10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

__________

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from ____ to ____

Commission file number 1-11314

LTC PROPERTIES, INC.

(Exact name of Registrant as specified in its charter)

Maryland	71-0720518
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2829 Townsgate Road, Suite 350

Westlake Village, California  91361

(Address of principal executive offices, including zip code)

(805) 981-8655

(Registrant’s telephone number, including area code)

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☑  No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☑  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

The number of shares of common stock outstanding on April 23, 2015was 35,540,762.

LTC PROPERTIES, INC.

FORM 10-Q

March 31, 2015

INDEX

PART I -- Financial Information		Page
Item 1.	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	35
PART II -- Other Information
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 5	Other Information	36
Item 6.	Exhibits	37

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

	March 31, 2015		December 31, 2014
ASSETS		(unaudited)		(audited)
Investments:
Land	$	83,858	$	80,024
Buildings and improvements		899,727		869,814
Accumulated depreciation and amortization		(230,071)		(223,315)
Net operating real estate property		753,514		726,523
Mortgage loans receivable, net of loan loss reserve: 2015—$1,653; 2014—$1,673		163,647		165,656
Real estate investments, net		917,161		892,179
Investment in unconsolidated joint venture		20,220		—
Investments, net		937,381		892,179
Other assets:
Cash and cash equivalents		3,417		25,237
Debt issue costs, net		3,561		3,782
Interest receivable		1,167		597
Straight-line rent receivable, net of allowance for doubtful accounts: 2015—$754;2014—$731		34,903		32,651
Prepaid expenses and other assets		12,657		9,931
Notes receivable		2,334		1,442
Total assets	$	995,420	$	965,819
LIABILITIES
Bank borrowings	$	36,500	$	—
Senior unsecured notes		277,467		281,633
Accrued interest		2,472		3,556
Earn-out liabilities		3,313		3,258
Accrued expenses and other liabilities		16,284		17,251
Total liabilities		336,036		305,698
EQUITY
Stockholders’ equity:
Preferred stock $0.01 par value; 15,000 shares authorized; shares issued and outstanding: 2015—2,000; 2014—2,000		38,500		38,500
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2015—35,541; 2014—35,480		355		355
Capital in excess of par value		718,050		717,396
Cumulative net income		872,799		855,247
Accumulated other comprehensive income		73		82
Cumulative distributions		(970,393)		(951,459)
Total equity		659,384		660,121
Total liabilities and equity	$	995,420	$	965,819

See accompanying notes.

3

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share, unaudited)

	Three Months Ended
	March 31,
	2015		2014
Revenues:
Rental income	$	26,678	$	25,252
Interest income from mortgage loans		4,607		4,093
Interest and other income		195		93
Total revenues		31,480		29,438
Expenses:
Interest expense		3,766		3,187
Depreciation and amortization		6,779		6,298
General and administrative expenses		3,499		2,949
Total expenses		14,044		12,434
Operating income		17,436		17,004
Income from unconsolidated joint venture		116		—
Net income		17,552		17,004
Income allocated to participating securities		(123)		(103)
Income allocated to preferred stockholders		(818)		(818)
Net income available to common stockholders	$	16,611	$	16,083
Earnings per common share:
Basic	$	0.47	$	0.47
Diluted	$	0.47	$	0.46
Weighted average shares used to calculate earnings per common share:
Basic		35,277		34,586
Diluted		37,292		36,611
Dividends declared and paid per common share	$	0.510	$	0.510

See accompanying notes.

4

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands, unaudited)

	Three Months Ended
	March 31,
	2015		2014
Net income	$	17,552	$	17,004
Reclassification adjustment (Note 6)		(9)		(9)
Comprehensive income	$	17,543	$	16,995

See accompanying notes.

5

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, unaudited)

	Three Months Ended March 31,
	2015		2014
OPERATING ACTIVITIES:
Net income	$	17,552	$	17,004
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,779		6,298
Stock-based compensation expense		982		666
Income from unconsolidated joint venture		(116)		—
Straight-line rental income		(2,275)		(639)
Amortization of lease inducement		352		165
Provision for doubtful accounts		3		27
Non-cash interest related to earn-out liabilities		55		—
Other non-cash items, net		215		204
(Increase) decrease in interest receivable		(570)		5
Decrease in accrued interest payable		(1,084)		(1,074)
Net change in other assets and liabilities		(4,029)		(2,827)
Net cash provided by operating activities		17,864		19,829
INVESTING ACTIVITIES:
Investment in real estate properties, net		(13,031)		—
Investment in real estate developments, net		(5,041)		(6,157)
Investment in real estate capital improvements, net		(4,928)		(7,410)
Capitalized interest		(147)		(307)
Advances under mortgage loans receivable		(1,858)		(2,568)
Investment in real estate mortgages		(9,500)		—
Principal payments received on mortgage loans receivable		2,786		519
Investment in unconsolidated joint ventures		(20,143)		—
Advances under notes receivable		(892)		—
Net cash used in investing activities		(52,754)		(15,923)
FINANCING ACTIVITIES:
Bank borrowings		36,500		20,000
Principal payments on senior unsecured notes		(4,167)		(4,167)
Principal payments on bonds payable		—		(635)
Stock option exercises		—		238
Distributions paid to stockholders		(18,934)		(18,560)
Other		(329)		(18)
Net cash provided by (used in) financing activities		13,070		(3,142)
(Decrease) increase in cash and cash equivalents		(21,820)		764
Cash and cash equivalents, beginning of year		25,237		6,778
Cash and cash equivalents, end of year	$	3,417	$	7,542
Supplemental disclosure of cash flow information:
Interest paid	$	4,774	$	4,375
Non-cash investing and financing transactions:
Mortgage loan receivable applied against purchase price to acquire real estate (Note 2)	$	10,600	$	—

See accompanying notes.

6

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

1.General

LTC Properties, Inc., a health care real estate investment trust (or REIT), was incorporated on May 12, 1992 in the State of Maryland and commenced operations on August 25, 1992.  We invest primarily in senior housing and long-term health care properties through acquisitions, development, mortgage loans and other investments. We conduct and manage our business as one operating segment, rather than multiple operating segments, for internal reporting and internal decision making purposes.   Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in senior housing and long-term health care properties managed by experienced operators.  Our primary senior housing and long-term health care property types include skilled nursing properties (or SNF), assisted living properties (or ALF), independent living properties (or ILF), memory care properties (or MC) and combinations thereof. To meet these objectives, we attempt to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location, operator, property type and form of investment.

We have prepared consolidated financial statements included herein without audit and in the opinion of management have included all adjustments necessary for a fair presentation of the consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (or SEC).  Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (or GAAP) have been condensed or omitted pursuant to rules and regulations governing the presentation of interim financial statements.  The accompanying consolidated financial statements include the accounts of our company, its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.  The results of operations for the three months ended March 31, 2015 and 2014 are not necessarily indicative of the results for a full year.

No provision has been made for federal or state income taxes.  Our company qualifies as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended.  As such, we generally are not taxed on income that is distributed to our stockholders.

Investments in unconsolidated joint ventures

From time to time, the Company may make investments in unconsolidated entities, which may be in the form of common equity, preferred equity, or debt (in the form of an acquisition, development or construction or “ADC” loan, or similar arrangement). The Company evaluates each investment pursuant to ASC 805, Consolidation, to determine whether it meets the definition of a variable interest entity (or VIE) and whether the Company is the primary beneficiary. If the entity is deemed to be a VIE but the Company is not the primary beneficiary, or if the entity is deemed to be a voting interest entity but the Company does not have a controlling financial interest, it accounts for its investment using the equity method. Under the equity method, the Company initially records its investment at cost and subsequently recognizes the Company’s share of net earnings or losses and other comprehensive income or loss, cash contributions made and distributions received, and other adjustments, as appropriate.  Allocations of net income or loss may be subject to preferred returns or allocation formulas defined in operating agreements and may not be according to percentage interests of the members. In certain circumstances where the Company has a substantive profit-sharing arrangement which provides a priority return on its investment, a portion of its equity in earnings may consist of a change in its claim on the net assets of the underlying

7

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

joint venture. Distributions of operating profit from the joint ventures are reported as part of operating cash flows, while distributions related to a capital transaction, such as a refinancing transaction or sale, are reported as investing activities.

The Company performs a quarterly evaluation of its investments in unconsolidated joint ventures to determine whether the fair value of each investment is less than the carrying value, and, if such decrease in value is deemed to be other-than-temporary, writes the investment down to its estimated fair value as of the measurement date.

Impact of New Accounting Pronouncements.

In May 2014, the FASB issued Accounting Standards Update (or ASU) No. 2014-09 (or ASU 2014-09), Revenue from Contracts with Customers: Topic 606. ASU 2014-09 provides for a single comprehensive principles based standard for the recognition of revenue across all industries. ASU 2014-09 requires expanded disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. On April 1, 2015, FASB voted for a one-year deferral of the effective date to December 15, 2017. Also, FASB will permit public companies to adopt the amendment as of the original effective date. We are currently evaluating the effects of this adoption on our consolidated financial statements.

In January 2015, FASB issued ASU No. 2015-01 (or ASU 2015-01), Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the separate classification, presentation and disclosure of extraordinary events and transactions. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We elected early adoption of ASU 2015-01 as of January 1, 2015. The adoption did not have a material impact on our consolidated financial statements.

In February 2015, FASB issued ASU No. 2015-02 (or ASU 2015-02), Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 amends the consolidation guidance for variable interest entities and voting interest entities, among other items, by eliminating the consolidation model previously applied to limited partnerships, emphasizing the risk of loss when determining a controlling financial interest and reducing the frequency of the application of related-party guidance when determining a controlling financial interest. ASU 2015-02 is effective for periods beginning after December 15, 2015, for public companies. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the effects of this adoption on our consolidated financial statements.

In April 2015, FASB issued ASU No. 2015-03 (ASU 2015-03), Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effects of this adoption on our consolidated financial statements.

8

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

2.Real Estate Investments

Assisted living properties, independent living properties, memory care properties, and combinations thereof are included in the assisted living property type. Range of care properties (or ROC) property type consists of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services.

Any reference to the number of properties, number of units, number of beds, and yield on investments in real estate are unaudited and outside the scope of our independent registered public accounting firm’s review of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Owned Properties.The following table summarizes our investments in owned properties at March 31, 2015 (dollar amounts in thousands):

								Average
			Percentage		Number	Number of		Investment
	Gross		of		of	SNF	ALF	per
Type of Property	Investments		Investments		Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	499,580	50.8	%	69	8,513	—	$	58.68
Assisted Living		416,079	42.3	%	85	—	4,236	$	98.22
Range of Care		43,907	4.5	%	7	634	274	$	48.36
Under Development(2)		13,136	1.3	%	—	—	—		—
Other(3)		10,883	1.1	%	1	—	—		—
Totals	$	983,585	100.0	%	162	9,147	4,510

(1) We own properties in 27 states that are leased to 29 different operators.

(2) Includes two MC developments with a total of 122 units and a combination ALF and MC development with 89 units.

(3) Includes one school property and five parcels of land held-for-use.

Owned properties are leased pursuant to non-cancelable operating leases generally with an initial term of 10 to 15 years.  Each lease is a triple net lease which requires the lessee to pay all taxes, insurance, maintenance and repairs, capital and non-capital expenditures and other costs necessary in the operations of the facilities.  Many of the leases contain renewal options. The leases provide for fixed minimum base rent during the initial and renewal periods.  The majority of our leases contain provisions for specified annual increases over the rents of the prior year that are generally computed in one of four ways depending on specific provisions of each lease:

(i) a specified percentage increase over the prior year’s rent, generally between 2.0% and 3.0%;

(ii) a calculation based on the Consumer Price Index;

(iii) as a percentage of facility net patient revenues in excess of base amounts; or

(iv) specific dollar increases.

During the three months ended March 31, 2015, we funded $7,195,000 under a $12,182,000 development commitment to purchase the land and existing improvements and then complete the related development of a 56-unit memory care property currently under construction in Texas. In conjunction with this commitment, we entered into a master lease agreement for an initial term of 15 years with three

9

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

5-year renewal options at an initial cash yield of 8.75%. The master lease provides for our payment of a lease inducement of up to $1,589,000. Also, the master lease gives us a right to provide similar financing for certain future development opportunities.

During the three months ended March 31, 2015, we elected to exercise our right to provide financing for one such opportunity, adding to the master lease a parcel of land purchased in South Carolina for $2,490,000as part of our commitment to provide the operator with up to $16,535,000, including the land purchase, for the development of an 89-unit combination assisted living and memory care property. In conjunction with this new development commitment, the master lease provides for an additional $2,363,000 lease inducement payment. See Note 7. Commitments and Contingencies for further discussion of the lease inducement commitments. 

During the quarter ended March 31, 2015, we purchased and equipped a 106-bed skilled nursing property in Wisconsin for a total of $13,946,000 by exercising our purchase option under a $10,600,000 mortgage and construction loan. The property was added to an existing master lease at a lease rate equivalent to the interest rate in effect on the loan at the time the purchase option was exercised. Additionally, we paid the lessee a $1,054,000 lease inducement which will be amortized as a yield adjustment over the life of the lease term. See Mortgage Loans below for further discussion of the loan agreement.

The following table summarizes our completed development and improvement projects and amounts funded during the three months ended March 31, 2015 (dollar amounts in thousands):

	Number		Number
	of	Type of	of
Type of Project	Properties	Property	Beds/Units	State	2015 Funding			Total Funding
Development	1	ALF	60	Colorado	$	1,360		$	10,541	(1)
Renovation	1	SNF	121	California		1,481			1,481
Renovation	2	SNF	141	Tennessee		40			2,200
	4		322		$	2,881	(2)	$	14,222

(1) Completed a MC property in February 2015.

(2) Excludes $5,692 of funding on projects that were completed during 2014.

The following table summarizes our investment commitments as of March 31, 2015, and amounts funded under these projects (excludes capitalized interest, dollar amounts in thousands):

									Number	Number
	Investment		2015		Commitment		Remaining		of	of
Type of Property	Commitment		Funding(2)		Funded		Commitment		Properties	Beds/Units
Skilled Nursing	$	6,600	$	25	$	25	$	6,575	3	510
Assisted Living(1)		45,765		11,056		13,144		32,621	27	1,240
Totals	$	52,365	$	11,081	$	13,169	$	39,196	30	1,750

(1) Includes the development of two MC properties for a total commitment of $24,430 andone ALF/MC property for a total commitment of $16,535. Also, includes three commitments for renovation projects on 24 ALFs totaling $4,800.

(2) Excludes funding for completed development and improvement projects discussed above. Includes $7,195 of land and improvements acquired for the development of a 56-unit MC property and $2,490 of land acquired for the development of an 89-unit ALF/MC property, as previously discussed.

