	$	334,066		$	343,842
Accounts payable and accrued liabilities		13,524			19,623
Equity		191,406			185,728
	$	538,996		$	549,193

INCOME STATEMENT

	2009			2008		2007
	(In thousands)
Revenues:
Rental income	$	46,502		$	45,541	$	16,560
Interest and other income		135			101		110
		46,637			45,642		16,670
Expenses:
Interest and amortization of deferred financing costs		20,665			19,939		6,379
Depreciation and amortization		18,740			18,359		6,811
General and administrative		4,667			6,345		1,719
		44,072			44,643		14,909
Gain on debt extinguishment, net		1,327			—		—
Net income		3,892			999		1,761
Net income attributable to noncontrolling interests		(13	)		—		—
Net income available to joint venture members	$	3,879		$	999	$	1,761

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December 31, 2009

PMB Real Estate Services LLC

In February 2008, we entered into an agreement with Pacific Medical Buildings LLC to acquire a 50% interest in PMBRES, a full service property management company. The transaction closed on April 1, 2008. In consideration for the 50% interest, we paid $1.0 million at closing, and we will make additional payments on or before March 31, 2010 and 2011 equal to six times the normalized net operating profit of PMBRES for 2009 and 2010, respectively (in each case, less the amount of all prior payments). PMBRES provides property management services for 26 multi-tenant medical office buildings that we own or have an ownership interest in. During 2009 and 2008, we made contributions of $0.1 million and $0.2 million, respectively, to PMBRES. During 2009 and 2008, our share of the net loss was $13,000 and $0.3 million, respectively.

PMB SB 399-401 East Highland LLC

In August 2008, we acquired from PMB SB 399-401 East Highland LLC (“PMB SB”), an entity affiliated with Pacific Medical Buildings LLC, a 44.95% interest in an entity that owns two multi-tenant medical office buildings for $3.5 million. During 2009 and 2008, we received distributions of $0.3 million and $0.2 million, respectively, from PMB SB. During 2009 our share of the net income was $17,000, and during 2008, our share of the net loss was $14,000.

On October 5, 2009, we reached an agreement in principle with Pacific Medical Buildings LLC (see Note 5) to, among other things, acquire the 55.05% interest that we do not already own in PMB SB.

7.   Assets Held for Sale

During 2008, we transferred 24 assisted and independent living facilities and one skilled nursing facility to assets held for sale.

On April 2, 2008, 23 of the 24 assisted and independent living facilities were sold to Emeritus Corporation (“Emeritus”), the tenant of the facilities, for a gross purchase price of $305.0 million. In connection with the sale, we retired $55.8 million of secured debt and provided Emeritus with a loan in the amount of $30.0 million (included in the caption “Other assets” on our consolidated balance sheets) at a rate of 7.25% per annum for a term of not more than four years. The sale resulted in a gain of $135.0 million which is included in gain on sale of facilities in discontinued operations.

The skilled nursing facility was sold in July 2008 for net cash proceeds of $4.9 million. The sale resulted in a gain of $2.3 million which is included in gain on sale of facilities in discontinued operations.

At December 31, 2008, one assisted living facility was classified as an asset held for sale. This facility was sold during 2009 for a gross purchase price of $19.0 million, resulting in a gain on sale of $14.4 million which is included in gain on sale of facilities in discontinued operations.

8.   Intangible Assets

Intangible assets include items such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets. At December 31, 2009 and 2008, the gross balance of intangible assets was $130.0 million and $130.1 million, respectively. At December 31, 2009 and 2008, the accumulated amortization of intangible assets was $36.3 million and $20.7 million, respectively. Intangible liabilities include below market tenant and ground lease intangible liabilities. At December 31, 2009 and 2008, we had $18.3 million and $23.9 million, respectively, of gross intangible liabilities recorded under the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets. At December 31, 2009 and 2008, the accumulated amortization of intangible liabilities was $3.9 million and $2.1 million, respectively. As of

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December 31, 2009

December 31, 2009, the weighted average amortization period of intangible assets and liabilities was approximately 23.4 years and 33.5 years, respectively.

For the years ended December 31, 2009, 2008 and 2007, medical office building operating rent includes $0.6 million, $0.1 million and $0.1 million from the amortization of above/below market lease intangibles, respectively. For the years ended December 31, 2009, 2008 and 2007, expenses include $14.7 million, $11.9 million and $4.8 million from the amortization of other intangible assets and liabilities, respectively.

The future estimated aggregate amortization related to intangible assets and liabilities is as follows:

	Intangible		Intangible		Net Intangible
Year	Assets		Liabilities		Amortization
	(In thousands)
2010	$	12,440	$	1,521	$	10,919
2011		10,013		1,194		8,819
2012		8,511		1,066		7,445
2013		6,904		980		5,924
2014		6,233		897		5,336
Thereafter		49,556		8,720		40,836
	$	93,657	$	14,378	$	79,279

9.   Other Assets

At December 31, 2009 and 2008, other assets consisted of:

	2009		2008
	(In thousands)
Other receivables, net of reserves of $4.2 million and $5.0 million at December 31, 2009 and 2008, respectively	$	68,535	$	64,998
Straight-line rent receivables, net of reserves of $108.3 million and $90.7 million at December 31, 2009 and 2008, respectively		27,450		21,224
Deferred financing costs		11,366		15,377
Capitalized lease and loan origination costs		2,418		2,631
Investments and restricted funds		9,545		13,257
Prepaid ground leases		10,051		10,241
Other		3,787		3,806
	$	133,152	$	131,534

Included in other receivables at both December 31, 2009 and 2008, are two unsecured loans to Emeritus in the amount of $21.4 million and $30.0 million due in March 2012 and April 2012, respectively.

Investments are recorded at fair value using quoted market prices.

10.   Debt

Unsecured Senior Credit Facility

At December 31, 2009 and 2008, we had no balance outstanding on our $700.0 million revolving unsecured senior credit facility. At our option, borrowings under the credit facility bear interest at the prime rate (3.25% at December 31, 2009) or applicable LIBOR plus 0.70% (0.95% at December 31, 2009). On March 12, 2009, our

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December 31, 2009

credit rating from Fitch Ratings was upgraded to BBB from BBB-, and on April 1, 2009, our credit rating from Moody’s was upgraded to Baa2 from Baa3. As a result, the spread over LIBOR decreased from 0.85% to 0.70%. We pay a facility fee of 0.15% per annum on the total commitment under the agreement. The credit facility matures on December 15, 2010. The maturity date may be extended by one additional year at our discretion.

Our credit facility requires us to maintain, among other things, the financial covenants detailed below. As of December 31, 2009, we were in compliance with all of these covenants:

Covenant	Requirement			Actual
	(Dollar amounts in thousands)
Minimum net asset value	$	820,000		$	3,071,146
Maximum total indebtedness to capitalization value		60	%		33	%
Minimum fixed charge coverage ratio		1.75			3.15
Maximum secured indebtedness ratio		30	%		11	%
Maximum unencumbered asset value ratio		60	%		30	%

Our credit facility allows us to exceed the 60% requirements, up to a maximum of 65%, on the maximum total indebtedness to capitalization value and maximum unencumbered asset value ratio for up to two consecutive fiscal quarters.

Senior Notes

During 2009, we repaid at maturity $32.0 million of senior notes with a weighted average interest rate of 7.76%, and $2.6 million of senior notes with an interest rate of 6.90% and final maturity in 2037 were put to us for payment.

During 2009, we retired $30.0 million of senior notes with an interest rate of 6.25% due in February 2013 for $25.4 million, resulting in a net gain of $4.6 million which is reflected on our consolidated income statements as gain on debt extinguishment, net.

During 2008, we repaid $60.5 million of senior notes with a weighted average rate of 7.17% at maturity and prepaid $49.7 million of senior notes with a weighted average rate of 7.15%. The prepayments resulted in a net gain totaling $4.6 million which is reflected as gain on debt extinguishment, net on our statements of operations.

The aggregate principal amount of notes outstanding at December 31, 2009 was $1.0 billion. At December 31, 2009, the weighted average interest rate on the notes was 6.47% and the weighted average maturity was 5.0 years. The principal balances of the notes as of December 31, 2009 mature as follows:

Year	Maturities
	(In thousands)
2010	$	—
2011		339,040
2012		72,950
2013		269,850
2014		—
Thereafter		309,793	(1)
	$	991,633

(1) There are $52.4 million of notes due in 2037 which may be put back to us at their face amount at the option of the holder on October 1st of any of the following years: 2012, 2017, or 2027. There are $23.0 million of notes

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December 31, 2009

due in 2038 which may be put back to us at their face amount at the option of the holder on July 7th of any of the following years: 2013, 2018, 2023, or 2028.

Notes and Bonds Payable

During 2009, prior to our acquisition of Broe’s interests in two consolidated joint ventures we had with them (see Note 5), an additional $6.9 million was funded on existing loans secured by a portion of the Broe I and Broe II portfolios, and Broe I exercised the first of two available 12-month extension options on a $32.9 million loan that was scheduled to mature in April 2009 and refinanced one additional $6.4 million loan that was scheduled to mature in February 2009, extending its maturity to February 2012.

During 2009, we prepaid $2.7 million of fixed rate secured debt with an interest rate of 8.75%.

During 2008, we assumed mortgages as part of various acquisitions totaling $120.8 million, and Broe II placed $35.8 million of secured debt on a portion of its portfolio (see Note 5). In connection with the sale of 23 assisted and independent living facilities to Emeritus, the tenant of the facilities, we prepaid $55.8 million of fixed rate secured debt that bore interest at a weighted average rate of 7.04% (see Note 7).

The aggregate principal amount of notes and bonds payable at December 31, 2009 was $431.5 million. Notes and bonds payable are due through the year 2037, at interest rates ranging from 1.04% to 8.63% and are secured by real estate properties with an aggregate net book value as of December 31, 2009 of $658.8 million. At December 31, 2009, the weighted average interest rate on the notes and bonds payable was 5.34% and the weighted average maturity was 6.9 years.

The principal balances of the notes and bonds payable as of December 31, 2009 mature as follows:

Year	Maturities
	(In thousands)
2010	$	107,961
2011		45,212
2012		48,357
2013		40,551
2014		25,714
Thereafter		163,661
	$	431,456

On February 9, 2010, we exercised a 12-month extension option on a $32.4 million loan that was scheduled to mature in April 2010 (see Note 25).

11.   Preferred Stock

During 2004, we issued 1,064,500 shares of 7.75% Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”) with a liquidation preference of $100 per share. Dividends on the Series B Preferred Stock are cumulative from the date of original issue and are payable quarterly in arrears, commencing September 30, 2004.

There were 513,644 and 749,184 shares of Series B Preferred Stock outstanding at December 31, 2009 and 2008, respectively. Each share of Series B Preferred Stock was initially convertible into 4.3975 shares of our

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December 31, 2009

common stock at the option of the holder (equivalent to a conversion price of $22.74 per share). The Series B Preferred Stock was convertible upon the occurrence of any of the following events:

•  Our common stock reaching a price equal to 125% of the conversion price (initially $28.43 per share, $27.69 at December 31, 2009) for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter;

•  The price per share of the Series B Preferred Stock falls below 98% of the product of the Conversion Rate and the average closing sale prices of our common stock for five consecutive trading days;

•  The credit ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services fall more than two levels below the initial ratings of Ba1 and BB+, respectively;

•  We are a party to a consolidation, merger, binding share exchange or sale of all or substantially all of our assets where our common stock would be converted into cash, securities or other property, or if a fundamental change occurs, as defined, a holder may convert the holder’s shares of Series B Preferred Stock into common stock or the cash, securities or other property that the holder would have received if the holder had converted the holders’ Series B Preferred Stock prior to the transaction or fundamental change; or

•  The Series B Preferred Stock is called for redemption by us.

During 2008, the Series B Preferred Stock was convertible from January 1, 2008 to December 31, 2008, and during that time, approximately 315,000 shares were converted into approximately 1,406,000 shares of common stock at a weighted average conversion price of $22.43 per share (equivalent to 4.4589 shares of common stock per share of Series B Preferred Stock). During 2009, the Series B Preferred Stock was convertible from October 1, 2009 to December 31, 2009, and during that time, approximately 235,000 shares were converted into approximately 1,061,000 shares of common stock at a weighted average conversion price of $22.20 per share (equivalent to 4.5054 shares of common stock per share of Series B Preferred Stock).

On January 18, 2010, we redeemed all outstanding shares of our Series B Preferred Stock at a redemption price per share of $103.875 plus an amount equal to accumulated and unpaid dividends thereon to the redemption date ($0.3875), for a total redemption price of $104.2625 per share, payable only in cash (see Note 25). As a result of the redemption, each share of Series B Preferred Stock was convertible until January 14, 2010 into 4.5150 shares of common stock. During that time, 512,727 shares were converted into approximately 2,315,000 shares of common stock. On January 18, 2010, we redeemed 917 shares that remained outstanding at a redemption price of $104.2625 per share. At December 31, 2009, if all of the Series B Preferred Stock were to have converted, it would have resulted in the issuance of approximately 2,319,000 common shares.

12.   Common Stock

We enter into sales agreements from time to time with agents to sell shares of our common stock through an at-the-market equity offering program. During 2009, we issued and sold approximately 9,537,000 shares of common stock at a weighted average price of $30.34 per share, resulting in net proceeds of approximately $286.3 million after sales agent fees. During 2008, we sold 4,955,000 shares of common stock at a weighted average price of $32.24 per share, resulting in net proceeds of $158.1 million after sales agent fees. From January 1, 2010 to February 16, 2010, we issued and sold approximately 635,000 shares at a weighted average price of $35.03 per share (see Note 25). We entered into new sales agreements, each dated January 15, 2010, to sell up to an aggregate of 5,000,000 shares of our common stock from time to time (see Note 25).

We sponsor a dividend reinvestment and stock purchase plan that enables existing stockholders to purchase additional shares of common stock by automatically reinvesting all or part of the cash dividends paid on their shares of common stock. Prior to November 27, 2009, the plan also allowed investors to acquire shares of our common stock for cash, subject to certain limitations, including a maximum monthly investment of $10,000, at a discount

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December 31, 2009

ranging from 0% to 5%, determined by us from time to time in accordance with the plan. The discount during 2009 and 2008 was 2%. During 2009, we issued approximately 1,083,000 shares of common stock, at an average price of $28.27 per share, resulting in net proceeds of approximately $30.6 million. During 2008, we issued approximately 789,000 shares of common stock, at an average price of $28.43 per share, resulting in net proceeds of approximately $22.4 million.

During 2009 and 2008, approximately 235,000 and 315,000 shares, respectively, of Series B Preferred Stock were converted into approximately 1,061,000 and 1,406,000 shares, respectively, of common stock (see Note 11). On January 18, 2010, we redeemed all outstanding shares of Series B Preferred Stock, and as a result, 512,727 shares of Series B Preferred Stock were converted into approximately 2,315,000 shares of common stock during the period from January 1, 2010 to January 14, 2010 (see Notes 11 and 25).

During 2009, 202,316 OP Units issued by NHP/PMB were exchanged for 202,361 shares of common stock (see Note 5).

13.   Stock Incentive Plan

Under the terms of a stock incentive plan (the “Plan”), we reserved for issuance 3,000,000 shares of common stock. At December 31, 2009, approximately 1,218,000 shares of common stock remained available for issuance under the Plan. Under the Plan, as amended, we may issue stock options, restricted stock, restricted stock units, performance shares, stock appreciation rights and dividend equivalents.

Summaries of the status of stock options granted to officers, restricted stock and restricted stock units granted to directors and restricted stock, restricted stock units, performance shares and stock appreciation rights granted to employees at December 31, 2009, 2008 and 2007 and changes during the years then ended are as follow:

	2009					2008					2007
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
	(Dollar amounts in thousands except per share amounts)
Officer Stock Options:
Outstanding at beginning of year		387,972		$	17.82		569,749		$	18.80		592,427		$	18.86
Granted		242,900			25.40		—			—		—			—
Exercised		(101,347	)		17.25		(181,777	)		20.91		(22,678	)		20.51
Forfeited		(4,400	)		25.40		—			—		—			—
Expired		—			—		—			—		—			—
Outstanding at end of year		525,125			21.37		387,972			17.82		569,749			18.80
Exercisable at end of year		286,625			18.02		387,972			17.82		569,749			18.80
Intrinsic value of options outstanding	$	7,251
Intrinsic value of options exercisable	$	4,918
Intrinsic value of options exercised	$	1,438				$	2,472				$	274
Director Restricted Stock and Restricted Stock Units:
Outstanding at beginning of year		42,000		$	29.63		49,000		$	25.39		47,000		$	22.11
Awarded		27,000			27.60		21,000			33.28		21,000			33.63
Vested		(21,000	)		29.56		(28,000	)		24.96		(19,000	)		21.88
Forfeited		—			—		—			—		—			—
Outstanding at end of year		48,000		$	28.52		42,000		$	29.63		49,000		$	25.39
Fair value of shares vested	$	545				$	699				$	416

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December 31, 2009

	2009					2008					2007
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
	(Dollar amounts in thousands except per share amounts)
Employee Restricted Stock:
Outstanding at beginning of year		52,037		$	30.59		64,610		$	23.43		97,675		$	22.38
Awarded		8,650			22.00		34,917			34.36		6,282			32.46
Vested		(27,734	)		27.61		(42,996	)		23.37		(39,347	)		22.26
Forfeited		(775	)		30.44		(4,494	)		26.00		—			—
Outstanding at end of year		32,178		$	30.85		52,037		$	30.59		64,610		$	23.43
Fair value of shares vested	$	744				$	1,005				$	876
Employee Restricted Stock Units:
Outstanding at beginning of year		313,007		$	28.48		288,542		$	28.49		406,182		$	28.60
Awarded		8,650			22.00		20,357			36.60		66,075			32.54
Dividend equivalents		55,377			26.96		51,167			29.47		39,797			30.47
Vested		(40,114	)		26.90		(37,577	)		33.13		(223,512	)		30.24
Forfeited		(2,305	)		30.64		(9,482	)		33.05		—			—
Outstanding at end of year		334,615		$	28.24		313,007		$	28.48		288,542		$	28.49
Fair value of units vested	$	1,079				$	1,121				$	6,403
Employee Performance Shares:
Outstanding at beginning of year		228,002		$	24.27		78,300		$	30.95		—		$	—
Awarded		127,300			24.62		175,002			21.28		78,300			30.95
Forfeited		(8,100	)		23.15		(25,300	)		24.26		—			—
Outstanding at end of year		347,202		$	24.42		228,002		$	24.27		78,300		$	30.95
Employee Stock Appreciation Rights:
Outstanding at beginning of year		538,034		$	6.92		268,000		$	7.44		—		$	—
Awarded		—			—		329,434			6.54		268,000			7.44
Vested(1)		(7,999	)		6.39		(9,033	)		7.47		—			—
Forfeited		(8,101	)		6.45		(50,367	)		6.85		—			—
Outstanding at end of year		521,934		$	6.96		538,034		$	6.92		268,000		$	7.44

(1) Some SARs were vested and settled in 2009 and 2008. At the time of settlement, the market price of the stock was below the exercise price of the SAR.

Stock options granted under the Plan become exercisable each year following the date of grant in annual increments of one-third, are exercisable at the market price of our common stock on the date of grant and have a 10 year life. The fair value per share of the options granted during the year ended December 31, 2009 was $4.30 and was estimated on the date of grant using a Black-Scholes option valuation model using the following assumptions: risk-free rate of rate of return of 2.42%, expected life of 6 years, expected volatility of 36.9% and expected dividends yield of 7.15%. The risk free rate of return was based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility was based on historical volatility for a period equal to the expected life.

We received $1.3 million, $3.2 million and $0.5 million for stock option exercises in 2009, 2008 and 2007, respectively.

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December 31, 2009

The following table summarizes information about stock options outstanding and exercisable at December 31, 2009:

Options Outstanding
								Weighted		Options Exercisable
						Weighted		Average				Weighted
						Average		Remaining				Average
Exercise Prices				Number		Exercise		Contractual		Number		Exercise
Low		High		of Shares		Price		Life		of Shares		Price
$	14.20	$	16.23		116,299	$	14.58		2.1 years		116,299	$	14.58
$	18.48	$	20.00		76,476	$	19.25		2.3 years		76,476	$	19.25
$	21.29	$	25.40		332,350	$	24.24		7.6 years		93,850	$	21.29

The director restricted stock and restricted stock unit awards are made to non-employee directors and granted at no cost. The awards historically vested at the third anniversary of the award date or upon the date they vacate their position. However, beginning in 2006, they vest in increments of one third per year for three years and will not fully vest if they vacate their position.

In 2006 and 2007, certain employees received annual awards of restricted stock or restricted stock units with dividend equivalents that are reinvested. These grants generally vest in increments of one third per year for three years are accompanied by awards of dividend equivalents credited in the form of stock units. In December 2006, certain employees received a three-year grant of restricted stock units related to performance from January 1, 2004 to December 31, 2006. This three-year grant vested one year after the date of grant.

Starting in 2007, performance shares and stock appreciation rights were granted as long-term incentive compensation awards for the officers and certain employees in place of restricted stock or restricted stock units. The performance share grants generally have a three year vesting period. The stock appreciation right grants vest in increments of one third per year for three years and earn dividend equivalents credited in the form of stock units.

In addition, on August 15, 2006, the President and Chief Executive Officer received a grant of approximately 120,968 restricted stock units. This grant vests with respect to 50% of the units on the fifth anniversary of the date of grant and with respect to 10% of the units each year thereafter. On April 23, 2007, the Executive Vice President and Chief Investment Officer received a grant of approximately 30,807 restricted stock units. This grant vests with respect to 50% of the units on January 23, 2014, with the remaining 50% of the units vesting in seven substantially equal annual installments on each subsequent anniversary of such date. On April 23, 2007, the Executive Vice President and Chief Financial and Portfolio Officer received a grant of approximately 30,807 restricted stock units. This grant vests with respect to 50% of the units on July 23, 2012, with respect to an additional 20% of the units on each of January 23, 2013 and January 23, 2014 and with respect to the final 10% of the units on January 23, 2015. The restricted stock units earn dividend equivalents which are reinvested.

Compensation expense related to awards of stock options, restricted stock, restricted stock units, performance shares and stock appreciation rights are measured at fair value on the date of grant and amortized over the relevant service period. The fair value of restricted stock, restricted stock unit and performance share awards is based on the market price of our common stock on the date of grant. The fair value of stock appreciation right awards was estimated on the date of grant using a Black-Scholes option valuation model. Compensation expense related to director restricted stock awards was $0.7 million in 2009, $0.6 million in 2008 and $0.4 million in 2007. Compensation expense related to employee stock options, restricted stock, restricted stock units, performance shares and stock appreciation rights awards was $6.3 million in 2009, $5.2 million in 2008 and $4.3 million in 2007. We expect to expense $10.1 million related to director and employee stock options, restricted stock, and employee restricted stock units, performance shares and stock appreciation rights over the remainder of the respective one to ten year service periods.

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December 31, 2009

Awards of dividend equivalents accompany the stock option grants beginning in 1996 on a one-for-one basis. For stock options granted prior to 2009, such dividend equivalents are payable in cash from the time the options are fully vested until such time as the corresponding stock option is exercised, based upon a formula approved by the Compensation Committee of the board of directors. For stock options granted in 2009, such dividend equivalents are payable in cash during the first three years after the date of grant, regardless of whether the stock options have been exercised, but dividend payments cease upon termination of employment. In addition, dividend equivalents are paid on restricted stock and restricted stock units prior to vesting. ASC 718 provides that payments related to the dividend equivalents are treated as dividends. If an employee were to leave before all restricted stock or restricted stock units had vested, any dividend equivalents previously paid on the unvested shares or units would be expensed.

14.   Earnings Per Share (EPS)

Certain of our share-based payment awards are considered participating securities which requires the use of the two-class method for the computation of basic and diluted EPS.

Diluted EPS also includes the effect of any potential shares outstanding, which for us is comprised of dilutive stock options, other share-settled compensation plans and, if the effect is dilutive, Series B Preferred Stock and/or OP Units. There were no stock options that would not be dilutive for any period presented. The calculation below excludes 7,000, 297,000 and 268,000 stock appreciation rights that would not be dilutive for 2009, 2008 and 2007, respectively. The Series B Preferred Stock is not dilutive for any period presented. The table below details the components of the basic and diluted EPS calculations:

	Years Ended December 31,
	2009			2008			2007
	(In thousands, except per share amounts)
Numerator:
Income from continuing operations	$	125,194		$	106,761		$	130,368
Net (income) loss attributable to noncontrolling interests		(668	)		131			212
Net income attributable to participating securities		(816	)		(221	)		(251	)
Undistributed earnings attributable to participating securities		—			(478	)		(602	)
Series B preferred stock dividends		(5,350	)		(7,637	)		(13,434	)
Numerator for Basic and Diluted EPS from continuing operations	$	118,360		$	98,556		$	116,293
Income from discontinued operations	$	23,864		$	161,246		$	93,878
Numerator for Basic and Diluted EPS from discontinued operations	$	23,864		$	161,246		$	93,878
Denominator:
Basic weighted average shares outstanding		106,329			97,246			90,625
Effect of dilutive securities:
Stock options		75			100			79
Other share-settled compensation plans		349			335			283
OP Units		1,794			1,082			—
Diluted weighted average shares outstanding		108,547			98,763			90,987

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December 31, 2009

	Years Ended December 31,
	2009		2008		2007
	(In thousands, except per share amounts)
Basic earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.11	$	1.01	$	1.28
Discontinued operations attributable to NHP common stockholders		0.23		1.66		1.04
Net income attributable to NHP common stockholders	$	1.34	$	2.67	$	2.32
Diluted earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.09	$	1.00	$	1.28
Discontinued operations attributable to NHP common stockholders		0.22		1.63		1.03
Net income attributable to NHP common stockholders	$	1.31	$	2.63	$	2.31

15.   Transactions with Significant Lessees

As of December 31, 2009, 96 triple-net leased facilities are leased to and operated by subsidiaries of Brookdale. Revenues from Brookdale were $55.0 million, $54.9 million and $54.6 million for the years ended December 31, 2009, 2008 and 2007, respectively. At December 31, 2009, Brookdale accounted for 15.2% of our revenues.

In February 2009, we entered into an agreement with Brookdale under which we became a lender with an initial commitment of $8.8 million ($2.9 million at December 31, 2009) under their original $230.0 million revolving loan facility ($75.0 million at December 31, 2009), which is scheduled to mature on August 31, 2010 (see Note 4). During 2009, we funded $7.5 million which was subsequently repaid. At December 31, 2009, there was no balance outstanding.

As of December 31, 2009, 32 triple-net leased facilities are leased to and operated by Hearthstone. Revenues from Hearthstone were $37.4 million, $37.3 million and $37.7 million for the years ended December 31, 2009, 2008 and 2007, respectively. At December 31, 2009, Hearthstone accounted for 10.8% of our revenues.

16.   Discontinued Operations

ASC 360 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. If we have a continuing involvement, as in the sales to our unconsolidated joint venture, the operating results remain in continuing operations. See Note 3 and Note 7 for more

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December 31, 2009

detail regarding the facilities sold and classified as held for sale during 2009. The following table details the operating results reclassified to discontinued operations for the periods presented:

	Years Ended December 31,
	2009			2008		2007
	(In thousands)
Rental income	$	802		$	10,006	$	36,179
Interest and other income		19			5		625
		821			10,011		36,804
Interest and amortization of deferred financing costs		—			1,004		4,340
Depreciation and amortization		865			2,732		10,808
General and administrative		—			8		(179	)
Medical office building operating expenses		—			16		26
		865			3,760		14,995
(Loss) income from discontinued operations		(44	)		6,251		21,809
Gain on sale of facilities, net		23,908			154,995		72,069
Discontinued operations	$	23,864		$	161,246	$	93,878

17.   Derivatives

During January 2008, the unconsolidated joint venture we have with a state pension fund investor entered into an interest rate swap contract (see Notes 6 and 18).

During August and September 2007, we entered into four six-month Treasury lock agreements totaling $250.0 million at a weighted average rate of 4.212%. We entered into these Treasury lock agreements in order to hedge the expected interest payments associated with a portion of our October 2007 issuance of $300.0 million of notes which mature in 2013. These Treasury lock agreements were settled in cash on October 17, 2007 for an amount equal to the present value of the difference between the locked Treasury rates and the unwind rate (equal to the then-prevailing Treasury rate less the forward premium or 4.364%). We reassessed the effectiveness of these agreements at the settlement date and determined that they were highly effective cash flow hedges under ASC 815 for $250.0 million of the $300.0 million of notes as intended. The prevailing Treasury rate exceeded the rates in the Treasury lock agreements and, as a result, the counterparties to those agreements made payments to us of $1.6 million, which was recorded as other comprehensive income. The settlement amounts are being amortized over the life of the debt as a yield reduction. During 2009, we retired $30.0 million of the $300.0 million of senior notes (see Note 10). In connection with the retirement, $0.1 million of the settlement amounts was expensed and is included in the net gain of $4.6 million which is reflected on our consolidated income statements as gain on debt extinguishment, net. During 2009, 2008 and 2007, we recorded $0.4 million, $0.3 million and $0.1 million of amortization, respectively. We expect to record $0.3 million of amortization during 2010.

In June 2006, we entered into two $125.0 million, two-month Treasury lock agreements in order to hedge the expected interest payments associated with a portion of our July 2006 issuance of $350.0 million of notes which mature in 2011. These Treasury lock agreements were settled in cash on July 11, 2006, concurrent with the pricing of the $350 million of notes, for an amount equal to the present value of the difference between the locked Treasury rates and the unwind rate. We reassessed the effectiveness of these agreements at the settlement date and determined that they were highly effective cash flow hedges under ASC 815 for $250.0 million of the $350.0 million of notes as intended. The prevailing Treasury rate exceeded the rates in the Treasury lock agreements and, as a result, the counterparty to those agreements made payments to us of $1.2 million, which was recorded as other comprehensive

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December 31, 2009

income. The settlement amounts are being amortized over the life of the debt as a yield reduction. During 2009, 2008 and 2007, we recorded $0.2 million, $0.3 million and $0.2 million of amortization, respectively. We expect to record $0.3 million of amortization during 2010.

18.   Comprehensive Income

During January 2008, the unconsolidated joint venture we have with a state pension fund investor entered into an interest rate swap contract (see Note 6). As of December 31, 2009, we had recorded our pro rata share of the unconsolidated joint venture’s accumulated other comprehensive loss related to this contract of $2.1 million.

We recorded the August and September 2007 Treasury lock agreements on our consolidated balance sheets at their estimated fair value of $0.1 million at September 30, 2007. In connection with the settlement of the August and September 2007 Treasury lock agreements on October 17, 2007, we recognized a gain of $1.6 million. The gain was recognized through other comprehensive income and is being amortized over the life of the related $300.0 million of notes which mature in 2013 as a yield reduction. During 2009, we retired $30.0 million of the $300.0 million of senior notes (see Note 10). In connection with the retirement, $0.1 million of the settlement amounts was expensed and is included in the net gain of $4.6 million which is reflected on our consolidated income statements as gain on debt extinguishment, net. During 2009, 2008 and 2007, we recorded $0.4 million, $0.3 million and $0.1 million of amortization, respectively. We expect to record $0.3 million of amortization during 2010.

We recorded the June 2006 Treasury lock agreements on our consolidated balance sheets at their estimated fair value of $1.6 million at June 30, 2006. In connection with the settlement of the June 2006 Treasury lock agreements on July 11, 2006, we recognized a gain of $1.2 million. The gain was recognized through other comprehensive income and is being amortized over the life of the related $350.0 million of notes which mature in 2011 as a yield reduction. During 2009, 2008 and 2007, we recorded $0.2 million, $0.3 million and $0.2 million of amortization, respectively. We expect to record $0.3 million of amortization during 2010.

ASC Topic 715, Compensation — Retirement Benefits, requires changes in the funded status of a defined benefit pension plan to be recognized through comprehensive income in the year in which they occur. During 2009 and 2008, we recognized other comprehensive loss of $8,000 and $0.2 million, respectively, and during 2007, we recognized other comprehensive income of $0.1 million, related to the change in the funded status of our defined benefit pension plan.

The following table sets forth the computation of comprehensive income for the periods presented:

	Year Ended December 31,
	2009			2008			2007
Net income	$	149,058		$	268,007		$	224,246
Other comprehensive income:
Pro rata share of accumulated other comprehensive loss from unconsolidated joint venture		(2,051	)		—			—
Gain on Treasury lock agreements		—			—			1,557
Amortization of gains on Treasury lock agreements		(610	)		(511	)		(279	)
Defined benefit pension plan net actuarial (loss) gain		(8	)		(204	)		52
Comprehensive income		146,389			267,292			225,576
Comprehensive (income) loss attributable to noncontrolling interests		(668	)		131			212
Comprehensive income attributable to NHP	$	145,721		$	267,423		$	225,788

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December 31, 2009

19.   Income Taxes

The provisions of ASC Topic 740, Income Taxes, which clarify the accounting for uncertainty in income taxes recognized in financial statements and prescribe a recognition threshold and measurement attribute of tax positions taken or expected to be taken on a tax return became effective January 1, 2007. No amounts have been recorded for unrecognized tax benefits or related interest expense and penalties. The taxable periods ending December 31, 2005 through December 31, 2009 remain open to examination by the Internal Revenue Service and the tax authorities of the significant jurisdictions in which we do business.

Hearthstone Acquisition

On June 1, 2006, we acquired the stock of Hearthstone Assisted Living, Inc. (“HAL”), causing HAL to become a qualified REIT subsidiary. As a result of the acquisition, we succeeded to HAL’s tax attributes, including HAL’s tax basis in its net assets. Prior to the acquisition, HAL was a corporation subject to federal and state income taxes. In connection with the acquisition of HAL, NHP acquired approximately $82.5 million of federal net operating losses (“NOLs”) which we can carryforward to future periods and the use of which is subject to annual limitations imposed by IRC Section 382. While we believe that these NOLs are accurate, any adjustments to HAL’s tax returns for periods prior to June 1, 2006 by the Internal Revenue Service could change the amount of the NOLs that we can utilize. We have used a portion of this amount in 2007 and 2008 and anticipate using additional amounts in future years. These NOLs are set to expire between 2017 and 2025. NOLs related to various states were also acquired and are set to expire based on the various laws of the specific states.

In addition, we may be subject to a corporate-level tax on any taxable disposition of HAL’s pre-acquisition assets that occurs within ten years after the June 1, 2006 acquisition. The corporate-level tax would be assessed only to the extent of the built-in gain that existed on the date of acquisition, based on the fair market value of the asset on June 1, 2006. We do not expect to dispose of any asset included in the HAL acquisition if such a disposition would result in the imposition of a material tax liability, and no such sales have taken place through December 31, 2009. Accordingly, we have not recorded a deferred tax liability associated with this corporate-level tax. Gains from asset dispositions occurring more than 10 years after the acquisition will not be subject to this corporate-level tax. However, we may dispose of HAL assets before the 10-year period if we are able to complete a tax-deferred exchange.

20.   Dividends

Dividend payments per share to the common stockholders were characterized in the following manner for tax purposes:

	2009		2008		2007
Ordinary income	$	1.60	$	0.59	$	1.40
Return of capital		0.09		—		—
Capital gain		0.07		1.17		0.24
Total dividends paid	$	1.76	$	1.76	$	1.64

21.   Segment Information

Our operations are organized into two segments — triple-net leases and multi-tenant leases. In the triple-net leases segment, we invest in healthcare related properties and lease the facilities to unaffiliated tenants under “triple-net” and generally “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, we invest in healthcare related properties that have several tenants under separate leases in each building, thus requiring

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December 31, 2009

active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). During 2009, 2008 and 2007, the multi-tenant leases segment was comprised exclusively of medical office buildings.

Non-segment revenues primarily consist of interest income on mortgages and unsecured loans and other income. Interest expense, depreciation and amortization and other expenses not attributable to individual facilities are not allocated to individual segments for purposes of assessing segment performance. Non-segment assets primarily consist of corporate assets including mortgages and unsecured loans, investment in unconsolidated joint ventures, cash, deferred financing costs and other assets not attributable to individual facilities.

Certain items in prior period financial statements have been reclassified to conform to current period presentation, including those required by ASC 360 which require the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest to be removed from income from continuing operations and reported as discontinued operations. Summary information related to our reportable segments is as follows:

	Years Ended December 31,
	2009		2008		2007
	(In thousands)
Revenues:
Triple-net leases	$	295,757	$	283,052	$	265,895
Multi-tenant leases		68,319		60,287		16,061
Non-segment		26,436		24,980		21,266
	$	390,512	$	368,319	$	303,222
Net operating income(1):
Triple-net leases	$	295,757	$	283,052	$	265,895
Multi-tenant leases		39,413		33,656		7,465
	$	335,170	$	316,708	$	273,360

	Years Ended December 31,
	2009		2008
	(In thousands)
Assets:
Triple-net leases	$	2,440,158	$	2,503,849
Multi-tenant leases		572,410		588,660
Non-segment		634,507		365,616
	$	3,647,075	$	3,458,125

(1) Net operating income (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of our facilities. We define NOI for our triple-net leases segment as rent revenues. For our multi-tenant leases segment, we define NOI as revenues minus medical office building operating expenses. In some cases, revenue for medical office buildings includes expense reimbursements for common area maintenance charges. NOI excludes interest expense and amortization of deferred financing costs, depreciation and amortization expense, general and administrative expense and discontinued operations. We present NOI as it effectively presents our portfolio on a “net” rent basis and provides relevant and useful information as it measures the operating performance at the facility level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. Furthermore, we

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December 31, 2009

believe that NOI provides investors relevant and useful information because it measures the operating performance of our real estate at the property level on an unleveraged basis. We believe that net income is the GAAP measure that is most directly comparable to NOI. However, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as presented above may not be comparable to other REITs or companies as their definitions of NOI may differ from ours.

A reconciliation of net income, a GAAP measure, to NOI, a non-conforming GAAP measure, is as follows:

	Years Ended December 31,
	2009			2008			2007
	(In thousands)
Net income	$	149,058		$	268,007		$	224,246
Interest and other income		(26,436	)		(24,980	)		(21,266	)
Interest expense and amortization of deferred financing costs		93,630			101,045			97,639
Depreciation and amortization expense		124,264			116,375			89,986
General and administrative expense		27,353			26,051			24,636
Acquisition costs		830			—			—
Income from unconsolidated joint ventures		(5,101	)		(3,903	)		(1,958	)
Gain on debt extinguishment		(4,564	)		(4,641	)		—
Gain on sale of facilities to unconsolidated joint venture, net		—			—			(46,045	)
Gains on sale of facilities, net		(23,908	)		(154,995	)		(72,069	)
Loss (income) from discontinued operations		44			(6,251	)		(21,809	)
Net operating income from reportable segments	$	335,170		$	316,708		$	273,360

22.   Commitments and Contingencies

Litigation

From time to time, we are a party to various other legal proceedings, lawsuits and other claims (some of which may not be insured) that arise in the normal course of our business. Regardless of their merits, these matters may force us to expend significant financial resources. Except as described herein, we are not aware of any other legal proceedings or claims that we believe may have, individually or taken together, a material adverse effect on our business, results of operations or financial position. However, we are unable to predict the ultimate outcome of pending litigation and claims, and if our assessment of our liability with respect to these actions and claims is incorrect, such actions and claims could have a material adverse effect on our business, results of operations or financial position.

