425

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 11, 2011

VENTAS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	1-10989	61-1055020
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

111 S. Wacker Drive, Suite 4800, Chicago, Illinois	60606
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (877) 483-6827

Not Applicable

Former Name or Former Address, if Changed Since Last Report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

xWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01.Other Events.

As previously announced, in October 2010, Ventas, Inc. (“Ventas”) signed a definitive agreement to acquire substantially all of the real estate assets of Atria Senior Living Group, Inc. (“Atria”) and certain of its affiliated entities (including One Lantern Senior Living Inc (“One Lantern”)), by way of merger, including 118 private pay seniors housing communities located in markets such as the New York metropolitan area, New England and California.  Completion of the Atria transaction is subject to certain conditions.  Ventas expects the Atria transaction to occur in the first half of 2011, although there can be no assurance as to whether or when the transaction will be completed.

Also as previously announced, in February 2011, Ventas signed a definitive agreement to acquire Nationwide Health Properties, Inc. (“NHP”) in a stock-for-stock transaction.  Completion of the NHP transaction is subject to, among other things, approval by Ventas stockholders and NHP stockholders.  Ventas expects the NHP transaction to occur in the third quarter of 2011, although there can be no assurance as to whether or when the transaction will be completed.

Additional Information about the Proposed NHP Transaction and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.  In connection with the proposed NHP transaction, Ventas and NHP expect to prepare and file with the SEC a registration statement on Form S-4 containing a joint proxy statement/prospectus and other documents with respect to Ventas’s proposed acquisition of NHP.  INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors may obtain free copies of the registration statement, the joint proxy statement/prospectus and other relevant documents filed by Ventas and NHP with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov.  Copies of the documents filed by Ventas with the SEC are also available free of charge on Ventas’s website at www.ventasreit.com, and copies of the documents filed by NHP with the SEC are available free of charge on NHP’s website at www.nhp-reit.com.

Ventas, NHP and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Ventas’s and NHP’s shareholders in respect of the proposed transaction.  Information regarding Ventas’s directors and executive officers can be found in Ventas’s definitive proxy statement filed with the SEC on March 28, 2011.  Information regarding NHP’s directors and executive officers can be found in NHP’s definitive proxy statement filed with the SEC on March 25, 2010.  Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed transaction if and when they become available.  These documents are available free of charge on the SEC’s website and from Ventas or NHP, as applicable, using the sources indicated above.

Item 9.01.Financial Statements and Exhibits.

(a)  Financial Statements of Businesses Acquired.

The audited consolidated financial statements of Atria as of and for the years ended December 31, 2010 and 2009 are filed herewith as Exhibit 99.1 and incorporated in this Item 9.01(a) by reference.

The audited consolidated financial statements of One Lantern as of and for the years ended December 31, 2010 and 2009 are filed herewith as Exhibit 99.2 and incorporated in this Item 9.01(a) by reference.

The audited consolidated financial statements of NHP as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010 are filed herewith as Exhibit 99.3 and incorporated in this Item 9.01(a) by reference.

(b)  Pro Forma Financial Information.

The unaudited pro forma condensed consolidated financial statements of Ventas as of and for the year ended December 31, 2010, giving effect to the Atria and NHP transactions, are filed herewith as Exhibit 99.4 and incorporated in this Item 9.01(b) by reference.

(c)  Shell Company Transactions.

Not applicable.

(d)Exhibits:

Exhibit Number	Description
23.1	Consent of Deloitte & Touche LLP (with respect to Atria).
23.2	Consent of Deloitte & Touche LLP (with respect to One Lantern).
23.3	Consent of Ernst & Young LLP (with respect to NHP).
99.1	Audited consolidated financial statements of Atria as of and for the years ended December 31, 2010 and 2009.
99.2	Audited consolidated financial statements of One Lantern as of and for the years ended December 31, 2010 and 2009.
99.3	Audited consolidated financial statements of NHP as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010.
99.4	Unaudited pro forma condensed consolidated financial statements of Ventas as of and for the year ended December 31, 2010.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VENTAS, INC.
Date: April 11, 2011	By:	/s/ T. Richard Riney
		T. Richard Riney
		Executive Vice President, Chief
		Administrative Officer, General
		Counsel and Corporate Secretary

3

EXHIBIT INDEX

Exhibit Number	Description
23.1	Consent of Deloitte & Touche LLP (with respect to Atria).
23.2	Consent of Deloitte & Touche LLP (with respect to One Lantern).
23.3	Consent of Ernst & Young LLP (with respect to NHP).
99.1	Audited consolidated financial statements of Atria as of and for the years ended December 31, 2010 and 2009.
99.2	Audited consolidated financial statements of One Lantern as of and for the years ended December 31, 2010 and 2009.
99.3	Audited consolidated financial statements of NHP as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010.
99.4	Unaudited pro forma condensed consolidated financial statements of Ventas as of and for the year ended December 31, 2010.

4

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Registration Statement Nos. 333-155770, 333-158424, and 333-165737 on Form S-3 and Registration Statement Nos. 333-61552, 333-97251, 333-107951, 333-118944, 333-126639, and 333-136175 on Form S-8 of Ventas, Inc. (the Company) of our report dated February 16, 2011 related to the consolidated financial statements of Atria Senior Living Group, Inc. and subsidiaries as of and for the years ended December 31, 2010 and 2009, appearing in Item 9.01 of this current report on Form 8-K of the Company dated April 11, 2011.

/s/ Deloitte & Touche LLP

Louisville, Kentucky

April 11, 2011

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Registration Statement Nos. 333-155770, 333-158424, and 333-165737 on Form S-3 and Registration Statement Nos. 333-61552, 333-97251, 333-107951, 333-118944, 333-126639, and 333-136175 on Form S-8 of Ventas, Inc. (the Company) of our report dated February 16, 2011 related to the consolidated financial statements of One Lantern Senior Living Inc  and subsidiaries as of and for the years ended December 31, 2010 and 2009, appearing in Item 9.01 of this current report on Form 8-K of the Company dated April 11, 2011.

/s/ Deloitte & Touche LLP

Louisville, Kentucky

April 11, 2011

EX-23.3

Exhibit 23.3

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements:

·Form S-8, File No. 333-61552 (pertaining to the Ventas, Inc. Common Stock Purchase Plan for Directors);

·Form S-8, File No. 333-97251 (pertaining to the Ventas, Inc. 2000 Incentive Compensation Plan);

·Form S-8, File No. 333-107951 (pertaining to the Ventas, Inc. 2000 Stock Option Plan for Directors);

·Form S-8, File No. 333-118944 (pertaining to the Ventas Executive Deferred Stock Compensation Plan and Ventas Nonemployee Director Deferred Stock Compensation Plan);

·Form S-8, File No. 333-126639 (pertaining to the Ventas Employee and Director Stock Purchase Plan);

·Form S-8, File No. 333-136175 (pertaining to the Ventas, Inc. 2006 Incentive Plan and Ventas, Inc. 2006 Stock Plan for Directors);

·Form S-3, File No. 333-155770 (pertaining to the Ventas, Inc. Distribution Reinvestment and Stock Purchase Plan);

·Form S-3, File No. 333-158424 (pertaining to preferred stock, depository shares, common stock, warrants and debt securities of Ventas, Inc.); and

·Form S-3, File No. 333-165737 (pertaining to the common stock of Ventas, Inc.)

filed by Ventas, Inc. of our report dated March 1, 2011, with respect to the consolidated financial statements and schedule of Nationwide Health Properties, Inc., included in Ventas, Inc.’s Current Report on Form 8-K dated April 11, 2011 filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Irvine, California

April 8, 2011

EX-99.1

Exhibit 99.1

Atria Senior Living Group, Inc.

Consolidated Financial Statements as of and for the Years Ended December 31, 2010 and 2009, and Independent Auditors’ Report

ATRIA SENIOR LIVING GROUP, INC.

TABLE OF CONTENTS

	Page
INDEPENDENT AUDITORS’ REPORT	1
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009:
Statements of Operations	2
Balance Sheets	3
Statements of Stockholder’s Equity	4
Statements of Cash Flows	5–6
Notes to Consolidated Financial Statements	7–24

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of
Atria Senior Living Group, Inc.
Louisville, Kentucky

We have audited the accompanying consolidated balance sheets of Atria Senior Living Group, Inc. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholder’s equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Louisville, Kentucky

February 16, 2011

ATRIA SENIOR LIVING GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

	2010			2009
REVENUES:
Assisted and independent living revenues	$	466,773		$	441,663
Managed facility reimbursements	68,362			66,634
Management fees	8,979			8,818
Total operating revenues	544,114			517,115
OPERATING EXPENSES:
Assisted and independent living operating expenses	309,269			293,422
Managed facility reimbursed expenses	68,362			66,634
General and administrative expenses	47,558			43,896
Depreciation and amortization	52,138			46,268
Community rent expense	19,524			19,259
Loss on disposition of assets — net	3,685			1,156
Development expenses	2,263			1,773
Impairment and lease termination costs	61			875
Total operating expenses	502,860			473,283
OPERATING INCOME	41,254			43,832
OTHER INCOME (EXPENSE):
Interest expense	(70,245		)	(68,721		)
Interest income	234			749
Loss on debt extinguishment	(2		)	(462		)
Other — net	214			153
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(28,545		)	(24,449		)
INCOME TAX BENEFIT	7,560			4,732
LOSS FROM CONTINUING OPERATIONS	(20,985		)	(19,717		)
LOSS FROM DISCONTINUED OPERATIONS — Net of tax	—			(103		)
NET LOSS	$	(20,985	)	$	(19,820	)

See notes to consolidated financial statements.

2

ATRIA SENIOR LIVING GROUP, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2010 AND 2009

(In thousands, except share amounts)

	2010			2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	143,833		$	174,235
Restricted cash — current	12,025			9,247
Resident accounts receivable — net	3,596			3,961
Due from affiliates	9,825			11,876
Assets held for sale	—			1,600
Deferred income taxes	3,679			2,047
Other current assets	7,248			6,534
Total current assets	180,206			209,500
PROPERTY AND EQUIPMENT — Net	1,037,012			1,036,590
LEASEHOLD INTERESTS AND OTHER INTANGIBLES — Net	16,583			19,044
GOODWILL	96,784			96,784
DEFERRED FINANCING COSTS — Net	11,384			13,674
LEASEHOLD DEPOSITS	5,127			5,127
RESTRICTED CASH	11,990			10,242
TOTAL	$	1,359,086		$	1,390,961
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	5,989		$	6,443
Accrued liabilities	60,022			55,105
Due to affiliates	109			95
Liabilities associated with assets held for sale	—			82
Capital lease obligations due within one year	1,288			1,010
Long-term debt due within one year	18,830			17,138
Total current liabilities	86,238			79,873
CAPITAL LEASE AND DEFERRED FINANCING OBLIGATIONS	223,082			223,267
LONG-TERM DEBT	824,321			831,564
DEFERRED INCOME TAXES	28,642			34,601
OTHER LONG-TERM LIABILITIES	12,592			10,670
Total liabilities	1,174,875			1,179,975
COMMITMENTS AND CONTINGENCIES	—			—
STOCKHOLDER’S EQUITY:
Common stock, $.001 par value — authorized 2,000 shares; 1,000 issued and outstanding	—			—
Paid-in capital	997,064			997,064
Advances to affiliates	(5,790		)	—
Accumulated deficit	(807,063		)	(786,078		)
Total stockholder’s equity	184,211			210,986
TOTAL	$	1,359,086		$	1,390,961

See notes to consolidated financial statements.

3

ATRIA SENIOR LIVING GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands, except share amounts)

												Total
	Common Stock					Accumulated			Advances to			Stockholder’s
	Shares	Amount		Paid-In-Capital		Deficit			Affiliates			Equity
BALANCE — January 1, 2009	1,000	$	—	$	997,064	$	(766,258	)	$	—		$	230,806
Net loss	—	—		—		(19,820		)	—			(19,820		)
BALANCE — December 31, 2009	1,000	—		997,064		(786,078		)	—			210,986
Advances to affiliates	—	—		—		—			(5,790		)	(5,790		)
Net loss	—	—		—		(20,985		)	—			(20,985		)
BALANCE — December 31, 2010	1,000	$	—	$	997,064	$	(807,063	)	$	(5,790	)	$	184,211

See notes to consolidated financial statements.

4

ATRIA SENIOR LIVING GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Loss from continuing operations	$	(20,985	)	$	(19,717	)
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities of continuing operations:
Depreciation and amortization	52,138			46,268
Deferred taxes	(7,591		)	(4,766		)
Loss on disposition of assets	3,685			1,156
Deferred financing costs amortization	2,903			2,593
Amortization of leasehold interests	2,064			2,064
Provision for doubtful accounts	799			1,252
Loss on debt extinguishment	2			462
Other	(153		)	33
Change in operating assets and liabilities:
Resident accounts receivable — net	(434		)	(555		)
Other current assets	(714		)	9,514
Accounts payable and other accrued liabilities	8,000			(11,108		)
Due to/from affiliates	2,065			(2,129		)
Net cash provided by operating activities	41,779			25,067
CASH FLOWS FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS:
Purchase of property and equipment	(55,963		)	(69,374		)
Acquisitions	—			(19,737		)
Proceeds from sale of notes	—			1,971
Proceeds from sale of property and equipment	48			30
Change in restricted cash and leasehold deposits	(4,334		)	(462		)
Net cash used in investing activities	(60,249		)	(87,572		)

(Continued)

5

ATRIA SENIOR LIVING GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

	2010			2009
CASH FLOWS FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS:
Issuance of long-term debt	$	22,020		$	65,231
Repayment of principal on long-term debt and bonds	(27,452		)	(37,157		)
Advances to affiliates	(5,790		)	—
Debt issuance costs	(710		)	(2,736		)
Net cash (used in) provided by financing activities	(11,932		)	25,338
NET CASH USED IN CONTINUING OPERATIONS	(30,402		)	(37,167		)
NET CASH USED IN DISCONTINUED OPERATIONS:
Net cash used in operating activities	—			(112		)
CHANGE IN CASH AND CASH EQUIVALENTS	(30,402		)	(37,279		)
CASH AND CASH EQUIVALENTS — Beginning of period	174,235			211,514
CASH AND CASH EQUIVALENTS — End of period	$	143,833		$	174,235
SUPPLEMENTAL INFORMATION:
Cash paid during the year for interest payments	$	72,237		$	62,442
Purchase of property and equipment included in liabilities	$	7,346		$	6,500
Noncash increase to property and equipment and capital lease obligations due to lease restructuring	$	—		$	4,211

See notes to consolidated financial statements. (Concluded)

6

ATRIA SENIOR LIVING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

1.THE COMPANY AND BACKGROUND

Organization — Atria Senior Living Group, Inc. (“Atria”) and subsidiaries (the “Company”), an indirect wholly-owned subsidiary of LF Strategic Realty Investors II L.P., LFSRI II-CADIM Alternative Partnership L.P., and LFSRI II Alternative Partnership L.P. (collectively known as “LFSRI II”), is a national provider of assisted and independent living services for seniors.

Background — As of December 31, 2010, the Company owned or operated 95 communities located in 27 states with a total of 11,324 units. Of the 95 communities, 71 are owned by the Company and 24 are operated by the Company pursuant to long-term leases. The Company also managed 31 communities for Lazard Senior Housing Partners LP (“LSHP”), a related investment fund (refer to Note 3 for a discussion of the Master Agreement).

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation — The accompanying consolidated financial statements include the Company’s subsidiaries and all variable interest entities where the Company is considered the primary beneficiary. Intercompany transactions have been eliminated.

As discussed in Note 5, the Company has presented certain operations on a discontinued basis.

Variable Interest Entities — The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 (previously SFAS No. 167, Amendments to FASB Interpretation No. 46(R)), addresses consolidation by business enterprises of variable interest entities (“VIE”). A VIE is subject to the consolidation provisions if it cannot support its financial activities without additional subordinated financial support from third parties or its equity investors lack any one of the following characteristics: the ability to make decisions about its activities through voting rights, the obligation to absorb losses of the entity if they occur, or the right to receive residual returns of the entity if they occur. A VIE is required to be consolidated by its primary beneficiary. The primary beneficiary is the party that (1) has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) has the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. For the purposes of determining a primary beneficiary, all related party interests must be combined with the actual interests of the Company in the VIE.

The Company has a variable interest in Senior Quarters Operating Company (“SQOC”). SQOC is the operator of 11 licensed assisted living facilities located in the state of New York and is 100% owned by an individual that is a director of Atria. SQOC operates the facilities under operating agreements with subsidiaries of the Company. SQOC is a VIE and the Company has consolidated SQOC as it has determined that it is the primary beneficiary. There are no consolidated assets that represent collateral for the VIE at December 31, 2010. The creditors have no recourse to the general credit of the Company. Intercompany amounts and balances have been eliminated.

7

The Company entered into an agreement with Forest City Daly Home Care Agency LLC (“FCD HCA”), a licensed home care services agency, in August 2007. Under the terms of the agreement, the Company had a variable interest in FCD HCA and was considered its primary beneficiary. The Company consolidated the assets and liabilities of the VIE as of the commencement date through April 2009. In May 2009, the Company purchased the operations and related assets of FCD HCA.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenues — Revenues are recognized when services are rendered and consist principally of monthly resident fees and fees for other ancillary services. Payments received in advance of services being rendered are recorded as deferred revenue which is included in accrued liabilities in the accompanying consolidated balance sheets. Residence and service agreements are for a term of one year, and are cancellable with 30 days notice from either party. Revenues from management contracts are recognized in the period earned in accordance with the terms of the management agreement.

Substantially all revenues are derived from private pay sources. Amounts due from residents are stated at net realizable value. The allowance for doubtful accounts at December 31, 2010 and 2009, was approximately $1.7 million and $1.9 million, respectively.

Advertising Costs — The Company expenses advertising costs as incurred. Advertising expense included in continuing operations was approximately $5.3 million and $4.4 million for the years ended December 31, 2010 and 2009, respectively.

Cash and Cash Equivalents — Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Cash and cash equivalents are carried at cost, which approximates their fair value.

The Company has invested a portion of its cash in money market funds, which are exposed to various risks, including interest rate, credit, and overall market risk. These funds have readily determinable market values. The Company identifies the cash invested in these funds as cash and cash equivalents as the Company has the ability to buy and sell shares at any time. As of December 31, 2010 and 2009, the Company had approximately $68.2 million and $107.1 million, respectively, invested in prime money market funds.

Restricted Cash — Current — Restricted cash — current includes insurance, real estate taxes and repair escrows held by third party lenders that will be disbursed in twelve months or less. Also included are replacement reserves to be released to the Company by third party lenders in the next twelve months as reimbursement for amounts previously expended by the Company for capital items.

Long-Lived Assets — Property and equipment are stated at cost. Depreciation expense is computed by the straight-line method over the estimated useful lives as follows: buildings (40 years), building improvements (5—20 years) and furniture and equipment (3—10 years). Leasehold improvements are depreciated over the shorter of the lease term or useful life. Repairs and maintenance expense included in continuing operations were approximately $11.8 million and $12.5 million for the years ended December 31, 2010 and 2009, respectively.

8

Property and equipment consist of the following at December 31, 2010 and 2009 (in thousands):

	2010			2009
Land	$	160,626		$	156,091
Buildings and improvements	1,132,146			1,077,297
Furniture and equipment	87,427			82,745
Construction in progress	24,156			45,073
Total	1,404,355			1,361,206
Accumulated depreciation	(367,343		)	(324,616		)
Total property and equipment — net	$	1,037,012		$	1,036,590

Depreciation expense was approximately $51.7 million and $45.9 million for the years ended December 31, 2010 and 2009, respectively.

Assets held under capital leases are included in the amounts above and consist of the following at December 31, 2010 and 2009 (in thousands):

	2010			2009
Land	$	26,159		$	24,556
Buildings and improvements	189,202			169,047
Furniture and equipment	5,847			5,481
Total	221,208			199,084
Accumulated depreciation	(21,464		)	(15,131		)
Total assets held under capital leases — net	$	199,744		$	183,953

In January 2009, the Company exercised a purchase option for $19.0 million for one community that was previously accounted for as a capital lease. The purchase was financed with $14.9 million of long-term debt.

The Company accounts for long-lived assets in accordance with the provisions of ASC Topic 360 (previously Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long Lived Assets). This guidance requires that intangible assets and long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company regularly reviews the carrying value of its long-lived assets with respect to any events or circumstances that indicate impairment or that depreciation estimates may require adjustment. If such circumstances suggest the recorded amounts are more than the sum of the undiscounted cash flows, the carrying values of such assets are reduced to fair market value. Assets to be disposed of are reported at the lower of the carrying amount or fair value of the assets. At December 31, 2010 and 2009, the Company does not believe that the carrying value or the depreciation periods of its intangible assets and long-lived assets require any material adjustment.

9

ASC Topic 410 (previously SFAS No. 143, Accounting for Asset Retirement Obligations), addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement cost. This guidance applies to legal obligations related to the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of leases. The fair value of a liability for an asset retirement obligation must be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability is discounted and accretion expense is recognized using the credit-adjusted risk-free interest rate in effect when the liability was initially recognized. An entity is required to recognize a liability for a legal obligation to perform asset retirement activities when the retirement is conditional on a future event and if the liability’s fair value can be reasonably estimated. This standard has not had a material effect on the Company’s earnings or financial position. The Company is currently evaluating potential investments in its existing properties that could result in significant future capital improvements to certain of the Company’s facilities. It is possible that the estimates used by the Company in accounting for its obligations could change in the near term depending on the timing of the projects approved in the future.

Goodwill, Leasehold Interests, and Other Intangibles — The Company accounts for business combinations under the purchase method. Accordingly, the aggregate purchase price of business combinations is allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on estimated fair values. Estimates are based on historical, financial, and market information.

The Company’s intangible assets at December 31, 2010 and 2009, consist of the following (in thousands):

	2010			2009
Goodwill	$	109,975		$	109,975
Accumulated amortization	(13,191		)	(13,191		)
Goodwill — net	96,784			96,784
Leasehold interests	31,014			31,014
Other intangibles	1,591			2,280
Accumulated amortization	(16,022		)	(14,250		)
Other intangibles — net	16,583			19,044
Total intangibles — net	$	113,367		$	115,828

The Company has completed its most recent annual goodwill impairment test at December 31, 2010, and has determined that no impairment exists. Goodwill is allocated to the carrying value of each facility and analyzed in connection with our evaluation of permanent impairment based on the relative fair value of the community to the Company as a whole. The fair values used in this evaluation are estimated based upon discounted future cash flow projections for the reporting unit as well as market based sales transactions. These cash flow projections are based upon a number of estimates and assumptions such as revenue and expense growth rates, capitalization rates and discount rates.

The amortization period of the leasehold interests includes renewal periods on the underlying leases extending to 2051.

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Other intangibles consist primarily of lease restructuring fees, additional rent charges and deferred lease costs, which are amortized over the life of the assets.

Estimated aggregate amortization expense for intangible assets subject to amortization is approximately $2.1 million for each of the next five years.

Leases — Leases that substantially transfer all of the benefits and risks of ownership of property to the Company, or otherwise meet the criteria for capitalizing a lease in accordance with accounting principles generally accepted in the United States, are accounted for as capital leases. Property and equipment recorded under capital leases are depreciated on the same basis as other property and equipment. Amortization related to capital leases is included in the consolidated statements of operations within depreciation and amortization expense. Rental payments under operating leases are expensed as incurred.

Deferred Financing Costs — Costs incurred in connection with obtaining financing are deferred and amortized (included in interest expense) over the life of the related long-term debt, using the straight-line method which approximates the effective interest method. Deferred financing costs are presented net of accumulated amortization of approximately $12.3 million and $9.4 million for the years ended December 31, 2010 and 2009, respectively.

Leasehold Deposits — Leasehold deposits of approximately $5.1 million as of December 31, 2010 and 2009 consist of cash payments made by the Company to certain lessors as required by the Company’s operating leases.

Restricted Cash and Other Non-Current Assets — Long-term restricted cash totaled approximately $12.0 million and $10.2 million at December 31, 2010 and 2009, respectively, which includes funds held for repair and replacement and debt service reserve escrows that are not expected to be disbursed to the Company within twelve months. Also included are money market funds held by RCI Insurance Company, a wholly owned captive insurance company.

Income Taxes — The Company accounts for income taxes using the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to adjust net deferred tax assets to the amount which management believes will more likely than not be recoverable. In making such determination, management considers available positive and negative evidence, including future reversals of existing taxable temporary differences, future taxable income, and the implementation of prudent tax planning strategies. In the event that the Company is able to utilize its deferred tax assets in excess of their recorded amount, the valuation allowance will be reduced with a corresponding reduction to income tax expense.

ASC Topic 740 (previously FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes) prescribes a recognition threshold and measurement attribute for the recognition, measurement, presentation, and disclosure of uncertain tax positions that the Company has taken or expects to take on a tax return. ASC Topic 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the income tax position. Income tax positions must meet a more likely than not recognition threshold to be

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recognized. The Company adopted this guidance as of January 1, 2009, and the adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows.

Fair Value Measurements — ASC Topic 820 (previously SFAS No. 157, Fair Value Measurements) defines fair value, provides a framework for measuring fair value, and expanded disclosures required for fair value measurements. This guidance also defines a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels. These levels, in order of highest to lowest priority, are described below:

Level 1 — Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 includes values determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting the Company’s own assumptions.

The Company adopted ASC Topic 820 (previously FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157) for all non-financial assets and liabilities in 2009. The adoption did not have a material impact on the Company’s financial position, results of operations, or cash flows.

The Company also adopted ASC Topic 825 (previously SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115) as of January 1, 2008, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. In addition, it also establishes recognition, presentation, and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The Company has not made any fair value elections with respect to any of its eligible assets or liabilities as of December 31, 2010.

Recently Issued Accounting Standards — In January 2010, the FASB issued guidance under ASC Topic 820, Improving Disclosure about Fair Value Measurements, which requires additional disclosures to recurring and non-recurring fair value measurements. A reporting entity is to disclose significant transfers in and out of Level 1 and Level 2, and describe the reason for those transfers. Additionally, an entity is to present separately, on a gross basis, information about purchases, sales, issuances, and settlements pertaining to the activity in Level 3. The guidance also clarifies the level of disaggregation and disclosures about input and valuation techniques used to determine Level 2 and Level 3 measurements. The ASC Topic 820 update is effective for reporting periods beginning after December 15, 2009 (except for the requirement to separately disclose purchases, sales, issuances and settlements in the Level 3 roll forward, which becomes effective for fiscal periods beginning after December 15, 2010). The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows as of and for the year ended December 31, 2010.

ASC Topic 805 (previously SFAS No. 141 (revised 2007), Business Combinations) provides guidance for the way companies account for business combinations. This guidance requires transaction-related costs to be expensed as incurred, which were previously accounted for as a cost of acquisition. ASC Topic 805 also requires acquirers to estimate the acquisition-date fair value of any contingent

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consideration and recognize any subsequent changes in the fair value of contingent consideration in earnings. In addition, restructuring costs the acquirer was not obligated to incur shall be recognized separately from the business acquisition. The Company adopted this guidance on a prospective basis as of January 1, 2009. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows. The Company has a total valuation allowance of $191.1 million as of December 31, 2010, to reduce its deferred tax assets, of which $15.9 million was recognized in purchase accounting to reserve a portion of an acquired entity’s deferred tax assets. Deferred tax assets related to acquired entities will affect income tax expense in the period of reversal if they are settled for lesser amounts. As of December 31, 2010, the Company has not reduced the valuation allowance established in connection with the acquisition.

ASC Topic 810 (previously SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, An Amendment of ARB No. 51) requires all entities to report noncontrolling interests in subsidiaries as a separate component of equity in the consolidated financial statements. A single method of accounting has been established for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation. Companies no longer recognize a gain or loss on partial disposals of a subsidiary where control is retained. In addition, in partial acquisitions where control is obtained, the acquiring company will recognize and measure at fair value 100 percent of the assets and liabilities, including goodwill, as if the entire target company had been acquired. The company adopted this guidance as of January 1, 2009. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows.

3.RELATED PARTY TRANSACTIONS

The Company reimbursed LFSRI II for certain professional fees, which it paid on the Company’s behalf, and for travel and out of pocket costs incurred by the general partner of LFSRI II directly related to the activities of the Company. These costs totaled approximately $149,000 and $281,000 for the years ended December 31, 2010 and 2009, respectively. These expenses are included in general and administrative expenses in the accompanying consolidated statements of operations. Additionally, the Company reimbursed LFSRI II $82,000 and $511,000, for the years ended December 31, 2010, and 2009, respectively, for certain professional fees related to development activities which have been capitalized and included in property and equipment.

During 2010, the Company paid $5.8 million in transaction expenses related to the Ventas transaction (refer to footnote 15) on behalf of LFSRI II and affiliates. The balance is included in Advances to Affiliates and is classified as a reduction of equity in the accompanying balance sheets.

The Company and Lazard Senior Housing Partners LP (“LSHP”), a real estate opportunity fund formed for the purpose of making debt and equity investments in senior housing assets, are parties to a Master Agreement under which the Company is engaged to provide certain management, operating and loan servicing activities for the investments made by LSHP. A majority of the partner capital interests in LSHP also hold partnership interests in LFSRI II. Under the terms of the Master Agreement, any new facilities acquired by LSHP, which are not already encumbered by an existing third party management agreement, will be added to this arrangement. The Master Agreement has an initial term of ten years (expiring July 2015) with automatic one year renewal periods thereafter, and establishes standardized terms for the facilities for which the Company will be engaged to provide services (the “Facility Management Agreements”). As of December 31, 2010 and 2009, the Company managed 31 communities for One Lantern Senior Living LLC (“OLSL LLC”) and SG Senior Living LLC (“SGSL”) under the terms of the Facility Management Agreement.

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Pursuant to the Facility Management Agreements, during the initial 24 months that a facility is owned, the Company receives a management fee of 5.00% of cash revenue. After this initial period, the Company receives a management fee of 3.00% to 5.00% of cash revenue based on the operating margins of the managed facilities. The Facility Management Agreements require the Company to be reimbursed for the payroll and related costs of on-site employees, as well as certain other costs that are incurred by the Company. These reimbursements are in addition to the management fees.

During 2010 and 2009, the Company received management fees of approximately $9.0 million and $8.8 million, respectively, under these agreements. Additionally, reimbursements for payroll and related expenses, as well as other expenses incurred by the Company on behalf of the communities managed for OLSL LLC and SGSL, totaled approximately $68.4 million and $66.6 million, respectively. As of December 31, 2010 and 2009, the communities managed for OLSL LLC and SGSL owed the Company approximately $9.8 million and $11.9 million, respectively, related to management fees and reimbursable expenses.

During the years ended December 31, 2010 and 2009, the Company received $164,000 and $227,000 in revenue from OLSL LLC, respectively, for residents that were relocated from an OLSL LLC facility to an Atria facility. During the year ended December 31, 2010, the Company received $27,000 in revenue from SGSL for residents that were relocated from an SGSL facility to an Atria facility.

4.ACQUISITIONS

In May 2009, the Company purchased the operations and related assets and liabilities of FCD HCA for $736,000, which was funded from existing cash balances. The acquisition was accounted for under the purchase method of accounting. The Company recorded an intangible asset for customer contracts that were in place between the home care agency and residents, which were amortized over 18 months, the estimated life of the contracts. Tangible assets and other intangible assets were not material. The home care services agency has been included in the results of operations for all periods presented as it was previously consolidated as a VIE.

5.ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Assets qualifying as “held for sale” are required to be recorded at the lower of their carrying value or fair value, less costs to sell, and must be classified separately on the Company’s consolidated balance sheets. In addition, operating results and cash flows for communities either sold or held for sale are required to be classified as discontinued operations in the Company’s accompanying consolidated statements of operations and cash flows.

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The following amounts were segregated from continuing operations and included in discontinued operations, net of tax in the accompanying consolidated statements of operations for the years ended December 31, 2010 and 2009 (in thousands):

	2010		2009
Revenues	$	—	$	1
Net operating loss	$	—	$	(136	)
Impairment and lease modification costs	—		(22		)
Gain on disposition of assets — net	—		16
Pretax loss on discontinued operations	—		(142		)
Income tax benefit	—		39
Loss from discontinued operations — net of tax	$	—	$	(103	)

The following assets and liabilities were segregated and included in assets held for sale and liabilities associated with assets held for sale in the accompanying consolidated balance sheets as of December 31, 2010 and 2009 (in thousands):

	2010		2009
Property and equipment — net	$	—	$	1,600
Total assets held for sale	$	—	$	1,600
Current liabilities	$	—	$	82
Total liabilities associated with assets held for sale	$	—	$	82

In 2010, assets classified as assets held for sale were deemed to no longer meet the criteria outlined in ASC Topic 360 (previously Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long Lived Assets). In accordance with ASC Topic 360, such assets were reclassified as held and used. In 2010, $1.6 million in assets were reclassified and are included in the accompanying consolidated balance sheets.

6.RETURN ON INVESTMENT OF UNCONSOLIDATED COMMUNITIES

In July 2009, the Company sold two outstanding notes and its .01% interest in a non-consolidated partnership for $2.0 million. The notes were previously reserved due to uncertainty of collection; therefore, the Company recognized a $2.0 million gain from sale which is included in loss on disposition of assets — net in the accompanying financial statements. The Company also ceased management services with the associated low income apartment complex and has no continuing involvement with the property.

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7.LEASES AND DEFERRED FINANCING OBLIGATIONS

Capital Leases and Deferred Financing Obligations — In April 2009, the Company amended lease agreements for nine communities. The term and renewal options related to these leases were unchanged. The initial term expires December 2021 with three ten year renewal options. One community has an additional fourth renewal option for nine years. The modifications to the lease terms included a 2% annual increase in the base rent payment and the elimination of additional rent that was previously tied to the increase in the Consumer Price Index. Additionally, the lease amendments included changes in the various dates at which fixed rate purchase options for the nine communities can be exercised, ranging from January 1, 2012 to January 1, 2017. The amendments did not result in changes to the accounting classification of these leases.

Future minimum lease payments for capital leases and deferred financing obligations, including amounts that would be due under future purchase options as of December 31, 2010, are as follows (in thousands):

Years Ending
December 31
2011	$	17,250
2012	34,242
2013	41,924
2014	41,643
2015	36,184
Thereafter	123,476
	294,719
Less:
Amounts representing interest	(70,349		)
Amounts due within one year	(1,288		)
Capital lease and deferred financing obligations	$	223,082

The fair value of the Company’s capital leases and deferred financing obligations has been estimated based on current rates offered for debt with the same remaining maturities and comparable collateralizing assets. Changes in assumptions or methodologies used to make estimates may have a material effect on the estimated fair value. As of December 31, 2010 and 2009, the fair value of capital lease and deferred financing obligations approximated $230.2 million and $229.0 million, respectively.