10

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

Our construction in progress (or CIP) activity during the three months ended March 31, 2015 for our development, redevelopment, renovation, and expansion projects is as follows (dollar amounts in thousands):

	CIP								CIP
	Balance at				Capitalized		Conversions		Balance at
Properties	12/31/2014		Funded(1)		Interest		out of CIP		3/31/2015
Development projects:
Assisted living	$	8,671	$	8,961	$	147	$	(9,413)	$	8,366
Subtotal		8,671		8,961		147		(9,413)		8,366
Redevelopment, renovation and expansion projects:
Skilled nursing		—		25		—		—		25
Subtotal		—		25		—		—		25
Total	$	8,671	$	8,986	$	147	$	(9,413)	$	8,391

(1) Excludes $7,298 of funding on development and renovations projects which was capitalized directly into building and includes the acquisition of the existing improvements of the 56-unit MC property for $6,315, as previously discussed.

Mortgage Loans.The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2015 (dollar amounts in thousands):

			Percentage		Number	Number	Number of		Investment
	Gross		of		of	of	SNF	ALF	per
Type of Property	Investments		Investments		Loans	Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	151,352	91.6	%	15	29	3,701	—	$	40.89
Assisted Living		13,948	8.4	%	3	8	—	270	$	51.66
Totals	$	165,300	100.0	%	18	37	3,701	270

(1) We have investments in properties located in 7 states that include mortgages to 10 different operators.

At March 31, 2015, the mortgage loans had interest rates ranging from 7.1% to 13.9% and maturities ranging from 2016 to 2045.  In addition, some loans contain certain guarantees, provide for certain facility fees and generally have 20-year to 30-year amortization schedules.  The majority of the mortgage loans provide for annual increases in the interest rate based upon a specified increase of 10 to 25 basis points. During the three months ended March 31, 2015, we received $2,285,000 plus accrued interest related to the payoff of a mortgage loan secured by a  range of care property located in California. During the three months ended March 31, 2015 and 2014, we received $501,000 and $519,000, respectively, in regularly scheduled principal payments.

During 2013, we funded the initial amount of $124,387,000 under a mortgage loan with a third‑party borrower secured by 15 skilled nursing properties with a total of 2,058 beds in Michigan. The loan agreement provides for additional commitments of $12,000,000 for capital improvements and up to $40,000,000 of additional proceeds, for a total loan commitment of up to $176,387,000. See Note 7. Commitments and Contingencies for further discussion of the additional $40,000,000 loan commitment. During the three months ended March 31, 2015, we funded $1,858,000 under the $12,000,000 capital improvement commitment with $6,804,000 remaining as of March 31, 2015.

In addition, this mortgage loan provided the borrower a one‑time option to prepay up to 50% of the then outstanding loan balance without penalty. During the three months ended March 31, 2015, we amended this mortgage loan to provide up to an additional $20,000,000 in loan proceeds for the

11

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

expansion of two properties securing the loan (increasing the total capital improvement commitment to $32,000,000 and the total loan commitment to $196,387,000) and agreed to convey, to the borrower,  two parcels of land held-for-use adjacent to these properties to facilitate the projects. As partial consideration for the increased commitment and associated conveyance, the borrower forfeited their prepayment option.

Additionally, during the quarter ended March 31, 2015, we originated an $11,000,000 mortgage loan with the borrower concurrently funding $9,500,000 with a commitment to fund the balance for approved capital improvement projects. The loan is secured by a 157-bed skilled nursing property in Michigan and bears interest at 9.41% for five years, escalating annually thereafter by 2.25%. The term is 30 years with interest-only payments for the initial three years. Additionally, we have the option to purchase the property under certain circumstances, including a change in regulatory environment.

We had a $10,600,000 mortgage and construction loan that afforded the borrower to develop a new 106-bed skilled nursing property in Wisconsin to replace an old existing skilled nursing property. Upon completion of construction and relocation of the residents from the old property to the replacement property in 2014, the old property was sold and released as collateral. During the three months ended March 31, 2015, we purchased and equipped the replacement property for a total of $13,946,000 by exercising our right under the agreement including applying amounts otherwise due to us under the underlying loan as a closing adjustment. See Owned Properties above for further discussion of the property purchase.

12

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

3.Investment in Unconsolidated Joint Ventures

During the three months ended March 31, 2015, we made a preferred equity investment in an entity (the JV) that owns four properties providing independent, assisted living and memory care services. These properties are located in Arizona. At closing, we provided an initial preferred capital contribution of $20,143,000 and have committed to contribute an additional preferred capital contribution of $5,507,000 for a total preferred capital contribution of $25,650,000. As the preferred member of the JV, we are not entitled to share in the JV’s earnings or losses. Rather, we are entitled to receive a 15% preferred return, a portion of which is paid in cash and a portion of which is deferred if the cash flow of the JV is insufficient to pay all of the accrued preferred return. The unpaid accrued preferred return will be added to the balance of the preferred equity investment and will be repaid upon redemption. In addition, we have the option to purchase either the properties owned by the JV or 100% of the common membership interest in the JV, which is exercisable between the 37th month and the 54th month from the commencement of the JV. If we elect not to exercise our purchase option, we have the right to put our preferred equity interest to the common member after the 54th month for an amount equal to the unpaid preferred equity investment balance and accrued preferred return thereon. The common equity member has the right to call our preferred interest at any time for an amount equal to the preferred equity investment balance and accrued preferred return thereon that would be due for the first 36 months, less amounts paid to us prior to the redemption date.

The JV is intended to be self-financing, other than our preferred capital contributions, no direct support will be provided by us. As a result, we believe our maximum exposure to loss due to our investment in the JV would be limited to our preferred capital contributions. We have concluded that the JV meets the accounting criteria to be considered as a variable interest entity (or VIE). However, because we do not control the entity, nor do we have any role in the day-to-day management, we are not the primary beneficiary of the JV. Therefore, we account for our JV investment using the equity method. During the three months ended March 31, 2015, we recognized $116,000 in income from our preferred equity investment in the JV.

4.Notes Receivable

Notes receivable consists of various loans and line of credit agreements with certain operators. During the three months ended March 31, 2015, we funded $892,000 in principal under these notes. In the comparable 2014 period, we did not receive or fund any principal under these notes. At March 31, 2015, we had twelve loans and line of credit agreements with commitments totaling $4,288,000 and weighted average interest rate of 10.8%.  As of March 31, 2015, we funded $2,334,000 under these commitments and we have a remaining commitment of $1,954,000.

5.Debt Obligations

Bank Borrowings. We have an Unsecured Credit Agreement that provides for a revolving line of credit up to $400,000,000 with the opportunity to increase the credit amount up to a total of $600,000,000.  The Unsecured Credit Agreement matures on October 14, 2018 and provides for a one-year extension option at our discretion, subject to customary conditions.  Based on our leverage at March 31, 2015, the facility provides for interest annually at LIBOR plus 125 basis points and an unused commitment fee of 30 basis points. During the three months ended March 31, 2015 and 2014 we borrowed $36,500,000 and $20,000,000, respectively, under our Unsecured Credit Agreement. At March 31, 2015, we

13

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

had $36,500,000 outstanding and $363,500,000 available for borrowing. At March 31, 2015, we were in compliance with all covenants.

Senior Unsecured Notes.  At March 31, 2015 and December 31, 2014, we had $277,467,000 and $281,633,000, respectively, outstanding under our Senior Unsecured Notes with a weighted average interest rate of 4.8%. During each of the three months ended March 31, 2015 and 2014, we paid $4,167,000 in regular scheduled principal payments.

Subsequent to March 31, 2015, we entered into a third amended and restated $200,000,000 private shelf agreement with Prudential Investment Management, Inc. (or Prudential) for a three year term. The agreement provides for the possible issuance of up to an additional $102,000,000 of senior unsecured fixed interest rate term notes.  After July 14, 2015 and for the balance of the term, the agreement provides for the possible issuance of additional senior unsecured fixed interest rate term notes up to the maximum availability upon us making our scheduled principal payments on existing notes then outstanding. Interest rates on any issuance under the shelf agreement will be set at a spread over applicable Treasury rates. Maturities of each issuance are at our election for up to 15 years from the date of issuance with a maximum average life of 12 years from the date of original issuance.     

Bonds Payable.  We had a multifamily tax-exempt revenue bonds that was secured by five assisted living properties in Washington which were paid off during 2014. For the three months ended March 31, 2014, we paid $635,000 in regularly scheduled principal payments.

6.Equity

Equity activity was as follows (in thousands):

	Total
	Equity
Balance at December 31, 2014	$	660,121
Net income		17,552
Vesting of stock option and restricted common stock		982
Reclassification adjustment		(9)
Preferred stock dividends		(818)
Common stock dividends		(18,116)
Other		(328)
Balance at March 31, 2015	$	659,384

Preferred Stock.  At March 31, 2015, we had 2,000,000 shares of our 8.5% Series C Cumulative Convertible Preferred Stock (or Series C preferred stock) outstanding.  Our Series C preferred stock is convertible into 2,000,000 shares of our common stock at $19.25 per share.  Total shares reserved for issuance of common stock related to the conversion of Series C preferred stock were 2,000,000 shares at March 31, 2015.

Common Stock.  During the three months ended March 31, 2015 and 2014, we acquired 4,609 shares and 200 shares respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

Available Shelf Registrations.  Our shelf registration statement provides us with the capacity to offer up to $800,000,000 in common stock, preferred stock, warrants, debt, depositary shares, or units.  We may from time to time raise capital under this current shelf registration in amounts, at prices, and on terms to be announced when and if the securities are offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. At March 31, 2015, we had availability of $775,100,000 under our effective shelf registration which expires on July 19, 2016.

Distributions.We declared and paid the following cash dividends (in thousands):

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
	Declared		Paid		Declared		Paid
Preferred Stock Series C	$	818	$	818	$	818	$	818
Common Stock(1)		18,116		18,116		17,742		17,742
Total	$	18,934	$	18,934	$	18,560	$	18,560

(1) Represents $0.17per share per month for each of the three months ended March 31, 2015 and 2014, respectively.

In April 2015, we declared a monthly cash dividend of $0.17 per share on our common stock for the months of April, May and June, payable on April 30, May 29, and June 30, 2015, respectively, to stockholders of record on April 22, May 21, and June 22, 2015, respectively.

Accumulated Other Comprehensive Income.At March 31, 2015 and December 31, 2014, accumulated comprehensive income of $73,000 and $82,000, respectively, represents the net unrealized holding gains on available-for-sale REMIC Certificates recorded in 2005 when we repurchased the loans in the underlying loan pool.  This amount is being amortized to increase interest income over the remaining life of the loans that we repurchased from the REMIC Pool.

Stock-Based Compensation.  During the three months ended March 31, 2015, no stock options were granted or exercised. In the comparable 2014 period, we granted 15,000 options to purchase common stock at an exercise price of $38.43 per share.  These stock options vest ratably over a three-year period from the grant date. Additionally, during the three months ended March 31, 2014, a total of 10,000 stock options were exercised at a total option value of $238,000 and a total market value on the date of exercise of $390,000. At March 31, 2015, we had 43,334 stock options outstanding and 33,334 stock options are exercisable.

At March 31, 2015, the total number of stock options that are scheduled to vest through December 31, 2015, 2016 and 2017 is 0;5,000 and 5,000, respectively.  We have no stock options outstanding that are scheduled to vest beyond 2017. Compensation expense related to the vesting of stock options for the three months ended March 31, 2015 and 2014, was $4,000 and $1,000, respectively. The remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options for 2015, 2016 and 2017 is $11,000;$15,000 and $2,000, respectively.

During the first quarter of March 31, 2015, we cancelled 640 shares of restricted stock. During the three months ended March 31, 2015 and 2014, we granted 65,750 and 62,000 shares of restricted common stock, respectively, as follows:

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

		Price per
Year	No. of Shares	Share		Vesting Period
2015
	65,750	$	44.45	ratably over 3 years
	65,750
2014
	59,000	$	36.81	ratably over 3 years
	3,000	$	38.43	ratably over 3 years
	62,000

At March 31, 2015, we had 255,815 restricted common shares outstanding. The total number of restricted common shares that are scheduled to vest through December 31, 2015, 2016, 2017 and 2018 is 94,168;88,360;51,367 and 21,920, respectively.  We have no restricted common stock that is scheduled to vest beyond 2018. During the three months ended March 31, 2015 and 2014, we recognized $978,000 and $665,000, respectively, of compensation expense related to the vesting of restricted common stock. The remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock for 2015, 2016, 2017, and 2018 is $2,648,000;$2,227,000;$1,162,000 and $81,000, respectively.

7.Commitments and Contingencies

As part of an acquisition in December 2014, we committed to provide two contingent payments totaling up to $4,000,000 payable in increments of $2,000,000 upon the property achieving a sustainable stipulated rent coverage ratio. We estimated the fair value of the contingent payment using a discounted cash flow analysis. This fair value measurement is based on significant input not observable in the market and thus represents a Level 3 measurement. These contingent payments were recorded at the date of the acquisition in the amount of $3,240,000 and we are accreting the contingent liability up to the estimated settlement amount as of the estimated payment dates. The fair value of these contingent liabilities are evaluated on a quarterly basis based on changes in estimates of future operating results and changes in market discount rates. During the three months ended March 31, 2015, we recorded non‑cash interest expense of $55,000 related to these contingent liabilities and the fair value of these contingent payments was $3,313,000 at March 31, 2015.

During the three months ended March 31, 2015, we entered into two development commitments totaling $28,717,000 to acquire two parcels of land and an existing improvement and to construct a 56-unit memory care property and an 89-unit combination assisted living and memory care property. Concurrent with these commitments, we entered into a master lease agreement which provides for two lease inducement payments totaling $3,952,000, which will be amortized as a yield adjustment over the lease term. Up to 25% of the fee is currently available for funding with the remaining balance available following the issuance of a certificate of occupancy and receipt of regulatory approval required for the operation of the newly constructed properties. As of March 31, 2015, we have funded $44,000 and have a remaining commitment of $944,000 under the available lease inducement commitment. See Note 2. Real Estate Investments for further discussion of the acquisition and master lease terms.

At March 31, 2015, we had a commitment to provide a borrower an additional $40,000,000 of loan proceeds under a mortgage loan secured by 15 skilled nursing properties in Michigan. The additional proceeds are contingent on certain conditions and are based on certain operating metrics and valuation thresholds. Also, the additional proceeds are limited to $10,000,000 in any twelve month period. See Note

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

2. Real Estate Investments for further discussion of this mortgage loan.

At March 31, 2015, we had additional commitments as follows (in thousands):

	Investment			2015		Commitment		Remaining
	Commitment			Funding		Funded		Commitment
Real estate properties(See Note 2)	$	52,365	(1)	$	11,081	$	13,169	$	39,196
Mortgage loans (See Note 2)		33,990	(1)		1,858		5,196		28,794
Notes receivable (See Note 4)		4,288	(2)		892		2,334		1,954
Totals	$	90,643		$	13,831	$	20,699	$	69,944

(1) Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand senior housing and long term care properties.

(2) Represents loan and line of credit commitments.

We are a party from time to time to various general and professional liability claims and lawsuits asserted against the lessees or borrowers of our properties, which in our opinion are not singularly or in the aggregate material to our results of operations or financial condition. These types of claims and lawsuits may include matters involving general or professional liability, which we believe under applicable legal principles are not our responsibility as a non-possessory landlord or mortgage holder. We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principles and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims.