In late 2004 and early 2005, we were served with several lawsuits in connection with a fire at the Greenwood Healthcare Center in Hartford, Connecticut, that occurred on February 26, 2003. At the time of the fire, the Greenwood Healthcare Center was owned by us and leased to and operated by Lexington Healthcare Group. There were a total of 13 lawsuits arising from the fire. Those suits have been filed by representatives of patients who were either killed or injured in the fire. The lawsuits seek unspecified monetary damages. The complaints allege that the fire was set by a resident who had previously been diagnosed with depression. The complaints allege theories of negligent operation and premises liability against Lexington Healthcare, as operator, and us as owner. Lexington Healthcare has filed for bankruptcy. The matters have been consolidated into one action in the Connecticut Superior Court Complex Litigation Docket at the Judicial District at Hartford and are in various stages of discovery and motion practice. We have filed a motion for summary judgment with regard to certain pending claims and will be filing additional summary judgment motions for any remaining claims. Mediation was

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December 31, 2009

commenced with respect to most of the claims, and a settlement has been reached in 10 of the 13 pending claims within the limits of our commercial general liability insurance. We obtained a judgment of nonsuit in one case whereby it is now dismissed, and the two remaining claims will be subject to summary judgment motions and ongoing efforts at resolution. Summary judgment rulings are not expected until late 2010.

Lexington Insurance, which potentially owes insurance coverage for these claims to us, has filed a lawsuit against us which seeks no monetary damages, but which does seek a court order limiting its insurance coverage obligations to us. We have filed a counterclaim against Lexington Insurance demanding additional insurance coverage from Lexington in amounts up to $10.0 million. The parties to that case, which is pending on the Complex Litigation Docket for the Judicial District of Hartford, filed cross-motions for summary judgment. Those motions were recently decided, resulting in a favorable outcome for us. The court’s ruling indicates $10.0 million in coverage is available from Lexington for the claims under the Professional Liability part of the Lexington policy. The court, however, declined to consider our counterclaim that there was an additional $10.0 million in coverage available to us under the comprehensive general liability part of the policy, ruling such a claim was premature. Lexington has appealed and filed post-judgment motions with the trial court. We have cross-appealed and filed our own post-judgment motions with the trial court in order to pursue the additional $10.0 million on the comprehensive general liability part of the policy. We do not expect the appeal to be resolved before the end of 2010.

We are being defended in the matter by our commercial general liability carrier. We believe that we have substantial defenses to the claims and that we have adequate insurance to cover the risks, should liability nonetheless be imposed. However, because the remaining claims are still in the process of discovery and motion practice, it is not possible to predict the ultimate outcome of these claims.

Revolving Loan Facility

In February 2009, we entered into an agreement with one of our triple-net tenants, Brookdale under which we became a lender with an initial commitment of $8.8 million ($2.9 million at December 31, 2009) under their original $230.0 million revolving loan facility ($75.0 million at December 31, 2009), which is scheduled to mature on August 31, 2010 (see Note 4). During 2009, we funded $7.5 million which was subsequently repaid. At December 31, 2009, there was no balance outstanding.

Lines of Credit

Under the terms of an agreement with PMB LLC, we agreed to extend to PMB LLC a $10.0 million line of credit at an interest rate equal to LIBOR plus 175 basis points to fund certain costs of PMB LLC with respect to the proposed development of multi-tenant medical office buildings. During 2009, we funded $3.2 million under the line of credit which remained outstanding at December 31, 2009 and is included in the caption “Other assets” on our consolidated balance sheet.

In April 2009, we entered into an agreement with PMB LLC, the manager of PMB Pomona LLC, to extend up to $3.0 million of funding at an interest rate of 7.25%, which is secured by 100% of the membership interests in PMB Pomona LLC (see Note 23). During 2009, we funded $1.6 million which remained outstanding at December 31, 2009 and is included in the caption “Other assets” on our consolidated balance sheet.

Indemnities

We have entered into indemnification agreements with those partners who contributed appreciated property into NHP/PMB. Under these indemnification agreements, if any of the appreciated real estate contributed by the partners is sold by NHP/PMB in a taxable transaction within a specified number of years after the property was contributed, we will reimburse the affected partners for the federal and state income taxes associated with the pre-

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December 31, 2009

contribution gain that is specially allocated to the affected partner under the Code. We have no current plans to sell any of these properties.

23.   Related Party Transactions

In August 2008, Dr. Jeffrey Rush became a director of NHP. In August 2008, we acquired for $3.5 million a 44.95% interest in PMB SB, an entity that owns two multi-tenant medical office buildings (see Note 6). Dr. Rush, through an unaffiliated entity, has an ownership interest in PMB SB.

In September 2008, we funded a mortgage loan secured by a medical office building in the amount of $47.5 million which was outstanding at December 31, 2009 (see Note 4). Dr. Rush has an ownership interest in another unaffiliated entity that owns the medical office building that is security for this loan. As of February 1, 2010, we acquired as intended the medical office building that served as collateral for this mortgage loan (see Note 25).

In February 2008, we entered into an agreement with Pacific Medical Buildings LLC to acquire a 50% interest in PMBRES, a full service property management company (see Note 6). Dr. Rush, through an unaffiliated entity, has an ownership interest in PMB Partners LLC which owns 50% of PMBRES.

We have also entered into an agreement with PMB Pomona LLC to acquire a medical office building currently in development for $37.5 million upon completion which was amended as of February 1, 2010 to provide for the future acquisition of the medical office building by NHP/PMB (see Note 25). Dr. Rush, through an unaffiliated entity, has an ownership interest in PMB Pomona LLC. In April 2009, we entered into an agreement with PMB LLC, the manager of PMB Pomona LLC, to extend up to $3.0 million of funding at an interest rate of 7.25%, which is secured by 100% of the membership interests in PMB Pomona LLC (see Note 22).

During 2009, NHP/PMB became obligated to pay $3.0 million under the Contribution Agreement, of which $2.7 million was payable to Pacific Medical Buildings LLC, 50% in cash and 50% in shares of our common stock (see Note 6). Dr. Rush is the Chairman of and owns an interest in Pacific Medical Buildings LLC. In addition, Dr. Rush and certain of his family members own interests, directly and indirectly through partnerships and trusts, in the entities that own the properties currently in development that may be acquired in the future under the Contribution Agreement.

24.   Quarterly Financial Data (Unaudited)

Amounts in the tables below may not add across due to rounding differences, and certain items in prior period financial statements have been reclassified to conform to current year presentation, including those required by ASC 360 which require the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest to be removed from income from continuing operations and reported as discontinued operations.

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December 31, 2009

	Three Months Ended,
	March 31,		June 30,		September 30,		December 31,
	(In thousands except per share amounts)
2009:
Revenues	$	97,083	$	97,143	$	97,656	$	98,631
Net income attributable to NHP common stockholders		49,154		33,299		29,692		30,895
Diluted income available to common stockholders per share		0.47		0.31		0.27		0.27
Dividends per share		0.44		0.44		0.44		0.44
2008:
Revenues	$	85,105	$	92,906	$	94,413	$	95,894
Income available to common stockholders		35,393		165,951		27,192		31,964
Diluted income available to common stockholders per share		0.37		1.69		0.27		0.31
Dividends per share		0.44		0.44		0.44		0.44

During the three months ended June 30, 2009, we recognized a $4.6 million gain on debt extinguishment. During the three months ended December 31, 2008, we recognized a $4.6 million gain on debt extinguishment.

25.   Subsequent Events

As of February 1, 2010, we entered into an amendment to the Contribution Agreement which reinstated one of the six properties that were previously eliminated from the Contribution Agreement and acquired such medical office building per the terms of the amendment. As a result of such acquisition, we retired our $47.5 million mortgage loan to a related party (see Note 23). Additionally, we acquired a majority ownership interest in a joint venture which owns one medical office building, amended and restated our development agreement with NHP/PMB, PMB LLC and PMBRES (see Note 5) and amended our agreement with PMB Pomona LLC to provide for the future acquisition by NHP/PMB of a medical office building currently in development (see Note 23). In connection with these transactions, NHP/PMB entered into a Third Amendment to the Amended and Restated Agreement of Limited Partnership, which, among other things, authorized NHP/PMB to acquire properties affiliated with Pacific Medical Buildings LLC pursuant to agreements other than the Contribution Agreement. (see Note 5).

On January 18, 2010, we redeemed all outstanding shares of our Series B Preferred Stock at a redemption price per share of $103.875 plus an amount equal to accumulated and unpaid dividends thereon to the redemption date ($0.3875), for a total redemption price of $104.2625 per share, payable only in cash (see Note 11). As a result of the redemption, each share of Series B Preferred Stock was convertible until January 14, 2010 into 4.5150 shares of common stock. During that time, 512,727 shares were converted into approximately 2,315,000 shares of common stock. On January 18, 2010, we redeemed 917 shares that remained outstanding at a redemption price of $104.2625 per share.

From January 1, 2010 to February 16, 2010, we issued and sold approximately 635,000 shares of common stock at a weighted average price of $35.03 per share through our at-the-market equity offering program (see Note 12).

On January 15, 2010, we filed a new shelf registration statement with the SEC under which we may issue securities including debt, convertible debt, common and preferred stock and warrants to purchase any of these securities. Our existing shelf registration statement was set to expire in May 2010. We also entered into new sales agreements, each dated January 15, 2010, to sell up to an aggregate of 5,000,000 shares of our common stock from time to time (see Note 12).

On February 9, 2010, we exercised a 12-month extension option on a $32.4 million loan that was scheduled to mature in April 2010 (see Note 10).

99

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Assisted and Independent Living Facilities:
Birmingham	AL	$	13,653	$	—	$	1,050	$	—	$	1,050	$	13,653	$	14,703	$	(1,644	)		2000		2006		35
Decatur	AL		1,824		—		1,484		—		1,484		1,824		3,308		(691	)		1987		1996		35
Hanceville	AL		2,447		—		197		—		197		2,447		2,644		(816	)		1996		1996		40
Huntsville	AL		7,092		—		260		—		260		7,092		7,352		(972	)		1999		2006		35
Mobile	AL		9,124		—		90		—		90		9,124		9,214		(1,180	)		2000		2006		35
Muscle Shoals	AL		5,933		—		314		—		314		5,933		6,247		(452	)		1999		2007		35
Scottsboro	AL		2,566		—		210		—		210		2,566		2,776		(102	)		1998		2008		35
Benton	AR		1,968		—		182		—		182		1,968		2,150		(652	)		1990		1998		35
Chandler	AZ		2,753		16		505		—		505		2,769		3,274		(788	)		1998		1998		40
Tempe	AZ		16,204		—		1,440		—		1,440		16,204		17,644		(1,905	)		1999		2006		35
Tucson	AZ		6,694		—		560		—		560		6,694		7,254		(931	)		1999		2006		35
Banning	CA		12,976		975		375		—		375		13,951		14,326		(1,839	)		2004		2003		40
Carmichael	CA		7,929		1,194		1,500		—		1,500		9,123		10,623		(4,232	)		1984		1995		30
Chula Vista	CA		6,281		493		950		—		950		6,774		7,724		(2,597	)		1989		1995		35
Encinitas(3)	CA		5,017		666		1,000		—		1,000		5,683		6,683		(2,356	)		1984		1995		35
Mission Viejo(4)	CA		3,544		262		900		—		900		3,806		4,706		(1,520	)		1985		1995		35
Novato(3)	CA		3,658		6,917		2,500		—		2,500		10,575		13,075		(2,297	)		1978		1995		30
Palm Desert	CA		6,179		4,701		1,400		—		1,400		10,880		12,280		(3,062	)		1989		1994		40
Placentia	CA		3,801		985		1,320		—		1,320		4,786		6,106		(1,972	)		1982		1995		30
Rancho Cucamonga(3)	CA		4,156		539		610		—		610		4,695		5,305		(1,846	)		1987		1995		35
Rancho Mirage	CA		13,391		290		1,630		—		1,630		13,681		15,311		(1,134	)		1999		2007		35
San Dimas	CA		3,577		776		1,700		—		1,700		4,353		6,053		(1,814	)		1975		1995		30
San Jose	CA		7,252		—		850		—		850		7,252		8,102		(2,130	)		1998		1996		40
San Juan Capistrano(3)	CA		3,834		830		1,225		—		1,225		4,664		5,889		(1,712	)		1985		1995		35
San Juan Capistrano	CA		6,344		620		700		—		700		6,964		7,664		(2,645	)		1985		1995		35
Santa Maria	CA		2,649		118		1,500		—		1,500		2,767		4,267		(1,304	)		1967		1995		30
Vista	CA		3,701		904		350		—		350		4,605		4,955		(1,829	)		1980		1996		30
Westminster	CA		4,883		—		2,350		—		2,350		4,883		7,233		(712	)		2001		2005		40
Aurora	CO		7,923		66		919		—		919		7,989		8,908		(3,717	)		1983		1995		30
Boulder	CO		4,811		14		833		—		833		4,825		5,658		(1,687	)		1985		1995		40

100

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Denver(5)	CO		28,682		—		2,350		—		2,350		28,682		31,032		(6,161	)		1987		2002		35
Branford	CT		6,709		2,645		2,000		—		2,000		9,354		11,354		(1,565	)		1999		2005		35
Madison	CT		16,032		1,400		4,000		—		4,000		17,432		21,432		(2,835	)		2002		2004		40
Coral Springs	FL		6,985		427		915		—		915		7,412		8,327		(850	)		1999		2006		35
Fort Myers(6)	FL		5,206		33		415		—		415		5,239		5,654		(787	)		1996		2005		35
Fort Walton	FL		6,372		—		694		—		694		6,372		7,066		(485	)		2000		2007		35
Hollywood	FL		9,887		—		1,994		—		1,994		9,887		11,881		(879	)		1972		2007		30
Jacksonville	FL		2,770		20		226		—		226		2,790		3,016		(852	)		1997		1997		40
Jacksonville(6)	FL		2,473		47		256		—		256		2,520		2,776		(376	)		1997		2005		35
Leesburg(6)	FL		3,239		—		301		—		301		3,239		3,540		(462	)		1999		2005		35
Ormond Beach(6)	FL		1,649		51		480		—		480		1,700		2,180		(246	)		1997		2005		35
Palm Coast	FL		2,580		38		406		—		406		2,618		3,024		(782	)		1997		1997		40
Pensacola	FL		5,667		1,238		408		—		408		6,905		7,313		(1,543	)		1999		1998		40
Rotunda West	FL		2,628		28		123		—		123		2,656		2,779		(794	)		1997		1997		40
Tallahassee	FL		9,218		45		696		—		696		9,263		9,959		(2,380	)		1999		1998		40
Tallahassee	FL		1,679		2,072		450		—		450		3,751		4,201		(264	)		1999		2006		35
Tamarac	FL		6,921		450		967		—		967		7,371		8,338		(817	)		2000		2006		35
Tampa	FL		12,343		—		2,360		—		2,360		12,343		14,703		(1,357	)		2001		2006		40
Tavares	FL		2,466		6		156		—		156		2,472		2,628		(782	)		1997		1997		40
Titusville	FL		4,706		—		1,742		—		1,742		4,706		6,448		(1,277	)		1987		2000		35
Augusta	GA		3,820		—		568		—		568		3,820		4,388		(340	)		1997		2007		30
Jonesboro	GA		8,776		—		1,320		—		1,320		8,776		10,096		(1,144	)		2000		2006		35
Marietta	GA		6,002		—		1,350		—		1,350		6,002		7,352		(860	)		2000		2006		35
Carmel	IN		3,861		84		805		—		805		3,945		4,750		(2,024	)		1998		1997		5
Floyds Knobs	IN		8,945		—		740		—		740		8,945		9,685		(292	)		2009		2008		40
Greensburg	IN		1,249		1		120		—		120		1,250		1,370		(169	)		1999		2007		35
Indianapolis	IN		4,267		—		750		—		750		4,267		5,017		(607	)		1998		2006		35
Michigan City(6)	IN		4,069		—		245		—		245		4,069		4,314		(582	)		1998		2005		35
Michigan City(6)	IN		3,331		—		370		—		370		3,331		3,701		(474	)		1999		2005		35
Monticello	IN		2,697		—		270		—		270		2,697		2,967		(269	)		1999		2007		35
Derby(6)	KS		1,463		57		269		—		269		1,520		1,789		(223	)		1994		2005		35

101

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Lawrence	KS		3,822		—		932		—		932		3,822		4,754		(1,115	)		1995		1998		40
Salina	KS		1,921		—		200		—		200		1,921		2,121		(612	)		1996		1997		40
Salina	KS		2,887		—		329		—		329		2,887		3,216		(1,744	)		1989		1998		3
Topeka	KS		2,955		87		424		—		424		3,042		3,466		(1,718	)		1986		1998		3
Wellington(6)	KS		1,006		56		11		—		11		1,062		1,073		(160	)		1994		2005		35
Kingston(7)	MA		12,780		5,123		1,000		—		1,000		17,903		18,903		(2,543	)		1996		2006		35
Hagerstown	MD		4,664		435		533		—		533		5,099		5,632		(1,253	)		1999		1998		40
Brownstown Township(8)	MI		20,513		—		660		—		660		20,513		21,173		(2,346	)		2000		2006		35
Davidson(6)	MI		1,754		26		154		—		154		1,780		1,934		(267	)		1997		2005		35
Delta(6)	MI		4,812		10		181		—		181		4,822		5,003		(730	)		1998		2005		35
Delta(6)	MI		1,743		16		155		—		155		1,759		1,914		(264	)		1998		2005		35
Farmington Hills(6)	MI		1,863		86		84		—		84		1,949		2,033		(293	)		1994		2005		35
Farmington Hills	MI		2,014		—		95		—		95		2,014		2,109		(304	)		1994		2005		35
Grand Blanc(6)	MI		4,135		70		375		—		375		4,205		4,580		(630	)		1998		2005		35
Grand Blanc(6)	MI		4,048		68		375		—		375		4,116		4,491		(616	)		1998		2005		35
Haslett(6)	MI		4,231		35		847		—		847		4,266		5,113		(628	)		1998		2005		35
Kentwood	MI		12,255		—		880		—		880		12,255		13,135		(1,349	)		2001		2006		40
Troy(6)	MI		7,582		68		697		—		697		7,650		8,347		(1,147	)		1998		2005		35
Troy(6)	MI		7,986		90		1,046		—		1,046		8,076		9,122		(1,203	)		1998		2005		35
Utica(6)	MI		5,102		33		245		—		245		5,135		5,380		(775	)		1995		2005		35
Austin	MN		8,893		—		400		—		400		8,893		9,293		(889	)		2002		2006		35
Blue Earth	MN		6,339		—		500		—		500		6,339		6,839		(664	)		1999		2006		35
Fairbault(6)	MN		1,328		29		121		—		121		1,357		1,478		(203	)		1997		2005		35
Mankato(6)	MN		1,064		25		90		—		90		1,089		1,179		(163	)		1996		2005		35
Owatonna(6)	MN		1,762		—		60		—		60		1,762		1,822		(262	)		1996		2005		35
Owatonna(6)	MN		2,239		—		70		—		70		2,239		2,309		(321	)		1999		2005		35
Sauk Rapids(6)	MN		748		49		67		—		67		797		864		(118	)		1997		2005		35
St. Louis	MN		10,423		—		900		—		900		10,423		11,323		(1,077	)		2003		2006		35
Wilmar(6)	MN		1,977		43		57		—		57		2,020		2,077		(305	)		1997		2005		35
Winona(6)	MN		1,436		36		65		—		65		1,472		1,537		(222	)		1997		2005		35

102

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Butler	MO		200		—		103		—		103		200		303		(18	)		1995		2007		30
Lamar	MO		899		—		113		—		113		899		1,012		(80	)		1996		2007		30
Nevada	MO		—		83		253		—		253		83		336		(8	)		1993		2007		0
Nevada	MO		—		—		253		—		253		—		253		—			1996		2007		0
Greenville	MS		4,411		—		271		—		271		4,411		4,682		(336	)		1999		2007		35
Asheboro	NC		7,054		—		200		—		200		7,054		7,254		(727	)		1998		2006		35
Cramerton	NC		13,713		—		300		—		300		13,713		14,013		(1,367	)		1999		2006		35
Harrisburg	NC		10,472		—		300		—		300		10,472		10,772		(1,081	)		1997		2006		35
Hendersonville	NC		12,183		—		400		—		400		12,183		12,583		(1,285	)		2005		2006		35
Hickory	NC		2,531		11		385		—		385		2,542		2,927		(746	)		1997		1998		40
Hillsborough	NC		12,755		—		400		—		400		12,755		13,155		(1,335	)		2005		2006		35
Newton	NC		11,707		—		400		—		400		11,707		12,107		(1,190	)		2000		2006		35
Salisbury	NC		11,902		500		300		—		300		12,402		12,702		(1,251	)		1999		2006		35
Shelby	NC		10,377		—		300		—		300		10,377		10,677		(1,073	)		2000		2006		35
Sourthport	NC		12,283		—		300		—		300		12,283		12,583		(1,294	)		2005		2006		35
Burleigh	ND		5,902		—		400		—		400		5,902		6,302		(573	)		1994		2006		35
Brick	NJ		2,428		—		1,102		—		1,102		2,428		3,530		(430	)		1999		2002		40
Deptford	NJ		3,430		1		655		—		655		3,431		4,086		(965	)		1998		1998		40
Albuquerque	NM		22,987		—		440		—		440		22,987		23,427		(2,599	)		1998		2006		35
Sparks(9)	NV		5,119		—		505		—		505		5,119		5,624		(1,755	)		1991		1997		35
Sparks(10)	NV		7,278		—		714		—		714		7,278		7,992		(2,183	)		1993		1997		40
Centereach	NY		15,204		1,291		6,000		—		6,000		16,495		22,495		(3,497	)		1973		2002		35
Manlius(6)	NY		10,080		48		500		—		500		10,128		10,628		(1,528	)		1994		2005		35
Vestal	NY		10,394		—		750		—		750		10,394		11,144		(1,997	)		1994		2004		35
Barberton(6)	OH		3,125		20		263		—		263		3,145		3,408		(472	)		1997		2005		35
Englewood(6)	OH		2,277		25		260		—		260		2,302		2,562		(344	)		1997		2005		35
Greenville	OH		2,311		3,975		215		—		215		6,286		6,501		(866	)		1997		1997		40
Groveport	OH		10,516		—		1,080		—		1,080		10,516		11,596		(1,144	)		1998		2006		35
Lancaster	OH		2,084		17		350		—		350		2,101		2,451		(594	)		1998		1998		40
Lorain	OH		9,280		—		620		—		620		9,280		9,900		(1,196	)		2000		2006		35
Marion(6)	OH		2,676		78		210		—		210		2,754		2,964		(412	)		1998		2005		35

103

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Medina	OH		10,199		—		500		—		500		10,199		10,699		(1,136	)		1995		2006		35
Medina	OH		11,809		—		900		—		900		11,809		12,709		(1,218	)		2000		2007		35
Mt. Vernon	OH		9,952		—		760		—		760		9,952		10,712		(1,147	)		2001		2006		35
Springdale	OH		2,092		16		440		—		440		2,108		2,548		(643	)		1997		1997		40
Zanesville	OH		12,421		—		830		—		830		12,421		13,251		(1,204	)		1996		2007		35
Bartlesville(6)	OK		2,337		83		183		—		183		2,420		2,603		(362	)		1997		2005		35
Bethany(6)	OK		1,212		77		114		—		114		1,289		1,403		(191	)		1994		2005		35
Broken Arrow	OK		1,445		19		178		—		178		1,464		1,642		(473	)		1996		1997		40
Oklahoma	OK		15,954		—		1,200		—		1,200		15,954		17,154		(1,879	)		1999		2006		35
Beaverton(6)	OR		5,695		—		721		—		721		5,695		6,416		(731	)		2000		2005		40
Bend(6)	OR		3,923		—		499		—		499		3,923		4,422		(504	)		2001		2005		40
Forest Grove	OR		3,152		—		401		—		401		3,152		3,553		(1,261	)		1994		1995		35
Gresham	OR		4,647		—		—		—		—		4,647		4,647		(1,859	)		1988		1995		35
McMinnville(11)	OR		3,976		—		760		—		760		3,976		4,736		(1,392	)		1989		1995		40
Troutdale(6)	OR		5,470		—		874		—		874		5,470		6,344		(699	)		2000		2005		40
Dublin(6)	PA		2,533		—		310		—		310		2,533		2,843		(360	)		1998		2005		35
Indiana	PA		2,706		—		194		—		194		2,706		2,900		(619	)		1997		2002		35
Kingston	PA		2,262		—		196		—		196		2,262		2,458		(201	)		1992		2007		30
Old Forge	PA		264		—		103		—		103		264		367		(23	)		1990		2007		30
Peckville	PA		2,078		—		163		—		163		2,078		2,241		(185	)		1989		2007		30
South Fayette Township	PA		9,159		276		653		—		653		9,435		10,088		(2,492	)		1999		1998		40
Wyoming	PA		1,500		—		107		—		107		1,500		1,607		(133	)		1993		2007		30
York	PA		4,534		288		413		—		413		4,822		5,235		(1,273	)		1999		1998		40
East Greenwich	RI		8,417		108		1,200		—		1,200		8,525		9,725		(2,126	)		2000		1998		40
Lincoln	RI		9,612		29		477		—		477		9,641		10,118		(2,618	)		2000		1998		5
Portsmouth	RI		9,155		97		1,200		—		1,200		9,252		10,452		(2,365	)		1999		1998		40
Clinton	SC		2,560		—		87		—		87		2,560		2,647		(1,153	)		1997		1998		20
Goose Creek	SC		2,336		—		619		—		619		2,336		2,955		(534	)		1998		2002		35
Greenwood	SC		2,648		—		107		—		107		2,648		2,755		(1,192	)		1997		1998		20
Brown	SD		3,125		—		400		—		400		3,125		3,525		(328	)		1991		2006		35
Brown	SD		2,584		—		300		—		300		2,584		2,884		(281	)		2000		2006		35

104

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Lincoln	SD		8,273		—		700		—		700		8,273		8,973		(887	)		2002		2006		35
Pennington	SD		5,575		—		300		—		300		5,575		5,875		(544	)		1997		2006		35
Bartlett	TN		12,069		—		870		—		870		12,069		12,939		(1,481	)		1999		2006		35
Bristol	TN		5,000		2,686		406		—		406		7,686		8,092		(1,584	)		1999		1998		40
Chattanooga	TN		6,159		—		310		—		310		6,159		6,469		(876	)		1999		2006		35
East Longmeadow	TN		18,208		9,973		1,360		—		1,360		28,181		29,541		(1,925	)		1964		2008		30
Hixson	TN		5,146		—		50		—		50		5,146		5,196		(268	)		2000		2008		35
Johnson City	TN		5,000		533		404		—		404		5,533		5,937		(1,376	)		1999		1998		40
Knoxville	TN		6,279		—		790		—		790		6,279		7,069		(706	)		2001		2005		40
Memphis	TN		8,180		84		629		—		629		8,264		8,893		(1,244	)		1989		2007		11
Memphis	TN		8,558		92		726		—		726		8,650		9,376		(1,243	)		1985		2007		11
Memphis	TN		5,259		38		412		—		412		5,297		5,709		(773	)		1989		2007		11
Murfreesboro	TN		5,131		479		499		—		499		5,610		6,109		(1,404	)		1999		1998		40
Nashville	TN		5,999		—		960		—		960		5,999		6,959		(860	)		1998		2006		35
Nashville	TN		6,156		—		1,000		—		1,000		6,156		7,156		(876	)		1999		2006		35
Newport	TN		6,116		—		423		—		423		6,116		6,539		(466	)		2000		2007		35
Arlington	TX		4,349		—		3,100		—		3,100		4,349		7,449		(691	)		1998		2006		35
Austin	TX		22,558		—		1,360		—		1,360		22,558		23,918		(2,555	)		2000		2006		35
Bedford(12)	TX		18,138		—		780		—		780		18,138		18,918		(2,103	)		1999		2006		35
Conroe	TX		17,898		—		1,510		—		1,510		17,898		19,408		(2,078	)		1997		2006		35
Dallas	TX		3,524		785		308		—		308		4,309		4,617		(3,230	)		1981		1994		0
Denton	TX		1,425		33		185		—		185		1,458		1,643		(472	)		1996		1996		40
Ennis	TX		1,409		26		119		—		119		1,435		1,554		(466	)		1996		1996		40
Fort Worth	TX		10,417		—		640		—		640		10,417		11,057		(1,172	)		2001		2005		40
Garland	TX		12,931		—		890		—		890		12,931		13,821		(1,570	)		1999		2006		35
Houston	TX		7,892		—		493		—		493		7,892		8,385		(2,269	)		1998		1997		40
Houston	TX		7,194		—		1,235		—		1,235		7,194		8,429		(2,068	)		1998		1997		40
Houston	TX		8,945		—		985		—		985		8,945		9,930		(2,404	)		1999		1997		40
Houston	TX		7,052		—		1,089		—		1,089		7,052		8,141		(1,895	)		1999		1997		40
Houston	TX		22,361		—		870		—		870		22,361		23,231		(2,535	)		1999		2006		35
Houston	TX		17,872		—		850		—		850		17,872		18,722		(2,075	)		1998		2006		35

105

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Irving	TX		12,597		—		930		—		930		12,597		13,527		(1,535	)		1999		2006		35
Kerrville(6)	TX		2,129		88		195		—		195		2,217		2,412		(331	)		1997		2005		35
Lake Jackson	TX		13,503		—		220		—		220		13,503		13,723		(1,628	)		1998		2006		35
Lancaster(6)	TX		2,100		65		175		—		175		2,165		2,340		(324	)		1997		2005		35
Lewisville	TX		13,933		—		770		—		770		13,933		14,703		(1,672	)		1998		2006		35
Paris	TX		1,465		32		166		—		166		1,497		1,663		(485	)		1996		1996		40
San Antonio	TX		7,765		—		470		—		470		7,765		8,235		(1,041	)		1999		2006		35
San Antonio(6)	TX		3,910		100		359		—		359		4,010		4,369		(600	)		1997		2005		35
Temple	TX		13,353		—		370		—		370		13,353		13,723		(1,551	)		1997		2006		35
Temple(6)	TX		2,055		34		84		—		84		2,089		2,173		(315	)		1997		2005		35
Texas City	TX		11,605		—		550		—		550		11,605		12,155		(1,372	)		1996		2006		35
Victoria	TX		12,707		—		330		—		330		12,707		13,037		(1,485	)		1997		2006		35
Wharton	TX		9,167		—		930		—		930		9,167		10,097		(1,123	)		1996		2006		35
Salem	VA		10,320		—		890		—		890		10,320		11,210		(1,068	)		1998		2006		35
Bellevue	WA		4,467		—		766		—		766		4,467		5,233		(1,275	)		1998		1996		40
Centralia	WA		5,254		89		610		—		610		5,343		5,953		(525	)		1993		2007		30
Olympia	WA		10,954		140		870		—		870		11,094		11,964		(1,044	)		1995		2007		30
Richland	WA		6,052		191		172		—		172		6,243		6,415		(2,482	)		1990		1995		35
Sedro Woolley	WA		4,480		—		340		—		340		4,480		4,820		(532	)		1996		2006		35
Spokane	WA		4,121		—		466		—		466		4,121		4,587		(904	)		1959		2003		35
Tacoma	WA		5,208		22		403		—		403		5,230		5,633		(1,631	)		1997		1996		40
Tacoma	WA		6,690		—		—		—		—		6,690		6,690		(1,179	)		1988		2003		35
Tacoma	WA		12,560		436		1,090		—		1,090		12,996		14,086		(1,785	)		1976		2007		20
Yakima	WA		5,122		39		500		—		500		5,161		5,661		(1,543	)		1998		1997		40
Appleton	WI		1,260		—		154		—		154		1,260		1,414		(102	)		1996		2008		30
Appleton	WI		1,120		—		136		—		136		1,120		1,256		(90	)		1997		2008		30
Beloit	WI		1,277		—		80		—		80		1,277		1,357		(119	)		1990		2007		30
Clinton	WI		1,126		—		80		—		80		1,126		1,206		(111	)		1991		2007		30
Cudahy	WI		1,859		—		220		—		220		1,859		2,079		(129	)		2001		2008		35
East Longmeadow	WI		1,147		—		150		—		150		1,147		1,297		(100	)		1999		2008		35
East Longmeadow	WI		716		—		116		—		116		716		832		(55	)		1994		2008		30

106

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
East Longmeadow	WI		1,959		—		120		—		120		1,959		2,079		(134	)		1998		2008		35
East Longmeadow	WI		2,235		—		190		—		190		2,235		2,425		(148	)		1998		2008		35
Glendale	WI		16,391		—		2,185		—		2,185		16,391		18,576		(5,737	)		1988		1997		35
Glendale	WI		1,732		—		190		—		190		1,732		1,922		(155	)		1999		2007		35
Glendale	WI		1,732		—		190		—		190		1,732		1,922		(155	)		1999		2007		35
Greenfield(13)	WI		20,540		—		1,500		—		1,500		20,540		22,040		(2,653	)		1999		2004		40
Hartland	WI		1,651		—		180		—		180		1,651		1,831		(171	)		1985		2007		35
Horicon	WI		2,751		—		270		—		270		2,751		3,021		(255	)		2002		2007		35
Jefferson	WI		2,036		—		130		—		130		2,036		2,166		(155	)		1997		2008		30
Kenosha	WI		2,996		—		170		—		170		2,996		3,166		(275	)		1996		2007		30
Kenosha(6)	WI		615		54		17		—		17		669		686		(100	)		1997		2005		35
Menasha	WI		706		—		114		—		114		706		820		(55	)		1994		2008		30
Menasha	WI		822		—		133		—		133		822		955		(64	)		1993		2008		30
Menomonee Falls(14)	WI		13,190		—		4,161		—		4,161		13,190		17,351		(4,617	)		1989		1997		35
Middleton(6)	WI		1,866		48		155		—		155		1,914		2,069		(286	)		1997		2005		35
Monroe	WI		1,348		—		160		—		160		1,348		1,508		(146	)		1990		2007		30
Neenah	WI		1,296		—		304		—		304		1,296		1,600		(95	)		2006		2008		40
Neenah(6)	WI		1,422		77		73		—		73		1,499		1,572		(224	)		1996		2005		35
Oak Creek	WI		1,732		—		190		—		190		1,732		1,922		(198	)		1997		2007		30
Oconomowoc	WI		3,831		—		300		—		300		3,831		4,131		(799	)		1992		2004		35
Onalaska(6)	WI		2,303		65		62		—		62		2,368		2,430		(357	)		1995		2005		35
Oshkosh(6)	WI		1,046		86		61		—		61		1,132		1,193		(168	)		1996		2005		35
Pewaukee	WI		4,766		—		360		—		360		4,766		5,126		(455	)		2001		2007		35
St. Francis(15)	WI		9,645		—		403		—		403		9,645		10,048		(1,739	)		2001		2004		40
St. Francis	WI		2,465		—		190		—		190		2,465		2,655		(234	)		2000		2007		35
St. Francis	WI		2,465		—		190		—		190		2,465		2,655		(234	)		2000		2007		35
Stoughton	WI		2,183		—		230		—		230		2,183		2,413		(215	)		1992		2007		30
Sun Prairie(6)	WI		436		89		85		—		85		525		610		(76	)		1994		2005		35
Waukesha	WI		5,790		—		2,272		—		2,272		5,790		8,062		(2,364	)		1978		1997		30
Waukesha(16)	WI		9,411		1,827		2,765		—		2,765		11,238		14,003		(3,901	)		1985		1997		35
Wauwatosa(17)	WI		11,483		—		1,541		—		1,541		11,483		13,024		(1,621	)		2005		2006		35

107

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
West Allis(18)	WI		8,117		2,911		682		—		682		11,028		11,710		(3,334	)		1996		1997		40
West Springfield	WI		1,732		—		406		—		406		1,732		2,138		(127	)		2007		2008		40
West Springfield	WI		1,566		—		570		—		570		1,566		2,136		(124	)		2001		2008		35
West Springfield	WI		841		—		136		—		136		841		977		(65	)		1993		2008		30
Hurricane	WV		5,419		357		704		—		704		5,776		6,480		(1,399	)		1999		1998		40
			1,520,087		63,914		159,668		—		159,668		1,584,001		1,743,669		(274,932	)
Skilled Nursing Facilities:
Benton	AR		4,659		9		685		—		685		4,668		5,353		(1,545	)		1992		1998		35
Bryant	AR		4,889		16		320		—		320		4,905		5,225		(1,623	)		1989		1998		35
Fort Smith	AR		3,318		—		350		—		350		3,318		3,668		(387	)		2000		2007		35
Hot Springs	AR		2,321		—		54		—		54		2,321		2,375		(1,553	)		1978		1986		35
Lake Village	AR		4,318		15		261		—		261		4,333		4,594		(1,255	)		1998		1998		40
Monticello	AR		3,295		8		300		—		300		3,303		3,603		(956	)		1995		1998		40
Morrilton	AR		3,703		7		250		—		250		3,710		3,960		(1,228	)		1988		1998		35
Morrilton	AR		4,995		2		308		—		308		4,997		5,305		(1,447	)		1996		1998		40
Wynne	AR		4,165		7		327		—		327		4,172		4,499		(1,380	)		1990		1998		35
Chowchilla	CA		1,119		—		109		—		109		1,119		1,228		(622	)		1965		1987		40
Gilroy	CA		1,892		387		714		—		714		2,279		2,993		(1,230	)		1968		1991		15
Orange	CA		5,082		—		1,141		—		1,141		5,082		6,223		(2,226	)		1987		1992		40
East Longmeadow	CT		2,804		—		140		—		140		2,804		2,944		(187	)		1969		2008		20
Hartford	CT		4,190		5,278		350		—		350		9,468		9,818		(1,680	)		1969		2001		35
Winsted	CT		3,516		969		70		—		70		4,485		4,555		(1,053	)		1960		2001		35
Fort Pierce	FL		3,038		—		125		—		125		3,038		3,163		(2,171	)		1960		1985		35
Jacksonville	FL		2,787		319		498		—		498		3,106		3,604		(1,307	)		1965		1996		30
Jacksonville	FL		1,760		3,382		1,503		—		1,503		5,142		6,645		(701	)		1997		2005		40
Pensacola	FL		1,833		—		77		—		77		1,833		1,910		(1,031	)		1962		1987		40
Flowery Branch	GA		3,180		600		562		—		562		3,780		4,342		(1,344	)		1970		1999		30
Buhl	ID		777		—		15		—		15		777		792		(742	)		1913		1986		5
Lasalle	IL		2,703		—		127		—		127		2,703		2,830		(2,061	)		1975		1989		4
Litchfield	IL		2,689		—		30		—		30		2,689		2,719		(1,982	)		1974		1989		4