Operating Leases — The Company leases real estate under cancelable and non-cancelable arrangements that are accounted for as operating leases. Certain of the leases require the payment of additional rent based on a percentage increase of gross revenues. Leases are subject to increases based upon changes in the Consumer Price Index or gross revenues, subject to certain limits, as defined in the individual lease agreements. During 2010 and 2009, such additional rent expense included in continuing operations amounted to approximately $1.2 million for each year.

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Future minimum lease payments required under non-cancelable operating leases classified in continuing operations as of December 31, 2010, are as follows (in thousands):

Years Ending
December 31
2011	$	18,168
2012	10,804
2013	9,308
2014	8,885
2015	6,727
Thereafter	47,591
Total	$	101,483

The Company is subject to various restrictive covenants including certain occupancy requirements for four communities that are leased under operating leases. In order for the properties to qualify as a “qualified residential rental project” in accordance with the Internal Revenue Code (for the underlying bonds to maintain their tax-exempt status), at least 20% of the units must be made available to persons whose adjusted family income is 50% or less of the area median gross income (adjusted for family size). As of December 31, 2010, all of the communities were in compliance with the low-income requirements.

As of December 31, 2010, the Company had approximately $4.7 million in outstanding letters of credit (the “L/Cs”) securing lease obligations. The lessors may draw upon the L/Cs if there are defaults under the related leases. The L/Cs expire between April 30, 2011 and September 1, 2011, with automatic one-year renewal periods thereafter, through the final expiration date.

8.LONG-TERM DEBT

A summary of long-term debt at December 31, 2010 and 2009 is as follows (in thousands):

	2010			2009
Mortgage notes payable, 2.51% to 8.06% (weighted average 5.88%) payable in periodic installments through 2038	$	822,830		$	833,949
Line of credit payable January 2021 (8.00% at December 31, 2010)	20,160			12,474
Note payable due December 2010	—			2,000
	842,990			848,423
Fair value adjustments resulting from original purchases	161			279
Less amounts due within one year	(18,830		)	(17,138		)
Total	$	824,321		$	831,564

In February 2010, the Company refinanced one community and entered into a new mortgage agreement totaling $15.0 million. An initial advance of $8.5 million was used to pay off existing mortgage debt on the community with the remainder of the proceeds available at future dates. The mortgage note matures in 2015. Interest and principal are payable monthly at LIBOR plus 5.80% (with a LIBOR floor of 1.50%), based on a 25 year amortization schedule.

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In January 2009, the Company exercised a purchase option for one community. The $19.0 million purchase was financed with a $14.9 million ten-year note with the remainder paid from existing cash balances. Interest and principal on the note are payable monthly at a fixed rate of 6.18% based on a 30-year amortization period.

In April 2009, a lessor provided the Company with a $35.0 million line of credit. The Company may request draws on the line at any time through December 31, 2011, to fund upgrade expenditures and alterations for eight leased communities. Individual draws bear interest at a rate equal to 10.00%. The line of credit includes interest-only payments and has a term extending through January 4, 2021, with mandatory pre-payments in the event of an early termination of the related leases or in the event of the execution of the related purchase options. As of December 31, 2010, the Company has not drawn any of the available proceeds.

The Company previously obtained a $30.0 million line of credit with the same lessor. The Company could draw on the line at any time through December 31, 2010, to fund upgrade expenditures and alterations for the eight leased communities. The individual draws bear interest at a rate equal to the greater of 8.00% or the current ten year treasury rate plus 3.00%. The line of credit includes interest-only payments and has a term extending through January 2021, with mandatory pre-payments in the event of an early termination of the related leases or in the event of the execution of the related purchase options. The Company may make optional prepayments in 2012, 2013, and 2014 in an amount not to exceed $10.0 million per year. As of December 31, 2010, $20.2 million was outstanding on this line of credit.

In May 2009, the Company refinanced two communities and entered into new mortgage agreements totaling $34.2 million. The mortgage notes mature in June 2019. Interest and principal are payable monthly at a fixed rate of 6.15%. A total of $24.0 million of the proceeds were used to pay off the existing mortgage debt. In conjunction with the payoff, the Company recorded a loss on debt extinguishment of approximately $363,000.

In August 2009, the Company obtained additional financing related to the development of a community located in Irvine, California. The construction loan has a maximum available loan amount of $8.15 million with a maturity date of January 1, 2013. Interest is payable monthly at LIBOR + 6.00% with an 8% floor. As of December 31, 2010, $5.3 million was outstanding on this loan.

In September 2009, the Company obtained additional financing related to the development of a community located in Walnut Creek, California. The construction loan has a maximum available loan amount of $6.6 million with an initial maturity date of October 1, 2012 and a one-year extension option. Interest is payable monthly at LIBOR + 6.00%. As of December 31, 2010, the Company had not drawn any of the available proceeds.

At December 31, 2010 and 2009, substantially all of the Company’s property and equipment is collateralized under long-term debt and lease arrangements.

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Aggregate maturities of long-term debt as of December 31, 2010, are as follows (in thousands):

Years Ending
December 31
2011	$	18,830
2012	81,045
2013	212,360
2014	144,966
2015	79,015
Thereafter	306,774
Total	$	842,990

The fair value of the Company’s debt has been estimated based on current rates offered for debt with the same remaining maturities and comparable collateralizing assets. Changes in assumptions or methodologies used to make estimates may have a material effect on the estimated fair value. As of December 31, 2010 and 2009, the Company estimated that the fair value of its long-term debt approximated $830.3 million and $832.3 million, respectively.

The Company’s various debt and lease agreements contain financial and other covenants. As of December 31, 2010, the Company was in compliance with all such covenants.

9.INCOME TAXES

During 2010 and 2009, the Company recorded income tax benefits related to continuing operations as follows (in thousands):

	2010			2009
Current tax expense	$	(31	)	$	(34	)
Deferred tax benefit	7,591			4,766
Total tax benefit	$	7,560		$	4,732

Discontinued operations include a deferred tax benefit of $38,700 in 2009.

A reconciliation of the federal statutory rate to the effective income tax rate for continuing operations is as follows:

	2010		2009
Federal statutory rate	(35.0	)%	(35.0	)%
State income taxes — net of federal income tax benefit	(5.0	)	(5.0	)
Other items	0.4		(1.5	)
Valuation allowance	13.1		22.2
Effective income tax rate	(26.5	)%	(19.3	)%

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A summary of the deferred income taxes by source included in the accompanying consolidated balance sheets at December 31, 2010 and 2009, is as follows (in thousands):

	2010			2009
Deferred tax assets:
Net operating losses	$	193,640		$	191,177
Capital losses	182			182
Accrued expenses not currently deductible	12,044			7,396
Capital lease and deferred financing obligations	89,403			89,367
Intangible assets	1,411			2,095
Other	4,746			4,151
Total gross deferred tax assets	301,426			294,368
Valuation allowance	(191,102		)	(187,372		)
Net deferred tax asset	110,324			106,996
Deferred tax liabilities:
Tax over book depreciation	(133,791		)	(138,340		)
Other	(1,496		)	(1,210		)
Total deferred tax liabilities	(135,287		)	(139,550		)
Net deferred tax liability	$	(24,963	)	$	(32,554	)

At December 31, 2010 and 2009, the Company had net operating loss carryforwards of approximately $484.1 million and $477.0 million, respectively, which expire in years 2011 through 2030. Approximately $165.9 million of the net operating loss carryforwards existing at December 31, 2010, are attributable to previously acquired entities, and the utilization of these losses is subject to limitations imposed by the Internal Revenue Code.

At December 31, 2010, the Company has a valuation allowance of approximately $191.1 million to reduce its deferred tax assets to an amount that is more likely than not to be realized. In determining the need for and the amount of the valuation allowance, the Company considered the future reversals of existing taxable temporary differences, future taxable income exclusive of reversals of existing taxable temporary differences and the implementation of prudent and feasible tax planning strategies. Although realization is not assured for the net deferred tax asset, management believes it is more likely than not that they will be utilized based on the future reversals of existing taxable temporary differences. If future taxable income is less than the amount that has been assumed in determining the deferred tax asset, then an increase in the valuation allowance will be required with a corresponding increase to income tax expense. Alternatively, if future taxable income exceeds the level that has been assumed in calculating the deferred tax asset, the valuation allowance could be reduced with the corresponding reduction to income tax expense. In 2010, the Company increased the valuation allowance by $3.7 million and recognized a corresponding expense. The increase in the valuation allowance was primarily due to a change in the estimated future reversal of existing taxable temporary differences.

The Company records interest and penalties related to uncertain tax positions as income tax expense. As of December 31, 2010 and 2009, the Company had determined that no uncertain tax positions existed and thus, no interest or penalties were accrued.

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The Company is subject to taxation in the U.S. and various state and local jurisdictions. As of December 31, 2010, the Company’s tax years for 2006 to 2010 are subject to examination by the tax authorities. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations for years before 2006.

10.OTHER CURRENT ASSETS AND ACCRUED LIABILITIES

A summary of other current assets at December 31, 2010 and 2009 is as follows (in thousands):

	2010		2009
Prepaid insurance	$	3,042	$	2,436
Prepaid property taxes	1,836		1,411
Food and supplies inventory	1,021		1,256
Prepaid expenses	590		693
Non-resident receivables	307		254
Other	452		484
Total	$	7,248	$	6,534

A summary of accrued liabilities at December 31, 2010 and 2009 is as follows (in thousands):

	2010		2009
Accrued payroll and benefits	$	25,517	$	18,651
Deferred revenue	10,235		8,418
Accrued insurance	8,688		5,429
Accrued capital expenditures	5,033		6,500
Accrued taxes other than income	4,137		4,394
Construction retainers	2,313		2,612
Accrued interest	555		4,508
Accrued legal	664		942
Accrued professional fees	269		444
Other accrued expenses	2,611		3,207
Total	$	60,022	$	55,105

11.EMPLOYEE BENEFIT PLAN

The Company sponsors a 401(k) plan for employees who meet certain minimum eligibility requirements. Retirement plan expense included in continuing operations was approximately $1.2 million and $1.0 million in 2010 and 2009, respectively.

12.SHARE-BASED PAYMENT ARRANGEMENTS

ASC Topic 718 (previously SFAS No. 123R, Accounting for Stock-Based Compensation), establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all companies to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees.

21

In 2006, Atria Holdings LLC (“Holdings”), parent of the Company and a wholly owned subsidiary of LFSRI II, adopted an Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”). The primary revision adopted in the LLC Agreement was to create two authorized classes of membership interests in Holdings: Common Units and Participation Units. The holders of Common Units (“Common Members”) have rights with respect to the management and operation of Holdings, as well as rights with respect to profits and losses and distributions. The holders of Participation Units (“Participation Members”) have no rights with respect to the management and operation of Holdings, but do have rights with respect to profits and losses and distributions.

At the time of a qualifying sale of the Company, as defined in the LLC Agreement, Participation Members will be entitled to distributions based on formulas in the LLC Agreement. Distributions to Participation Members shall, to the extent practicable, be made in the same form of consideration as corresponding distributions to Common Members.

Participation Members’ interests in Holdings are subject to certain terms and conditions pursuant to individual admission letters. While the terms and conditions of the individual admission letters vary, in general, the Participation Members must be employed by the Company when a qualifying sale occurs in order to be entitled to a distribution, unless terminated without cause, as defined in the LLC Agreement, prior to distributions, in which case the executive will be entitled to a portion of their interest based on a vesting schedule. The Participation Units vest one-third on December 31 in the year of grant with the remainder vesting on December 31 two years later. A change in control, as defined in the LLC Agreement, will result in 100% accelerated vesting of all Participation Units.

Valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Expected volatility and dividends are based on implied and historical factors related to the Company’s common stock and public competitors within the assisted-living industry. Expected term represents the estimated weighted-average duration that the Participation Units will be outstanding. Due to the limited number of Participation Members, the Company has assumed that all Participation Units outstanding as of December 31, 2010, will vest and none will be forfeited in determining the grant date fair value of the Participation Units.

As of December 31, 2010, 82 Participation Units were outstanding that were issued to certain key executives that are employed by the Company. A summary of the Participation Units issued to employees of the Company for the years ended December 31, 2010 and 2009 are as follows (dollars in thousands):

	Participation	Estimated Grant
	Units	Date Fair Value
Outstanding — January 1, 2009	82	$	7,900
Issued during 2009	—	—
Outstanding — December 31, 2009	82	7,900
Issued during 2010	—	—
Outstanding — December 31, 2010	82	$	7,900

22

The Participation Units that are outstanding as of December 31, 2010, include certain performance conditions that must be met in order for the Participation Members to receive a distribution. These performance conditions include a change of control or sale of the Company. Accruals of compensation expense for an award with a performance condition are to be accrued only if it is probable that the performance condition will be achieved. The performance conditions associated with the Participation Units were not met or deemed probable as of December 31, 2010, and thus no expense has been recorded in the accompanying financial statements. If the performance conditions are met or deemed to be met in a future period the Company would be required to record additional expense totaling $7.9 million based on the Participation Units outstanding as of December 31, 2010.

13.GENERAL, PROFESSIONAL AND WORKER’S COMPENSATION LIABILITY RESERVES

RCI Insurance Company (“RCI”) is a wholly owned captive insurance company domiciled in South Carolina and is consolidated in the accompanying financial statements. RCI insures general and professional liability risks of the Company in excess of a $100,000 deductible that is retained by the Company. RCI insures claims up to $1.0 million per claim, above the deductible, and $3.0 million in the aggregate. Funding for RCI is based upon actuarial evaluations of claims and industry trends.

Even though the Company funds certain amounts to RCI to pay potential claims, the Company retains various levels of professional and general liability risks. The financial statements include estimates of the ultimate costs for both reported and incurred but not reported claims. The Company has also purchased separate umbrella coverage to cover risk exposures in excess of RCI limits.

Currently, claims against the Company are in various stages of adjudication and/or litigation, some of which may result in payment from RCI. In the opinion of management, the ultimate disposition of claims incurred to date should not have a material adverse effect on the financial position or operations of the Company.

The Company is primarily self-insured for worker’s compensation and employee medical costs. Estimated costs and liabilities associated with these self-insurance programs are determined using actuarial models based on the Company’s claim history and estimates of ultimate losses.

14.CONTINGENCIES AND GUARANTEES

The Company is subject to claims and legal actions in the ordinary course of its business. The Company believes that any liability resulting from these matters, after taking into consideration its insurance coverages and amounts recorded in the consolidated financial statements, will not have a material adverse effect on its consolidated financial position, results of operations, and cash flows.

The Company has made certain guarantees to third parties, particularly related to communities that have been sold. These guarantees may survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal statute of limitations). There are no specific limitations on the maximum potential amount of future payments to be made under these guarantees, as the triggering events are not subject to predictability. The Company believes the likelihood of any losses resulting from these guarantees, including the affect of insurance coverages that would mitigate any potential payments, is remote, and historically the Company has not been required to make payments under these guarantees.

23

15.VENTAS TRANSACTION

On October 21, 2010, the Company announced that it has signed a definitive agreement to merge its real estate with Ventas, Inc., a healthcare real estate investment trust. As part of this transaction, Ventas, Inc. will acquire the majority of the Company’s senior living communities. Subject to certain approvals, the transaction is expected to close in the first half of 2011.

16.SUBSEQUENT EVENTS

The Company’s financial statements are available for issuance as of February 16, 2011. Any subsequent events have been evaluated through this date.

******

24

EX-99.2

Exhibit 99.2

One Lantern Senior Living Inc and Subsidiaries

Consolidated Financial Statements as of and for the Years Ended December 31, 2010 and 2009, and Independent Auditors’ Report

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

TABLE OF CONTENTS

	Page
INDEPENDENT AUDITORS’ REPORT	1
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009:
Statements of Operations	2
Balance Sheets	3–4
Statements of Equity	5
Statements of Cash Flows	6–7
Notes to Consolidated Financial Statements	8–24

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors
One Lantern Senior Living Inc
Louisville, Kentucky

We have audited the accompanying consolidated balance sheets of One Lantern Senior Living Inc and subsidiaries (the “Company”), a wholly owned subsidiary of Lazard Senior Housing Partners LP, as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Louisville, Kentucky

February 16, 2011

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

	2010			2009
REVENUES:
Assisted and independent living revenues	$	165,463		$	154,501
Management fees and other revenues	738			298
Total operating revenues	166,201			154,799
OPERATING EXPENSES:
Managed facility reimbursed expenses	61,513			59,324
Assisted and independent living operating expenses	38,715			39,652
General and administrative expenses	749			1,304
Depreciation and amortization	22,663			30,181
Management fees	9,049			8,314
Loss on disposition of assets — net	2,256			2,126
Development expenses	1,288			1,298
Community rent expense	169			147
Integration related expenses	—			590
Total operating expenses	136,402			142,936
OPERATING INCOME	29,799			11,863
OTHER INCOME (EXPENSE):
Interest expense	(47,067		)	(48,217		)
(Loss) gain on derivative instruments	(16,020		)	16,960
Interest income	82			228
Loss on debt extinguishment	—			(115		)
Equity earnings (loss) in joint ventures	130			(45		)
Other — net	(43		)	5
LOSS BEFORE INCOME TAX EXPENSE	(33,119		)	(19,321		)
INCOME TAX EXPENSE	—			—
LOSS FROM CONTINUING OPERATIONS	(33,119		)	(19,321		)
GAIN FROM DISCONTINUED OPERATIONS	—			4,513
NET LOSS	(33,119		)	(14,808		)
LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	5,907			(329		)
NET LOSS ATTRIBUTABLE TO ONE LANTERN SENIOR LIVING INC	$	(27,212	)	$	(15,137	)
SUMMARY OF LOSS ATTRIBUTABLE TO ONE LANTERN SENIOR LIVING INC:
Loss from continuing operations	$	(27,212	)	$	(18,390	)
Gain from discontinued operations	—			3,253
NET LOSS ATTRIBUTABLE TO ONE LANTERN SENIOR LIVING INC	$	(27,212	)	$	(15,137	)

See notes to consolidated financial statements.

2

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND 2009

(In thousands, except share amounts)

	2010		2009
ASSETS(1)
CURRENT ASSETS:
Cash and cash equivalents	$	27,858	$	31,437
Restricted cash — current	7,085		5,538
Resident accounts receivable — net	1,162		1,364
Due from affiliates	13		201
Other current assets	2,859		3,113
Total current assets	38,977		41,653
PROPERTY AND EQUIPMENT — Net	720,175		714,485
INTANGIBLE ASSETS — Net	4,418		5,910
DEFERRED FINANCING COSTS — Net	4,064		5,273
LEASEHOLD DEPOSITS	—		63
INVESTMENT IN JOINT VENTURE	1,314		1,214
RESTRICTED CASH AND OTHER NONCURRENT ASSETS	27,653		39,354
TOTAL	$	796,601	$	807,952

(Continued)

3

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND 2009

(In thousands, except share amounts)

	2010			2009
LIABILITIES AND EQUITY(2)
CURRENT LIABILITIES:
Accounts payable	$	1,883		$	2,081
Accrued liabilities	18,829			16,348
Due to affiliates	3,879			7,517
Capital lease obligations due within one year	—			8
Long-term debt due within one year	7,420			3,713
Bonds payable due within one year	565			530
Total current liabilities	32,576			30,197
CAPITAL LEASE OBLIGATIONS	143,618			142,143
LONG-TERM DEBT	362,878			353,906
BONDS PAYABLE	147,038			146,750
OTHER LONG-TERM LIABILITIES	26,554			19,985
Total liabilities	712,664			692,981
COMMITMENTS AND CONTINGENCIES	—			—
EQUITY:
Common stock, $.01 par value — 100 shares authorized, issued, and outstanding	—			—
Paid-in-capital	190,514			188,429
Accumulated deficit	(141,365		)	(114,153		)
Equity attributable to One Lantern Senior Living Inc	49,149			74,276
Noncontrolling interest in majority owned entities	34,788			40,695
Total equity	83,937			114,971
TOTAL	$	796,601		$	807,952

(1)The following represent assets of consolidated Variable Interest Entities (“VIE”) as of December 31, 2010 which can only be used to settle obligations of the VIE: Cash and cash equivalents — $1.2 million, Restricted cash — current — $0.7 million, Resident accounts receivable — $0.3 million, Other current assets — $0.2 million, Property and equipment — $18.2 million, Restricted cash and other noncurrent assets — $1.1 million.

(2)The following represents liabilities of VIE as of December 31, 2010 for which the creditors do not have recourse to the general liability of the Company: Accounts payable — $0.4 million, Accrued liabilities — $5.6 million, Due to affiliates — $0.5 million, Long-term debt (current and noncurrent) — $9.1 million, Other long-term liabilities — $0.6 million.

See notes to consolidated financial statements. (Concluded)

4

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands, except share amounts)

	Common
	Stock			Paid-In		Accumulated			Noncontrolling			Total
	Shares	Amount		Capital		Deficit			Interest			Equity
BALANCE — January 1, 2009	100	$	—	$	148,079	$	(99,016	)	$	18,306		$	67,369
Equity contributions	—	—		40,350		—			22,060			62,410
Net (loss) income	—	—		—		(15,137		)	329			(14,808		)
BALANCE — December 31, 2009	100	—		188,429		(114,153		)	40,695			114,971
Equity contributions	—	—		2,085		—			—			2,085
Net loss	—	—		—		(27,212		)	(5,907		)	(33,119		)
BALANCE — December 31, 2010	100	$	—	$	190,514	$	(141,365	)	$	34,788		$	83,937

See notes to consolidated financial statements.

5

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Loss from continuing operations	$	(33,119	)	$	(19,321	)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities of continuing operations:
Depreciation and amortization	22,663			30,181
Loss (gain) on derivative instruments	16,020			(16,960		)
Noncash interest expense	4,789			4,448
Loss on disposition of assets — net	2,256			2,126
Deferred financing costs amortization	1,067			1,516
Provision for doubtful accounts	69			479
Loss on debt extinguishment	—			115
(Loss) Earnings from joint venture — net of distributions	(101		)	45
Change in operating assets and liabilities:
Resident accounts receivable	133			59
Other current assets	442			2,058
Accounts payable and other	(2,906		)	4,149
Net cash provided by operating activities	11,313			8,895
CASH FLOWS FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS:
Purchase of property and equipment	(27,530		)	(13,892		)
Change in restricted cash	(371		)	(7,408		)
Proceeds from disposal of property and equipment	18			9
Acquisitions — net of cash received	—			(27,217		)
Net cash used in investing activities	(27,883		)	(48,508		)

(Continued)

6

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

(In thousands)

	2010			2009
CASH FLOWS FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS:
Issuance of long-term debt	$	16,324		$	74,766
Repayment of long-term debt, bonds payable, and capital lease obligations	(5,328		)	(92,177		)
Equity contribution	2,085			40,350
Noncontrolling interest equity contribution	—			22,060
Fees related to issuance of long-term debt	(90		)	(2,347		)
Other	—			(215		)
Net cash provided by financing activities	12,991			42,437
NET CASH (USED IN) PROVIDED BY CONTINUING OPERATIONS	(3,579		)	2,824
NET CASH USED IN DISCONTINUED OPERATIONS:
Net cash used in operating activities	—			(1,351		)
Net cash provided by investing activities	—			606
CHANGE IN CASH AND CASH EQUIVALENTS	(3,579		)	2,079
CASH AND CASH EQUIVALENTS — Beginning of year	31,437			29,358
CASH AND CASH EQUIVALENTS AT END OF PERIOD — End of year	$	27,858		$	31,437
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest payments	$	42,738		$	42,183
Purchase of property and equipment included in liabilities	$	4,031		$	1,844
Noncash increase (decrease) to property and equipment and capital lease obligations due to purchase option price adjustment and lease modification	$	469		$	(30,482	)

See notes to consolidated financial statements. (Concluded)

7

ONE LANTERN SENIOR LIVING INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

1.THE COMPANY AND BACKGROUND

Organization — One Lantern Senior Living Inc (“OLSL INC”) and subsidiaries (the “Company”) is a wholly owned subsidiary of Lazard Senior Housing Partners LP (“LSHP”), a real estate opportunity fund formed for the purpose of making debt and/or equity investments in senior housing assets located in the United States.

Background — As of December 31, 2010, the Company owned, operated, or managed 31 communities located in the Northeastern United States with a total of 3,097 units. Of the 31 communities, 16 were owned by the Company, 11 were operated by the Company pursuant to lease agreements, and two were managed by the Company on behalf of third parties. The Company also manages two communities in which it has a partial equity interest.

The Company owns a 72.09% interest in SG Senior Living LLC (“SGSL LLC”) as the managing member and LSHP Coinvestment Partnership I LP (“Coinvestment Partnership”) indirectly holds the remaining 27.91% membership interest. As of December 31, 2010, SGSL LLC owned and operated 12 properties.

Related Party Management Agreements — LSHP, Coinvestment Partnership, and Atria Senior Living Group, Inc. (“Atria”) are parties to a Master Agreement under which LSHP engaged Atria to provide certain management, operating and loan servicing activities for the investments made by LSHP. A majority of the partner capital interests in LSHP and Coinvestment Partnership also hold partnership interests in certain of the real estate opportunity funds that indirectly hold interests in Atria. Under the terms of the Master Agreement, any new facilities acquired by LSHP, which are not already encumbered by an existing third party management agreement, will be added to this arrangement. The Master Agreement has an initial term of 10 years (expiring July 2015) with automatic one year renewal periods thereafter, and establishes standardized terms for the facilities which Atria is engaged to provide services (the “Facility Management Agreements”).

As defined in the Facility Management Agreements, during the initial 24 months that a facility is owned, Atria receives a management fee of 5% of cash revenue. After this initial period, Atria receives a management fee of 3% to 5% of cash revenue based on the operating margins of the facilities. The Facility Management Agreements also require the Company to reimburse Atria for the payroll and related costs of on-site employees as well as certain other costs that are incurred by Atria. These reimbursements are in addition to the management fees and are shown as managed facility reimbursed expenses on the accompanying consolidated statements of operations.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation — The accompanying consolidated financial statements include the Company’s majority-owned subsidiaries and all variable interest entities where the Company is considered the primary beneficiary. Intercompany transactions have been eliminated. Investments in entities not controlled by ownership or contractual obligations are accounted for under the equity method.

As discussed in Note 4, the Company has presented certain operations on a discontinued basis.

8

Variable Interest Entities — The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 (previously SFAS No. 167, Amendments to FASB Interpretation No. 46(R)), addresses consolidation by business enterprises of variable interest entities (“VIE”). A VIE is subject to the consolidation provisions if it cannot support its financial activities without additional subordinated financial support from third parties or its equity investors lack any one of the following characteristics: the ability to make decisions about its activities through voting rights, the obligation to absorb losses of the entity if they occur, or the right to receive residual returns of the entity if they occur. A VIE is required to be consolidated by its primary beneficiary. The primary beneficiary is the party that (1) has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) has the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. For the purposes of determining a primary beneficiary, all related party interests must be combined with the actual interests of the Company in the VIE.

The Company owns a 1% general partner interest in Marland Place Associates LP (“Marland Place”) that meets the definition of a VIE. Marland Place owns one assisted living facility. The Company has determined that it is the primary beneficiary of this VIE and has consolidated the VIE as part of these financial statements. The only consolidated asset that represents collateral for the VIE is the building, with a net book value of approximately $15.0 million and $15.5 million at December 31, 2010 and 2009, respectively. The creditors have no recourse to the general credit of the Company. Intercompany amounts and balances have been eliminated.

For a portion of 2009, the Company had a variable interest in five legal entities that operated five of its communities. These operators were licensed by the New York State Department of Health (“NYSDOH”) and were owned by individuals that were not associated with the Company or related entities. The operators operated these facilities under long-term leases with subsidiaries of the Company. The operators were VIEs and the Company consolidated the VIEs as it was the primary beneficiary. The operating agreements with four of these operators were terminated on August 31, 2009 and one was terminated on September 30, 2009. These VIEs were no longer consolidated as of the respective termination dates. There were no consolidated assets that represented collateral for the VIEs and the creditors had no recourse to the general credit of the Company. All intercompany amounts and balances have been eliminated.

Upon the termination of the operating agreements referenced above, OLSL New York Operating Company LLC (“OLSL NYOC”) became the operator of these communities. OLSL NYOC is also the operator for one additional community. OLSL NYOC is 100% owned by an individual that is a director of both the Company and Atria. These facilities are operated under long-term lease agreements with subsidiaries of the Company. OLSL NYOC is considered a VIE and the Company has consolidated the operations of these six communities as it has determined that it is the primary beneficiary. There are no consolidated assets that represent collateral for OLSL NYOC as of December 31, 2010 and the creditors have no recourse to the general credit of the Company. All intercompany amounts and balances have been eliminated.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

9

Revenues — Revenues are recognized when services are rendered and consist principally of monthly resident fees and fees for other ancillary services. Payments received in advance of services being rendered are recorded as deferred revenue, which is included in accrued liabilities in the accompanying consolidated balance sheets. Residence and service agreements are for a term of one year, and are cancellable with 30 to 60 day notice from either party. Revenues from management contracts are recognized in the period earned in accordance with the terms of the management agreement.

Substantially all revenues are derived from private pay sources. Amounts due from residents are stated at net realizable value. The allowance for doubtful accounts at December 31, 2010 and 2009 was approximately $400,000 and $690,000, respectively.

Advertising Costs — The Company expenses advertising costs as incurred. Advertising expense included in assisted and independent living operating expenses and managed facility reimbursed expenses was approximately $1.9 million and $1.8 million for the years ended December 31, 2010 and 2009, respectively.

Noncontrolling Interest — The Company shows income or losses attributable to noncontrolling interests separately on the consolidated statements of operations. Income attributable to the noncontrolling interests is based on the non-wholly owned subsidiaries’ ultimate share of the economics. Losses are attributed to the noncontrolling interests even if that attribution results in a deficit noncontrolling interest balance.

Third-Party and Affiliate Management Agreements — At December 31, 2010, the Company had management agreements with two properties in which it has a partial equity interest and two managed communities. Under these agreements, the Company receives a base management fee ranging from 3% to 4% of cash revenue, plus additional incentive fees for three of the properties based on the operating margins of the individual facilities. These revenues are recorded as management fees on the accompanying consolidated statements of operations. Management fees related to one consolidated community (Marland Place) have been eliminated in consolidation.

The Company sub-contracts the majority of its responsibilities under these agreements to Atria under the terms of the Facility Management Agreements.

Cash and Cash Equivalents — Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Cash and cash equivalents are carried at cost, which approximates its fair value.

Restricted Cash — Current — Restricted cash — current includes insurance, real estate taxes, interest, and repair escrows held by third party lenders that will be disbursed in twelve months or less. Also included are replacement reserves to be released to the Company by third party lenders in the next twelve months as reimbursement for amounts previously expended by the Company for capital items.

Accounting for Acquisitions and Intangibles — The Company accounts for business combinations under the purchase method. Accordingly, the aggregate purchase price of business combinations is allocated to tangible and intangible assets acquired and liabilities assumed based on estimated fair values. Estimates are based upon historical, financial, and market information.

10

Intangible assets consist of the following at December 31, 2010 and 2009 (in thousands):

	2010			2009
Property tax abatement agreements	$	8,793		$	8,793
Accumulated amortization	(4,375		)	(2,883		)
Total intangibles — net	$	4,418		$	5,910

The Company is a party to certain property tax abatement agreements that allow the Company to pay reduced property taxes on certain facilities. All property tax abatement agreements are amortized from the date of acquisition until the fiscal year in which real property taxes will be assessed at 100%.

In 2009, the Company wrote off the balance of fully amortized in-place leases in the amount of approximately $24.3 million. Amortization expense for intangible assets for the years ended December 31, 2010 and 2009 was approximately $1.5 million and $9.3 million, respectively. Estimated amortization expense for the next five years is approximately $1.4 million in 2011, $1.2 million in 2012, $0.8 million in 2013, $0.6 million in 2014 and $0.4 million in 2015.

Long-lived Assets — Property and equipment are stated at cost. Depreciation expense is computed by the straight-line method over the estimated useful lives as follows: buildings (40 years), building improvements (5—20 years), and furniture and equipment (3—10 years). Leasehold improvements are depreciated over the shorter of the lease term or useful life. Repairs and maintenance expense included in assisted and independent living operating expenses was approximately $3.8 million and $4.2 million for the years ended December 31, 2010 and 2009, respectively.

Property and equipment consists of the following at December 31, 2010 and 2009 (in thousands):

	2010			2009
Land	$	128,746		$	128,303
Buildings and improvements	626,727			624,087
Furniture and equipment	15,171			13,702
Construction in progress	30,469			8,833
Total	801,113			774,925
Accumulated depreciation	(80,938		)	(60,440		)
Total property and equipment — net	$	720,175		$	714,485

Depreciation expense was approximately $21.1 million and $20.9 million for the years ended December 31, 2010 and 2009, respectively.

11

Assets held under capital leases are included in the amounts above and consist of the following at December 31, 2010 and 2009 (in thousands):

	2010			2009
Land	$	16,173		$	15,814
Buildings and improvements	157,581			156,898
Furniture and equipment	4,138			3,780
Total	177,892			176,492
Accumulated depreciation	(26,646		)	(21,045		)
Total assets held under capital leases — net	$	151,246		$	155,447

In January 2009, the Company purchased a community for approximately $70.0 million which was previously accounted for as a capital lease. This property and the related obligation were originally recorded at approximately $95.0 million, which represented the amount originally due under put and call options. An adjustment was made as of December 31, 2008 to reduce the capital lease obligation and property and equipment by approximately $25.0 million to reflect the reduction in purchase price.

In September 2009, the Company purchased two communities for approximately $53.5 million which were previously accounted for as capital leases. The properties and the related obligations were originally recorded at approximately $84.0 million, which represented the amount originally due under put and call options. An adjustment of approximately $30.5 million was made to the capital lease obligations and property and equipment to reflect the reduction in purchase price.

The Company accounts for long-lived assets in accordance with the provisions in ASC Topic 360 (previously Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long Lived Assets). This guidance requires that intangible assets and long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company regularly reviews the carrying value of its long-lived assets with respect to any events or circumstances that indicate impairment or that depreciation estimates may require adjustment. If such circumstances suggest the recorded amounts are more than the sum of the undiscounted cash flows, the carrying values of such assets are reduced to fair market value. Assets to be disposed of are reported at the lower of the carrying amount or fair value of the assets less cost to sell. As of December 31, 2010 and 2009, the Company does not believe that the carrying value or the depreciation periods of its intangible assets and long-lived assets require any material adjustment.