8.Major Operators

We have three operators from each of which we derive approximately 10% of our combined rental revenue and interest income from mortgage loans.

Prestige Healthcare (or Prestige) is a privately held company and operates 16 skilled nursing properties and two range of care properties that we own or on which we hold mortgages secured by first trust deeds. These properties consist of a total of 2,333 skilled nursing beds and 93 assisted living units. Additionally, Prestige manages five parcels of land that we own. These assets represent 15.0% of our total assets at March 31, 2015 and generated 13.2% of our combined rental revenue and interest income from mortgage loans recognized for the three months ended March 31, 2015.   

In July 2014, Brookdale Senior Living, Inc. (or Brookdale), parent company of Brookdale Senior Living Communities, Inc. (or Brookdale Communities), merged with Emeritus Corporation. Brookdale Communities leases 37 assisted living properties with a total of 1,704 units owned by us representing approximately 8.2% of our total assets at March 31, 2015 and 12.4% of our combined rental revenue and interest income from mortgage loans recognized for the three months ended March 31, 2015.

Senior Care Centers, LLC (or Senior Care) is a privately held company. Senior Care leases nine skilled nursing properties with a total of 1,190 beds owned by us representing approximately 10.1% of our total assets at March 31, 2015 and generated 9.9% of our combined rental revenue and interest income from mortgage loans recognized for the three months ended March 31, 2015.

Our financial position and ability to make distributions may be adversely affected by financial difficulties experienced by Brookdale Communities, Prestige Healthcare, Senior Care, or any of our

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

lessees and borrowers, including any bankruptcies, inability to emerge from bankruptcy, insolvency or general downturn in business of any such operator, or in the event any such operator does not renew and/or extend its relationship with us or our borrowers when it expires.

9.Earnings per Share

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

	Three Months Ended
	March 31,
	2015		2014
Net income	$	17,552	$	17,004
Less net income allocated to participating securities:
Non-forfeitable dividends on participating securities		(123)		(103)
Total net income allocated to participating securities		(123)		(103)
Less net income allocated to preferred stockholders:
Preferred stock dividends		(818)		(818)
Total net income allocated to preferred stockholders		(818)		(818)
Net income available to common stockholders		16,611		16,083
Effect of dilutive securities:
Convertible preferred securities		818		818
Total effect of dilutive securities		818		818
Net income for diluted net income per share	$	17,429	$	16,901
Shares for basic net income per share		35,277		34,586
Effect of dilutive securities:
Stock options		15		25
Convertible preferred securities		2,000		2,000
Total effect of dilutive securities		2,015		2,025
Shares for diluted net income per share		37,292		36,611
Basic net income per share	$	0.47	$	0.47
Diluted net income per share	$	0.47	$	0.46

10.Fair Value Measurements

In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses reported in earnings.  We did not adopt the elective fair value option for our financial assets and financial liabilities.

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments. We do not invest our cash in auction rate securities. The carrying value and fair value of our financial instruments as of March 31, 2015 and December 31, 2014 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):

	At March 31, 2015					At December 31, 2014
	Carrying					Carrying
	Value		Fair Value			Value		Fair Value
Mortgage loans receivable	$	163,647	$	196,024	(1)	$	165,656	$	198,977	(1)
Bank borrowings		36,500		36,500	(2)		—		—	(2)
Senior unsecured notes		277,467		286,181	(3)		281,633		283,933	(3)
Contingent liabilities		3,313		3,313	(4)		3,258		3,258	(4)

(1) Our investment in mortgage loans receivable is classified as Level 3.  The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows.  The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments.  The discount rate used to value our future cash inflows of the mortgage loans receivable at March 31, 2015 and December 31, 2014 was 8.7% and 8.6%, respectively.

(2) Our bank borrowings are at a variable interest rate.  The estimated fair value of our bank borrowings approximated their carrying values at March 31, 2015 and December 31, 2014 based upon prevailing market interest rates for similar debt arrangements.

(3) Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows.  The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities.  At March 31, 2015,  the discount rate used to value our future cash outflow of our senior unsecured notes was 3.75% for those maturing before year 2020 and 4.0% for those maturing beyond year 2020. At December 31, 2014, the discount rate used to value our future cash outflow of our senior unsecured notes was 3.8% for those maturing before year 2020 and 4.55% for those maturing beyond year 2020.

(4) Our contingent obligation under the earn‑out liabilities is classified as Level 3. We estimated the fair value of the contingent earn‑out payments using a discounted cash flow analysis. The discount rate that we use consists of a risk‑free U.S. Treasury rate plus a company specific credit spread which we believe is acceptable by willing market participants. At March 31, 2015 and December 31, 2014, the discount rate used to value our future cash outflow of the earn-out liability was 6.1% and 6.2%, respectively.

11.Subsequent Events

Subsequent to March 31, 2015 the following events occurred.

Debt Obligations:We amended and restated our note purchase and private shelf agreement with Prudential which provides for the possible issuance of up to $102,000,000 of senior unsecured fixed interest rate term notes. See Note 5. Debt Obligations for further discussion.

Equity: We declared a monthly cash dividend of $0.17 per share on our common stock for the months of April,  May and June, payable on April 30,  May 29, and June 30, 2015, respectively, to stockholders of record on April 22,  May 21, and June 22, 2015, respectively.

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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Statement Regarding Forward Looking Disclosure

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act of 1995.  Statements that are not purely historical may be forward-looking.  You can identify some of the forward-looking statements by their use of forward-looking words, such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or the negative of those words or similar words.  Forward- looking statements involve inherent risks and uncertainties regarding events, conditions and financial trends that may affect our future plans of operation, business strategy, results of operations and financial position.  A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements, including, but not limited to, the status of the economy; the status of capital markets (including prevailing interest rates) and our access to capital; the income and returns available from investments in health care related real estate (including our ability to re-lease properties upon expiration of a lease term); the ability of our borrowers and lessees to meet their obligations to us; our reliance on a few major operators; competition faced by our borrowers and lessees within the health care industry; regulation of the health care industry by federal, state and local governments (including as a result of the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010); changes in Medicare and Medicaid reimbursement amounts (including due to federal and state budget constraints); compliance with and changes to regulations and payment policies within the health care industry; debt that we may incur and changes in financing terms; our ability to continue to qualify as a real estate investment trust; the relative illiquidity of our real estate investments; potential limitations on our remedies when mortgage loans default; and risks and liabilities in connection with properties owned through limited liability companies and partnerships.  For a discussion of these and other factors that could cause actual results to differ from those contemplated in the forward-looking statements, please see the discussion under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and in our publicly available filings with the Securities and Exchange Commission.  We do not undertake any responsibility to update or revise any of these factors or to announce publicly any revisions to forward-looking statements, whether as a result of new information, future events or otherwise.

Executive Overview

Business

We are a self-administered health care real estate investment trust (or REIT) that invests primarily in senior housing and long-term health care properties through acquisitions, development, mortgage loans and other investments. We conduct and manage our business as one operating segment, rather than multiple operating segments, for internal reporting and internal decision making purposes. Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in senior housing and long-term health care properties managed by experienced operators. Our primary senior housing and long-term health care property types include skilled nursing properties (or SNF), assisted living properties (or ALF), independent living properties (or ILF), memory care properties (or MC) and combinations thereof. ALF, ILF, MC, and combinations thereof are included in the ALF property type. Range of care properties (or ROC) property type consists of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services.  As of March 31, 2015, senior housing and long-

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term health care properties comprised approximately 99% of our real estate investment portfolio.  We have been operating since August 1992.

The following table summarizes our real estate investment portfolio as of March 31, 2015 (dollar amounts in thousands):

					Three Months Ended
			Percentage		March 31, 2015				Percentage		Number	Number of
	Gross		of		Rental		Interest		of		of	SNF	ALF
Type of Property	Investments		Investments		Income		Income(1)		Revenues(2)		Properties(3)	Beds(3)	Units(3)
Skilled Nursing	$	650,932	56.7	%	$	14,021	$	4,334	58.7	%	98	12,214	—
Assisted Living		430,027	37.4	%		10,870		244	35.6	%	93	—	4,506
Range of Care		43,907	3.8	%		1,459		—	4.7	%	7	634	274
Under Development(4)		13,136	1.1	%		—		—	—	%	—	—	—
Other(5)		10,883	1.0	%		328		—	1.0	%	1	—	—
Totals	$	1,148,885	100.0	%	$	26,678	$	4,578	100.0	%	199	12,848	4,780

(1) Includes interest income from mortgage loans excluding interest income from mortgage loan paid off during the three months ended March 31, 2015.

(2) Includes rental income and (1) above.

(3) We have investments in 29 states leased or mortgaged to 35 different operators. See Item 1. Financial Statements – Note 2. Real Estate Investments for discussion of bed/unit count.

(4) Includes two MC developments with a total of 122 units and a combination ALF and MC development with 89 units.

(5) Includes one school property and five parcels of land held-for-use.

As of March 31, 2015 we had $917.2 million in carrying value of net real estate investments, consisting of $753.5 million or 82.2% invested in owned and leased properties and $163.7 million or 17.8% invested in mortgage loans secured by first mortgages.

For the three months ended March 31, 2015, rental income and interest income from mortgage loans represented 84.7% and 14.6%, respectively, of total gross revenues. In most instances, our lease structure contains fixed annual rental escalations, which are generally recognized on a straight-line basis over the minimum lease period. Certain leases have annual rental escalations that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the property.  This revenue is not recognized until the appropriate contingencies have been resolved.  For the three months ended March 31, 2015, we recorded $2.3 million in straight-line rental income and $23,000 of straight-line rent receivable reserve. During the three months ended March 31, 2015, we received $24.8 million of cash rental revenue and recorded amortization of lease inducement cost of $0.4 million.  During the three months ended March 31, 2015, an existing master lease was amended to extend the terms an additional three years and increased rent by 3%. In conjunction with the amendment, we provided the lessee a $2.0 million lease inducement, which is amortized as a yield adjustment over the life of the lease term. At March 31, 2015, the straight-line rent receivable balance, net of reserves, on the balance sheet was $34.9 million.

Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in senior housing and long-term health care properties managed by experienced operators or in investments secured by health care related real estate assets. To meet these objectives, we attempt to make investments that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location, operator, property type and form of investment.  We opportunistically consider investments in health care facilities in related businesses where the business model is similar to our existing model and the opportunity provides an attractive expected return.  Consistent with this

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strategy, we pursue, from time to time, opportunities for potential acquisitions and investments, with due diligence and negotiations often at different stages of development at any particular time.

· With respect to skilled nursing properties, a primary component of our strategy is to invest in new or modernized properties operated by experienced, regionally-based operators demonstrating established relationships with local health care systems and managed care provider networks.  We prefer to invest in a property that has significant market presence in its community and where state certificate of need and/or licensing procedures limit the entry of competing properties.

· For assisted living and independent living investments we have attempted to diversify our portfolio both geographically and across product levels.

· Memory care facilities offer specialized options for seniors with Alzheimer’s disease and other forms of dementia.  Purpose built, free-standing memory care facilities offer an attractive alternative for private-pay residents affected by memory loss in comparison to other accommodations that typically have been provided within a secured unit of an assisted living or skilled nursing facility. These facilities offer dedicated care and specialized programming for various conditions relating to memory loss in a secured environment that is typically smaller in scale and more residential in nature than traditional assisted living facilities.  Residents require a higher level of care and more assistance with activities of daily living than in assisted living facilities.  Therefore, these facilities have staff available 24 hours a day to respond to the unique needs of their residents.

Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals and interest earned on outstanding loans receivable.  Our investments in owned properties and mortgage loans represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon.  To the extent that the operators experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.  To mitigate this risk, we monitor our investments through a variety of methods determined by the type of health care facility and operator.  Our monitoring process includes periodic review of financial statements for each facility, periodic review of operator credit, scheduled property inspections and review of covenant compliance.

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

Depending upon the availability and cost of external capital, we anticipate making additional investments in health care related properties and health care related securities and/or ventures.  New investments are generally funded from cash on hand, temporary borrowings under our unsecured revolving line of credit and internally generated cash flows.  Our investments generate internal cash from rent and interest receipts and principal payments on mortgage loans receivable.  Permanent financing for future investments, which replaces funds drawn under our unsecured revolving line of credit, is expected to be provided through a combination of public and private offerings of debt and equity securities and secured and unsecured debt financing.  The timing, source and amount of cash flows provided by financing activities and used in investing activities are sensitive to the capital markets environment,

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especially to changes in interest rates.  Changes in the capital markets’ environment may impact the availability of cost-effective capital.

We believe our business model has enabled and will continue to enable us to maintain the integrity of our property investments, including in response to financial difficulties that may be experienced by operators.  Traditionally, we have taken a conservative approach to managing our business, choosing to maintain liquidity and exercise patience until favorable investment opportunities arise.

At March 31, 2015, we had $3.4 million of cash on hand and $363.5 million available under our unsecured revolving line of credit with the opportunity to increase the credit up to an additional $200.0 million. Also, we have $775.1 million available under our effective shelf registration to access the capital markets through the issuance of debt and/or equity securities. Subsequent to March 31, 2015, we amended and restated our note purchase and private shelf agreement with Prudential Investment Management, Inc. (or Prudential) which provides for the possible issuance of up to an additional $102.0 million of senior unsecured fixed interest rate term notes. As a result, we believe our liquidity and various sources of available capital are sufficient to fund operations and development commitments, meet debt service obligations (both principal and interest), make dividend distributions and finance some future investments should we determine such future investments are financially feasible.

Health Care Regulatory Climate

The Centers for Medicare & Medicaid Services (or CMS) annually updates Medicare skilled nursing facility prospective payment system rates and other policies. CMS published the final fiscal year 2015 Medicare skilled nursing facility payment update on August 5, 2014. Under the final rule, Medicare rates are updated by 2%, based on a 2.5% market basket increase that is reduced by a 0.5 percentage point multifactor productivity adjustment (described below).  CMS estimates that the final rule will increase aggregate Medicare payments to skilled nursing facilities by $750 million.  On April 15, 2015, CMS released its proposed skilled nursing facility prospective payment system update for fiscal year 2016.  CMS projects that aggregate Medicare payments to skilled nursing facilities would increase by $500 million, or 1.4% under the proposed rule.  This estimated increase reflects a 2.6% market basket increase, reduced by both a 0.6 percentage point forecast error adjustment and a 0.6 percentage point multifactor productivity adjustment.  The final fiscal year 2016 rule has not yet been released.  There can be no assurance that future regulations modifying Medicare skilled nursing facility payment rates will not have an adverse effect on the financial condition of our borrowers and lessees which could, in turn, adversely impact the timing or level of their payments to us.