108

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Berne	IN		1,904		4		150		—		150		1,908		2,058		(403	)		1986		2007		15
Clinton	IN		6,440		20		330		—		330		6,460		6,790		(1,495	)		1971		2007		12
Columbus	IN		3,147		11		200		—		200		3,158		3,358		(526	)		1988		2007		20
East Longmeadow	IN		4,340		—		390		—		390		4,340		4,730		(390	)		1975		2008		20
East Longmeadow	IN		5,116		—		620		—		620		5,116		5,736		(444	)		1967		2008		20
Fowler	IN		3,223		—		300		—		300		3,223		3,523		(286	)		1973		2008		20
Gas City	IN		5,377		261		100		—		100		5,638		5,738		(1,250	)		1974		2007		12
Hartford City	IN		1,848		89		130		—		130		1,937		2,067		(403	)		1988		2007		15
Huntington	IN		3,263		62		160		—		160		3,325		3,485		(660	)		1987		2007		15
Indianapolis	IN		4,829		535		1,700		—		1,700		5,364		7,064		(485	)		1968		2006		35
Knox	IN		1,412		—		300		—		300		1,412		1,712		(136	)		1984		2008		20
Lawrenceburg	IN		3,834		—		720		—		720		3,834		4,554		(296	)		1966		2008		20
Monticello	IN		827		—		180		—		180		827		1,007		(112	)		1988		2008		20
Muncie	IN		4,344		5		220		—		220		4,349		4,569		(988	)		1976		2007		12
Muncie	IN		7,295		125		160		—		160		7,420		7,580		(1,412	)		2001		2007		15
Petersburg	IN		2,352		4		33		—		33		2,356		2,389		(1,574	)		1970		1986		35
Portland	IN		5,313		56		240		—		240		5,369		5,609		(1,485	)		1964		2007		10
Richmond	IN		2,520		—		114		—		114		2,520		2,634		(1,686	)		1975		1986		35
Terre Haute	IN		3,245		227		330		—		330		3,472		3,802		(820	)		1965		2007		35
West Springfield	IN		9,673		—		420		—		420		9,673		10,093		(688	)		1968		2008		20
Winchester	IN		2,430		51		80		—		80		2,481		2,561		(492	)		1986		2007		15
Belleville	KS		1,887		—		213		—		213		1,887		2,100		(1,053	)		1977		1993		30
Hiawatha	KS		788		35		150		—		150		823		973		(479	)		1974		1998		5
Salina	KS		2,463		335		27		—		27		2,798		2,825		(1,397	)		1981		1994		30
Topeka	KS		1,137		58		100		—		100		1,195		1,295		(380	)		1973		1998		35
Wichita	KS		3,168		26		200		—		200		3,194		3,394		(471	)		1965		2004		35
Yates Center	KS		705		—		18		—		18		705		723		(412	)		1967		2002		6
Andover	MA		10,177		3,414		2,000		—		2,000		13,591		15,591		(2,154	)		1992		2006		35
Brighton	MA		9,694		533		2,000		—		2,000		10,227		12,227		(1,783	)		1995		2006		35
Danvers	MA		7,244		1,192		366		—		366		8,436		8,802		(1,856	)		1998		1999		40
East Longmeadow	MA		16,462		—		700		—		700		16,462		17,162		(1,946	)		1985		2006		35

109

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Haverhill	MA		5,734		3,620		660		—		660		9,354		10,014		(4,119	)		1973		1993		30
Kingston(7)	MA		4,890		3,484		2,000		—		2,000		8,374		10,374		(1,363	)		1992		2006		35
Lowell	MA		3,945		4,677		2,500		—		2,500		8,622		11,122		(1,080	)		1966		2006		35
Needham	MA		13,416		647		2,000		—		2,000		14,063		16,063		(2,223	)		1996		2006		35
Reading	MA		8,184		396		1,000		—		1,000		8,580		9,580		(1,616	)		1988		2006		35
South Hadley	MA		7,250		1,105		1,000		—		1,000		8,355		9,355		(1,580	)		1988		2006		35
Springfield(19)	MA		8,250		2,869		2,000		—		2,000		11,119		13,119		(1,099	)		1987		2007		35
Sudbury	MA		10,006		902		4,000		—		4,000		10,908		14,908		(1,833	)		1997		2006		35
West Springfield	MA		9,432		2,544		580		—		580		11,976		12,556		(1,432	)		1960		2006		35
Wilbraham	MA		4,473		396		1,000		—		1,000		4,869		5,869		(1,197	)		1988		2006		35
Worcester	MA		12,182		2,662		500		—		500		14,844		15,344		(2,194	)		1970		2006		35
Cumberland	MD		5,260		600		150		—		150		5,860		6,010		(3,608	)		1968		1985		35
Hagerstown	MD		4,316		170		215		—		215		4,486		4,701		(3,044	)		1971		1985		35
Westminster	MD		6,795		216		80		—		80		7,011		7,091		(4,697	)		1973		1985		35
Duluth	MN		7,377		4,245		1,014		—		1,014		11,622		12,636		(4,115	)		1971		1997		30
Hopkins	MN		4,184		2,273		436		—		436		6,457		6,893		(3,289	)		1961		1985		22
Minneapolis	MN		5,935		2,028		333		—		333		7,963		8,296		(5,076	)		1941		1985		22
Ashland	MO		3,281		—		670		—		670		3,281		3,951		(630	)		1993		2005		35
Columbia	MO		5,182		—		430		—		430		5,182		5,612		(981	)		1994		2005		35
Dixon	MO		1,892		—		330		—		330		1,892		2,222		(434	)		1989		2005		35
Doniphan	MO		4,943		—		120		—		120		4,943		5,063		(1,032	)		1991		2005		35
Forsyth	MO		5,472		—		230		—		230		5,472		5,702		(1,106	)		1993		2005		35
Maryville	MO		2,689		—		51		—		51		2,689		2,740		(1,844	)		1972		1985		35
Seymour	MO		3,120		—		200		—		200		3,120		3,320		(607	)		1990		2005		35
Silex	MO		1,536		—		870		—		870		1,536		2,406		(384	)		1991		2005		35
St. Louis	MO		1,953		—		1,370		—		1,370		1,953		3,323		(443	)		1988		2005		35
St. Louis	MO		7,924		—		683		—		683		7,924		8,607		(2,113	)		1954		2007		10
Strafford	MO		4,441		—		530		—		530		4,441		4,971		(877	)		1995		2005		35
Windsor	MO		2,969		—		350		—		350		2,969		3,319		(586	)		1996		2005		35
Columbus	MS		3,520		197		750		—		750		3,717		4,467		(1,190	)		1976		1998		35
Hendersonville	NC		2,244		—		116		—		116		2,244		2,360		(1,539	)		1979		1985		35

110

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Sparks	NV		3,294		355		740		—		740		3,649		4,389		(1,630	)		1988		1991		40
Beacon	NY		20,710		293		1,000		—		1,000		21,003		22,003		(2,927	)		2002		2006		35
Fishkill	NY		18,399		300		2,000		—		2,000		18,699		20,699		(2,561	)		1996		2006		35
Highland	NY		13,992		276		1,500		—		1,500		14,268		15,768		(2,100	)		1998		2006		35
Columbus	OH		4,333		—		343		—		343		4,333		4,676		(2,473	)		1984		1991		40
Galion	OH		3,420		93		24		—		24		3,513		3,537		(2,671	)		1967		1997		2
Warren	OH		7,489		266		450		—		450		7,755		8,205		(6,025	)		1967		1997		2
Washington Court House	OH		4,086		166		356		—		356		4,252		4,608		(2,404	)		1984		1991		40
Youngstown	OH		7,046		326		60		—		60		7,372		7,432		(5,534	)		1962		1997		2
Grandfield	OK		—		—		—		—		—		—		—		—			1965		2007		—
Lawton	OK		201		75		130		—		130		276		406		(39	)		1968		2007		20
Lawton	OK		4,946		282		196		—		196		5,228		5,424		(691	)		1985		2007		20
Temple	OK		1,405		—		23		—		23		1,405		1,428		(375	)		1971		2007		10
Tuttle	OK		1,489		340		35		—		35		1,829		1,864		(460	)		1960		2007		10
Greensburg	PA		9,129		—		769		—		769		9,129		9,898		(2,435	)		1971		2007		10
Kingston	PA		2,507		—		209		—		209		2,507		2,716		(334	)		1995		2007		20
Peckville	PA		1,302		—		116		—		116		1,302		1,418		(174	)		1991		2007		20
Beaufort(20)	SC		10,399		—		923		—		923		10,399		11,322		(1,127	)		1970		2007		20
Bennettsville	SC		6,555		—		674		—		674		6,555		7,229		(1,165	)		1958		2007		15
Conway	SC		10,423		—		1,158		—		1,158		10,423		11,581		(782	)		1975		2007		30
Mt. Pleasant	SC		5,916		—		648		—		648		5,916		6,564		(1,052	)		1977		2007		15
Celina	TN		861		—		150		—		150		861		1,011		(465	)		1975		1993		30
Decatur	TN		3,329		27		193		—		193		3,356		3,549		(1,100	)		1981		1998		35
Harrogate	TN		6,058		—		664		—		664		6,058		6,722		(808	)		1990		2007		20
Jonesborough	TN		2,562		58		65		—		65		2,620		2,685		(1,387	)		1982		1993		30
Madison	TN		6,415		500		1,120		—		1,120		6,915		8,035		(2,139	)		1967		1998		35
Baytown	TX		2,010		80		61		—		61		2,090		2,151		(1,045	)		1970		1990		40
Baytown	TX		2,496		224		90		—		90		2,720		2,810		(1,319	)		1975		1990		40
Center	TX		1,532		213		22		—		22		1,745		1,767		(849	)		1972		1990		40
Clarksville	TX		3,075		174		210		—		210		3,249		3,459		(660	)		1989		2005		35
DeSoto	TX		4,662		1,046		610		—		610		5,708		6,318		(1,087	)		1987		2005		35

111

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Flowery Mound	TX		4,873		41		1,211		—		1,211		4,914		6,125		(993	)		1995		2002		35
Garland	TX		1,727		212		238		—		238		1,939		2,177		(946	)		1970		1990		40
Garland	TX		6,474		—		750		—		750		6,474		7,224		(392	)		2008		2008		30
Gilmer	TX		4,818		88		248		—		248		4,906		5,154		(1,511	)		1990		1998		35
Houston	TX		4,262		301		408		—		408		4,563		4,971		(2,527	)		1982		1990		30
Humble	TX		1,929		400		140		—		140		2,329		2,469		(1,089	)		1972		1990		40
Huntsville	TX		2,037		32		135		—		135		2,069		2,204		(1,045	)		1968		1990		40
Kirbyville	TX		2,533		258		350		—		350		2,791		3,141		(457	)		1987		2006		35
Linden	TX		2,520		75		25		—		25		2,595		2,620		(1,421	)		1968		1993		30
Marshall	TX		6,291		—		265		—		265		6,291		6,556		(438	)		2008		2008		30
McKinney	TX		4,797		—		1,263		—		1,263		4,797		6,060		(1,572	)		1967		2000		30
McKinney	TX		4,737		170		756		—		756		4,907		5,663		(524	)		2006		2006		35
Mt. Pleasant	TX		2,505		158		40		—		40		2,663		2,703		(1,443	)		1970		1993		30
Nacogdoches	TX		1,211		43		135		—		135		1,254		1,389		(650	)		1973		1990		40
New Boston	TX		2,366		172		44		—		44		2,538		2,582		(1,353	)		1966		1993		30
Omaha	TX		1,579		92		28		—		28		1,671		1,699		(907	)		1970		1993		30
San Antonio	TX		4,536		—		—		—		—		4,536		4,536		(972	)		1988		2002		35
San Antonio	TX		2,320		399		308		—		308		2,719		3,027		(858	)		1986		2004		35
Sherman	TX		2,075		87		67		—		67		2,162		2,229		(1,177	)		1971		1993		30
Texarkana	TX		1,244		—		87		—		87		1,244		1,331		(1,126	)		1983		1986		5
Trinity	TX		2,466		237		510		—		510		2,703		3,213		(449	)		1985		2006		35
Waxahachie	TX		3,493		406		319		—		319		3,899		4,218		(2,042	)		1976		1987		40
West Springfield	TX		6,245		—		534		—		534		6,245		6,779		(493	)		2008		2008		30
Wharton	TX		2,596		269		380		—		380		2,865		3,245		(405	)		1988		2006		35
Salt Lake City	UT		2,479		34		280		—		280		2,513		2,793		(370	)		1972		2004		35
Annandale	VA		7,752		603		487		—		487		8,355		8,842		(5,419	)		1963		1985		35
Charlottesville	VA		4,620		337		362		—		362		4,957		5,319		(3,226	)		1964		1985		35
Emporia	VA		6,960		320		473		—		473		7,280		7,753		(1,215	)		1971		2007		15
Petersburg	VA		2,215		1,486		93		—		93		3,701		3,794		(1,519	)		1972		1985		35
Petersburg	VA		2,945		1,474		94		—		94		4,419		4,513		(2,020	)		1976		1985		35
South Boston	VA		1,335		—		176		—		176		1,335		1,511		(661	)		1966		2007		1

112

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Bellingham	WA		8,526		—		620		—		620		8,526		9,146		(212	)		1999		2008		40
Everett	WA		7,045		—		830		—		830		7,045		7,875		(1,073	)		1995		2004		35
Moses Lake	WA		4,307		1,326		304		—		304		5,633		5,937		(2,395	)		1972		1994		35
Moses Lake	WA		2,385		—		164		—		164		2,385		2,549		(1,219	)		1988		1994		30
Seattle	WA		5,752		182		1,223		—		1,223		5,934		7,157		(2,288	)		1993		1994		40
Shelton	WA		4,682		—		327		—		327		4,682		5,009		(1,514	)		1998		1997		40
Vancouver	WA		6,254		—		680		—		680		6,254		6,934		(953	)		1991		2004		35
Chilton	WI		2,423		116		55		—		55		2,539		2,594		(1,679	)		1963		1986		35
Florence	WI		1,529		5		15		—		15		1,534		1,549		(1,024	)		1970		1986		35
Green Bay	WI		2,255		—		300		—		300		2,255		2,555		(1,508	)		1965		1986		35
Sheboygan	WI		1,697		22		348		—		348		1,719		2,067		(1,132	)		1967		1986		35
St. Francis	WI		535		—		80		—		80		535		615		(357	)		1960		1986		35
Waukesha	WI		13,546		1,850		2,196		—		2,196		15,396		17,592		(6,106	)		1973		1997		30
Wisconsin Dells	WI		1,697		1,517		81		—		81		3,214		3,295		(1,377	)		1972		1986		35
Logan	WV		3,006		—		100		—		100		3,006		3,106		(776	)		1987		2004		35
Ravenswood	WV		2,986		—		250		—		250		2,986		3,236		(756	)		1987		2004		35
South Charleston	WV		4,907		—		750		—		750		4,907		5,657		(1,360	)		1987		2004		35
White Sulphur	WV		2,894		—		250		—		250		2,894		3,144		(766	)		1987		2004		35
Casper	WY		5,816		—		930		—		930		5,816		6,746		(1,328	)		1994		2004		35
Sheridan	WY		4,401		—		836		—		836		4,401		5,237		(991	)		1989		2004		35
			746,909		68,879		82,219		—		82,219		815,788		898,007		(230,856	)
Continuing Care Retirement Communities:
Chandler	AZ		7,039		3,868		1,980		—		1,980		10,907		12,887		(2,255	)		1992		2002		35
Sterling	CO		2,716		—		400		—		400		2,716		3,116		(1,426	)		1979		1994		30
Largo	FL		8,508		2,625		910		—		910		11,133		12,043		(6,593	)		1972		2002		1
Northborough	MA		2,512		11,844		300		—		300		14,356		14,656		(3,799	)		1968		1998		30
Auburn	ME		10,502		—		400		—		400		10,502		10,902		(1,297	)		1982		2007		35
Gorham	ME		15,590		—		800		—		800		15,590		16,390		(1,602	)		1990		2007		35
York	ME		10,749		—		1,300		—		1,300		10,749		12,049		(1,033	)		2000		2007		35

113

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Tulsa	OK		7,267		951		500		—		500		8,218		8,718		(1,120	)		1981		2007		15
Trenton	TN		3,004		—		174		—		174		3,004		3,178		(701	)		1974		2000		40
Corpus Christi	TX		15,430		13,591		1,848		—		1,848		29,021		30,869		(9,393	)		1985		1997		40
			83,317		32,879		8,612		—		8,612		116,196		124,808		(29,219	)
Specialty Hospitals:
Scottsdale	AZ		5,924		195		242		—		242		6,119		6,361		(3,278	)		1986		1988		40
Tucson	AZ		9,435		—		1,275		—		1,275		9,435		10,710		(4,147	)		1992		1992		40
Orange	CA		3,715		—		700		—		700		3,715		4,415		(759	)		2000		2004		40
Tustin	CA		33,092		—		1,800		—		1,800		33,092		34,892		(6,273	)		1991		2004		35
Conroe	TX		3,772		—		900		—		900		3,772		4,672		(915	)		1992		2004		35
Houston	TX		3,272		8,207		1,097		—		1,097		11,479		12,576		(1,260	)		1999		2004		35
The Woodlands	TX		2,472		—		100		—		100		2,472		2,572		(603	)		1995		2004		35
			61,682		8,402		6,114		—		6,114		70,084		76,198		(17,235	)
Triple Net Medical Office Buildings:
Huntsville(21)	AL		11,061		—		5,645		—		5,645		11,061		16,706		(952	)		1994		2007		30
Chula Vista(22)	CA		18,108		—		4,080		—		4,080		18,108		22,188		(619	)		2005		2008		42
East Longmeadow	FL		2,244		—		280		—		280		2,244		2,524		(94	)		1993		2008		30
East Longmeadow	FL		3,433		—		1,010		—		1,010		3,433		4,443		(143	)		1984		2008		30
East Longmeadow	FL		2,786		—		950		—		950		2,786		3,736		(116	)		1987		2008		30
Englewood	FL		2,314		—		1,220		—		1,220		2,314		3,534		(96	)		1992		2008		30
Ft. Myers	FL		2,109		—		1,930		—		1,930		2,109		4,039		(88	)		1989		2008		30
Naples	FL		2,736		—		1,000		—		1,000		2,736		3,736		(98	)		1999		2008		35
Pt. Charlotte	FL		2,541		—		1,700		—		1,700		2,541		4,241		(106	)		1985		2008		30
Sarasota	FL		2,948		—		2,000		—		2,000		2,948		4,948		(123	)		1996		2008		30
Venice	FL		2,642		—		1,700		—		1,700		2,642		4,342		(110	)		1997		2008		30
Elkhart(23)	IN		2,743		—		107		—		107		2,743		2,850		(198	)		1994		2007		30
LaPorte(23)	IN		1,676		—		93		—		93		1,676		1,769		(121	)		1997		2007		30
Mishawaka(24)	IN		6,741		—		1,023		—		1,023		6,741		7,764		(487	)		1993		2007		30
South Bend(25)	IN		3,013		—		328		—		328		3,013		3,341		(218	)		1996		2007		30

114

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Berlin	MD		1,717		—		—		—		—		1,717		1,717		(72	)		1994		2008		30
East Longmeadow	MI		2,748		—		180		—		180		2,748		2,928		(115	)		1997		2008		30
Madison Heights	MI		2,546		—		180		—		180		2,546		2,726		(91	)		2002		2008		35
Houston	TX		21,955		—		1,000		—		1,000		21,955		22,955		(2,121	)		2006		2007		25
			96,061		—		24,426		—		24,426		96,061		120,487		(5,968	)
Medical Office Buildings:
Burbank(26)	CA		23,031		2,505		—		—		—		25,536		25,536		(1,035	)		2004		2008		41
Castro Valley(27)	CA		5,003		472		—		—		—		5,475		5,475		(241	)		1998		2008		40
Lynwood(28)	CA		15,811		1,301		—		—		—		17,112		17,112		(958	)		1993		2008		29
San Gabriel(29)	CA		16,135		1,288		—		—		—		17,423		17,423		(609	)		2004		2008		46
Santa Clarita(30)	CA		26,284		2,681		6,870		374		7,244		28,965		36,209		(1,070	)		2005		2008		47
Torrance	CA		7,198		1,318		2,980		173		3,153		8,516		11,669		(600	)		1989		2008		23
Tamarac(31)	FL		4,704		169		1,492		—		1,492		4,873		6,365		(339	)		1980		2007		40
Augusta(32)	GA		2,061		548		—		12		12		2,609		2,621		(397	)		1972		2006		40
Augusta(32)	GA		2,359		621		587		324		911		2,980		3,891		(486	)		1983		2006		40
Evans(32)	GA		891		36		—		198		198		927		1,125		(157	)		1940		2006		40
Buffalo Grove(31)	IL		1,383		39		1,031		30		1,061		1,422		2,483		(103	)		1992		2007		40
Grayslake(31)	IL		2,429		136		2,198		—		2,198		2,565		4,763		(185	)		1996		2007		40
Gurnee(31)	IL		1,436		3		126		—		126		1,439		1,565		(125	)		2005		2007		40
Gurnee(31)	IL		1,418		7		176		—		176		1,425		1,601		(106	)		2002		2007		40
Gurnee(31)	IL		821		—		72		—		72		821		893		(55	)		2002		2007		40
Gurnee(31)	IL		5,445		3		492		—		492		5,448		5,940		(366	)		2001		2007		40
Gurnee(31)	IL		1,489		10		147		—		147		1,499		1,646		(100	)		1996		2007		40
Libertyville(31)	IL		5,066		155		153		37		190		5,221		5,411		(317	)		1990		2007		40
Libertyville(31)	IL		2,598		25		10		—		10		2,623		2,633		(141	)		1980		2007		40
Libertyville(31)	IL		3,301		—		336		—		336		3,301		3,637		(219	)		1988		2007		40
Round Lake(31)	IL		891		19		1,956		—		1,956		910		2,866		(86	)		1984		2007		40
Vernon Hills(31)	IL		946		18		1,914		35		1,949		964		2,913		(106	)		1986		2007		40
Covington(32)	LA		6,026		763		0		11		11		6,789		6,800		(846	)		1994		2006		40
Lafayette(32)	LA		972		105		0		36		36		1,077		1,113		(151	)		1984		2006		40

115

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Lafayette(32)	LA		2,145		307		—		30		30		2,452		2,482		(387	)		1984		2006		40
Madeville(32)	LA		1,111		113		—		35		35		1,224		1,259		(181	)		1987		2006		40
Metairie(32)	LA		3,729		477		—		31		31		4,206		4,237		(544	)		1986		2006		40
Metairie(32)	LA		747		366		—		21		21		1,113		1,134		(230	)		1980		2006		40
Slidell(32)	LA		1,720		580		1,421		—		1,421		2,300		3,721		(254	)		1986		2007		40
Slidell(32)	LA		1,790		534		1,314		—		1,314		2,324		3,638		(246	)		1990		2007		40
Arnold	MO		1,371		19		874		—		874		1,390		2,264		(82	)		1999		2007		35
Fenton	MO		1,737		103		—		—		—		1,840		1,840		(106	)		2003		2007		35
St. Louis	MO		14,362		956		—		—		—		15,318		15,318		(925	)		2003		2007		35
St. Louis	MO		12,416		219		—		—		—		12,635		12,635		(857	)		1993		2007		30
St. Louis	MO		4,032		117		—		—		—		4,149		4,149		(292	)		1975		2007		30
St. Louis	MO		5,052		114		—		—		—		5,166		5,166		(344	)		1980		2007		30
St. Louis	MO		2,549		75		1,364		—		1,364		2,624		3,988		(268	)		1983		2007		20
Henderson(33)	NV		23,418		1,701		—		—		—		25,119		25,119		(920	)		1999		2008		46
Reno(34)	NV		10,988		1,662		1,254		—		1,254		12,650		13,904		(2,089	)		2004		2008		33
Columbus(31)	OH		10,738		27		698		—		698		10,765		11,463		(674	)		1999		2007		40
Hillsboro(35)	OR		28,480		2,625		—		—		—		31,105		31,105		(1,125	)		2003		2008		45
Irmo(36)	SC		8,754		13		2,177		—		2,177		8,767		10,944		(529	)		2004		2007		40
Walterboro(32)	SC		2,033		200		10		—		10		2,233		2,243		(321	)		1998		2006		40
Jasper(32)	TN		3,862		113		7		—		7		3,975		3,982		(424	)		1998		2006		40
Brownsville(32)	TX		381		5		351		—		351		386		737		(73	)		1989		2006		40
Frisco(32)	TX		885		68		210		—		210		953		1,163		(208	)		1996		2006		40
Houston(32)	TX		1,341		968		260		71		331		2,309		2,640		(445	)		1982		2006		40
Houston(32)	TX		858		512		5		—		5		1,370		1,375		(113	)		1982		2006		40
Keller(32)	TX		270		12		195		62		257		282		539		(51	)		1995		2006		40
Mansfield(32)	TX		1,038		115		152		—		152		1,153		1,305		(190	)		1998		2006		40
Christiansburg(32)	VA		649		257		71		22		93		906		999		(94	)		1997		2006		40
Midlothian(32)	VA		252		100		190		83		273		352		625		(84	)		1985		2006		40
Richmond(32)	VA		3,038		1,051		4		—		4		4,089		4,093		(497	)		1976		2006		40
Vancouver	WA		31,554		343		—		—		—		31,897		31,897		(1,990	)		2001		2007		44
Vancouver	WA		6,379		13		—		—		—		6,392		6,392		(347	)		1972		2007		38

116

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009
		Initial Cost to		Cost						Gross Amount at which													Life on which
		Company		Capitalized						Carried at Close of Period(1)									Original				Depreciation in the
		Buiding and		Subsequent to				Land				Buildings and				Accumulated			Construction		Date		Latest Income Statement
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date		Acquired		is Computed (in Years)
(Dollar amounts in thousands)
Vancouver	WA		29,518		58		—		—		—		29,576		29,576		(2,076	)		1980		2007		29
Vancouver	WA		11,615		28		—		—		—		11,643		11,643		(616	)		1999		2007		39
Vancouver	WA		8,376		—		699		—		699		8,376		9,075		(405	)		1994		2007		43
Vancouver	WA		4,223		—		2,969		—		2,969		4,223		7,192		(242	)		1995		2007		36
Vancouver	WA		871		—		1,068		—		1,068		871		1,939		(57	)		1997		2007		33
			379,980		26,073		35,833		1,585		37,418		406,053		443,471		(27,084	)
Grand Total		$	2,888,036	$	200,147	$	316,872	$	1,585	$	318,457	$	3,088,183	$	3,406,640	$	(585,294	)

(1)	Also represents the approximate cost for federal income tax purposes.
(2)	Gross amount at which land is carried at close of period also represents initial costs to the Company.
(3)	Real estate is security for notes payable in the aggregate of $25,685,179 at December 31, 2009.
(4)	Real estate is security for notes payable in the aggregate of $6,379,516 at December 31, 2009.
(5)	Real estate is security for notes payable in the aggregate of $25,611,462 at December 31, 2009.
(6)	Real estate is security for notes payable in the aggregate of $53,889,137 at December 31, 2009.
(7)	Real estate is security for notes payable in the aggregate of $13,617,061 at December 31, 2009.
(8)	Real estate is security for notes payable in the aggregate of $9,868,018 at December 31, 2009.
(9)	Real estate is security for notes payable in the aggregate of $2,582,517 at December 31, 2009.
(10)	Real estate is security for notes payable in the aggregate of $2,247,075 at December 31, 2009.
(11)	Real estate is security for notes payable in the aggregate of $2,626,882 at December 31, 2009.
(12)	Real estate is security for notes payable in the aggregate of $8,157,458 at December 31, 2009.
(13)	Real estate is security for notes payable in the aggregate of $8,785,735 at December 31, 2009.
(14)	Real estate is security for notes payable in the aggregate of $8,370,547 at December 31, 2009.
(15)	Real estate is security for notes payable in the aggregate of $6,000,000 at December 31, 2009.
(16)	Real estate is security for notes payable in the aggregate of $5,289,249 at December 31, 2009.

117

(17)	Real estate is security for notes payable in the aggregate of $6,600,000 at December 31, 2009.
(18)	Real estate is security for notes payable in the aggregate of $5,150,000 at December 31, 2009.
(19)	Real estate is security for notes payable in the aggregate of $5,109,219 at December 31, 2009.
(20)	Real estate is security for notes payable in the aggregate of $4,775,774 at December 31, 2009.
(21)	Real estate is security for notes payable in the aggregate of $6,342,688 at December 31, 2009.
(22)	Real estate is security for notes payable in the aggregate of $16,000,000 at December 31, 2009.
(23)	Real estate is security for notes payable in the aggregate of $2,155,356 at December 31, 2009.
(24)	Real estate is security for notes payable in the aggregate of $3,807,169 at December 31, 2009.
(25)	Real estate is security for notes payable in the aggregate of $1,567,104 at December 31, 2009.
(26)	Real estate is security for notes payable in the aggregate of $14,149,662 at December 31, 2009.
(27)	Real estate is security for notes payable in the aggregate of $2,870,208 at December 31, 2009.
(28)	Real estate is security for notes payable in the aggregate of $9,726,100 at December 31, 2009.
(29)	Real estate is security for notes payable in the aggregate of $9,813,982 at December 31, 2009.
(30)	Real estate is security for notes payable in the aggregate of $23,707,530 at December 31, 2009.
(31)	Real estate is security for notes payable in the aggregate of $46,352,315 at December 31, 2009.
(32)	Real estate is security for notes payable in the aggregate of $44,408,988 at December 31, 2009.
(33)	Real estate is security for notes payable in the aggregate of $12,663,819 at December 31, 2009.
(34)	Real estate is security for notes payable in the aggregate of $8,024,739 at December 31, 2009.
(35)	Real estate is security for notes payable in the aggregate of $20,994,567 at December 31, 2009.
(36)	Real estate is security for notes payable in the aggregate of $8,127,187 at December 31, 2009.

118

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
NATIONWIDE HEALTH PROPERTIES, INC.
DECEMBER 31, 2009

	Real Estate			Accumulated
	Properties			Depreciation
	(Dollar amounts in thousands)
Balances at December 31, 2006	$	2,848,787		$	372,201
Acquisitions		661,801			92,325
Improvements and Construction		17,719			3,497
Sales and Transfers to Assets Held for Sale		(330,331	)		(57,158	)
Balances at December 31, 2007		3,197,976			410,865
Acquisitions		375,724			103,221
Improvements and Construction		45,544			4,147
Sales and Transfers to Assets Held for Sale		(219,031	)		(28,121	)
Balances at December 31, 2008		3,400,213			490,112
Acquisitions		—			—
Improvements and Construction		34,298			109,104
Sales and Transfers to Assets Held for Sale		(27,871	)		(13,922	)
Balances at December 31, 2009	$	3,406,640		$	585,294

119

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

None.

Item 9A.   Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial and Portfolio Officer, of the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based upon that evaluation, our Chief Executive Officer and Chief Financial and Portfolio Officer concluded that our disclosure controls and procedures were effective as of the end of the quarterly period covered by this report. No change in our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

The management of Nationwide Health Properties, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such item is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial and Portfolio Officer, we assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2009. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2009, the company’s internal control over financial reporting is effective.

The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the fourth quarter of 2009 that materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

120

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Stockholders of Nationwide Health Properties, Inc.

We have audited Nationwide Health Properties, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Nationwide Health Properties, 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’s Annual 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, Nationwide Health Properties, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, 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 Nationwide Health Properties, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of income, equity, and cash flows for each of the three years in the period ended December 31, 2009 of Nationwide Health Properties, Inc. and our report dated February 17, 2010 expressed an unqualified opinion thereon.

/s/  ERNST & YOUNG LLP

Irvine, California

February 17, 2010

121

PART III

Item 9B.   Other Information.

None.

Item 10.   Directors, Executive Officers and Corporate Governance.

The information required by this item is presented (i) under the captions “Executive Officers of the Company” and “Business Code of Conduct & Ethics” in Item 1 of this report, and (ii) in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 4, 2010, under the captions “Directors Standing for Election,” “Directors Continuing in Office,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Stockholder Proposals for the 2011 Annual Meeting,” “Audit Committee” and “Board Composition,” and is incorporated herein by reference.

Item 11.   Executive Compensation.

The information required by this item is presented under the captions “How are directors compensated?,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report” and “Executive Compensation” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 4, 2010, and is incorporated herein by reference.

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

The information required by this item is presented under the caption “Stock Ownership” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 4, 2010, and is incorporated herein by reference.

The information required by this item is presented under the caption “Equity Compensation Plans” in Item 5 of this report, and is incorporated herein by reference.

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is presented under the captions “Certain Relationships and Related Transactions,” “Compensation Committee Interlocks and Insider Participation” and “Board Composition” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 4, 2010, and is incorporated herein by reference.

Item 14.   Principal Accountant Fees and Services.

The information required by this item is presented under the caption “Audit Fees” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 4, 2010, and is incorporated herein by reference.

122

PART IV

Item 15.   Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements.

	Page
Report of Independent Registered Public Accounting Firm		58
Consolidated Balance Sheets at December 31, 2009 and 2008		59
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007		60
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009, 2008 and 2007		61
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007		62
Notes to Consolidated Financial Statements		63
(2) Financial Statement Schedules
Schedule III Real Estate and Accumulated Depreciation		119

All other schedules have been omitted because the required information is not significant or is included in the financial statements or notes thereto, or is not applicable.

(b) Exhibits

Exhibit No.			Description
	2	.1	Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008, by and among the Company, Pacific Medical Buildings LLC (“PMB”), and certain of PMB’s affiliates, filed as Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.(1)
	2	.2	First Amendment to Formation and Contribution Agreement and joint Escrow Instructions, dated as of March 10, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.2 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.(2)
	2	.3	Due Diligence Waiver and Second Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.3 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.4	Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.4 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.5	Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.5 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.6	Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.6 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.7	Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of May 12, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.7 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.

123

Exhibit No.			Description
	2	.8	Seventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 24, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.8 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.9	Eighth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of July 25, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.9 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.10	Ninth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of August 27, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.10 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.11	Tenth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of October 21, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.11 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.12	Eleventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 1, 2009, by and among the Company, PMB, and certain of PMB’s affiliates, filed as exhibit 2.1 to the Company’s Form 8-K dated June 1, 2009, and incorporated herein by this reference.
	2	.13	Twelfth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 1, 2010, by and among the Company, PMB, and certain of PMB’s affiliates, filed as 2.1 to the Company’s Form 8-K dated February 5, 2010, and incorporated herein by this reference.
	3	.1	Charter of the Company, filed as Exhibit 3.2 to the Company’s Form 8-K dated August 1, 2008, and incorporated herein by this reference.
	3	.2	Bylaws of the Company, as amended and restated on February 10, 2009, filed as Exhibit 3.1 to the Company’s Form 8-K dated February 17, 2009, and incorporated herein by this reference.
	4	.1	Indenture dated as of August 19, 1997, between the Company and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333-32135) dated July 25, 1997, and incorporated herein by this reference.
	4	.2	Indenture, dated July 14, 2006, between the Company and J.P. Morgan Trust Company, National Association, filed as Exhibit 4.1 to the Company’s Form 8-K dated July 14, 2006, and incorporated herein by this reference.
	4	.3	Form of 6.50% Note Due 2011, filed as Exhibit 4.3 to the Company’s Form 8-K dated July 14, 2006, and incorporated herein by this reference.
	4	.4	Specimen Common Stock Certificate, filed as Exhibit 4.6 to the Company’s Registration Statement on Form S-3 (No. 333-127366) dated August 9, 2005, and incorporated herein by this reference.
	4	.5	Indenture, dated October 19, 2007, between the Company and The Bank of New York Trust Company, N.A., filed as Exhibit 4.1 to the Company’s Form 8-K dated October 19, 2007, and incorporated herein by this reference.
	10	.1	1989 Stock Option Plan of the Company, as Amended and Restated April 20, 2001, filed as Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.*
	10	.2	Form of Stock Option Agreement under the 1989 Stock Option Plan of the Company, as Amended and Restated April 20, 2001, filed as Exhibit 10.2 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*
	10	.3(a)	Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Appendix B to the Company’s Proxy Statement filed with the Commission pursuant to Section 14(a) of the Exchange Act on March 24, 2005, and incorporated herein by this reference.*
	10	.3(b)	First Amendment to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, dated October 28, 2008, filed as Exhibit 10.1 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*

124

Exhibit No.			Description
	10	.4(a)	Nationwide Health Properties, Inc. Retirement Plan for Directors, as Amended and Restated April 20, 2006, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by this reference.*
	10	.4(b)	Amendment to the Nationwide Health Properties, Inc. Retirement Plan for Directors, as Amended and Restated April 20, 2006, filed as Exhibit 10.9 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.5	Amended and Restated Deferred Compensation Plan of the Company, dated October 28, 2008, filed as Exhibit 10.16 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.6	Form of Amended and Restated Deferred Compensation Election and Agreement under the Nationwide Health Properties, Inc. Amended and Restated Deferred Compensation Plan, filed as Exhibit 10.7 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.7	Form of Deferred Compensation Election and Agreement under the Nationwide Health Properties, Inc. Amended and Restated Deferred Compensation Plan, filed as Exhibit 10.8 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.8(a)	Amended and Restated Credit Agreement, dated as of October 20, 2005, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and 23 additional banks, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by this reference.
	10	.8(b)	First Amendment to Amended and Restated Credit Agreement, dated as of December 15, 2006, among the Company, the Lender party thereto, JPMorgan Chase Bank, N.A., as administrative agent and 20 additional banks, filed as Exhibit 10.1 to the Company’s Form 8-K dated December 18, 2006, and incorporated herein by this reference.
	10	.9	Form of Indemnity Agreement for certain officers and directors of the Company, filed as Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference.*
	10	.10	Executive Employment Security Policy, as Amended and Restated April 20, 2001, filed as Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.*
	10	.11	Form of Change in Control Agreement with certain officers of the Company, filed as Exhibit 10.10 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.12	Retirement and Severance Agreement, dated April 16, 2004, by and between the Company and R. Bruce Andrews, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by this reference.*
	10	.13	Second Amended and Restated Employment Agreement, dated as of October 28, 2008, by and between the Company and Douglas M. Pasquale, filed as Exhibit 10.11 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.14	Separation Agreement, dated April 5, 2005, by and between the Company and Mark L. Desmond, filed as Exhibit 10.1 to the Company’s Form 8-K dated April 5, 2005, and incorporated herein by this reference.*
	10	.15	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Douglas M. Pasquale, filed as Exhibit 10.15 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*
	10	.16	Form of Stock Unit Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.3 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.17	Form of Stock Appreciation Rights Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.4 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.18	Form of Performance Share Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.5 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.19	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Abdo H. Khoury, filed as Exhibit 10.19 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*

125

Exhibit No.			Description
	10	.20	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Donald D. Bradley, filed as Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*
	10	.21	Form of Restricted Stock Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2007, and incorporated herein by this reference.*
	10	.22(a)	Master Lease Agreement, dated May 31, 2006, by and among the Company and the other entities listed on Schedule I thereto, filed as Exhibit 2.3 to the Company’s Form 8-K dated June 6, 2006, and incorporated herein by this reference.
	10	.22(b)	First Amendment to Master Lease and Letter of Credit Agreement and Consent of Guarantor, dated June 29, 2006 by and among the Company, the entities listed on the signature pages thereto as “Tenant,” and Hearthstone Senior Services, L.P., filed as Exhibit 10.1 to the Company’s Form 8-K/A dated June 30, 2006, and incorporated herein by this reference.
	10	.23	Guaranty of Obligations, dated as of September 18, 2008, by and among Jeffrey L. Rush, Mark D. Toothacre, Elizabeth A. Powell, Kimberly B. Cochrane and Robert A. Rosenthal, as guarantors, and the Company, filed as Exhibit 10.28 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	10	.24(a)	Form of Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., filed as Exhibit T to the Formation and Contribution Agreement and Joint Escrow Instructions, filed as Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	10	.24(b)	First Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of May 12, 2008, filed as Exhibit 10.29(b) to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	10	.24(c)	Second Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of February 9, 2009, filed as Exhibit 10.29(c) to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	10	.24(d)	Third Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of February 1, 2010.
	10	.25	Amended and Restated Pipeline Property Agreement, dated effective as of February 1, 2010, by and among, the Company, NHP/PMB L.P., PMB LLC and PMB Real Estate Services.
	12		Ratio of Earnings to Fixed Charges.
	21		Subsidiaries of the Company.
	23	.1	Consent of Ernst & Young LLP.
	31		Rule 13a-14(a)/15d-14(a) Certifications of CEO and CFO.
	32		Section 1350 Certifications of CEO and CFO.