ASC Topic 410 (previously SFAS No. 143, Accounting for Asset Retirement Obligations) addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement cost. This guidance applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of leases. The fair value of a liability for an asset retirement obligation must be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability is discounted and accretion expense is recognized using the credit-adjusted risk-free interest rate in effect when the liability was initially recognized. An entity is required to recognize a liability for a legal obligation to perform asset retirement activities when the retirement is conditional on a future event and if the liability’s fair value can be

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reasonably estimated. This standard has not had a material effect on the Company’s financial position, results of operations, or cash flows. The Company is currently evaluating potential investments in its existing properties that could result in significant future capital improvements to certain of the Company’s facilities. It is possible that the estimates used by the Company in accounting for its obligations could change in the near term depending on the timing of the projects approved in the future.

At December 31, 2010 and 2009, substantially all of the Company’s property and equipment is collateralized under long-term debt and lease arrangements.

Investments — The Company has a 23.25% investment in Broadway/Browne, LLC which holds a .01% general partner interest in Maplewood Place Associates, LP, which owns a single assisted living facility. Broadway/Browne, LLC has no other significant assets or operations and is accounted for on the equity basis of accounting. This investment is included in investment in joint venture on the accompanying consolidated balance sheets.

Leases — Leases that substantially transfer all of the benefits and risks of ownership of property to the Company, or otherwise meet the criteria for capitalizing a lease in accordance with accounting principles generally accepted in the United States, are accounted for as capital leases. Property and equipment recorded under capital leases are depreciated on the same basis as other property and equipment of the same nature. Amortization related to capital leases is included in the consolidated statements of operations within depreciation and amortization expense. Rental payments under operating leases are expensed as incurred.

Deferred Financing Costs — Costs incurred in connection with obtaining financing are deferred and amortized (included in interest expense) over the life of the related long-term debt using the straight-line method, which approximates the effective interest method. Deferred financing costs are presented net of accumulated amortization of approximately $3.0 million and $1.7 million at December 31, 2010 and 2009, respectively.

Restricted Cash and Other Noncurrent Assets — Long-term restricted cash totaled approximately $17.4 million and $18.5 million at December 31, 2010 and 2009, respectively, which includes funds held for interest reserves, operating expense reserves, debt service reserves, and repair and replacement reserve escrows that are not expected to be disbursed to the Company within twelve months. Also included are money market funds held by Charles Channel Indemnity Inc. (“CCI”), a wholly owned captive insurance company, and Mystic River Insurance Inc (“MRI”), a majority-owned captive insurance company. Other noncurrent assets at December 31, 2010 and 2009 were composed primarily of approximately $8.7 million and $11.8 million, respectively, of security and other deposits, and approximately $1.5 million and $9.0 million, respectively, related to the fair value of derivative financial instruments.

Income Taxes — The Company accounts for income taxes using the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to adjust net deferred tax assets to the amount which management believes will more likely than not be recoverable. In making such determination, management considers available positive and negative evidence, including future reversals of existing taxable temporary differences, future taxable income, and the implementation of prudent tax planning strategies. In the event that the Company is able to utilize its

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deferred tax assets in excess of their recorded amount, the valuation allowance will be reduced with a corresponding reduction to income tax expense.

ASC Topic 740 (previously FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes) prescribes a recognition threshold and measurement attribute for the recognition, measurement, presentation, and disclosure of uncertain tax positions that the Company has taken or expects to take on a tax return. ASC Topic 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the income tax position. Income tax positions must meet a more likely than not recognition threshold to be recognized. The Company adopted this guidance as of January 1, 2009 and the adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows.

Derivative Financial Instruments — The Company accounts for derivatives according to ASC Topic 815 (previously SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities), which requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheet and to measure those instruments at fair value. The accounting for changes in the fair value of a derivative are recorded each period in current earnings or in other comprehensive income depending on the intended use of the derivative and the Company’s designation of the instrument.

The Company’s derivative financial instruments include interest rate swaps and interest rate caps which are not used for trading or speculative purposes. These derivatives were not designated as having a hedging relationship with their underlying securities, and therefore the Company did not qualify for hedge accounting for book accounting purposes. The Company’s interest rate swaps and interest rate caps are recorded at fair value in the consolidated balance sheets. Changes in fair value are recorded in current earnings as separately stated in the accompanying statements of operations.

Fair Value Measurements — ASC Topic 820 (previously SFAS No. 157, Fair Value Measurements) defines fair value, provides a framework for measuring fair value, and expands disclosures required for fair value measurements. This guidance defines a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels. These levels, in order of highest to lowest priority, are described below:

Level 1 — Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Level 3 includes values determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting the Company’s own assumptions.

The following methods and assumptions were used in estimating fair value disclosures for financial instruments:

Interest Rate Caps — The fair value is determined with the assistance of a third party using forward yield curves and other relevant information generated by market transactions involving comparable instruments.

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Interest Rate Swaps — The fair value is derived using hypothetical market transactions involving comparable instruments, as well as alternative financing rates derived from market based financing rates, forward yield curves, discount rates, and the Company’s own credit risk.

The Company adopted ASC Topic 820 (previously FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157) for all nonfinancial assets and liabilities in 2009. The adoption did not have a material impact on the Company’s financial position, results of operations, or cash flows.

The Company also adopted ASC Topic 825 (previously SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including An Amendment of FASB Statement No. 115), as of January 1, 2008, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. In addition, it also establishes recognition, presentation, and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The Company has not made any fair value elections with respect to any of its eligible assets or liabilities as of December 31, 2010.

Recently Issued Accounting Standards — In January 2010, the FASB issued guidance under ASC Topic 820, Improving Disclosure about Fair Value Measurements, which requires additional disclosures to recurring and non-recurring fair value measurements. A reporting entity is required to disclose significant transfers in and out of Level 1 and Level 2, and describe the reason for those transfers. Additionally, an entity is to present separately, on a gross basis, information about purchases, sales, issuances, and settlements pertaining to the activity in Level 3. The guidance also clarifies the level of disaggregation and disclosures about input and valuation techniques used to determine Level 2 and Level 3 measurements. The ASC Topic 820 update is effective for reporting periods beginning after December 15, 2009 (except for the requirement to separately disclose purchases, sales, issuances and settlements in the Level 3 roll forward, which becomes effective for fiscal periods beginning after December 15, 2010). The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows as of and for the year ended December 31, 2010.

ASC Topic 805 (previously SFAS No. 141 (revised 2007), Business Combinations) provides guidance for the way companies account for business combinations. This guidance requires transaction-related costs to be expensed as incurred, which were previously accounted for as a cost of acquisition. ASC Topic 805 also requires acquirers to estimate the acquisition-date fair value of any contingent consideration and to recognize any subsequent changes in the fair value of contingent consideration in earnings. In addition, restructuring costs the acquirer was not obligated to incur shall be recognized separately from the business acquisition. The Company adopted this guidance on a prospective basis as of January 1, 2009. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows.

ASC Topic 810 (previously SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statement — an Amendment of ARB No. 51) requires all entities to report noncontrolling interests in subsidiaries as a separate component of equity in the consolidated financial statements. A single method of accounting has been established for changes in a parent’s ownership interest in a subsidiary that does not result in deconsolidation. Companies will no longer recognize a gain or loss on partial disposals of a subsidiary where control is retained. In addition, in partial acquisitions, where control is obtained, the acquiring company will recognize and measure at fair value 100% of the assets and liabilities, including goodwill, as if the entire target company had been acquired. The Company has reported noncontrolling interests in subsidiaries as a separate component of equity and has adjusted net income for the comparative periods presented to include the amounts attributable to noncontrolling interests.

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3.RELATED PARTY TRANSACTIONS

The Company has various agreements with related parties. As described in Note 1, each of the Company’s properties is managed by Atria pursuant to individual Facility Management Agreements. During 2010 and 2009, the Company incurred management fee expenses of approximately $9.0 million and $8.3 million, respectively, payable to Atria under these agreements. Additionally, reimbursements to Atria for payroll and related expenses, as well as other expenses incurred by Atria on behalf of the Company, totaled approximately $61.5 million and $59.3 million for the years ended December 31, 2010 and 2009, respectively. As of December 31, 2010 and 2009, the Company owed Atria approximately $3.9 million and $7.5 million, respectively, related to the management fees and reimbursable expenses. As of December 31, 2010 and 2009, Atria and the communities managed by the Company owed the Company approximately $13,000 and $201,000, respectively.

For the years ended December 31, 2010 and 2009, Atria charged the Company approximately $191,000 and $227,000, respectively, for residents that were relocated from two of the Company’s facilities to an Atria facility.

4.ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Assets qualifying as “held for sale” are required to be recorded at the lower of their carrying value or fair value, less costs to sell, and must be classified separately on the Company’s consolidated balance sheets. In addition, operating results or cash flows for communities either sold or held for sale are required to be classified as discontinued operations in the Company’s accompanying consolidated statements of operations or cash flows.

In January 2009, the Company cancelled the lease on one property and transferred ownership of the operations back to the lessor and the following amounts were segregated from continuing operations and included in discontinued operations in the accompanying consolidated statements of operations for the years ended December 31, 2010 and 2009 (in thousands):

	2010		2009
Revenues	$	—	$	1,084
Net operating loss	$	—	$	(205	)
Nonoperating expenses	—		(531		)
Gain on disposition of assets — net	—		5,249
Gain from discontinued operations — net of tax	$	—	$	4,513

5.LEASES

Capital Leases — As of December 31, 2010, the Company operated 11 communities pursuant to lease arrangements that were accounted for as capital leases. One of the leases requires the payment of additional rent based on a percentage increase of gross revenues. Leases are subject to increase based upon changes in Consumer Price Index or gross revenues, subject to certain limits, as defined in the individual lease agreements. The capital lease agreements contain bargain purchase options to purchase the leased property and the option to exercise renewal terms.

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Future minimum lease payments required under the capital lease agreements, including amounts that would be due under purchase options as of December 31, 2010, are as follows (in thousands):

Years Ending
December 31
2011	$	12,120
2012	21,940
2013	37,441
2014	9,530
2015	9,656
Thereafter	168,810
	259,497
Less:
Amount representing interest	(115,879		)
Amounts due within one year	—
Capital lease obligations	$	143,618

The Company has a lease agreement which allows the Company to purchase eight of its communities. The option price is the greater of the landlord’s investment amount of approximately $82.4 million or the sum of the landlord’s investment amount plus 34% of the difference between the fair market value at the time the option is exercised and the landlord’s investment amount. This option is exercisable at the end of the initial or renewal terms and is first exercisable in 2019.

In March 2010, the Company amended a lease agreement and exercised its purchase option for two of its communities. The original purchase option prices were based on the landlord’s investment amounts plus increases in the Consumer Price Index occurring after the landlord’s investment. The amendment altered the purchase option to a fixed amount of approximately $26.8 million with a closing date between 2013 and 2020. The lease also encompassed an additional community which had a purchase option equal to the fair market value minus 50% of the amount by which such fair market value exceeded $5.0 million. The amendment altered the purchase option to a fixed amount of approximately $10.2 million which is exercisable in 2012. These amendments did not result in a change to the capital lease classification.

For a portion of 2009, the Company operated four properties pursuant to nonrenewable five to ten year lease agreements that were accounted for as capital leases. Three of these properties were purchased during 2009 and one lease was cancelled in 2009.

The fair value of the Company’s capital leases has been estimated based on current rates offered for debt with the same remaining maturities and comparable collateralizing assets. Changes in assumptions or methodologies used to make estimates may have a material effect on the estimated fair value. As of December 31, 2010 and 2009, the Company estimated that the fair value of its capital lease obligations approximated $153.3 million and $151.5 million, respectively.

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Operating Leases — The Company owns one property that is subject to a 99 year ground lease. Future minimum lease payments required under this operating lease agreement as of December 31, 2010, are as follows (in thousands):

Years Ending
December 31
2011	$	174
2012	174
2013	174
2014	174
2015	174
Thereafter	13,770
Total	$	14,640

As of December 31, 2010, the Company had approximately $3.8 million in outstanding letters of credit (the “L/Cs”) securing lease obligations. The lessors may draw upon the L/Cs if there are defaults under the related leases. The L/Cs expire between September and November 2011. One L/C is secured by a certificate of deposit that is included in restricted cash and other noncurrent assets in the accompanying consolidated balance sheets.  The second L/C is secured by a restricted cash depository account at the issuing bank.

6.LONG-TERM DEBT AND BONDS PAYABLE

A summary of long-term debt and bonds payable at December 31, 2010 and 2009, is as follows (in thousands):

	2010			2009
Mortgage notes payable, fixed rates 5.55% to 9.95% (weighted average 7.21%), payable in periodic installments through 2027	$	301,148		$	305,619
Mortgage notes payable, variable rates 2.97% to 7.50% (weighted average 6.28%), payable in periodic installments through 2013	57,944			41,736
Mezzanine notes payable, LIBOR plus 3.95% (4.22% at December 31, 2010), payable in periodic installments through 2013	14,915			14,915
Bonds Payable, 6.75% fixed rate through 2014, interest only, due in 2033	65,325			65,325
Bonds Payable, 8.25%, payable in periodic installments through 2026	12,610			12,855
Bonds Payable, 7.90%, payable in periodic installments through 2044	50,073			50,367
Bonds Payable, 6.00%, payable in periodic installments through 2045	20,415			20,415
Bonds Payable, 6.50%, payable in periodic installments through 2043	7,285			7,285
Bonds Payable, 7.00%, interest only, due in 2029	16,000			16,000
Other	1,000			1,077
	546,715			535,594
Fair value adjustments resulting from original purchase	(28,814		)	(30,695		)
Less amounts due within one year	(7,985		)	(4,243		)
Total	$	509,916		$	500,656

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In January 2009, the Company purchased one facility for approximately $70.0 million which was previously accounted for as a capital lease. The purchase was primarily financed through the assumption of approximately $47.0 million of existing financing and a $22.8 million capital contribution. The Company paid off the approximately $47.0 million loan in September 2009 by refinancing the existing debt with a $46.8 million loan bearing 6.23% fixed interest with a 10 year maturity. The Company recognized an approximately $11,400 loss on debt extinguishment.

In September 2009, the Company purchased two communities that were previously accounted for as capital leases. As part of these purchases, the Company assumed bonds payable totaling approximately $12.9 million and bearing interest at 8.25%. The bonds mature in October 2026 with principal payable annually beginning in September 2011. The Company also assumed approximately $37.7 million of mortgage notes payable bearing interest at 6.52%. The mortgage note matures in August 2017.

In September 2009, the Company modified two of its loan agreements. An approximately $17.5 million loan with an original maturity of August 2009 was extended until February 2013. As part of the modification, the Company made a principal payment of approximately $5.0 million on the loan. Interest is payable monthly at LIBOR plus 2.70% with principal payable at maturity. Additionally, an approximately $52.4 million mezzanine loan with an original maturity of August 2009 was extended until February 2013. As part of the modification, the Company made a principal payment of approximately $37.5 million on the loan. Interest is payable monthly at LIBOR plus 3.95% with periodic principal payments beginning in February 2011. The amendment was not considered a substantial modification in accordance with ASC Topic 470, Debt Modifications and Extinguishments.

The construction of five of the Company’s properties was financed through the issuance of Industrial Development Revenue Bonds. The Company has recorded obligations on the accompanying balance sheets for outstanding bond issues (the “Bonds Payable”) as it is the primary obligor and has guaranteed the payments of these bonds. Interest on Bonds Payable is payable either quarterly or semiannually.

Under the debt and bond agreements, the Company is subject to various restrictive covenants including certain occupancy requirements. In order for the properties to qualify as “qualified residential rental projects” in accordance with the Internal Revenue Code (for the Bonds to maintain their tax-exempt status), at least 20% of the units must be made available to persons whose adjusted family income is 50% or less of the area median gross income (adjusted for family size). As of December 31, 2010, all of the communities were in compliance with the low-income requirements.

Aggregate maturities of long-term debt (inclusive of extension options) and bonds payable as of December 31, 2010, are as follows (in thousands):

Years Ending
December 31
2011	$	7,985
2012	15,711
2013	135,029
2014	5,912
2015	38,813
Thereafter	343,265
Total	$	546,715

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The fair value of the Company’s debt has been estimated based on current rates offered for debt with the same remaining maturities and comparable collateralizing assets. Changes in assumptions or methodologies used to make estimates may have a material effect on the estimated fair value. As of December 31, 2010 and 2009, the Company estimated that the fair value of its long-term debt and bonds payable approximated $517.4 million and $487.6 million, respectively.

Collateral for the mezzanine notes payable includes the One Lantern Senior Living LLC membership interests of the majority of SGSL LLC’s subsidiaries which encompasses substantially all of the operations of SGSL LLC.

7.DERIVATIVES

The Company and Goldman Sachs Capital Markets, L.P. are parties to multiple total return interest rate swap agreements which effectively convert fixed rate Bonds Payable to variable rate obligations. Prior to September 2009, the swaps were scheduled to mature in 2011 and included interest payments based on a weighted average SIFMA Municipal Swap Index plus a 1.50% spread per annum.

In September 2009, the Company extended the existing total return interest rate swap agreements and entered into one additional swap agreement. The swaps are scheduled to mature in February 2013 and the interest rate was increased to SIFMA Municipal Swap Index plus a 2.50% spread per annum (2.84% at December 31, 2010). As of December 31, 2010, the notional amounts of the swap agreements total approximately $171.7 million with interest payable semi-annually.

In September 2009, the Company entered into two interest rate cap agreements with Goldman Sachs Mitsui Marine Derivative Products, L.P. on two of the variable rate mortgage loans. The Company paid an aggregate of $215,000 of fees under the terms of the agreements, which are in effect until February 2013. The interest rate cap agreements effectively limit the LIBOR Index rate under the loan agreements to a capped rate of 6.00% per annum. The interest rate cap agreements were assigned to Goldman Sachs Commercial Mortgage Company, L.P. as collateral under the individual loan agreements.

The Company entered into the total return interest rate swap agreements in order to mitigate the fair value risk associated with the underlying debt. The Company entered into the interest rate cap agreements in order to mitigate interest rate risk. Under ASC Topic 815, however, the Company did not qualify for hedge accounting. The fair values of the derivatives are recorded in other noncurrent assets and other long-term liabilities (see Note 8). Gains and losses associated with the derivatives are recorded in gain (loss) on derivative instruments.

The effect of derivative instruments on the consolidated statements of operations as of December 31, 2010 and 2009, is as follows (in thousands):

	Amount of (Loss) Gain
	Recognized in Income
	2010			2009
Interest rate swap agreements	$	(15,825	)	$	16,960
Interest rate cap agreements	(195		)	—
Total	$	(16,020	)	$	16,960

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8.FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments as of December 31, 2010 and 2009, is as follows (in thousands):

	Carrying Amount at		Fair Value
	December 31, 2010		Level 1		Level 2		Level 3
Interest rate swap agreements	$	1,468	$	—	$	1,468	$	—
Interest rate cap agreements	20		—		20		—
Total assets	$	1,488	$	—	$	1,488	$	—
Interest rate swap agreements	$	13,301	$	—	$	13,301	$	—
Total liabilities	$	13,301	$	—	$	13,301	$	—

	Carrying Amount at		Fair Value
	December 31, 2009		Level 1		Level 2		Level 3
Interest rate swap agreements	$	8,800	$	—	$	8,800	$	—
Interest rate cap agreements	215		—		215		—
Total assets	$	9,015	$	—	$	9,015	$	—
Interest rate swap agreements	$	4,809	$	—	$	4,809	$	—
Total liabilities	$	4,809	$	—	$	4,809	$	—

At December 31, 2010 and 2009, the assets related to the fair value of interest rate swap and cap agreements were recorded in other noncurrent assets at approximately $1.5 million and $9.0 million, respectively. Liabilities related to the interest rate swap agreements were recorded in other long-term liabilities at approximately $13.3 million and $4.8 million, respectively. A net (loss) gain on derivative financial instruments of approximately ($16.0) million and $17.0 million was recorded in the consolidated statements of operations for the year ended December 31, 2010 and 2009, respectively (see Note 7).

9.INCOME TAXES

The Company’s effective tax rate for the years ended December 31, 2010 and 2009 was 0.0%.

A reconciliation of the federal statutory rate to the effective income tax rate follows:

	2010		2009
Federal statutory rate	(35.0	)%	(35.0	)%
State income taxes — net of federal income tax benefit	(5.0	)	(5.0	)
Valuation allowance	40.7		40.2
Other items	(0.7	)	(0.2	)
Effective income tax rate	—	%	—	%

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A summary of the deferred income taxes by source included in the consolidated balance sheet at December 31, 2010 and 2009, is as follows (in thousands):

	2010			2009
Deferred tax assets:
Net operating losses	$	33,102		$	26,768
Accrued expenses not currently deductible	1,231			1,102
Capital lease obligations	57,447			56,861
Investment in partnerships	3,054			1,299
Intangible assets	3,950			4,255
Other	1,548			1,319
Total deferred tax assets	100,332			91,604
Valuation allowance	(54,307		)	(43,236		)
Net deferred tax assets	46,025			48,368
Deferred tax liabilities:
Property and equipment	(44,097		)	(46,356		)
Notes receivable	(1,928		)	(2,012		)
Total deferred tax liabilities	(46,025		)	(48,368		)
Net deferred tax asset	$	—		$	—

At December 31, 2010 and 2009, the Company has net operating loss carryforwards of approximately $82.8 million and $68.1 million, respectively, which expire in years 2025 through 2030.

At December 31, 2010, the Company has a valuation allowance of $54.3 million to reduce its deferred tax assets to an amount that is more likely than not to be realized. In determining the need for and the amount of the valuation allowance, the Company considered the future reversals of existing taxable temporary differences, future taxable income exclusive of reversals of existing taxable temporary differences, and the implementation of prudent and feasible tax planning strategies. Although realization is not assured for the net deferred tax asset, management believes it is more likely than not that they will be utilized based on the future reversals of existing taxable temporary differences. If future taxable income is less than the amount that has been assumed in determining the deferred tax asset, then an increase in the valuation allowance will be required with a corresponding increase to income tax expense. Alternatively, if future taxable income exceeds the level that has been assumed in calculating the deferred tax asset, the valuation allowance could be reduced with the corresponding reduction to income tax expense. In 2010, the Company increased the valuation allowance by $11.1 million and recognized a corresponding expense. The increase in the valuation allowance was primarily due to a change in the estimated future reversal of existing taxable temporary differences.

The Company records interest and penalties related to uncertain tax positions as income tax expense. As of December 31, 2010 and 2009, the Company had determined that no uncertain tax positions existed and thus, no interest or penalties were accrued.

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The Company is subject to taxation in the U.S. and various state and local jurisdictions. As of December 31, 2010, the Company’s tax years for 2006 to 2010 are subject to examination by the tax authorities. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations for years before 2006.

10.OTHER CURRENT ASSETS AND ACCRUED LIABILITIES

A summary of other current assets at December 31, 2010 and 2009, is as follows (in thousands):

	2010		2009
Nonresident receivables	$	1,106	$	1,107
Prepaid insurance	950		952
Prepaid property taxes	412		552
Food inventory	226		213
Other	165		289
Total	$	2,859	$	3,113

A summary of accrued liabilities at December 31, 2010 and 2009, is as follows (in thousands):

	2010		2009
Accrued interest	$	5,229	$	4,330
Deferred revenue	4,720		4,362
Accrued payroll and benefits	4,551		3,548
Construction retainers	1,744		130
Accrued capital expenditures	900		1,844
Accrued professional fees	405		465
Accrued insurance	360		360
Accrued rent	206		262
Other accrued expenses	714		1,047
Total	$	18,829	$	16,348

11.INSURANCE

MRI is majority-owned by a subsidiary of the Company. MRI is a captive insurance company domiciled in South Carolina, which insures the general and professional liability risks of SGSL LLC in excess of a $100,000 deductible that is retained by the Company. MRI insures claims up to $1.0 million per claim, above the deductible, and $3.0 million in the aggregate. Funding for MRI is based upon actuarial evaluations of claims and industry trends.

CCI, a captive insurance company domiciled in South Carolina, is wholly owned by the Company and is consolidated in the accompanying financial statements. CCI insures the general and professional liability risks of the Company (other than SGSL LLC, which is insured by MRI) in excess of a $100,000 deductible that is retained by the Company. CCI insures claims up to $1.0 million per claim, above the deductible, and $3.0 million in the aggregate. Funding for CCI is based upon actuarial evaluations of claims and industry trends.

23

Even though the Company funds certain amounts to CCI and MRI to pay potential claims, the Company retains various levels of professional and general liability risks. The Company accrues estimates of the ultimate costs for both reported claims and incurred but not reported claims payable by the Company. The Company has also purchased separate umbrella coverage to cover risk exposures in excess of CCI and MRI limits.

Currently, claims against the Company are in various stages of adjudication and/or litigation, some of which may result in payment from CCI and MRI. In the opinion of management, the ultimate disposition of claims incurred to date should not have a material adverse effect on the financial position, liquidity or operations of the Company.

12.INTEGRATION-RELATED EXPENSES

The Company incurred approximately $0.6 million of expense in 2009 for integration costs associated with its acquisitions. These expenses related primarily to transitional expenses incurred for licensing services.

13.CONTINGENCIES AND GUARANTEES

The Company is subject to claims and legal actions in the ordinary course of its business. The Company believes that any liability resulting from these matters, after taking into consideration its insurance coverages and amounts recorded in the consolidated financial statements, will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

The Company has made certain guarantees to third parties. These guarantees may survive the expiration of the term of the agreements or extend into perpetuity (unless subject to a legal statute of limitations). There are no specific limitations on the maximum potential amount of future payments to be made under these guarantees, as the triggering events are not subject to predictability. The Company believes the likelihood of any losses resulting from these guarantees is remote.

The Company and certain partners have guaranteed certain obligations of Maplewood Place, a non-consolidated entity. These guarantees include the payment of a monthly replacement reserve deposit in the amount of $3,474 if not paid by Maplewood Place. Additionally, the Company and certain partners have guaranteed to make payments in the event of certain tax credit recapture events. As of December 31, 2010 and 2009, no payments were required under these guarantees and the fair value of these guarantees was not material.

14.VENTAS TRANSACTION

On October 21, 2010, the Company announced that it had signed a definitive agreement to merge its real estate with Ventas, Inc., a healthcare real estate investment trust. As part of this transaction, Ventas, Inc. will acquire all of the Company’s senior living communities. Subject to certain approvals, the transaction is expected to close in the first half of 2011.

15.SUBSEQUENT EVENTS

The Company’s financial statements are available for issuance as of February 16, 2011. Any subsequent events have been evaluated through this date.

******

24

EX-99.3

Exhibit 99.3

	Page
Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets	3
Consolidated Income Statements	4
Consolidated Statements of Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7
Schedule III: Real Estate and Accumulated Depreciation	55

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, 2010 and 2009, and the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule — Schedule III: Real Estate and Accumulated Depreciation. 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, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, 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, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2011 expressed an unqualified opinion thereon.

	/s/  ERNST & YOUNG LLP
Irvine, California
March 1, 2011

2

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2010			2009
	(Dollars in thousands)
ASSETS
Investments in real estate:
Land	$	339,534		$	318,457
Buildings and improvements	3,679,745			3,088,183
Development in progress	17,827			—
	4,037,106			3,406,640
Less accumulated depreciation	(670,601		)	(585,294		)
	3,366,505			2,821,346
Mortgage loans receivable, net	289,187			110,613
Mortgage loan receivable from related party	—			47,500
Investment in unconsolidated joint ventures	42,582			51,924
	3,698,274			3,031,383
Cash and cash equivalents	59,591			382,278
Receivables, net	8,336			6,605
Asset held for sale	5,150			—
Intangible assets	163,238			93,657
Other assets	158,035			133,152
	$	4,092,624		$	3,647,075
LIABILITIES AND EQUITY
Unsecured senior credit facility	$	175,000		$	—
Senior notes	991,633			991,633
Notes and bonds payable	362,624			431,456
Accounts payable and accrued liabilities	151,069			132,915
Total liabilities	1,680,326			1,556,004
Redeemable OP unitholder interests	79,188			57,335
Commitments and contingencies
Equity:
NHP stockholders’ equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized; 7.750% Series B Convertible, none and 513,644 shares issued and outstanding at December 31, 2010 and 2009, respectively, stated at liquidation preference of $100 per share	—			51,364
Common stock $0.10 par value; 200,000,000 shares authorized; issued and outstanding: 126,253,858 and 114,320,786 at December 31, 2010 and 2009, respectively	12,625			11,432
Capital in excess of par value	2,516,397			2,128,843
Cumulative net income	1,849,045			1,705,279
Accumulated other comprehensive income (loss)	8,614			(823		)
Cumulative dividends	(2,086,854		)	(1,862,996		)
Total NHP stockholders’ equity	2,299,827			2,033,099
Noncontrolling interests	33,283			637
Total equity	2,333,110			2,033,736
	$	4,092,624		$	3,647,075

See accompanying notes.

3

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED INCOME STATEMENTS

	Years Ended December 31,
	2010			2009			2008
	(In thousands, except per share amounts)
Revenue:
Triple-net lease rent	$	307,567		$	287,379		$	275,351
Medical office building operating rent	102,287			70,054			60,576
	409,854			357,433			335,927
Interest and other income	29,397			26,420			24,942
	439,251			383,853			360,869
Expenses:
Interest expense	95,761			93,630			100,956
Depreciation and amortization	134,540			121,032			113,422
General and administrative	30,836			27,320			25,981
Acquisition costs	5,118			830			—
Medical office building operating expenses	41,325			28,906			26,631
	307,580			271,718			266,990
Operating income	131,671			112,135			93,879
Income from unconsolidated joint ventures	5,478			5,101			3,903
Gain on debt extinguishment	75			4,564			4,641
Income from continuing operations	137,224			121,800			102,423
Discontinued operations:
Gain on sale of facilities, net	16,948			23,908			154,995
Impairments	(15,006		)	—			—
Income from discontinued operations	2,957			3,350			10,589
	4,899			27,258			165,584
Net income	142,123			149,058			268,007
Net loss (income) attributable to noncontrolling interests	1,643			(668		)	131
Net income attributable to NHP	143,766			148,390			268,138
Preferred stock dividends	—			(5,350		)	(7,637		)
Net income attributable to NHP common stockholders	$	143,766		$	143,040		$	260,501
Basic earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.13		$	1.08		$	0.97
Discontinued operations attributable to NHP common stockholders	0.04			0.26			1.70
Net income attributable to NHP common stockholders	$	1.17		$	1.34		$	2.67
Basic weighted average shares outstanding	121,687			106,329			97,246
Diluted earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.11		$	1.06		$	0.95
Discontinued operations attributable to NHP common stockholders	0.04			0.25			1.68
Net income attributable to NHP common stockholders	$	1.15		$	1.31		$	2.63
Diluted weighted average shares outstanding	124,339			108,547			98,763

See accompanying notes.

4

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

	NHP Stockholders’ Equity
														Accumulated
														Other
									Capital in					Comprehensive
	Preferred Stock					Common Stock			Excess of			Cumulative		Income			Cumulative			Noncontrolling			Total
	Shares		Amount			Shares	Amount		par Value			Net Income		(Loss)			Dividends			Interests			Equity
	(In thousands)
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 loss	—		—			—	—		—			—		(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	—		—			10,778	1,078		317,067			—		—			—			—			318,145
Conversion of OP unitholder interests to common stock	—		—			202	20		6,057			—		—			—			—			6,077
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
Comprehensive income:
Net income	—		—			—	—		—			143,766		—			—			(1,643		)	142,123
Gain on interest rate swap agreements	—		—			—	—		—			—		11,157			—			—			11,157
Amortization of gain on Treasury lock agreements	—		—			—	—		—			—		(519		)	—			—			(519		)
Pro rata share of accumulated other comprehensive loss from unconsolidated joint venture	—		—			—	—		—			—		(1,147		)	—			—			(1,147		)
Defined benefit pension plan net actuarial loss	—		—			—	—		—			—		(54		)	—			—			(54		)
Comprehensive income																							151,560
Conversion/redemption of preferred stock	(514	)	(51,364		)	2,315	231		51,041			—		—			—			—			(92		)
Issuance of common stock, net	—		—			9,588	959		337,072			—		—			—			—			338,031
Conversion of OP unitholder interests to common stock	—		—			30	3		846			—		—			—			—			849
Amortization of stock-based compensation	—		—			—	—		6,939			—		—			—			—			6,939
Common dividends	—		—			—	—		—			—		—			(223,858		)	—			(223,858		)
Adjust redeemable OP unitholder interests to current redemption value	—		—			—	—		(7,274		)	—		—			—			—			(7,274		)
Non-cash acquisition/elimination of noncontrolling interests	—		—			—	—		(1,070		)	—		—			—			1,727			657
Non-cash contributions from noncontrolling interests	—		—			—	—		—			—		—			—			25,289			25,289
Contributions from noncontrolling interests	—		—			—	—		—			—		—			—			9,271			9,271
Distributions to noncontrolling interests	—		—			—	—		—			—		—			—			(1,998		)	(1,998		)
Balances at December 31, 2010	—		$	—		126,254	$	12,625	$	2,516,397		$	1,849,045	$	8,614		$	(2,086,854	)	$	33,283		$	2,333,110

See accompanying notes.