In March 2010, the President signed into law the Patient Protection and Affordable Care Act, which subsequently was amended by the Health Care and Education and Reconciliation Act of 2010 (collectively referred to as the “Affordable Care Act”).  The Affordable Care Act is designed to expand access to affordable health insurance, contain health care costs, and institute a variety of health policy reforms.  The provisions of the sweeping law may affect us directly, as well as impact our lessees and borrowers.  While certain provisions, such as expanding the insured population, may positively impact the revenues of our lessees and borrowers, other provisions, particularly those intended to reduce federal health care spending, could have a negative impact on our lessees and borrowers.  Among other things, the Affordable Care Act:  reduces Medicare skilled nursing facility reimbursement by a so-called “multifactor productivity adjustment” based on economy-wide productivity gains; requires the development of a value-based purchasing program for Medicare skilled nursing facility services; establishes a national voluntary pilot program to bundle Medicare payments for hospital and post-acute services that could lead to changes in the delivery of post-acute services; and provides incentives to state Medicaid programs to promote community-based care as an alternative to institutional long-term health

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care services.  The Affordable Care Act also includes provisions intended to expand public disclosure about nursing home ownership and operations, institute mandatory compliance and quality assurance programs, increase penalties for noncompliance, and expand fraud and abuse enforcement and penalty provisions that could impact our operators.  In addition, the Affordable Care Act impacts both us and our lessees and borrowers as employers, including new requirements related to the health insurance we offer to our respective employees.  Many aspects of the Affordable Care Act are being implemented through new regulations and subregulatory guidance. We cannot predict at this time what effect, if any, the various provisions of the Affordable Care Act will have on our lessees and borrowers or our business when fully implemented. There can be no assurances, however, that the Affordable Care Act will not adversely impact the operations, cash flows or financial condition of our lessees and borrowers, which subsequently could materially adversely impact our revenue and operations.

Under the terms of the Budget Control Act of 2011, as modified by the American Taxpayer Relief Act, President Obama issued a sequestration order on March 1, 2013 that mandates a 2% cut to Medicare payments to providers and health plans. The cuts generally apply to Medicare fee-for-service claims with dates-of-service or dates-of-discharge on or after April 1, 2013. As amended by subsequent legislation, the Medicare sequestration cuts are currently scheduled to be applied through fiscal year 2024, although Congress and the Administration could enact legislation to modify sequestration at any time. On April 1, 2014, President Obama signed into law H.R. 4302, the “Protecting Access to Medicare Act of 2014.”  Among other things, the Protecting Access to Medicare Act requires the Secretary of the Department of Health and Human Services to develop a skilled nursing facility “value-based purchasing program,” which will tie Medicare payments to skilled nursing facilities to their performance on certain new readmissions measures, applicable to services furnished beginning October 1, 2018. On October 6, 2014, President Obama signed the Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT Act”). This law requires the collection of standardized post-acute care assessment data, which eventually could be used as the basis for developing changes to Medicare post-acute care reimbursement policy.  On April 16, 2015, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), which, among other things, sets the annual skilled nursing facility prospective payment system update for FY 2018 at 1%.  Congress and the Administration also could consider other legislation that would have the impact of reducing Medicare reimbursement for skilled nursing facilities and other Medicare providers, encouraging home and community-based long term care services as an alternative to institutional settings, or otherwise reforming payment policy for post-acute care services. There can be no assurances that enacted or future budget control mechanisms will not have an adverse impact on the financial condition of our borrowers and lessees, which subsequently could materially adversely impact our company.

Additional reforms affecting the payment for and availability of health care services have been proposed at the state level and adopted by certain states. Increasingly state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to decrease state Medicaid costs. Congress and state legislatures can be expected to continue to review and assess alternative health care delivery systems and payment methodologies. Changes in the law, new interpretations of existing laws, or changes in payment methodologies may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by the government and other third party payors.

Key Transactions

During the three months ended March 31, 2015, we purchased and equipped a 106-bed skilled nursing property in Wisconsin for a total of $13.9 million by exercising our purchase option under a $10.6 million mortgage and construction loan. The property was added to an existing master lease at a lease rate

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equivalent to the interest rate in effect on the loan at the time the purchase option was exercised. In addition, we completed the development and opened a 60-unit memory care property located in Colorado.

Also, during the first quarter of 2015, we entered into two development commitments totaling $28.7 million to acquire two parcels of land and an existing improvement and to develop a 56-unit memory care property located in Texas and an 89-unit combination assisted living and memory care property located in South Carolina. Concurrent with these commitments, we entered into a master lease agreement for an initial term of 15 years with three 5-year renewal options at an initial cash yield of 8.75%. The master lease gives us a right to provide similar financing for certain future development opportunities.

We also committed to provide a borrower additional loan proceeds up to $20.0 million for the expansion of two of the 15 properties securing its original loan which increased the total loan commitment to $196.4 million.  We also agreed to convey to the borrower two parcels of land adjacent to these properties to facilitate the projects. As partial consideration for the increased commitment and associated conveyance, the borrower forfeited a one-time option to prepay up to 50% of the then outstanding loan balance without penalty.

Furthermore, we originated a new $11.0 million mortgage loan, of which $9.5 millionwas initially funded, with a commitment to fund the balance for approved capital improvement projects. The loan is secured by a 157-bed skilled nursing property in Michigan and bears interest at 9.41% for five years, escalating annually thereafter by 2.25%. The term is 30 years with interest-only payments for the initial three years. Additionally, we have the option to purchase the property under certain circumstances, including a change in regulatory environment.

During the three months ended March 31, 2015, we made a preferred equity investment in an entity (the JV) that owns four properties providing independent, assisted living and memory care services. These properties are located in Arizona. At closing, we provided an initial preferred capital contribution of $20.1 million and have committed to contribute an additional preferred capital contribution of $5.5 million for a total preferred capital contribution of $25.6 million. As the preferred member of the JV, we are entitled to receive a 15% preferred return, a portion of which is paid in cash and a portion of which is deferred if the cash flow of the JV is insufficient to pay all of the accrued preferred return. The unpaid accrued preferred return will be added to the balance of the preferred equity investment and will be repaid upon redemption.

Key Performance Indicators, Trends and Uncertainties

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

Concentration Risk.  We evaluate by gross investment our concentration risk in terms of asset mix, investment mix, operator mix and geographic mix.  Concentration risk is valuable to understand what portion of our investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our investments that are real property or mortgage loans.  In order to qualify as an equity REIT, at least 75 percent of our total assets must be represented by real estate assets, cash, cash items and government securities.  Investment mix measures the portion of our investments that relate to our various property types.  Operator mix measures the portion of our investments that relate to our top five operators.  Geographic mix measures the portion of our investment that relate to our top five states.

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The following table reflects our recent historical trends of concentration risk (gross investment, in thousands):

	3/31/15		12/31/14		9/30/14		6/30/14		3/31/14
Asset mix:
Real property	$	983,585	$	949,838	$	966,012	$	956,516	$	951,491
Loans receivable		165,300		167,329		173,051		169,766		169,163
Investment mix:
Skilled nursing properties	$	650,932	$	633,052	$	632,547	$	629,228	$	625,831
Assisted living properties(1)		430,027		424,940		449,340		440,254		434,777
Range of care properties		43,907		46,217		46,293		46,367		46,439
Under development(1)		13,136		2,075		—		—		—
Other(2)		10,883		10,883		10,883		10,433		13,607
Operator mix:
Prestige Healthcare(2)	$	152,885	$	141,527	$	139,702	$	138,437	$	137,739
Brookdale Communities		126,991		123,984		123,229		123,172		119,160
Senior Care Centers, LLC		115,039		115,039		114,539		114,539		114,539
Juniper Communities, LLC		87,088		87,088		87,088		87,088		87,088
Preferred Care		86,700		86,827		86,951		87,070		87,186
Remaining operators		580,182		562,702		587,554		575,976		574,942
Geographic mix:
Texas	$	246,756	$	239,539	$	239,926	$	239,809	$	239,158
Michigan		140,696		129,338		127,513		126,247		125,550
Colorado		114,701		109,859		94,598		89,019		78,258
Ohio		98,647		98,647		98,647		98,647		98,647
Florida		71,053		71,011		77,665		77,555		82,046
Remaining states		477,032		468,773		500,714		495,005		496,995

(1) During the three months ended March 31, 2015, we completed the construction of a 60-unit memory care property. Accordingly, this property was reclassified from “Under development” to “Assisted living property” for all periods presented.

(2) During the second quarter of 2014, we sold a school property. Accordingly, we had one school property and five parcels of landas of March 31, 2015. The parcels of land are located adjacent to properties securing the Prestige mortgage loan and are managed by Prestige. During the three months ended March 31, 2015, we committed to provide additional loan proceeds under the Prestige mortgage loan for the expansion of two of the 15 properties secured under a mortgage loan and we will convey to Prestige two parcels of land adjacent to those properties.

Credit Strength.  We measure our credit strength both in terms of leverage ratios and coverage ratios.  Our leverage ratios include debt to gross asset value and debt to market capitalization.  The leverage ratios indicate how much of our consolidated balance sheet capitalization is related to long term obligations.  Our coverage ratios include interest coverage ratio and fixed charge coverage ratio.  The coverage ratios indicate our ability to service interest and fixed charges (interest plus preferred dividends).  The coverage ratios are based on adjusted earnings before gain on sale of real estate, interest, taxes, depreciation and amortization (or Adjusted EBITDA).  Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies.  The following table reflects the recent historical trends for our credit strength measures:

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Balance Sheet Metrics

	Quarter Ended
	3/31/15		12/31/14		9/30/14		6/30/14	3/31/14
Debt to gross asset value	25.6%	(1)	23.7%	(3)	25.4%		25.1%	25.2%
Debt & preferred stock to gross asset value	28.7%	(1)	26.9%	(3)	28.7%		28.4%	28.4%
Debt to market capitalization ratio	15.8%	(1)	15.2%	(4)	18.6%	(6)	17.4%	17.9%
Debt & preferred stock to market capitalization ratio	17.7%	(1)	17.3%	(4)	21.0%	(6)	19.7%	20.2%
Interest coverage ratio(7)	7.2x	(2)	6.9x	(5)	7.3x		7.5x	7.6x
Fixed charge coverage ratio(7)	5.9x	(2)	5.7x	(5)	6.0x		6.1x	6.1x

(1) Increased primarily due to the increase in outstanding debt partially offset by the increase in gross asset value from acquisitions, additional development and capital improvement funding.

(2) Increased primarily due to revenue from the new investment in an unconsolidated joint venture and higher effective interest income from the forfeiture of a mortgage loan prepayment option.

(3) Decrease primarily due to debt pay down from proceeds from the sale of 16 properties to Enlivant and proceeds from the sale of 600,000 shares of common stock in a registered direct placement partially offset by a decrease in gross asset value related to the sale of properties.

(4) Decrease primarily due to the decrease in outstanding debt and the increase in market capitalization resulting from the sale of 600,000 shares of common stock in a registered direct placement and increase in stock price.

(5) Decrease primarily due to increase in interest expense resulting from the sale of senior unsecured notes and increased availability under our expanded unsecured revolving line of credit.

(6) Increase primarily due to sale of senior unsecured notes and decrease in market capitalization due to decrease in stock price.

(7) In calculating our interest coverage and fixed charge coverage ratios above, we use Adjusted EBITDA, which is a financial measure not derived in accordance with U.S. generally accepted accounting principles (non-GAAP financial measure). Adjusted EBITDA is not an alternative to net income, operating income or cash flows from operating activities as calculated and presented in accordance with U.S. GAAP. You should not rely on Adjusted EBITDA as a substitute for any such U.S. GAAP financial measures or consider it in isolation, for the purpose of analyzing our financial performance, financial position or cash flows.  Net income is the most directly comparable GAAP measure to Adjusted EBITDA.

	Quarter Ended
	3/31/15			12/31/14			9/30/14			6/30/14			3/31/14
Net income	$	17,552		$	21,000		$	17,122		$	18,273		$	17,004
Less: Gain on sale		—			(3,819)			—			(1,140)			—
Add: Interest expense		3,766			3,683			3,170			3,088			3,187
Add: Depreciation and amortization		6,779			6,594			6,335			6,302			6,298
Total adjusted EBITDA	$	28,097		$	27,458		$	26,627		$	26,523		$	26,489
Interest expense	$	3,766		$	3,683		$	3,170		$	3,088		$	3,187
Add: Capitalized interest		147			290			474			435			307
Interest incurred	$	3,913		$	3,973		$	3,644		$	3,523		$	3,494
Interest coverage ratio		7.2	x		6.9	x		7.3	x		7.5	x		7.6	x
Interest incurred	$	3,913		$	3,973		$	3,644		$	3,523		$	3,494
Preferred stock dividends		818			819			818			818			818
Total fixed charges	$	4,731		$	4,792		$	4,462		$	4,341		$	4,312
Fixed charge coverage ratio		5.9	x		5.7	x		6.0	x		6.1	x		6.1	x

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We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations.  This may be a result of various factors, including, but not limited to

· The status of the economy;

· The status of capital markets, including prevailing interest rates;

· Compliance with and changes to regulations and payment policies within the health care industry;

· Changes in financing terms;

· Competition within the health care and senior housing industries; and

· Changes in federal, state and local legislation.

Management regularly monitors the economic and other factors listed above.  We develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends.

Operating Results

Three months ended March 31, 2015 compared to three months ended March 31, 2014 (amounts in thousands)

	Three Months Ended
	March 31,				Increase/
	2015		2014		(Decrease)
Revenues:
Rental income	$	26,678	$	25,252	$	1,426	(1)
Interest income from mortgage loans		4,607		4,093		514	(2)
Interest and other income		195		93		102	(3)
Total revenues		31,480		29,438		2,042
Expenses:
Interest expense		3,766		3,187		579	(4)
Depreciation and amortization		6,779		6,298		481	(1)
General and administrative expenses		3,499		2,949		550	(5)
Total expenses		14,044		12,434		1,610
Operating income		17,436		17,004		432
Income from unconsolidated joint ventures		116		—		116	(6)
Net income		17,552		17,004		548
Income allocated to participating securities		(123)		(103)		(20)
Income allocated to preferred stockholders		(818)		(818)		—
Net income available to common stockholders	$	16,611	$	16,083	$	528

(1) Increased due to acquisitions, development and capital improvement investments.

(2) Increased primarily due to increase in effective interest income from a mortgage loan when the borrower forfeited its prepayment option, a mortgage origination and additional funding for capital improvement commitments under certain mortgage loans partially offset by normal amortization of existing mortgage loans.

(3) Increased primarily due to additional funding under our notes receivable.

(4) Increased primarily due to the sale of senior unsecured notes and decrease in capitalized interest related to development projects.

(5) Increased primarily due to additional expenditures related to increased investment activity and restricted stock vesting.

(6) Represents our preferred return from our investment in an unconsolidated joint venture during the first quarter of 2015.

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Funds From Operations

Funds from Operations (or FFO) available to common stockholders, basic FFO available to common stockholders per share and diluted FFO available to common stockholders per share are supplemental measures of a REIT’s financial performance that are not defined by U.S. GAAP. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with U.S. GAAP assumes that the value of real estate assets diminishes predictably over time.  We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO facilitates comparisons of operating performance between periods.

We use FFO as a supplemental performance measurement of our cash flow generated by operations.  FFO does not represent cash generated from operating activities in accordance with U.S. GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.

We calculate and report FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (or NAREIT). FFO, as defined by NAREIT, means net income available to common stockholders (computed in accordance with U.S. GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Our calculation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that have a different interpretation of the current NAREIT definition from us; therefore, caution should be exercised when comparing our FFO to that of other REITs.