(1)	Exhibits D, E, P-2, V-1, V-2, W, X, Y and BB have been omitted but will be furnished supplementally to the Securities and Exchange Commission upon request.
(2)	Exhibit V-1 has been omitted but will be furnished supplementally to the Securities and Exchange Commission upon request.
*	Management contract or compensatory plan or arrangement.

126

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATIONWIDE HEALTH PROPERTIES, INC.

By:  /s/  Douglas M. Pasquale

Douglas M. Pasquale

Chairman of the Board of Directors and

President and Chief Executive Officer

Dated: February 17, 2010

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

Signature	Title	Date
/s/  Douglas M. Pasquale Douglas M. Pasquale	Chairman and President and Chief Executive Officer	February 17, 2010
/s/  Abdo H. Khoury Abdo H. Khoury	Executive Vice President and Chief Financial and Portfolio Officer (Principal Financial and Accounting Officer)	February 17, 2010
/s/  R. Bruce Andrews R. Bruce Andrews	Director	February 17, 2010
/s/  David R. Banks David R. Banks	Director	February 17, 2010
/s/  William K. Doyle William K. Doyle	Director	February 17, 2010
/s/  Richard I. Gilchrist Richard I. Gilchrist	Director	February 17, 2010
/s/  Charles D. Miller Charles D. Miller	Director	February 17, 2010
/s/  Robert D. Paulson Robert D. Paulson	Director	February 17, 2010
/s/  Jeffrey L. Rush Jeffrey L. Rush	Director	February 17, 2010
/s/  Keith P. Russell Keith P. Russell	Director	February 17, 2010
/s/  Jack D. Samuelson Jack D. Samuelson	Director	February 17, 2010

127

INDEX TO EXHIBITS

Exhibit No.			Description
	2	.1	Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008, by and among the Company, Pacific Medical Buildings LLC (“PMB”), and certain of PMB’s affiliates, filed as Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.(1)
	2	.2	First Amendment to Formation and Contribution Agreement and joint Escrow Instructions, dated as of March 10, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.2 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.(2)
	2	.3	Due Diligence Waiver and Second Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.3 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.4	Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.4 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.5	Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.5 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.6	Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.6 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	2	.7	Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of May 12, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.7 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.8	Seventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 24, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.8 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.9	Eighth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of July 25, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.9 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.10	Ninth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of August 27, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.10 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.11	Tenth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of October 21, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.11 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	2	.12	Eleventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 1, 2009, by and among the Company, PMB, and certain of PMB’s affiliates, filed as exhibit 2.1 to the Company’s Form 8-K dated June 1, 2009, and incorporated herein by this reference.
	2	.13	Twelfth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 1, 2010, by and among the Company, PMB, and certain of PMB’s affiliates, filed as 2.1 to the Company’s Form 8-K dated February 5, 2010, and incorporated herein by this reference.
	3	.1	Charter of the Company, filed as Exhibit 3.2 to the Company’s Form 8-K dated August 1, 2008, and incorporated herein by this reference.

Exhibit No.			Description
	3	.2	Bylaws of the Company, as amended and restated on February 10, 2009, filed as Exhibit 3.1 to the Company’s Form 8-K dated February 17, 2009, and incorporated herein by this reference.
	4	.1	Indenture dated as of August 19, 1997, between the Company and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333-32135) dated July 25, 1997, and incorporated herein by this reference.
	4	.2	Indenture, dated July 14, 2006, between the Company and J.P. Morgan Trust Company, National Association, filed as Exhibit 4.1 to the Company’s Form 8-K dated July 14, 2006, and incorporated herein by this reference.
	4	.3	Form of 6.50% Note Due 2011, filed as Exhibit 4.3 to the Company’s Form 8-K dated July 14, 2006, and incorporated herein by this reference.
	4	.4	Specimen Common Stock Certificate, filed as Exhibit 4.6 to the Company’s Registration Statement on Form S-3 (No. 333-127366) dated August 9, 2005, and incorporated herein by this reference.
	4	.5	Indenture, dated October 19, 2007, between the Company and The Bank of New York Trust Company, N.A., filed as Exhibit 4.1 to the Company’s Form 8-K dated October 19, 2007, and incorporated herein by this reference.
	10	.1	1989 Stock Option Plan of the Company, as Amended and Restated April 20, 2001, filed as Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.*
	10	.2	Form of Stock Option Agreement under the 1989 Stock Option Plan of the Company, as Amended and Restated April 20, 2001, filed as Exhibit 10.2 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*
	10	.3(a)	Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Appendix B to the Company’s Proxy Statement filed with the Commission pursuant to Section 14(a) of the Exchange Act on March 24, 2005, and incorporated herein by this reference.*
	10	.3(b)	First Amendment to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, dated October 28, 2008, filed as Exhibit 10.1 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.4(a)	Nationwide Health Properties, Inc. Retirement Plan for Directors, as Amended and Restated April 20, 2006, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by this reference.*
	10	.4(b)	Amendment to the Nationwide Health Properties, Inc. Retirement Plan for Directors, as Amended and Restated April 20, 2006, filed as Exhibit 10.9 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.5	Amended and Restated Deferred Compensation Plan of the Company, dated October 28, 2008, filed as Exhibit 10.16 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.6	Form of Amended and Restated Deferred Compensation Election and Agreement under the Nationwide Health Properties, Inc. Amended and Restated Deferred Compensation Plan, filed as Exhibit 10.7 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.7	Form of Deferred Compensation Election and Agreement under the Nationwide Health Properties, Inc. Amended and Restated Deferred Compensation Plan, filed as Exhibit 10.8 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.8(a)	Amended and Restated Credit Agreement, dated as of October 20, 2005, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and 23 additional banks, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by this reference.
	10	.8(b)	First Amendment to Amended and Restated Credit Agreement, dated as of December 15, 2006, among the Company, the Lender party thereto, JPMorgan Chase Bank, N.A., as administrative agent and 20 additional banks, filed as Exhibit 10.1 to the Company’s Form 8-K dated December 18, 2006, and incorporated herein by this reference.
	10	.9	Form of Indemnity Agreement for certain officers and directors of the Company, filed as Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference.*
	10	.10	Executive Employment Security Policy, as Amended and Restated April 20, 2001, filed as Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.*

Exhibit No.			Description
	10	.11	Form of Change in Control Agreement with certain officers of the Company, filed as Exhibit 10.10 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.12	Retirement and Severance Agreement, dated April 16, 2004, by and between the Company and R. Bruce Andrews, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by this reference.*
	10	.13	Second Amended and Restated Employment Agreement, dated as of October 28, 2008, by and between the Company and Douglas M. Pasquale, filed as Exhibit 10.11 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.14	Separation Agreement, dated April 5, 2005, by and between the Company and Mark L. Desmond, filed as Exhibit 10.1 to the Company’s Form 8-K dated April 5, 2005, and incorporated herein by this reference.*
	10	.15	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Douglas M. Pasquale, filed as Exhibit 10.15 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*
	10	.16	Form of Stock Unit Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.3 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.17	Form of Stock Appreciation Rights Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.4 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.18	Form of Performance Share Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.5 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
	10	.19	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Abdo H. Khoury, filed as Exhibit 10.19 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*
	10	.20	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Donald D. Bradley, filed as Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.*
	10	.21	Form of Restricted Stock Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2007, and incorporated herein by this reference.*
	10	.22(a)	Master Lease Agreement, dated May 31, 2006, by and among the Company and the other entities listed on Schedule I thereto, filed as Exhibit 2.3 to the Company’s Form 8-K dated June 6, 2006, and incorporated herein by this reference.
	10	.22(b)	First Amendment to Master Lease and Letter of Credit Agreement and Consent of Guarantor, dated June 29, 2006 by and among the Company, the entities listed on the signature pages thereto as “Tenant,” and Hearthstone Senior Services, L.P., filed as Exhibit 10.1 to the Company’s Form 8-K/A dated June 30, 2006, and incorporated herein by this reference.
	10	.23	Guaranty of Obligations, dated as of September 18, 2008, by and among Jeffrey L. Rush, Mark D. Toothacre, Elizabeth A. Powell, Kimberly B. Cochrane and Robert A. Rosenthal, as guarantors, and the Company, filed as Exhibit 10.28 to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	10	.24(a)	Form of Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., filed as Exhibit T to the Formation and Contribution Agreement and Joint Escrow Instructions, filed as Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
	10	.24(b)	First Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of May 12, 2008, filed as Exhibit 10.29(b) to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.
	10	.24(c)	Second Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of February 9, 2009, filed as Exhibit 10.29(c) to the Company’s Form 10-K for the year ended December 31, 2008, and incorporated herein by this reference.

Exhibit No.			Description
	10	.24(d)	Third Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of February 1, 2010.
	10	.25	Amended and Restated Pipeline Property Agreement, dated effective as of February 1, 2010, by and among, the Company, NHP/PMB L.P., PMB LLC and PMB Real Estate Services.
	12		Ratio of Earnings to Fixed Charges.
	21		Subsidiaries of the Company.
	23	.1	Consent of Ernst & Young LLP.
	31		Rule 13a-14(a)/15d-14(a) Certifications of CEO and CFO.
	32		Section 1350 Certifications of CEO and CFO.

(1)	Exhibits D, E, P-2, V-1, V-2, W, X, Y and BB have been omitted but will be furnished supplementally to the Securities and Exchange Commission upon request.
(2)	Exhibit V-1 has been omitted but will be furnished supplementally to the Securities and Exchange Commission upon request.
*	Management contract or compensatory plan or arrangement.

EX-10.24

Exhibit 10.24

THIRD AMENDMENT TO THE
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
NHP/PMB L.P.

          This THIRD AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NHP/PMB L.P., dated as of February 1, 2010 (this “Amendment”), is being executed by NHP/PMB GP LLC, a Delaware limited liability company (the “General Partner”), as the general partner of NHP/PMB L.P., a Delaware limited partnership (the “Partnership”). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed thereto in the Partnership Agreement (as defined below).

          WHEREAS, the General Partner, the Limited Partners and Nationwide Health Properties, Inc., a Maryland corporation (for the sole purpose of agreeing to the provisions of Article XVI thereof) entered into that certain Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of April 1, 2008, as amended by the First Amendment thereto, dated as of May 12, 2008, and the Second Amendment thereto, dated as of February 9, 2009 (as so amended, the “Partnership Agreement”); and

          WHEREAS, the General Partner has proposed this amendment of the Partnership Agreement, and Limited Partners holding a majority of the outstanding Class A Partnership Units (or their attorney-in-fact) held by all Limited Partners have approved or consented to it pursuant to Section 14.2 of the Partnership Agreement.

          NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.	Amendment to Definition of “Adjustment Factor.” Section 1.6 of the Partnership Agreement is hereby amended to delete the words, “after the date of the Contribution Agreement” and insert, in lieu thereof, the words, “after April 1, 2008.”
2.	Amendment to Definition of “Contribution Agreement.” Section 1.30 of the Partnership Agreement is hereby amended to read in its entirety as follows:

     “Section 1.30 “Contribution Agreement” means (i) the Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008, by and among NHP, as NHP, the Partnership, as Transferee, and the Persons named therein as Transferors, (ii) the Option Agreement, dated as of July 8, 2008, by and between NHP and PMB Pomona LLC, (iii) the Limited Liability Company Agreement of NHP/PMB Gilbert LLC, a Delaware limited liability company, and (iv) the Limited Liability Company Agreement of NHP/PMB Pasadena LLC, a Delaware limited liability company, in each case, as it may be amended, supplemented or restated from time to time in accordance with its terms.”

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3. Amendment to Allocations of Net Income and Net Loss. Section 6.1 of the Partnership Agreement is hereby amended to read in its entirety as follows:

     “Section 6.1 Allocations of Net Income and Net Loss

     Net Income and Net Loss of the Partnership shall be determined and allocated with respect to each taxable year or other period of the Partnership as of the end of such year or period. Except as otherwise provided in this Article VI or in Exhibit C of this Agreement (a) to the extent possible, any items of income, gain, loss or deduction that are allocated pursuant to Section 6.1(a)(i)(B) shall be of the same character as the items of Net Loss being offset; (b) an allocation to a Partner of a share of Net Income under Section 6.1(a)(i)(A) and (C) shall be treated as (i) first an allocation of items of income, gain, loss or deduction that are taken into account in computing Net Income other than such items relating to or generated by a taxable disposition of any Property, and (ii) second (if necessary) as an allocation of items of income, gain, loss or deduction that are taken into account in computing Net Income that are related to or generated by a taxable disposition of any Property; (c) subject to the foregoing, an allocation to a Partner of a share of Net Income or Net Loss (or such portion of Net Income as described above) shall be treated as the same share of each item of income gain, loss or deduction that is taken into account in computing Net Income or Net Loss (or such portion of Net Income). For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Net Income and Net Loss of the Partnership shall be allocated among the General and Limited Partners in each taxable year (or portion thereof) as provided below.

     (a) Except as provided in Section 6.1(b) below:

     (i) Net Income or Allocable Net Income shall be allocated as follows:

     (A) First, Allocable Net Income to the holders of Class A Partnership Units and the Class B Partnership Units in an amount that will cause such allocation, together with the amount of all previous allocations of Allocable Net Income pursuant to this
Section 6.1(a)(i)(A), to be in proportion to and to the extent of cumulative distributions received by such Partners pursuant to Sections 5.1 and 5.4 for the current and all prior taxable years;

     (B) Second, any remaining Net Income to holders of Class A Partnership Units and Class B Partnership Units in proportion to, and to the extent that, the amount of cumulative Net Loss previously allocated to such Partners exceeds the cumulative amount of Net Income previously allocated to such Partners pursuant to this Section 6.1(a)(i)(B); and

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     (C) Third, any remaining Net Income (i) 100% to holders of Class B Partnership Units to the extent such Net Income relates to or is generated by a taxable disposition of any Property, and (ii) with respect to all other Net Income, 99% to the holders of Class B Partnership Units and 1% to the holders of Class A Partnership Units, on a pari passu basis.

     (ii) After the allocation of Allocable Net Income pursuant to Section 6.1(a)(i), Net Loss for a particular period shall be allocated 99% to the holders of Class B Partnership Units and 1% to the holders of Class A Partnership Units, on a pari passu basis.

(b) If a Liquidating Event occurs in a Partnership taxable year, Net Income or Net Loss (or, if necessary, separate items of income, gain, loss and deduction) for such taxable year and any prior taxable years (to the extent permitted by Section 761(c) of the Code) shall be allocated among the Partners in such amounts as will cause, to the greatest extent possible, the distributions to the Partners pursuant to Section 13.2(a)(iii) to be made in accordance with the Liquidating Distribution Priority. If the Carrying Values of the Partnership’s assets are adjusted in accordance with subparagraph (b) of the definition of “Carrying Value,” after all other items of income or loss are allocated pursuant to Section 6.1(a) above, such adjustments shall be allocated in accordance with this Section 6.1(b).

     (c) As used in this Section 6.1, the following terms shall have the respective meanings set forth below:

     (i) “Allocable Net Income” means, for any taxable period, an amount equal to the Partnership’s Net Income or Net Loss for such year or period computed without regard to the following items:

     (A) Loss resulting from any disposition of Partnership property, including amounts described in paragraph (c) and paragraph (f) of the definition of “Net Income”; and

     (B) Depreciation; provided, however, (x) that Allocable Net Income of the Partnership for any taxable period, shall be limited to and shall not exceed the Partnership’s Taxable Income for such taxable period; and (y) if Allocable Net Income is a negative number, it shall be treated as zero.

     (ii) “Taxable Income” means, for any taxable period, an amount equal to the Partnership’s taxable income or loss for such year or period determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, deduction or credit required to

3

be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss).

4.	Applicable Law. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
5.	Effect of Amendment. In the event of any inconsistency between the terms of the Partnership Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.
6.	Ratification. Except as otherwise expressly modified hereby, the Partnership Agreement shall remain in full force and effect, and all of the terms and provisions of the Partnership Agreement, as herein modified, are hereby ratified and reaffirmed.

[the remainder of this page is intentionally blank]

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          IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.

GENERAL PARTNER:
NHP/PMB GP LLC, a Delaware limited liability company
	By:	NHP OPERATING PARTNERSHIP L.P.,
		its sole member
	By:	NHP GP LLC,
		its general partner
	By:	NATIONWIDE HEALTH PROPERTIES, INC.,
		its sole member
	By:	/s/ Abdo H. Khoury
		Name:	Abdo H. Khoury
		Title:	Chief Financial & Portfolio Officer Executive Vice President

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EX-10.25

Exhibit 10.25

AMENDED AND RESTATED PIPELINE PROPERTY AGREEMENT
(FOR MOB DEVELOPMENT, MANAGEMENT AND ROFOS)

dated effective as of

February 1, 2010

by and among

NATIONWIDE HEALTH PROPERTIES, INC.,

NHP/PMB L.P.,

PMB LLC,

and

PMB REAL ESTATE SERVICES LLC

TABLE OF CONTENTS

	PAGE
1. TERM		1
2. PMB DEVELOPMENT PIPELINE		1
2.1 Delivery of Preliminary Notice of MOB Development; Non-Qualifying MOBs		2
2.2 Preliminary Notice		3
2.3 Preliminary Acceptance Period		3
2.4 Non-Qualifying MOB Dispute		3
2.5 Financing Matters; Abandonment		4
2.6 Final Acceptance Period		6
2.7 Strikes		6
2.8 Approved Properties		7
2.9 Non-Approved Properties at End of Term		7
2.10 Torrance Expansion MOB		7
3. PMBRES RIGHT TO MANAGE NHP PROPERTIES		8
3.1 Exclusive Right		8
3.2 Waiver of Exclusive Right		8
3.3 Excluded NHP Properties and Exclusions to Asset Management Services		8
4. LINE OF CREDIT		9
5. RIGHTS OF FIRST OFFER/REFUSAL		9
5.1 Competitive Properties		9
5.2 Protected Territory		9
5.3 Excluded ROFO Transaction		9
5.4 ROFO Notice; Right of First Offer		10
5.5 Material Changes to the ROFO Terms; Failure to Close		10
5.6 Revised Offer Notice; Right of First Refusal		10
5.7 Closing		11
6. REPRESENTATIONS AND WARRANTIES		11
6.1 No Conflicts		11
6.2 Due Organization; Consents		11
6.3 Authority; Validity of Agreement		11
6.4 Not a Prohibited Person		11
7. BROKERS		12
8. PUBLIC ANNOUNCEMENTS		12
9 MISCELLANEOUS PROVISIONS		13
9.1 Governing Law		13
9.2 Entire Agreement		13

(i)

	PAGE
9.3 Modification; Waiver		13
9.4 Communications		13
9.5 Assignment		14
9.6 Severability		14
9.7 Successors and Assigns; Third Parties		15
9.8 Counterparts		15
9.9 Headings		15
9.10 Time of Essence		15
9.11 Number and Gender		15
9.12 Construction		15
9.13 Exhibits		15
9.14 Attorneys’ Fees		15
9.15 Dispute Resolution		15

(ii)

LIST OF EXHIBITS

EXHIBIT “A”	DEFINED TERMS
EXHIBIT “B”	PMB EXCLUDED PROPERTIES
EXHIBIT “C”	PRELIMINARY SUMMARY INFORMATION
EXHIBIT “D”	FINAL INFORMATION PACKAGE
EXHIBIT “E”	PERMITTED PMB CONSTRUCTION MANAGEMENT, DEVELOPMENT AND LEASING FEES
EXHIBIT “F”	JV AGREEMENT TERMS
EXHIBIT “G”	CONTRIBUTION AGREEMENT TERMS

(iii)

AMENDED AND RESTATED PIPELINE PROPERTY AGREEMENT
(FOR MOB DEVELOPMENT, MANAGEMENT AND ROFOS)

          IN CONSIDERATION OF the mutual covenants contained in this Amended and Restated Pipeline Property Agreement (For MOB Development, Management and ROFOs) (this “Agreement”) and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“NHP”), NHP/PMB L.P., a Delaware limited partnership (the “OP”), PMB LLC, a California limited liability company (“PMB”), and PMB Real Estate Services LLC, a Delaware limited liability company (“PMBRES”), hereby agree, effective as of February 1, 2010 (the “Effective Date”), to the terms of this Agreement and that the Pipeline Property Agreement, dated April 1, 2008 (as amended to date, the “Original Agreement”), among the parties hereto is hereby amended, restated and replaced it in its entirety with this Agreement. All capitalized terms used and not otherwise defined herein, shall have the meanings set forth for the same on Exhibit “A” attached hereto.

1. TERM.

          The term of this Agreement, and the parties’ rights and obligations hereunder, shall commence effective as of April 1, 2008, and shall automatically terminate and be of no further force or effect upon the earliest to occur of:

          (a) April 1, 2019;

          (b) if any time after three Strikes (as defined in Section 2.7) have occurred, the date on which NHP and the OP receive written notice from PMB of the occurrence of such third Strike and PMB’s election to terminate this Agreement; and

          (c) the date on which the aggregate of Total Project Costs for all Approved Properties (as defined in Section 2.8), with respect to which a Contribution Transaction has occurred or for which a Contribution Agreement has been executed and as to which NHP and the OP are obligated thereunder to consummate a Contribution Transaction in accordance with the terms thereof, equals at least One Billion Three Hundred Forty Eight Million Dollars ($1,348,000,000).

Notwithstanding the foregoing, (i) PMB may, in its sole discretion, terminate this Agreement earlier at any time upon written notice to NHP and the OP if (x) the Common Stock of NHP, or any capital stock into which the Common Stock of NHP may hereafter be converted (including any shares of common stock of any successor or acquiring corporation received by or distributed to the holders of the Common Stock of NHP), ceases to be listed on a national securities exchange (or is suspended from trading on any such exchange for more than fourteen (14) consecutive trading days) or (y) NHP (or the issuer of any common stock of any successor or acquiring corporation received by or distributed to the holders of the Common Stock of NHP) fails to qualify as a REIT, and (ii) the parties’ rights and obligations with respect to Competitive Properties under (and as defined in) Section 5 hereof shall continue for so long as the OP shall continue to own (whether directly or indirectly) any material portion of any Protected Property (as defined in Section 5.1).

2. PMB DEVELOPMENT PIPELINE.

          2.1 Delivery of Preliminary Notice of MOB Development; Non-Qualifying MOBs. For each property that PMB and/or any one or more of its affiliates intends to develop (or has commenced development) into a MOB (a “Property”), other than one that constitutes a Non-Qualifying MOB pursuant to clause (a), (c), (d) or (e) of the definition thereof set forth below in this Section 2.1, PMB shall deliver to NHP and the OP a written notice (a “Preliminary Notice”) in accordance with the terms of Section 2.2. Notwithstanding anything herein to the contrary and regardless of the delivery of such Preliminary Notice, the parties shall not be obligated to execute a JV Agreement or a Contribution Agreement or otherwise consummate a Contribution Transaction with respect to any Property that is determined to be a Non-Qualifying MOB. Accordingly, PMB and its affiliates may develop any Property that is a Non-Qualifying MOB without regard to this Agreement. A “Qualifying MOB” means any Property that is not a Non-Qualifying MOB. A “Non-Qualifying MOB” means any Property with respect to which any of the following is true:

               (a) the applicable Property is listed on Exhibit “B” attached hereto;

               (b) subject to the last sentence of this Section 2.1, the applicable Property is not expected upon completion thereof to be of a reasonably comparable commercial quality as those MOBs (i) developed by PMB or an affiliate of PMB after the year 2000, and (ii) acquired by the OP pursuant to the Master Contribution Agreement;

               (c) the applicable Property is or will be encumbered by third party restrictions on financing or sale, the removal of which are not within PMB’s or its affiliate’s sole control;

               (d) the applicable Property is a MOB as to which PMB and/or its affiliates are acting solely as a so-called “fee developer”;

               (e) the applicable Property is located on a property or is a prospective project otherwise identified on Exhibit “B” attached hereto, with respect to which PMB is already committed or obligated as of October 25, 2007, to acquire and/or develop with a third party through a joint venture or similar ownership structure; or

               (f) PMB and NHP reasonably agree that the applicable Property should not be subject to a Contribution Transaction because, (i) of requirements imposed by a hospital or then current market conditions with respect to the ownership or ownership structure (including physician or hospital participation) of the Property, or (ii) the development of such Property is originated through a third party financing or joint venture source.

If a Property is a Non-Qualifying MOB solely because of clause (b) of the above definition, PMB shall nevertheless be required to deliver a Preliminary Notice with respect to such Property in accordance with Section 2.2 and NHP and the OP shall have the right to either approve or reject such MOB as provided therein; provided, however, that if NHP and the OP agree in writing in advance with PMB that a Property is a Non-Qualifying MOB, including because of clause (b) or (f) of the above definition, then PMB shall not be required to deliver a Preliminary Notice with respect to such Property in accordance with Section 2.2.

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          2.2 Preliminary Notice. Each Preliminary Notice required by Section 2.1 shall specify that such notice is the Preliminary Notice with respect to a specified Property and include the following information (collectively, the “Preliminary Information”):

               (a) a statement as to whether PMB believes that such Property is or should be a Non-Qualifying MOB pursuant to clauses (b) or (f) of the definition thereof in Section 2.1; and

               (b) the materials and information identified on Exhibit “C” attached hereto (each, a “Preliminary Summary”), which materials and information shall include a preliminary budget detailing the projected Total Project Costs reasonably anticipated to be expended in connection with the contemplated development of such Property, including certain construction, development and leasing fees payable to PMB which PMB shall be entitled to receive so long as such amounts are not greater than those set forth on Exhibit “E” attached hereto.

If NHP and the OP reasonably determine that any of the Preliminary Information for the applicable Property has not been provided or otherwise made available in connection with the applicable Preliminary Notice, NHP and the OP shall notify PMB within five (5) Business Days of its receipt of such Preliminary Notice of any Preliminary Information which has not been provided or made available and, notwithstanding anything to the contrary contained herein, the Preliminary Acceptance Period (as defined in Section 2.3) shall not be deemed to have commenced until such information is provided.

          2.3 Preliminary Acceptance Period. NHP and the OP shall have until 5:00 p.m., California time, on the tenth (10^th) Business Day following its receipt of each Preliminary Notice (each, a “Preliminary Acceptance Period”) to review the Preliminary Information. PMB shall cooperate reasonably with NHP and the OP during the Preliminary Acceptance Period to provide NHP and the OP with any reasonable information in addition to the Preliminary Information as shall be reasonably requested by them to evaluate the Property, but the same shall not extend the Preliminary Acceptance Period. NHP and the OP shall give written notice to PMB of its initial approval (each, an “Initial Approval Notice”) or its rejection (each, a “Preliminary Rejection Notice”) of such Property on or before the expiration of the applicable Preliminary Acceptance Period. If NHP and the OP fail to timely provide an Initial Approval Notice with respect to a particular Property, then NHP and the OP shall be deemed to have delivered a Preliminary Rejection Notice with respect to such Property. If NHP and the OP deliver or are deemed to have delivered a Preliminary Rejection Notice with respect to any Property, they shall have no further rights with respect to such Property and PMB and its affiliates may develop or pursue development of such Property without regard to this Agreement. If NHP and the OP timely deliver an Initial Approval Notice with respect to any Property, the provisions of Sections 2.5, 2.6 and 2.8 below shall apply.

          2.4 Non-Qualifying MOB Dispute. Notwithstanding any provision in this Agreement to the contrary, if (a) the applicable Preliminary Summary with respect to any Property contends that such Property is a Non-Qualifying MOB pursuant to clauses (b) or (f) of the definition thereof in Section 2.1, and (b) NHP and the OP disagree with PMB’s contention as set forth therein, then on or before the expiration of such Preliminary Acceptance Period, NHP and the OP shall give an Initial Approval Notice with respect to such Property along with notice that NHP and the OP disagree with PMB’s contention that such Property is a Non-Qualifying

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MOB (each, a “Disagreement Notice”). In such event, the parties shall meet in person or by telephone within three (3) Business Days after PMB’s receipt of any such Disagreement Notice to attempt to mutually agree upon whether such Property is a Non-Qualifying MOB or a Qualifying MOB. In the event that the parties are not able to agree within five (5) Business Days after any in person or telephone meeting, then, notwithstanding the first sentence of Section 9.15 hereof, the Dispute (as defined in Section 9.15) shall be submitted to mediation and, if necessary, resolved at the written request of any party to this Agreement by binding arbitration in accordance with the arbitration provisions of Section 9.15 hereof. If the parties agree, or it is determined through mediation or binding arbitration, that such Property is a (i) Non-Qualifying MOB, then the provisions of Section 2.1 with respect to Non-Qualifying MOBs shall apply, or (ii) Qualifying MOB, then NHP’s and the OP’s Initial Approval Notice shall constitute their initial approval of such Property and the provisions of Sections 2.5, 2.6 and 2.8 shall apply. If NHP and the OP fail to timely deliver a Disagreement Notice, then each of NHP and the OP shall be deemed to have agreed with PMB’s determination as to whether the applicable Property is a Non-Qualifying MOB. The later of (A) the delivery of an Initial Approval Notice and (B) if applicable, the date of determination that a Property is a Qualifying MOB, notwithstanding that PMB contended that it was a Non-Qualifying MOB, whether by agreement of the parties, mediation or binding arbitration, shall be referred to herein as the “Preliminary Approval Date.”

          2.5 Financing Matters; Abandonment.

               (a) Each of NHP and the OP agrees that during the period of time between the Preliminary Approval Date and the Final Date (as defined in Section 2.6) for a Property, PMB will need to understand the available mortgage construction financing for such Property in order to accurately prepare, if at all, the Final Information Package (as defined in Section 2.6) for such Property; it being understood, that if such Property becomes an Approved Property (as defined in Section 2.8), NHP will be responsible for securing financing for such Approved Property pursuant to the terms of the JV Agreement for such Approved Property. Accordingly, PMB may, from time to time during the period from and after the Preliminary Approval Date until the Final Date for a Property, request that NHP gather the then available market terms for potential mortgage construction financing for such Property by delivering a written request therefor to NHP, which request shall include PMB’s then good faith estimate of the Total Project Costs for such Property (a “Financing Request”); it being further acknowledged and agreed by the parties that NHP shall not be required to seek any amount of financing for an Approved Property that would result in less than ten percent (10%) of the Approved Budgeted Costs for such Approved Property being funded in the form of equity contributions from one or more members of the JV Entity (such ten percent (10%) equity requirement being hereinafter referred to as the “Equity Requirement”). Within ten (10) Business Days of NHP’s receipt of any such Financing Request (or such longer period to the extent necessary, as long as NHP is diligently proceeding in good faith), NHP shall deliver a written notice to PMB setting forth the then available market terms for potential mortgage construction financing for such Property (“Market Terms”).

               (b) Notwithstanding anything to the contrary in this Section 2.5, each of NHP and the OP acknowledges and agrees that (i) it is likely that, with respect to any proposed Property, there may be a significant period of time between the Preliminary Approval Date and the Final Date for such Property in order to permit PMB to fully analyze such Property, including any requested Market Terms with respect thereto, and to prepare and finalize, if at all, the Final Information Package, and (ii) at any time between the Preliminary Approval Date and

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the Final Date for a Property (including after receipt of any Market Terms), PMB may, in its sole discretion, elect to abandon such Property, in which case PMB shall promptly notify each of NHP and the OP of the same in writing.

               (c) At any time prior to the Final Date for a Property when PMB is otherwise close to being ready to deliver the Final Information Package for such Property, PMB may request that NHP obtain and deliver to PMB one actual mortgage construction financing loan proposal for such Property by delivering a written request therefor to NHP, which request shall include PMB’s then good faith estimate of the Total Project Costs for such Property (a “Loan Proposal Request”). Within thirty (30) days of NHP’s receipt of a Loan Proposal Request (or such longer period to the extent necessary, as long as NHP is diligently proceeding in good faith), NHP shall deliver to PMB a copy of one actual mortgage construction financing proposal for such Property (which shall comply with the Equity Requirement) (the “Loan Proposal”).

               (d) In the event that the Loan Proposal requires that more than thirty percent (30%) of the Approved Budgeted Costs for such Approved Property be funded in the form of equity contributions from one or more members of the JV Entity, then PMB may request that NHP obtain and deliver to PMB two additional actual mortgage construction financing loan proposals for such Property by delivering a written request therefor to NHP (an “Additional Loan Proposal Request”) within twenty (20) days after the date upon which PMB receives the Loan Proposal. Within thirty (30) days of NHP’s receipt of an Additional Loan Proposal Request (or such longer period to the extent necessary, as long as NHP is diligently proceeding in good faith), NHP shall deliver to PMB copies of two additional actual mortgage construction financing proposals for such Property (which shall each comply with the Equity Requirement) (collectively, the “Additional Loan Proposals”). Notwithstanding the terms of Section 2.5(c) hereof to the contrary, as between the original Loan Proposal and the Additional Loan Proposals (if any) for a Property, the proposal mutually selected by PMB and NHP (which the parties agree to select in good faith) shall be deemed to be the “Loan Proposal” thereafter for all purposes under the terms of Section 2.5(e) and Exhibit “D” attached hereto; provided, however, that if PMB and NHP cannot mutually agree within ten (10) days of PMB’s receipt of the Additional Loan Proposals as to which of the three (3) proposals to select, then the proposal that requires the lowest amount of equity contributions (but still complies with the Equity Requirement) shall be deemed to be the “Loan Proposal” thereafter for all purposes under the terms of Section 2.5(e) and Exhibit “D” attached hereto, provided that such proposal is substantially consistent with the rest of the terms in the original Loan Proposal.

               (e) PMB shall, within thirty (30) days after the date upon which it receives the Loan Proposal for a Property pursuant to Section 2.5(c) hereof, or the date that the Loan Proposal is deemed selected pursuant to Section 2.5(d) hereof, if applicable, either (i) deliver the Final Information Package for the applicable Property utilizing the information contained in the Loan Proposal, (ii) notify NHP and the OP in writing that PMB elects to abandon such Property or (iii) notify NHP and the OP in writing that PMB elects to delay making a decision as to whether or not to deliver the Final Information Package or abandon the Property (in which case, such election to delay shall mean that when PMB thereafter becomes close to being ready to deliver a Final Information Package for such Property, the terms of Section 2.5(c) (and, thereafter, the terms of Sections 2.5(d), (e) and (f)) shall apply once again to such Property).

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               (f) In the event that PMB elects to abandon a Property pursuant to the terms of this Section 2.5, then thereafter neither PMB nor any affiliate of PMB may acquire, own or develop (or pursue the acquisition, ownership or development of) such Property either on its own or with any other person or entity at any time during the term of this Agreement.

          2.6 Final Acceptance Period. If NHP and the OP shall timely deliver an Initial Approval Notice within the applicable Preliminary Acceptance Period, then NHP and the OP shall have until 5:00 p.m., California time, on the tenth (10^th) Business Day (the “Final Acceptance Period”) following PMB’s delivery to NHP and the OP of the last of the materials and information identified on Exhibit “D” attached hereto (each, a “Final Information Package”) in which to complete its due diligence regarding such Property; provided, however, that if NHP and the OP reasonably determine that any portion of the Final Information Package for the applicable Property has not been completely provided or otherwise made available, NHP and the OP shall notify PMB within five (5) Business Days of its receipt of such Final Information Package of the portions of such Final Information Package which have not been provided or made available and, notwithstanding anything to the contrary contained herein, the Final Acceptance Period shall not be deemed to have commenced until such information is provided. During the period from the Preliminary Approval Date to and until the earlier of (a) abandonment of such Property by PMB pursuant to Section 2.5 and (b) delivery to NHP and the OP of the Final Information Package for such Property, if at all (such earlier date being hereinafter referred to as the “Final Date”), PMB shall keep each of NHP and the OP reasonably informed as to the status of such proposed Property and PMB’s efforts with respect to the same. After delivery to NHP and the OP of the Final Information Package for such Property, if at all, PMB shall cooperate reasonably with NHP and the OP during the Final Acceptance Period to provide NHP and the OP with any reasonable information in addition to the Final Information Package as shall be reasonably requested by NHP and the OP to evaluate such Property, but the same shall not extend the Final Acceptance Period. NHP and the OP shall give written notice to PMB of their final approval (each, a “Final Approval Notice”) or rejection (each, a “Final Rejection Notice”) of such Property on or before the expiration of the applicable Final Acceptance Period. If NHP and the OP fail to timely provide a Final Approval Notice within the Final Acceptance Period with respect to a particular Property, then NHP and the OP shall be deemed to have delivered a Final Rejection Notice with respect to such Property. If NHP and the OP deliver or are deemed to have delivered a Final Rejection Notice with respect to any Property, NHP and the OP shall have no further rights with respect to such Property and PMB and its affiliates may develop or pursue development of such Property without regard to this Agreement

          2.7 Strikes. The delivery or deemed delivery by NHP or the OP of either a Preliminary Rejection Notice or a Final Rejection Notice with respect to a Qualifying MOB shall constitute a “Strike” if and at such time as PMB and/or one or more of its affiliates has commenced construction activities with respect thereto (i.e., has both commenced grading the applicable development site and obtained a construction loan or other debt or equity financing with respect to such development). If a third Strike shall occur, PMB shall have the right (but not the obligation) to terminate this Agreement in accordance with the provisions of Section 1. Notwithstanding the foregoing or anything to the contrary contained herein, it is expressly understood that none of the following shall be considered a Strike:

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               (a) PMB’s and/or one or more of its affiliates’ development of any Property that is a Non-Qualifying MOB, regardless of whether a Preliminary Rejection Notice or Final Rejection Notice has been delivered by NHP or the OP with respect thereto;

               (b) any delivery of a Preliminary Rejection Notice with respect to a Property that PMB and NHP agree or it is otherwise determined pursuant to Section 2.4 is a Non-Qualifying MOB under clause (f) of the definition thereof set forth in Section 2.1; and

               (c) the delivery by NHP of a Preliminary Rejection Notice or Final Rejection Notice with respect to a Property of the type referred to in clause (b) of the definition of Non-Qualifying MOB set forth in Section 2.1.

          2.8 Approved Properties. If NHP and the OP timely deliver a Final Approval Notice with respect to any Property, then such Property shall be deemed an “Approved Property” (and collectively, with each other Approved Property, the “Approved Properties”) for purposes of this Agreement and, as promptly as practicable thereafter, NHP shall secure the necessary mortgage construction financing for such Approved Property upon terms consistent with those set forth in the Final Information Package for such Approved Property (the “Financing”), and upon the earlier of (i) the issuance of a firm loan commitment from the lender providing such Financing or (ii) the closing of such Financing, the following shall occur:

               (a) NHP shall execute and deliver (or, at NHP’s election, NHP shall cause a subsidiary that is wholly-owned, directly or indirectly, by NHP to execute and deliver), and PMB shall cause the applicable PMB Member to execute and deliver, a JV Agreement relating to the development and financing of such Approved Property; and

               (b) NHP, the OP, PMB, the NHP Member and the PMB Member shall execute and deliver a Contribution Agreement in order to set forth the terms and conditions of the future Contribution Transaction with respect to such Approved Property.