5

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2010			2009			2008
	(In thousands)
Cash flows from operating activities:
Net income	$	142,123		$	149,058		$	268,007
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	136,892			125,129			119,107
Stock-based compensation	6,939			7,007			5,800
Gain on re-measurement of equity interest upon acquisition, net	(620		)	—			—
Gain on debt extinguishment	(75		)	(4,564		)	(4,641		)
Gain on sale of facilities, net	(16,948		)	(23,908		)	(154,995		)
Straight-line rent	(12,285		)	(6,355		)	(10,263		)
Amortization of above/below market lease intangibles, net	342			(585		)	(559		)
Mortgage and other loan premium and discount amortization	(104		)	49			145
Amortization of deferred financing costs	3,289			2,515			2,662
Equity in earnings from unconsolidated joint ventures	(1,001		)	(974		)	37
Distributions of income from unconsolidated joint ventures	1,045			987			236
Impairments	15,006			—			—
Changes in operating assets and liabilities:
Receivables	(1,088		)	(445		)	(2,258		)
Intangible and other assets	5,645			4,666			(5,313		)
Accounts payable and accrued liabilities	16,581			(5,435		)	25,873
Net cash provided by operating activities	295,741			247,145			243,838
Cash flows from investing activities:
Investment in real estate and related assets and liabilities	(532,660		)	(42,733		)	(325,216		)
Proceeds from sale of real estate facilities	43,623			43,533			288,639
Investment in mortgage and other loans receivable	(229,474		)	(15,738		)	(91,357		)
Principal payments on mortgage and other loans receivable	4,874			12,691			18,781
Contributions to unconsolidated joint ventures	(136		)	(2,244		)	(6,678		)
Distributions from unconsolidated joint ventures	5,319			2,591			4,743
Net cash used in investing activities	(708,454		)	(1,900		)	(111,088		)
Cash flows from financing activities:
Borrowings under unsecured senior credit facility	175,000			—			169,000
Repayment of borrowings under unsecured senior credit facility	—			—			(210,000		)
Repayments of senior notes	—			(60,036		)	(105,626		)
Issuance of notes and bonds payable	—			6,862			36,461
Principal payments on notes and bonds payable	(194,107		)	(10,605		)	(18,522		)
Redemption of preferred stock	(92		)	—			—
Issuance of common stock, net	336,972			316,729			183,819
Dividends paid	(223,452		)	(193,149		)	(179,133		)
Contributions from redeemable OP unitholders	—			—			58,435
Distributions to redeemable OP unitholders	(3,629		)	(3,102		)	(1,506		)
Contributions from noncontrolling interests	3,016			—			620
Distributions to noncontrolling interests	(1,998		)	(1,777		)	(1,973		)
Payment of deferred financing costs	(1,684		)	(139		)	(1,482		)
Net cash provided by (used in) financing activities	90,026			54,783			(69,907		)
(Decrease) increase in cash and cash equivalents	(322,687		)	300,028			62,843
Cash and cash equivalents, beginning of year	382,278			82,250			19,407
Cash and cash equivalents, end of year	$	59,591		$	382,278		$	82,250
Supplemental schedule of cash flow information:
Non-cash investing activities:
Assumption of debt upon acquisition of real estate	$	125,350		$	—		$	—
Retirement of mortgage loan receivable upon acquisition of real estate	$	47,500		$	—		$	—
Capital contributions from noncontrolling interests upon acquisition of real estate	$	25,289		$	—		$	—
Issuance of redeemable OP unitholder interests upon acquisition of real estate	$	18,986		$	—		$	—
Issuance of mortgage loan receivables upon sale of real estate/disposition of noncontrolling interest	$	10,495		$	—		$	—
Acquisition/disposition of noncontrolling interests	$	1,727		$	—		$	—
Foreclosure of facility securing mortgage loan receivable	$	—		$	—		$	2,945
Non-cash financing activities:
Conversion of preferred stock to common stock	$	51,272		$	23,554		$	31,527
Adjust redeemable OP unitholder interests to current redemption value	$	7,274		$	9,523		$	—
Conversion of redeemable OP unitholder interests to common stock	$	849		$	6,077		$	—
Interest paid	$	91,938		$	92,038		$	98,028

See accompanying notes.

6

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2010

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, 2010, 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, 2010, we had investments in 663 healthcare facilities, one land parcel, two development projects and two assets held for sale located in 42 states, consisting of:

	Consolidated Facilities	Unconsolidated Facilities	Facilities and LandParcel SecuringMortgage Loans	Total
Assisted and independent living facilities	267	19	12	298
Skilled nursing facilities	178	14	20	212
Continuing care retirement communities	10	1	1	12
Specialty hospitals	7	—	—	7
Triple-net medical office buildings	24	—	27	51
Multi-tenant medical office buildings	83	—	—	83
Land parcel	—	—	1	1
Development projects	2	—	—	2
Assets held for sale	2	—	—	2
	573	34	61	668

7

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

As of December 31, 2010, our directly owned facilities, other than our multi-tenant medical office buildings, were operated by 88 different healthcare providers, including the following publicly traded companies:

	Facilities Operated
Assisted Living Concepts, Inc.	4
Brookdale Senior Living, Inc.	93
Emeritus Corporation	6
Extendicare, Inc.	1
HealthSouth Corporation	2
Kindred Healthcare, Inc.	1
Sun Healthcare Group, Inc.	4

One of our triple-net lease tenants accounted for more than 10% of our revenues at December 31, 2010, as follows:

Brookdale Senior Living, Inc. 12.2 %

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.

We have evaluated events subsequent to December 31, 2010 for their impact on our consolidated financial statements (see Note 24).

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 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.

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.

As of December 31, 2010, we leased ten facilities under triple-net leases with fixed price purchase options through eight wholly owned, consolidated subsidiaries that have been identified as VIEs and for which we have been identified as the primary beneficiary. The carrying value of the facilities was $108.5 million as of December 31, 2010, and the purchase options are exercisable between 2011 and 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

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 accounting principles generally accepted in the United States (“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.

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 20).

Revenue Recognition

We derive the majority of our revenue from leases related to our real estate investments and a much smaller portion of our revenue from mortgage loans, other financing activities and other miscellaneous income. Revenue is recognized when it is realized or is realizable and earned.

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 rent 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 rent 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 rent 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 rent 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 and the type of facility, 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

We recorded $12.3 million of revenues in excess of cash received during 2010, $6.4 million of revenues in excess of cash received during 2009 and $10.3 million of revenues in excess of cash received during 2008. We had straight-line rent receivables, net of reserves, recorded under the caption “Other assets” on our consolidated balance sheets of $39.3 million as of December 31, 2010 and $27.5 million as of December 31, 2009, net of reserves of $114.7 million and $108.3 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 vary from the amounts currently recorded.

Interest income from loans, including discounts and premiums, is recognized using the effective interest method when collectability is reasonably assured. The effective interest method is applied on a loan-by-loan basis, and discounts and premiums are recognized as yield adjustments over the term of the related loans. 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.

We recognize sales of facilities 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. We had $20.3 million and $19.3 million of deferred gains included in the caption “Mortgage loans receivable, net” on our consolidated balance sheets as of December 31, 2010 and December 31, 2009, respectively.

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 as of December 31, 2010 and December 31, 2009. All other gains are included in discontinued operations.

Investments in Real Estate

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 $117.2 million in 2010, $105.7 million in 2009 and $100.9 million in 2008.

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. We incurred $5.1 million and $0.8 million of acquisition costs during 2010 and 2009, respectively, that are included on our consolidated income statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

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 was 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.

We capitalize direct costs, including interest costs, associated with the development and construction of real estate assets while substantive activities are ongoing to prepare the assets for their intended use.

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 related lease agreement and 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 if such reduced fair value 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

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.

We recognized an impairment charge of $15.0 million related to one asset held for sale during 2010 (see Note 7). No impairments were recognized during 2009 or 2008.

Collectability of Receivables

We evaluate the collectability of our rent, mortgage and other 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 related to rent receivables included in the caption “Receivables, net” on our consolidated balance sheets of $14.9 million as of December 31, 2010 and $12.7 million as of December 31, 2009.

For our mortgage loans, the evaluation emphasizes the operations, operating trends, financial performance and value of the underlying collateral, and for our other loans, the evaluation emphasizes the financial strength of the borrower and any guarantors. Our year-end evaluation was performed using operating and financial information as of November 30, 2010, and based on this evaluation, our mortgage and other loans are grouped into three classes — good standing, watch list and special monitoring. For loans classified as good standing, the likelihood of loss is remote, and while borrowers may be current on all required payments for loans classified as watch list or special monitoring, there are other factors considered in our evaluation which cause the likelihood of loss to be reasonably possible. Our analysis did not identify any mortgage loans for which we believe we may not recover the full value of the receivable, and as such, no reserves for mortgage loans receivable have been recorded as of December 31, 2010. Our analysis identified certain other loans for which we believe we may not recover the full value of the receivable, and we have recorded $6.1 million of reserves for other loans receivable as of December 31, 2010. The balances of mortgage and other loans by class as of December 31, 2010 were as follow:

	Principal		Deferred Gainsand Discounts			Reserves		CarryingAmount
	(In thousands)
Mortgage loans receivable:
Good standing	$	298,387	$	(20,042	)	$	—	$	278,345
Watch list	5,229		(992		)	—		4,237
Special monitoring	6,605		—			—		6,605
	$	310,221	$	(21,034	)	$	—	$	289,187

	Principal		Reserves			CarryingAmount
	(In thousands)
Other loans receivable:
Good standing	$	64,209	$	—		$	64,209
Watch list	4,821		(1,411		)	3,410
Special monitoring	5,227		(4,646		)	581
	$	74,257	$	(6,057	)	$	68,200

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

Cash and Cash Equivalents

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

Capital Raising Costs

Deferred financing costs are included in the caption “Other assets” on our consolidated balance sheets and are amortized as a component of interest expense over the terms of the related borrowings using a method that approximates a level yield. Deferred financing cost amortization is included in the caption “Interest expense” on our consolidated income statements. Costs incurred in connection with the issuance of common stock are recorded as a reduction of capital in excess of par value.

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 sheets 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.

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, 2010 and December 31, 2009, third party investors owned 2,176,700 and 1,629,752 Class A limited partnership units in NHP/PMB (“OP Units”), respectively, which represented 32.0% and 52.4% of the total units outstanding as of December 31, 2010 and December 31, 2009, respectively. As of December 31, 2010 and December 31, 2009, 4,619,330 and 1,482,713 Class B limited partnership units in NHP/PMB were outstanding, respectively, all of which were held by our subsidiaries. During 2010, 577,114 OP Units were issued by NHP/PMB in connection with acquisitions and under terms of an agreement with Pacific Medical Buildings and certain of its affiliates (see Note 5). After a one year holding period, the OP Units are exchangeable for cash or, at our option, shares of our common stock equal to the “REIT Shares Amount” per OP Unit. As of December 31, 2010, the REIT Shares Amount was 1.000. We have entered into a registration rights agreement with the holders of the OP Units which, subject to the terms and conditions set forth therein, obligates us to register the shares of common stock that we may issue in exchange for such OP Units. As registration rights are outside of our control, the redeemable OP unitholder interests are classified outside of permanent equity on our consolidated balance sheets. During 2010, 30,166 OP Units were converted into 30,166 shares of our common stock. During 2009, 202,361 OP Units were exchanged for 202,361 shares of our common stock. We applied the provisions of ASC

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

Topic 480, Distinguishing Liabilities from Equity, to reflect the redeemable OP unitholder interests at the greater of cost or fair value. As of December 31, 2010, the fair value of the OP Units exceeded the cost basis by $16.8 million, and the adjustment was recorded through capital in excess of par value. The value of the OP Units held by redeemable OP unitholder interests was $79.2 million and $57.3 million as of December 31, 2010 and December 31, 2009, respectively.

Noncontrolling Interests

We have four consolidated joint ventures in which we have equity interests, ranging from 71% to 95%, in nine multi-tenant medical office buildings and one development project (see Note 5).

NHP/PMB has equity interests, ranging from 50% to 69%, in three joint ventures which each own one multi-tenant medical office building (see Note 5). The joint ventures are consolidated by NHP/PMB, and we consolidate NHP/PMB in our consolidated financial statements.

We also have six partnerships in which we have equity interests, ranging from 51% to 96%, in 11 skilled nursing facilities, five assisted and independent living facilities, one continuing care retirement community and one specialty hospital (see Note 3). We consolidate the partnerships in our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation, 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 $6.9 million in 2010, $7.0 million in 2009 and $5.8 million in 2008.

Income Taxes

We intend to continue to qualify as a REIT under Sections 856 through 860 of the Code, and accordingly, no provision has been made for federal income taxes. However, we are subject to certain state and local taxes on our income and/or property, and these amounts are included in the expense caption “General and administrative” on our consolidated income statements.

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.

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.

We apply the 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 stockholders for purposes of calculating basic earnings per share.

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, our 7.75% Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”), which was redeemed on January 18, 2010 (see Note 11) and/or OP Units. 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 method with an offset from expected proceeds upon exercise of the stock options and unrecognized compensation expense.

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.

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December 31, 2010

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.

Fair value measurements as of December 31, 2010 are as follow:

	Fair Value			Level 1			Level 2		Level 3
	(In thousands)
Financial assets	$	5,282		$	5,282		$	—	$	—
Financial liabilities	(5,282		)	(5,282		)	—		—
Interest rate swaps	11,157			—			11,157		—
Redeemable OP unitholder interests	79,188			—			79,188		—
	$	90,345		$	—		$	90,345	$	—

Amounts related to our deferred compensation plan are invested in various financial assets, and the fair value of the corresponding assets and liabilities is based on market quotes. Interest rate swaps are valued using standard derivative pricing models that consider forward yield curves and discount rates. OP Units are exchangeable for cash or, at our option, shares of our common stock equal to the REIT Shares Amount. As such, the fair value of OP Units outstanding as of December 31, 2010 is based on the closing price of our common stock on December 31, 2010, which was $36.38 per share.

The provisions of ASC Topic 825, Financial Instruments, 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. 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 the estimates of management and on 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 as of December 31, 2010. These fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of these financial instruments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

	Book Value		Fair Value
	(In thousands)
Mortgage loans receivable	$	310,221	$	314,534
Other loans receivable	$	74,258	$	66,461
Unsecured senior credit facility	$	175,000	$	175,000
Senior notes	$	991,633	$	1,090,446
Notes and bonds payable	$	362,624	$	353,144

During 2010, we acquired one mortgage loan (see Note 4) and assumed secured debt as part of certain acquisitions (see Note 10). The valuations were determined using Level 2 inputs of rates prevailing for comparable loans at the time of acquisition. During 2010, we recognized an impairment charge related to one asset held for sale, the fair value for which was determined using Level 2 and 3 inputs (see Note 7).

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 VIEs are also required under the provisions of ASC 810. These requirements became effective January 1, 2010. The adoption of these requirements did not have a material impact on our results of operations or financial position.

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 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 became 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 has not and is not expected to have a material impact on our results of operations or financial position.

In February 2010, the FASB issued ASU 2010-09, Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”). ASU 2010-09 amends ASC Topic 855, Subsequent Events, to require SEC registrants and conduit bond obligors to evaluate subsequent events through the date that the financial statements are issued, however, SEC registrants are exempt from disclosing the date through which subsequent events have been evaluated. All other entities are required to evaluate subsequent events through the date that the financial statements are available to be issued and must disclose the date through which subsequent events have been evaluated. ASU 2010-09 was effective upon issuance for all entities except conduit debt obligors. The adoption of ASU 2010-09 did not have an impact on our results of operations or financial position.

In July 2010, the FASB issued ASU 2010-20, Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”). ASU 2010-20 amends ASC Topic 310, Receivables, to require additional disclosures regarding credit quality and the allowance for credit losses related to financing receivables, including credit quality indicators and past due and modification information. Disclosures must be

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December 31, 2010

disaggregated by segment and class. The disclosures as of the end of a reporting period became effective December 31, 2010, and the disclosures about activity that occurs during a reporting period are effective January 1, 2011. The adoption of these requirements did not have an impact on our results of operations or financial position.

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December 31, 2010

3.  Real Estate Properties

As of December 31, 2010, we had direct ownership of:

Assisted and independent living facilities	267
Skilled nursing facilities	178
Continuing care retirement communities	10
Specialty hospitals	7
Triple-net medical office buildings	24
Multi-tenant medical office buildings, including 21 owned by consolidated joint ventures (see Note 5)	83
Development projects, including one owned by a consolidated joint venture (see Note 5)	2
Assets held for sale (see Note 7)	2
	573

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 20 years and generally have two or more multiple-year renewal options. As of December 31, 2010, approximately 88% 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, 2010, leases covering 417 triple-net leased facilities were backed by security deposits consisting of irrevocable letters of credit or cash totaling $78.8 million. 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, 2010, leases covering 386 facilities contained provisions for property tax impounds, and leases covering 274 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.

The following table lists our owned real estate properties, excluding assets held for sale, as of December 31, 2010:

	Number ofFacilities	Land		Buildings andImprovements		Total RealEstateInvestment		AccumulatedDepreciation		Notes andBondsPayable
	(Dollar amounts in thousands)
Assisted and independent living facilities	267	$	165,453	$	1,645,881	$	1,811,334	$	316,024	$	115,670
Skilled nursing facilities	178	90,732		1,007,133		1,097,865		255,793		—
Continuing care retirement communities	10	8,452		119,639		128,091		26,352		—
Specialty hospitals	7	6,114		70,089		76,203		19,147		—
Medical office buildings — triple-net	24	24,956		93,790		118,746		5,901		13,422
Medical office buildings — multi-tenant	83	43,827		743,213		787,040		47,384		233,532
	569	$	339,534	$	3,679,745	$	4,019,279	$	670,601	$	362,624

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

Future minimum rentals on non-cancelable leases, including medical office building leases, as of December 31, 2010 are as follows:

Year	Rentals
	(In thousands)
2011	$	412,709
2012	$	394,002
2013	$	370,128
2014	$	344,834
2015	$	324,514
Thereafter	$	1,631,980

In addition to the transactions with Pacific Medical Buildings LLC described below and in Note 5, during 2010, we acquired 21 skilled nursing facilities, 20 assisted and independent living facilities, seven medical office buildings and one continuing care retirement community subject to triple-net leases and 15 multi-tenant medical office buildings in 17 separate transactions for an aggregate investment of $437.2 million, including the assumption of $15.8 million of mortgage financing. The transactions included the acquisition of equity interests ranging from 91% to 96% in ten of the skilled nursing facilities, four of the assisted and independent living facilities and the continuing care retirement community. In connection with the acquisition of five of the assisted and independent living facilities and one of the skilled nursing facilities described above, we funded two unsecured loans totaling $5.5 million and funded an additional $0.4 million subsequent to acquisition during 2010.

During 2010, we acquired the remaining 55.05% interest in PMB SB 399-401 East Highland LLC (“PMB SB”), an entity affiliated with Pacific Medical Buildings LLC that owns two multi-tenant medical office buildings. PMB SB was valued at $17.4 million at the date of acquisition, and the acquisition was paid in a combination of cash and the assumption of $11.2 million of mortgage financing (of which $6.2 million was previously attributable to the controlling interest in PMB SB) (see Note 6).

During 2010, we also entered into an agreement to develop an assisted and independent living facility. The total budget for the project is $6.6 million. Costs of $1.2 million were incurred as of December 31, 2010 and are included in the caption “Development in progress” on our consolidated balance sheets.

During 2010, we funded $21.0 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. As of December 31, 2010, we had committed to fund additional expansions, construction and capital improvements of $14.5 million. During 2010, we also funded $2.0 million in capital and tenant improvements at certain multi-tenant medical office buildings.

During 2010, we sold nine skilled nursing facilities and three assisted and independent living facilities for net cash proceeds of $43.6 million that resulted in a total gain of $16.9 million which is included in the caption “Gain on sale of facilities, net” in “Discontinued operations” on our consolidated income statements.

During 2010, we sold the assisted living portion of a continuing care retirement community, for which we had an existing mortgage loan secured by the skilled nursing portion of such continuing care retirement community (see Note 4) to the tenant of the facility. We provided financing of $6.5 million related to the sale, including the concurrent repayment of a $0.7 million unsecured loan which had previously been included in the caption “Other assets” on our consolidated balance sheets (see Note 4). As we have a continuing interest in the facility, operating results from the facility are included in income from continuing operations on our consolidated income statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

During 2010, we transferred and assigned our controlling interest in one consolidated partnership which owned one assisted and independent living facility (“Partnership A”) to our partner in exchange for our partner’s noncontrolling interest in a second consolidated partnership which owned one assisted and independent living facility (“Partnership B”). We had previously provided a mortgage loan to Partnership A which was assigned to our partner as part of the exchange transaction (see Note 4). Upon exchange of the ownership interests, the remaining $1.7 million of noncontrolling interests in the partnerships was eliminated.

During 2010, we transferred one skilled nursing facility and one medical office building to assets held for sale (see Note 7).

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.

During 2009, we sold five skilled nursing facilities for a gross purchase price of $23.3 million that resulted in a total gain of $9.5 million which is included in the caption “Gain on sale of facilities, net” in “Discontinued operations” on our consolidated income statements.

We recognized an impairment charge of $15.0 million related to one asset held for sale during 2010 (see Note 7). No impairments were recognized during 2009 or 2008.

4.  Mortgage Loans Receivable

As of December 31, 2010, we held 20 mortgage loans receivable secured by:

Multi-tenant medical office buildings	27
Skilled nursing facilities	20
Assisted and independent living facilities	12
Continuing care retirement communities	1
Land parcel	1
	61

As of December 31, 2010, the mortgage loans receivable had an aggregate principal balance of $310.2 million and are reflected in our consolidated balance sheets net of aggregate deferred gains and discounts totaling $21.0 million, with individual outstanding balances ranging from $0.7 million to $83.1 million and maturities ranging from 2010 to 2031. We had a $6.6 million mortgage loan which matured during 2010 and is expected to be repaid during the first quarter of 2011. The borrower was current on all interest payments as of December 31, 2010, and the loan is included in the 2011 maturities in the table below. The principal balances of mortgage loans receivable as of December 31, 2010 mature as follows:

Year	Maturities
	(In thousands)
2011	$	111,889
2012	1,414
2013	8,366

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

Year	Maturities
	(In thousands)
2014	2,742
2015	3,145
Thereafter	182,665
	310,221
Less: deferred gains and discounts	(21,034		)
	$	289,187

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

The following table lists our mortgage loans receivable as of December 31, 2010:

	Facilities and Land Parcel	Interest Rate		Final Maturity Date	Estimated Balloon Payment(1)		Original Face Amount of Mortgages		Carrying Amount of Mortgages
	(Dollar amounts in thousands)
Skilled Nursing Facilities:
California	7	12.25	%	12/11	$	57,477	$	57,477	$	47,575
California	1	12.09	%	01/22	10,589		10,589		10,589
Florida	1	9.75	%	12/18	5,358		5,630		5,484
Florida	1	11.59	%	05/17	4,996		5,409		5,297
Illinois	1	9.00	%	01/24	—		9,500		7,030
Indiana	1	10.40	%	06/13	6,750		6,750		6,750
Kansas	2	11.58	%	01/13	896		1,148		569
		6.80	%	10/14	1,934		2,000		2,000
Louisiana	1	10.89	%	04/15	2,453		3,850		3,041
Michigan	4	15.00	%	06/10	6,604		6,671		6,604
Pennsylvania	1	10.82	%	06/17	12,403		12,403		12,403
Subtotal	20				109,460		121,427		107,342
Assisted and Independent Living Facilities:
Delaware	1	10.50	%	06/11	5,280		5,280		4,533
Florida	1	9.00	%	11/11	6,220		6,220		4,415
Louisiana	1	10.50	%	06/11	7,260		7,260		6,232
Massachusetts	1	9.52	%	06/23	8,500		8,500		8,500
Ohio	1	10.50	%	06/11	6,270		6,270		5,382
Tennessee	1	10.50	%	06/11	5,280		5,280		4,533
Tennessee	1	9.00	%	11/11	3,252		3,252		2,308
Virginia	1	10.50	%	06/11	8,910		8,910		7,649
Virginia	1	9.00	%	11/11	4,665		4,665		3,311
Washington	1	6.00	%	07/17	6,030		6,856		6,098
Washington	1	8.00	%	08/20	25,000		25,000		25,000
Washington	1	9.06	%	03/31	5,229		5,229		4,237
Subtotal	12				91,896		92,722		82,198
Continuing Care Retirement Community:
Florida	1	9.38	%	01/20	15,848		15,848		15,848
Subtotal	1				15,848		15,848		15,848
Medical Office Building:
Arizona	5	8.25	%	03/17	16,792		16,792		16,792
California	4	8.25	%	03/17	15,175		15,175		15,175
Florida	13	8.25	%	03/17	42,884		42,884		42,884
Kentucky	1	8.25	%	03/17	620		620		620
New Jersey	1	8.25	%	03/17	1,787		1,787		1,787
Nevada	2	8.25	%	03/17	4,734		4,734		4,734
West Virginia	1	8.25	%	03/17	1,115		1,115		1,115
Subtotal	27				83,107		83,107		83,107
Land Parcel:
Texas	1	9.00	%	09/12	692		692		692
Subtotal	1				692		692		692
	61				$	301,003	$	313,796	$	289,187

23

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

(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.

During 2010, we funded four mortgage loans secured by 27 medical office buildings, one assisted and independent living facility and four skilled nursing facilities in the amount of $155.3 million. In connection with the funding of a mortgage loan secured by one of the skilled nursing facilities, we agreed to fund up to $10.9 million to expand the facility and funded $1.9 million as of December 31, 2010. During 2010, we also acquired one mortgage loan secured by one assisted and independent living facility with an effective interest rate of 8.27% for $6.1 million, net of a $0.8 million discount, and secured a $2.0 million unsecured loan which had previously been included in the caption “Other assets” on our consolidated balance sheets with two skilled nursing facilities.

During 2010, we also funded $6.8 million and $52.8 million under loans to our consolidated joint ventures with PMB Gilbert LLC and PMB Pasadena LLC, respectively (see Note 5). As we consolidate these joint ventures, these balances have been eliminated for purposes of our consolidated financial statements.

During 2010, we sold the assisted living portion of a continuing care retirement community, for which we had an existing mortgage loan secured by the skilled nursing portion of such continuing care retirement community to the tenant of the facility. For facility count purposes, this was previously accounted for in real estate properties as a continuing care retirement community (see Note 3). We provided financing of $6.5 million related to the sale, including the concurrent repayment of a $0.7 million unsecured loan which had previously been included in the caption “Other assets” on our consolidated balance sheets, and funded an additional $0.4 million subsequent to the sale.

During 2010, we transferred and assigned our controlling interest in Partnership A to our partner in exchange for our partner’s noncontrolling interest in Partnership B (see Note 3). We had previously provided a mortgage loan in the amount of $5.2 million to Partnership A which was assigned to our partner as part of the exchange transaction. Fair value at the exchange transaction date was determined based on estimates considering factors and assumptions including historical operating results, available market information and known trends and market/economic conditions. The exchange transaction resulted in a $1.0 million gain which was deferred.

During 2010, we also funded $2.5 million on existing loans.

As of February 1, 2010, we acquired the multi-tenant medical office building which served as collateral for our $47.5 million mortgage loan from a related party, and as a result, the loan was retired (see Notes 5 and 22).

In 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. During 2009, we funded $7.5 million which was subsequently repaid. As of December 31, 2009, there was no balance outstanding. The revolving loan facility was terminated as of February 23, 2010. There was no balance outstanding at the date of termination.

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.

24

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

The following table summarizes the changes in mortgage loans receivable, net during 2010 and 2009:

	Year Ended December 31,
	2010			2009
	(In thousands)
Balance at January 1	$	158,113		$	159,899
New mortgage loans	164,722			7,461
Issuance of mortgage loan receivables upon sale of real estate/disposition of noncontrolling interest	11,487			—
Additional fundings on existing mortgage loans	2,500			2,521
Securitization of previously unsecured loan	2,000
Deferred gains	(993		)	—
Discount	(758		)	—
Amortization of deferred gains, premiums and discounts, net	159			(58		)
Collection of principal	(543		)	(11,710		)
Retirement of mortgage loan upon acquisition of real estate	(47,500		)	—
Balance at December 31	$	289,187		$	158,113

As of December 31, 2010 we had one mortgage loan to Brookdale secured by five assisted and independent living facilities with a carrying value of $28.3 million (net of a deferred gain of $4.7 million). The loan had a stated maturity date of June 2011 and was prepaid during January 2011 (see Notes 14 and 24).

5.  Medical Office Building Joint Ventures

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 multi-tenant medical office buildings, including six that were 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, 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). 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. As a result of the elimination of these six properties, under the Contribution Agreement, NHP/PMB became obligated to pay $3.0 million (the “2009 Premium Adjustment”), of which $2.7 million was payable to Pacific Medical Buildings LLC. The portion of the 2009 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.

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. NHP/PMB acquired this multi-tenant medical office building for $74.0 million, which was paid in a combination of cash and the issuance of 301,599 OP Units with a fair value at the date of issuance of $10.0 million. As a result of such acquisition, we retired our $47.5 million mortgage loan from a related party to which such acquired medical office building had served as collateral (see Note 22). Additionally, as of February 1, 2010, we acquired a majority ownership interest in a joint venture which owns one multi-tenant medical office building (see NHP/PMB Gilbert LLC below), amended and restated our agreement with NHP/PMB, PMB LLC and PMB Real Estate Services LLC (“PMBRES”) as described below and amended our agreement with PMB Pomona LLC to provide for the future

25

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

acquisition by NHP/PMB of a medical office building currently in development (see Note 22). In connection with these transactions, NHP/PMB entered into a Third Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB, which, among other things, authorized NHP/PMB to acquire properties affiliated with Pacific Medical Buildings LLC pursuant to agreements other than the Contribution Agreement.

As of March 1, 2010, we entered into an amendment to the Contribution Agreement which reinstated another two of the six properties that were previously eliminated from the Contribution Agreement. NHP/PMB acquired a 65% interest in a joint venture which is consolidated by NHP/PMB that owns one of the two multi-tenant medical office buildings valued at $79.9 million. The acquisition was paid in a combination of cash, the assumption of $48.1 million of mortgage financing and the issuance of 152,238 OP Units with a fair value at the date of issuance of $5.0 million. NHP/PMB acquired a 69% interest in a joint venture which is consolidated by NHP/PMB that owns the second multi-tenant medical office building valued at $69.3 million. The acquisition was paid in a combination of cash, the assumption of $50.2 million of mortgage financing and the issuance of 121,489 OP Units with a fair value at the date of issuance of $4.0 million. Additionally, as of March 1, 2010, we acquired the remaining interest in PMB SB (see Note 6).

The amendment to the Contribution Agreement dated as of March 1, 2010 also eliminated one of the two remaining properties from the Contribution Agreement, however, we concurrently entered into a joint venture with PMB Pasadena LLC (an entity affiliated with Pacific Medical Buildings LLC) to acquire this property (see NHP/PMB Pasadena LLC below). As a result of the elimination of this property from the Contribution Agreement, NHP/PMB became obligated to pay $2.1 million (the “2010 Premium Adjustment”), of which $1.9 million was payable to Pacific Medical Buildings LLC in cash. The portion of the 2010 Premium Adjustment not payable to Pacific Medical Buildings LLC was paid in the form of $0.1 million in cash and the issuance of 1,788 additional OP Units with an aggregate value of $57,000. As a result of the payment, we received an additional 4,514 Class B limited partnership units in NHP/PMB. Under the Contribution Agreement, if the agreement is terminated with respect to the remaining development property, NHP/PMB will become obligated to pay approximately $2.4 million (the “Future Premium Adjustment”) which has been accrued as of December 31, 2010 and of which a portion would be payable to Pacific Medical Buildings LLC.

Under the terms of the Contribution Agreement, a portion of the consideration for the multi-tenant medical office buildings is 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 equal to the REIT Shares Amount. During 2010, 30,166 OP Units were converted into 30,166 shares of our common stock. During 2009, 202,361 OP Units were converted into 202,361 shares of our common stock. As of December 31, 2010, 1,599,586 of the remaining OP Units had been outstanding for one year or longer and were exchangeable for cash of $58.2 million. During 2010 and 2009, cash distributions from NHP/PMB of $3.6 million and $3.1 million, respectively, were made to OP unitholders.

Additionally, we have entered into an agreement (the “Pipeline Agreement”) with NHP/PMB, PMB LLC and 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 of multi-tenant medical office buildings developed by PMB LLC through April 2019. As of February 1, 2010, the Pipeline Agreement was amended and restated to provide NHP/PMB with the option to acquire medical office buildings developed in the future through a joint venture between NHP and PMB LLC, obligate us to provide or arrange financing for approved developments and provide us with improved terms, including preferred returns, a reduction in PMB LLC’s promote interest and acquisition pricing determined at the time of acquisition rather than at the pre-development stage. As of September 23, 2010, we entered into a joint venture with PMB Mission Hills 1 LLC (an entity affiliated with Pacific Medical Buildings LLC) to develop a medical office building with a total budget of $53.0 million (see PDP Mission Hills 1 LLC below) in accordance with the terms of the Pipeline Agreement. We concurrently entered into an agreement with NHP/PMB, PMB LLC and PMB Mission Hills 1 LLC under which the interests in the joint venture will be contributed to NHP/PMB subsequent to completion of development in accordance with the terms of the Pipeline Agreement.

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

During 2010 and 2009, NHP/PMB funded $0.7 million and $0.2 million, respectively, in capital and tenant improvements at certain facilities.

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

NHP/PMB Gilbert LLC

As of February 1, 2010, we entered into a joint venture with PMB Gilbert LLC (an entity affiliated with Pacific Medical Buildings LLC) called NHP/PMB Gilbert LLC (“Gilbert JV”) to acquire a multi-tenant medical office building. PMB Gilbert LLC contributed the multi-tenant medical office building to Gilbert JV, and we contributed $6.3 million in cash. Additionally, we agreed to loan Gilbert JV up to $8.8 million as project financing at an interest rate of 7.00%, including $6.8 million that was disbursed initially and remains outstanding as of December 31, 2010. We hold a 71.17% equity interest in the joint venture and PMB Gilbert LLC holds a 28.83% equity interest. PMB Gilbert LLC is the managing member of Gilbert JV, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies. Pursuant to a contribution agreement dated as of February 1, 2010, among us, NHP/PMB, Pacific Medical Buildings LLC and PMB Gilbert LLC, NHP/PMB may in the future acquire Gilbert JV if certain conditions are met.

Net income or loss is allocated between the partners in the joint venture based on the hypothetical liquidation at book value method (the “HLBV method”). Under the HLBV method, net income or loss is allocated between the partners based on the difference between each partner’s claim on the net assets of the partnership at the end and beginning of the period, after taking into account contributions and distributions. Each partner’s share of the net assets of the partnership is calculated as the amount that the partner would receive if the partnership were to liquidate all of its assets at net book value and distribute the resulting cash to creditors and partners in accordance with their respective priorities. Under this method, in any given period, we could be recording more or less income than the joint venture has generated or more or less income than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation. During 2010, operating cash distributions from Gilbert JV of $0.2 million and $4,000 were made to us and to PMB Gilbert LLC, respectively.

During 2010, Gilbert JV funded $0.1 million in capital and tenant improvements at certain facilities.

All intercompany balances with Gilbert JV have been eliminated for purposes of our consolidated financial statements.