The following table reconciles net income available to common stockholders to FFO available to common stockholders (unaudited, amounts in thousands, except per share amounts):

	Three Months Ended
	March 31,
	2015		2014
Net income available to common stockholders	$	16,611	$	16,083
Add: Depreciation and amortization		6,779		6,298
FFO available to common stockholders	$	23,390	$	22,381
FFO available to common stockholders per share:
Basic	$	0.66	$	0.65
Diluted(1)	$	0.65	$	0.63
Weighted average shares used to calculate FFO per share:
Basic		35,277		34,586
Diluted(2)		37,529		36,806

⁽¹⁾ Diluted FFO available to common stockholders per share includes the effect of the participating securities and the convertible preferred securities.

⁽²⁾ Diluted weighted average shares used to calculate FFO per share includes the effect of stock option equivalents, participating securities and convertible preferred securities.

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Liquidity and Capital Resources

Operating Activities.  At March 31, 2015, our gross real estate investment portfolio (before accumulated depreciation and amortization) consisted of $983.6 million invested primarily in owned long-term health care properties and mortgage loans of approximately $165.3 million (prior to deducting a $1.7 million reserve). Our portfolio consists of direct investments (properties that we either own or on which we hold promissory notes secured by first mortgages) in 98 skilled nursing properties, 93 assisted living properties, 7 range of care properties, one school, three parcels of land under development and five parcels of land held-for-use.  These properties are located in 29 states.  Assisted living properties, independent living properties, memory care properties and combinations thereof are included in the assisted living property type. Range of care properties consist of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services.  For the three months ended March 31, 2015, we had net cash provided by operating activities of $17.9 million.

For the three months ended March 31, 2015, we recorded $2.3 million in straight-line rental income and a reserve of $23,000 on our straight-line rent receivable. During the three months ended March 31, 2015, we received $24.8 million of cash rental revenue and recorded amortization of lease inducement cost of $0.4 million. During the three months ended March 31, 2015, an existing master lease was amended to extend the terms an additional three years and increased rent by 3%. In conjunction with the amendment, we provided the lessee a $2.0 million lease inducement, which is amortized as a yield adjustment over the life of the lease term. At March 31, 2015, the straight-line rent receivable balance, net of reserves, on the balance sheet was $34.9 million.

We committed to provide, as part of an acquisition in 2014, two contingent payments totaling up to $4.0 million payable in increments of $2.0 million upon the property achieving a sustainable stipulated rent coverage ratio. These contingent payments were recorded at the date of the acquisition in the amount of $3.2 millionwhich is the estimated fair value using a discounted cash flow analysis and we are accreting the contingent liability up to the estimated settlement amount as of the estimated payment dates. During the three months ended March 31, 2015, we recorded non‑cash interest expense of $55,000 related to these contingent liabilities and the fair value of these contingent payments was $3.3 million at March 31, 2015.

Investing Activities.  For the three months ended March 31, 2015, we used $52.8 million of cash for investing activities.

Real Estate Investments – Owned Properties.  We funded $7.2 million under a $12.2 million development commitment to purchase the land and existing improvements and then complete the related development of a 56-unit memory care property currently under construction in Texas. In conjunction with this commitment, we entered into a master lease agreement for an initial term of 15 years with three 5-year renewal options at an initial cash yield of 8.75%. The master lease provides for our payment of a lease inducement of up to $1.6 million. Also, the master lease gives us a right to provide similar financing for certain future development opportunities.

During the three months ended March 31, 2015, we elected to exercise our right to provide financing for one such opportunity, adding to the master lease a parcel of land purchased in South Carolina for $2.5 millionas part of our commitment to provide the operator with up to $16.5 million, including the land purchase, for the development of an 89-unit combination assisted living and memory

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care property. In conjunction with this new development commitment, the master lease provides for an additional $2.4 million lease inducement payment.

The two lease inducement payments under the master lease totaling $4.0 million will be amortized as a yield adjustment over the lease term. Up to 25% of the fee is currently available for funding with the remaining balance available following the issuance of a certificate of occupancy and receipt of regulatory approval required for the operation of the newly constructed properties. As of March 31, 2015, we have funded $44,000 and have a remaining commitment of $0.9 million under the available lease inducement commitment.

Additionally, during the quarter ended March 31, 2015, we purchased and equipped a 106-bed skilled nursing property in Wisconsin for a total of $13.9 million by exercising our purchase option under a $10.6 million mortgage and construction loan. Theproperty was added to an existing master lease at a lease rate equivalent to the interest rate in effect on the loan at the time the purchase option was exercised. Additionally, we paid the lessee a $1.1 million lease inducement which will be amortized as a yield adjustment over the life of the lease term.  

The following table summarizes our completed development and improvement projects and amounts funded during the three months ended March 31, 2015 (dollar amounts in thousands):

	Number		Number
	of	Type of	of
Type of Project	Properties	Property	Beds/Units	State	2015 Funding			Total Funding
Development	1	ALF	60	Colorado	$	1,360		$	10,541	(1)
Renovation	1	SNF	121	California		1,481			1,481
Renovation	2	SNF	141	Tennessee		40			2,200
	4		322		$	2,881	(2)	$	14,222

(1) Completed a MC property in February 2015.

(2) Excludes $5,692 of funding on projects that were completed during 2014.  

The following table summarizes our investment commitments as of March 31, 2015 and amounts funded under these projects (excludes capitalized interest, dollar amounts in thousands):

	Investment		2015		Commitment		Remaining		Number of	Number of
Type of Property	Commitment		Funding (2)		Funded		Commitment		Properties	Beds/Units
Skilled Nursing	$	6,600	$	25	$	25	$	6,575	3	510
Assisted Living (1)		45,765		11,056		13,144		32,621	27	1,240
Totals	$	52,365	$	11,081	$	13,169	$	39,196	30	1,750

(1) Includes the development of two MC properties for a total commitment of $24,430 and one ALF/MC property for a total commitment of $16,535. Also, includes three commitments for renovation projects on 24 ALFs totaling $4,800.

(2) Excludes funding for completed development and improvement projects discussed above. Includes $7,195 of land and improvements acquired for the development of a 56-unit MC property and $2,490 of land acquired for the development of an 89-unit ALF/MC property, as previously discussed.

Real Estate Investments – Mortgage Loans.During 2013, we funded the initial amount of $124.4 million under a mortgage loan with a third‑party borrower secured by 15 skilled nursing properties with a total of 2,058 beds in Michigan. The loan agreement provided for additional commitments of $12.0 million for capital improvements and up to $40.0 million of additional proceeds, for a total loan commitment of up to $176.4 million. The additional proceeds are contingent on certain conditions and are based on certain operating metrics and valuation thresholds. Also, the additional proceeds are limited to $10.0 million in any twelve month period. During the three months ended March 31, 2015, we funded

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$1.9 million under the $12.0 million capital improvement commitment with $6.8 million remaining as of March 31, 2015.  

This mortgage loan also provided the borrower a one‑time option to prepay up to 50% of the then outstanding loan balance without penalty. During the three months ended March 31, 2015, we amended this mortgage loan to provide up to an additional $20.0 million in loan proceeds for the expansion of two properties securing the loan (increasing the total capital improvement commitment to $32.0 million and the total loan commitment to $196.4 million) and agreed to convey, to the borrower, two parcels of land held-for-use adjacent to these properties to facilitate the projects. As partial consideration for the increased commitment and associated conveyance, the borrower forfeited their prepayment option.

Furthermore, we originated anew $11.0 million mortgage loan with the borrower concurrently funding $9.5 million with a commitment to fund the balance for approved capital improvement projects. The loan is secured by a 157-bed skilled nursing property in Michigan and bears interest at 9.41% for five years, escalating annually thereafter by 2.25%. The term is 30 years with interest-only payments for the initial three years. Additionally, we have the option to purchase the property under certain circumstances, including a change in regulatory environment.

Investment in Unconsolidated Joint Ventures.  During the three months ended March 31, 2015, we made a preferred equity investment in an entity (the JV) that owns four properties providing independent, assisted living and memory care services. These properties are located in Arizona. At closing, we provided an initial preferred capital contribution of $20.1 million and have committed to contribute an additional preferred capital contribution of $5.5 million for a total preferred capital contribution of $25.6 million. As the preferred member of the JV, we are entitled to receive a 15% preferred return, a portion of which is paid in cash and a portion of which is deferred if the cash flow of the JV is insufficient to pay all of the accrued preferred return. The unpaid accrued preferred return will be added to the balance of the preferred equity investment and will be repaid upon redemption. In addition, we have the option to purchase either the properties owned by the JV or 100% of the common membership interest in the JV, which is exercisable between the 37th month and the 54th month from the commencement of the JV. If we elect not to exercise our purchase option, we have the right to put our preferred equity interest to the common member after the 54th month for an amount equal to the unpaid preferred equity investment balance and accrued preferred return thereon. The common equity member has the right to call our preferred interest at any time for an amount equal to the preferred equity investment balance and accrued preferred return thereon that would be due for the first 36 months, less amounts paid to us prior to the redemption date.

Notes Receivable.  During the three months ended March 31, 2015, we funded $0.9 million in principal under our note receivable loans. At March 31, 2015, we had twelve notes receivable outstanding with a total commitment to fund $4.3 million and a weighted average interest rate of 10.8%. As of March 31, 2015, we funded $2.3 million under these commitments and we have a remaining commitment of $2.0 million.

Financing Activities. For the three months ended March 31, 2015, we had net cash provided by financing activities of $13.1 million.

Debt Obligations.  During the three months ended March 31, 2015, we borrowed $36.5 million under our unsecured revolving line of credit. At March 31, 2015, we had $36.5 million outstanding under our unsecured revolving line of credit with $363.5 million available for borrowing. At March 31, 2015, we were in compliance with all our covenants.

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During the three months ended March 31, 2015, we paid $4.2 million in scheduled principal payments on senior unsecured notes. Subsequent to March 31, 2015, we entered into a third amended and restated $200.0 million private shelf agreement with Prudential for a three year term. The agreement provides for the possible issuance of up to an additional $102.0 million senior unsecured fixed interest rate term notes.  After July 14, 2015 and for the balance of the term, the agreement provides for the possible issuance of additional senior unsecured fixed interest rate term notes up to the maximum availability upon us making our scheduled principal payments on existing notes then outstanding. Interest rates on any issuance under the shelf agreement will be set at a spread over applicable Treasury rates. Maturities of each issuance are at our election for up to 15 years from the date of issuance with a maximum average life of 12 years from the date of original issuance.

Equity.  During the three months ended March 31, 2015, we acquired 4,609 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. During the three months ended March 31, 2015, we paid cash dividends on our 8.5% Series C Cumulative Convertible Preferred Stock totaling $0.8 million. We also declared and paid cash dividends on our common stock totaling $18.1 million. Subsequent to March 31, 2015, we declared a monthly cash dividend of $0.17 per share on our common stock for the months of April, May and June, payable on April 30, May 29, and June 30, 2015, respectively, to stockholders of record on April 22, May 21, and June 22, 2015, respectively.

During the three months ended March 31, 2015, no stock options were granted or exercised. At March 31, 2015, we had 43,334 stock options outstanding and 33,334 stock options were exercisable. The total number of stock options that are scheduled to vest through December 31, 2015, 2016 and 2017 is 0; 5,000 and 5,000, respectively.  We have no stock options outstanding that are scheduled to vest beyond 2017. Compensation expense relating to the vesting of stock options for the three months ended March 31, 2015 was $4,000. The remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options for 2015, 2016 and 2017 is $11,000; $15,000 and $2,000, respectively.

During the three months ended March 31, 2015, we cancelled 640 shares of restricted common stock. In addition, we granted 65,750 shares of restricted common stock at $44.45 per share. These shares vest ratably over a three-year period from the grant date. At March 31, 2015, we had 255,815 restricted common shares outstanding. The total number of restricted common shares that are scheduled to vest through December 31, 2015, 2016, 2017 and 2018 is 94,168; 88,360; 51,367 and 21,920, respectively.  We have no restricted common stock that are scheduled to vest beyond 2018. During the three months ended March 31, 2015, we recognized $1.0 million of compensation expense related to the vesting of restricted common stock. The remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock for 2015, 2016, 2017 and 2018 is $2.6 million; $2.2 million; $1.2 million and $0.1 million, respectively.

Available Shelf Registration. Our shelf registration statement provides us with the capacity to offer up to $800.0 million in common stock, preferred stock, warrants, debt, depositary shares, or units.  We may from time to time raise capital under our current shelf registration in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. At March 31, 2015, we had availability of $775.1 million under our effective shelf registration which expires in July 2016.

Liquidity.  We expect our future income and ability to make distributions from cash flows from operations to depend on the collectibility of our rents and mortgage loans receivable.  The collection of these loans and rents will be dependent, in large part, upon the successful operation by the operators of

33

the skilled nursing properties, assisted living properties, independent living properties, memory care properties, range of care properties and school we own or that are pledged to us.  The operating results of the facilities will be impacted by various factors over which the operators/owners may have no control.  Those factors include, without limitation, the status of the economy, changes in supply of or demand for competing long-term health care facilities, ability to control rising operating costs, and the potential for significant reforms in the long-term health care industry.  In addition, our future growth in net income and cash flow may be adversely impacted by various proposals for changes in the governmental regulations and financing of the long-term health care industry.  We cannot presently predict what impact these proposals may have, if any.  We believe that an adequate provision has been made for the possibility of loans proving uncollectible but we will continually evaluate the financial status of the operations of the senior housing and long-term health care properties.  In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and will make future revisions to the provision, if considered necessary.

Our investments, principally our investments in mortgage loans and owned properties, are subject to the possibility of loss of their carrying values as a result of changes in market prices, interest rates and inflationary expectations.  The effects on interest rates may affect our costs of financing our operations and the fair market value of our financial assets.  Generally our loans have predetermined increases in interest rates and our leases have agreed upon annual increases.  Inasmuch as we may initially fund some of our investments with variable interest rate debt, we would be at risk of net interest margin deterioration if medium and long-term rates were to increase. 

At March 31, 2015, we had $3.4 million of cash on hand and $363.5 million available under our unsecured revolving line of credit with the opportunity to increase the credit up to an additional $200.0 million. Also, we have $775.1 million available under our effective shelf registration to access the capital markets through the issuance of debt and/or equity securities. Subsequent to March 31, 2015, we amended and restated our note purchase and private shelf agreement with Prudential which provides for the possible issuance of up to an additional $102.0 million of senior unsecured fixed interest rate term notes. We believe that our current cash balance, cash flow from operations available for distribution or reinvestment, our borrowing capacity and our potential ability to access the capital markets are sufficient to provide for payment of our current operating costs, meet debt obligations, provide funds for distribution to the holders of our preferred stock and pay common dividends at least sufficient to maintain our REIT status and repay borrowings at, or prior to, their maturity. The timing, source and amount of cash flows provided by financing activities and used in investing activities are sensitive to the capital markets environment, especially to changes in interest rates. We continuously evaluate the availability of cost-effective capital and believe we have sufficient liquidity for additional capital investments in 2015.