Notwithstanding anything to the contrary contained herein, in the event that NHP is unable (despite the use of good faith efforts) to secure the Financing for any Approved Property upon terms consistent with those set forth in the Loan Proposal for such Approved Property, such inability shall not constitute a breach of this Agreement and, instead, NHP shall promptly deliver a new Loan Proposal to PMB and the process set forth in Sections 2.5(d), (e) and (f) and Section 2.6 shall begin all over again for such Property.

          2.9 Non-Approved Properties at End of Term. Notwithstanding anything in this Agreement to the contrary, if a Property has not become an Approved Property prior to the expiration of the term of this Agreement, then PMB and its affiliates may develop such Property without regard to this Agreement (except for the provisions with respect to Competitive Properties of Section 5 hereof), and without submitting to either NHP or the OP the Preliminary Information or a Final Information Package with respect thereto.

          2.10 Torrance Expansion MOB. Each of NHP, the OP and PMB acknowledge and agree that the expansion MOB contemplated by Section 13.1 of the ground lease originally with PMB Torrance 1 LLC, as lessee, for the Kenneth Watts Medical Office Building will be

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pursued by PMB or an affiliate of PMB, and not by the OP or any subsidiary thereof, but in all events shall be subject to the terms of this Agreement as a Property.

3. PMBRES RIGHT TO Manage NHP Properties.

          3.1 Exclusive Right. So long as no material default by PMB is continuing hereunder and no material default by PMBRES is continuing under any asset and/or property management agreement entered into pursuant to the Master Contribution Agreement or any Contribution Agreement (herein, a "Contribution Transaction Related Management Agreement”) or this Section 3, PMBRES will have the exclusive right to provide property and asset management services with respect to any MOBs first acquired or developed by NHP or any affiliate of NHP from and after April 1, 2008 located in Arizona, California, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington or Wyoming (each such property, a “NHP Property”, and collectively, the “NHP Properties”), other than (a) any Excluded NHP Property, as defined in Section 3.3, or (b) any property or interest therein acquired by the OP or any subsidiary thereof pursuant to the Master Contribution Agreement or any Contribution Agreement, where PMBRES is entitled to enter into a Contribution Transaction Related Management Agreement in accordance with the terms thereof. Accordingly, NHP shall deliver a written notice to PMB and to PMBRES identifying any NHP Properties that PMBRES shall have the right to manage pursuant to this Section 3 and, except as otherwise provided in this Section 3, each of PMBRES and NHP (or its affiliate that is the owner of any such NHP Property) shall deliver two (2) executed original counterparts of the applicable asset and property management agreement (which shall be substantially in the form of the “Property Management Agreement” (as defined in the Master Contribution Agreement), except that the term shall be limited to the term of this Agreement and, if applicable, the “Asset Management Services” (as defined in such form of Property Management Agreement) may be deleted therefrom pursuant to Section 3.3), within the time period specified in such notice.

          3.2 Waiver of Exclusive Right. At the request of NHP, PMB agrees to reasonably consider and waive the provisions of Section 3.1 with respect to any particular NHP Property if (a) such new NHP Property is being subsequently acquired pursuant to an extraordinary transaction (as opposed to an ordinary course acquisition) or (b) NHP’s acquisition of such new NHP Property is conditioned upon a requirement imposed by a third party to such transaction that such third party (or its affiliates) retain the right to manage such NHP Property following NHP’s (or its affiliates) acquisition thereof.

          3.3 Excluded NHP Properties and Exclusions to Asset Management Services. “Excluded NHP Property” shall mean any property owned by NHP or any affiliate of NHP that is leased on a triple net basis to a single tenant that manages and operates such property for its own account and pays all operating expenses, taxes and insurance directly (without the need for any third party property management services). Notwithstanding anything to the contrary contained in this Section 3, PMBRES shall not have the right to provide Asset Management Services with respect to those properties known as “Southwest Washington” or “San Bernardino,” or any other properties for which an asset management fee is not being charged (i.e., passed through) to the tenants thereof.

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4. LINE OF CREDIT.

          NHP shall continue to make available (or cause an affiliate of NHP to continue to make available) the Ten Million Dollar ($10,000,000.00) line of credit pursuant to and in accordance with the terms of that certain Revolving Credit Agreement, dated as of December 23, 2008, by and between PMB, as borrower, and NHP, as lender, as the same has been or may hereafter be amended from time to time.

5. RIGHTS OF FIRST OFFER/REFUSAL.

          5.1 Competitive Properties. For so long as the OP and/or NHP, directly or indirectly owns any material portion of any real property acquired pursuant to the Master Contribution Agreement and/or any Approved Property being developed pursuant to a JV Agreement or thereafter acquired pursuant to a Contribution Agreement under this Agreement (individually, a “Protected Property”, and collectively, the “Protected Properties”), PMB shall, prior to seeking or negotiating any third party investments or financial arrangements with respect to a Competitive Property (other than with any hospitals or doctors that may be affiliated with such Property), deliver a ROFO Notice (as defined in, and in accordance with, Section 5.4) to NHP and the OP in the event that PMB or its affiliates intend to acquire and develop a MOB, or acquire an existing MOB, whether directly or indirectly and whether by fee or by leasehold, to the extent that such additional real property, or any portion of such additional real property, is located in the Competitive Area of such Protected Property (each, a “Competitive Property” and, collectively, the “Competitive Properties”). The term “Competitive Area” shall mean with respect to a given Protected Property (a) if such Protected Property is located on a hospital campus, the hospital campus on which such Protected Property is situated or any real property located across the street from such campus, and (b) if such Protected Property is not located on a hospital campus, the area located within the one-half (1/2) mile radius of such Protected Property.

          5.2 Protected Territory. During the term of this Agreement only, prior to seeking or negotiating any third party investments (of debt or equity) with respect to any then existing MOB that is to be acquired (whether by fee or by leasehold) by PMB or its affiliates, and is located within the States of California, Oregon, Washington, Idaho, Nevada, Utah, Wyoming, Arizona, New Mexico, Hawaii and/or Montana (each, a “Western Property”), PMB shall deliver a ROFO Notice (as defined in, and in accordance with, Section 5.4) to NHP and the OP.

          5.3 Excluded ROFO Transaction. Notwithstanding anything to the contrary in this Section 5, the Rights of First Offer and the Rights of First Refusal provided in this Section 5 shall not apply to the extent the proposed transaction involves any of the following: (a) a property encumbered by third party restrictions on financing or sale, the removal of which are not within PMB’s or its affiliate’s sole control; (b) a property or a prospective project otherwise identified on Exhibit “B” attached hereto, with respect to which PMB or an affiliate is already committed or obligated as of October 25, 2007, to acquire and/or develop with a third party through a joint venture or similar ownership; (c) a Property as to which NHP or the OP have delivered a Preliminary Rejection Notice or a Final Rejection Notice; or (d) a property that PMB and NHP reasonably agree should not be subject to a Right of First Offer or Right of First Refusal hereunder because (i) of requirements imposed by a hospital or then current market conditions with respect to the ownership and ownership structure (including physician or hospital

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participation) of such property, or (ii) the acquisition or development of such property, as the case may be, is originated through a third party financing or joint venture source.

          5.4 ROFO Notice; Right of First Offer. A “ROFO Notice” shall (a) state PMB’s intentions with respect to a Competitive Property or a Western Property, as the case may be (each, a “ROFO Property”), (b) summarize the transaction that PMB or its affiliates are considering (including, without limitation, information regarding the debt and equity, or ownership interests or investment opportunities that PMB wishes to offer to a third party financial institution or investor and what interests are likely to be held by doctors and/or hospitals), (c) contain the material economic terms upon which PMB would, in good faith, expect to be able to enter into its contemplated transaction in the market and (d) offer (in each case, a “Right of First Offer”) to the OP the opportunity to consider whether it will participate in the contemplated transaction on material economic terms substantially similar to those contained in such notice. PMB shall also provide any reasonable additional information that it has with respect to the transaction and such ROFO Property, which the OP may reasonably request in connection with its consideration of the transaction. The OP shall have ten (10) Business Days from the date upon which it receives a ROFO Notice to notify PMB of its exercise of such Right of First Offer (or to notify PMB of its intention to exercise such Right of First Offer subject to the approval of NHP’s Board of Directors, in which case the OP shall notify PMB of its exercise of such Right of First Offer on or before the twentieth (20^th) Business Day following the date upon which it receives such ROFO Notice). If the OP has not responded to a ROFO Notice within the aforementioned time periods, the OP shall have been deemed to waive its Right of First Offer with respect to such ROFO Property, subject to the Right of First Refusal with respect to such ROFO Property and the other express terms of this Section 5. Upon the OP’s rejection, or deemed rejection of a Right of First Offer with respect to a ROFO Property, PMB shall then have the right to cause the transaction described in such ROFO Notice to occur with any third party, provided that (i) the closing of such transaction occurs within one (1) year of the date on which the OP is deemed to have waived such Right of First Offer, and (ii) there are no Material Changes to the ROFO Terms (as defined in Section 5.5) from those set forth in such ROFO Notice.

          5.5 Material Changes to the ROFO Terms; Failure to Close. “Material Changes to the ROFO Terms” shall mean that (a) the aggregate effective economic terms are less than ninety-five percent (95%) of the aggregate effective economic terms set forth in the applicable ROFO Notice and/or (b) any other material term is not substantially similar to such material term as set forth in the applicable ROFO Notice. If any transaction with a third party relating to a ROFO Property does not close within one (1) year of the date on which the OP is deemed to have waived its Right of First Offer with respect thereto, such ROFO Property shall again become subject to a Right of First Offer.

          5.6 Revised Offer Notice; Right of First Refusal. If, after the OP rejects or is deemed to have rejected its Right of First Offer with respect to any ROFO Property, there are any Material Changes to the ROFO Terms with respect thereto from those set forth in the ROFO Notice, before consummating any transaction with a third party based thereon, PMB shall provide written notice to the OP of such Material Changes to the ROFO Terms (the “Revised Offer Notice”). The OP shall then have the right to enter into the transaction upon the same terms as are set forth in the Revised Offer Notice (a “Right of First Refusal”) by delivering written notice of its exercise of such Right of First Refusal within ten (10) Business Days from the date upon which it receives the Revised Offer Notice (or to notify PMB of its intention to exercise its Right of First

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Refusal subject to the approval of NHP’s Board of Directors, in which case the OP shall notify PMB of its exercise of a Right of First Refusal on or before the twentieth (20^th) Business Day following the date upon which it receives the Revised Offer Notice). If the OP has not responded to the Revised Offer Notice within the aforementioned time periods, the OP shall have been deemed to waive its Right of First Refusal with respect to such ROFO Property.

          5.7 Closing. If the OP has exercised its Right of First Offer or Right of First Refusal with respect to a ROFO Property pursuant to the terms of this Section 5, the OP and PMB shall use good faith efforts to close such transaction within sixty (60) days of such exercise upon the terms of definitive legal documents to be negotiated in good faith by the parties (substantially similar to the applicable terms of a Contribution Agreement to the extent that the proposed transaction is substantially similar to a Contribution Transaction, if at all) as soon as practicable following the exercise of such Right of First Offer or Right of First Refusal, as the case may be, by the OP.

6. REPRESENTATIONS AND WARRANTIES. Each party hereto (“Party”) represents and warrants to and agrees with the other parties hereto, as of the date of this Agreement, as follows:

          6.1 No Conflicts. The execution and delivery of this Agreement by such Party, the consummation of the transactions herein contemplated to be performed by such Party, and compliance with the terms of this Agreement by such Party will not conflict with, or, with or without notice or the passage of time or both, result in a breach of any of the terms or provisions of, or constitute a default under, (a) any indenture, deed of trust, mortgage, loan agreement, or other document, instrument or agreement, oral or written, to which such Party is a party or by which such Party or its assets are bound, or (b) any applicable regulation of any governmental agency, or any judgment, order or decree of any court having jurisdiction over such Party.

          6.2 Due Organization; Consents. Such Party is a duly organized entity as set forth below its signature hereto and is validly existing and in good standing under the laws of the state specified below its signature hereto, with its principal place of business in the State of California. All requisite action has been taken by such Party in connection with entering into this Agreement. No consent of any partner, shareholder, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party is required in connection with the execution by such Party of this Agreement and/or the performance by such Party of its obligations hereunder.

          6.3 Authority; Validity of Agreement. Such Party has full right, power and authority to carry out its obligations hereunder and to execute, deliver and perform, and enter into and consummate, all of the documents and transactions contemplated by this Agreement to which it is a party. The individual(s) executing this Agreement and the instruments referenced herein on behalf of such Party have the legal power, right and actual authority to bind such Party to the terms hereof and thereof. This Agreement has been duly authorized, executed and delivered by such Party and is the valid, binding and enforceable obligation of such Party.

          6.4 Not a Prohibited Person.

               (a) To such Party’s Knowledge, such Party is not a Prohibited Person.

               (b) To such Party’s Knowledge, neither such Party nor any of its other

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investors, affiliates or brokers or other agents (if any), acting or benefiting in any capacity in connection with this Agreement is a Prohibited Person.

               (c) To such Party’s Knowledge, the assets of such Party and, (i) in the case of PMB, any PMB Member, and (ii) in the case of NHP, any NHP Member, that may be transferred under this Agreement and/or under any other document executed in connection with the transactions contemplated hereby are not and will not be the property of, and are not and will not be beneficially owned, directly or indirectly, by a Prohibited Person.

               (d) To such Party’s Knowledge, the assets of such Party and, (i) in the case of PMB, any PMB Member, and (ii) in the case of NHP, any NHP Member, that may be transferred under this Agreement and/or under any other document executed in connection with the transactions contemplated hereby are not and will not be proceeds of specified unlawful activity as defined by 18 U.S.C. §1956(c)(7).

7. BROKERS.

          PMB represents, warrants to and agrees with each of NHP and the OP that it has not had, and shall not have, any dealings with any third party to whom the payment of any broker’s fee, finder’s fee, commission or other similar compensation (“Commissions”) shall or may become due or payable in connection with the transactions contemplated hereby, other than any Commissions that may be due and owing to a third party in connection with the acquisition or leasing of an Approved Property. Each of NHP and the OP hereby represents, warrants to and agrees with PMB that it has not had, and shall not have, any dealings with any third party to whom the payment of any Commissions shall or may become due or payable in connection with the transactions contemplated hereby, other than certain advisor fees payable to Shattuck Hammond Partners LLC and J.P. Morgan Securities Inc. (collectively, the “NHP Commission Parties”). Each of NHP and the OP hereby agrees to pay all Commissions due and payable to the NHP Commission Parties in connection with the transactions contemplated hereby pursuant to its separate agreements with the NHP Commission Parties. PMB shall indemnify, protect, defend and hold each of NHP and the OP harmless from and against any and all claims, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by either NHP or the OP by reason of any breach or inaccuracy of the representation, warranty and agreement of PMB contained in this Section 7. Each of NHP and the OP shall indemnify, protect, defend and hold PMB and its affiliates harmless from and against any and all claims, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by PMB or such affiliate by reason of any breach or inaccuracy of the representation, warranty and agreement of NHP or the OP contained in this Section 7. The provisions of this Section 7 shall survive the expiration or earlier termination of this Agreement.

8. PUBLIC ANNOUNCEMENTS.

          The parties shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable laws (including, without limitation, applicable securities laws and the rules and regulations of the

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Securities and Exchange Commission), court process or the rules and regulations of any national securities exchange.

9 MISCELLANEOUS PROVISIONS.

          9.1 Governing Law. This Agreement and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law.

          9.2 Entire Agreement. This Agreement, including the exhibits attached hereto, constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties (including, without limitation, the Original Agreement, that certain Non-Binding Term Sheet dated October 25, 2007, between NHP and an affiliate of PMB, and that certain Non-Binding Term Sheet dated October 5, 2009, between NHP and an affiliate of PMB), and there are no warranties, representations or other agreements, express or implied, made to any party by any other party in connection with the subject matter hereof except as specifically set forth herein or in the documents delivered pursuant hereto or in connection herewith.

          9.3 Modification; Waiver. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

          9.4 Communications. All notices, consents, requests, reports, demands or other communications hereunder (collectively, “Communications”) shall be in writing and may be given personally, by registered or certified mail, by electronic communication, telecopy or by Federal Express (or other reputable overnight delivery service) as follows:

To NHP or the OP:
	c/o Nationwide Health Properties, Inc.
	610 Newport Center Drive, Suite 1150
	Newport Beach, California 92660
	Attention: Doug Pasquale
	Telephone: (949) 718-4400
	Facsimile: (949) 759-6887
	Email: doug@nhp-reit.com
With a Copy To:	c/o Nationwide Health Properties, Inc.
	610 Newport Center Drive, Suite 1150
	Newport Beach, California 92660
	Attention: Abdo Khoury
	Telephone: (949) 718-4413
	Facsimile: (949) 759-6887
	Email: abdo@nhp-reit.com

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With A Copy To:	Skadden, Arps, Slate, Meagher & Flom LLP
	300 South Grand Avenue, Suite 3400
	Los Angeles, California 90071
	Attention: Meryl K. Chae, Esq.
	Telephone: (213) 687-5035
	Facsimile: (213) 621-5035
	Email: mchae@skadden.com
To PMB or PMBRES:	c/o PMB LLC
	12348 High Bluff Drive, Suite 100
	San Diego, California 92130
	Attention: Mark D. Toothacre
	Telephone: (858) 794-1900
	Facsimile: (858) 794-1910
	Email: mark@pmbllc.com
With A Copy To:	c/o PMB LLC
	12348 High Bluff Drive, Suite 100
	San Diego, California 92130
	Attention: Evan Stone
	Telephone: (858) 794-1900 x313
	Facsimile: (858) 794-1910
	Email: evan@pmbllc.com
With A Copy To:	Latham & Watkins LLP
	650 Town Center Drive, 20th Floor
	Costa Mesa, California 92626-1925
	Attention: David C. Meckler
	Telephone: (714) 755-8103
	Facsimile: (714) 755-8290
	Email: david.meckler@lw.com

or to such other address or such other person as the addressee party shall have last designated by notice to the other parties. All Communications shall be deemed to have been given when received. All Communications given by telecopy or electronic communication shall be followed by the delivery of a hard copy of such Communication, provided that such Communications shall be deemed to have been given when received by telecopy or electronic communication.

          9.5 Assignment. No party hereto shall have the right, power, or authority to assign all or any portion of this Agreement or its rights hereunder or to delegate any duties or obligations arising under this Agreement, voluntarily, involuntarily or by operation of law, without the prior written consent of the other parties hereto.

          9.6 Severability. Any provision or part of this Agreement which is invalid or unenforceable in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be ineffective only to the extent of such invalidity and shall not affect the enforceability of the

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remaining provisions hereof or the validity or enforceability of any such provision in any other situation or in any other jurisdiction.

          9.7 Successors and Assigns; Third Parties. Subject to and without waiver of the provisions of Section 9.5 hereof, all of the rights, duties, benefits, liabilities and obligations of the parties shall inure to the benefit of, and be binding upon, their respective successors and assigns. Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement.

          9.8 Counterparts. This Agreement may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

          9.9 Headings. The Section headings of this Agreement are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof. Unless otherwise provided, all references to sections and paragraphs shall refer to sections and paragraphs of this Agreement.

          9.10 Time of Essence. Time shall be of the essence with respect to all matters contemplated by this Agreement.

          9.11 Number and Gender. Whenever the singular number is used, and when required by the context, the same includes the plural, and the masculine gender includes the feminine and neuter genders.

          9.12 Construction. This Agreement shall not be construed more strictly against one party hereto than against any other party hereto merely by virtue of the fact that it may have been prepared by counsel for one of the parties.

          9.13 Exhibits. All exhibits and schedules attached hereto are hereby incorporated by reference as though set out in full herein.

          9.14 Attorneys’ Fees. In the event that any party hereto brings an action or proceeding against any other party to enforce or interpret any of the covenants, conditions, agreements or provisions of this Agreement, the prevailing party in such action or proceeding shall be entitled to recover all reasonable costs and expenses of such action or proceeding, including, without limitation, attorneys’ fees, charges, disbursements and the fees and costs of expert witnesses.

          9.15 Dispute Resolution. Any controversy, dispute, or claim of any nature arising out of, in connection with, or in relation to the interpretation, performance, enforcement or breach of this Agreement, including any claim based on contract, tort or statute (collectively, a “Dispute”), that cannot be resolved by the parties within thirty (30) days shall first be submitted to mediation between the parties. In the event that such mediation does not resolve the Dispute within ten (10) Business Days, the Dispute shall be resolved at the written request of any party to this Agreement by binding arbitration using applicable arbitration procedures of JAMS located in San Diego, California pursuant to California law. The parties shall attempt to designate one

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arbitrator from JAMS. If they are unable to do so within thirty (30) days after written demand therefor, then JAMS shall designate an arbitrator. The arbitration shall be final and binding, and enforceable in any court of competent jurisdiction. The arbitrator shall award attorneys’ fees (including those of in-house counsel) and costs to the prevailing party and charge the cost of arbitration to the party which is not the prevailing party. Notwithstanding anything to the contrary contained herein, this Section 9.15 shall not prevent any party hereto from seeking and obtaining equitable relief on a temporary or permanent basis, including, without limitation, a temporary restraining order, a preliminary or permanent injunction or similar equitable relief, from a court of competent jurisdiction located in the State of California (to which all parties hereto consent to venue and jurisdiction) by instituting a legal action or other court proceeding in order to protect or enforce the rights of such party under this Agreement or to prevent irreparable harm and injury. The court’s jurisdiction over any such equitable matter, however, shall be expressly limited only to the temporary, preliminary, or permanent equitable relief sought; all other claims initiated under this Agreement between the parties hereto shall be determined through final and binding arbitration in accordance with the terms of this Section 9.15.

[Remainder of Page Left Blank Intentionally]

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

NHP:
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By:	/s/ Abdo H. Khoury
	Name:	Abdo H. Khoury
	Title:	Chief Financial & Portfolio Officer
		Executive Vice President
OP:
NHP/PMB L.P.
a Delaware limited partnership
By:	NHP/PMB GP LLC,
	a Delaware limited liability company,
	its general partner
By:	NHP OPERATING PARTNERSHIP L.P.,
	a Delaware limited partnership,
	its sole member
By:	NHP GP LLC,
	a Delaware limited liability company,
	its general partner
By:	NATIONWIDE HEALTH PROPERTIES, INC.,
	A Maryland corporation,
	its sole member
	By:	/s/ Abdo H. Khoury
		Name:	Abdo H. Khoury
		Title:	Chief Financial & Portfolio Officer, Executive Vice President

[Additional Signature Pages Follow]

Signature Page

PMB: PMB LLC, a California limited liability company
By:	/s/ Mark Toothacre
	Name:	Mark Toothacre
	Title:	President
PMBRES: PMB REAL ESTATE SERVICES LLC, a Delaware limited liability company
By:	/s/ Claude Hooton
	Name:	Claude Hooton
	Title:	President

Signature Page

EXHIBIT “A”

DEFINED TERMS

The following terms shall have the following meanings (and, unless otherwise provided, all references to sections, recitals and paragraphs shall refer to sections, recitals and paragraphs of the Amended and Restated Pipeline Property Agreement (For MOB Development, Management and ROFOs) to which this Exhibit “A” is attached):

          “Approved Budgeted Costs” shall mean, with respect to each Approved Property, the total amount of the budgeted Total Project Costs that are set forth in the budget as part of the Final Information Package.

          “Business Day” shall mean a day that is not a Saturday, Sunday or legal holiday. In the event that the date for the performance of any covenant or obligation under this Agreement shall fall on a Saturday, Sunday or legal holiday, the date for performance thereof shall be extended to the next Business Day.

          “Contribution Agreement” shall mean, with respect to each Approved Property, a contribution agreement to be executed and delivered by PMB, the PMB Member, the NHP Member, NHP and the OP incorporating the terms and conditions set forth on Exhibit “G” attached hereto.

          “Contribution Transaction” shall have the meaning given to such term on Exhibit “G” attached hereto.

          “JV Agreement” shall mean, with respect to each Approved Property, a limited liability company operating agreement, in a form mutually and reasonably agreed upon in good faith by the parties, pursuant to which the parties agree to immediately form and operate a JV Entity consistent with the terms set forth on Exhibit “F” attached hereto.

          “JV Entity” shall mean, with respect to each Approved Property, a Delaware limited liability company single asset entity that owns such Approved Property and whose sole members are the NHP Member and the PMB Member.

          “Knowledge” shall mean, (a) when used with respect to PMB, the actual, current knowledge of Mark Toothacre, Gregory P. Nelson, Evan Stone, James Rohan, Elizabeth Powell, Jeffrey L. Rush, Claude Hooton and Sherwood Johnston, III, without independent investigation or the duty to conduct an independent investigation, and without imputation of the knowledge of any other employees, agents or other advisors of PMB or its affiliates, and (b) when used with respect to NHP or the OP, the actual, current knowledge of Doug Pasquale, Abdo Khoury, Don Bradley, Bill Wagner and Derrick Pete, without independent investigation or the duty to conduct an independent investigation, and without imputation of the knowledge of any other employees, agents or other advisors of NHP or its affiliates.

          “Master Contribution Agreement” shall mean that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (as amended to date and as the same may be hereinafter amended from time to time), by and among NHP, the OP and Pacific Medical Buildings, LLC, among others, relating to the contribution of certain “Properties” (as defined in the Master Contribution Agreement) or interests therein to the OP or certain affiliates of the OP.

A-1

          “MOB” shall mean one or more medical office buildings containing suites for physicians and physician practice groups, parking structures and/or ancillary and outpatient services (including, without limitation, ambulatory surgery centers, urgent care centers, fitness/wellness centers, child care centers, specialty practice clinics, imaging and diagnostic centers, rehabilitation centers, kidney dialysis centers, radiology units, linear acceleration units, cancer treatment centers, healthcare administrative facilities, pharmacies and/or other medical related retail services).

          “NHP Member” shall mean, with respect to each Approved Property, NHP (or, at NHP’s election, a wholly-owned, directly or indirectly, subsidiary of NHP) which shall be a member of the JV Entity along with the PMB Member.

          “OP Agreement” shall mean the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P. dated as of April 1, 2008, by and among NHP/PMB GP LLC, a Delaware limited liability company, as the general partner, the persons whose names are set forth from time to time on Exhibit “A” thereto, and NHP for the purposes of agreeing to the provisions of Article XVI thereof, as the same has been or may hereafter be amended, modified or supplemented from time to time in accordance with the terms thereof.

          “PMB Member” shall mean, with respect to each Approved Property, an affiliate of PMB which is formed by PMB to be a member of the JV Entity along with the NHP Member (it being acknowledged and agreed that the PMB Member may be an entity managed and controlled by an affiliate of PMB in which any hospitals or doctors that may be affiliated with or tenants of such Approved Property are members or partners and/or in which members, officers or employees of PMB may be members or partners).

          “Prohibited Person” shall mean any of the following: (a) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (the “Executive Order”); (b) a person or entity owned or controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a person or entity that is named as a “specially designated national” or “blocked person” on the most current list published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac; (d) a person or entity that is otherwise the target of any economic sanctions program currently administered by OFAC; or (e) a person or entity that is affiliated with any person or entity identified in clause (a), (b), (c) and/or (d) above.

          “REIT” shall mean a real estate investment trust under Section 856 of the US Internal Revenue Code of 1986, as amended and in effect from time to time.

          “Total Project Costs” shall mean, with respect to each Approved Property, all project costs, including all costs related to the acquisition, ground leasing and financing of such Approved Property and all hard and soft construction and development costs (including entitlement and design (including architecture and engineering costs)) and all other costs of pre-development, development, construction, lease-up and ownership, expended (or, in the case of estimates, reasonably anticipated to be expended) (including so-called fill-up losses) in connection with such Approved Property through the earlier of (i) the date on which a Contribution Transaction is consummated with respect to such Approved Property, as more particularly described on Exhibit “G” attached hereto, or (ii) the date such Approved Property generates sufficient cash flow to cover or fund all then current operating expenses, debt service payments and a reasonable set-aside for reserves.

A-2

EXHIBIT “B”

PMB EXCLUDED PROPERTIES

Excluded Existing Development Projects:

1. LAKEWAY REGIONAL MEDICAL CENTER MOB, AUSTIN, TX.

2. SHARP-REES STEALY, DOWNTOWN MOB, SAN DIEGO, CA.

3. ST. JOSEPH MOB, YORBA LINDA, CA.

4. ST. JOSEPH MOB & PARKING STRUCTURE, BURBANK, CA.

5. PMB POMONA LLC, POMONA, CA.

Excluded Future Development Projects:

6. PMB ACQUISITION #2 PARTNERS LLC— This LLC’s Operating Agreement with AIG’s affiliate contains a radius restriction on prospective transactions that affects the Henderson Sienna campus MOBs (doesn’t affect St. Rose Dominican Medical Plaza Limited Partnership).

7. PMB ACQUISITION GLENDALE LLC— This LLC’s Operating Agreement with LaSalle’s affiliate contains a radius restriction on prospective transactions.

8. PDP LA MESA LLC — This LLC’s prospective Amended & Restated Operating Agreement with LaSalle’s affiliate contains a radius restriction on prospective transactions. LaSalle has yet to exercise its option, so this Amended & Restated Operating Agreement is not yet effective.

9. AMP III LLC— This MOB would be excluded as it is a Dr. Rush investment outside PMB.

B-1

EXHIBIT “C”

PRELIMINARY SUMMARY INFORMATION¹

Objective: Rapidly evaluate the development potential of a specific Property.

A.	Investment Overview
	Succinctly describe investment including strategy and competition, risks, and mitigating factors.

List the salient deal terms as follows:

Property Name and Address

Estimated Total Project Costs

Estimated Financing desired, if any (it being acknowledged and agreed that NHP and the OP shall not be required to seek any amount of Financing which would result in less than ten percent (10%) of the Approved Budgeted Costs being funded in the form of equity contributions from one or more members of the JV Entity)

Estimated equity to be provided by hospital or tenant/physicians or PMB members, officers and/or employees

Hospital affiliation and relative local competitive position

B. Preliminary Financial Analysis

1.	Cash Flow Model — Preliminary cash flow and return analysis
2.	Preliminary Project Budget — Estimated Total Project Costs, including all hard and soft costs of development, including construction costs (including contingency amounts), design, engineering, permits, project management and sales fees, marketing sales and expenses, and legal fees.

C.	Pro-forma Leasing Rates — demonstration of support for the proposed leasing rates in the project submarket (including information regarding any significant anticipated tenant groups (e.g., hospitals and/or physician groups).
D.	Land Proposal

1. Terms of Ground Lease/Land Acquisition — Outline all relevant terms (price, payment terms, conditions of sale or contribution, timing, initial lease term and renewals, material landlord restrictions, ROFOs, options to purchase, etc.)

E. Preliminary Site Analysis

1.	Zoning and Services Analysis — Summary of zoning and building code and entitlement analysis
2.	Utilities Review — Availability of utilities, and discretionary risks of obtaining service, if any.
3.	Site Plan and Topographic/Soils Conditions — Estimated dimensions and configuration of the site. Identification of any known conditions that are material to the project concept.
4.	Legal Analysis — Preliminary title report, including title to legal ownership, rights, easements. Identification of significant title issues, if any, that could affect the project.

¹ In addition to the delivery of the initial Preliminary Summary pursuant to Section 2.2(b) of this Agreement, PMB shall, from time to time following the Preliminary Approval Date, notify NHP and the OP of any material changes to the scope of or the financial analysis relating to each proposed Property. Such changes shall include, without limitation, material changes to the project size, development budget or proforma financial analysis.

C-1

F. Project Design Concept

1.	Architectural Description — A general description of the architectural concept, describing square footage, floor plates (shapes, bay depths, core locations, etc.), common areas, parking spaces, amenities and access. Identify specialized tenant suite configurations, if identified at this time.
2.	Square Footage — A table outlining the estimated rentable and usable square footage per floor.
3.	Conceptual Drawings — PMB to provide all available existing conceptual drawings, if any.

G. Pre-construction Schedules

1.	Estimated Pre-construction Budget
2.	Estimated Pre-construction Timeline

C-2

EXHIBIT “D”

FINAL INFORMATION PACKAGE

All capitalized terms used and not otherwise defined herein shall have the meanings set forth for the same in the Amended and Restated Pipeline Property Agreement (For MOB Development, Management and ROFOs) to which this Exhibit “D” is attached.

PMB to deliver to or assist in completing the following items as part of final approval of a Property:

A. Investment Executive Summary Overview

Value, Cost, Schedule, Major Tenants, Market Position, Unique Features, Competitive Challenges

B. Preliminary Financial Analysis

Leasing

Pre-leasing (tenants, rentable areas, lease terms)

Tenant prospects (name, projected area, comments)

Budget

Contractor’s cost breakdown (core/shell, site, tenant improvement allowance, and any special items)

Professional fees (developer’s OH/P, construction mgmt, third-party consultants, etc.)

Financing costs (construction interest, loan fees, lender legal, etc.) based on the Loan Proposal

Marketing & leasing fees

Reserves

Ten-year Operating Forecast¹

Lease up forecast

Revenue & expenses (building & parking)

Reimbursables

Vacancy & collections allowance

Operating reserves

Ground rent, if any

Lease renewal and second generation allowances

NOI

Acquisition Value Forecast

NOI at sale/contribution

Cap rate analysis

Projected sale/contribution date

¹ Such Ten-year Operating Forecast shall include, without limitation, the model assumptions relating thereto such as lease-up timeline, anticipated turnover and retention, tenant improvement costs, operating costs and capital expenditures.

D-1

C. Loan/Land Documents

The desired Financing terms (consistent with the Loan Proposal)

Closing checklist

Option, Purchase & Sale Agreement or Ground Lease and any related documents

Title report

Phase 1 Environmental Report

Third-party reports

Survey

ALTA

Insurance (builder’s risk, & title)

Final architectural & construction contracts (assignments)

D. Updated Development, Location, Market and Competitive Overview

Site, location and improvements description (see Note #1, below)

Market/feasibility study (third party study, if required)

Competitive project discussion

Regional location map

Market/city location map

Sub-market/neighborhood location map

Subject aerial photos

Site photos

E. Entitlement Summary

All discretionary approvals

Non-discretionary approvals including building & site building permits

F. Final Site Analysis

Zoning approvals (public approval documents, zoning letters, etc.)

Site plan

Phase 1 if applicable

G. Project Construction Documents (substantially negotiated forms)

Construction Documents

Bonds, insurance, major sub-contractor list

H. Construction Schedules

Grading, foundations, core & shell, tenant improvement build-out, occupancy

D-2

EXHIBIT “E”

PERMITTED PMB CONSTRUCTION MANAGEMENT,
DEVELOPMENT AND LEASING FEES

PMB will be entitled to receive the following fees:

• Development Overhead Fees calculated to be 5% of total development costs, or otherwise stated in the Approved Budgeted Costs, payable in equal monthly installments during the construction period.

• Construction Management Fees calculated to be 3% of all direct construction costs or otherwise stated in the Approved Budgeted Costs, payable in equal monthly installments during the construction period.

• Leasing Fees calculated to be 5% of the value of leases’ income over their first five (5) years and 2.5% of the value of leases’ income beyond 5 years, payable half on lease signing and half on occupancy, but in no event sooner than the closing of initial funding.

E-1

EXHIBIT “F”

JV AGREEMENT TERMS

Each JV Agreement shall provide as follows (and all capitalized terms used and not otherwise defined herein shall have the meanings set forth or cross-referenced to other agreements in the Amended and Restated Pipeline Property Agreement (For MOB Development, Management and ROFOs) to which this Exhibit “F” is attached (the “Agreement”)):

• The NHP Member and the PMB Member shall form a JV Entity (or, if permitted by the facts and circumstances surrounding such a contribution and mutually agreed upon by the parties, by the admission of NHP to an existing entity which is then wholly-owned by the PMB Member and which will thereafter become such JV Entity in which case, the operating agreement for such existing entity shall be amended and restated into a JV Agreement).

• The sole members of such JV Entity shall be the NHP Member and the PMB Member.

• The PMB Member will be solely responsible for the development of the applicable Approved Property and will be the day-to-day manager of the JV Entity, subject to the NHP Member’s consent for “major decisions” (which shall be defined consistent with the definition of “Major Decisions” set forth in the limited liability company agreement among NHP, PMB and/or their affiliates relating to the property referenced in the Master Contribution Agreement as being leased by PMB Gilbert LLC (the “Gilbert JV Agreements”)).

• The JV Agreement will not contain a so-called buy-sell procedure, including by reason of a “major decision” deadlock. The JV Agreement will, however, provide an alternative dispute resolution process for resolving disputes between the members (including those relating to “major decision” deadlocks) substantially similar to the terms of Section 9.15 of the Agreement.

• The NHP Member will be solely responsible for all aspects of the required financing of the development of the applicable Approved Property, including providing the applicable third party financing source(s) for such Approved Property such as:

– Any and all equity required (as capital contributions to the JV Entity) (provided that, at the option of the PMB Member, the PMB Member may contribute any required equity up to a maximum of 49% thereof);

– Obtaining all third-party construction financing, including the amount thereof and all costs associated therewith;

– Any and all guarantees (including payment and completion) required in connection with any third-party construction financing; and

F-1

– If required in lieu of a guarantee (but not in addition thereto), any and all take-out commitments required.

• The NHP Member will be solely responsible for providing any completion or similar guarantees required by any ground lessor in connection with the leasing and development of the Approved Property.

• The PMB Member will cross-guarantee to the NHP Member and the JV Entity all costs incurred by the NHP Member or the JV Entity in order to engage a third party construction manager/developer (as selected by NHP in its sole discretion), if, at anytime, the PMB Member shall refuse to perform or otherwise abandon or relinquish its responsibilities to manage and oversee the development of the applicable Approved Property for any reason other than as a result of (i) a breach by the NHP Member of its obligations under the JV Agreement or (ii) the lack or unavailability of equity and/or Financing to pay the Total Project Costs for such Approved Property (provided that such lack or unavailability of equity is not a result of the PMB Member’s breach of any obligation under the JV Agreement to contribute capital for any “Cost Overrun,” as defined below). Such cross-guarantee obligations of the PMB Member shall be secured by a pledge of the PMB Member’s entire interest in the JV Entity in favor of the NHP Member.

• In exchange for its participation in the development of such Approved Property, the NHP Member will receive:

– a membership interest in the JV Entity;

– a 10% preferred return, calculated on a simple (i.e., not compounded) basis, on any cash equity provided by the NHP Member (the “Preferred Return”), understanding that the PMB Member shall also receive such a Preferred Return to the extent of any equity contributed by the PMB Member (and equity for each of the NHP Member and the PMB Member shall include, without limitation, any required equity contributed if the actual Total Project Costs for any Approved Property exceed the Approved Budgeted Costs for such Approved Property as provided below);

– a share (as determined by the waterfall below) of the remaining cash flow or profit from any capital event; and

– if the NHP Member’s take-out commitment is required in lieu of a guarantee (but not in addition thereto), a special preferred return calculated annually to be an amount equal to 150 basis points (based on the take-out loan commitment amount) from commencement of construction to the earlier of the take-out or the consummation of a Contribution Transaction (the “Special Preferred Return”).