NHP/PMB Pasadena LLC

As of March 1, 2010, we entered into a joint venture with PMB Pasadena LLC (an entity affiliated with Pacific Medical Buildings LLC) called NHP/PMB Pasadena LLC (“Pasadena JV”) to acquire a multi-tenant medical office building. PMB Pasadena LLC contributed the multi-tenant medical office building to Pasadena JV, and we contributed $13.5 million in cash. Additionally, we provided Pasadena JV with a $56.5 million mortgage loan at an initial interest rate equal to the greater of 3.50% or LIBOR plus 165 basis points (increasing to the greater of 5.125% or LIBOR plus 375 basis points as of April 1, 2010), of which $49.8 million has been funded, and a $3.0 million mezzanine loan at an interest rate of 15.00%, both of which remain outstanding as of December 31, 2010. We hold a 71% equity interest in the joint venture and PMB Pasadena LLC holds a 29% equity interest. PMB Pasadena LLC is the managing member of Pasadena JV, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies. Pursuant to a contribution agreement dated as of March 1, 2010, among us, NHP/PMB, Pacific Medical

27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

Buildings LLC and PMB Pasadena LLC, NHP/PMB may in the future acquire Pasadena JV if certain conditions are met.

Net income or loss is allocated between the partners in the joint venture based on the HLBV method. During 2010, operating cash distributions from Pasadena JV of $0.1 million were made to us.

During 2010, Pasadena JV funded $0.3 million in capital and tenant improvements at certain facilities.

All intercompany balances with Pasadena JV have been eliminated for purposes of our consolidated financial statements.

PDP Mission Hills 1 LLC

As of September 23, 2010, we entered into a joint venture with PMB Mission Hills 1 LLC (an entity affiliated with Pacific Medical Buildings LLC) called PDP Mission Hills 1 LLC (“Mission Hills JV”) to develop a medical office building. We contributed $14.7 million in cash, and PMB Mission Hills 1 LLC contributed $1.8 million in cash, and the joint venture acquired the land on which the medical office building is to be developed for $15.5 million. The total budget for the project is $53.0 million, and construction is expected to commence in early 2011. We hold an 89.1% equity interest in the joint venture and PMB Mission Hills 1 LLC holds a 10.9% equity interest. PMB Mission Hills 1 LLC is the managing member of Mission Hills JV, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies. Pursuant to a contribution agreement dated as of September 23, 2010, among us, NHP/PMB, PMB LLC and PMB Mission Hills 1 LLC, the interests in the joint venture will be contributed to NHP/PMB subsequent to completion of development in accordance with the terms of the Pipeline Agreement.

During 2010, Mission Hills JV incurred costs of $16.6 million (including the land acquisition) which is included in the caption “Development in progress” on our consolidated balance sheets.

Net income or loss is allocated between the partners in the joint venture based on the HLBV method. No cash distributions were made during 2010.

All intercompany balances with Mission Hills JV 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 joint 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.

As of December 31, 2010, McShane/NHP owned seven multi-tenant medical office buildings located in one state.

Cash distributions from McShane/NHP are made in accordance with the members’ ownership interests and will continue to be made 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 2010, operating cash distributions from McShane/NHP of $1.1 million and $0.1 million were made to us and to McShane, respectively.

28

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

During 2009, operating cash distributions from McShane/NHP of $0.9 million and $0.1 million were made to us and to McShane, respectively.

During 2010 and 2009, McShane/NHP funded $1.0 million and $1.4 million, respectively, in capital and tenant improvements at certain facilities.

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

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

On August 21, 2009, we acquired for $4.3 million the 10% and 5% noncontrolling interests held by The Broe Companies in NHP/Broe, LLC (“Broe I”) and NHP/Broe II, LLC (“Broe II”), respectively. 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 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 consolidated both joint ventures in our consolidated financial statements in accordance with ASC 810.

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. Both loans were prepaid during 2010.

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.

6.  Investment in Unconsolidated Joint Ventures

The following table sets forth the amounts from our unconsolidated joint ventures included in the caption “Income from unconsolidated joint ventures” on our consolidated income statements for the periods presented:

	Year Ended December 31,
	2010			2009			2008
	(In thousands)
Management fees:
State pension fund investor	$	4,477		$	4,128		$	3,940
NHP share of net income (loss):
State pension fund investor	1,033			969			250
PMBRES	(44		)	(13		)	(273		)
PMB SB	12			17			(14		)
	$	5,478		$	5,101		$	3,903

29

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

State Pension FundInvestor

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.

As of December 31, 2010, 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 2010, the joint venture prepaid two loans totaling $4.3 million with a weighted average rate of 9.16%, and placed $12.0 million of mortgage financing on a portion of its portfolio resulting in net cash distributions of $5.5 million and $1.8 million to our joint venture partner and to us, respectively.

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 entered into an interest rate swap contract that is designated as effectively 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 as of December 31, 2010 and 2009 was $12.8 million and $8.2 million, respectively, which is included as a liability on the joint venture’s balance sheets.

During 2010 and 2009, we made additional contributions of $0.1 million and $0.2 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 2010 and 2009, we received additional distributions of $3.5 million and $2.3 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.

The unaudited condensed balance sheet and income statement for the joint venture below present its financial position as of December 31, 2010 and 2009 and its results of operations for the years ended December 31, 2010, 2009 and 2008.

BALANCE SHEET

	Year Ended December 31,
	2010			2009
	(In thousands)
ASSETS
Investments in real estate:
Land	$	38,892		$	38,892
Buildings and improvements	535,529			532,470
	574,421			571,362
Less accumulated depreciation	(61,780		)	(42,878		)
	512,641			528,484
Cash and cash equivalents	4,769			3,689
Other assets	7,306			6,823
	$	524,716		$	538,996
LIABILITIES AND EQUITY
Notes and bonds payable	$	340,924		$	334,066
Accounts payable and accrued liabilities	17,488			13,524
Equity	166,304			191,406
	$	524,716		$	538,996

30

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

INCOME STATEMENT

	Year Ended December 31,
	2010			2009			2008
	(In thousands)
Revenue:
Rent	$	48,173		$	46,502		$	45,541
Interest and other income	248			135			101
	48,421			46,637			45,642
Expenses:
Interest expense	20,593			20,665			19,939
Depreciation and amortization	18,913			18,740			18,359
General and administrative	4,769			4,667			6,345
	44,275			44,072			44,643
Operating income	4,146			2,565			999
Gain on debt extinguishment, net	—			1,327			—
Net income	4,146			3,892			999
Net income attributable to noncontrolling interests	(13		)	(13		)	—
Net income available to joint venture members	$	4,133		$	3,879		$	999

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 an additional payment on or before March 31, 2011 equal to six times the normalized net operating profit of PMBRES for 2010 (less the amount of all prior payments). An additional payment equal to six times the Normalized Net Operating Profit, as defined, of PMBRES for 2009 was to be made on or before March 31, 2010. During 2009, PMBRES had a net operating loss, and as such, no additional payment was made on or before March 31, 2010. PMBRES provides property management services for 33 multi-tenant medical office buildings that we own or in which we have an ownership interest.

PMB SB 399-401 East Highland LLC

In August 2008, we acquired from PMB SB (an entity affiliated with Pacific Medical Buildings LLC) a 44.95% interest in an entity that owned two multi-tenant medical office buildings for $3.5 million. As of March 1, 2010, we acquired the remaining 55.05% interest in PMB SB. PMB SB was valued at $17.4 million at the date of acquisition, and the acquisition was paid in a combination of cash and the assumption of $11.2 million of mortgage financing (of which $6.2 million was previously attributable to the controlling interest in PMB SB). Prior to the acquisition, our investment in PMB SB was $3.0 million which was accounted for under the equity method. In connection with the acquisition, we re-measured our previously held equity interest at the acquisition date fair

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

value based on an independent consultant’s report and recognized a net gain on the re-measurement of $0.6 million which is included in the caption “Interest and other income” on our consolidated income statements. Subsequent activity related to these facilities is included in our consolidated activity for wholly owned real estate properties (see Note 3). During the period from January 1, 2010 to February 28, 2010, we received distributions of $0.1 million from PMB SB.

7.  Assets Held for Sale

During 2010, we transferred one skilled nursing facility and one medical office building to assets held for sale. The skilled nursing facility was sold in January 2011 for net cash proceeds of $0.8 million (see Note 24). The tenant of the medical office building has filed bankruptcy, and an impairment charge of $15.0 million was recognized in discontinued operations based on broker estimates of fair value, comparable sales in the local submarket and an unsolicited cash offer received during 2010. We intend to sell the medical office building within one year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

8.  Intangible Assets and Liabilities

Intangible assets include items such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets. Intangible liabilities include below market tenant and ground lease intangible liabilities and are included in the caption “Accounts payable and accrued liabilities” on our consolidated balance sheets. As of December 31, 2010 and 2009, intangible assets and liabilities consisted of:

	December 31,
	2010			2009
	(Dollars in thousands)
Gross intangible assets	$	211,134		$	129,979
Accumulated amortization	(47,896		)	(36,322		)
	$	163,238		$	93,657
Weighted average amortization period in years	24.8			23.4
Gross intangible liabilities	$	18,643		$	18,268
Accumulated amortization	(5,398		)	(3,890		)
	$	13,245		$	14,378
Weighted average amortization period in years	30.4			33.5

The amortization of above/below market lease intangibles is included in the caption “Medical office building operating rent” on our consolidated income statements. The amortization of other intangible assets and liabilities is included in the caption “Depreciation and amortization” on our consolidated income statements. The following table sets forth amounts included on our consolidated income statements related to the amortization of intangible assets and liabilities for the periods presented:

	Year Ended December 31,
	2010		2009			2008
	(In thousands)
Amortization:
Above/below market lease intangibles	$	342	$	(585	)	$	(559	)
Other intangible assets and liabilities	16,548		14,662			11,912
	$	16,890	$	14,077		$	11,353

As of December 31, 2010, the future estimated aggregate amortization related to intangible assets and liabilities is as follows:

	IntangibleAssets		IntangibleLiabilities		Net IntangibleAmortization
	(In thousands)
2011	$	20,355	$	1,269	$	19,086
2012	17,646		1,139		16,507
2013	15,335		1,081		14,254
2014	5,663		912		4,751
2015	10,878		788		10,090
Thereafter	93,361		8,056		85,305
	$	163,238	$	13,245	$	149,993

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

9.  Other Assets

As of December 31, 2010 and 2009, other assets consisted of:

	December 31,
	2010		2009
	(In thousands)
Other receivables, net of reserves of $6.1 million and $4.2 million at December 31, 2010 and 2009, respectively	$	68,200	$	68,535
Straight-line rent receivables, net of reserves of $114.7 million and $108.3 million at December 31, 2010 and 2009, respectively	39,331		27,450
Prepaid ground leases	12,804		10,051
Investments and restricted funds	12,567		9,545
Interest rate swaps	11,157		—
Deferred financing costs	8,566		11,366
Capitalized lease and loan origination costs	1,910		2,418
Other	3,500		3,787
	$	158,035	$	133,152

Included in other receivables at both December 31, 2010 and 2009, are two unsecured loans to Emeritus Corporation in the amount of $21.4 million and $30.0 million. The loans mature in March 2017.

10.  Debt

Unsecured Senior Credit Facility

As of December 31, 2010, we had $175.0 million outstanding on our $700.0 million revolving unsecured senior credit facility. There was no balance outstanding as of December 31, 2009. At our option, borrowings under the credit facility bear interest at the prime rate (3.25% at December 31, 2010) or applicable LIBOR plus 0.70% (1.01% at December 31, 2010). 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. Effective June 25, 2010, we exercised our option to extend the maturity date by one year to December 15, 2011.

Our credit facility requires us to maintain, among other things, the financial covenants detailed below. As of December 31, 2010, we were in compliance with these covenants:

	Requirement			Actual
	(Dollar amounts in thousands)
Minimum net asset value	$	820,000		$	3,242,217
Maximum total indebtedness to capitalization value	60		%	33		%
Minimum fixed charge coverage ratio	1.75		x	3.35		x
Maximum secured indebtedness ratio	30		%	9		%
Maximum unencumbered asset value ratio	60		%	26		%

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.

34

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

Senior Notes

The aggregate principal amount of notes outstanding at each of December 31, 2010 and 2009 was $991.6 million, and the weighted average interest rate on the notes was 6.47%. The weighted average maturity was 4.0 years and 5.0 years as of December 31, 2010 and 2009, respectively.

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.

Notes and Bonds Payable

The aggregate principal amount of notes and bonds payable at December 31, 2010 was $362.6 million. Notes and bonds payable are due through the year 2037, at interest rates ranging from 1.00% to 8.63% and are secured by real estate properties with an aggregate net book value as of December 31, 2010 of $512.9 million. As of December 31, 2010, the weighted average interest rate on the notes and bonds payable was 5.59% and the weighted average maturity was 7.2 years. As of December 31, 2009, the aggregate amount of notes and bonds payable was $431.5 million, and the notes and bonds payable had a weighted average interest rate of 5.34% and a weighted average maturity of 6.9 years.

During 2010, we assumed mortgages as part of certain acquisitions totaling $125.3 million.

During 2010, we repaid at maturity $67.2 million of secured debt with a weighted average interest rate of 5.24% and prepaid $118.3 million of secured debt with a weighted average interest rate of 4.73%.

During 2010, we exercised a 12-month extension option on a $32.4 million loan that was scheduled to mature in April 2010 and subsequently prepaid the loan.

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. Additionally, 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. Both loans were prepaid during 2010.

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

Debt Maturities

The principal balances of our debt as of December 31, 2010 mature as follows:

	Credit Facility		SeniorNotes		Notes and BondsPayable		Total
	(In thousands)
2011	$	175,000	$	339,040	$	—	$	514,040
2012	—		72,950		38,384		111,334
2013	—		269,850		38,100		307,950
2014	—		—		37,596		37,596
2015	—		234,420		35,319		269,739
Thereafter(1)	—		75,373		213,225		288,598
	$	175,000	$	991,633	$	362,624	$	1,529,257

35

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

(1)There are $52.4 million of senior notes due in 2037 which may be put back to us at their face amount at the option of the holder on October 1 of any of the following years: 2012, 2017 or 2027. There are $23.0 million of senior notes due in 2038 which may be put back to us at their face amount at the option of the holder on July 7 of any of the following years: 2013, 2018, 2023 or 2028.

11.  Stockholders’ Equity

Preferred Stock

During 2004, we issued 7.75% Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”) with a liquidation preference of $100 per share. The Series B Preferred Stock was convertible upon the occurrence of certain events.

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).

There were 513,644 shares of Series B Preferred Stock outstanding as of December 31, 2009. As of 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.

On January 18, 2010, we redeemed all outstanding shares of our Series B Preferred Stock at a redemption price of $103.875 per share 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 917 shares that remained outstanding.

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. On January 15, 2010, we entered into two sales agreements to sell up to an aggregate of 5,000,000 shares of our common stock from time to time. When that program was completed, we entered into two additional sales agreements on July 2, 2010 to sell up to an aggregate of an additional 5,000,000 shares of our common stock from time to time. During 2010, we issued and sold approximately 9,141,000 shares of common stock at a weighted average price of $37.04 per share, resulting in net proceeds of approximately $335.1 million after sales agent fees. 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.

36

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

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 2010 and 2009 was 2%. During 2010, we issued approximately 150,000 shares of common stock, at an average price of $33.26 per share, resulting in proceeds of approximately $5.0 million. During 2009, we issued approximately 1,083,000 shares of common stock, at an average price of $28.27 per share, resulting in proceeds of approximately $30.6 million.

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. During 2009, approximately 235,000 shares of Series B Preferred Stock were converted into approximately 1,061,000 shares of common stock.

During 2010, 30,166 OP Units issued by NHP/PMB were exchanged for 30,166 shares of common stock, and during 2009, 202,361 OP Units issued by NHP/PMB were exchanged for 202,361 shares of common stock (see Note 5).

12.  Stock Incentive Plan

Under the terms of a stock incentive plan (the “Plan”), we reserved for issuance 6,000,000 shares of common stock. As of December 31, 2010, approximately 4.1 million 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 as of December 31, 2010, 2009 and 2008 and changes during the years then ended are as follow:

	2010					2009					2008
	Shares			WeightedAverageExercisePrice		Shares			WeightedAverageExercisePrice		Shares			WeightedAverageExercisePrice
Stock Options:
Outstanding at beginning of year	525,125			$	21.37	387,972			$	17.82	569,749			$	18.80
Granted	270,100			31.97		242,900			25.40		—			—
Exercised	(207,593		)	19.39		(101,347		)	17.25		(181,777		)	20.91
Forfeited	—			—		(4,400		)	25.40		—			—
Expired	—			—		—			—		—			—
Outstanding at end of year	587,632			$	26.94	525,125			$	21.37	387,972			$	17.82
Exercisable at end of year	158,532			$	19.93	286,625			$	18.02	387,972			$	17.82
Intrinsic value — exercised	$	3,310				$	1,438				$	2,472
Intrinsic value — outstanding	$	5,546
Intrinsic value — exercisable	$	2,609
Restricted Stock and Restricted Stock Units:
Outstanding at beginning of year	385,786			$	28.17	386,687			$	28.47	402,152			$	27.30
Awarded	63,218			34.14		35,650			26.24		55,917			33.95
Dividend equivalents	28,269			36.04		55,377			26.96		51,167			29.47

37

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

	2010					2009					2008
	Shares			WeightedAverageExercisePrice		Shares			WeightedAverageExercisePrice		Shares			WeightedAverageExercisePrice
Vested	(99,349		)	29.94		(88,848		)	27.84		(108,573		)	27.16
Cancelled	(250		)	32.70		—			—		—			—
Forfeited	(4,627		)	30.23		(3,080		)	30.59		(13,976		)	30.78
Outstanding at end of year	373,047			$	29.28	385,786			$	28.17	386,687			$	28.47
Fair value — vested	$	2,975				$	2,473				$	2,949
Performance Shares:
Outstanding at beginning of year	278,302			$	22.79	228,002			$	24.27	78,300			$	30.95
Awarded	147,600			25.51		127,300			24.62		175,002			21.28
Vested	(153,302		)	21.30		(68,900		)	31.02		—			—
Forfeited	—			—		(8,100		)	23.15		(25,300		)	24.26
Outstanding at end of year	272,600			$	25.10	278,302			$	22.79	228,002			$	24.27
Stock Appreciation Rights:
Outstanding at beginning of year	521,934			$	6.96	538,034			$	6.94	268,000			$	7.44
Awarded	—			—		—			—		329,434			6.54
Vested(1)	(233,000		)	7.47		(8,000		)	6.39		(9,033		)	7.47
Forfeited	—			—		(8,100		)	6.45		(50,367		)	6.85
Outstanding at end of year	288,934			$	6.54	521,934			$	6.96	538,034			$	6.94

38

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

(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 2010 and 2009 was estimated on the date of grant using a Black-Scholes option valuation model using the assumptions in the table below. 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. The following table summarizes the assumptions used in estimating the fair value of options granted during 2010 and 2009:

	2010			2009
Fair value per share on date of grant	$	6.27		$	4.30
Assumptions:
Risk-free rate of return	2.73		%	2.42		%
Expected life in years	6			6
Expected volatility	34.5		%	36.9		%
Expected dividend yield	5.51		%	7.15		%

We received $4.0 million, $1.3 million and $3.2 million for stock option exercises in 2010, 2009 and 2008, respectively.

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2010:

				Outstanding				Exercisable
							Weighted
					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	30,047	$	14.68	1.3	30,047	$	14.68
$	18.48	$	21.29	113,316	$	20.58	2.7	113,316	$	20.58
$	25.40	$	31.97	444,269	$	29.39	8.6	15,169	$	25.40

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.

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. A percentage (ranging from 50% to 200%) of the number of performance shares granted is eligible to become earned and vested based on our total stockholder return (“TSR”) over a three year period, starting from the beginning of the year of grant, relative to the TSR of the companies comprising the NAREIT Index as of the end of the year

39

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

prior to the year of grant, except that the percentage is capped at 100% if TSR is negative. 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 2010, $0.7 million in 2009 and $0.6 million in 2008. Compensation expense related to employee stock options, restricted stock, restricted stock units, performance shares and stock appreciation rights awards was $6.2 million in 2010, $6.3 million in 2009 and $5.2 million in 2008. We expect to expense $11.4 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.

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 and 2010, 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.

40

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

13.  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, which was redeemed on January 18, 2010 (see Note 11) and/or OP Units. There were 270,100 stock options that would not be dilutive for 2010. The calculation below excludes 7,000 and 297,000 stock appreciation rights that would not be dilutive for 2009 and 2008, respectively. The Series B Preferred Stock is not dilutive for any period presented. The following table sets forth the components of the basic and diluted EPS calculations:

	Year Ended December 31,
	2010			2009			2008
	(In thousands, except per share amounts)
Numerator:
Income from continuing operations	$	137,224		$	121,800		$	102,423
Net loss (income) attributable to noncontrolling interests	1,643			(668		)	131
Net income attributable to participating securities	(1,318		)	(816		)	(221		)
Undistributed earnings attributable to participating securities	—			—			(478		)
Series B preferred stock dividends	—			(5,350		)	(7,637		)
Numerator for Basic and Diluted EPS from continuing operations	$	137,549		$	114,966		$	94,218
Numerator for Basic and Diluted EPS from discontinued operations	$	4,899		$	27,258		$	165,584
Denominator:
Basic weighted average shares outstanding	121,687			106,329			97,246
Effect of dilutive securities:
Stock options	50			75			100
Other share-settled compensation plans	472			349			335
OP Units	2,130			1,794			1,082
Diluted weighted average shares outstanding	124,339			108,547			98,763
Basic earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.13		$	1.08		$	0.97
Discontinued operations attributable to NHP common stockholders	0.04			0.26			1.70
Net income attributable to NHP common stockholders	$	1.17		$	1.34		$	2.67
Diluted earnings per share amounts:
Income from continuing operations attributable to NHP common stockholders	$	1.11		$	1.06		$	0.95
Discontinued operations attributable to NHP common stockholders	0.04			0.25			1.68
Net income attributable to NHP common stockholders	$	1.15		$	1.31		$	2.63

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

14.  Transactions with Significant Lessees

As of December 31, 2010, 93 triple-net leased facilities are leased to and operated by subsidiaries of Brookdale. Revenues from Brookdale were $54.3 million, $55.0 million and $54.9 million for the years ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010, Brookdale accounted for 12.2% of our revenues.

As of December 31, 2010 we had one mortgage loan to Brookdale secured by five assisted and independent living facilities with a carrying value of $28.3 million (net of a deferred gain of $4.7 million). The loan had a stated maturity date of June 2011 and was prepaid during January 2011 (see Notes 4 and 24).

In 2009, we entered into an agreement with Brookdale under which we became a lender with an initial commitment of $8.8 million under their $230.0 million revolving loan facility (see Note 4). During 2009, we funded $7.5 million which was subsequently repaid. As of December 31, 2009, there was no balance outstanding. The revolving loan facility was terminated as of February 23, 2010. There was no balance outstanding at the date of termination.

15.  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. The following table details the operating results reclassified to discontinued operations for the periods presented:

	Year Ended December 31,
	2010			2009		2008
	(In thousands)
Rental income	$	5,319		$	7,445	$	17,418
Interest and other income	1			35		43
	5,320			7,480		17,461
Expenses:
Interest expense	—			—		1,093
Depreciation and amortization	2,352			4,097		5,685
General and administrative	11			33		78
Medical office building operating expenses	—			—		16
	2,363			4,130		6,872
Income from discontinued operations	2,957			3,350		10,589
Impairments	(15,006		)	—		—
Gain on sale of facilities, net	16,948			23,908		154,995
	$	4,899		$	27,258	$	165,584

16.  Derivatives

During August 2010, we entered into six 12-month forward-starting interest rate swap agreements for an aggregate notional amount of $250.0 million at a weighted average rate of 3.16%. We entered into these swap agreements in order to hedge the expected interest payments associated with fixed rate debt forecasted to be issued in 2011. The swap agreements each have an effective date of August 1, 2011 and a termination date of August 1, 2021. We expect to settle the swap agreements when the forecasted debt is issued. We assessed the effectiveness of these swap agreements as hedges at inception and on December 31, 2010 and consider these swap agreements to be highly effective cash flow hedges. The swap agreements are recorded under the caption “Other assets” on our consolidated balance sheets at their aggregate estimated fair value of $11.2 million at December 31, 2010.

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

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. 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. We expect to record $0.3 million of amortization during 2011.

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 income. The settlement amounts are being amortized over the life of the debt as a yield reduction. We expect to record $0.1 million of amortization during 2011.

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 17).

The following table sets forth amounts included on our consolidated income statements related to the amortization of the Treasury lock agreements for the periods presented:

	Year Ended December 31,
	2010		2009		2008
	(In thousands)
2007 Treasury lock agreements	$	263	$	370	$	279
2006 Treasury lock agreements	256		240		232
	$	519	$	610	$	511

17.  Comprehensive Income

We recorded the August 2010 swap agreements under the caption “Other assets” on our consolidated balance sheets at their aggregate estimated fair value of $11.2 million at December 31, 2010.

We recorded the August and September 2007 Treasury lock agreements on our consolidated balance sheets at their estimated fair value of $0.1 million as of 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

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

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. We expect to record $0.3 million of amortization during 2011.

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. We expect to record $0.1 million of amortization during 2011.

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, 2010, we had recorded our pro rata share of the unconsolidated joint venture’s accumulated other comprehensive loss related to this contract of $3.2 million.

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 2010, 2009 and 2008, we recognized other comprehensive loss of $0.1 million, $8,000 and $0.2 million, respectively, 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
	2010			2009			2008
	(In thousands)
Net income	$	142,123		$	149,058		$	268,007
Other comprehensive income:
Gain on interest rate swap agreements	11,157			—			—
Amortization of gains on Treasury lock agreements	(519		)	(610		)	(511		)
Pro rata share of accumulated other comprehensive loss from unconsolidated joint venture	(1,147		)	(2,051		)	—
Defined benefit pension plan net actuarial loss	(54		)	(8		)	(204		)
Comprehensive income	151,560			146,389			267,292
Comprehensive loss (income) attributable to noncontrolling interests	1,643			(668		)	131
	$	153,203		$	145,721		$	267,423

18.  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, 2010 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 carry forward to future periods and the use of which is subject to annual limitations

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

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, 2010. 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.

45

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)

December 31, 2010

19.  Dividends

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

	Year Ended December 31,
	2010		2009		2008
Ordinary income	$	1.53	$	1.60	$	0.59
Return of capital	0.22		0.09		—
Capital gain	0.07		0.07		1.17
Total dividends paid	$	1.82	$	1.76	$	1.76

20.  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 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 2010, 2009 and 2008, 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:

	Year Ended December 31,
	2010		2009		2008
	(In thousands)
Revenue:
Triple-net leases	$	307,567	$	287,379	$	275,351
Multi-tenant leases	102,287		70,054		60,576
Non-segment	29,397		26,420		24,942
	$	439,251	$	383,853	$	360,869
Net operating income(1):
Triple-net leases	$	307,567	$	287,379	$	275,351
Multi-tenant leases	60,962		41,148		33,945
	$	368,529	$	328,527	$	309,296

46

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

	December 31,
	2010		2009
	(In thousands)
Assets:
Triple-net leases	$	2,640,361	$	2,362,195
Multi-tenant leases	937,636		555,998
Non-segment	514,627		728,882
	$	4,092,624	$	3,647,075

(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.

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

	Year Ended December 31,
	2010			2009			2008
	(In thousands)
Net income	$	142,123		$	149,058		$	268,007
Interest and other income	(29,397		)	(26,420		)	(24,942		)
Interest expense	95,761			93,630			100,956
Depreciation and amortization expense	134,540			121,032			113,422
General and administrative expense	30,836			27,320			25,981
Acquisition costs	5,118			830			—
Income from unconsolidated joint ventures	(5,478		)	(5,101		)	(3,903		)
Gain on debt extinguishment	(75		)	(4,564		)	(4,641		)
Gain on sale of facilities, net	(16,948		)	(23,908		)	(154,995		)
Impairments	15,006			—			—
Income from discontinued operations	(2,957		)	(3,350		)	(10,589		)
Net operating income from reportable segments	$	368,529		$	328,527		$	309,296

21.  Commitments and Contingencies

Litigation

From time to time, we are a party to various legal proceedings, lawsuits and other claims (as to some of which we may not be insured) that arise in the normal course of our business. Regardless of their merits, these matters

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

may require 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.

Greenwood Healthcare Center

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 (“Lexington Healthcare”). 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 the end of 2011, if not later.

Lexington Insurance, the insurance carrier for Lexington Healthcare, 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 Insurance 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 have been decided, resulting in an outcome that is largely favorable for us. The court’s ruling indicates $10.0 million in aggregate coverage is available from Lexington Insurance for both the various plaintiffs’ claims and our claims under the Professional Liability part of the Lexington Insurance policy. The court then found that there were 13 separate medical incidents for each of the 13 plaintiffs’ claims. However, the court limited the coverage to $500,000 per claim with a $250,000 self insured retention per claim, which retention will not be paid due to the bankruptcy of Lexington Healthcare. Further, the court has ruled that both the various plaintiffs’ claims and our claims are subject to the same policy limits. The court declined to find coverage for our claims under the comprehensive general liability portions of the Lexington Insurance policy. Lexington Insurance is pursuing an appeal of the rulings. We are currently defending the appeal by Lexington Insurance. We do not expect the appeal to be resolved before the end of 2011, if not later.

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.

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

Shareholder Litigation

On February 28, 2011, a putative class action entitled Palma v. Nationwide Health Properties, Inc. et al., was filed purportedly on behalf of our stockholders in the Superior Court of the State of California, Orange County Superior Court. It names us and members of our Board of Directors as defendants. The complaint alleges, among other things, that our directors breached their fiduciary duties by approving a proposed merger transaction between us and Ventas, Inc. (“Ventas”) because the proposed transaction would not maximize shareholder value and would allegedly provide the directors personal benefits not shared by our shareholders. Along with other relief, the complaint seeks an injunction against the closing of the proposed merger.

Development Agreements

During 2010, we entered into Mission Hills JV to develop a medical office building (see Note 5) and entered into other agreements to develop a skilled nursing facility (see Note 3) and to fund the expansion of a skilled nursing facility securing a mortgage loan (see Note 4). As of December 31, 2010, we had committed to fund an additional $50.8 million under these agreements, of which $36.4 million relates to Mission Hills JV and is expected to be funded through a third party construction loan.

49

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS –(Continued)

December 31, 2010

Revolving Loan Facility

In 2009, we entered into an agreement with Brookdale under which we became a lender with an initial commitment of $8.8 million under their $230.0 million revolving loan facility (see Note 4). During 2009, we funded $7.5 million which was subsequently repaid. As of December 31, 2009, there was no balance outstanding. The revolving loan facility was terminated as of February 23, 2010. There was no balance outstanding at the date of termination.

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 2010 and 2009, we funded $1.7 million and $3.2 million, respectively, under the line of credit. As of December 31, 2010 and 2009, $4.9 million and $3.2 million, respectively, was outstanding and is included in the caption “Other assets” on our consolidated balance sheets.

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 was secured by 100% of the membership interests in PMB Pomona LLC (see Note 22). During 2010 and 2009, we funded $0.3 million and $1.6 million, respectively. The total $1.9 million was repaid during 2010. No further disbursements will be made under the agreement.

As of February 1, 2010, in connection with the formation of Gilbert JV, a consolidated joint venture, we agreed to loan Gilbert JV up to $8.8 million as project financing at an interest rate of 7.00%, including $6.8 million that was disbursed initially and remains outstanding at December 31, 2010 (see Note 5).

As of March 1, 2010, in connection with the formation of Pasadena JV, a consolidated joint venture, we agreed to loan Pasadena JV up to $56.5 million as project financing at an initial interest rate equal to the greater of 3.50% or LIBOR plus 165 basis points (increasing to the greater of 5.125% or LIBOR plus 375 basis points as of April 1, 2010), including $49.8 million that was disbursed initially and remains outstanding at December 31, 2010 (see Note 5).

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

22.  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, and as of March 1, 2010, we acquired the remaining interest in PMB SB (see Note 6). Dr. Rush, through an unaffiliated entity, had an ownership interest in PMB SB.

50

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

In September 2008, we funded a mortgage loan secured by a multi-tenant medical office building in the amount of $47.5 million which was outstanding as of December 31, 2009 (see Note 4). As of February 1, 2010, we acquired the multi-tenant medical office building, and as a result, the loan was retired (see Notes 4 and 5). Dr. Rush has an ownership interest in another unaffiliated entity that owned the multi-tenant medical office building that was security for this loan.

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. Dr. Rush, through an unaffiliated entity, has an ownership interest in PMB Pomona LLC. We also 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 was secured by 100% of the membership interests in PMB Pomona LLC (see Note 21).

As of March 1, 2010, NHP/PMB became obligated to pay $2.1 million under the Contribution Agreement, of which $1.9 million was paid to Pacific Medical Buildings LLC in cash (see Note 5). 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 5). In addition, Dr. Rush and certain of his family members own or owned interests, directly and indirectly through partnerships and trusts, in the entities that contributed the five multi-tenant medical office buildings acquired by NHP/PMB, Gilbert JV and Pasadena JV during 2010 (see Note 5), in PMB Mission Hills 1 LLC (see Note 5) and/or own the remaining development property that may be acquired in the future under the Contribution Agreement.

23.  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.

	Three Months Ended
	March 31		June 30		September 30		December 31
	(In thousands except per share amounts)
2010:
Revenue	$	100,992	$	108,003	$	113,598	$	116,657
Net income attributable to NHP common stockholders	$	31,429	$	37,169	$	39,854	$	35,313
Diluted net income attributable to NHP common stockholders per share	$	0.26	$	0.30	$	0.31	$	0.27
Dividends per share	$	0.44	$	0.45	$	0.46	$	0.47
2009:
Revenue	$	95,184	$	95,539	$	96,084	$	97,045
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

51

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

During the three months ended March 31, 2010, we recognized a net gain on the re-measurement of our equity interest in PMB SB of $0.6 million. During the three months ended December 31, 2010, we recognized an impairment charge of $15.0 million. During the three months ended June 30, 2009, we recognized a $4.6 million gain on debt extinguishment.

52

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

24.  Subsequent Events

Hearthstone Senior Living

In February 2011, our tenant, Hearthstone Senior Services, L.P. (“Hearthstone”), notified us that it would be unable to pay the rent then due under its leases with us, and asked us to amend certain terms of the leases to make rents achievable. In order to substantially increase the ability of Hearthstone to meet its future obligations, we agreed to certain modifications of the terms of our leases with Hearthstone that include, among other things, a reduction in the aggregate rent payable by $7.4 million for the lease year ending February 2012, and by $6.4 million for subsequent lease years. After giving effect to these reductions, the aggregate rent payable by Hearthstone is $31.7 million for the first lease year, $33.7 million for the second lease year and increases by 3% each year thereafter. In connection with the lease modifications, we also obtained the right to terminate any and all of our leases with Hearthstone at any time without cause. We hold a $6.0 million letter of credit that secures Hearthstone’s payment obligations to us. However, it is possible that the letter of credit may not be sufficient to compensate us for any future losses or expenses that may arise if Hearthstone defaults under its leases with us. Other terms of our modified arrangements with Hearthstone include:

·We have eliminated supplemental rent obligations, except for supplemental rent accrued prior to February 1, 2011, which totals $6.0 million and becomes payable (i) in full upon an event of default by Hearthstone for which NHP chooses to exercise its remedies, (ii) in full upon a sale of Hearthstone and (iii) in part, if we exercise our right to terminate the leases with Hearthstone without cause.