Critical Accounting Policies

There have been no material changes from the critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in our market risk during the three months ended March 31, 2015.  For additional information, refer to Item 7A as presented in our Annual Report on Form 10-K for the year ended December 31, 2014.

34

Item 4.  CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended). As of the end of the period covered by this report based on such evaluation our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective.

There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

We are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of business, which in our opinion are not singularly or in the aggregate anticipated to be material to our results of operations or financial condition. Claims and lawsuits may include matters involving general or professional liability asserted against the lessees or borrowers related to our properties, which we believe under applicable legal principles are not our responsibility as a non-possessory landlord or mortgage holder. We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principles and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims and lawsuits.

Item 1A.  Risk Factors

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Item 5.  OTHER INFORMATION

On April 28, 2015, we entered into an amended and restated note purchase and private shelf agreement with Prudential Investment Management, Inc. (or Prudential) for a three year term. The amended shelf agreement increases the aggregate commitment to $200.0 million compared to $100.0 million previously.

As a result of prior issuances and payments, the amended shelf agreement currently provides for the possible issuance by us to Prudential of up to $102.0 million of senior unsecured fixed interest rate term notes.  After July 14, 2015 and for the balance of the term, the amended shelf agreement provides for the possible issuance of additional senior unsecured fixed interest rate term notes up to the maximum availability upon us making our scheduled principal payments on existing notes then outstanding.  The amended shelf agreement also provides for other limitations as to the maximum amount that can be held by Prudential.

Interest rates on any issuance under the amended shelf agreement will be set at a fixed spread over applicable Treasury rates.  Maturities of each issuance are at our election for up to 15 years from the date of issuance with a maximum average life of 12 years from the date of original issuance.  The amended shelf agreement also contains standard covenants including requirements to maintain financial ratios such as debt to asset value ratios. 

The amended shelf agreement is filed as an exhibit to this Quarterly Report on Form 10-Q.  The description herein of the amended shelf agreement is qualified in its entirety by reference to the exhibit filed hereto.

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Item 6.  Exhibits

3.1	LTC Properties, Inc. Articles of Restatement (incorporated by reference to Exhibit 3.2 to LTC Properties Inc.’s Current Report on Form 8-K filed September 14, 2012)
3.2	Bylaws of LTC Properties, Inc., as amended and restated August 3, 2009 (incorporated by reference to Exhibit 3.2 to LTC Properties Inc.’s Form 10-Q for the quarter ended June 30, 2009)
3.3	First Amendment to Bylaws of LTC Properties, Inc. (incorporated by reference to Exhibit 3.1 to LTC Properties Inc.’s Current Report on Form 8-K filed February 12, 2015)
10.1	Third Amended and Restated Note Purchase and Private Shelf Agreement between LTC Properties, Inc. and Prudential Investment Management, Inc. dated April 28, 2015
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from LTC Properties, Inc.’s Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2015 and December 31, 2014; (ii) Consolidated Statements of Income for the three months ended March 31, 2015 and 2014; (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014; and (iv) Notes to Consolidated Financial Statements

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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.

	LTC PROPERTIES, INC.
	Registrant
Dated:  April 30, 2015	By:	/s/ Pamela Kessler
		Pamela Kessler
		Executive Vice President, Chief Financial Officer and Corporate Secretary
		(Principal Financial and Accounting Officer)

38

EX-10.1

EXHIBIT 10.1

LTC PROPERTIES, INC.

THIRDAMENDED AND RESTATED

NOTE PURCHASE AND PRIVATE SHELF AGREEMENT

5.26% Series A-1 Senior Notes Due July 14, 2015

($25,000,000 Aggregate Original Principal Amount)

5.74% Series A-2 Senior Notes Due January 14, 2019

($25,000,000 Aggregate Original Principal Amount)

4.80% Series B Senior Notes Due July 20, 2021

($50,000,000 Aggregate Original Principal Amount)

3.99% Series C Senior Notes Due November 20, 2021

($70,000,000 Aggregate Original Principal Amount)

4.50% Series D Senior Notes Due July 31, 2026

($30,000,000 Aggregate Original Principal Amount)

$200,000,000 Private Shelf Facility

As of April28, 2015

Information Schedule
Schedule A	—	Purchaser Schedule Related to Series A Notes Purchaser Schedule Related to Series B Notes
Schedule B	—	Defined Terms
Schedule 5.4	—	Subsidiaries; Affiliates; Directors and Officers; Restrictions on Subsidiaries
Schedule 5.15	—	Existing Indebtedness for Borrowed Money
Schedule 10.2	—	Existing Investments
Exhibit A-1	—	Form of 5.26% Series A-1 Senior Note due July 14, 2015
Exhibit A-2	—	Form of 5.74% Series A-2 Senior Note due January 14, 2019
Exhibit A-3	—	Form of 4.80% Series B Senior Note due July 20, 2021
Exhibit A-4	—	Form of 3.99% Series C Senior Note due November 20, 2021
Exhibit A-5	—	Form of 4.50% Series D Senior Note due July 31, 2016
Exhibit A-6	—	Form of Shelf Note
Exhibit B	—	Form of Request for Purchase
Exhibit C	—	Form of Confirmation of Acceptance
Exhibit D-1	—	Form of Opinion of Special Counsel for the Company
Exhibit D-2	—	Form of Opinion of Special Maryland Counsel for the Company
Exhibit E	—	Form of Compliance Certificate

Table of Contents

					Page
1	Authorization of Notes				1
	1A	Amendment and Restatement; Prior Release of Guarantors			1
	1B	Existing Series A-1 Notes			1
	1C	Existing Series A-2 Notes			2
	1D	Existing Series B Notes			2
	1E	EXISTING SERIES C NOTES			2
	1F	EXISTING SERIES D NOTES			2
	1G	Authorization of Issue of Shelf Notes			2
2	Sale And Purchase of Notes				3
	2A	[Intentionally Omitted]			3
	2B	Sale and Purchase of Shelf Notes			3
		2B(1)	Facility		3
		2B(2)	Issuance Period		3
		2B(3)	Request For Purchase		4
		2B(4)	Rate Quotes		4
		2B(5)	Acceptance		4
		2B(6)	Market Disruption		5
		2B(7)	Facility Closings		5
		2B(8)	Fees		6
			2B(8)(i)	Draw Fees	6
			2B(8)(ii)	Structuring Fee	6
			2B(8)(iii)	Delayed Delivery Fees	6
			2B(8)(iv)	Cancellation Fee	7
3	[Intentionally Omitted]				8
4	Conditions				8
	4A	Conditions to Effectiveness of Amendment and Restatement			8
		4A(1)	Officer’s Certificate (Unencumbered Assets/Qualified Mortgage Loans)		8
		4A(2)	Officer’s Certificate (Bringdown)		8
		4A(3)	Payment of Special Counsel Fees		8

i

Table of Contents

(continued)

				Page
	4B	Conditions to Each Closing		8
		4B(1)	Certain Documents	8
		4B(2)	Payment of Fees	9
		4B(3)	Representations and Warranties	9
		4B(4)	Performance; No Default	9
		4B(5)	Changes in Structure	10
		4B(6)	Purchase Permitted By Applicable Law, Etc	10
		4B(7)	Private Placement Number	10
		4B(8)	Proceedings and Documents	10
5	Representations and Warranties of the Company			10
	5.1	Organization; Power and Authority		10
	5.2	Authorization, Etc		11
	5.3	Disclosure		11
	5.4	Organization and Ownership of Equity in Subsidiaries; Affiliates		11
	5.5	Financial Statements		12
	5.6	Compliance with Laws; Other Instruments, Etc		13
	5.7	Governmental Authorizations, Etc		13
	5.8	Litigation; Observance of Agreements, Statutes and Orders		13
	5.9	Taxes		13
	5.10	Title to Property; Leases		14
	5.11	Licenses, Permits, Etc		14
	5.12	Compliance with ERISA		14
	5.13	Private Offering		15
	5.14	Use of Proceeds; Margin Regulations		16
	5.15	Existing Indebtedness for Borrowed Money; Future Liens		16
	5.16	Foreign Assets Control Regulations, Etc		16
	5.17	Status under Certain Statutes		18
	5.18	Environmental Matters		18
	5.19	Stock of the Company		19
	5.20	Condition of Property; Casualties; Condemnation		19

ii

Table of Contents

(continued)

			Page
	5.21	Legal Requirements and Zoning	19
	5.22	[Intentionally Omitted]	20
	5.23	Solvency	20
	5.24	Hostile Tender Offers	20
6	Representations of the Purchasers		20
	6.1	Purchase for Investment	20
	6.2	Source of Funds	20
7	Information as to the Company		22
	7.1	Financial and Business Information	22
	7.2	Officer’s Certificate	24
	7.3	Visitation	25
8	Prepayment of the Notes		25
	8.1	Required Prepayments	26
	8.2	Optional Prepayments with Make-Whole Amount	26
	8.3	Allocation of Partial Prepayments	26
	8.4	Maturity; Surrender, Etc	27
	8.5	Purchase of Notes	27
	8.6	Make-Whole Amount	27
9	Affirmative Covenants		28
	9.1	Compliance with Laws and Contractual Obligations	28
	9.2	Insurance	29
	9.3	Maintenance of Properties	30
	9.4	Payment of Taxes and Claims	30
	9.5	Maintenance of Existence, Etc	30
	9.6	Books and Records	31
	9.7	Maintenance of REIT Status	31
	9.8	Listing of Common Stock; Filing of Reports	31
	9.9	Limitations on Guaranties of Indebtedness	31
	9.10	Information Required by Rule 144A	31
10	Negative Covenants		31

iii

Table of Contents

(continued)

			Page
	10.1	Liens, Etc	31
	10.2	Investments, Acquisitions, Loans and Advances	32
	10.3	Mergers, Consolidations and Sales	33
	10.4	No Burdensome Contracts With Affiliates	34
	10.5	No Changes in Fiscal Year	34
	10.6	Change in the Nature of Business	34
	10.7	Use of Proceeds of Notes	34
	10.8	No Restrictions	34
	10.9	Financial Covenants	35
	10.10	Two-Way Most Favored Lender	35
	10.11	Redemption of Stock, Etc	37
	10.12	Terrorism Sanctions Regulations	37
11	Events Of Default		37
12	Remedies On Default, Etc		40
	12.1	Acceleration	40
	12.2	Other Remedies	40
	12.3	Rescission	40
	12.4	No Waivers or Election of Remedies, Expenses, Etc	41
13	Registration; Exchange; Substitution Of Notes		41
	13.1	Registration of Notes	41
	13.2	Transfer and Exchange of Notes	41
	13.3	Replacement of Notes	42
14	Payments On Notes		42
	14.1	Place of Payment	42
	14.2	Home Office Payment	43
15	Expenses, Etc		43
	15.1	Transaction Expenses	43
	15.2	Survival	44
16	Survival Of Representations And Warranties; Entire Agreement		44
17	Amendment And Waiver		44

iv

Table of Contents

(continued)

			Page
	17.1	Requirements	44
	17.2	Solicitation of Holders of Notes	45
	17.3	Binding Effect. Etc	45
	17.4	Notes Held by Company, Etc	45
18	Notices		46
19	Reproduction Of Documents		46
20	CONFIDENTIALITY		47
21	MISCELLANEOUS		48
	21.1	Successors and Assigns	48
	21.2	Payments Due on Non-Business Days	48
	21.3	Accounting Terms	48
	21.4	Severability	49
	21.5	Construction	49
	21.6	Counterparts	49
	21.7	Governing Law	49
	21.8	Jurisdiction and Process	49
	21.9	Waiver of Jury Trial	50
	21.10	Transaction References	50
	21.11	No Novation	50

v

LTC PROPERTIES, INC.
2829 Townsgate Road, Suite 350
Westlake Village, California 91361

As of April28, 2015

Prudential Investment Management, Inc.
Each Prudential Affiliate (as hereinafter defined) which is
a signatory of this Agreement or becomes bound by certain
provisions of this Agreement as hereinafter provided)

c/o Prudential Capital Group
2029 Century Park East,Suite 715
Los Angeles, California 90067

Ladies and Gentlemen:

The undersigned, LTC Properties, Inc., a Maryland corporation (the “Company”), agrees with each of the Purchasers as follows:

1Authorization of Notes

1AAmendment and Restatement; Prior Release of Guarantors.

This Agreement amends, restates and replaces in its entirety that certain Second Amended and Restated Note Purchase and Private Shelf Agreement, dated as of October 30, 2013 (as amended, restated, supplemented or otherwise modified through the date hereof, the “Prior Agreement”), between the Persons which are parties hereto as of the date hereof.  Certain capitalized and other terms used in this Agreement are defined in Schedule B; and references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

Pursuant to Section 20.4(b) of the Prior Agreement, each Guarantor (as defined in the Prior Agreement) was released and discharged automatically from its obligations under the Multiparty Guaranty (as defined in the Prior Agreement) effective as of October 14, 2014.

1BExisting Series A-1 Notes.

On July 14, 2010 the Company issued and sold $25,000,000 aggregate original principal amount of its 5.26% Series A-1 Senior Notes due July 14, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Series A-1 Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement, the Prior Agreement or any predecessor agreement to the Prior Agreement).  The Series A-1 Notes are substantially in the form set out in Exhibit A-1.

1CExisting Series A-2 Notes.

On July 14, 2010 the Company issued and sold $25,000,000 aggregate original principal amount of its 5.74% Series A-2 Senior Notes due January 14, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the “Series A-2 Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement, the Prior Agreement or any predecessor agreement to the Prior Agreement).  The Series A-2 Notes are substantially in the form set out in Exhibit A-2.  The terms “Series A Note” and “Series A Notes” as used herein shall include each Series A-1 Note and each Series A-2 Note.

1DExisting Series B Notes.

On July 20, 2011 the Company issued and sold $50,000,000 aggregate original principal amount of its 4.80% Series B Senior Notes due July 20, 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Series B Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement, the Prior Agreement or any predecessor agreement to the Prior Agreement).  The Series B Notes are substantially in the form set out in Exhibit A-3.

1EEXISTING SERIES C NOTES.

On November 20, 2013 the Company issued and sold $70,000,000 aggregate original principal amount of its 3.99% Series C Senior Notes due November 20, 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Series C Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement, the Prior Agreement or any predecessor agreement to the Prior Agreement).  The Series C Notes are substantially in the form set out inExhibit A-4.

1FEXISTING SERIES D NOTES.

On August 21, 2014 the Company issued and sold $30,000,000 aggregate original principal amount of its 4.50% Series D Senior Notes due July 31, 2026 (as amended, restated, supplemented or otherwise modified from time to time, the “Series D Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement, the Prior Agreement or any predecessor agreement to the Prior Agreement).  The Series D Notes are substantially in the form set out in Exhibit A-5.

1GAuthorization of Issue of Shelf Notes.