• In lieu of obtaining third-party construction financing, the NHP Member or its affiliate may become the construction lender for such Approved Property, provided that the loan must reflect the then current market terms provided by third-party lenders (as such terms are reasonably approved by the PMB Member).

F-2

• All excess cash flow will be distributed as follows:

– first, to the NHP Member for the accrued and unpaid Special Preferred Return (if any);

– second, to the NHP Member and the PMB Member for the Preferred Return (pro rata based on the then accrued but unpaid Preferred Return, if any, of each Member); and

– third, the balance to be split (a) 15% to the NHP Member, (b) 37.5% to the PMB Member, and (c) 47.5% to the members of the JV Entity (pro rata based on the share of the equity contributed by such members, if any, to the JV Entity).

• All capital proceeds (or deemed proceeds upon consummation of a Contribution Transaction), will be distributed as follows:

– first, to the NHP Member for the accrued and unpaid Special Preferred Return (if any);

– second, to the NHP Member and the PMB Member for the Preferred Return (pro rata based on the then accrued but unpaid Preferred Return, if any, of each Member);

– third, (pro rata based on the share of equity contributed by such members, if any, to the JV Entity) to the NHP Member and to the PMB Member on account of unreturned capital; and

– fourth, the balance to be split (a) 15% to the NHP Member, (b) 37.5% to the PMB Member, and (c) 47.5% to the members of the JV Entity (pro rata based on the share of the equity contributed by such members, if any, to the JV Entity).

• Notwithstanding anything to the contrary: (a) if the actual Total Project Costs for any Approved Property exceed the Approved Budgeted Costs for such Approved Property (herein, a “Cost Overrun”), then such excess shall be the responsibility of the members of the JV Entity (pro rata based on the percentage splits to which each member would then be entitled under the fourth tier of the capital proceeds waterfall above); and (b) if the actual Total Project Costs for any Approved Property are less than the Approved Budgeted Costs for such Approved Property, then upon any capital event (or funding of such savings by the construction lender for such Property) in which such savings would be realized, the members of the JV Entity shall be entitled to receive the benefit of such savings (pro rata based on the percentage splits to which each member would then be entitled under the fourth tier of the capital proceeds waterfall above).

• If, at any time after the date such Approved Property first generates sufficient cash flow to cover or fund all then current operating expenses, debt service payments and a reasonable set-aside for reserves, and prior to the date on which a Contribution

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Transaction is consummated with respect to such Approved Property, cash flow for such Approved Property together with any available reserves become insufficient to cover or fund future operating expenses, debt service payments and a reasonable set-aside for reserves (an “Operating Deficiency”), then, unless otherwise agreed by the members in their sole discretion, each of the PMB Member and the NHP Member shall be obligated to contribute capital to the JV Entity (pro rata based on the percentage splits to which each member would then be entitled under the fourth tier of the capital proceeds waterfall above) in an amount necessary to eliminate such Operating Deficiency. Provisions substantially similar to Section 3.3 of the Gilbert JV Agreement will be included in the JV Agreement to address the failure of any member to make any required capital contribution as a result of any such Operating Deficiency or Cost Overrun.

• Such Approved Property shall not be sold to any third party prior to the earlier of (i) the consummation of a Contribution Transaction with respect thereto pursuant to the terms of the Contribution Agreement, or (ii) any termination of the Contribution Agreement prior to the consummation of such Contribution Transaction.

• The PMB Member shall have the sole and exclusive right to enforce the terms of the applicable Contribution Agreement against NHP, the OP and the NHP Member, and any damages payable thereunder by NHP, the OP and/or the NHP Member shall be payable solely to the PMB Member.

• Neither the PMB Member nor the NHP Member shall have any right to sell or otherwise transfer its respective interest in the JV Entity prior to the earlier of (i) the consummation of a Contribution Transaction with respect thereto pursuant to the terms of the Contribution Agreement, or (ii) any termination of the Contribution Agreement prior to the consummation of such Contribution Transaction. In the event of a termination of the Contribution Agreement with respect to any Approved Property as a result of a default by NHP, the OP and/or the NHP Member, the PMB Member will have the sole and exclusive right and authority to market and sell such Approved Property to a third party and the same shall not constitute a Major Decision or require the approval of the NHP Member.

• Each member of the JV Entity will agree that: (a) it will cooperate with NHP to structure its actions in a manner that would not jeopardize the status of NHP as a REIT, including utilizing REIT protections substantially similar to those contained in Section 5.10 of the Gilbert JV Agreement; and (b) it will cooperate with NHP to structure the JV Entity and NHP’s debt and equity interests therein, together with any payments made to NHP or the NHP Member by the JV Entity or the PMB Member (other than, in either case, distributions made by the JV Entity in respect of NHP’s equity interest in the JV Entity), in a manner that enables NHP to satisfy the REIT requirements and enables such debt interests to qualify as real estate assets under Section 856(c)(5)(B) of the Code.

• Upon the later to occur of (a) the date by which the aggregate of Total Project Costs for all Approved Properties, with respect to which a Contribution Transaction has occurred or for which a Contribution Agreement has been executed and as to which NHP, the OP

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and the applicable NHP Member are obligated thereunder to consummate a Contribution Transaction in accordance with the terms thereof (or were obligated, but breached such obligation), equals at least One Hundred Sixty Million Dollars ($160,000,000.00) and (b) the fourth (4th) anniversary of the Effective Date, the parties hereto shall in good faith revisit the terms set forth on this Exhibit “F” with respect to the Preferred Return, the Special Preferred Return and the waterfall and, if mutually and reasonably agreed upon at such time, amend such terms to reflect then applicable market conditions, which amended terms shall only apply to any and all JV Agreements entered into thereafter.

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EXHIBIT “G”

CONTRIBUTION AGREEMENT TERMS

     Each Contribution Agreement (this “Agreement”) shall provide as follows (and all capitalized terms used and not otherwise defined herein shall have the meanings set forth for the same or cross-referenced to other agreements in the Amended and Restated Pipeline Property Agreement (For MOB Development, Management and ROFOs) to which this Exhibit “G” is attached (the “Pipeline Agreement”)):

     1.1 Parties. NHP and the OP, collectively, and jointly and severally, as “Transferee,” the NHP Member, the PMB Member, PMB LLC, a California limited liability company (“PMB”), and a national title company reasonably acceptable to the parties, as “Escrow Agent.” The NHP Member and the PMB Member may sometimes be referred to herein, collectively, as the “Members,” and individually, as a “Member.”

     1.2 Contribution Transaction Structure.

          (a) As used herein, the term “Property” shall mean the “Approved Property” (as defined in the Pipeline Agreement), including the “Improvements,” the “Real Property,” the “Personal Property,” and the “Intangible Property” relating thereto (each as defined in Section 5 of the Master Contribution Agreement).

          (b) The transaction will be either a “Property Interest Contribution” (as hereinafter defined) or an “Investment Entity Transaction” (as hereinafter defined). A Property Interest Contribution or an Investment Entity Transaction may sometimes be referred to herein as a “Contribution Transaction.” The JV Entity as constituted immediately prior to the Closing of the Contribution Transaction (i.e., as a partnership between the Members) shall sometimes be referred to herein as the “Partnership,” and the JV Entity as constituted immediately following the Closing (i.e., as either a wholly-owned direct or indirect subsidiary of the OP in connection with a Property Interest Contribution, or as a continuing partnership between the OP (or a wholly-owned subsidiary of the OP) and the PMB Member (on behalf of the “Continuing Partners” (as hereinafter defined)) in connection with an Investment Entity Transaction) shall be referred to herein as the “Continuing Entity.”

          (c) A “Property Interest Contribution” shall mean (i) in exchange for “Class A Partnership Units” (as defined in the OP Agreement) (“Class A OP Units”), cash or a combination thereof, the PMB Member will transfer, contribute and convey its entire membership interest in the Partnership to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof), and (ii) in exchange for “Class B Partnership Units” (as defined in the OP Agreement) (“Class B OP Units”), the NHP Member will transfer, contribute and convey its entire membership interest in the Partnership to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof).

          (d) An “Investment Entity Transaction” shall mean (i) certain partners and/or members of the PMB Member will retain their interests in the PMB Member (each such partner and/or member, a “Continuing Partner” and, collectively, the “Continuing Partners”), while other partners and/or members of the PMB Member will transfer, contribute and convey their respective interests in the Partnership to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof) in exchange for Class A OP Units, cash or a combination thereof, and (ii) the NHP Member will transfer, contribute and convey its entire membership interest in the Partnership to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof) for Class B OP Units. To accommodate an Investment Entity Transaction, subject to the other terms and conditions of this Agreement as herein provided, the PMB

Member will (i) distribute certain membership interests (the “Distributed Partnership Interests”) in the Partnership to each of its partners and/or members (other than the Continuing Partners) prior to the “Closing” (as hereinafter defined) in redemption of each such partner’s and/or member’s interest in the PMB Member (each such redeeming partner and/or member, a “Distributed Interest Transferor Party” and, collectively, the “Distributed Interest Transferor Parties”), and (ii) cause each such Distributed Interest Transferor Party to transfer, contribute and convey its respective Distributed Partnership Interests to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof) in exchange for Class A OP Units, cash or a combination thereof.

          (e) In the case of a Property Interest Contribution, for income tax purposes, the parties intend and agree that each of the transactions associated with such Property Interest Contribution by the PMB Member will constitute an “assets-over” partnership merger within the meaning of Treasury Regulations Section 1.708-1(c)(3)(i), and, as a result, that (i) the payment of cash in excess of the “Cap-Ex Amount” (as hereinafter defined), if any, to any “Cash Recipient” (as hereinafter defined) will be treated as a sale of such Cash Recipient’s interests in PMB Member and a purchase of such interests by the OP for the cash so paid under the terms of this Agreement, and (ii) the OP will be treated as acquiring the portion of the interests in the Partnership attributable to such interests in PMB Member in redemption of such interest in PMB Member, in each case, in accordance with Treasury Regulations Section 1.708-1(c)(4).

          (f) In the case of an Investment Entity Transaction, for income tax purposes, the parties intend and agree that the transfer of the Distributed Partnership Interests by the Distributed Interest Transferor Parties to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof) constitutes (i) a contribution pursuant to Section 721 of the Internal Revenue Code of 1986, as amended (the “Code”) to the extent of the Class A OP Units received by the “Class A OP Unit Recipients” (as hereinafter defined), and (ii) a sale to the extent of the “Cash Amount” (as hereinafter defined) received by the Cash Recipients.

          (g) The parties agree that, for the 24-month period following the Contribution Transaction, (i) in the case of a Property Interest Contribution, the Continuing Entity shall (A) be owned one hundred percent (100%) by the OP, either directly or through one or more disregarded entities as determined for U.S. federal income tax purposes, and (B) be classified for U.S. Federal income tax purposes as a disregarded entity and not as a partnership or association taxable as a corporation, and (ii) in the case of an Investment Entity Transaction, the Continuing Entity shall continue to be treated as a partnership and not as an association taxable as a corporation.

     1.3 Determination of Contribution Value and Percentage Interest of the Members.

          (a) The “Contribution Value” shall mean the contribution value for the Property determined as of the “Closing Date” (as hereinafter defined) by dividing the projected “Net Operating Income” (as hereinafter defined) for the Property by the “FMV Cap Rate” (as hereinafter defined), subject to adjustment as hereinafter provided, and subject to a deduction for the sum of the following amounts (which shall be credits against the Contribution Value): (i) the outstanding balance (i.e., principal, accrued and unpaid interest and any other amounts otherwise then due and payable other than those otherwise allocated hereunder) under any loans made to the Partnership (each, a “Loan Obligation” and, collectively, the “Loan Obligations”) as of the Closing Date; (ii) the “Property Tax Reserve Amount” (as hereinafter defined), if any, to the extent funded by Transferee in accordance with Section 1.4(d) hereof; (iii) the “Proration Reserve Amount” (as hereinafter defined), to the extent funded by Transferee in accordance with the terms of Section 1.11(a)(ii) hereof; (iv) an amount equal to the “Reimbursable Closing Costs” (as hereinafter defined); and (v) the “Credit Amount” (as hereinafter defined). Notwithstanding anything contained herein to the contrary, the Contribution Value shall be increased by

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the aggregate amount of (A) all escrow accounts, reserves and similar amounts maintained by the Partnership with or for the benefit of any lender in connection with the Loan Obligations to the extent that such escrow accounts, reserves or similar amounts (or the rights thereto) shall be retained by the Continuing Entity, (B) an amount necessary to account for any reimbursements required to be paid to the Partnership pursuant to the last sentence of Section 1.5 hereof, and (iii) any other cash funds then held by or for the benefit of the Partnership that (1) have not been distributed to the Members in accordance with the terms of the JV Agreement, (2) have not otherwise been prorated or adjusted as provided in this Agreement, and (3) will be retained by or for the benefit of the Continuing Entity following the Closing.

          (b) Each Member’s share of the Contribution Value shall be equal to that amount (expressed as a percentage) determined by dividing (i) the amount that such Member would receive if the Property were sold for cash at the Contribution Value and the gross proceeds thereof were distributed to the Members in connection with a capital event in accordance with the terms of the JV Agreement, by (ii) the Contribution Value (with respect to each Member, the “Percentage Interest”), and the amount that each Member shall receive on account of the Contribution Value shall be equal to its respective Percentage Interest multiplied by the Contribution Value (with respect to each Member, the “Contribution Value Amount”). To the extent, however, that PMB and/or the PMB Member has delivered the “Legal Fees and Costs Notice” (as hereinafter defined) in accordance with Section 1.19(b) hereof, then the “Reimbursable Legal Fees and Costs Amount” (as hereinafter defined) shall be deducted from the PMB Member’s Contribution Value Amount at the Closing. Notwithstanding anything to the contrary in this Agreement, in no event shall either Member’s Contribution Value Amount be less than zero (-0).

          (c) The “FMV Cap Rate” shall mean the fair market value cap rate for properties substantially similar to the Property that (x) have at least the “Elected Percentage” (as hereinafter defined) of their respective rentable square footage leased, pursuant to leases with weighted average initial term lengths of not less than five (5) years, (y) are located in the same or substantially similar geographic market as the Property, and (z) are substantially similarly situated as the Property (i.e., location to a hospital or other applicable characteristics), in each case determined as of the date on which the applicable “Closing Notice” (as hereinafter defined) is delivered, and in accordance with this definition. PMB and the PMB Member shall include in the applicable Closing Notice, their good faith determination of the FMV Cap Rate for the Property, together with reasonable back-up documentation for such calculation, and the following shall apply:

          (i) Transferee shall have ten (10) Business Days upon receipt of the applicable Closing Notice to deliver to PMB and the PMB Member written notice of its objection to the proposed FMV Cap Rate, which notice shall also specify in reasonable detail Transferee’s basis therefore;

          (ii) if Transferee timely objects to the determination of the FMV Cap Rate by PMB and the PMB Member, then the parties shall meet and confer in person or telephonically in good faith for a period of ten (10) Business Days following receipt by PMB and the PMB Member of such notice to attempt to mutually agree upon the FMV Cap Rate;

          (iii) if Transferee fails to deliver written notice of its objection to the proposed FMV Cap Rate to PMB and the PMB Member as provided above, then Transferee shall be deemed to have agreed that the FMV Cap Rate shall be as proposed by PMB and the PMB Member in the applicable Closing Notice; and

          (iv) if the parties are not able to agree timely on the FMV Cap Rate, then such dispute shall be resolved as follows:

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          (1) each of PMB and the PMB Member, on the one hand, and Transferee, on the other hand, shall select a MAI designated appraiser with at least ten (10) years of experience in appraising MOBs in the geographic region in which the Property is located (a “Qualified Appraiser”) and shall give notice to the other specifying the name and address of the Qualified Appraiser each has chosen;

          (2) the two Qualified Appraisers so chosen shall, within ten (10) days after the second Qualified Appraiser is appointed, determine the FMV Cap Rate for the Property in accordance with the terms hereof;

          (3) if the two valuations produced are within ten percent (10%) of each other, then the average of the two (2) FMV Cap Rates shall be deemed to be the FMV Cap Rate for the Property, but if the two (2) FMV Cap Rates produced are not within ten percent (10%) of each other, the two (2) Qualified Appraisers shall together designate a third (3^rd) Qualified Appraiser;

          (4) if applicable, the FMV Cap Rate of the third (3^rd) Qualified Appraiser shall be compared to the FMV Cap Rates of the first (1^st) Qualified Appraisers, and the two (2) valuations that are nearest to each other shall be averaged, and the average of such two (2) FMV Cap Rates shall be deemed to be the FMV Cap Rate for the Property;

          (5) each of PMB and the PMB Member, on the one hand, and Transferee, on the other hand, shall pay the fees and expenses of the Qualified Appraiser it has selected, and if applicable, one half (1/2) of the fees and expenses of the third (3^rd) Qualified Appraiser; and

          (6) the decision and award of the Qualified Appraisers shall be in writing and shall be final, conclusive and enforceable in any court of competent jurisdiction.

          (d) The “Net Operating Income” shall mean, the amount by which (i) the revenues projected to be received from the operation and/or leasing of the Property or any portion thereof (excluding proceeds from any capital event) for the twelve (12) full calendar month period following the calendar month in which the applicable Closing Notice is delivered (the “Post-Closing Period”) (based on executed “Leases” (as hereinafter defined) with “Tenants” (as hereinafter defined) not in default and with respect to which no action or proceeding shall have been commenced under the federal bankruptcy code or any state law for the relief of debtors or for the enforcement of the rights of creditors and no attachment, execution, lien or levy shall have attached to or been issued with respect to such Tenant’s interest in the Property or any portion thereof) exceeds (ii) the operating expenses, forecasted real estate taxes and ground rent projected to be paid or incurred with respect to the Property that would be paid for such Post-Closing Period; provided, however, that the term “Net Operating Income” shall be net of (A) a deduction for a general operating reserve equal to Twenty Cents ($0.20) per rentable square foot of medical office building space for the Property, and (B) an allowance for bad debt expenses, which shall be calculated in accordance with generally accepted accounting principles in the United States (consistently applied) and based on actual prior experience; and provided further, however, that the term “Net Operating Income” shall take into account all revenues earned with respect to parking operations at the Property (“Parking Revenues”), which shall be valued for the Post-Closing Period based upon the

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Parking Revenues actually collected for the three (3) month period ending on the date the applicable Closing Notice is delivered net of any un-reimbursed expenses and maintenance reserves (to the extent not passed through to Tenants). Notwithstanding the foregoing, to the extent that PMB and/or the PMB Member demonstrate to Transferee’s reasonable satisfaction that the Parking Revenues for the Property are subject to seasonality or planned rate increases, then such seasonality or planned rate increases shall be considered for purposes of projecting such Parking Revenues for the Post-Closing Period.

     1.4 Consideration. The Contribution Value shall be payable at the Closing (except as otherwise described herein) as follows:

          (a) Notices. The Closing Notice will include the PMB Member’s election specifying whether the PMB Member will engage in a Property Interest Contribution or an Investment Entity Transaction. In addition, the applicable Closing Notice shall specify the matters set forth in clauses (i) and (ii) below, as applicable.

          (i) If the PMB Member elects to engage in a Property Interest Contribution, the Closing Notice shall (A) identify the names of the parties that are or, at the Closing, will be members or partners of the PMB Member or their respective designees (each, a “PMB Transferor Party” and collectively, the “PMB Transferor Parties”), (B) include a representation from PMB and the PMB Member that the identified PMB Transferor Parties are all of the members of the PMB Member, (C) indicate PMB’s good faith estimate of the percentage of the PMB Member’s Contribution Value Amount that is allocable to each such PMB Transferor Party based upon a good faith estimate of the Contribution Value (which estimated percentage shall, with respect to each PMB Transferor Party be hereinafter referred to as an “Estimated PMB Transferor Party Allocable Share”) and (D) with respect to each Estimated PMB Transferor Party Allocable Share, identify (1) the percentage to be payable in cash (a “Cash Portion” and, aggregated together with all of the other Cash Portions, the “Cash Amount”) and the percentage to be treated as the Cap-Ex Amount, and (2) the percentage to be payable in Class A OP Units (collectively with respect to all PMB Transferor Parties, the “Class A OP Unit Portion”).

          (ii) If the PMB Member elects to engage in an Investment Entity Transaction (in accordance with and subject to the restrictions set forth in this Section 1.4), the Closing Notice shall (A) identify the names of the parties that are or, at the Closing, will be members or partners of the PMB Member or their respective designees and which of the same shall be Continuing Partners and which shall be Distributed Interest Transferor Parties, (B) include a representation from PMB and the PMB Member that the identified Continuing Partners and Distributed Interest Transferor Parties are all of the members of the PMB Member, (C) indicate PMB’s good faith estimate of the percentage of the PMB Member’s Contribution Value Amount that is allocable to each such Distributed Interest Transferor Party based upon a good faith estimate of the Contribution Value (which percentage shall, with respect to each Distributed Interest Transferor Party be hereinafter referred to as an “Estimated Distributed Interest Transferor Party Allocable Share”) and PMB’s good faith estimate of the PMB Member’s Contribution Value Amount that will not be paid, but which will be attributed to the interests retained by the Continuing Partners in the Continuing Entity (through their retained interest in the PMB Member) based upon a good faith estimate of the Contribution Value (which percentage shall, with respect to the Continuing Partners be hereinafter referred to as the “Estimated Continuing Partners Allocable Share”) and shall also be the percentage ownership that such Continuing Partners shall own in the Continuing Entity (through their retained interest in the PMB Member) following the Closing, and (D) with respect to each such Estimated Distributed Interest Transferor Party Allocable Share, identify (1) the percentage constituting the Cash Portion, and (2) the percentage constituting the Class A OP Unit Portion. An Estimated PMB Transferor Party Allocable Share, Estimated Distributed

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Interest Transferor Party Allocable Share and/or Estimated Continuing Partners Allocable Share shall sometimes be referred with respect to any such party(ies) as an “Estimated Allocable Share.”

          (iii) Prior to the Closing, PMB and/or the PMB Member shall update the Estimated Allocable Share for each PMB Transferor Party or for each Distributed Interest Transferor Party and Continuing Partners, as applicable, and cause to be included as part of the “Closing Statement” (as hereinafter defined), (A) the actual percentage of the PMB Member’s Contribution Value Amount that is allocable to each such PMB Transferor Party or Distributed Interest Transferor Party and Continuing Partner, as applicable, based upon the actual Contribution Value (which percentage shall, with respect to each PMB Transferor Party or Distributed Interest Transferor Party and Continuing Partner, be hereinafter referred to as the “Allocable Share”), (B) the actual Cash Portion for each PMB Transferor Party or Distributed Interest Transferor Party, as applicable, and (C) the actual Cash Amount, the percentage to be treated as the Cap-Ex Amount, if any, and the actual Class A OP Unit Portion.

          (iv) A PMB Transferor Party or a Distributed Interest Transferor Party may sometimes be referred to herein as a “Transferor Party” and, collectively, as the “Transferor Parties.” Each entity which, or person who, is identified in the applicable Closing Notice as a party who is to receive (A) Class A OP Units shall hereinafter be referred to as a “Class A OP Unit Recipient” and collectively such parties shall hereinafter be referred to as the “Class A OP Unit Recipients” and (B) all or a portion of the Cash Amount shall hereinafter be referred to as a “Cash Recipient” and collectively such parties shall hereinafter be referred to as the “Cash Recipients.”

          (b) Delivery of OP Units and Cash.

          (i) At the Closing of the Contribution Transaction, Transferee shall (A) issue to each of the Class A OP Unit Recipients, if any, Class A OP Units equal in value (as determined in accordance with this Section 1.4(b)) to the Class A OP Unit Portion attributable to the Allocable Share of such Class A OP Unit Recipient, as identified in the Closing Statement, (B) pay to each of the Cash Recipients, if any, the Cash Portion attributable to the Allocable Share of such Cash Recipient in cash by wire transfer of federal funds, as identified in the Closing Statement, and (C) issue to the NHP Member Class B OP Units equal in value (as determined in accordance with this Section 1.4(b)) to the NHP Member’s Contribution Value Amount. The number of Class A OP Units that the Class A OP Unit Recipients shall receive on account of the Class A OP Unit Portion of the Contribution Value and the number of Class B OP Units that the NHP Member shall receive on account of the NHP Member’s Contribution Value Amount shall be determined as of the Closing Date by dividing, (1) with respect to the Class A OP Unit Recipients, the Class A OP Unit Portion, and (2) with respect to the NHP Member, the NHP Member’s Contribution Value Amount, in each case by the average closing price per share of Common Stock of NHP (the “Common Stock”) for the twenty (20) consecutive trading days ending on the fifth (5^th) trading day prior to the Closing Date; provided, however, that in calculating such average, each closing price shall be multiplied by the “Adjustment Factor” (as defined in the OP Agreement) then in effect for each applicable closing price date; provided further, however, that the OP shall not issue any fractional Class A OP Units or Class B OP Units, and the number of Class A OP Units and Class B OP Units to be issued to each Class A OP Unit Recipient and the NHP Member, respectively, pursuant to the foregoing calculation shall be rounded to the nearest whole number to the extent required to avoid such a result.

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          (ii) To the extent that any adjustments to the Contribution Value pursuant to this Agreement result in any amounts owing to an applicable Transferor Party after the Closing Date, PMB shall notify Transferee of the percentage of the post-Closing adjustment amount that is allocable to each such Transferor Party (which percentage shall, with respect to each Transferor Party be hereinafter referred to as a “Post-Closing Allocable Share”) prior to any such amounts becoming due. Any post-Closing adjustments owing to an applicable Transferor Party shall be paid by Transferee promptly following receipt of PMB’s notice of each such Transferor Party’s Post-Closing Allocable Share.

          (iii) Notwithstanding anything to the contrary contained herein, (A) if Transferee reasonably determines that any person or entity identified in the applicable Closing Notice as a proposed Transferor Party is not an “Accredited Investor” (as defined in Rule 501 of the General Rules and Regulations promulgated under the Securities Act of 1933, as amended (the “Act”)), then Transferee, in its sole and absolute discretion, may deliver cash, in lieu of Class A OP Units, to such person or entity; (B) if and to the extent that the rules of the New York Stock Exchange would require approval of the shareholders of NHP prior to such issuance of Class A OP Units to Dr. Jeffrey Rush and his affiliates and related entities (collectively, the “Rush Related Parties”), then the Rush Related Parties shall only qualify as Class A OP Unit Recipients and may only elect to receive that number of Class A OP Units, if any, up to an amount that would not so require the approval of the shareholders of NHP, and the balance, including all, if applicable, of the Allocable Share(s) of the Contribution Value to which the Rush Related Parties are entitled must be received in cash; and (C) each then member/principal of PMB that is a Transferor Party (herein, a “PMB Principal Transferor”) shall be required to elect not less than five percent (5%) of his/her respective Allocable Share of the PMB Member’s Contribution Value Amount in the form of Class A OP Units, and all such Class A OP Units issued to each PMB Principal Transferor (up to such minimum election amount) (the “Restricted Class A OP Units”) shall be issued to such PMB Principal Transferor with a restriction prohibiting a “Redemption” (as defined in the OP Agreement) of such Class A OP Units until the expiration or earlier termination of the “Term” (as defined in the Pipeline Agreement) of the Pipeline Agreement, unless otherwise consented to by the OP in its sole discretion. In connection with the foregoing, the “Certificates” (as hereinafter defined) to be issued to each PMB Principal Transferor by the OP with respect to the Restricted Class A OP Units may, at the option of the OP, contain a legend providing for such restriction on Redemption for such period.

          (c) Contribution of Distributed Partnership Interests. To the extent that the “Investment Entity Requirements” (as hereinafter defined) are satisfied, then the PMB Member may elect to engage in an Investment Entity Transaction by notifying Transferee of such election in accordance with the terms of Section 1.4(a) hereof and by complying with each of the following requirements: (i) immediately prior to the Closing, distributing the Distributed Partnership Interests to the applicable Distributed Interest Transferor Parties in proportion to their respective interests in the PMB Member and in redemption of each such Distributed Interest Transferor Parties’ interest in the PMB Member (so that after the distribution, the applicable Distributed Interest Transferor Parties shall directly hold membership interests in the Partnership in proportion to their respective Allocable Share of the PMB Member’s Contribution Value Amount and the Continuing Partners continue to hold directly their membership interests in the PMB Member and indirectly their interests in the Continuing Entity in proportion to their applicable Allocable Share of the PMB Member’s Contribution Value Amount); and (ii) at the Closing, causing each Distributed Interest Transferor Party to transfer, contribute and convey all of its respective Distributed Partnership Interests to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof) by delivering a fully executed “Assignment of Membership Interests” (as hereinafter defined) in exchange for Class A OP Units, cash or a combination thereof, as specified in the Closing Statement (subject to the requirements of Section 1.4(b) hereof and this Section 1.4(c)). As used herein, the term

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“Investment Entity Requirements” shall mean that each of the following conditions have been satisfied prior to the Closing: (1) the PMB Member shall have provided each holder of interests in the PMB Member other than such holders as are affiliates of the PMB Member (collectively, the non-affiliate holders of interests in the PMB Member being hereinafter referred to as the “Outside Investors”) with the option to elect to receive Class A OP Units, cash or a combination thereof in consideration of its interests in the PMB Member; (2) Outside Investors holding interests which entitle them to an aggregate Allocable Share of the PMB Member’s Contribution Value Amount totaling at least ten percent (10%) (unless a smaller percentage is otherwise approved by NHP in its sole and absolute discretion , including as part of the “Final Information Package” (as defined in the Pipeline Agreement)) shall elect not to receive cash or Class A OP Units as consideration for their interests (and thus elect to remain Continuing Partners); (3) after giving effect to the transactions contemplated to occur at the Closing, the PMB Member (on behalf of the Continuing Partners) may continue to own no more than twenty-five percent (25%) of the membership interests of the Continuing Entity (unless a larger percentage is otherwise approved by NHP in its sole and absolute discretion , including as part of the Final Information Package); and (4) PMB (or another entity reasonably acceptable to NHP) shall remain the managing member or manager of the PMB Member with the sole authority to control and make day-to-day decisions for the PMB Member, subject to the non-managing members’ consent rights with respect to major decisions consistent with the terms of the then existing operating agreement governing the PMB Member, and that such provisions shall not be amended without the prior written consent of NHP for so long as the PMB Member (on behalf of the Continuing Partners) continues to hold any interest in the Continuing Entity (and NHP shall have the opportunity to review such operating agreement to insure that it complies with the foregoing requirement), and as between the PMB Member and the OP, the PMB Member shall be solely responsible for all costs of maintaining and administering itself, which covenants and agreements shall survive the Closing.

          (d) Real Property Tax Reserves. If requested by PMB and/or the PMB Member, at their option, the parties agree that increases in the real property taxes for the Property directly attributable to the Contribution Transaction (the “Prop 13 Tax Increases”) will not be immediately passed through to (and payable or reimbursable by) the “Non-Protected Tenants” (as hereinafter defined) for the tax year during which such Prop 13 Tax Increases are imposed, but rather that such Prop 13 Tax Increases may be phased in over a period of time (not to exceed three (3) years), as may be set forth in a schedule to the applicable Closing Notice delivered by PMB and the PMB Member. Accordingly, upon the Closing, Transferee shall cause a reserve account to be established and held by the OP, which shall be funded with cash in an amount that is sufficient to cover the difference between the amount of such estimated Prop 13 Tax Increases that will be passed through to the Non-Protected Tenants for the relevant period and the estimated total amount of such Prop 13 Tax Increases for the relevant period set forth in the schedule to the applicable Closing Notice. Such reserve shall be funded at the Closing by Transferee, and the amount so funded by Transferee (the “Property Tax Reserve Amount”) will reduce (and be treated as a credit against) the Contribution Value in accordance with Section 1.3(a) hereof. The cash in such reserves shall be disbursed by the OP to the Continuing Entity from time to time to pay that portion of such Prop 13 Tax Increases that are then due and payable, which the parties have agreed will not be passed through (i.e., billed) to the Non-Protected Tenants during the applicable period; provided, however, that in no event shall the OP disburse nor shall the Continuing Entity be entitled to receive any amounts from such reserves to the extent that the parties reasonably agree subsequent to the Closing to pass (i.e., bill) such Prop 13 Tax Increases onto the Non-Protected Tenants, but any such Non-Protected Tenant elects not or refuses to pay the same. To the extent that the actual Prop 13 Tax Increases attributable to the Property for which reserves are held by the OP pursuant to the terms of this Section 1.4(d) exceed the estimates set forth in the schedule to the applicable Closing Notice, the OP may cause the Continuing Entity to pass (i.e., bill) such excess onto the applicable Non-Protected Tenants. To the extent that any cash remains in such reserves after the Prop 13 Tax Increases have been passed through (i.e., billed) to the Non-Protected Tenants for payment or reimbursement, Transferee shall cause the OP to deliver such remaining funds to

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the NHP Member and to PMB for distribution to the applicable Transferor Parties in proportion to the NHP Member’s and the PMB Member’s respective Percentage Interest. As used herein, “Non-Protected Tenants” shall mean tenants or other occupants (each, a “Tenant” and, collectively, the “Tenants”), under leases, licenses, tenancies or other occupancy agreements (whether written or oral) (each, a “Lease” and, collectively, the “Leases”) for all or any portion of the Property that are obligated to reimburse the landlord for a portion of the real estate taxes attributable to the Property, including Prop 13 Tax Increases (and shall include any Tenant that, under the terms of its Lease, is obligated to pay a portion of any Prop 13 Tax Increases to the extent of such obligation), but specifically excludes any Tenant that, under the terms of its Lease, is either (i) not obligated to pay any portion of such real estate taxes, including any Prop 13 Tax Increases or (ii) obligated to pay a portion of such real estate taxes, but such obligation is limited so as not to include all or any portion of such Prop 13 Tax Increases.

          (e) Cash Elections. In connection with any Property Interest Contribution, at the request of the PMB Transferor Parties, the OP shall cooperate with each PMB Transferor Party in good faith to treat all or a portion of the Cash Amount, as requested by the PMB Transferor Parties, as a reimbursement of preformation expenditures pursuant to Treasury Regulations Section 1.707-4(d) (the “Cap-Ex Amount”).

          (f) Tax Reporting.

          (i) The parties hereto intend and agree that to the extent any Class A OP Units are received by Class A OP Unit Recipients with respect to a Property Interest Contribution: (A) for U.S. federal income tax purposes, the payment of cash to the Cash Recipients in such Property Interest Contribution in excess of their allocable share of the Cap-Ex Amount (the “Excess Cash Amount”) shall be treated as a sale of the interests in PMB Member held by such Cash Recipients and a purchase of such interests by the OP for the cash so paid under the terms hereof in accordance with Treasury Regulations Section 1.708-1(c)(4); and (B) pursuant to such Treasury Regulation and for income tax purposes, PMB Member will be treated as (1) distributing the portion of the interests in the Partnership attributable to the Excess Cash Amount to the OP in liquidation of the interests in the PMB Member acquired by the OP in exchange for the Excess Cash Amount, and (2) contributing the remaining portion of the interests in the Partnership to the OP in exchange for the Cap-Ex Amount and the Class A OP Unit Portion pursuant to Section 721 of the Code in a transaction in which no gain or loss is recognized and, immediately thereafter, distributing the Class A OP Unit Portion to the Class A OP Unit Recipients in liquidation. PMB and the PMB Member will use their commercially reasonable efforts to cause each of the Cash Recipients to agree to the tax treatment described in the foregoing sentence at or prior to the Closing of the Contribution Transaction. The OP shall file its tax returns consistent with the above-described transaction structure, including the treatment of the Cap-Ex Amount as a reimbursement of the preformation expenditures pursuant to Treasury Regulations Section 1.707-4(d), to the extent the Cash Recipients agree as provided above.

          (ii) The parties hereto intend and agree that to the extent the PMB Member, if applicable, only receives the Cash Amount in consideration for a Property Interest Contribution and no Class A OP Units are issued in connection with such Property Interest Contribution, such Property Interest Contribution shall be treated as a sale for U.S. federal income tax purposes. The parties hereto shall file their tax returns consistently with this Section 1.4(f)(ii).

          (iii) The parties hereto intend and agree that for U.S. federal income tax purposes, (A) any payment of cash to the Cash Recipients in an Investment Entity Transaction shall be treated as a sale of the Distributed Partnership Interests held by such Cash Recipients and a purchase of such interests by the OP for the cash so paid under the terms hereof, and (B) the

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contribution of the Distributed Partnership Interests to the OP by the Distributed Interest Transferor Parties in exchange for the Class A OP Unit Portion shall be treated as a contribution pursuant to Section 721 of the Code. The parties hereto shall file their tax returns consistently with this Section 1.4(f)(iii).

     1.5 Adjustment for Prorations and Closing Costs. On the Closing Date, Transferee shall receive as a credit against the Contribution Value an amount (the “Credit Amount”) equal to the sum of: (a) all unapplied cash security deposits which were paid by the Tenants under the Leases to or for the account of the Partnership and that are refundable to such Tenants, plus accrued interest, if and to the extent required to be paid to such Tenants on such unapplied cash security deposits, unless the Continuing Entity retains cash following the Closing equal to all such unapplied security deposits, plus any accrued interest thereon, if applicable; (b) expenses and other sums owed by or required to be funded by the Partnership to any Tenant for any tenant improvement work related to the Property which occurred and/or were due and payable prior to the date the applicable Closing Notice is delivered; (c) rentals already received for the Property by the Partnership attributable to the period from and after the Closing Date to the extent funds on account thereof are not retained by the Continuing Entity at the Closing; (d) any rent concessions which accrue to any Tenants of the Property after the Closing Date; and (e) the amount, if any, by which prorated amounts allocated to the Partnership pursuant to Section 1.11 hereof exceed prorated amounts allocated to the Continuing Entity pursuant to Section 1.11 hereof. In addition, notwithstanding anything to the contrary contained herein, on the Closing Date, Transferee shall be obligated to reimburse the Partnership (as a credit towards the Contribution Value) at Closing for any expenses or other sums (other than any legal fees or attorneys’ costs) actually funded or incurred following the date that the applicable Closing Notice is delivered for any tenant improvement work or leasing costs related to the Property to the extent such amounts were actually paid by the Partnership and not taken into account in calculating the agreed upon Net Operating Income for the Property; provided, however, that if such amounts are not yet due and payable as of the Closing Date, then upon such Closing Date, the Continuing Entity shall remain responsible for all obligations therefor and shall pay all such amounts when due.

     1.6 Loan Obligations. The Continuing Entity shall continue to remain obligated for, or Transferee shall cause the Continuing Entity immediately following the Closing to fully prepay, the Loan Obligations on the Closing Date, in each case subject to the other terms and conditions of the other “Transaction Documents” (as hereinafter defined). Transferee shall or cause the Continuing Entity to pay all fees, charges and related costs in connection with the assumption (or deemed assumption) or refinance of the Loan Obligations (including, without limitation, any prepayment or assumption fees) (collectively, the “Assumption Costs”), which fees, charges and costs (other than the outstanding balance (i.e., principal and accrued and unpaid interest)) shall not be credited against the Contribution Value. As used herein, the term “Transaction Documents” means, collectively, this Agreement, the Pipeline Agreement, the OP Agreement, the “Tax Protection Agreement” (as defined in the OP Agreement), the “Registration Rights Agreement” (as defined in the OP Agreement), the “Joinder Agreement” (as hereinafter defined), the “Property Management Agreement” (as hereinafter defined), each Assignment of Membership Interests and any other documents, certificates or instruments executed by any of the parties to the Contribution Transaction.