·We will be entitled to receive revenue participation rent, payable monthly and calculated as 20% of incremental gross revenue over the base month of February 2011, commencing February 1, 2012 and capped in any one year at $6.4 million (subject to annual increases of 3%).

·Upon exercise of our right to terminate the leases without cause, Hearthstone must enter into an operations transfer agreement with a successor operator to allow for an efficient transfer of operations to our designee.

·If we exercise the right to terminate the Hearthstone leases without cause, upon transition of the facilities to a licensed replacement operator we must release to Hearthstone a portion of the $6.0 million letter of credit. The amount released is $3.0 million if the transition occurs prior to September 1, 2011, and increases by $1 million for every six month period thereafter.

·The Chief Executive Officer of Hearthstone has executed a guaranty in our favor that would obligate him to reimburse us the amount of any (i) distributions in excess of permitted amounts, (ii) compensation paid to him in excess of permitted amounts, and (iii) losses arising from customary “bad boy” acts such as fraud, misappropriation of funds, rents or insurance proceeds.

Proposed Merger with Ventas

On February 27, 2011, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ventas, a Delaware corporation, and Needles Acquisition LLC, a Delaware limited liability company and wholly owned subsidiary of Ventas (“Merger Sub”).

Under the terms of the Merger Agreement, NHP will be merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as a subsidiary of Ventas. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of common stock, other than shares held by any

53

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ─(Continued)

December 31, 2010

wholly owned subsidiary of NHP, by Ventas or by any subsidiary of Ventas, will be cancelled and converted into the right to receive 0.7866 shares (the “Exchange Ratio”) of common stock of Ventas (“Ventas Common Stock”).

Immediately prior to the Effective Time:  (i) each option to purchase common stock will, at the option of Ventas, either be cancelled in exchange for the right to receive a cash payment, or be converted into an option exercisable for a number of shares of Ventas Common Stock, in either case, calculated based on the Exchange Ratio; (ii) all of the restricted stock units will vest and will either be assumed by Ventas or converted into the right to receive a cash amount calculated based on the Exchange Ratio; (iii) each share of restricted stock will vest and will be converted into the right to receive a number of shares of Ventas Common Stock equal to the Exchange Ratio; (iv) all dividend equivalent rights granted in connection with any other award will vest and will be paid in accordance with their terms; and (v) the performance period for any performance shares will be terminated, and the number of performance shares that vest will be determined based on NHP’s actual performance for the shortened performance period, with each performance share that vests converted into the right to receive a number of shares of Ventas Common Stock equal to the Exchange Ratio.

We have made customary representations and warranties in the Merger Agreement and has agreed to customary covenants, including covenants regarding the operation of our business prior to the closing and covenants prohibiting us from soliciting, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, except in limited circumstances relating to unsolicited proposals that constitute, or are reasonably expected to lead to, a superior proposal.

Consummation of the Merger is subject to customary closing conditions, including approval of our stockholders and Ventas’s stockholders. The Merger Agreement may be terminated under certain circumstances, including by either party if the Merger has not occurred by October 31, 2011, if an order is entered prohibiting or disapproving the transaction and the order has become final and non-appealable, if our stockholders or Ventas fail to approve the transaction, or upon a material uncured breach by the other party that would cause the closing conditions not to be satisfied.

Shareholder Litigation

On February 28, 2011, a putative class action entitled Palma v. Nationwide Health Properties, Inc. et al., was filed purportedly on behalf of our stockholders in the Superior Court of the State of California, Orange County Superior Court. It names us and members of our Board of Directors as defendants. The complaint alleges, among other things, that our directors breached their fiduciary duties by approving a proposed merger transaction between us and Ventas because the proposed transaction would not maximize shareholder value and would allegedly provide the directors personal benefits not shared by our shareholders. Along with other relief, the complaint seeks an injunction against the closing of the proposed merger.

Other

From January 1, 2011 to February 28, 2011, we completed approximately $102 million of investments in seven facilities and sold one skilled nursing facility that was included in assets held for sale as of December 31, 2010 for net cash proceeds of $0.8 million (see Note 7).

One mortgage loan to Brookdale with a carrying value of $28.3 million (net of a deferred gain of $4.7 million) and secured by five assisted and independent living facilities was prepaid during January 2011 (see Notes 4 and 14).

54

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2010

																					Life on which
		Initial Cost to		Cost															Year		Depreciation in the
		Company		Capitalized						Carried at Close of Period(1)									Original		Latest Income
		Building and		Subsequent to				Land				Buildings and				Accumulated			Construction	Date	Statement is
		Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date	Acquired	Computed (in Years)
		(Dollar amounts in thousands)
Assisted and Independent Living Facilities:
Birmingham	AL	$	13,653	$	—	$	1,050	$	—	$	1,050	$	13,653	$	14,703	$	(2,101	)	2000	2006	35
Decatur	AL	1,824		—		1,484		—		1,484		1,824		3,308		(742		)	1987	1996	35
Hanceville	AL	2,447		—		197		—		197		2,447		2,644		(876		)	1996	1996	40
Huntsville	AL	7,092		—		260		—		260		7,092		7,352		(1,242		)	1999	2006	35
Mobile	AL	9,124		—		90		—		90		9,124		9,214		(1,509		)	2000	2006	35
Muscle Shoals	AL	5,933		—		314		—		314		5,933		6,247		(622		)	1999	2007	35
Scottsboro	AL	2,566		—		210		—		210		2,566		2,776		(189		)	1998	2008	35
Benton	AR	1,968		1		182		—		182		1,969		2,151		(708		)	1990	1998	35
Chandler	AZ	2,753		16		505		—		505		2,769		3,274		(858		)	1998	1998	40
Tempe	AZ	16,204		—		1,440		—		1,440		16,204		17,644		(2,436		)	1999	2006	35
Tucson	AZ	6,694		—		560		—		560		6,694		7,254		(1,191		)	1999	2006	35
Banning	CA	12,976		3,918		375		—		375		16,894		17,269		(2,164		)	2004	2003	40
Carmichael	CA	7,929		1,194		1,500		—		1,500		9,123		10,623		(4,549		)	1984	1995	30
Chula Vista	CA	6,281		820		950		—		950		7,101		8,051		(2,812		)	1989	1995	35
Encinitas(3)	CA	5,017		666		1,000		—		1,000		5,683		6,683		(2,549		)	1984	1995	35
Eureka	CA	2,784		—		480		—		480		2,784		3,264		—			1997	2010	30
Mission Viejo(4)	CA	3,544		263		900		—		900		3,807		4,707		(1,633		)	1985	1995	35
Novato(3)	CA	3,658		11,160		2,500		—		2,500		14,818		17,318		(3,070		)	1978	1995	30
Palm Desert	CA	6,179		8,143		1,400		—		1,400		14,322		15,722		(3,513		)	1989	1994	40
Placentia	CA	3,801		1,071		1,320		—		1,320		4,872		6,192		(2,160		)	1982	1995	30
Rancho Cucamonga	CA	4,156		540		610		—		610		4,696		5,306		(1,986		)	1987	1995	35
Rancho Mirage	CA	13,391		471		1,630		—		1,630		13,862		15,492		(1,531		)	1999	2007	35
Redding	CA	14,601		—		430		—		430		14,601		15,031		—			2007	2010	40
San Dimas	CA	3,577		776		1,700		—		1,700		4,353		6,053		(1,974		)	1975	1995	30
San Jose	CA	7,252		—		850		—		850		7,252		8,102		(2,311		)	1998	1996	40
San Juan Capistrano(3)	CA	3,834		846		1,225		—		1,225		4,680		5,905		(1,857		)	1985	1995	35
San Juan Capistrano	CA	6,344		620		700		—		700		6,964		7,664		(2,851		)	1985	1995	35
Santa Maria	CA	2,649		118		1,500		—		1,500		2,767		4,267		(1,397		)	1967	1995	30
Vista	CA	3,701		904		350		—		350		4,605		4,955		(2,003		)	1980	1996	30
Westminster	CA	4,883		—		2,350		—		2,350		4,883		7,233		(845		)	2001	2005	40

55

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
		(Dollar amounts in thousands)
Boulder	CO	4,811	14	833	—	833	4,825	5,658	(1,808	)	1985	1995	40
Denver(5)	CO	28,682	—	2,350	—	2,350	28,682	31,032	(6,982	)	1987	2002	35
Greeley	CO	4,246	—	690	—	690	4,246	4,936	—		1998	2010	30
Greeley	CO	1,828	—	470	—	470	1,828	2,298	—		1995	2010	30
Branford	CT	6,709	2,645	2,000	—	2,000	9,354	11,354	(1,870	)	1999	2005	35
Madison	CT	16,032	1,400	4,000	—	4,000	17,432	21,432	(3,261	)	2002	2004	40
Belleview	FL	4,592	—	360	—	360	4,592	4,952	(53	)	1988	2010	30
Cantonment	FL	3,477	—	800	—	800	3,477	4,277	—		1999	2010	30
Coral Springs	FL	6,985	625	915	—	915	7,610	8,525	(1,122	)	1999	2006	35
Defuniak Springs	FL	3,439	—	770	—	770	3,439	4,209	—		1999	2010	30
Fort Myers	FL	5,206	33	415	—	415	5,239	5,654	(937	)	1996	2005	35
Fort Walton	FL	6,372	—	694	—	694	6,372	7,066	(668	)	2000	2007	35
Hollywood	FL	9,887	—	1,994	—	1,994	9,887	11,881	(1,208	)	1972	2007	30
Jacksonville	FL	2,770	20	226	—	226	2,790	3,016	(922	)	1997	1997	40
Jacksonville	FL	2,473	47	256	—	256	2,520	2,776	(448	)	1997	2005	35
Leesburg	FL	3,239	—	301	—	301	3,239	3,540	(552	)	1999	2005	40
Milton	FL	3,929	—	990	—	990	3,929	4,919	—		1999	2010	30
Ocala	FL	5,260	—	620	—	620	5,260	5,880	(66	)	1996	2010	30
Ocala	FL	3,516	—	750	—	750	3,516	4,266	(37	)	2005	2010	35
Ormond Beach	FL	1,649	51	480	—	480	1,700	2,180	(294	)	1997	2005	35
Palm Coast	FL	2,580	38	406	—	406	2,618	3,024	(847	)	1997	1997	40
Pensacola	FL	5,667	1,250	408	—	408	6,917	7,325	(1,726	)	1999	1998	40
Quincy	FL	2,615	—	980	—	980	2,615	3,595	—		1999	2010	30
Rotunda West	FL	2,628	29	123	—	123	2,657	2,780	(861	)	1997	1997	40
Tallahassee	FL	9,218	95	696	—	696	9,313	10,009	(2,613	)	1999	1998	40
Tallahassee	FL	1,679	2,076	450	—	450	3,755	4,205	(379	)	1999	2006	35
Tamarac	FL	6,921	639	967	—	967	7,560	8,527	(1,082	)	2000	2006	35
Tampa	FL	12,343	—	2,360	—	2,360	12,343	14,703	(1,735	)	2001	2006	40
Tavares	FL	2,466	7	156	—	156	2,473	2,629	(844	)	1997	1997	40
Titusville	FL	4,706	—	1,742	—	1,742	4,706	6,448	(1,412	)	1987	2000	35

56

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
		(Dollar amounts in thousands)
Augusta	GA	3,820	—	568	—	568	3,820	4,388	(467	)	1997	2007	30
Jonesboro	GA	8,776	—	1,320	—	1,320	8,776	10,096	(1,464	)	2000	2006	35
Marietta	GA	6,002	—	1,350	—	1,350	6,002	7,352	(1,100	)	2000	2006	35
Carmel	IN	3,861	84	805	—	805	3,945	4,750	(2,413	)	1998	1997	14
Floyds Knobs	IN	8,945	—	740	—	740	8,945	9,685	(584	)	2008	2008	40
Greensburg	IN	1,249	1	120	—	120	1,250	1,370	(239	)	1999	2007	35
Indianapolis	IN	4,267	—	750	—	750	4,267	5,017	(788	)	1998	2006	35
Michigan City	IN	4,069	—	245	—	245	4,069	4,314	(695	)	1998	2005	40
Michigan City	IN	3,331	—	370	—	370	3,331	3,701	(567	)	1999	2005	40
Monticello	IN	2,697	—	270	—	270	2,697	2,967	(380	)	1999	2007	35
South Bend	IN	2,602	—	490	—	490	2,602	3,092	—		1990	2010	30
Derby	KS	1,463	57	269	—	269	1,520	1,789	(267	)	1994	2005	35
Lawrence	KS	3,822	—	932	—	932	3,822	4,754	(1,210	)	1995	1998	40
Salina	KS	1,921	—	200	—	200	1,921	2,121	(660	)	1996	1997	40
Salina	KS	2,887	—	329	—	329	2,887	3,216	(2,086	)	1989	1998	15
Topeka	KS	2,955	87	424	—	424	3,042	3,466	(1,983	)	1986	1998	15
Wellington	KS	1,006	56	11	—	11	1,062	1,073	(190	)	1994	2005	35
Kingston	MA	12,780	5,566	1,000	—	1,000	18,346	19,346	(3,230	)	1996	2006	35
Hagerstown	MD	4,664	448	533	—	533	5,112	5,645	(1,384	)	1999	1998	40
Brownstown Township(6)	MI	20,513	—	660	—	660	20,513	21,173	(3,000	)	2000	2006	35
Davidson	MI	1,754	26	154	—	154	1,780	1,934	(318	)	1997	2005	35
Delta	MI	4,812	10	181	—	181	4,822	5,003	(868	)	1998	2005	35
Delta	MI	1,743	16	155	—	155	1,759	1,914	(314	)	1998	2005	35
Farmington Hills	MI	1,863	86	84	—	84	1,949	2,033	(348	)	1994	2005	35
Farmington Hills	MI	2,014	—	95	—	95	2,014	2,109	(362	)	1994	2005	35
Grand Blanc	MI	4,135	70	375	—	375	4,205	4,580	(750	)	1998	2005	35
Grand Blanc	MI	4,048	68	375	—	375	4,116	4,491	(734	)	1998	2005	35
Haslett	MI	4,231	35	847	—	847	4,266	5,113	(750	)	1998	2005	35
Kentwood	MI	12,255	—	880	—	880	12,255	13,135	(1,725	)	2001	2006	40

57

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
		(Dollar amounts in thousands)
Troy	MI	7,582	68	697	—	697	7,650	8,347	(1,365	)	1998	2005	35
Troy	MI	7,986	90	1,046	—	1,046	8,076	9,122	(1,434	)	1998	2005	35
Utica	MI	5,102	33	245	—	245	5,135	5,380	(922	)	1995	2005	35
Austin	MN	8,893	—	400	—	400	8,893	9,293	(1,178	)	2002	2006	35
Blue Earth	MN	6,339	—	500	—	500	6,339	6,839	(880	)	1999	2006	35
Fairbault	MN	1,328	29	121	—	121	1,357	1,478	(242	)	1997	2005	35
Mankato	MN	1,064	25	90	—	90	1,089	1,179	(194	)	1996	2005	35
Owatonna	MN	1,762	—	60	—	60	1,762	1,822	(312	)	1996	2005	35
Owatonna	MN	2,239	—	70	—	70	2,239	2,309	(383	)	1999	2005	40
Sauk Rapids	MN	748	49	67	—	67	797	864	(141	)	1997	2005	35
St. Louis	MN	10,423	—	900	—	900	10,423	11,323	(1,426	)	2003	2006	35
Wilmar	MN	1,977	43	57	—	57	2,020	2,077	(363	)	1997	2005	35
Winona	MN	1,436	36	65	—	65	1,472	1,537	(264	)	1997	2005	35
Butler	MO	200	72	103	—	103	272	375	(27	)	1995	2007	30
Lamar	MO	899	52	113	—	113	951	1,064	(111	)	1996	2007	30
Nevada	MO	—	136	253	—	253	136	389	(14	)	1993	2007	35
Nevada	MO	—	48	253	—	253	48	301	(2	)	1996	2007	35
Greenville	MS	4,411	—	271	—	271	4,411	4,682	(462	)	1999	2007	35
Asheboro	NC	7,054	—	200	—	200	7,054	7,254	(963	)	1998	2006	35
Cramerton	NC	13,713	—	300	—	300	13,713	14,013	(1,810	)	1999	2006	35
Harrisburg	NC	10,472	—	300	—	300	10,472	10,772	(1,432	)	1997	2006	35
Hendersonville	NC	12,183	—	400	—	400	12,183	12,583	(1,701	)	2005	2006	35
Hickory	NC	2,531	11	385	—	385	2,542	2,927	(809	)	1997	1998	40
Hillsborough	NC	12,755	—	400	—	400	12,755	13,155	(1,768	)	2005	2006	35
Newton	NC	11,707	528	400	—	400	12,235	12,635	(1,580	)	2000	2006	35
Salisbury	NC	11,902	500	300	—	300	12,402	12,702	(1,657	)	1999	2006	35
Shelby	NC	10,377	544	300	—	300	10,921	11,221	(1,425	)	2000	2006	35
Sourthport	NC	12,283	—	300	—	300	12,283	12,583	(1,713	)	2005	2006	35
Burleigh	ND	5,902	—	400	—	400	5,902	6,302	(759	)	1994	2006	35

58

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Brick	NJ	2,428	—	1,102	—	1,102	2,428	3,530	(491	)	1999	2002	40
Deptford	NJ	3,430	1	655	—	655	3,431	4,086	(1,051	)	1998	1998	40
Albuquerque	NM	22,987	—	440	—	440	22,987	23,427	(3,324	)	1998	2006	35
Sparks	NV	5,119	85	505	—	505	5,204	5,709	(1,905	)	1991	1997	35
Sparks	NV	7,278	132	714	—	714	7,410	8,124	(2,370	)	1993	1997	40
Centereach	NY	15,204	1,291	6,000	—	6,000	16,495	22,495	(3,963	)	1973	2002	35
Manlius	NY	10,080	48	500	—	500	10,128	10,628	(1,818	)	1994	2005	35
Vestal	NY	10,394	—	750	—	750	10,394	11,144	(2,283	)	1994	2004	35
Barberton	OH	3,125	20	263	—	263	3,145	3,408	(562	)	1997	2005	35
Englewood	OH	2,277	25	260	—	260	2,302	2,562	(410	)	1997	2005	35
Greenville	OH	2,311	3,990	215	—	215	6,301	6,516	(1,063	)	1997	1997	40
Groveport	OH	10,516	—	1,080	—	1,080	10,516	11,596	(1,496	)	1998	2006	35
Lancaster	OH	2,084	17	350	—	350	2,101	2,451	(646	)	1998	1998	40
Lorain	OH	9,280	—	620	—	620	9,280	9,900	(1,530	)	2000	2006	35
Marion	OH	2,676	78	210	—	210	2,754	2,964	(491	)	1998	2005	35
Medina	OH	10,199	—	500	—	500	10,199	10,699	(1,469	)	1995	2006	35
Medina	OH	11,809	—	900	—	900	11,809	12,709	(1,624	)	2000	2007	35
Mt. Vernon	OH	9,952	—	760	—	760	9,952	10,712	(1,500	)	2001	2006	35
Springdale	OH	2,092	16	440	—	440	2,108	2,548	(696	)	1997	1997	40
Zanesville	OH	12,421	—	830	—	830	12,421	13,251	(1,605	)	1996	2007	35
Bartlesville	OK	2,337	83	183	—	183	2,420	2,603	(431	)	1997	2005	35
Bethany	OK	1,212	77	114	—	114	1,289	1,403	(228	)	1994	2005	35
Broken Arrow	OK	1,445	19	178	—	178	1,464	1,642	(510	)	1996	1997	40
Oklahoma	OK	15,954	—	1,200	—	1,200	15,954	17,154	(2,404	)	1999	2006	35
Beaverton	OR	5,695	—	721	—	721	5,695	6,416	(873	)	2000	2005	40
Bend	OR	3,923	—	499	—	499	3,923	4,422	(602	)	2001	2005	40
Forest Grove	OR	3,152	—	401	—	401	3,152	3,553	(1,351	)	1994	1995	35
Gresham	OR	4,647	—	—	—	—	4,647	4,647	(1,992	)	1988	1995	35
McMinnville(7)	OR	3,976	—	760	—	760	3,976	4,736	(1,491	)	1989	1995	40

59

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Springfield	OR	3,382	—	140	—	140	3,382	3,522	—		1991	2010	30
Troutdale	OR	5,470	—	874	—	874	5,470	6,344	(836	)	2000	2005	40
Dublin	PA	2,533	—	310	—	310	2,533	2,843	(431	)	1998	2005	40
Indiana	PA	2,706	—	194	—	194	2,706	2,900	(696	)	1997	2002	35
Kingston	PA	2,262	—	196	—	196	2,262	2,458	(276	)	1992	2007	30
Old Forge	PA	264	—	103	—	103	264	367	(32	)	1990	2007	30
Peckville	PA	2,078	—	163	—	163	2,078	2,241	(254	)	1989	2007	30
South Fayette Township	PA	9,159	282	653	—	653	9,441	10,094	(2,729	)	1999	1998	40
Wyoming	PA	1,500	—	107	—	107	1,500	1,607	(183	)	1993	2007	30
York	PA	4,534	318	413	—	413	4,852	5,265	(1,396	)	1999	1998	40
East Greenwich	RI	8,417	108	1,200	—	1,200	8,525	9,725	(2,339	)	2000	1998	40
Lincoln	RI	9,612	29	477	—	477	9,641	10,118	(2,777	)	2000	1998	33
Portsmouth	RI	9,155	91	1,200	—	1,200	9,246	10,446	(2,596	)	1999	1998	40
Clinton	SC	2,560	—	87	—	87	2,560	2,647	(1,271	)	1997	1998	20
Goose Creek	SC	2,336	—	619	—	619	2,336	2,955	(601	)	1998	2002	35
Greenwood	SC	2,648	—	107	—	107	2,648	2,755	(1,314	)	1997	1998	20
Brown	SD	3,125	—	400	—	400	3,125	3,525	(435	)	1991	2006	35
Brown	SD	2,584	—	300	—	300	2,584	2,884	(371	)	2000	2006	35
Lincoln	SD	8,273	—	700	—	700	8,273	8,973	(1,175	)	2002	2006	35
Pennington	SD	5,575	—	300	—	300	5,575	5,875	(720	)	1997	2006	35
Bartlett	TN	12,069	—	870	—	870	12,069	12,939	(1,895	)	1999	2006	35
Bristol	TN	5,000	2,690	406	—	406	7,690	8,096	(1,793	)	1999	1998	40
Chattanooga	TN	6,159	—	310	—	310	6,159	6,469	(1,121	)	1999	2006	35
Hixson	TN	5,146	—	50	—	50	5,146	5,196	(497	)	2000	2008	35
Johnson City	TN	5,000	543	404	—	404	5,543	5,947	(1,518	)	1999	1998	40
Knoxville	TN	6,279	—	790	—	790	6,279	7,069	(863	)	2001	2005	40
Memphis	TN	18,208	10,642	1,360	—	1,360	28,850	30,210	(3,144	)	1964	2008	30
Memphis	TN	8,180	84	629	—	629	8,264	8,893	(1,772	)	1989	2007	13
Memphis	TN	8,558	92	726	—	726	8,650	9,376	(1,768	)	1985	2007	13

60

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Memphis	TN	5,259	38	412	—	412	5,297	5,709	(1,095	)	1989	2007	13
Murfreesboro	TN	5,131	488	499	—	499	5,619	6,118	(1,549	)	1999	1998	40
Nashville	TN	5,999	—	960	—	960	5,999	6,959	(1,100	)	1998	2006	35
Nashville	TN	6,156	—	1,000	—	1,000	6,156	7,156	(1,120	)	1999	2006	35
Newport	TN	6,116	—	423	—	423	6,116	6,539	(641	)	2000	2007	35
Arlington	TX	4,349	—	3,100	—	3,100	4,349	7,449	(884	)	1998	2006	35
Austin	TX	22,558	—	1,360	—	1,360	22,558	23,918	(3,268	)	2000	2006	35
Bedford(8)	TX	18,138	—	780	—	780	18,138	18,918	(2,690	)	1999	2006	35
Conroe	TX	17,898	—	1,510	—	1,510	17,898	19,408	(2,658	)	1997	2006	35
Denton	TX	1,425	33	185	—	185	1,458	1,643	(509	)	1996	1996	40
Ennis	TX	1,409	26	119	—	119	1,435	1,554	(502	)	1996	1996	40
Flower Mound	TX	3,215	—	650	—	650	3,215	3,865	—		1995	2010	30
Fort Worth	TX	10,417	—	640	—	640	10,417	11,057	(1,432	)	2001	2005	40
Garland	TX	12,931	—	890	—	890	12,931	13,821	(2,008	)	1999	2006	35
Houston	TX	7,892	—	493	—	493	7,892	8,385	(2,466	)	1998	1997	40
Houston	TX	7,194	—	1,235	—	1,235	7,194	8,429	(2,248	)	1998	1997	40
Houston	TX	8,945	—	985	—	985	8,945	9,930	(2,628	)	1999	1997	40
Houston	TX	7,052	—	1,089	—	1,089	7,052	8,141	(2,072	)	1999	1997	40
Houston	TX	22,361	—	870	—	870	22,361	23,231	(3,243	)	1999	2006	35
Houston	TX	17,872	—	850	—	850	17,872	18,722	(2,655	)	1998	2006	35
Irving	TX	12,597	—	930	—	930	12,597	13,527	(1,964	)	1999	2006	35
Kerrville	TX	2,129	88	195	—	195	2,217	2,412	(394	)	1997	2005	35
Lake Jackson	TX	13,503	—	220	—	220	13,503	13,723	(2,083	)	1998	2006	35
Lancaster	TX	2,100	65	175	—	175	2,165	2,340	(386	)	1997	2005	35
Lewisville	TX	13,933	—	770	—	770	13,933	14,703	(2,139	)	1998	2006	35
Paris	TX	1,465	32	166	—	166	1,497	1,663	(523	)	1996	1996	40
San Antonio	TX	7,765	—	470	—	470	7,765	8,235	(1,331	)	1999	2006	35
San Antonio	TX	3,910	100	359	—	359	4,010	4,369	(714	)	1997	2005	35
Temple	TX	13,353	—	370	—	370	13,353	13,723	(1,984	)	1997	2006	35

61

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Temple	TX	2,055	34	84	—	84	2,089	2,173	(375	)	1997	2005	35
Texas City	TX	11,605	—	550	—	550	11,605	12,155	(1,755	)	1996	2006	35
Victoria	TX	12,707	—	330	—	330	12,707	13,037	(1,900	)	1997	2006	35
Wharton	TX	9,167	—	930	—	930	9,167	10,097	(1,436	)	1996	2006	35
Salem	VA	10,320	—	890	—	890	10,320	11,210	(1,414	)	1998	2006	35
Centralia	WA	5,254	87	610	—	610	5,341	5,951	(737	)	1993	2007	30
Olympia	WA	10,954	156	870	—	870	11,110	11,980	(1,465	)	1995	2007	30
Richland	WA	6,052	191	172	—	172	6,243	6,415	(2,661	)	1990	1995	35
Sedro Woolley	WA	4,480	4	340	—	340	4,484	4,824	(677	)	1996	2006	35
Sequim	WA	5,570	—	230	—	230	5,570	5,800	(169	)	1961	2010	20
Spokane	WA	4,121	—	466	—	466	4,121	4,587	(1,019	)	1959	2003	35
Tacoma	WA	5,208	22	403	—	403	5,230	5,633	(1,762	)	1997	1996	40
Tacoma	WA	6,690	—	—	—	—	6,690	6,690	(1,370	)	1988	2003	35
Tacoma	WA	12,560	466	1,090	—	1,090	13,026	14,116	(2,509	)	1976	2007	20
Yakima	WA	5,122	39	500	—	500	5,161	5,661	(1,673	)	1998	1997	40
Appleton	WI	1,260	—	154	—	154	1,260	1,414	(152	)	1996	2008	30
Appleton	WI	1,120	—	136	—	136	1,120	1,256	(135	)	1997	2008	30
Beaver Dam	WI	1,959	—	120	—	120	1,959	2,079	(207	)	1998	2008	35
Beloit	WI	1,277	—	80	—	80	1,277	1,357	(167	)	1990	2007	30
Clinton	WI	1,126	—	80	—	80	1,126	1,206	(155	)	1991	2007	30
Cudahy	WI	1,859	—	220	—	220	1,859	2,079	(199	)	2001	2008	35
Eau Claire	WI	1,459	—	220	—	220	1,459	1,679	(44	)	1996	2010	30
Fitchburg	WI	2,235	—	190	—	190	2,235	2,425	(229	)	1998	2008	35
Glendale	WI	16,391	—	2,185	—	2,185	16,391	18,576	(6,205	)	1988	1997	35
Glendale	WI	1,732	—	190	—	190	1,732	1,922	(213	)	1999	2007	35
Glendale	WI	1,732	—	190	—	190	1,732	1,922	(213	)	1999	2007	35
Greenfield(9)	WI	20,540	—	1,500	—	1,500	20,540	22,040	(3,167	)	1999	2004	40
Hartland	WI	1,651	—	180	—	180	1,651	1,831	(236	)	1985	2007	35
Horicon	WI	2,751	—	270	—	270	2,751	3,021	(351	)	2002	2007	35

62

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Jefferson	WI	2,036	—	130	—	130	2,036	2,166	(239	)	1997	2008	30
Kenosha	WI	2,996	—	170	—	170	2,996	3,166	(385	)	1996	2007	30
Kenosha	WI	615	54	17	—	17	669	686	(119	)	1997	2005	35
Manitowac	WI	479	—	100	—	100	479	579	(16	)	1997	2010	30
Menasha	WI	716	—	116	—	116	716	832	(83	)	1994	2008	30
Menasha	WI	841	—	136	—	136	841	977	(98	)	1993	2008	30
Menasha	WI	706	—	114	—	114	706	820	(82	)	1994	2008	30
Menasha	WI	822	—	133	—	133	822	955	(96	)	1993	2008	30
Menomonee Falls(10)	WI	13,190	—	4,161	—	4,161	13,190	17,351	(4,993	)	1989	1997	35
Middleton	WI	1,866	48	155	—	155	1,914	2,069	(341	)	1997	2005	35
Monroe	WI	1,348	—	160	—	160	1,348	1,508	(204	)	1990	2007	30
Neenah	WI	1,732	—	406	—	406	1,732	2,138	(190	)	2007	2008	40
Neenah	WI	1,566	—	570	—	570	1,566	2,136	(186	)	2001	2008	35
Neenah	WI	1,296	—	304	—	304	1,296	1,600	(142	)	2006	2008	40
Neenah	WI	1,422	77	73	—	73	1,499	1,572	(267	)	1996	2005	35
Oak Creek	WI	1,732	—	190	—	190	1,732	1,922	(273	)	1997	2007	30
Oconomowoc	WI	3,831	—	300	—	300	3,831	4,131	(903	)	1992	2004	35
Onalaska	WI	2,303	65	62	—	62	2,368	2,430	(425	)	1995	2005	35
Oshkosh	WI	616	—	100	—	100	616	716	(24	)	1993	2010	30
Oshkosh	WI	1,046	86	61	—	61	1,132	1,193	(201	)	1996	2005	35
Pewaukee	WI	4,766	—	360	—	360	4,766	5,126	(625	)	2001	2007	35
Rib Mountain	WI	1,174	—	100	—	100	1,174	1,274	(36	)	1997	2010	30
Sheboygan	WI	1,144	—	680	—	680	1,144	1,824	(40	)	1995	2010	30
St. Francis	WI	2,465	—	190	—	190	2,465	2,655	(321	)	2000	2007	35
St. Francis	WI	2,465	—	190	—	190	2,465	2,655	(321	)	2000	2007	35
St. Francis(11)	WI	9,645	—	403	—	403	9,645	10,048	(1,970	)	2001	2004	40
Stoughton	WI	2,183	—	230	—	230	2,183	2,413	(301	)	1992	2007	30
Sun Prairie	WI	436	89	85	—	85	525	610	(91	)	1994	2005	35
Waukesha(12)	WI	9,411	1,827	2,765	—	2,765	11,238	14,003	(4,224	)	1985	1997	35

63

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Wauwatosa(13)	WI	11,483	—	1,541	—	1,541	11,483	13,024	(2,035	)	2005	2006	35
West Allis(14)	WI	8,117	2,911	682	—	682	11,028	11,710	(3,612	)	1996	1997	40
Wrightstown	WI	1,147	—	150	—	150	1,147	1,297	(150	)	1999	2008	35
Hurricane	WV	5,419	413	704	—	704	5,832	6,536	(1,549	)	1999	1998	40
		1,568,311	77,570	165,453	—	165,453	1,645,881	1,811,334	(316,024	)
Skilled Nursing Facilities:
Benton	AR	4,659	9	685	—	685	4,668	5,353	(1,679	)	1992	1998	35
Bryant	AR	4,889	16	320	—	320	4,905	5,225	(1,764	)	1989	1998	35
Fort Smith	AR	3,318	—	350	—	350	3,318	3,668	(517	)	2000	2007	35
Hot Springs	AR	2,321	—	54	—	54	2,321	2,375	(1,620	)	1978	1986	35
Lake Village	AR	4,318	15	261	—	261	4,333	4,594	(1,363	)	1998	1998	40
Monticello	AR	3,295	8	300	—	300	3,303	3,603	(1,039	)	1995	1998	40
Morrilton	AR	3,703	7	250	—	250	3,710	3,960	(1,334	)	1988	1998	35
Morrilton	AR	4,995	102	308	—	308	5,097	5,405	(1,573	)	1996	1998	40
Wynne	AR	4,165	7	327	—	327	4,172	4,499	(1,500	)	1990	1998	35
Chowchilla	CA	1,119	—	109	—	109	1,119	1,228	(650	)	1965	1987	40
Gilroy	CA	1,892	387	714	—	714	2,279	2,993	(1,321	)	1968	1991	30
Orange	CA	5,082	—	1,141	—	1,141	5,082	6,223	(2,352	)	1987	1992	40
Hartford	CT	4,190	5,278	350	—	350	9,468	9,818	(1,972	)	1969	2001	35
Torrington	CT	2,804	—	140	—	140	2,804	2,944	(327	)	1969	2008	20
Winsted	CT	3,516	969	70	—	70	4,485	4,555	(1,182	)	1960	2001	35
Fort Pierce	FL	3,038	—	125	—	125	3,038	3,163	(2,250	)	1960	1985	35
Jacksonville	FL	1,760	3,382	1,503	—	1,503	5,142	6,645	(863	)	1997	2005	40
Pensacola	FL	1,833	—	77	—	77	1,833	1,910	(1,077	)	1962	1987	40
Flowery Branch	GA	3,180	600	562	—	562	3,780	4,342	(1,470	)	1970	1999	30
Anderson	IN	5,116	—	620	—	620	5,116	5,736	(741	)	1967	2008	20
Berne	IN	1,904	4	150	—	150	1,908	2,058	(570	)	1986	2007	15
Clinton	IN	6,440	20	330	—	330	6,460	6,790	(2,115	)	1971	2007	12
Columbus	IN	3,147	11	200	—	200	3,158	3,358	(744	)	1988	2007	20