The Company will authorize the issue and sale of its additional senior notes (as amended, restated, supplemented or otherwise modified from time to time, the “Shelf Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement) in the aggregate principal amount of up to $200,000,000, which amount for the avoidance of doubt does not include the outstanding principal amounts under the Series A Notes, the Series B Notes, the Series C Notes and the Series D Notes, to be dated the date of issue thereof, to mature, in the case of each Shelf Note so issued, no more than 15 years after the date of original issuance thereof, to have an average life, in the case of each Shelf Note so issued, of no more than 12 years after the date of original issuance thereof, to bear interest on the unpaid balance thereof

2

from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Shelf Note so issued, in the Confirmation of Acceptance with respect to such Shelf Note delivered pursuant to Section 2B(5), and to be substantially in the form of Exhibit A-6.  The terms “Note” and “Notes” as used herein shall include each Series A Note, each Series B Note, each Series C Note, each Series D Note and each Shelf Note.  Notes that have (i) the same final maturity, (ii) the same principal prepayment dates, (iii) the same principal prepayment amounts (as a percentage of the original principal amount of each Note), (iv) the same interest rate, (v) the same interest payment periods, and (vi) the same date of issuance (which, in the case of a Note issued in exchange for another Note, shall be deemed for these purposes the date on which such Note’s ultimate predecessor Note was issued), are herein called a “Series” of Notes.

2Sale And Purchase of Notes

2A[Intentionally Omitted].

2BSale and Purchase of Shelf Notes.

2B(1)Facility.  PIM is willing to consider, in its sole discretion and within limits that may be authorized for purchase by PIM and Prudential Affiliates from time to time, the purchase of Shelf Notes pursuant to this Agreement.  The willingness of PIM to consider such purchase of Shelf Notes is herein called the “Facility.”  At any time, (i) the aggregate principal amount of Shelf Notes stated in Section 1G,  minus (ii) the aggregate principal amount of Shelf Notes purchased and sold pursuant to this Agreement prior to such time, minus (iii) the aggregate principal amount of Accepted Notes (as hereinafter defined) which have not yet been purchased and sold hereunder prior to such time, is herein called the “Available Facility Amount” at such time.Notwithstanding anything to the contrary appearing herein, (a) in no event shall any Shelf Note be purchased under the Facility if, upon giving effect to such purchase and the use of proceeds thereof, the aggregate principal amount of all Notes then outstanding would exceed $300,000,000, and (b) in no event shall any Shelf Note be purchased under the Facility by a Prudential Affiliate described in clause (i) of the definition thereof if, upon giving effect to such purchase and the use of proceeds thereof, the aggregate principal amount of all Notes and any other notes of the Company then outstanding and held by all Prudential Affiliates described in such clause, would exceed $250,000,000.NOTWITHSTANDING THE WILLINGNESS OF PIM TO CONSIDER PURCHASES OF SHELF NOTES, THIS AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PIM NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE SHELF NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PIM OR ANY PRUDENTIAL AFFILIATE.

2B(2)Issuance Period.  Shelf Notes may be issued and sold pursuant to this Agreement until the earlier of (i) the third anniversary of the date of this Agreement (or if such date is not a New York Business Day, the New York Business Day next preceding such date), and (ii) the thirtieth day after PIM shall have given to the Company, or the Company shall have given to PIM, written notice stating that it elects to terminate the issuance and sale of Shelf Notes

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pursuant to this Agreement (or if such thirtieth day is not a New York Business Day, the New York Business Day next preceding such thirtieth day).  The period during which Shelf Notes may be issued and sold pursuant to this Agreement is herein called the “Issuance Period.”

2B(3)Request For Purchase.  The Company may from time to time during the Issuance Period make requests for purchases of Shelf Notes (each such request being herein called a “Request for Purchase”).  Each Request for Purchase shall be made to PIM by email or overnight delivery service, and shall (i) specify the aggregate principal amount of Shelf Notes covered thereby, which shall not be less than $10,000,000 and not be greater than the Available Facility Amount at the time such Request for Purchase is made, (ii) specify the principal amounts, final maturities (which shall be no more than 15 years from the date of original issuance), and principal prepayment dates and amounts (which shall result in an average life of no more than 12 years from the date of original issuance) of the Shelf Notes covered thereby, (iii) specify the interest payment periods (which shall be quarterly or semi-annually), (iv) specify the use of proceeds of such Shelf Notes, (v) specify the proposed day for the closing of the purchase and sale of such Shelf Notes, which shall be a Business Day during the Issuance Period not less than 10 Business Days and not more than 120 daysafter the making of such Request for Purchase, (vi)specify the number of the account and the name and address of the depository institution to which the purchase prices of such Shelf Notes are to be transferred on the Closing Day for such purchase and sale, (vii) certify that the representations and warranties contained in Section 5 are true on and as of the date of such Request for Purchase and that there exists on the date of such Request for Purchase no Event of Default or Default, and (viii) be substantially in the form of Exhibit B attached hereto.  Each Request for Purchase shall be in writing and shall be deemed made when received by PIM.

2B(4)Rate Quotes.  Not later than 5 Business Days after the Company shall have given PIM a Request for Purchase pursuant to Section 2B(3), PIM may, but shall be under no obligation to, provide to the Company by telephone interest rate quotes for the several principal amounts, maturities and principal prepayment schedules, and interest payment periods of Shelf Notes specified in such Request for Purchase.  Each quote shall represent the interest rate per annum payable on the outstanding principal balance of such Shelf Notes at which PIM or a Prudential Affiliate would be willing to purchase such Shelf Notes at 100% of the principal amount thereof.

2B(5)Acceptance.  Within 2 minutes after PIM shall have provided any interest rate quotes pursuant to Section 2B(4) or such shorter period as PIM may specify to the Company (such period herein called the “Acceptance Window”), the Company may, subject to Section 2B(6), elect to accept such interest rate quotes as to not less than $10,000,000 aggregate principal amount of the Shelf Notes specified in the related Request for Purchase.  Such election shall be made by an Authorized Officer of the Company notifying PIM by telephone or email within the Acceptance Window (but not earlier than 9:30 a.m. or later than 1:30 p.m. (or such later time as PIM may agree), New York City local time) that the Company elects to accept such interest rate quotes, specifying the Shelf Notes (each such Shelf Note being herein called an “Accepted Note”) as to which such acceptance (herein called an “Acceptance”) relates.  The day the Company notifies PIM of an Acceptance with respect to any Accepted Notes is herein called the “Acceptance Day” for such Accepted Notes.  Any interest rate quotes as to which PIM does not receive an Acceptance within the Acceptance Window shall expire, and no

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purchase or sale of Shelf Notes hereunder shall be made based on such expired interest rate quotes.  Subject to Section 2B(6) and the other terms and conditions hereof, the Company agrees to sell to PIM or a Prudential Affiliate, and PIM agrees to purchase, or to cause the purchase by a Prudential Affiliate of, the Accepted Notes at 100% of the principal amount of such Accepted Notes.  As soon as practicable following the Acceptance Day, the Company, PIM and each Prudential Affiliate which is to purchase any such Accepted Notes will execute a confirmation of such Acceptance substantially in the form of Exhibit C (herein called a “Confirmation of Acceptance”).  If the Company should fail to execute and return to PIM within 2 Business Days following receipt thereof a Confirmation of Acceptance with respect to any Accepted Notes, PIM may at its election at any time prior to its receipt thereof cancel the closing with respect to such Accepted Notes by so notifying the Company in writing.

2B(6)Market Disruption.  Notwithstanding the provisions of Section 2B(5), if PIM shall have provided interest rate quotes pursuant to Section 2B(4) and thereafter, prior to the time an Acceptance with respect to such quotes shall have been notified to PIM in accordance with Section 2B(5), the domestic market for United States treasury securities or derivatives shall have closed or there shall have occurred a general suspension, material limitation, or significant disruption of trading in securities generally on the New York Stock Exchange or in the domestic market for United States treasury securities or derivatives, then such interest rate quotes shall expire, and no purchase or sale of Shelf Notes hereunder shall be made based on such expired interest rate quotes.  If the Company thereafter notifies PIM of the Acceptance of any such interest rate quotes, such Acceptance shall be ineffective for all purposes of this Agreement, and PIM shall promptly notify the Company that the provisions of this Section 2B(6) are applicable with respect to such Acceptance.

2B(7)Facility Closings.  Not later than 1:30 p.m. (New York City local time) on the Closing Day for any Accepted Notes, the Company will deliver to each Purchaser listed in the Confirmation of Acceptance relating thereto at the offices of Vedder Price P.C.,  275 Battery Street, Suite 2464, San Francisco, California 94111 (or such other address as PIM may specify in writing), the Accepted Notes to be purchased by such Purchaser in the form of one or more Notes in authorized denominations as such Purchaser may request for each Series of Accepted Notes to be purchased on such Closing Day, dated the applicable Closing Day and registered in such Purchaser’s name (or in the name of its nominee), against payment of the purchase price thereof by transfer of immediately available funds for credit to the account specified in the Request for Purchase of such Notes.  If the Company fails to tender to any Purchaser the Accepted Notes to be purchased by such Purchaser on the scheduled Closing Day for such Accepted Notes as provided above in this paragraph 2B(7), or any of the conditions specified in Section 4 shall not have been fulfilled by the time required on such scheduled Closing Day, the Company shall, prior to 2:00 p.m., New York City local time, on such scheduled Closing Day notify PIM (which notification shall be deemed received by each Purchaser) in writing whether (i) such closing is to be rescheduled (such rescheduled date to be a Business Day during the Issuance Period not less than one Business Day and not more than 10 Business Days after such scheduled Closing Day (the “Rescheduled Closing Day”)) and certify to PIM (which certification shall be for the benefit of each Purchaser) that the Company reasonably believes that it will be able to comply with the conditions set forth in Section 4 on such Rescheduled Closing Day and that the Company will pay the Delayed Delivery Fee in accordance with Section 2B(8)(iii), or (ii) such closing is to be canceled and the Company will pay the Cancellation Fee

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as provided in Section 2B(8)(iv).  In the event that the Company shall fail to give such notice referred to in the immediately preceding sentence, PIM (on behalf of each Purchaser) may at its election, at any time after 2:00 p.m., New York City local time, on such scheduled Closing Day, notify the Company in writing that such closing is to be canceled and the Company is obligated to pay the Cancellation Fee as provided in Section 2B(8)(iv).  Notwithstanding anything to the contrary appearing in this Agreement, the Company may elect to reschedule a closing with respect to any given Accepted Notes on not more than one occasion, unless PIM shall have otherwise consented in writing.

2B(8)Fees.

2B(8)(i)Draw Fees.  The Company shall pay to or as directed by PIM in immediately available funds a fee (herein called a “Draw Fee”) on or before each Closing Day (other than the initial Closing Day, if any, occurring within the first six months after the date hereof on which a minimum aggregate principal amount of $25,000,000 of Shelf Notes is purchased and sold) in an amount equal to 0.10% of the aggregate principal amount of Notes sold on such Closing Day.

2B(8)(ii)Structuring Fee.In consideration for the time, effort and expense involved in the preparation, negotiation and execution of this Agreement, the Company will pay to or as directed by PIM, on the date that is six months after the date hereof (or, if such date is not a Business Day, the next succeeding Business Day),  a fully earned and non-refundable fee in the aggregate amount of $50,000;  provided,  however, that (a) ifa minimum aggregate principal amount of $25,000,000 of Shelf Notes is purchased and sold during the first six months after the date hereof, then the amount of such fee required to be paid on such day shall be reduced to $25,000, and (b) if a minimum aggregate principal amount of $100,000,000 of Shelf Notes is purchased and sold during the first three months after the date hereof, then no such fee shall be payable (herein called the “Structuring Fee”).

2B(8)(iii)Delayed Delivery Fees.

(a)  In the Event of a  Delayed Closing.  If the closing of the purchase and sale of any Accepted Note is delayed for any reason beyond the original Closing Day for such Accepted Note but such closing is ultimately consummated, then the Company shall pay to or as directed by PIM, on the actual Closing Day of such purchase and sale, an amount (herein called the “Delayed Delivery Fee”) equal to:

(BEY - MMY) X DTS/360 X PA

where “BEY” means Bond Equivalent Yield, i.e., the bond equivalent yield per annum of such Accepted Note; “MMY” means Money Market Yield, i.e., the yield per annum on an alternative Dollar investment of the highest quality selected by PIM having a maturity date or dates the same as, or closest to, the Rescheduled Closing Day from time to time fixed for the delayed delivery of such Accepted Note; “DTS” means Days to Settlement, i.e., the number of actual days elapsed from and including the original Closing Day for such Accepted Note to but excluding the date of such payment; and “PA” means Principal Amount, i.e., the principal amount of the Accepted Note for which such calculation is being made.

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In no case shall the Delayed Delivery Fee be less than zero.  Nothing contained herein shall obligate any Purchaser to purchase any Accepted Note on any day other than the Closing Day for

7

such Accepted Note, as the same may be rescheduled from time to time in compliance with Section 2B(7).

(b)  In the Event of Cancellation.  If the Company at any time notifies PIM in writing that the Company is canceling the closing of the purchase and sale of any Accepted Note, or if PIM notifies the Company in writing under the circumstances set forth in the last sentence of paragraph 2B(5) or the penultimate sentence of Section 2B(7) that the closing of the purchase and sale of such Accepted Note is to be canceled, or if the closing of the purchase and sale of such Accepted Note is not consummated on or prior to the last day of the Issuance Period (the date of any such notification, or the last day of the Issuance Period, as the case may be, being herein called the “Cancellation Date”), the Company shall pay to or as directed by PIM in immediately available funds on the Cancellation Date an amount (herein called the “Cancellation Event Delayed Delivery Fee”) equal to:

(BEY - MMY) X DTS/360 X PA

where “BEY” means Bond Equivalent Yield, i.e., the bond equivalent yield per annum of such Accepted Note; “MMY” means Money Market Yield, i.e., the yield per annum on an alternative Dollar investment of the highest quality selected by PIM having a maturity date or dates the same as, or closest to, the original scheduled Closing Day or any Rescheduled Closing Day from time to time fixed for the delayed delivery of such Accepted Note; “DTS” means Days to Settlement, i.e., the number of actual days elapsed from and including the Acceptance Day for such Accepted Note to but excluding the Cancellation Date of such Accepted Note; and “PA” means Principal Amount, i.e., the principal amount of the Accepted Note for which such calculation is being made.

In no case shall the Cancellation Event Delayed Delivery Fee be less than zero.

2B(8)(iv)Cancellation Fee.  If the Company at any time notifies PIM in writing that the Company is canceling the closing of the purchase and sale of any Accepted Note, or if PIM notifies the Company in writing under the circumstances set forth in the last sentence of paragraph 2B(5) or the penultimate sentence of Section 2B(7) that the closing of the purchase and sale of such Accepted Note is to be canceled, or if the closing of the purchase and sale of such Accepted Note is not consummated on or prior to the last day of the Issuance Period, the Company shall pay to or as directed by PIM in immediately available funds on the Cancellation Date an amount (herein called the “Cancellation Fee”) equal to:

PI X PA

where “PI” means Price Increase, i.e., the quotient (expressed in decimals) obtained by dividing (a) the excess of the ask price (as determined by PIM) of the Hedge Treasury Note(s) on the Cancellation Date over the bid price (as determined by PIM) of the Hedge Treasury Note(s) on the Acceptance Day for such Accepted Note by (b) such bid price; and “PA” has the meaning ascribed to it in paragraph 2B(8)(iii).  The foregoing bid and ask prices shall be as reported by such publicly available source of such market data as is then customarily used by PIM, and rounded to the second decimal place.