     1.7 Opening of Escrow. On or before the third (3^rd) Business Day after the execution of this Agreement, the parties shall cause an escrow (“Escrow”) to be opened with Escrow Agent by delivery to Escrow Agent of a fully executed copy of this Agreement. This Agreement shall constitute escrow instructions to Escrow Agent as well as the agreement of the parties. Escrow Agent is hereby appointed and designated to act as Escrow Agent and instructed to deliver, pursuant to the terms of this Agreement, the documents and funds to be deposited into Escrow as herein provided. The parties shall execute such additional escrow instructions (not inconsistent with this Agreement as determined by the respective

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counsel for the parties) as Escrow Agent shall deem reasonably necessary for its protection, including Escrow Agent’s general provisions (as may be modified by the parties and Escrow Agent). In the event of any inconsistency between the provisions of this Agreement and such additional escrow instructions, the provisions of this Agreement shall govern.

     1.8 Closing Notice. On the earlier to occur of (a) (i) the date on which ninety-five percent (95%) of the rentable square footage of the Property is leased pursuant to Leases (A) having a weighted average initial term length of five (5) years or more and (B) otherwise on terms that are consistent with PMB’s past leasing practices, or (ii) at the option of PMB and/or the PMB Member, if later than the foregoing date, the date that is the thirteenth (13^th) month anniversary of the date on which the Property was first placed in service (in a condition or state of readiness and availability for its intended use), and (b) the fifth (5th) anniversary of the date of this Agreement, PMB and the PMB Member shall, and Transferee shall be entitled to demand that PMB and the PMB Member, deliver a notice (the “Closing Notice”) to Transferee that shall specify that such notice is the Closing Notice for purposes of this Agreement; provided, however, that PMB and the PMB Member shall have the right (but not the obligation) to elect to deliver the Closing Notice at any time on or after the date on which ninety percent (90%) of the rentable square footage of the Property is leased pursuant to Leases (x) having a weighted average initial term length of five (5) years or more and (y) otherwise on terms that are consistent with PMB’s past leasing practices (the percentage between 90% and 95% at which the Closing Notice is actually delivered being referred to herein as the “Elected Percentage”). The Closing Notice shall include: (1) PMB and the PMB Member’s good faith determination of the FMV Cap Rate for the Property, together with reasonable back-up documentation for such calculation, as provided in Section 1.3(c) hereof; (2) an estimated calculation of the Net Operating Income for the Property pursuant to Section 1.3(d) hereof, together with reasonable back-up documentation for such calculation; (3) whether the PMB Member is electing to engage in a Property Interest Contribution or an Investment Entity Transaction pursuant to Section 1.4(a) hereof, together with all other information required to be delivered in the Closing Notice pursuant to Section 1.4(a) hereof; and (4) any request of PMB and/or the PMB Member to phase in Prop 13 Tax Increases for the Property pursuant to Section 1.4(d) hereof, including information related thereto with respect to the Property substantially similar to the type of information contained on Exhibit “D” to the Master Contribution Agreement. Notwithstanding anything to the contrary contained herein, if, at any time after the delivery of the Closing Notice and prior to the Closing, the parties agree, or it is otherwise determined pursuant to Section 1.3(c) hereof, that the FMV Cap Rate is less than the “Development Yield” (as hereinafter defined), then PMB and the PMB Member shall have a one-time right, but not the obligation, upon written notice (the “Rescission Notice”) to Transferee to withdraw and rescind the Closing Notice, irrespective of whether the events set forth in any of clauses (a) or (b) above have occurred. If PMB and the PMB Member shall be entitled to and shall deliver a Rescission Notice as herein provided, then the prior Closing Notice shall have no further force or effect for any purpose under this Agreement, and at any time within twelve (12) months after the date of such Rescission Notice, PMB and the PMB Member shall be entitled to deliver, and shall be obligated to deliver no later than the expiration of such twelve (12) month period (and Transferee shall have the right to demand that such delivery be made no later than the expiration of such twelve (12) month period), a new Closing Notice containing the information specified in clauses (1) through (4) above as of the date of such new Closing Notice. In such event, such new Closing Notice shall be deemed the “Closing Notice” for all purposes of this Agreement. As used herein, “Development Yield” shall mean the percentage determined by dividing (x) the projected first year stabilized Net Operating Income for the Property as set forth in the Final Information Package, by (y) the “Approved Budgeted Costs” (as defined in the Pipeline Agreement) for the Property as set forth in the Final Information Package.

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     1.9 Conditions to Closing.

          (a) Transferee’s Closing Conditions. The obligation of Transferee to complete the Contribution Transaction shall be subject to the following conditions precedent (and conditions concurrent, with respect to deliveries to be made by the parties at the Closing), to the extent applicable to the Closing (the “Transferee’s Closing Conditions”), which conditions may be waived, or the time for satisfaction thereof extended, by Transferee only in a writing executed by Transferee (provided, however, that any such waiver shall not affect Transferee’s ability to pursue any remedy it may have against PMB or the PMB Member with respect to any breach of this Agreement by PMB or the PMB Member; provided, further, however, that in no event shall Transferee have any rights or remedies against PMB or the PMB Member as a result of a breach of this Agreement by the NHP Member):

          (i) PMB’s and the PMB Member’s Due Performance. All of the representations and warranties of PMB and the PMB Member set forth in this Agreement shall be true, correct and complete in all material respects as of the Closing Date, and PMB and the PMB Member, on or prior to the Closing Date, shall have complied in all material respects with and/or performed all of the obligations, covenants and agreements required on the part of such party to be complied with or performed pursuant to the terms of this Agreement.

          (ii) Bankruptcy. No action or proceeding shall have been commenced by or against PMB or the PMB Member under the federal bankruptcy code or any state law for the relief of debtors or for the enforcement of the rights of creditors and no attachment, execution, lien or levy shall have attached to or been issued with respect to any Transferor Party’s interest in the PMB Member or the Partnership.

          (iii) Deliveries. PMB, the PMB Member and each Transferor Party shall have delivered to Escrow Agent or Transferee, as the case may be, such funds, documents or instruments as are required to be delivered by such parties pursuant to the terms of this Agreement.

          (iv) No Defaults under JV Agreement. No material default by the PMB Member of any of its duties, covenants or obligations under the JV Agreement shall have occurred and be continuing.

          (v) Statement of Representations and Covenants and Investor Questionnaire. Subject to the provisions of Section 1.14(b)(ii) hereof, on or before the tenth (10^th) Business Day prior to the Closing, PMB and the PMB Member shall deliver to Transferee (A) a statement in substantially the same form as the form attached to the Master Contribution Agreement as Exhibit “O-1”, executed by each applicable Class A OP Unit Recipient (or their respective attorneys-in-fact), pursuant to which each such Class A OP Unit Recipient represents and warrants to and agrees with the OP as of the Closing Date as to each of the representations, warranties and covenants set forth therein (with respect to such Class A OP Unit Recipient), and (B) an investor questionnaire in substantially the same form as the form attached to the Master Contribution Agreement as Exhibit “O-2”, duly completed and executed by each of the applicable Class A OP Unit Recipients (or their respective attorneys-in-fact).

          (vi) Partner Consents. At or prior to the Closing, all consents and/or elections of all of the partners and/or members of the PMB Member shall have been obtained by PMB and/or the PMB Member (to the extent required by the organizational documents of the PMB Member or otherwise necessary in connection with the applicable Contribution Transaction (the “Required Interest Holder Consents”)) and copies thereof shall be delivered to Transferee

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(understanding that Transferee shall reasonably cooperate with PMB and the PMB Member in obtaining such Required Interest Holder Consents).

Notwithstanding anything to the contrary contained in this Agreement, the performance of the NHP Member of its respective duties, covenants and obligations under this Agreement, and/or the accuracy of its representations and warranties under this Agreement, shall not be a condition to Transferee’s obligations to complete the Contribution Transaction.

          (b) Failure of Transferee’s Closing Conditions. Subject to Transferee’s rights with respect to any default by PMB or the PMB Member, if any of the Transferee’s Closing Conditions have not been fulfilled within the applicable time periods, Transferee may:

          (i) waive the Transferee’s Closing Condition and close Escrow in accordance with this Agreement, without adjustment or abatement of the Contribution Value; or

          (ii) terminate this Agreement by written notice to PMB, the PMB Member and Escrow Agent, in which event Escrow Agent shall return all documents, instruments and funds delivered into Escrow with respect to the Closing to the party that delivered the same into Escrow, and PMB and the PMB Member shall pay for all of the cancellation charges, if any, of Escrow Agent with respect to such cancellation, and no party (or its affiliates) shall have any further rights or obligations under this Agreement, other than pursuant to any provision of this Agreement which expressly survives the termination of this Agreement.

          (c) PMB’s and PMB Member’s Closing Conditions. The obligations of PMB and the PMB Member to complete the Contribution Transaction shall be subject to the following conditions precedent (and conditions concurrent, with respect to deliveries to be made by the parties at the Closing), to the extent applicable to the Closing (the “PMB Closing Conditions”), which conditions may be waived, or the time for satisfaction thereof extended, by PMB and the PMB Member only in a writing executed by PMB and the PMB Member (provided, however, that any such waiver shall not affect PMB and/or the PMB Member’s abilities to pursue any remedy they may have with respect to any breach hereunder by Transferee or the NHP Member):

          (i) Transferee’s and the NHP Member’s Due Performance. All of the representations and warranties of Transferee and the NHP Member set forth in this Agreement shall be true, correct and complete in all material respects as of the Closing Date, and Transferee and the NHP Member, on or prior to such Closing Date, shall have complied in all material respects with and/or performed all of the obligations, covenants and agreements required on the part of such party to be complied with or performed pursuant to the terms of this Agreement.

          (ii) Deliveries. Transferee and the NHP Member shall have delivered to Escrow Agent or PMB, the PMB Member or the Transferor Parties, as the case may be, such funds, documents or instruments as are required to be delivered by Transferee and/or the NHP Member pursuant to the terms of this Agreement.

          (iii) No Defaults under JV Agreement. No material default by the NHP Member of any of its duties, covenants or obligations under the JV Agreement shall have occurred and be continuing.

          (iv) Partner Consents. At or prior to the Closing, all the Required Interest Holder Consents shall have been obtained (understanding that Transferee shall reasonably cooperate with PMB and the PMB Member in obtaining such Required Interest Holder Consents).

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          (d) Failure of PMB Closing Conditions. Subject to PMB and the PMB Member’s rights with respect to any default by Transferee or the NHP Member, if any of the PMB Closing Conditions have not been fulfilled within the applicable time periods, PMB and the PMB Member may:

          (i) waive the PMB Closing Condition and close Escrow in accordance with this Agreement, without adjustment or abatement of the Contribution Value; or

          (ii) terminate this Agreement by written notice to Transferee and Escrow Agent, in which event Escrow Agent shall return all documents, instruments and funds delivered into Escrow with respect to the Closing to the party that delivered the same into Escrow, and Transferee and the NHP Member shall pay for all of the cancellation charges, if any, of Escrow Agent with respect to such cancellation, and no party (or its affiliates) shall have any further rights or obligations under this Agreement, other than pursuant to any provision of this Agreement which expressly survives the termination of this Agreement.

     1.10 Closing.

          (a) Closing Date. Subject to the provisions of this Agreement, including, without limitation, Section 1.14(b)(ii) hereof, the Closing shall take place on the thirtieth (30^th) day following the later of (x) the delivery of the applicable Closing Notice (or, if a Rescission Notice is delivered in connection therewith pursuant to Section 1.8 hereof, then the delivery of the new Closing Notice), and (y) the date on which the parties agree in writing as to the FMV Cap Rate and Net Operating Income, or the same is otherwise determined pursuant to the applicable dispute resolution procedures set forth in Section 1.3(c) hereof (with respect to any dispute regarding the FMV Cap Rate) or incorporated in this Agreement pursuant to Section 1.19(a) hereof (with respect to any dispute regarding Net Operating Income). Notwithstanding anything to the contrary in this Agreement:

          (i) If, as of the Closing, the Contribution Value as determined pursuant to Section 1.3(a) hereof, including the adjustments and deductions thereto as provided for in this Agreement, is less than or equal to the aggregate outstanding balance of all debt then encumbering the Property (the “Debt Amount”), then Transferee shall have the right, in its sole discretion, to postpone the Closing until such time as the Contribution Value is greater than the Debt Amount; and

          (ii) If the Closing is postponed by Transferee pursuant to clause (i) above, and the Closing has not occurred within ten (10) years after the date of the applicable Closing Notice, then this Agreement shall automatically terminate, in which event, Transferee, the NHP Member and the PMB Member shall divide equally all of the cancellation charges, if any, of Escrow Agent with respect to such termination, and no party (or its affiliates) shall have any further rights or obligations under this Agreement, other than pursuant to any provision of this Agreement which expressly survives the termination of this Agreement.

          (b) Closing and Closing Date Defined. As used herein, the following terms shall have the following meanings: (i) the “Closing” shall mean the closing of the Contribution Transaction as contemplated by this Agreement; and (ii) the “Closing Date” shall mean the date upon which such Closing actually occurs.

          (c) Deliveries by PMB and the PMB Member. On or before the Closing Date, PMB and/or the PMB Member, each at its sole cost and expense, shall deliver or cause to be delivered into Escrow the following funds, documents and instruments, as applicable, each to be dated by Escrow Agent

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as of the Closing Date, in addition to all other items and payments required by this Agreement to be delivered by PMB and/or the PMB Member at the Closing:

          (i) Cash. Cash in an amount equal to the sum of any amounts payable by PMB or the PMB Member under this Agreement, if any.

          (ii) Conveyance Documents. (A) With respect to a Property Interest Contribution, an original executed counterpart assignment and assumption instrument by the PMB Member transferring, contributing and conveying to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof) the PMB Member’s entire membership interest in the Partnership in substantially the same form as the form attached to the Master Contribution Agreement as Exhibit “C-2” (the “Assignment of Membership Interests”), and withdrawing as a member of the Continuing Entity effective as of the Closing, and (B) with respect to an Investment Entity Transaction, an original executed Assignment of Membership Interests from each Distributed Interest Transferor Party, conveying each such Transferor Party’s entire Distributed Partnership Interests to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof), and withdrawing as a member of the Continuing Entity effective as of the Closing.

          (iii) Non-Foreign Affidavits. Originally executed non-foreign affidavits in substantially the same form as the form attached to the Master Contribution Agreement as Exhibit “L” (collectively, “Non-Foreign Affidavits”), together with any comparable State required affidavits and forms required by the State in which the Property is located, and IRS Forms W-9, in each case executed by the PMB Member and each Transferor Party. The documents and instruments required by Section 1.9(a)(v) hereof and this Section 1.10(c)(iii) from each Transferor Party shall sometimes be referred to herein, collectively, as the “Investor Documents”.

          (iv) Amended and Restated JV Agreement. With respect to an Investment Entity Transaction, two (2) original executed counterparts of an amended and restated limited liability company agreement in substantially the form attached to the Master Contribution Agreement as Exhibit “I-1” for the Continuing Entity (the “A&R JV Agreement”), executed by the PMB Member (on behalf of each of the Continuing Partners).

          (v) Joinder Agreement. Two (2) original executed counterparts of an agreement in substantially the same form as the form attached to the Master Contribution Agreement as Exhibit “M” (each a “Joinder Agreement”), as necessary (A) to add each additional Class A OP Unit Recipient as a “Protected Partner” (as defined in the Tax Protection Agreement) under the “Tax Protection Agreement” (as defined in the OP Agreement), (B) to supplement Exhibit A to the Tax Protection Agreement to include any additional “Qualified Liabilities” (as defined in the Tax Protection Agreement) and Exhibit C thereto to include the good faith estimates of Section 704(c) gain, with the initial amounts of Section 704(c) gain allocable to each Protected Partner (in connection with the Contribution Transactions), (C) to add each additional Class A OP Unit Recipient as an “Investor” (as defined in the Registration Rights Agreement) under the “Registration Rights Agreement” (as defined in the OP Agreement), and (D) to add each additional Class A OP Unit Recipient as a “Limited Partner” (as defined in the OP Agreement) in the OP, executed by each applicable Class A OP Unit Recipient (or their respective attorneys-in-fact).

          (vi) Proof of Authority. Such proof of PMB’s and the PMB Member’s authority and authorization to enter into this Agreement and the Contribution Transaction, and such proof of the power and authority of the individual(s) executing or delivering any

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instruments, documents or certificates on behalf of PMB, the PMB Member and each Transferor Party to act for and bind such party as may be reasonably required by Transferee.

          (vii) Indemnity Pledge Agreements and Escrow Agreements. As security for the indemnity obligations of the PMB Member pursuant to Section 1.18(b) hereof, at the Closing, the PMB Member shall cause (A) each Transferor Party receiving solely Class A OP Units to execute and deliver two (2) original executed counterparts of a pledge agreement in substantially the same form as the form attached to the Master Contribution Agreement as Exhibit “Q-1” (each, a “Indemnity Pledge Agreement”) pursuant to which such Class A OP Unit Recipient shall pledge Class A OP Units with a “Market Value” (as defined in the OP Agreement), as of the Closing, equal to such Class A OP Unit Recipient’s Allocable Share multiplied by the “Secured Amount” (as hereinafter defined), and (B) each Transferor Party receiving solely cash to deposit cash equal to its Allocable Share multiplied by the Secured Amount into an escrow maintained by Escrow Agent and execute and deliver two (2) original executed counterparts of a cash indemnification agreement in substantially the same form as the form attached to the Master Contribution Agreement as Exhibit “Q-2” (each, an “Indemnity Cash Escrow Agreement”). For each Transferor Party receiving both Class A OP Units and cash in connection with the Closing, the parties shall determine the percentage of such Transferor Party’s Allocable Share of the Secured Amount to be delivered by such Transferor Party in the form of Class A OP Units (the “Class A OP Unit Percentage”) and the percentage of such Transferor Party’s Allocable Share of the Secured Amount to be delivered in the form of cash (“Cash Percentage”), and based thereon, the PMB Member shall cause (1) such Transferor Party to pledge Class A OP Units with a “Market Value” (as defined in the OP Agreement), as of the Closing, equal to such Transferor Party’s Class A OP Unit Percentage multiplied by such Transferor Party’s Allocable Share of the Secured Amount and execute and deliver two (2) original executed counterparts of an Indemnity Pledge Agreement with respect thereto, and (2) such Transferor Party to deposit cash equal to its Cash Percentage multiplied by its Allocable Share of the Secured Amount into an escrow maintained by Escrow Agent and execute and deliver two (2) original executed counterparts of an Indemnity Cash Escrow Agreement. As used herein, the “Secured Amount” shall mean an amount equal to one and a half percent (1.5%) of the PMB Member’s Contribution Value Amount. The parties hereto acknowledge and agree that notwithstanding anything to the contrary contained in the foregoing, (1) the Indemnity Pledge Agreements and/or the Indemnity Cash Escrow Agreements required to be delivered by the applicable Transferor Parties pursuant to this Section 1.10(c)(vii), may instead be delivered jointly by such applicable Transferor Parties as a single Indemnity Pledge Agreement and/or Indemnity Cash Escrow Agreements, as applicable, and in such event, the agreed upon forms thereof may be revised to reflect such multiple parties, each of which shall be severally liable, as shall be reasonably agreed upon by the parties, and (2) the applicable Transferor Parties shall not pledge any fractional OP Units, and the number of OP Units to be pledged pursuant to the foregoing calculation shall be rounded to the nearest whole number to the extent required to avoid such a result.

          (viii) Other. Such other documents and instruments (including, without limitation, affidavits and any declaration of value forms or other documents customarily required or in accordance with applicable Laws), signed and properly acknowledged by the PMB Member, if appropriate, as may be reasonably and customarily required by Transferee or the Escrow Agent, or otherwise in order to effectuate the provisions of this Agreement and the Closing. As used herein, the term “Laws” shall mean all applicable laws, rules and regulations, ordinances and orders of all applicable federal, state, city and other governmental authorities in effect as of the date of execution of this Agreement (collectively, including without limitation, (A) the Americans with Disabilities Act, 42 U.S.C. § 12102, et seq., together with all rules, regulations and official interpretations promulgated pursuant thereto, (B) all laws with respect to zoning, building, fire,

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life safety, health codes and sanitation, and (C) applicable securities laws and the rules and regulations of the Securities and Exchange Commission affecting the Partnership, the Continuing Entity, NHP, the OP, PMB, the Members or the Property or any portion thereof.

          (d) Deliveries by the NHP Member. On or before the Closing Date, the NHP Member, at its sole cost and expense, shall deliver or cause to be delivered into Escrow (and Transferee shall cause the NHP Member to do the same) the following funds, documents and instruments, as applicable, each to be dated by Escrow Agent as of the Closing Date, in addition to the other items and payments required by this Agreement to be delivered by the NHP Member at the Closing:

          (i) Cash. Cash in an amount equal to the sum of any amounts payable by the NHP Member under this Agreement, if any.

          (ii) Conveyance Documents. With respect to either a Property Interest Contribution or an Investment Entity Transaction, an original executed counterpart of an Assignment of Membership Interests by the NHP Member transferring, contributing and conveying to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof) the NHP Member’s entire membership interest in the Partnership, and withdrawing as a member of the Continuing Entity effective as of the Closing.

          (iii) Proof of Authority. Such proof of the NHP Member’s authority and authorization to enter into this Agreement and the Contribution Transaction, and such proof of the power and authority of the individual(s) executing or delivering any instruments, documents or certificates on behalf of the NHP Member to act for and bind the NHP Member as may be reasonably required by PMB and the PMB Member;

          (iv) Other. Such other documents and instruments (including, without limitation, affidavits and any declaration of value forms or other documents customarily required or in accordance with applicable Laws), signed and properly acknowledged by the NHP Member, if appropriate, as may be reasonably and customarily required by PMB and the PMB Member or the Escrow Agent, or otherwise in order to effectuate the provisions of this Agreement and the Closing.

          (e) Deliveries by Transferee. On or before the Closing Date, Transferee, at its sole cost and expense, shall deliver or cause to be delivered into Escrow the following funds, documents and instruments, as applicable, each to be dated by Escrow Agent as of the Closing Date, in addition to the other items and payments required by this Agreement to be delivered by Transferee at the Closing:

          (i) Cash. Cash in an amount equal to the sum of (A) the Cash Amount, (B) all Closing Costs (to the extent due and payable hereunder by Transferee under this Agreement), (C) the amount, if any, by which prorated amounts allocated to the Continuing Entity pursuant to Section 1.11 hereof exceed prorated amounts allocated to the Partnership pursuant to Section 1.11 hereof and (D) all other amounts, if any, required to be paid or funded by the Transferee under this Agreement in connection with such Contribution Transaction;

          (ii) Conveyance Documents. (A) With respect to a Property Interest Contribution, original executed counterparts of each Assignment of Membership Interests by the OP (or at the election of the OP by a wholly-owned subsidiary thereof) with respect to all the membership interests in the Partnership being transferred, contributed and conveyed to the OP (or at the direction of the OP to a wholly-owned subsidiary thereof) by each of the Members, and (B) with respect to an Investment Entity Transaction, original executed counterparts of each

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Assignment of Membership Interests by the OP (or at the election of the OP by a wholly-owned subsidiary thereof) with respect to all the membership interests in the Partnership being transferred, contributed and conveyed to the OP (or at the direction of the OP to a wholly-owned subsidiary thereof) by the NHP Member and by each Distributed Interest Transferor Party.

          (iii) Amended and Restated JV Agreement. With respect to an Investment Entity Transaction, two (2) original executed counterparts of the A&R JV Agreement, by the OP (or at the election of the OP by a wholly-owned subsidiary thereof);

          (iv) Joinder Agreement. Two (2) original executed counterparts of the Joinder Agreement, executed by NHP and the OP;

          (v) Certificates. Certificates (the “Certificates”) representing the applicable Class A OP Units issued pursuant to Section 1.4(b) hereof; provided, however, that, notwithstanding the foregoing, Transferee may, at its election in its sole and absolute discretion, deliver the Certificates directly to PMB (on behalf of the applicable Class A OP Unit Recipients), outside of Escrow promptly following the Closing Date but no later than the fifth (5^th) Business Day after such Closing Date; provided further, however, that to the extent that any such Certificates are not delivered on the Closing Date, the delivery of the Indemnity Pledge Agreements may be delayed until the day on which the delivery of the applicable Certificates has been made.

          (vi) Indemnity Pledge Agreements and Escrow Agreements. Two (2) original executed counterparts to each Indemnity Pledge Agreement and/or Indemnity Cash Escrow Agreement, by the OP;

          (vii) Proof of Authority. Such proof of NHP’s and the OP’s authority and authorization to enter into the Agreement and the transactions contemplated thereby, and such proof of the power and authority of the individual(s) executing or delivering any instruments, documents or certificates on behalf of NHP or the OP to act for and bind such parties as may be reasonably required by PMB and the PMB Member; and

          (viii) Other. Such other documents and instruments (including, without limitation, affidavits and any declaration of value forms or other documents customarily required or in accordance with applicable Laws), signed and properly acknowledged by Transferee, if appropriate, as may be reasonably and customarily required by PMB, the PMB Member, the Escrow Agent, or otherwise in order to effectuate the provisions of this Agreement and the Closing.

          (f) Deliveries by PMBRES and the Continuing Entity. Each of PMB and NHP shall cause PMBRES and the OP shall cause the Continuing Entity to execute and deliver two (2) fully executed originals or counterpart originals of an asset and property management agreement with respect to the Property in substantially the same form (and upon the same terms, including the stated term thereof) as the form attached to the Master Contribution Agreement as Exhibit “R” (the “Property Management Agreement”).

          (g) Review of Investor Documents. Notwithstanding anything to the contrary contained in this Agreement, if Transferee reasonably determines that any Investor Documents with respect to any person or entity are materially incomplete or inaccurate as of the Closing, (i) Transferee shall promptly notify PMB of the same and PMB will cooperate with Transferee to promptly cause the applicable Transferor Parties to complete and/or correct the same, and (ii) the OP shall have the right to

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delay the issuance of Class A OP Units and any Certificates to such person or entity (and delay its determination as to whether such person or entity is an Accredited Investor or otherwise impacted by the terms Section 1.4(b)(iii) hereof for a reasonable period, to the extent necessary to make such determination and issue any such Class A OP Units and Certificates) and the delivery of the applicable Indemnity Pledge Agreements may be delayed until the day on which the delivery of each of the applicable Certificates has been made.

          (h) Actions by Escrow Agent. The provisions of Section 7.4 of the Master Contribution Agreement shall be incorporated into this Agreement, but shall be deemed modified for purposes of this Agreement to reflect the transactions contemplated by this Agreement and the applicable parties hereto.

     1.11 Prorations.

          (a) Adjustments.

          (i) General. Rentals (including common area maintenance charges), revenues, and other income, if any, from the Property (including, without limitation, any property management fees, any and all fees or other compensation paid to the Partnership under any Service Contract, Lease or other agreement for the Property, whether paid monthly, upon contract execution or otherwise, as consideration for the Partnership or its agent entering into the applicable Service Contract, Lease or other agreement), taxes, assessments, ground rents, improvement bonds, service or other contract fees, utility costs, amounts due and payable under the “Loan Documents” (as defined in the Master Contribution Agreement) for the Property (to the extent that the Loan Obligations are not otherwise included in any other adjustment to the Contribution Value under this Agreement or otherwise allocated as herein provided), and other expenses affecting the Property that are received or due and payable, shall be prorated between the Partnership and the Continuing Entity as of the Closing Date based on a 365 day year. For purposes of calculating prorations, the Continuing Entity shall be deemed to be title holder of the Property, and therefore entitled to the income and responsible for the expenses, after 12:01 a.m. on the Closing Date. Delinquent rentals, if any, attributable to the Property as of the applicable Closing Date (including, without limitation, any monthly estimates of percentage rents, operating expenses and/or common area maintenance charges), shall not be prorated as of such Closing Date, but when paid to the Continuing Entity, Transferee shall cause the Continuing Entity to deliver such amounts to the Members (or to PMB on behalf of the Transferor Parties) in proportion to their respective Percentage Interest, less the costs and expenses incurred by the Continuing Entity in collecting the same (provided that all current rent has then been paid with respect to such Leases). After the Closing, neither the Partnership nor the Members nor any Transferor Party shall have any right to proceed in any manner or make any claim against Tenants of the Property for rents that were delinquent as of the Closing Date for the Property or for other matters relating to the Leases for the Property; provided, however, that PMBRES may proceed or make a claim against Tenants of the Property for such rents in accordance with the terms of the Property Management Agreement. As of the Closing Date, all non-delinquent real estate taxes or assessments with respect to the Property shall be prorated based on the actual current tax bill for the Property, but if such tax bill has not yet been received by the Partnership by the Closing Date or if supplemental taxes are assessed after the Closing for the period prior to the Closing the latest available tax bill will be used and the parties shall make any necessary adjustment after the Closing by either using the applicable “Estimated Post-Closing Adjustment Amount” (as hereinafter defined) (to the extent that a payment is owed to the Continuing Entity) or by cash payment to the party entitled thereto as soon as the final bills are available, so that the Partnership shall have borne all real property taxes, including all supplemental taxes, allocable to the period

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prior to the Closing (and its Members in proportion to their respective Percentage Interest) and the Continuing Entity shall bear all real property taxes, including all supplemental taxes, allocable to the period from and after the Closing. If any revenue or expenses attributable to the Property and allocable to the period prior to the Closing are discovered, billed or received (as the case may be) after the Closing (including, without limitation, as a result of any adjustments made after the Closing Date pursuant to any percentage rent or operating expense annual reconciliation provisions contained in any of the Leases for the Property), the Continuing Entity and the Members shall make any necessary adjustment after the applicable Closing by either using the applicable Estimated Post-Closing Adjustment Amount (to the extent that a payment is owed to the Continuing Entity) or by cash payment to the other party entitled thereto so that the Partnership shall have borne all expenses and received all revenue allocable to the period prior to the Closing (and its Members in proportion to their respective Percentage Interest) and the Continuing Entity shall bear all expenses and receive all revenue allocable to the period from and after the applicable Closing.

          (ii) Estimated Post-Closing Adjustment Amount Reserves. At the Closing, Transferee and PMB (on behalf of the Members) shall in good faith estimate the amount of post-Closing proration adjustments reasonably expected to occur with respect to the Property after the Closing (an “Estimated Post-Closing Adjustment Amount”), understanding that the Estimated Post-Closing Adjustment Amount is just an estimate and the parties are not bound by such Estimated Post-Closing Adjustment Amount. Transferee shall cause a reserve account held by the OP (on behalf of the Continuing Entity) to be established, which shall be funded with cash in an amount equal to fifty percent (50%) of the Estimated Post-Closing Adjustment Amount for the Property. Such reserve shall be funded at the Closing in cash by Transferee. The amount funded by Transferee (the “Proration Reserve Amount”) will reduce (and be treated as a credit against) the Contribution Value in accordance with Section 1.3(a) hereof. Following the Closing, as and when post-Closing proration adjustments are mutually agreed upon by the parties, the OP may disburse the cash in such reserve to the Continuing Entity (to the extent that such post-Closing adjustment amounts are owed to the Continuing Entity). To the extent that any cash remains in such reserve as of the first (1^st) anniversary of the Closing Date, subject to the terms of Section 1.4(b)(ii) hereof, Transferee shall cause the OP to deliver such remaining funds to the Members in proportion to their respective Percentage Interest; provided, however, that any amounts owing to the PMB Member shall be disbursed to PMB (on behalf of the Transferor Parties). In the event that the reserve’s funds are insufficient to pay for the entirety of the post-Closing proration adjustments, the NHP Member and PMB (on behalf of the PMB Member) shall deliver such funds in proportion to their respective Percentage Interest to the Continuing Entity within thirty (30) days of receiving a request for the same from the OP. Nothing contained in this Section 1.11(a)(ii) shall in any way limit the obligations of the parties set forth in Section 1.11(a)(i) hereof.

          (iii) Proportionate Percentage Adjustments. Notwithstanding anything to the contrary contained herein, in the event of an Investment Entity Transaction, Transferee and the Continuing Entity shall only owe a “Proportionate Percentage” (as hereinafter defined) of any proration adjustment to be made after the Closing of the Investment Entity Transaction. As used herein, the term “Proportionate Percentage” shall mean, a percentage equal to the percentage of membership interests in the Continuing Entity held by the OP (or a subsidiary thereof) after the Closing. For example, if the Continuing Entity is owned 80% by the OP (or a subsidiary thereof) and 20% by the PMB Member (on behalf of the Continuing Partners), then Transferee and the Continuing Entity will only owe eighty percent (80%) of any proration adjustment to be made after the Closing of the Investment Entity Transaction. Regardless of the Proportionate Percentage, if any proration adjustments are owed by the NHP Member or the PMB Member

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under this Section 1.11(a), then the NHP Member and PMB (on behalf of the PMB Member) shall deliver one hundred percent (100%) of such amounts to the Continuing Entity in proportion to their respective Percentage Interest.

          (iv) Survival. The provisions of this Section 1.11(a) shall survive the Closing.

          (b) Closing Statements. Not less than five (5) Business Days prior to the Closing, Escrow Agent shall deliver to the parties for their review and approval a preliminary closing statement (the “Preliminary Closing Statement”) setting forth (i) the proration amounts allocable to the Partnership and the Continuing Entity, if applicable, pursuant to this Section 1.11, (ii) the applicable Closing Costs allocable to each of the parties pursuant to Section 1.11(c) hereof, and (iii) the breakdown of the Contribution Value payable in cash, Class A OP Units and Class B OP Units, or retained by the PMB Member (on behalf of the Continuing Partners in connection with an Investment Entity Transaction as per the terms of the Closing Notice). Based on each party’s comments, if any, regarding the Preliminary Closing Statement, Escrow Agent shall revise the Preliminary Closing Statement and deliver a final, signed version of a closing statement to Transferee, the NHP Member, PMB and the PMB Member for the Closing (the “Closing Statement”).

          (c) Closing Costs. Subject to the terms of Section 1.19(b) hereof, Transferee and the NHP Member, on the one hand, and PMB and the PMB Member, on the other hand, shall pay or cause to be paid its own costs and expenses arising in connection with the Closing (including, without limitation, its own attorneys’ and advisors’ fees, charges and disbursements), except the following costs (the “Closing Costs”), which shall be allocated at the Closing as follows:

          (i) any and all documentary transfer, stamp, filing, recording, conveyance, intangible, sales and other taxes related to the Contribution Transaction (“Reimbursable Transfer Taxes”), which shall be paid by the OP;

          (ii) all of Escrow Agent’s escrow fees and costs (fifty percent (50%) of which being referred to hereinafter as “Reimbursable Escrow Fees,” and together with the Reimbursable Transfer Taxes, the “Reimbursable Closing Costs”), which shall be paid by the OP;

          (iii) the cost of any surveys, appraisals, environmental, physical and financial audits and the costs of any other examinations, inspections or audits of the Property obtained by Transferee, which shall be paid by the OP;

          (iv) any and all assumption, prepayment or other fees, penalties or amounts due and payable in connection with the discharge and satisfaction or the assumption of any Loan Obligation, which shall be paid by the OP; and

          (v) any costs associated with any new financing, including any application and commitment fees or the costs of such new lender’s other requirements, which shall be paid by the OP.

     1.12 Representations and Warranties of the PMB Member and PMB. The PMB Member represents and warrants to and agrees with Transferee for itself only, and PMB represents and warrants to and agrees with Transferee as to itself and jointly and severally with the PMB Member, as of date of this Agreement and as of the Closing Date (unless otherwise specified herein) as follows:

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          (a) No Conflicts. Other than any consent that may be required under the Loan Obligations, which shall be Transferee’s sole obligation to obtain, and the Required Interest Holder Consents, the execution and delivery of this Agreement by PMB and the PMB Member, the consummation of the transactions herein contemplated to be performed by PMB and the PMB Member, and compliance with the terms of this Agreement by PMB and the PMB Member will not conflict with, or, with or without notice or the passage of time or both, result in a breach of any of the terms or provisions of, or constitute a default under, (i) any indenture, deed of trust, mortgage, loan agreement, or other document, instrument or agreement, oral or written, to which PMB or the PMB Member is a party or by which PMB or the PMB Member or its assets are bound (excluding, however, any restrictions in the JV Agreement applicable to the PMB Member), or (ii) any applicable regulation of any governmental agency, or any judgment, order or decree of any court having jurisdiction over PMB or the PMB Member, except as would not, in the case of (i) or (ii), have a material adverse effect on the membership interest of the PMB Member in the Partnership.

          (b) Due Organization; Consents. Each of PMB and the PMB Member is a duly organized limited liability company, is validly existing and in good standing under the Laws of the State of California, with its principal place of business in the State of California and has never existed or operated under any other name. All requisite action has been taken by each of PMB and the PMB Member in connection with entering into this Agreement, and will be taken prior to the Closing in connection with, the execution and delivery of the instruments referenced herein and the consummation of the transactions contemplated hereby. Other than any consent that may be required under the Loan Obligations, which shall be Transferee’s sole obligation to obtain, and the Required Interest Holder Consents, no consent of any partner, shareholder, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party is required in connection with the execution by PMB or the PMB Member of this Agreement and/or the performance by PMB or the PMB Member of its obligations hereunder.

          (c) Authority; Validity of Agreements. Other than any consent that may be required under the Loan Obligations, which shall be Transferee’s sole obligation to obtain, and the Required Interest Holder Consents, (i) (A) with respect to a Property Interest Contribution, if applicable, the PMB Member has (or will have as of the Closing) full right, power and authority to transfer, contribute and convey its membership interests in the Partnership to the OP as provided in this Agreement and (B) with respect to an Investment Entity Transaction, if applicable, the PMB Member has (or will have as of the Closing) full right, power and authority to transfer, contribute and convey the Distributed Partnership Interests in the Partnership to the Distributed Interest Transferor Parties (so that they shall each have full right, power and authority to transfer, contribute and convey such Distributed Partnership Interests to the OP (or at the direction of the OP, to a wholly-owned subsidiary thereof)) and (ii) each of PMB and the PMB Member has full right, power and authority to carry out its obligations hereunder and to execute, deliver and perform, and enter into and consummate, all of the documents and transactions contemplated by this Agreement. The individual(s) executing this Agreement and the instruments referenced herein on behalf of PMB and the PMB Member have the legal power, right and actual authority to bind PMB and the PMB Member to the terms hereof and thereof. This Agreement is, and each of the Transaction Documents to which PMB or the PMB Member is a party shall be, duly authorized, executed and delivered by PMB and/or the PMB Member and shall be valid, binding and enforceable obligations of PMB and/or the PMB Member, as applicable.

          (d) Foreign Investment In Real Property Tax Act. The PMB Member is not a foreign person within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), or any comparable State statute in the State in which the Property is located.

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          (e) No Defaults under JV Agreement. To the “knowledge” (as defined in (or to be defined pursuant to) Section 1.19(a) hereof) of PMB and the PMB Member, the PMB Member is not in material default of any of its duties, covenants or obligations under the JV Agreement.