64

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Fowler	IN	3,223	—	300	—	300	3,223	3,523	(477	)	1973	2008	20
Gas City	IN	5,377	261	100	—	100	5,638	5,738	(1,780	)	1974	2007	12
Hanover	IN	4,340	—	390	—	390	4,340	4,730	(650	)	1975	2008	20
Hartford City	IN	1,848	89	130	—	130	1,937	2,067	(572	)	1988	2007	15
Huntington	IN	3,263	62	160	—	160	3,325	3,485	(935	)	1987	2007	15
Indianapolis	IN	4,829	535	1,700	—	1,700	5,364	7,064	(638	)	1968	2006	35
Knox	IN	1,412	—	300	—	300	1,412	1,712	(226	)	1984	2008	20
Lawrenceburg	IN	3,834	—	720	—	720	3,834	4,554	(533	)	1966	2008	20
Monticello	IN	827	—	180	—	180	827	1,007	(186	)	1988	2008	20
Muncie	IN	4,344	5	220	—	220	4,349	4,569	(1,397	)	1976	2007	12
Muncie	IN	7,295	125	160	—	160	7,420	7,580	(2,001	)	2001	2007	15
Petersburg	IN	2,352	4	33	—	33	2,356	2,389	(1,641	)	1970	1986	35
Portland	IN	5,313	56	240	—	240	5,369	5,609	(2,102	)	1964	2007	10
Richmond	IN	2,520	—	114	—	114	2,520	2,634	(1,758	)	1975	1986	35
Terre Haute	IN	3,245	227	330	—	330	3,472	3,802	(1,170	)	1965	2007	12
Washington	IN	9,673	—	420	—	420	9,673	10,093	(1,239	)	1968	2008	20
Winchester	IN	2,430	51	80	—	80	2,481	2,561	(698	)	1986	2007	15
Belleville	KS	1,887	—	213	—	213	1,887	2,100	(1,116	)	1977	1993	30
Hiawatha	KS	788	35	150	—	150	823	973	(577	)	1974	1998	14
Salina	KS	2,463	335	27	—	27	2,798	2,825	(1,497	)	1981	1994	30
Topeka	KS	1,137	58	100	—	100	1,195	1,295	(415	)	1973	1998	35
Wichita	KS	3,168	26	200	—	200	3,194	3,394	(563	)	1965	2004	35
Andover	MA	10,177	3,472	2,000	—	2,000	13,649	15,649	(2,717	)	1992	2006	35
Brighton	MA	9,694	533	2,000	—	2,000	10,227	12,227	(2,249	)	1995	2006	35
Danvers	MA	7,244	1,192	366	—	366	8,436	8,802	(2,082	)	1998	1999	40
East Longmeadow	MA	16,462	38	700	—	700	16,500	17,200	(2,503	)	1985	2006	35
Haverhill	MA	5,734	4,213	660	—	660	9,947	10,607	(4,561	)	1973	1993	30
Kingston	MA	4,890	3,484	2,000	—	2,000	8,374	10,374	(1,793	)	1992	2006	35
Lowell	MA	3,945	4,685	2,500	—	2,500	8,630	11,130	(1,370	)	1966	2006	35

65

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Needham	MA	13,416	720	2,000	—	2,000	14,136	16,136	(2,794	)	1996	2006	35
Reading	MA	8,184	403	1,000	—	1,000	8,587	9,587	(2,033	)	1988	2006	35
South Hadley	MA	7,250	1,105	1,000	—	1,000	8,355	9,355	(1,991	)	1988	2006	35
Springfield	MA	8,250	2,890	2,000	—	2,000	11,140	13,140	(1,512	)	1987	2007	35
Sudbury	MA	10,006	928	4,000	—	4,000	10,934	14,934	(2,321	)	1997	2006	35
West Springfield	MA	9,432	3,897	580	—	580	13,329	13,909	(1,917	)	1960	2006	35
Wilbraham	MA	4,473	453	1,000	—	1,000	4,926	5,926	(1,509	)	1988	2006	35
Worcester	MA	12,182	3,176	500	—	500	15,358	15,858	(2,808	)	1970	2006	35
Cumberland	MD	5,260	600	150	—	150	5,860	6,010	(3,813	)	1968	1985	35
Hagerstown	MD	4,316	1,598	215	—	215	5,914	6,129	(3,187	)	1971	1985	35
Westminster	MD	6,795	1,367	80	—	80	8,162	8,242	(4,980	)	1973	1985	35
Duluth	MN	7,377	4,245	1,014	—	1,014	11,622	12,636	(4,538	)	1971	1997	30
Hopkins	MN	4,184	2,273	436	—	436	6,457	6,893	(3,604	)	1961	1985	22
Minneapolis	MN	5,935	2,028	333	—	333	7,963	8,296	(5,367	)	1941	1985	22
Ashland	MO	3,281	—	670	—	670	3,281	3,951	(721	)	1993	2005	35
Columbia	MO	5,182	—	430	—	430	5,182	5,612	(1,125	)	1994	2005	35
Dixon	MO	1,892	—	330	—	330	1,892	2,222	(486	)	1989	2005	35
Doniphan	MO	4,943	—	120	—	120	4,943	5,063	(1,168	)	1991	2005	35
Forsyth	MO	5,472	—	230	—	230	5,472	5,702	(1,257	)	1993	2005	35
Maryville	MO	2,689	—	51	—	51	2,689	2,740	(1,921	)	1972	1985	35
Seymour	MO	3,120	—	200	—	200	3,120	3,320	(694	)	1990	2005	35
Silex	MO	1,536	—	870	—	870	1,536	2,406	(426	)	1991	2005	35
St. Louis	MO	1,953	—	1,370	—	1,370	1,953	3,323	(496	)	1988	2005	35
St. Louis	MO	7,924	—	683	—	683	7,924	8,607	(2,905	)	1954	2007	10
Strafford	MO	4,441	—	530	—	530	4,441	4,971	(1,000	)	1995	2005	35
Windsor	MO	2,969	—	350	—	350	2,969	3,319	(668	)	1996	2005	35
Columbus	MS	3,520	197	750	—	750	3,717	4,467	(1,297	)	1976	1998	35
Hendersonville	NC	2,244	—	116	—	116	2,244	2,360	(1,603	)	1979	1985	35
Sparks	NV	3,294	355	740	—	740	3,649	4,389	(1,731	)	1988	1991	40

66

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Beacon	NY	20,710	370	1,000	—	1,000	21,080	22,080	(3,706	)	2002	2006	35
Fishkill	NY	18,399	307	2,000	—	2,000	18,706	20,706	(3,269	)	1996	2006	35
Highland	NY	13,992	356	1,500	—	1,500	14,348	15,848	(2,682	)	1998	2006	35
Columbus	OH	4,333	—	343	—	343	4,333	4,676	(2,575	)	1984	1991	40
Galion	OH	3,420	93	24	—	24	3,513	3,537	(2,715	)	1967	1997	33
Warren	OH	7,489	266	450	—	450	7,755	8,205	(6,114	)	1967	1997	33
Washington Court House	OH	4,086	166	356	—	356	4,252	4,608	(2,506	)	1984	1991	40
Youngstown	OH	7,046	326	60	—	60	7,372	7,432	(5,629	)	1962	1997	40
Grandfield	OK	—	—	—	—	—	—	—	—		1965	2007	0
Lawton	OK	201	75	130	—	130	276	406	(53	)	1968	2007	20
Lawton	OK	4,946	282	196	—	196	5,228	5,424	(953	)	1985	2007	20
Temple	OK	1,405	—	23	—	23	1,405	1,428	(515	)	1971	2007	10
Tuttle	OK	1,489	340	35	—	35	1,829	1,864	(638	)	1960	2007	10
Greensburg	PA	9,129	—	769	—	769	9,129	9,898	(3,347	)	1971	2007	10
Kingston	PA	2,507	—	209	—	209	2,507	2,716	(460	)	1995	2007	20
Peckville	PA	1,302	—	116	—	116	1,302	1,418	(239	)	1991	2007	20
Beaufort	SC	10,399	—	923	—	923	10,399	11,322	(1,646	)	1970	2007	20
Bennettsville	SC	6,555	—	674	—	674	6,555	7,229	(1,602	)	1958	2007	15
Conway	SC	10,423	—	1,158	—	1,158	10,423	11,581	(1,129	)	1975	2007	30
Mt. Pleasant	SC	5,916	—	648	—	648	5,916	6,564	(1,446	)	1977	2007	15
Mitchell	SD	8,758	3	239	—	239	8,761	9,000	(292	)	1966	2010	20
Rapid City	SD	8,350	—	650	—	650	8,350	9,000	(112	)	1989	2010	20
Decatur	TN	3,329	27	193	—	193	3,356	3,549	(1,196	)	1981	1998	35
Harrogate	TN	6,058	—	664	—	664	6,058	6,722	(1,111	)	1990	2007	20
Madison	TN	6,415	500	1,120	—	1,120	6,915	8,035	(2,340	)	1967	1998	35
Baytown	TX	2,010	80	61	—	61	2,090	2,151	(1,095	)	1970	1990	40
Baytown	TX	2,496	224	90	—	90	2,720	2,810	(1,387	)	1975	1990	40
Beaumont	TX	12,847	—	290	—	290	12,847	13,137	—		2009	2010	30
Center	TX	1,532	213	22	—	22	1,745	1,767	(892	)	1972	1990	40

67

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Clarksville	TX	3,075	174	210	—	210	3,249	3,459	(769	)	1989	2005	35
Conroe	TX	19,657	2	670	—	670	19,659	20,329	(425	)	2001	2010	25
Corpus Christi	TX	4,485	—	330	—	330	4,485	4,815	(118	)	1973	2010	20
Corpus Christi	TX	8,277	—	580	—	580	8,277	8,857	(216	)	1994	2010	20
Corsicana	TX	10,925	—	440	—	440	10,925	11,365	—		1995	2010	20
DeSoto	TX	4,662	1,046	610	—	610	5,708	6,318	(1,262	)	1987	2005	35
Dripping Springs	TX	4,818	—	420	—	420	4,818	5,238	(120	)	1986	2010	20
Flowery Mound	TX	4,873	41	1,211	—	1,211	4,914	6,125	(1,134	)	1995	2002	35
Gainesville	TX	10,227	—	440	—	440	10,227	10,667	(256	)	1990	2010	20
Garland	TX	1,727	212	238	—	238	1,939	2,177	(994	)	1970	1990	40
Garland	TX	6,474	—	750	—	750	6,474	7,224	(706	)	2008	2008	30
Gilmer	TX	4,818	88	248	—	248	4,906	5,154	(1,655	)	1990	1998	35
Houston	TX	4,262	301	408	—	408	4,563	4,971	(2,680	)	1982	1990	30
Houston	TX	15,084	—	660	—	660	15,084	15,744	(334	)	2003	2010	25
Houston	TX	11,945	—	910	—	910	11,945	12,855	(279	)	2005	2010	25
Houston	TX	10,399	—	1,260	—	1,260	10,399	11,659	(290	)	1999	2010	20
Humble	TX	1,929	400	140	—	140	2,329	2,469	(1,148	)	1972	1990	40
Humble	TX	14,466	—	780	—	780	14,466	15,246	(321	)	2003	2010	25
Huntsville	TX	2,037	32	135	—	135	2,069	2,204	(1,094	)	1968	1990	40
Jacksonville	TX	7,684	—	410	—	410	7,684	8,094	(124	)	2006	2010	30
Kirbyville	TX	2,533	258	350	—	350	2,791	3,141	(633	)	1987	2006	10
Lancaster	TX	6,245	—	534	—	534	6,245	6,779	(804	)	2008	2008	30
Linden	TX	2,520	75	25	—	25	2,595	2,620	(1,508	)	1968	1993	30
Marshall	TX	6,291	—	265	—	265	6,291	6,556	(751	)	2008	2008	30
McKinney	TX	4,797	97	1,263	—	1,263	4,894	6,157	(1,736	)	1993	2000	30
McKinney	TX	4,737	170	756	—	756	4,907	5,663	(665	)	2006	2006	35
Midland	TX	8,534	—	800	—	800	8,534	9,334	(142	)	2008	2010	30
Missouri	TX	8,388	—	780	—	780	8,388	9,168	(193	)	2005	2010	25
Mt. Pleasant	TX	2,505	158	40	—	40	2,663	2,703	(1,534	)	1970	1993	30

68

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Nacogdoches	TX	1,211	43	135	—	135	1,254	1,389	(680	)	1973	1990	40
New Boston	TX	2,366	172	44	—	44	2,538	2,582	(1,441	)	1966	1993	30
Omaha	TX	1,579	92	28	—	28	1,671	1,699	(964	)	1970	1993	30
Orange	TX	7,431	—	180	—	180	7,431	7,611	—		2006	2010	30
Port Arthur	TX	11,167	—	510	—	510	11,167	11,677	—		2000	2010	20
Port Arthur	TX	9,224	—	160	—	160	9,224	9,384	—		1986	2010	20
Portland	TX	6,873	—	350	—	350	6,873	7,223	(168	)	1998	2010	20
San Angelo	TX	10,257	—	410	—	410	10,257	10,667	(171	)	2006	2010	30
San Antonio	TX	4,536	—	—	—	—	4,536	4,536	(1,102	)	1988	2002	35
San Antonio	TX	2,320	399	308	—	308	2,719	3,027	(921	)	1986	2004	35
Sherman	TX	2,075	87	67	—	67	2,162	2,229	(1,251	)	1971	1993	30
Trinity	TX	2,466	237	510	—	510	2,703	3,213	(627	)	1985	2006	10
Waxahachie	TX	3,493	406	319	—	319	3,899	4,218	(2,148	)	1976	1987	40
Wharton	TX	2,596	269	380	—	380	2,865	3,245	(571	)	1988	2006	10
Salt Lake City	UT	2,479	34	280	—	280	2,513	2,793	(442	)	1972	2004	35
Annandale	VA	7,752	603	487	—	487	8,355	8,842	(5,686	)	1963	1985	35
Charlottesville	VA	4,620	337	362	—	362	4,957	5,319	(3,383	)	1964	1985	35
Emporia	VA	6,960	320	473	—	473	7,280	7,753	(1,688	)	1971	2007	15
Petersburg	VA	2,215	1,486	93	—	93	3,701	3,794	(1,717	)	1972	1985	35
Petersburg	VA	2,945	1,474	94	—	94	4,419	4,513	(2,238	)	1976	1985	35
South Boston	VA	1,335	—	176	—	176	1,335	1,511	(830	)	1966	2007	6
Bellingham	WA	8,526	—	620	—	620	8,526	9,146	(426	)	1999	2008	40
Everett	WA	7,045	—	830	—	830	7,045	7,875	(1,275	)	1995	2004	35
Moses Lake	WA	4,307	1,326	304	—	304	5,633	5,937	(2,561	)	1972	1994	35
Moses Lake	WA	2,385	—	164	—	164	2,385	2,549	(1,298	)	1988	1994	30
Seattle	WA	5,752	182	1,223	—	1,223	5,934	7,157	(2,439	)	1993	1994	40
Shelton	WA	4,682	—	327	—	327	4,682	5,009	(1,624	)	1998	1997	40
Vancouver	WA	6,254	—	680	—	680	6,254	6,934	(1,132	)	1991	2004	35
Chilton	WI	2,423	116	55	—	55	2,539	2,594	(1,754	)	1963	1986	35

69

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Florence	WI	1,529	5	15	—	15	1,534	1,549	(1,068	)	1970	1986	35
Green Bay	WI	2,255	—	300	—	300	2,255	2,555	(1,573	)	1965	1986	35
Sheboygan	WI	1,697	22	348	—	348	1,719	2,067	(1,181	)	1967	1986	35
St. Francis	WI	535	—	80	—	80	535	615	(372	)	1960	1986	35
Waukesha	WI	13,546	1,850	2,196	—	2,196	15,396	17,592	(6,629	)	1973	1997	30
Wisconsin Dells	WI	1,697	1,519	81	—	81	3,216	3,297	(1,535	)	1972	1986	35
Logan	WV	3,006	—	100	—	100	3,006	3,106	(852	)	1987	2004	35
Ravenswood	WV	2,986	—	250	—	250	2,986	3,236	(832	)	1987	2004	35
South Charleston	WV	4,907	676	750	—	750	5,583	6,333	(1,493	)	1987	2004	35
White Sulphur	WV	2,894	100	250	—	250	2,994	3,244	(840	)	1987	2004	35
		932,160	74,973	90,732	—	90,732	1,007,133	1,097,865	(255,793	)
Continuing Care Retirement Communities:
Chandler	AZ	7,039	3,868	1,980	—	1,980	10,907	12,887	(2,570	)	1992	2002	35
Sterling	CO	2,716	—	400	—	400	2,716	3,116	(1,516	)	1979	1994	30
Northborough	MA	2,512	11,844	300	—	300	14,356	14,656	(4,365	)	1968	1998	30
Auburn	ME	10,502	—	400	—	400	10,502	10,902	(1,768	)	1982	2007	35
Gorham	ME	15,590	—	800	—	800	15,590	16,390	(2,185	)	1990	2007	35
York	ME	10,749	—	1,300	—	1,300	10,749	12,049	(1,409	)	2000	2007	35
Tulsa	OK	7,267	951	500	—	500	8,218	8,718	(1,641	)	1981	2007	15
Trenton	TN	3,004	—	174	—	174	3,004	3,178	(776	)	1974	2000	40
Corpus Christi	TX	15,430	13,591	1,848	—	1,848	29,021	30,869	(10,122	)	1985	1997	40
Corsicana	TX	14,576	—	750	—	750	14,576	15,326	—		1996	2010	30
		89,385	30,254	8,452	—	8,452	119,639	128,091	(26,352	)
Specialty Hospitals:
Scottsdale	AZ	5,924	195	242	—	242	6,119	6,361	(3,435	)	1986	1988	40
Tucson	AZ	9,435	—	1,275	—	1,275	9,435	10,710	(4,383	)	1992	1992	40
Orange	CA	3,715	—	700	—	700	3,715	4,415	(845	)	2000	2004	40
Tustin	CA	33,092	—	1,800	—	1,800	33,092	34,892	(7,192	)	1991	2004	35

70

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Conroe	TX	3,772	—	900	—	900	3,772	4,672	(1,013	)	1992	2004	35
Houston	TX	3,272	8,212	1,097	—	1,097	11,484	12,581	(1,611	)	1999	2004	35
The Woodlands	TX	2,472	—	100	—	100	2,472	2,572	(668	)	1995	2004	35
		61,682	8,407	6,114	—	6,114	70,089	76,203	(19,147	)
Triple Net Medical Office Buildings:
Huntsville(15)	AL	11,061	—	5,645	—	5,645	11,061	16,706	(1,320	)	1994	2007	30
Arcadia	FL	2,244	—	280	—	280	2,244	2,524	(168	)	1993	2008	30
Cape Coral	FL	3,433	—	1,010	—	1,010	3,433	4,443	(257	)	1984	2008	30
Englewood	FL	2,314	—	1,220	—	1,220	2,314	3,534	(174	)	1992	2008	30
Ft. Myers	FL	2,109	—	1,930	—	1,930	2,109	4,039	(158	)	1989	2008	30
Key West	FL	2,786	—	950	—	950	2,786	3,736	(209	)	1987	2008	30
Naples	FL	2,736	—	1,000	—	1,000	2,736	3,736	(176	)	1999	2008	35
Pt. Charlotte	FL	2,541	—	1,700	—	1,700	2,541	4,241	(191	)	1985	2008	30
Sarasota	FL	2,948	—	2,000	—	2,000	2,948	4,948	(221	)	1996	2008	30
Venice	FL	2,642	—	1,700	—	1,700	2,642	4,342	(198	)	1997	2008	30
Elkhart(16)	IN	2,743	—	107	—	107	2,743	2,850	(290	)	1994	2007	30
LaPorte(16)	IN	1,676	—	93	—	93	1,676	1,769	(177	)	1997	2007	30
Mishawaka(17)	IN	6,741	—	1,023	—	1,023	6,741	7,764	(712	)	1993	2007	30
South Bend(18)	IN	3,013	—	328	—	328	3,013	3,341	(318	)	1996	2007	30
Berlin	MD	1,717	—	—	—	—	1,717	1,717	(129	)	1994	2008	30
Madison Heights	MI	2,546	—	180	—	180	2,546	2,726	(164	)	2002	2008	35
Monroe	MI	2,748	—	180	—	180	2,748	2,928	(206	)	1997	2008	30
Brookfield	WI	4,005	—	630	—	630	4,005	4,635	(89	)	1999	2010	30
Hartland	WI	3,372	—	550	—	550	3,372	3,922	(75	)	1994	2010	30
New Berlin	WI	5,227	—	1,190	—	1,190	5,227	6,417	(116	)	1999	2010	30
Pewaukee	WI	7,968	—	1,300	—	1,300	7,968	9,268	(177	)	1997	2010	30
Watertown	WI	2,044	—	540	—	540	2,044	2,584	(39	)	2003	2010	35
Waukesha	WI	4,095	—	450	—	450	4,095	4,545	(91	)	1997	2010	30

71

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Waukesha	WI	11,081	—	950	—	950	11,081	12,031	(246	)	2008	2010	30
		93,790	—	24,956	—	24,956	93,790	118,746	(5,901	)
Medical Office Buildings:
Gilbert	AZ	8,224	647	—	—	—	8,871	8,871	(205	)	2007	2010	47
Burbank(19)	CA	23,031	2,505	—	—	—	25,536	25,536	(1,642	)	2004	2008	41
Castro Valley	CA	5,003	536	—	—	—	5,539	5,539	(409	)	1998	2008	35
Chula Vista(20)	CA	18,108	—	4,080	—	4,080	18,108	22,188	(1,022	)	2001	2008	43
Lynwood(21)	CA	15,811	1,320	—	—	—	17,131	17,131	(1,600	)	1993	2008	29
Mission Viejo(22)	CA	66,716	456	—	—	—	67,172	67,172	(1,320	)	2007	2010	43
Orange(23)	CA	55,987	504	—	—	—	56,491	56,491	(1,089	)	2008	2010	44
Padadena	CA	61,023	471	—	—	—	61,494	61,494	(1,735	)	2009	2010	46
Poway	CA	46,179	260	—	—	—	46,439	46,439	(979	)	2007	2008	44
San Bernardino	CA	8,325	178	—	—	—	8,503	8,503	(440	)	1971	2008	16
San Bernardino	CA	5,165	24	—	—	—	5,189	5,189	(189	)	1988	2008	23
San Gabriel(24)	CA	16,135	1,288	—	—	—	17,423	17,423	(1,032	)	2004	2008	46
Santa Clarita(25)	CA	26,284	2,746	6,870	374	7,244	29,030	36,274	(1,793	)	2005	2008	47
Torrance	CA	7,198	1,342	2,980	173	3,153	8,540	11,693	(1,051	)	1989	2008	23
Tamarac(26)	FL	4,704	203	1,492	—	1,492	4,907	6,399	(487	)	1980	2007	40
Augusta	GA	2,061	670	—	12	12	2,731	2,743	(509	)	1972	2006	40
Augusta	GA	2,359	690	587	324	911	3,049	3,960	(625	)	1983	2006	40
Austell(27)	GA	16,520	10	—	—	—	16,530	16,530	—		2002	2010	37
Evans	GA	891	79	—	198	198	970	1,168	(201	)	1940	2006	40
Fort Oglethorpe(28)	GA	7,000	10	—	—	—	7,010	7,010	—		2004	2010	44
Buffalo Grove	IL	1,383	84	1,031	80	1,111	1,467	2,578	(156	)	1992	2007	40
Grayslake	IL	2,429	135	2,198	25	2,223	2,564	4,787	(289	)	1996	2007	40
Gurnee	IL	1,436	23	126	7	133	1,459	1,592	(145	)	2005	2007	40
Gurnee	IL	1,418	11	176	8	184	1,429	1,613	(156	)	2002	2007	40
Gurnee	IL	821	—	72	—	72	821	893	(80	)	2002	2007	40
Gurnee	IL	5,445	3	492	—	492	5,448	5,940	(535	)	2001	2007	40

72

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Gurnee	IL	1,489	13	147	8	155	1,502	1,657	(153	)	1996	2007	40
Libertyville	IL	5,066	280	153	37	190	5,346	5,536	(473	)	1990	2007	40
Libertyville	IL	2,598	29	10	—	10	2,627	2,637	(210	)	1980	2007	40
Libertyville	IL	3,301	—	336	—	336	3,301	3,637	(323	)	1988	2007	40
Round Lake	IL	891	24	1,956	14	1,970	915	2,885	(128	)	1984	2007	40
Vernon Hills	IL	946	29	1,914	62	1,976	975	2,951	(156	)	1986	2007	40
Covington	LA	6,026	802	—	11	11	6,828	6,839	(1,115	)	1994	2006	40
Lafayette	LA	972	143	—	36	36	1,115	1,151	(223	)	1984	2006	40
Lafayette	LA	2,145	399	—	30	30	2,544	2,574	(518	)	1984	2006	40
Madeville	LA	1,111	89	—	35	35	1,200	1,235	(205	)	1987	2006	40
Metairie	LA	3,729	746	—	31	31	4,475	4,506	(715	)	1986	2006	40
Metairie	LA	747	348	—	21	21	1,095	1,116	(293	)	1980	2006	40
Slidell	LA	1,720	671	1,421	—	1,421	2,391	3,812	(385	)	1986	2007	40
Slidell	LA	1,790	532	1,314	—	1,314	2,322	3,636	(376	)	1990	2007	40
Arnold	MO	1,371	27	874	—	874	1,398	2,272	(124	)	1999	2007	35
Fenton	MO	1,737	103	—	—	—	1,840	1,840	(167	)	2003	2007	35
St. Louis	MO	14,362	1,827	—	—	—	16,189	16,189	(1,488	)	2003	2007	35
St. Louis	MO	12,416	381	—	—	—	12,797	12,797	(1,321	)	1993	2007	30
St. Louis	MO	4,032	132	—	—	—	4,164	4,164	(443	)	1975	2007	30
St. Louis	MO	5,052	41	—	—	—	5,093	5,093	(513	)	1980	2007	30
St. Louis	MO	2,549	77	1,364	—	1,364	2,626	3,990	(407	)	1983	2007	20
Henderson	NV	23,418	2,069	—	—	—	25,487	25,487	(1,552	)	1999	2008	46
Reno(29)	NV	10,988	1,662	1,254	—	1,254	12,650	13,904	(2,000	)	2004	2008	32
Columbus(26)	OH	10,738	35	698	—	698	10,773	11,471	(944	)	1999	2007	40
Zanesville	OH	4,950	210	—	—	—	5,160	5,160	—		2000	2010	40
Zanesville	OH	652	19	30	—	30	671	701	—		1960	2010	15
Zanesville	OH	1,658	110	450	—	450	1,768	2,218	—		2006	2010	36
Zanesville	OH	3,400	220	—	—	—	3,620	3,620	—		1995	2010	30
Zanesville	OH	176	30	—	—	—	206	206	—		1970	2010	6

73

													Life on which
													Depreciation in
													The Latest
		Initial Cost to	Cost								Year		Income
		Company	Capitalized			Carried at Close of Period(1)					Original		Statement is
		Building and	Subsequent to		Land		Buildings and		Accumulated		Construction	Date	Computed (in
		Improvements	Acquisition	Land(2)	Improvement	Land	Improvements	Total	Depreciation		Date	Acquired	Years)
						(Dollar amounts in thousands)
Zanesville	OH	831	60	—	—	—	891	891	—		1999	2010	22
Zanesville	OH	736	30	—	—	—	766	766	—		1985	2010	20
Zanesville	OH	741	30	—	—	—	771	771	—		1988	2010	22
Zanesville	OH	9,740	510	1,710	—	1,710	10,250	11,960	—		1990	2010	30
Zanesville	OH	3,535	281	—	—	—	3,816	3,816	—		1990	2010	25
Zanesville	OH	314	20	—	—	—	334	334	—		1985	2010	20
Zanesville	OH	538	30	—	—	—	568	568	—		1999	2010	20
Hillsboro(30)	OR	28,480	2,719	—	—	—	31,199	31,199	(1,944	)	2003	2008	45
Irmo(31)	SC	8,754	942	2,177	—	2,177	9,696	11,873	(1,189	)	2004	2007	40
Walterboro	SC	2,033	207	10	—	10	2,240	2,250	(410	)	1998	2006	40
Jasper	TN	3,862	156	7	—	7	4,018	4,025	(544	)	1998	2006	40
Brownsville	TX	381	5	351	—	351	386	737	(91	)	1989	2006	40
Frisco	TX	885	68	210	—	210	953	1,163	(252	)	1996	2006	40
Houston	TX	1,341	1,142	260	71	331	2,483	2,814	(605	)	1982	2006	40
Houston	TX	858	431	5	—	5	1,289	1,294	(143	)	1982	2006	40
Keller	TX	278	12	195	62	257	290	547	(64	)	1995	2006	40
Mansfield	TX	1,038	188	152	—	152	1,226	1,378	(255	)	1998	2006	40
Christiansburg	VA	649	276	71	22	93	925	1,018	(137	)	1997	2006	40
Midlothian	VA	252	158	190	83	273	410	683	(116	)	1985	2006	40
Richmond	VA	3,038	1,117	4	—	4	4,155	4,159	(685	)	1976	2006	40
Vancouver	WA	31,554	1,814	—	—	—	33,368	33,368	(2,976	)	2001	2007	44
Vancouver	WA	6,379	701	—	—	—	7,080	7,080	(570	)	1972	2007	38
Vancouver	WA	29,518	1,027	—	—	—	30,545	30,545	(3,296	)	1980	2007	29
Vancouver	WA	11,615	705	—	—	—	12,320	12,320	(1,000	)	1999	2007	39
Vancouver	WA	8,376	777	699	—	699	9,153	9,852	(650	)	1994	2007	43
Vancouver	WA	4,223	593	2,969	—	2,969	4,816	7,785	(403	)	1995	2007	36
Vancouver	WA	871	95	1,068	—	1,068	966	2,034	(129	)	1997	2007	33
Vancouver	WA	3,180	190	—	—	—	3,370	3,370	(4	)	1991	2010	29
		703,686	39,527	42,103	1,724	43,827	743,213	787,040	(47,384	)

74

																				Life on which
																				Depreciation in
																				The Latest
	Initial Cost to		Cost															Year		Income
	Company		Capitalized						Carried at Close of Period(1)									Original		Statement is
	Building and		Subsequent to				Land				Buildings and				Accumulated			Construction	Date	Computed (in
	Improvements		Acquisition		Land(2)		Improvement		Land		Improvements		Total		Depreciation			Date	Acquired	Years)
									(Dollar amounts in thousands)
Development in Progress	17,827		—		—		—		—		17,827		17,827		—
	$	3,466,841	$	230,731	$	337,810	$	1,724	$	339,534	$	3,697,572	$	4,037,106	$	(670,601	)

(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 $24,929,253.00 at December 31, 2010.
(4)	Real estate is security for notes payable in the aggregate of $6,178,460.16 at December 31, 2010.
(5)	Real estate is security for notes payable in the aggregate of $24,848,125.52 at December 31, 2010.
(6)	Real estate is security for notes payable in the aggregate of $9,579,893.88 at December 31, 2010.
(7)	Real estate is security for notes payable in the aggregate of $2,483,879.81 at December 31, 2010.
(8)	Real estate is security for notes payable in the aggregate of $7,949,747.66 at December 31, 2010.
(9)	Real estate is security for notes payable in the aggregate of $8,701,146.30 at December 31, 2010.
(10)	Real estate is security for notes payable in the aggregate of $8,070,559.72 at December 31, 2010.
(11)	Real estate is security for notes payable in the aggregate of $6,000,000.00 at December 31, 2010.
(12)	Real estate is security for notes payable in the aggregate of $5,179,249.35 at December 31, 2010.
(13)	Real estate is security for notes payable in the aggregate of $6,600,000.00 at December 31, 2010.

75

(14)	Real estate is security for notes payable in the aggregate of $5,150,000.00 at December 31, 2010.
(15)	Real estate is security for notes payable in the aggregate of $6,022,133.53 at December 31, 2010.
(16)	Real estate is security for notes payable in the aggregate of $2,118,122.95 at December 31, 2010.
(17)	Real estate is security for notes payable in the aggregate of $3,741,401.19 at December 31, 2010.
(18)	Real estate is security for notes payable in the aggregate of $1,540,032.74 at December 31, 2010.
(19)	Real estate is security for notes payable in the aggregate of $13,844,506.18 at December 31, 2010.
(20)	Real estate is security for notes payable in the aggregate of $16,000,000.00 at December 31, 2010.
(21)	Real estate is security for notes payable in the aggregate of $9,502,693.85 at December 31, 2010.
(22)	Real estate is security for notes payable in the aggregate of $47,473,082.83 at December 31, 2010.
(23)	Real estate is security for notes payable in the aggregate of $49,720,248.66 at December 31, 2010.
(24)	Real estate is security for notes payable in the aggregate of $9,649,634.48 at December 31, 2010.
(25)	Real estate is security for notes payable in the aggregate of $23,374,017.19 at December 31, 2010.
(26)	Real estate is security for notes payable in the aggregate of $11,752,314.77 at December 31, 2010.
(27)	Real estate is security for notes payable in the aggregate of $9,274,172.35 at December 31, 2010.
(28)	Real estate is security for notes payable in the aggregate of $6,487,204.93 at December 31, 2010.
(29)	Real estate is security for notes payable in the aggregate of $7,813,593.42 at December 31, 2010.
(30)	Real estate is security for notes payable in the aggregate of $20,650,427.18 at December 31, 2010.
(31)	Real estate is security for notes payable in the aggregate of $7,990,384.71 at December 31, 2010.