          (f) Title to Partnership Interests. Subject to the distribution of any Distributed Partnership Interests to a Distributed Interest Transferor Party in connection with an Investment Entity Transaction, the PMB Member is the legal, record and beneficial owner of the membership interests in the Partnership held by the PMB Member and reflected in the JV Agreement, and has title thereto, free and clear of any liens, encumbrances, security agreements, equities, pledges, assessments, options, claims, charges, conditions or restrictions, other than any restrictions under the Act, any state securities laws or those created or evidenced by this Agreement, the JV Agreement or the Loan Obligations.

          (g) Private Placement. Each of the Class A OP Unit Recipients has a pre-existing business relationship with PMB. At the time of each Class A OP Unit Recipient’s investment in the PMB Member, PMB received representations from such Class A OP Unit Recipient that it was an Accredited Investor at the time of such investment in the PMB Member. To the knowledge of PMB, as of the date of this Agreement, there are no changes in facts or circumstances with respect to any Class A OP Unit Recipient that would make it no longer qualify as an Accredited Investor.

          (h) Not a Prohibited Person.

          (i) As used herein, the term “Prohibited Person” shall mean any of the following: (A) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (the “Executive Order”); (B) a person or entity owned or controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (C) a person or entity that is named as a “specially designated national” or “blocked person” on the most current list published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac; (D) a person or entity that is otherwise the target of any economic sanctions program currently administered by OFAC; or (E) a person or entity that is affiliated with any person or entity identified in clause (A), (B), (C) and/or (D) above.

          (ii) To the knowledge of PMB and the PMB Member, neither PMB nor the PMB Member is, and no Transferor Party or Continuing Partner will be, a Prohibited Person.

          (iii) To the knowledge of PMB and the PMB Member, neither PMB, the PMB Member nor any of its other investors, affiliates or brokers or other agents (if any), acting or benefiting in any capacity in connection with this Agreement is a Prohibited Person.

          (iv) The assets of the PMB Member that will transfer under this Agreement and/or any other document executed in connection with the transactions contemplated hereby are not the property of, and are not beneficially owned, directly or indirectly, by a Prohibited Person.

          (v) The assets of the PMB Member that will transfer to Transferee under this Agreement and/or any other document executed in connection with the transactions contemplated hereby are not the proceeds of specified unlawful activity as defined by 18 U.S.C. §1956(c)(7).

          (i) Taxes. All material business, occupation, sales, use and other similar taxes imposed with respect to the PMB Member which are due and payable have been paid in full, or will be paid in full by the PMB Member as and when such taxes become due and payable. The PMB Member

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has timely and properly filed (or timely requested extensions with respect to) all material federal, state, local and foreign tax returns, reports and forms for which it is or has been required to file and, all such returns, reports and forms are (or were at the time of their filing) true, correct and complete in all material respects.

          (j) Survival. All of the representations and warranties of PMB and the PMB Member set forth in this Agreement shall be true, correct and complete upon the date of this Agreement, shall be deemed to be repeated at and as of the Closing Date (except as otherwise disclosed in writing to Transferee) and shall survive the Closing of the Contribution Transaction for a period of one (1) year; provided, however, that the representations and warranties set forth in Sections 1.12(b), (c), (d), (g), (h) and (i) hereof shall survive the Closing for the period of the applicable statute of limitations.

     1.13 Representations and Warranties of Transferee and the NHP Member. Each of Transferee and the NHP Member represents and warrants to PMB and the PMB Member, as of the date of this Agreement and as of the Closing Date, as follows:

          (a) No Conflicts. Other than any consent that may be required under the Loan Obligations, which shall be Transferee’s sole obligation to obtain, the execution and delivery of this Agreement by Transferee and the NHP Member, the consummation of the transactions herein contemplated to be performed by Transferee and the NHP Member, and compliance with the terms of this Agreement by Transferee and the NHP Member will not conflict with, or, with or without notice or the passage of time or both, result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, deed of trust, mortgage, loan agreement, or other document, instrument or agreement, oral or written, to which Transferee or the NHP Member is a party or by which Transferee or the NHP Member is bound, or any applicable regulation of any governmental agency, or any judgment, order or decree of any court having jurisdiction over Transferee or the NHP Member.

          (b) Due Organization; Consents. NHP is a corporation duly organized, validly existing and in good standing under the Laws of the State of Maryland, with its principal place of business in the State of California. The OP is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware, with its principal place of business in the State of California. The NHP Member is duly organized, validly existing and in good standing under the Laws of the State of its organization or formation, with its principal place of business in the State of California. All requisite action has been taken by Transferee and the NHP Member in connection with entering into this Agreement, and will be taken prior to the Closing in connection with, the execution and delivery of the instruments referenced herein and the consummation of the transactions contemplated hereby. Other than any consent that may be required under the Loan Obligations, which shall be Transferee’s sole obligation to obtain, no consent of any partner, shareholder, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party is required in connection with the execution by Transferee or the NHP Member of this Agreement and/or the performance by Transferee or the NHP Member of its obligations hereunder.

          (c) Authority; Validity of Agreements. Other than any consent that may be required under the Loan Obligations, which shall be Transferee’s sole obligation to obtain, (i) the NHP Member has (or will have as of the Closing) full right, power and authority to transfer, contribute and convey its membership interests in the Partnership to the OP as provided in this Agreement, (ii) Transferee has full right, power and authority to accept the membership interests in the Partnership from each Transferor Party and the NHP Member as provided in this Agreement (collectively, the “Acquired Partnership Interests”), and (iii) each of Transferee and the NHP Member has full right, power and authority to carry out its obligations hereunder and to execute, deliver and perform, and enter into and consummate, all of the documents and transactions contemplated by this Agreement to which it is a party. The individual(s)

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executing this Agreement on behalf of Transferee and the NHP Member and the instruments referenced herein on behalf of Transferee and the NHP Member have the legal power, right and actual authority to bind Transferee and the NHP Member to the terms hereof and thereof. This Agreement is, and all other documents and instruments to be executed and delivered by Transferee and the NHP Member in connection herewith shall be, duly authorized, executed and delivered by Transferee and the NHP Member and shall be valid, binding and enforceable obligations of Transferee and the NHP Member.

          (d) Title to Partnership Interests. The NHP Member is the legal, record and beneficial owner of the membership interests in the Partnership held by the NHP Member and reflected in the JV Agreement, and has title thereto, free and clear of any liens, encumbrances, security agreements, equities, pledges, assessments, options, claims, charges, conditions or restrictions, other than any restrictions under the Act, any state securities laws or those created or evidenced by this Agreement, the JV Agreement or the Loan Obligations.

          (e) Common Stock and REIT Status. (i) NHP’s Common Stock is listed on the New York Stock Exchange, (ii) NHP has not received any notice from the New York Stock Exchange that NHP is not in compliance with the listing requirements for such Common Stock, and (iii) NHP has been organized and has operated in conformity with the requirements for qualification and taxation as a “real estate investment trust” under the Code, and has elected to be taxed as a “real estate investment trust” under Section 856 et seq. of the Code, in each case commencing with its taxable year ended December 31, 1985.

          (f) Accredited Investor. Transferee is an Accredited Investor and is able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and understands that the Acquired Partnership Interests are speculative and illiquid.

          (g) Not A Public Offering. Transferee acknowledges that it is acquiring the Acquired Partnership Interests in a transaction not involving any public offering within the meaning of the Act. Transferee will acquire the Acquired Partnership Interests for its own account for investment only and not with a view to, or with any intention of, a distribution or resale thereof, in whole or in part, in violation of the Act or state securities or “blue sky” laws.

          (h) No Defaults under JV Agreement. To the knowledge of Transferee and the NHP Member, the NHP Member is not in material default of any of its duties, covenants or obligations under the JV Agreement.

          (i) Survival. All of the representations and warranties of Transferee and the NHP Member set forth in this Agreement shall be true, correct and complete upon the date of this Agreement, shall be deemed to be repeated at and as of the Closing Date (except as otherwise disclosed in writing to PMB or the PMB Member) and shall survive the Closing of the Contribution Transaction for a period of one (1) year; provided, however, that the representations and warranties set forth in Sections 1.13(b), (c), (e), (f) and (g) hereof shall survive the Closing of the Contribution Transaction for the period of the applicable statute of limitations.

     1.14 Additional Covenants of Transferee.

          (a) AS IS and Release.

          (i) Except for those express representations, warranties and covenants set forth in this Agreement or in the other Transaction Documents, Transferee covenants and agrees that the Acquired Partnership Interests and the indirect interests in the Property are being acquired

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by the OP (or at the direction of the OP, by a wholly-owned subsidiary thereof), “AS-IS” and “WITH ALL FAULTS”, and without any other representation, warranty or covenant, express or implied.

          (ii) WITHOUT LIMITING THE PROVISIONS OF SECTION 1.14(a)(i) HEREOF, ANY CLAIMS OR CAUSES OF ACTION AGAINST PMB, THE PMB MEMBER OR ANY AFFILIATE, MEMBER, PARTNER, AGENT, ADVISOR OR OTHER PERSON ACTING ON BEHALF OF ANY OF THEM, THAT MIGHT OR COULD BE BASED IN WHOLE OR IN PART ON ANY IMPLIED WARRANTY OR ON ANY VIOLATION OF, OR ARISING WITH RESPECT TO, ANY FEDERAL, STATE OR LOCAL STATUTE, ORDINANCE, RULE OR REGULATION, OR BY VIRTUE OF ANY SUCH PARTY’S STATUS OR POSITION AS CONSTITUENT PARTNER OR MEMBER OF THE OWNER OR GROUND LESSEE OF THE PROPERTY, ARE HEREBY EXPRESSLY WAIVED AND RELEASED BY TRANSFEREE, EXCEPT SOLELY TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS. WITHOUT LIMITING THE FOREGOING, AND SUBJECT ONLY TO THE EXPRESS PROVISIONS OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, TRANSFEREE HEREBY WAIVES ANY OTHER RIGHTS, INCLUDING RIGHTS OF SUBROGATION AND CONTRIBUTION, THAT TRANSFEREE MIGHT HAVE AGAINST PMB, THE PMB MEMBER OR ANY AFFILIATE OF ANY OF THEM (EXCLUDING FROM SUCH WAIVER ONLY ANY RIGHTS WHICH TRANSFEREE MIGHT HAVE PURSUANT TO THE EXPRESS PROVISIONS OF THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS). WITH RESPECT TO ANY WAIVER OF CLAIMS OR RIGHTS AND ANY RELEASES SET FORTH IN THIS SECTION 1.14(a), TRANSFEREE HEREBY EXPRESSLY WAIVES ALL RIGHTS UNDER CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES THAT:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

TRANSFEREE EXPRESSLY CONFIRMS THAT TRANSFEREE WAS REPRESENTED AND ADVISED BY COUNSEL REGARDING THE MEANING AND EFFECT OF THE WAIVERS AND RELEASES CONTAINED IN THIS SECTION 1.14(a), AND HEREBY DECLARES THAT SUCH WAIVERS AND RELEASES WERE GIVEN FREELY AND WITH FULL UNDERSTANDING OF THE CONSEQUENCES THEREOF.

Transferee’s Initials:                                         

NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN THIS SECTION 1.14(a) SHALL RELIEVE PMB OR THE PMB MEMBER FROM LIABILITY FOR: (I) BREACH OF ITS EXPRESS REPRESENTATIONS, WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, INCLUDING, WITHOUT LIMITATION IN SECTIONS 1.14(b)(vi) and 1.18(b) HEREOF, SUBJECT, HOWEVER TO THE SURVIVAL AND OTHER LIMITATIONS ON SUCH LIABILITY AS SET FORTH IN THIS AGREEMENT (INCLUDING SECTION 1.12(j) HEREOF) OR IN THE OTHER TRANSACTION DOCUMENTS; OR (II) ANY FRAUD OR WILLFUL MISCONDUCT OF PMB OR THE PMB

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MEMBER. THE TERMS AND PROVISIONS OF THIS SECTION 1.14(a) SHALL SURVIVE THE CLOSING.

          (b) Private Placement Memorandum.

          (i) Current PPM. Pursuant to the Master Contribution Agreement, NHP prepared the “PPM” (as defined in the Master Contribution Agreement) (as the same may be amended, supplemented, updated and/or replaced from time to time, including, without limitation, pursuant to a “PPM Update” (as hereinafter defined), the “Current PPM”) relating to the offering of Class A OP Units in connection with the transactions contemplated by the Master Contribution Agreement or such other transactions contemplated thereby, by the Pipeline Agreement or other agreements between Transferee or affiliates of the Transferee, on the one hand, and PMB or affiliates of PMB, on the other hand (collectively, the “NHP/PMB Transactions”). PMB and the PMB Member shall deliver the then Current PPM to the Transferor Parties prior to delivery of the applicable Closing Notice.

          (ii) PPM Update. In connection with the transactions contemplated by this Agreement, Transferee may elect to prepare amendments, supplements, updates and/or replacements to the Current PPM (in each instance, a “PPM Update”), and deliver the same to PMB for delivery to the Transferor Parties. In connection therewith, PMB and the PMB Member shall notify Transferee if it anticipates delivering a Closing Notice (or a new Closing Notice following delivery of a Rescission Notice) within the next sixty (60) days (herein, an “Anticipated Closing Notice”). If Transferee prepares a PPM Update as provided herein, then PMB and the PMB Member shall promptly deliver the PPM Update to the Transferor Parties. In the event that Transferee elects to prepare a PPM Update less than fifteen (15) days prior to the scheduled Closing Date, then the Closing shall be delayed until the 15^th day following PMB’s receipt of such PPM Update in order to provide PMB with sufficient time to (A) deliver such PPM Update to the Transferor Parties, (B) obtain the Required Interest Holder Consents from each of the Transferor Parties, (C) prepare and deliver the Closing Notice (or prepare and redeliver a new Closing Notice in order to update or modify any information set forth in the previously delivered Closing Notice based upon any changed election or information with respect to any Transferor Party following such Transferor Party’s receipt of such PPM Update) and (D) obtain and deliver to the OP those Investor Documents specified in Section 1.9(a)(v), or, in the case of any of the items in clauses (B) through (D), update the same based upon any changed election or information with respect to any Transferor Party following such Transferor Party’s receipt of such PPM Update.

          (iii) Provision of Information by PMB for PPM Update. If Transferee elects to prepare a PPM Update, then PMB shall promptly, but in any event within five (5) Business Days after a request from Transferee, furnish (or cause to be furnished) to Transferee, for inclusion in such PPM Update, (A) all information required by Exhibit “Z” attached to the Master Contribution Agreement for the Property and any other properties described in the then Current PPM (including any such PPM Update) that may be acquired in the future in any NHP/PMB Transactions (the Property and such other future properties being referred to herein, collectively, as the “PMB Properties”), and (B) the “Property Financial Statements” (as defined in the Master Contribution Agreement) for the PMB Properties for the most recently completed fiscal quarter.

          (iv) Accuracy of Information. PMB hereby represents and warrants that (i) the information to be provided pursuant to Section 1.14(b)(iii)(A) hereof will not contain any untrue statement of a material fact or omit any of the information required by Exhibit “Z” to the Master Contribution Agreement, or any material fact necessary to make the statements therein, in

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light of the circumstances under which they were made, not misleading, and (B) the Property Financial Statements with respect to the PMB Properties that it will provide for inclusion in the PPM Update pursuant to Section 1.14(b)(iii)(B) hereof will fairly present, in all material respects, the financial position of the PMB Properties as of the date of such Property Financial Statements, and the results of operations, if applicable, of the PMB Properties for the periods indicated therein, subject, in the case of Property Financial Statements relating to any quarterly period, to normal year-end adjustments.

          (v) Notice of Inaccuracies. If, at any time prior to the Closing, PMB has knowledge of any fact or circumstance that would make any representation or warranty in Section 1.14(b)(iv) hereof untrue, then PMB shall promptly inform Transferee and provide Transferee with the information necessary to prepare an appropriate PPM Update with respect thereto.

          (vi) Liability and Indemnification.

          (A) This Section 1.14(b)(vi) shall constitute PMB and their affiliates’ sole liability and shall constitute Transferee’s and its affiliates’ sole recourse for any breach of this Section 1.14(b) by PMB or any of its affiliates. For the avoidance of doubt, none of PMB or any of its affiliates shall have any liability under this Section 1.14(b) unless there is a “Claim” (as hereinafter defined) by a Transferor Party based on a misstatement in or omission from the Current PPM as a result of an inaccuracy of a representation or warranty of PMB set forth in Section 1.14(b)(iv) hereof or a breach by PMB of any of its obligations under this Section 1.14(b), and any such liability shall be limited to the specific scope of the indemnity provided in Section 1.14(b)(vi)(B) hereof.

          (B) PMB will indemnify, and hold Transferee harmless from and against all Claims incurred by Transferee to a Transferor Party as a result of a misstatement of material fact contained in the Current PPM or omission of a material fact from the Current PPM that is (A) required by Exhibit “Z” attached to the Master Contribution Agreement with respect to the PMB Properties or (B) necessary in order to make the statements therein, under the circumstances under which they are made, not misleading, but only to the extent that such information was included in, or omitted from the Current PPM, as a result of an inaccuracy in a representation or warranty of PMB made in Section 1.14(b)(iv) hereof or a breach by PMB of its obligations under this Section 1.14(b); provided, however, that PMB will not be liable in any such case if Transferee has knowledge of any misstatement in or omission from the Current PPM, and Transferee failed to deliver an amendment, supplement, update and/or replacement to the Current PPM correcting such misstatement or omission. In the event that Transferee incurs any Claims to a Transferor Party other than pursuant to a binding judgment of a court of competent jurisdiction, such Claims may not be used to establish whether any alleged misstatement of material fact or omission to state a material fact actually existed or if it existed, whether it resulted from an inaccuracy in a representation or warranty of PMB in Section 1.14(b)(iv) hereof or a breach by PMB of this Section 1.14(b), such facts to be separately established by Transferee in any dispute between the parties relating thereto.

     1.15 Risk of Loss. The provisions of Section 11 of the Master Contribution Agreement shall be incorporated into this Agreement, except that all references therein to (a) “each Property” shall mean the Property, (b) “NHP” shall mean Transferee, (c) “Transferor” shall mean the Partnership, (d) “Property

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Owning Entity” shall mean the Continuing Entity, and (e) “Total Property Value” shall mean the sum of the Contribution Value and the outstanding balance of the Loan Obligations.

     1.16 Defaults and Remedies.

          (a) Default by Transferee or NHP Member. IN THE EVENT THAT THE ESCROW AND THE CONTRIBUTION TRANSACTION CONTEMPLATED HEREBY FAIL TO CLOSE AS A RESULT OF THE DEFAULT OF TRANSFEREE OR THE NHP MEMBER IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, TRANSFEREE, THE NHP MEMBER, PMB AND THE PMB MEMBER AGREE THAT PMB AND THE PMB MEMBER’S ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX. SUBJECT TO SECTION 1.16(b) HEREOF, THE PARTIES THEREFORE AGREE THAT IN THE EVENT THAT THE ESCROW AND THE CONTRIBUTION TRANSACTION CONTEMPLATED HEREBY FAIL TO CLOSE AS A RESULT OF THE DEFAULT OF TRANSFEREE OR THE NHP MEMBER IN THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, THEN, AS PMB’S AND THE PMB MEMBER’S SOLE AND EXCLUSIVE REMEDY, TRANSFEREE AND/OR THE NHP MEMBER SHALL PAY TO THE PMB MEMBER (FOR THE BENEFIT OF PMB AND THE PMB MEMBER) LIQUIDATED DAMAGES IN THE AMOUNT OF FIVE PERCENT (5%) OF THE SUM OF THE CONTRIBUTION VALUE AND THE OUTSTANDING BALANCE OF THE LOAN OBLIGATIONS (THE “LIQUIDATED DAMAGES AMOUNT”). IN THE EVENT THAT THE ESCROW AND THE CONTRIBUTION TRANSACTION CONTEMPLATED HEREBY FAIL TO CLOSE AS A RESULT OF TRANSFEREE’S OR THE NHP MEMBER’S DEFAULT, THEN (A) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THE ESCROW CREATED HEREBY SHALL TERMINATE, (B) ESCROW AGENT SHALL, AND IS HEREBY AUTHORIZED AND INSTRUCTED TO, RETURN PROMPTLY ALL DOCUMENTS AND INSTRUMENTS WITH RESPECT TO THE CONTRIBUTION TRANSACTION TO THE PARTIES WHO DEPOSITED THE SAME, (C) TRANSFEREE AND/OR THE NHP MEMBER SHALL DELIVER THE LIQUIDATED DAMAGES AMOUNT TO THE PMB MEMBER (FOR THE BENEFIT OF PMB AND THE PMB MEMBER), AND THE SAME SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES, AND (D) ALL RELATED ESCROW CANCELLATION CHARGES, IF ANY, SHALL BE CHARGED TO TRANSFEREE OR THE NHP MEMBER, AS APPLICABLE.

          FOR PURPOSES OF THIS SECTION 1.16(a), A BREACH UNDER THIS AGREEMENT BY TRANSFEREE OR THE NHP MEMBER SHALL RESULT IN DEFAULT UNDER THIS AGREEMENT BY TRANSFEREE AND THE NHP MEMBER ONLY AFTER WRITTEN NOTICE OF THE BREACH IS GIVEN TO TRANSFEREE AND THE NHP MEMBER AND ONLY IF SUCH BREACH IS NOT CURED WITHIN FIVE (5) BUSINESS DAYS THEREAFTER.

          PMB, THE PMB MEMBER, TRANSFEREE AND THE NHP MEMBER EACH ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE PROVISIONS OF THIS SECTION 1.16(a), AND BY ITS INITIALS IMMEDIATELY BELOW AGREES TO BE BOUND BY ITS TERMS.

Transferee’s Initials	PMB’s Initials	PMB Member’s Initials
NHP Member’s Initials

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          (b) Default by PMB or the PMB Member. In the event that the Closing of the Contribution Transaction contemplated by this Agreement does not occur by reason of any default by PMB or the PMB Member of its obligations under this Agreement, then Transferee and the NHP Member shall be entitled, as its sole and exclusive remedy, to either (i) terminate this Agreement by written notice to PMB, the PMB Member and Escrow Agent, in which event Escrow Agent shall return all documents, instruments and funds delivered into Escrow with respect to the Contribution Transaction to the party that delivered the same into Escrow, and no party (or its affiliates) shall have any further rights or obligations hereunder with respect to consummating the Contribution Transaction contemplated hereby, other than pursuant to any provision hereof which expressly survives the termination of this Agreement, in which case PMB and/or the PMB Member shall be obligated to pay any cancellation charges to Escrow Agent and/or Assumption Costs, subject to a cap of $250,000, or (ii) treat this Agreement as being in full force and effect and pursue an action for specific performance of this Agreement, provided that Transferee or the NHP Member must commence any action for specific performance within sixty (60) days after the scheduled Closing Date. Transferee and the NHP Member expressly waive any right to recover any and all consequential damages, punitive damages and exemplary damages, and any other damages which would be predicated in whole or in part upon loss of bargain, opportunity lost, or any loss of anticipated benefits incurred by Transferee or the NHP Member.

          (c) Notwithstanding anything contained herein to the contrary, no party shall be deemed in default or breach under this Agreement unless written notice of such breach or default has been given to such party by the party(ies) asserting such breach or default, and such party alleged to be in breach or default fails to cure such breach or default within five (5) Business Days after its receipt of such notice.

     1.17 Broker. The provisions of Section 13 of the Master Contribution Agreement shall be incorporated into this Agreement, but shall be deemed modified for purposes of this Agreement to reflect the transactions contemplated by this Agreement and the applicable parties hereto.

     1.18 Indemnification.

          (a) By Transferee and the NHP Member. Each of Transferee and the NHP Member, jointly and severally, hereby agrees to indemnify, protect, defend and hold PMB and the PMB Member harmless from and against any claim, demand, obligation, loss, cost, damage, liability, judgment or expense (including, without limitation, reasonable attorneys’ fees, charges and disbursements) (collectively, “Claims” and individually, a “Claim”) arising out of or in connection with (i) the breach of any of Transferee’s and/or the NHP Member’s representations or warranties set forth herein (subject to the survival limitations set forth in Section 1.13(i) hereof), or (ii) the breach of any of Transferee’s and/or the NHP Member’s covenants or agreements set forth herein.

          (b) By PMB and the PMB Member. The PMB Member, individually and not jointly with PMB, and PMB for itself and jointly and severally with the PMB Member, hereby agrees to indemnify, protect, defend and hold Transferee and the NHP Member harmless from and against any Claims arising out of or in connection with (i) the breach of PMB’s or the PMB Member’s representations or warranties set forth herein (subject to the survival limitations set forth in Section 1.12(j) hereof), (ii) the breach of any of PMB’s or the PMB Member’s covenants or agreements set forth herein, (iii) the failure to pay any amounts that PMB is obligated to pay or reimburse Transferee or its affiliates for hereunder (including, without limitation, pursuant to Section 1.14(b)(vi)), (iv) any fraud or willful misconduct by PMB or the PMB Member, or (v) any Claims made by any Outside Investors or any other investors, partners, members or direct or indirect constituents of the PMB Member that such entities suffered losses due to the breach of any fiduciary or other duties or obligations owed by PMB, the PMB Member or any of their affiliates, to such persons in connection with the transactions contemplated by this

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Agreement or any other Transaction Document, or due to any allocation of the PMB Member’s Contribution Value Amount (collectively, “Investor Claims”). Notwithstanding anything to the contrary contained herein, or in any Indemnity Pledge Agreement and/or Indemnity Cash Escrow Agreement, if Transferee shall seek or be entitled to indemnification or any other action with respect to any Claim against the PMB Member, then Transferee agrees to proceed against all Transferor Parties pursuant to the applicable Indemnity Pledge Agreements and/or the applicable Indemnity Cash Escrow Agreement delivered by such Transferor Parties, or the Transferor Parties and PMB, as applicable, solely in proportion to each such Transferor Party’s Allocable Share of the applicable Secured Amount.

          (c) Interpretation. Notwithstanding anything to the contrary contained herein, no party shall be entitled to any recovery of damages pursuant to this Section 1.18 to the extent that the party seeking indemnification hereunder had knowledge as of the Closing of the matter that gives rise to the Claims, including, without limitation, the breach by any party of any of its representations, warranties, covenants or agreements set forth in this Agreement that give rise to such Claims. In addition, and notwithstanding anything to the contrary contained herein, the indemnification provisions of this Section 1.18 shall be the sole remedy of an indemnified party and shall be in lieu of any other remedy available to any indemnified party, whether at law or in equity, arising out of or in connection with Claim for which an indemnified party is entitled to indemnification hereunder, including, without limitation, on account of any breach by any party of any of its representations, warranties, covenants or agreements set forth in this Agreement that give rise to such Claims.

          (d) Limitations on Indemnity. Notwithstanding anything to the contrary in this Agreement (other than with respect to Transferee’s Claims arising from (i) PMB’s or the PMB Member’s fraud or willful misconduct, (ii) any Investor Claims, (iii) the indemnity set forth in Section 11.14(b)(vi) hereof, (iv) the exercise of any Claim under the JV Agreement, or (v) the exercise of any Claim under the Pipeline Agreement (or any other documents or agreements executed in connection therewith) with respect to any other property (other than the Property), with respect to items (i) through (v) above the parties hereby agree that the limitations set forth in this sentence shall not apply), Transferee shall not seek, or be entitled to, indemnification or any other action, whether in law or in equity, for a breach of any express representation, warranty, covenant or obligation of PMB or the PMB Member under this Agreement or under any other Transaction Document (A) to the extent the aggregate Claims for damages or losses for which indemnification is sought pursuant to this Section 1.18 or any other claim for breach of any other express representation, warranty, covenant or obligation of PMB or the PMB Member under this Agreement or under any other Transaction Document is less than the applicable “Threshold” (as hereinafter defined) or (ii) to the extent the aggregate Claims for all such damages or losses exceed an amount equal to the “Cap” (as hereinafter defined). As used herein, the term “Threshold” shall mean with respect to PMB and the PMB Member, the sum of $50,000.00. As used herein, the term “Cap” shall mean with respect to PMB and the PMB Member, an amount equal to three percent (3%) of the sum of the PMB Member’s Contribution Value Amount and the PMB Member’s Percentage Interest of the outstanding balance of the Loan Obligations. In calculating the amount of any damages payable to Transferee hereunder, the amount of the damages (A) shall not be duplicative of any other award for any indemnification claim or other claim for breach of any express representation, warranty, covenant or obligation of PMB or the PMB Member under this Agreement or any other Transaction Document, and (B) shall be computed net of any amounts actually recovered by Transferee under any insurance policy with respect to such damages. Notwithstanding anything to the contrary herein, no party hereto shall seek, or be entitled to indemnification or any other action, and each of the party’s hereby expressly waive any right to recover, any and all consequential damages, punitive damages and exemplary damages, and any other damages which would be predicated in whole or in part upon loss of bargain, opportunity lost, or any loss of anticipated benefits incurred by such party by reason of a breach of any representation, warranty, covenant or obligation of any other party under this Agreement or any other Transaction Document.

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          (e) Further Assurances. Each party shall do, execute and deliver, or shall cause to be done, executed and delivered, all such further acts and instruments which the other party may reasonably request in order to more fully effectuate the indemnifications provided for in this Agreement.

          (f) Survival. The provisions of this Section 1.18 shall survive the Closing; provided, however, that in addition to the terms of Section 1.12(j) hereof, all or any Claims for indemnification made directly and independently by Transferee (and not as a result of any third party Claims) must be made (by Transferee delivering written notice thereof to PMB and the PMB Member), if at all, on or before the second (2^nd) anniversary of the Closing Date.

     1.19 Miscellaneous.

          (a) Generally. The provisions of Section 15, Sections 16.1 through 16.4, inclusive, and Sections 16.6 through 16.24, inclusive, of the Master Contribution Agreement shall be incorporated into this Agreement, but shall be deemed modified for purposes of this Agreement to reflect the transactions contemplated by this Agreement and the applicable parties hereto. In addition, for purposes of this Agreement the definition of “knowledge” parties set forth in Section 16.20 of the Master Contribution Agreement (and any corollary provisions relating thereto) as used in this Agreement shall be deemed modified to reflect the then current executive officers of NHP and PMB, and to the extent applicable any additional state specific requirements (i.e., consistent with those set forth in Sections 16.21 through 16.23 of the Master Contribution Agreements) shall be incorporated into this Agreement.

          (b) PMB Legal Fees and Other Costs. Subject to the provision for payment of Closing Costs in accordance with the terms of Section 1.11(c) hereof and any other provision of this Agreement or other Transaction Documents to the contrary, whether or not the transactions contemplated by this Agreement shall be consummated, all fees and expenses incurred by any party hereto in connection with this Agreement and the other Transaction Documents shall be borne by such party. Notwithstanding the foregoing, PMB and the PMB Member, in their sole and absolute discretion, may direct Transferee to pay on behalf of PMB and/or the PMB Member all or any portion of such party’s third party legal fees and other third party expenses actually incurred in connection with (i) the negotiation and preparation of this Agreement, the other Transaction Documents, (ii) the performance of such party’s obligations and covenants contemplated by any of the foregoing, and (iii) the costs of all certificates, instruments, documents and other items required to be delivered or caused to be delivered by such party in connection with the transactions contemplated by any of the foregoing (collectively, the “Legal Fees and Costs”), by delivering written notice to Transferee and Escrow Agent not less than four (4) Business Days prior to the applicable Closing of its election to cause the OP to pay such amount (each a “Legal Fees and Costs Notice”). The exact amount of Legal Fees and Costs that PMB and/or the PMB Member has elected to cause Transferee to pay or reimburse at Closing shall be set forth in the final Closing Statement approved by the parties prior to the Closing. Transferee shall pay such Legal Fees and Costs at the Closing (the “Reimbursable Legal Fees and Costs Amount”) as directed in the Closing Statement and the PMB Member’s Contribution Value Amount shall be reduced by the amount of such payments pursuant to the terms of Section 1.3(b) hereof.

     1.20 Additional Tax Matters Regarding Partnership.

          (a) The NHP Member and PMB Member acknowledge and agree that the Partnership will terminate as

          a partnership for tax purposes upon the Closing and, that as a result, (i) the taxable year of the Partnership shall end at the end of the day on which such Closing occurs for federal and state income tax purposes and (ii) the accounting and financial books of the Partnership shall be closed at the end of the day on which such Closing occurs. All items of income, gain, loss and deduction of the Partnership for the taxable year of the Partnership that ends at the end of the day on which such

32

Closing occurs shall be allocated to such period using a “closing of the books” method. In the case of any taxes owed by the Partnership that are imposed on a periodic basis and are payable for a taxable period that includes (but does not end on) the day such Closing occurs, the portion of such tax which relates to the portion of such taxable period ending on the day such Closing occurs shall (A) in the case of any taxes other than taxes based upon or related to income or receipts, be deemed to be the amount of such tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending at the end of the day on which such Closing occurs and the denominator of which is the number of days in the entire taxable period, and (B) in the case of any tax based upon or related to income or receipts be deemed equal to the amount which would be payable if the relevant taxable period ended at the end of the day on which such Closing occurs. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with the prior practices of the Partnership and all tax returns of the Partnership shall be prepared in a manner consistent with the prior practices of the Partnership.

          (b) Following such Closing, the PMB Member will coordinate and facilitate the preparation of drafts of the final tax returns for the Partnership through the Partnership’s accountants. The PMB Member shall provide such draft returns to the NHP Member for its review and approval and shall do so such that the NHP Member has a minimum of thirty (30) days to review the same prior to the deadline for filing such returns. Upon the NHP Member’s approval of the draft returns, the PMB Member shall cause the same to be properly filed with the applicable local, state and federal authorities. The PMB Member shall also coordinate and facilitate the preparation of a final tax basis balance sheet and the detail of all of the tax basis fixed assets by the Partnership’s accountants, and shall provide the same in electronic form to the NHP Member concurrently with providing the draft returns. All fees payable to the Partnership’s accountants in connection with services rendered pursuant to this Section 1.20 and all filing fees and other costs payable to third parties incurred pursuant to this Section 1.20 shall be paid by the Members in proportion to their respective Percentage Interest. The NHP Member shall promptly reimburse the PMB Member for, or pay directly, its Percentage Interest of all such fees, filing fees and other costs in connection with the foregoing promptly upon receipt of an invoice therefor.

          (c) The provisions of this Section 1.20 shall survive the Closing.

33

EX-12

EXHIBIT 12

Ratio of Earnings to Fixed Charges

	2009		2008		2007		2006		2005
Ratio of earnings to fixed charges:
Ratio		2.34		2.06		2.34		1.60		1.51
Income from continuing operations	$	125,207	$	107,048	$	130,368	$	51,107	$	31,796
Interest		93,630		101,045		97,639		85,541		62,625
“Earnings”	$	218,837	$	208,093	$	228,007	$	136,648	$	94,421
Interest	$	93,630	$	101,045	$	97,639	$	85,541	$	62,625
Capitalized interest		—		—		—		—		—
“Fixed charges”	$	93,630	$	101,045	$	97,639	$	85,541	$	62,625
Ratio of earnings to combined fixed charges and preferred stock dividends:
Ratio		2.21		1.91		2.05		1.36		1.21
Income from continuing operations	$	125,207	$	107,048	$	130,368	$	51,107	$	31,796
Interest		93,630		101,045		97,639		85,541		62,625
“Earnings”	$	218,837	$	208,093	$	228,007	$	136,648	$	94,421
Interest	$	93,630	$	101,045	$	97,639	$	85,541	$	62,625
Capitalized interest		—		—		—		—		—
Preferred dividends		5,350		7,637		13,434		15,163		15,622
“Combined fixed charges and preferred stock dividends”	$	98,980	$	108,682	$	111,073	$	100,704	$	78,247

EX-21

EXHIBIT 21

Subsidiaries of the Company
As of December 31, 2009

	State of
	Incorporation or
Name	Organization
JER/NHP Senior Housing, LLC	Delaware
JER/NHP Senior Living Acquisition, LLC	Delaware
MLD Delaware Trust	Delaware
MLD Financial Capital Corporation	Delaware
MLD Properties Limited Partnership	Delaware
MLD Properties, Inc.	Delaware
MLD Properties, LLC	Delaware
Nationwide Health Properties Finance Corporation	Delaware
NH Texas Properties Limited Partnership	Texas
NHP Brownstown, LLC	Delaware
NHP Carillon, LLC	Delaware
NHP Centereach, LLC	Delaware
NHP Heritage Club, LLC	Colorado
NHP Properties Business Trust	Massachusetts
NHP Secured, Inc.	California
NHP Senior Indiana, LLC	Delaware
NHP Tucson Health Care Associated LP	Delaware
NHP/McShane SAMC, LLC	Delaware
NHP/PMB Limited Partnership	Delaware
PMB/NHP Vancouver, LLC	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements and related prospectuses:

(1) Registration Statement (Form S-3 No. 333-164384) of Nationwide Health Properties, Inc.,

(2) Registration Statement (Form S-3 No. 333-158442) of Nationwide Health Properties, Inc.,

(3) Registration Statement (Form S-3 No. 333-142643) of Nationwide Health Properties, Inc.,

(4) Registration Statement (Form S-3 No. 333-106730) of Nationwide Health Properties, Inc.,

(5) Registration Statement (Form S-8 No. 333-125908) pertaining to the securities to be offered under the performance incentive plan of Nationwide Health Properties, Inc., and

(6) Registration Statement (Form S-8 No. 333-20589) pertaining to the securities to be offered under the stock option plan of Nationwide Health Properties, Inc.,

of our report dated February 17, 2010, with respect to the consolidated financial statements and schedule of Nationwide Health Properties, Inc. and our report dated February 17, 2010, with respect to the effectiveness of internal control over financial reporting of Nationwide Health Properties, Inc., included in this Annual Report (Form 10-K) of Nationwide Health Properties, Inc. for the year ended December 31, 2009.

/s/ ERNST & YOUNG LLP 

Irvine, California
February 17, 2010

EX-31

Exhibit 31

CERTIFICATIONS

I, Douglas M. Pasquale, certify that:

1. I have reviewed this report on Form 10-K of Nationwide Health Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: February 17, 2010	/s/ Douglas M. Pasquale
	Douglas M. Pasquale
	Chairman of the Board of Directors and President and Chief Executive Officer

I, Abdo H. Khoury, certify that:

1. I have reviewed this report on Form 10-K of Nationwide Health Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: February 17, 2010	/s/ Abdo H. Khoury
	Abdo H. Khoury
	Executive Vice President and Chief Financial and Portfolio Officer

EX-32

Exhibit 32

WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350

     The undersigned, Douglas M. Pasquale, the Chief Executive Officer, and Abdo H. Khoury, the Chief Financial and Portfolio Officer, of Nationwide Health Properties, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certify that, to the best of my knowledge:

     (i) the Annual Report on Form 10-K for the annual period ended December 31, 2009 of the Company (the “Report”) fully complies with the requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

     (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 17, 2010

/s/ Douglas M. Pasquale  

Douglas M. Pasquale 

Chairman of the Board of Directors and President and Chief Executive Officer 

/s/ Abdo H. Khoury  

Abdo H. Khoury 

Executive Vice President and Chief Financial and Portfolio Officer 

     A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, regardless of any general incorporation language in such filing.