76

	Real EstateProperties			AccumulatedDepreciation
	(Dollar amounts in thousands)
Balances at December 31, 2007	$	3,197,976		$	410,865
Investments in real estate	421,268			107,368
Sales and transfers to assets held for sale	(219,031		)	(28,121		)
Balances at December 31, 2008	3,400,213			490,112
Investments in real estate	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
Investments in real estate	719,963			118,840
Sales and transfers to assets held for sale	(74,491		)	(33,533		)
Impairments	(15,006		)	—
Balances at December 31, 2010	$	4,037,106		$	670,601

77

EX-99.4

Exhibit 99.4

VENTAS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of and For the Year Ended December 31, 2010

On October 22, 2010, Ventas, Inc. (“Ventas” or the “Company”) announced that it had entered into a definitive agreement to acquire 118 private pay seniors housing communities owned and/or operated by Atria Senior Living Group, Inc. (“Atria”) (including assets owned by Atria’s affiliate, One Lantern Senior Living Inc (“One Lantern”)) from funds affiliated with Lazard Real Estate Partners LLC for a purchase price of approximately $3 billion, comprised of $1.35 billion in Ventas common stock (a fixed 24.96 million shares based on Ventas’s 10-day volume weighted average price as of October 20, 2010 of $54.09), $150 million in cash and the assumption or repayment of approximately $1.6 billion of debt and capital lease obligations, less assumed cash.

On February 28, 2011, Ventas announced that it had entered into a definitive agreement to acquire Nationwide Health Properties, Inc. (“NHP”) in a stock-for-stock transaction valued at approximately $7 billion.  Under the terms of the agreement, in the merger, NHP stockholders will receive a fixed exchange ratio of 0.7866 shares of Ventas common stock for each share of NHP common stock they own.

The following unaudited pro forma condensed consolidated financial information sets forth:

·The historical consolidated financial information of Ventas as of and for the year ended December 31, 2010 derived from Ventas’s audited consolidated financial statements;

·Pro forma adjustments to give effect to Ventas’s other 2010 acquisitions and other investments, dispositions and significant debt activity on the consolidated statement of income of Ventas for the year ended December 31, 2010, as if these transactions occurred on January 1, 2010;

·The historical consolidated financial information of Atria and One Lantern as of and for the year ended December 31, 2010 derived from Atria’s and One Lantern’s audited consolidated financial statements, respectively;

·Pro forma adjustments to give effect to Ventas’s acquisition of Atria and One Lantern on the consolidated balance sheet of Ventas as of December 31, 2010, as if the acquisition closed on December 31, 2010;

·Pro forma adjustments to give effect to Ventas’s acquisition of Atria and One Lantern on the consolidated statement of income of Ventas for the year ended December 31, 2010, as if the acquisition closed on January 1, 2010;

·Pro forma adjustments to give effect to Ventas’s February 2011 equity issuance, which was completed in contemplation of the acquisition of Atria and One Lantern;

·The historical consolidated financial information of NHP as of and for the year ended December 31, 2010 derived from NHP’s audited consolidated financial statements;

·Pro forma adjustments to give effect to NHP’s 2010 acquisitions and other investments, dispositions, significant debt activity and equity issuances on the consolidated statement of income of NHP for the year ended December 31, 2010, as if these transactions occurred on January 1, 2010;

·Pro forma adjustments to give effect to Ventas’s acquisition of NHP on the consolidated balance sheet of Ventas as of December 31, 2010, as if the acquisition closed on December 31, 2010; and

·Pro forma adjustments to give effect to Ventas’s acquisition of NHP on the consolidated statement of income of Ventas for the year ended December 31, 2010, as if the acquisition closed on January 1, 2010.

Certain assets and liabilities of Atria and One Lantern included in the historical consolidated financial information consisting primarily of certain working capital, property leases, insurance items and property management services will not be acquired and have been so reflected in the pro forma adjustments.  Also, certain intercompany activity between Atria, One Lantern and NHP has been eliminated in the pro forma adjustments.

These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only and are based on assumptions and estimates considered appropriate by Ventas’s management; however, they are not necessarily indicative of what Ventas’s consolidated financial condition or results of operations actually would have been assuming the transactions had been consummated as of the dates indicated,

nor do they purport to represent the consolidated financial position or results of operations for future periods. These unaudited pro forma condensed consolidated financial statements do not include the impact of any synergies that may be achieved in the transactions or any strategies that management may consider in order to continue to efficiently manage Ventas’s operations.  This pro forma condensed consolidated financial information should be read in conjunction with (1) Ventas’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2010 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 18, 2011, (2) Atria’s and One Lantern’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2010 included herein and (3) NHP’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2010 included herein.

The acquisition of Atria, One Lantern and NHP will be accounted for using the acquisition method of accounting.  The total purchase price of approximately $10 billion will be allocated to the assets ultimately acquired and liabilities ultimately assumed based upon their respective fair values.  The allocations of the purchase prices reflected in these unaudited pro forma condensed consolidated financial statements have not been finalized and are based upon preliminary estimates of these fair values, which is the best available information at the current time. A final determination of the fair values of the assets and liabilities, which cannot be made prior to the completion of the acquisitions, which are anticipated to occur during 2011, will be based on the actual valuations of the tangible and intangible assets and liabilities that exist as of the dates of completion of the acquisitions. Consequently, amounts preliminarily allocated to identifiable tangible and intangible assets and liabilities could change significantly from those used in the pro forma condensed consolidated financial statements and could result in a material change in depreciation and amortization of tangible and intangible assets and liabilities.

The completion of the valuations, the allocations of purchase price, the impact of ongoing integration activities, the timing of completion of the acquisitions and other changes in tangible and intangible assets and liabilities that occur prior to completion of the acquisitions could cause material differences in the information presented.

VENTAS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of December 31, 2010

(In thousands)

	Ventas Historical		Atria Historical (A)		One Lantern Historical (B)		Atria and One Lantern  Acquisition  Adjustments (C)			Ventas Pro  Forma for the  Atria and One  Lantern  Acquisition		NHP Historical  (D)		NHP  Acquisition  Adjustments (E)			Total Pro  Forma
Assets:
Net real estate investments	$	5,444,114	$	1,053,595	$	721,489	$	1,483,572	(F)	$	8,702,770	$	3,861,512	$	3,548,347	(O)	$	16,112,629
Cash and cash equivalents	21,812		143,833		27,858		(104,333		)(G)	89,170		59,591		749		(P)	149,510
Escrow deposits and restricted cash	38,940		29,142		33,250		(13,320		)(G)	88,012		7,285		(4,202		)(Q)	91,095
Deferred financing costs, net	19,533		11,384		4,064		(15,448		)(H)	19,533		8,566		(8,566		)(H)	19,533
Other	233,622		121,132		9,940		(52,276		)(I)	312,418		155,670		48,133		(R)	516,221
Total assets	$	5,758,021	$	1,359,086	$	796,601	$	1,298,195		$	9,211,903	$	4,092,624	$	3,584,461		$	16,888,988
Liabilities and equity:
Liabilities:
Senior notes payable and other debt	$	2,900,044	$	1,067,521	$	661,519	$	(51,229	)(J)	$	4,577,855	$	1,529,257	$	(63,682	)(S)	$	6,043,430
Accrued interest	19,296		555		5,229		(418		)(G)	24,662		23,728		(137		)(Q)	48,253
Accounts payable and other liabilities	207,143		78,157		45,916		12,422		(K)	343,638		127,341		401,623		(T)	872,602
Deferred income taxes	241,333		28,642		—		11,221		(L)	281,196		—		—			281,196
Total liabilities	3,367,816		1,174,875		712,664		(28,004		)	5,227,351		1,680,326		337,804			7,245,481
Redeemable OP unitholder interests	—		—		—		—			—		79,188		18,742		(U)	97,930
Commitments and contingencies
Equity:
Total stockholders’ equity	2,386,726		184,211		49,149		1,360,987		(M)	3,981,073		2,299,827		3,145,043		(V)	9,425,943
Noncontrolling interest	3,479		—		34,788		(34,788		)(N)	3,479		33,283		82,872		(W)	119,634
Total equity	2,390,205		184,211		83,937		1,326,199			3,984,552		2,333,110		3,227,915			9,545,577
Total liabilities and equity	$	5,758,021	$	1,359,086	$	796,601	$	1,298,195		$	9,211,903	$	4,092,624	$	3,584,461		$	16,888,988

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

VENTAS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

For the year ended December 31, 2010

(In thousands, except per share amounts)

	Ventas Historical			Ventas 2010 Transactions Adjustments (X)			Pro Forma for Ventas 2010 Transactions			Atria Historical (A)			One Lantern Historical (B)			Atria and One Lantern Acquisition Adjustments (C)			Ventas Pro Forma for the Atria and One Lantern Acquisition			NHP Historical (D)			NHP 2010 Transactions Adjustments (X)			Pro Forma for NHP 2010 Transactions			NHP Acquisition Adjustments (E)			Total Pro Forma
Revenues:
Rental income:
Triple-net leased	$	469,825		$	260		$	470,085		$	—		$	—		$	—		$	470,085		$	307,567		$	20,845		$	328,412		$	13,464	(EE)	$	811,961
Medical office buildings	69,747			25,949			95,696			—			—			—			95,696			102,287			12,376			114,663			(2,398		)(FF)	207,961
	539,572			26,209			565,781			—			—			—			565,781			409,854			33,221			443,075			11,066			1,019,922
Resident fees and services	446,301			1,619			447,920			466,773			165,463			(33,316		)(Y)	1,046,840			—			—			—			—			1,046,840
Medical office building services revenue	14,098			14,098			28,196			—			—			—			28,196			—			—			—			—			28,196
Income from loans and investments	16,412			1,024			17,436			—			—			—			17,436			26,402			5,678			32,080			(100		)(GG)	49,416
Interest and other income	484			19			503			77,789			820			(78,318		)(Y)	794			2,977			(1		)	2,976			—			3,770
Total revenues	1,016,867			42,969			1,059,836			544,562			166,283			(111,634		)	1,659,047			439,233			38,898			478,131			10,966			2,148,144
Expenses:
Interest	178,863			9,178			188,041			71,604			47,236			(47,508		)(Z)	259,373			97,329			(3,329		)	94,000			(38,266		)(HH)	315,107
Depreciation and amortization	205,600			14,845			220,445			52,138			22,663			109,093		(AA)	404,339			134,522			18,276			152,798			108,859		(II)	665,996
Property-level operating expenses:
Senior living	291,831			1,443			293,274			395,796			109,277			(75,565		)(BB)	722,782			—			—			—			(3,039		)(Q)	719,743
Medical office buildings	24,122			9,783			33,905			—			—			—			33,905			39,536			2,432			41,968			—			75,873
	315,953			11,226			327,179			395,796			109,277			(75,565		)	756,687			39,536			2,432			41,968			(3,039		)	795,616
Medical office building services costs	9,518			9,518			19,036			—			—			—			19,036			—			—			—			—			19,036
General, administrative and professional fees	49,830			7,981			57,811			47,558			749			(48,307		)(Y)	57,811			31,057			—			31,057			—			88,868
Foreign currency loss	272			—			272			—			—			—			272			—			—			—			—			272
Loss (gain) on extinguishment of debt	9,791			—			9,791			2			—			(2		)(Y)	9,791			(75		)	—			(75		)	75		(JJ)	9,791
Other	—			—			—			6,009			19,607			(85		)(Y)	25,531			—			—			—			—			25,531
Merger related expenses and deal costs	19,243			—			19,243			—			—			—			19,243			5,118			—			5,118			—			24,361
Total expenses	789,070			52,748			841,818			573,107			199,532			(62,374		)	1,552,083			307,487			17,379			324,866			67,629			1,944,578
Income (loss) before (loss) income from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest	227,797			(9,779		)	218,018			(28,545		)	(33,249		)	(49,260		)	106,964			131,746			21,519			153,265			(56,663		)	203,566
(Loss) income from unconsolidated entities	(664		)	(664		)	(1,328		)	—			130			(130		)(Y)	(1,328		)	5,478			(12		)	5,466			(869		)(KK)	3,269
Income tax (expense) benefit	(5,201		)	(39		)	(5,240		)	7,560			—			32,303		(CC)	34,623			—			—			—			—			34,623
Income (loss) from continuing operations	221,932			(10,482		)	211,450			(20,985		)	(33,119		)	(17,087		)	140,259			137,224			21,507			158,731			(57,532		)	241,458
Net income (loss) attributable to noncontrolling interest	3,562			(3,616		)	(54		)	—			(5,907		)	5,907		(N)	(54		)	(1,643		)	(317		)	(1,960		)	(3,165		)(KK)	(5,179		)
Income (loss) from continuing operations attributable to common stockholders	$	218,370		$	(6,866	)	$	211,504		$	(20,985	)	$	(27,212	)	$	(22,994	)	$	140,313		$	138,867		$	21,824		$	160,691		$	(54,367	)	$	246,637
Income from continuing operations attributable to common stockholders per common share:
Basic	$	1.39		n/a			$	1.35		n/a			n/a			n/a			$	0.75		$	1.14		n/a			$	1.27		n/a			$	0.86
Diluted	$	1.38		n/a			$	1.34		n/a			n/a			n/a			$	0.75		$	1.12		n/a			$	1.24		n/a			$	0.85
Shares used in computing earnings per common share:
Basic	156,608			—			156,608			n/a			n/a			30,522		(DD)	187,130			121,687			4,782			126,469			99,481		(LL)	286,611
Diluted	157,657			—			157,657			n/a			n/a			30,522		(DD)	188,179			124,339			4,782			129,121			101,567		(LL)	289,746

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

VENTAS, INC.

NOTES AND MANAGEMENT’S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — BASIS OF PRO FORMA PRESENTATION

Ventas, Inc. (“Ventas” or the “Company”) is a real estate investment trust (“REIT”) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada.  The historical consolidated financial statements of Ventas include the accounts of the Company and its wholly owned subsidiaries and joint venture entities over which it exercises control.

On October 22, 2010, Ventas announced that it had entered into a definitive agreement to acquire 118 private pay seniors housing communities owned and/or operated by Atria Senior Living Group, Inc. (“Atria”) (including assets owned by Atria’s affiliate, One Lantern Senior Living Inc (“One Lantern”)) from funds affiliated with Lazard Real Estate Partners LLC (“Lazard”) for a purchase price of approximately $3 billion, comprised of $1.35 billion in Ventas common stock (a fixed 24.96 million shares based on Ventas’s 10-day volume weighted average price as of October 20, 2010 of $54.09), $150 million in cash and the assumption or repayment of approximately $1.6 billion of debt and capital lease obligations, less assumed cash.

On February 28, 2011, Ventas announced that it had entered into a definitive agreement to acquire Nationwide Health Properties, Inc. (“NHP”) in a stock-for-stock transaction valued at approximately $7 billion.  Under the terms of the agreement, in the merger, NHP stockholders will receive a fixed exchange ratio of 0.7866 shares of Ventas common stock for each share of NHP common stock they own.

NOTE 2 — ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(A)Reflects historical financial condition or results of operations of Atria as of or for the year ended December 31, 2010.  Certain amounts have been reclassified to conform to Ventas’s presentation.

(B)Reflects historical financial condition or results of operations of One Lantern as of or for the year ended December 31, 2010.  Certain amounts have been reclassified to conform to Ventas’s presentation.

(C)Represents adjustments to record the acquisition of Atria and One Lantern by Ventas based upon the purchase price of approximately $3 billion.  The calculation of the purchase price to be allocated is as follows (in millions, except per share amounts):

Equity to be issued (24.96 million shares at $54.09 per share) (1)	$	1,350
Cash to be paid (assumed to be funded with borrowings from Ventas’s unsecured revolving credit facilities)	150
Assumption or repayment of net debt, including capital lease obligations	1,626
Purchase price	$	3,126

(1)Purchase price will be adjusted based on the share price of Ventas common stock at closing consistent with the requirements of ASC 805, Business Combinations.

(D)Reflects historical financial condition or results of operations of NHP as of or for the year ended December 31, 2010.  Certain amounts have been reclassified to conform to Ventas’s presentation.

(E)Represents adjustments to record the acquisition of NHP by Ventas based upon the purchase price of approximately $7 billion.  Additionally, certain intercompany activity between Atria, One Lantern and NHP has been eliminated. The calculation of the purchase price to be allocated is as follows (in millions, except per share amounts):

Equity to be issued (126.3 million shares of NHP common stock and 2.2 million Class A limited partnership units at $44.99 per share) (1)	$	5,778
Assumption of debt (2)	1,614
Purchase price	$	7,392

(1)Purchase price will be adjusted based on the share price of Ventas common stock at closing consistent with the requirements of ASC 805, Business Combinations.

(2)Includes NHP’s joint venture share of total debt from its unconsolidated entities.

(F)Reflects adjustment to eliminate assets of Atria and One Lantern included in the historical consolidated financial information that Ventas is not purchasing and an adjustment to record the estimated increase over Atria’s and One Lantern’s historical investment in real estate based upon the preliminary estimated fair value for the tangible and intangible real estate assets to be acquired.  These estimated values are as follows (in millions):

Land	$	608
Buildings and improvements	2,470
Acquired lease intangibles	125
Construction in progress	55
Estimated value of net real estate investments	$	3,258

(G)Reflects adjustments to eliminate assets and liabilities of Atria and One Lantern included in the historical consolidated financial information that Ventas is not acquiring or assuming as part of the working capital consideration.

(H)Represents the write-off of Atria’s, One Lantern’s and NHP’s historical deferred financing costs, which were not assigned any value in the preliminary purchase price allocation.

(I)Reflects adjustment to eliminate other assets of Atria and One Lantern included in the historical consolidated financial information that Ventas is not acquiring as part of the working capital consideration, net of other acquired assets, primarily consisting of goodwill.

(J)Represents the following adjustments (in millions):

Write-off Atria’s and One Lantern’s historical fair market value of debt adjustment	$	29
Fair market value of debt adjustment recorded in connection with the acquisition	49
Debt not assumed as part of the acquisition included in the historical consolidated financial information	(58		)
Net adjustment allocated for the acquired capital lease obligations	26
Atria and/or One Lantern debt anticipated to be repaid at closing	(176		)
Anticipated borrowings on unsecured revolving credit facility (1)	386
Ventas debt repaid with proceeds from its February 2011 equity issuance	(307		)
Pro forma adjustment to debt	$	(51	)

(1)Borrowings are comprised of $150 million of cash to be paid at closing, $176 million for the Atria and/or One Lantern debt anticipated to be repaid at closing and $60 million for estimated transaction and debt extinguishment costs to be paid related to the Atria and One Lantern acquisition.

(K)Reflects adjustment to eliminate other liabilities of Atria and One Lantern included in the historical consolidated financial information that Ventas is not assuming as part of the working capital consideration, offset by approximately $40.2 million of a contingent consideration liability, which is based on the preliminary fair value calculations.

(L)Represents the write-off of Atria’s historical deferred income tax liability, which was not assigned any value in the allocation of the acquisition, offset by Ventas’s estimate of approximately $39.9 million for its deferred tax liability associated with the step up to fair value for book purposes of the Atria and One Lantern assets acquired by a wholly owned taxable REIT subsidiary of Ventas (difference between book and tax bases).

(M)Represents the write-off of Atria’s and One Lantern’s historical equity, net of the issuance of 24.96 million shares of Ventas common stock to be issued in connection with the Atria acquisition, which was valued at $1.35 billion at the time of the announcement of the transaction, and proceeds received from Ventas’s February 2011 equity issuance of approximately $300 million. Additionally, the adjustment includes a reduction of stockholders’ equity in the amount of $60 million for the estimated transaction and debt extinguishment costs to be paid related to the Atria and One Lantern acquisition.

(N)Reflects the acquisition of the noncontrolling interest in One Lantern by Ventas as part of the transaction consideration.

(O)Reflects adjustment to record the estimated increase over NHP’s historical investment in real estate based upon the preliminary estimated fair value for the tangible and intangible real estate assets to be acquired.  Additionally, certain intercompany activity between Atria, One Lantern and NHP has been eliminated. These estimated values and eliminations are as follows (in millions):

Land	$	1,287
Buildings and improvements	5,653
Acquired lease intangibles	418
Construction in progress	18
Loans receivable	310
Investments in unconsolidated entities	85
Elimination of Atria and One Lantern assets leased from NHP that were classified as capital lease assets	(361		)
Pro forma adjustment to net real estate investments	$	7,410

(P)Reflects the net cash proceeds NHP received in January 2011 from the sale of a skilled nursing facility that was reflected as held for sale at December 31, 2010.

(Q)Reflects the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(R)Reflects adjustment to eliminate historical other assets of NHP that were not assigned any value in the preliminary purchase price allocation, the elimination of the asset held for sale at December 31, 2010 that was subsequently sold by NHP in January 2011 and the elimination of certain intercompany activity between Atria, One Lantern and NHP, net of other acquired assets, primarily consisting of other intangible assets.

(S)Represents the following adjustments (in millions):

Fair market value of debt adjustment allocated for the acquisition	$	66
Borrowings on unsecured revolving credit facility for estimated transaction costs to be paid related to the NHP acquisition	100
Elimination of promissory note between Atria and NHP	(23		)
Elimination of capital lease obligations between Atria, One Lantern and NHP	(207		)
Pro forma adjustment to debt	$	(64	)

(T)Reflects adjustment to eliminate historical other liabilities of NHP that were not assigned any value in the preliminary purchase price allocation, the elimination of certain intercompany activity between Atria, One Lantern and NHP and the recording of approximately $434.8 million of various lease intangibles, which primarily include below market operating lease intangibles, all of which are based on the preliminary fair value calculations.

(U)Represents the adjustment to record the fair market value of the redeemable OP unitholder interests, which are valued at a price of $44.99 per unit (the acquisition value of each share of NHP common stock at the time the acquisition was announced).

(V)Represents the adjustment to convert NHP’s historical equity into Ventas common stock, which was valued at a price of $44.99 per common share at the time the acquisition was announced. Additionally, the adjustment includes a reduction of stockholders’ equity in the amount of $100 million for the estimated transaction costs to be paid related to the NHP acquisition.

(W)Reflects the adjustment to record the estimated increase over NHP’s historical noncontrolling interest value based upon the preliminary estimated fair value of the noncontrolling interest.

NOTE 3 — VENTAS AND NHP 2010 TRANSACTIONS ADJUSTMENTS

(X)Adjustments reflect the effect on Ventas’s and NHP’s historical consolidated statements of income and shares used in computing earnings per common share as if Ventas or NHP had consummated its significant 2010 transactions on January 1, 2010.  With respect to Ventas, these adjustments primarily relate to the recording of income statement activity specific to the acquisition of Lillibridge Healthcare Services, Inc. and the acquisition of Sunrise Senior Living, Inc.’s noncontrolling interest in certain consolidated entities, and adjusting interest expense for a $200 million term loan with Bank of America, N.A. and a $400 million 3.125% senior notes issuance, assuming all transactions occurred on January 1, 2010.  With respect to NHP, the adjustments primarily relate to the recording of income statement activity for 2010 acquisitions (49 properties subject to triple-net leases and 20 multi-tenant medical office buildings), adjusting income from loans and other investments for the funding/acquisition of five new mortgage loans, adjusting interest expense for the prepayment of $118.3 million of secured debt and $175 million of credit facility borrowings and adjusting shares used in computing earnings per share for equity issuances, assuming all transactions occurred on January 1, 2010.

NOTE 4 — ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Y)Reflects adjustments to eliminate historical revenues and expenses of Atria and One Lantern attributable to assets or liabilities that Ventas is not acquiring or assuming as part of the acquisition.

(Z)Represents the following adjustments (in millions):

	For the Year Ended December 31, 2010
Elimination of historical interest expense on debt not assumed as part of the acquisition	$	(5	)
Fair market value of debt adjustment allocated for the acquisition	(14		)
Elimination of historical interest related to Atria and/or One Lantern deferred financing fees	(4		)
Elimination of Atria’s and/or One Lantern’s historical interest expense on debt anticipated to be repaid at closing	(13		)
Additional interest expense on borrowings on unsecured revolving credit facility	13
Ventas debt repaid with proceeds from its February 2011 equity issuance	(19		)
Net adjustment allocated for the acquired capital lease obligations	(5		)
Pro forma adjustment to interest	$	(47	)

(AA)Based on the preliminary purchase price allocation, Ventas expects to allocate $608 million to land and $2.5 billion to buildings and improvements. Depreciation expense is calculated on a straight line basis based on Ventas’s purchase price allocation and using a 35-year life for buildings and permanent structural improvements, a five-year life for furniture and equipment and a 10-year life for land improvements. Additionally, Ventas’s purchase price allocation includes $101 million of acquired in-place lease intangibles, which will be amortized over the average life of these leases (approximately one year).  Further, the adjustment reflects the elimination of historical depreciation expense related to assets Ventas is not acquiring.

(BB)Reflects adjustments to eliminate historical expenses of Atria and One Lantern attributable to assets or liabilities that Ventas is not acquiring or assuming as part of the acquisition, offset by the 5% management fee Ventas will be paying to Atria for management services related to the acquired communities.

(CC)Reflects adjustments to eliminate the historical tax benefit of Atria, offset by the estimated tax benefit Ventas expects to recognize due to the acquisition.

(DD)Reflects the issuance of 24.96 million shares of Ventas common stock at the Atria and One Lantern acquisition closing and Ventas’s February 2011 equity issuance of 5.6 million shares.

(EE)Reflects the net amortization of above and below market lease intangibles recorded by Ventas as a result of the NHP acquisition and the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(FF)Reflects the net amortization of above and below market lease intangibles recorded by Ventas as a result of the NHP acquisition and the elimination of NHP’s historical amortization related to above and below market lease intangibles.

(GG)Reflects adjustments to eliminate revenues and expenses of NHP attributable to assets or liabilities that Ventas is not acquiring or assuming as part of the acquisition and the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(HH)Represents the following adjustments (in millions):

	For the Year Ended December 31, 2010
Fair market value of debt adjustment allocated for the acquisition	$	(26	)
Elimination of historical interest expense related to NHP deferred financing fees	(4		)
Elimination of interest expense from a promissory note between Atria and NHP	(1		)
Elimination of Atria and One Lantern capital lease obligation interest	(10		)
Additional interest on borrowings on unsecured revolving credit facility	3
Pro forma adjustment to interest	$	(38	)

(II)Based on the preliminary purchase price allocation, Ventas expects to allocate $1.3 billion to land and $5.7 billion to buildings and improvements. Depreciation expense is calculated on a straight line basis based on Ventas’s purchase price allocation and using an average 34-year life for buildings and permanent structural improvements, a five-year life for furniture and equipment, an average eight-year life for land improvements and an average four-year life for tenant improvements. Additionally, Ventas’s purchase price allocation includes $261 million of in-place acquired lease intangibles, which will be amortized over the average remaining life of these leases.  Further, the adjustment reflects the elimination of certain intercompany activity between Atria, One Lantern and NHP.

(JJ)Reflects adjustment to eliminate gains and expenses of NHP attributable to transactions that would not have occurred had the acquisition closed on January 1, 2010.

(KK)Reflects the adjustment to record the estimated increase over NHP’s historical income related to the various joint venture entities as a result of the preliminary estimated fair value for the assets and liabilities acquired that will be depreciated and amortized over the estimated remaining useful life.

(LL)Reflects the conversion of NHP common stock to Ventas common stock at the exchange ratio of 0.7866.

NOTE 5 — FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS

Ventas’s historical and pro forma funds from operations (“FFO”) and normalized FFO for the year ended December 31, 2010 are summarized as follows (in thousands):

	Ventas Historical			Ventas 2010 Transactions Adjustments (X)			Pro Forma for Ventas 2010 Transactions			Atria Historical (A)			One Lantern Historical (B)			Atria and One Lantern Acquisition Adjustments (C)			Ventas Pro Forma for the Atria and One Lantern Acquisition			NHP Historical (D)			NHP 2010 Transactions Adjustments (X)			Pro Forma for NHP 2010 Transactions			NHP Acquisition Adjustments (E)			Total Pro Forma
Income (loss) from continuing operations attributable to common stockholders	$	218,370		$	(6,866	)	$	211,504		$	(20,985	)	$	(27,212	)	$	(22,994	)	$	140,313		$	138,867		$	21,824		$	160,691		$	(54,367	)	$	246,637
Discontinued operations	27,797			(2,556		)	25,241			—			—			—			25,241			4,899			(3,836		)	1,063			—			26,304
Net income (loss) attributable to common stockholders	246,167			(9,422		)	236,745			(20,985		)	(27,212		)	(22,994		)	165,554			143,766			17,988			161,754			(54,367		)	272,941
Adjustments:
Real estate depreciation and amortization	203,966			14,845			218,811			52,138			22,663			109,093			402,705			133,992			18,276			152,268			108,859			663,832
Real estate depreciation and amortization related to noncontrolling interest	(6,217		)	—			(6,217		)	—			—			—			(6,217		)	(1,099		)	(2,005		)	(3,104		)	(2,656		)	(11,977		)
Real estate depreciation and amortization related to unconsolidated entities	2,367			2,367			4,734			—			—			—			4,734			4,793			—			4,793			878			10,405
Discontinued operations:
Gain on sale of real estate assets	(25,241		)	—			(25,241		)	—			—			—			(25,241		)	(16,948		)	—			(16,948		)	—			(42,189		)
Depreciation on real estate assets	464			(464		)	—			—			—			—			—			2,352			(1,473		)	879			—			879
FFO	421,506			7,326			428,832			31,153			(4,549		)	86,099			541,535			266,856			32,786			299,642			52,714			893,891
Adjustments:
Income tax expense (benefit)	2,930			39			2,969			(7,560		)	—			(32,303		)	(36,894		)	—			—			—			—			(36,894		)
Loss (gain) on extinguishment of debt	9,791			—			9,791			2			—			(2		)	9,791			(75		)	—			(75		)	75			9,791
Merger-related expenses and deal costs	19,243			—			19,243			—			—			—			19,243			5,118			—			5,118			—			24,361
Loss on interest rate swap	—			—			—			—			16,020			—			16,020			—			—			—			—			16,020
Amortization of other intangibles	511			511			1,022			—			—			—			1,022			—			—			—			—			1,022
Gain on re-measurement of equity interest upon acquisition, net	—			—			—			—			—			—			—			(620		)	—			(620		)	—			(620		)
Impairments	—			—			—			—			—			—			—			15,006			—			15,006			—			15,006
Normalized FFO	$	453,981		$	7,876		$	461,857		$	23,595		$	11,471		$	53,794		$	550,717		$	286,285		$	32,786		$	319,071		$	52,789		$	922,577

Ventas’s historical and pro forma FFO and normalized FFO per diluted share outstanding for the year ended December 31, 2010 follows (in thousands, except per share amounts)(1):

	Ventas Historical			Ventas Pro Forma for the Atria and One Lantern Acquisition			NHP Historical (D)			Total Pro Forma
Income from continuing operations attributable to common stockholders	$	1.39		$	0.75		$	1.12		$	0.85
Discontinued operations	0.18			0.13			0.04			0.09
Net income attributable to common stockholders	1.56			0.88			1.15			0.94
Adjustments:
Real estate depreciation and amortization	1.29			2.14			1.08			2.29
Real estate depreciation related to noncontrolling interest	(0.04		)	(0.03		)	(0.01		)	(0.04		)
Real estate depreciation and amortization related to unconsolidated entities	0.02			0.03			0.04			0.04
Discontinued operations:
Gain on sale of real estate assets	(0.16		)	(0.13		)	(0.14		)	(0.15		)
Depreciation on real estate assets	0.00			—			0.02			0.00
FFO	2.67			2.88			2.14			3.09
Adjustments:
Income tax expense (benefit)	0.02			(0.20		)	—			(0.13		)
Loss on extinguishment of debt	0.06			0.05			(0.00		)	0.03
Merger-related expenses and deal costs	0.12			0.10			0.04			0.08
Loss on interest rate swap	—			0.09			—			0.06
Amortization of other intangibles	0.00			0.01			—			0.00
Gain on re-measurement of equity interest upon acquisition, net	—			—			(0.00		)	(0.00		)
Impairments	—			—			0.12			0.05
Normalized FFO	$	2.88		$	2.93		$	2.30		$	3.18
Diluted shares outstanding used in computing FFO and normalized FFO per common share	157,657			188,179			124,514			289,746

(1) Per share amounts may not add due to rounding.

Pro forma FFO and normalized FFO are presented for information purposes only, and were based on available information and assumptions that the Company’s management believes to be reasonable; however, they are not necessarily indicative of what Ventas’s FFO or normalized FFO actually would have been assuming the transactions had occurred as of the dates indicated.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values, instead, have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.  To overcome this problem, Ventas considers FFO and normalized FFO appropriate measures of operating performance of an equity REIT.  Further, Ventas believes that normalized FFO provides useful information because it allows investors, analysts and Ventas management to compare Ventas’s operating performance to the operating performance of other real estate companies and between periods on a consistent basis without having to account for differences caused by unanticipated items.  Ventas uses the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO.  NAREIT defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis.  Ventas defines “normalized FFO” as FFO excluding the following items (which may be recurring in nature): (a) gains and losses on the sales of real property assets; (b)

merger-related costs and expenses, including amortization of intangibles and transition and integration expenses, and deal costs and expenses, including expenses and recoveries, if any, relating to the Company’s lawsuit against HCP, Inc.; (c) the impact of any expenses related to asset impairment and valuations allowances, the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of the Company’s debt; (d) the non-cash effect of income tax benefits or expenses; (e) the impact of future unannounced acquisitions or divestitures (including pursuant to tenant options to purchase) and capital transactions; (f) gains and losses for the non-operational hedge agreements; and (g) any gains or losses on re-measurement of equity interests upon acquisition.

FFO and normalized FFO presented herein are not necessarily identical to FFO and normalized FFO presented by other real estate companies due to the fact that not all real estate companies use the same definitions.  FFO and normalized FFO should not be considered as alternatives to net income (determined in accordance with GAAP) as indicators of Ventas’s financial performance or as alternatives to cash flow from operating activities (determined in accordance with GAAP) as measures of Ventas’s liquidity, nor is FFO and normalized FFO necessarily indicative of sufficient cash flow to fund all of Ventas’s needs.  Ventas believes that in order to facilitate a clear understanding of Ventas’s consolidated historical operating results, FFO and normalized FFO should be examined in conjunction with net income as presented in the Unaudited Pro Forma Consolidated Condensed Financial Statements.