In no case shall the Cancellation Fee be less than zero.

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3[Intentionally Omitted].

4Conditions.

The effectiveness of the amendment and restatement effected herein is subject to the satisfaction of the conditions set forth in Section 4A, and the obligation of any Purchaser to purchase and pay for any Shelf Notes is subject to the fulfillment to its satisfaction, on or before the applicable Closing Day, of the conditions set forth in Section 4B:

4AConditions to Effectiveness of Amendment and Restatement.

4A(1)Officer’s Certificate (Unencumbered Assets/Qualified Mortgage Loans).   The Company shall have delivered to PIM an Officer’s Certificate, dated the date of this Agreement, setting forth a listing of the Unencumbered Assets and Qualified Mortgage Loans as of the date of this Agreement.

4A(2)Officer’s Certificate (Bringdown).  The Company shall have delivered to PIM an Officer’s Certificate, dated the date of this Agreement, certifying that (a) the representations and warranties of the Company in Section 5 hereof are correct on and as of the date of this Agreement, and (b) on and as of the date of this Agreement (both immediately before and immediately after giving effect to the effectiveness of the amendment and restatement effected herein) no Default or Event of Default has occurred and is continuing.

4A(3)Payment of Special Counsel Fees.  Without limiting the provisions of Section 15.1, the Company shall have paid on or before the date hereof the fees, charges and disbursements of the special counsel of PIM, the Series A Purchasers and the Series B Purchasers referred to in Section 4B(1)(g), to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the date hereof.

4BConditions to Each Closing.

4B(1)Certain Documents.  PIM and each Purchaser that is purchasing Notes on such Closing Day shall have received the following, each dated the applicable Closing Day (except as provided in clause (h)):

(a) The Note(s) to be purchased by such Purchaser;

(b) an Officer’s Certificate from the Company, certifying that the conditions specified in Sections 4B(3), 4B(4) and 4B(5) have been fulfilled;

(c) certified copies of the resolutions of the Company, authorizing the execution and delivery of the Transaction Documents (and authorizing the issuance of the applicable Series of Notes), and of all documents evidencing other necessary corporate or similar action and governmental approvals, if any, with respect to the Transaction Documents and the applicable Series of Notes;

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(d) a certificate of the Secretary or an Assistant Secretary and one other officer of the Company, certifying the names and true signatures of the officers of the Company authorized to sign the Transaction Documents;

(e) certified copies of the articles of incorporation and by-laws of the Company;

(f) favorable opinions of:  (i) Reed Smith LLP, special counsel for the Company, satisfactory to such Purchaser and substantially in the form of Exhibit D-1 attached hereto, and as to such other matters as such Purchaser may reasonably request, and (ii) Ballard Spahr LLP, special Maryland counsel for the Company, satisfactory to such Purchaser and substantially in the form of Exhibit D-2 attached hereto, and as to such other matters as such Purchaser may reasonably request.  The Company hereby directs each such counsel to deliver such opinion, agrees that the issuance and sale of any Notes will constitute a reconfirmation of such direction, and understands and agrees that each Purchaser receiving such an opinion will and is hereby authorized to rely on such opinion;

(g) a favorable opinion of Vedder Price P.C., special counsel for PIM and the Purchasers, as to such matters incident to the matters herein contemplated related to the applicable Series of Notes as such Purchaser reasonably requests;

(h) a good standing or similar certificate for the Company from the appropriate Governmental Authority of its jurisdiction of organization, dated as of a recent date, and such other evidence of the status of the Company as such Purchaser may reasonably request; and

(i) additional documents or certificates with respect to legal matters or corporate or other proceedings related to the transactions contemplated hereby as may be reasonably requested by such Purchaser prior to the applicable Closing Day.

4B(2)Payment of Fees.  The Company shall have paid to or as directed by PIM any fees due pursuant to or in connection with this Agreement, including the Draw Fee due pursuant to Section 2B(8)(i) and any Delayed Delivery Fee due pursuant to Section 2B(8)(iii).

4B(3)Representations and Warranties.  The representations and warranties of the Company in Section 5 hereof shall, in each case, be correct when made and on and as of such Closing Day.

4B(4)Performance; No Default.The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at such Closing Day, and after giving effect to the issue and sale of the applicable Series of Notes (and the application of the proceeds thereof pursuant to the requirements of Section 5.14) no Default or Event of Default shall have occurred and be continuing.

4B(5)Changes in Structure.  The Company shall not have changed its jurisdiction of organization or been a party to any merger or consolidation or succeeded to all or any substantial

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part of the liabilities of any other Person, at any time following the date of the most recent financial statements referred to in Section 5.5.

4B(6)Purchase Permitted By Applicable Law, Etc.  Each Purchaser’s purchase of Notes on such Closing Day shall (i) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii)not violate any applicable law or regulation (including Regulation T, U or X of the Board of Governors of the Federal Reserve System), and (iii) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof.  If requested by any Purchaser of Notes on such Closing Day, such Purchaser shall have received an Officer’s Certificate certifying as to such matters of fact as it may reasonably specify to enable it to determine whether such purchase is so permitted.

4B(7)Private Placement Number.  A Private Placement number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each Series of Notes to be issued on the applicable Closing Day.

4B(8)Proceedings and Documents.  All corporate, organizational and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be reasonably satisfactory to each Purchaser purchasing Notes on the applicable Closing Day and its special counsel, and each such Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such counsel may reasonably request.

5RepresentationS and Warranties of the Company.

The Company represents and warrants to each Purchaser that:

5.1Organization; Power and Authority.

The Company is a corporationduly organized, validly existing and in good standing under the laws of Maryland, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Company has the requisite power and authority to own or hold under lease the Properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver the Transaction Documents and to perform the provisions of the Transaction Documents which it is required to perform.  The Company is organized in conformity with the requirements for qualification as a REIT under the Code, and its method of operation enables it to meet the requirements for qualification and taxation as a REIT under the Code.

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5.2Authorization, Etc.

This Agreement, the Notes and the other Transaction Documents have been duly authorized by all necessary action on the part of the Company, and each of this Agreement and the other Transaction Documents (other than the Notes) constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

5.3Disclosure.

Neither this Agreement nor any other document, certificate or statement furnished to PIM by or on behalf of the Companyin connection herewith, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading in light of the circumstances under which they were made, PIM acknowledging that as to any projections furnished to PIM, the Company only represents that the same were prepared in good faith on the basis of information and estimates the Company believed to be reasonable at the time of the preparation and delivery thereof.  There is no fact known to the Companythat could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the other documents, certificates and other writings (including the Company’s most recent reports on Form 10-Q and Form 10-K and the Company’s reports on Form 8-K filed during the period from January 1, 2014 through the date hereof) delivered to PIM by or on behalf of the Company.  Since the date of the most recent audited balance sheet delivered pursuant to Section 7.1(b), or if no such balance sheet has been delivered, the most recent audited balance sheet referred to in Section 5.5, there has been no change in the financial condition, operations, business, Properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the other documents, certificates and other writings delivered to PIM by or on behalf of the Company.

5.4Organization and Ownership of Equity in Subsidiaries; Affiliates.

(a) Schedule 5.4contains complete and correct lists as of the date hereof(i)of each of the Subsidiaries of the Company, showing, as to each such Subsidiary,  whether such Subsidiary is an Unencumbered Asset Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and the otherSubsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares or units of each class issued and outstanding, (ii) of each of the Company’s Affiliates, other than such Person’s Subsidiaries, and (iii) of the Company’s directors and senior officers.

(b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary owned by the Company and its Subsidiaries have been validly issued, are fully

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paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien except as disclosed onSchedule 5.4.

(c) Each Subsidiary is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each such Subsidiary has the corporate or other power and authority to own or hold under lease the Properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

(d) No Subsidiary is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

5.5Financial Statements.

The Company has furnished each holder of Notes and each Purchaser of Accepted Notes with the following financial statements:  (i)consolidated balance sheets of the Company and its Subsidiaries as of the last day in each of the last three Fiscal Years completed prior to the date as of which this representation is made or repeated (other than Fiscal Years completed within 90 days prior to such date for which audited financial statements have not been released), and consolidated statements of income, retained earnings and cash flows of the Company and its Subsidiaries for each such year, all certified by independent certified public accountants of recognized international standing; and (ii) unaudited consolidated balance sheets of the Company and its Subsidiaries as at the end of the quarterly period (if any) most recently completed prior to such date and after the end of the most recent Fiscal Year (other than quarterly periods completed within 45 days prior to such date for which financial statements have not been released) and unaudited consolidated statements of income and cash flows of the Company and its Subsidiaries for the periods from the beginning of the Fiscal Years in which such quarterly periods are included to the end of such quarterly periods and the comparable quarterly period in the immediately preceding Fiscal Year.  Such financial statements (including any related schedules and/or notes) have been prepared in accordance with GAAP (subject, as to interim statements, to changes resulting from year-end adjustments) consistently applied throughout the periods involved and show all liabilities, direct and contingent, of the Company and its Subsidiaries required to be shown in accordance with such principles.  The balance sheets fairly present in all material respects the consolidated financial condition of the Company and its Subsidiaries as at the dates thereof, and the statements of income, retained earnings and cash flows fairly present the consolidated financial results of their operations for the periods indicated.  The Company and its Subsidiaries do not have any Material liabilities that are not disclosed on such financial statements or otherwise disclosed in writing to the Purchasers.  No event has occurred since the end of the most recent Fiscal Year for which such audited financial statements

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have been furnished which has had or could reasonably be expected to have a Material Adverse Effect.

5.6Compliance with Laws; Other Instruments, Etc.

The execution, delivery and performance by the Company of the Transaction Documents will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any Property of the Company or any of its Subsidiaries under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter (or similar constitutive documents) or bylaws (or similar documents), or any other agreement or instrument to which the Company or any of its Subsidiaries is bound or by which the Company or any of its Subsidiaries or any of their respective Properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any of its Subsidiaries, or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any of its Subsidiaries.

Neither the Company nor any Subsidiary is in default under the terms of any covenant, indenture or agreement of or affecting such Person or any of its Property, which default, if uncured, could reasonably be expected to have a Material Adverse Effect.

5.7Governmental Authorizations, Etc.

No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement, the Notes or the other Transaction Documents.

5.8Litigation; Observance of Agreements, Statutes and Orders.

(a) There are no actions, suits, investigations or proceedings pending or, to the actual knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any Property of the Company or any of its Subsidiaries in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(b) Neither the Company nor any Subsidiary is in default under any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws or the USA PATRIOT Act) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.9Taxes.

All tax returns required to be filed by the Company or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and other governmental charges upon the Company or any Subsidiary or upon any of its Property, income or franchises, which are shown to be due and payable in such returns, have been paid, except such taxes, assessments, fees and governmental charges, if any, as are being contested in good faith and by appropriate

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proceedings which prevent enforcement of the matter under contest and as to which adequate reserves established in accordance with GAAP have been provided or where the failure to so file or pay would not cause a Material Adverse Effect.  The Company does not know of any proposed additional tax assessment against it or its Subsidiaries for which adequate provisions in accordance with GAAP have not been made on their accounts.  Adequate provisions in accordance with GAAP for taxes on the books of the Company and each Subsidiary have been made for all open years, and for its current fiscal period.

5.10Title to Property; Leases.

The Company and its Subsidiaries have good and sufficient title to their respective Properties (other than Properties which are leased) that individually or in the aggregate are Material, including all such Properties reflected in the most recent audited balance sheet delivered pursuant to Section 7.1(b), or if no such balance sheet has been delivered, the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement.

5.11Licenses, Permits, Etc.

(a) The Company and its Subsidiaries own, possess or have the right to use alllicenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others.

(b) To the best knowledge of the Company, no product of the Company or any of its Subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, proprietary software, service mark, trademark, trade name or other right owned by any other Person.

(c) To the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, proprietary software, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries.

5.12Compliance with ERISA.

(a) The Company, each Subsidiary and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect.  None of the Company, any Subsidiary or any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company, any Subsidiary or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company, any Subsidiary or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or pursuant to section 430 or 436 of the Code or section 4068 of

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ERISA, other than such liabilities or Liens as would not be individually or in the aggregate Material.

(b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan’s most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities.  The term “benefit liabilities” has the meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the meaning specified in section 3 of ERISA.  Following the effective date of the Pension Act, for any Plan which is subject to the Pension Funding Rules, the funding target attainment percentage, within the meaning of Section 303 of ERISA or Section 430 of the Code, for such Plan is not less than 100%.

(c) The Company, the Subsidiaries and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

(d) The expected postretirement benefit obligation (determined as of the last day of the Company’s most recently ended Fiscal Year in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 715-60 (formerly known as Financial Accounting Standards Board Statement No. 106), without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material.

(e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.  The representation by the Company to each Purchaser in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of such Purchaser’s representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser.

5.13Private Offering.

Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than the Purchasersand other Institutional Investors (as defined in clause (c)to the definition of such term), each of which has been offered the Notes at a private sale for investment.  Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would constitute a general solicitation with respect to the issuance or sale of the Notes or that otherwise would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act or the registration requirements of any securities or blue sky laws of any applicable jurisdiction.

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5.14Use of Proceeds; Margin Regulations.

The Company will apply the proceeds of the sale of each Series of Shelf Notes in the manner described in the applicable Request for Purchase with respect to such Series of Shelf Notes.  None of the proceeds of the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).  Margin stock does not constitute more than 25% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 25% of the value of such assets.  As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in saidRegulation U.

5.15Existing Indebtedness for Borrowed Money;  Future Liens.

(a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness for Borrowed Money of the Company and its Subsidiaries as of December 31, 2014 (including a description of the obligors and obligees, principal amount outstanding and collateral therefor, if any, and Guaranties thereof, if any), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness for Borrowed Money of the Company or any of its Subsidiaries.

(b) Neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its Property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.1.

(c) As of the date hereof, neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness for Borrowed Money of the Company or such Subsidiary, any agreement relating thereto or any other agreement (including, but not limited to, its charter or other organizational document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness for Borrowed Money of the Company or any Subsidiary, except as specifically indicated in Schedule 5.15.

5.16Foreign Assets Control Regulations, Etc.

(a) Neither the Company nor any Controlled Entity is (i) a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons published by the Office of Foreign Assets Control, United States Department of the Treasury (“OFAC”) (an “OFAC Listed Person”) (ii) an agent, department, or instrumentality of, or is otherwise beneficially owned by, controlled by or acting on behalf of, directly or indirectly, (x) any OFAC Listed Person or (y) any Person, entity, organization, foreign country or regime that is subject to any OFAC Sanctions Program, or (iii) otherwise blocked, subject to sanctions under or engaged in any activity in violation of other United States economic sanctions, including but not limited

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to, the Trading with the Enemy Act, the International Emergency Economic Powers Act, the Comprehensive Iran Sanctions, Accountability and Divestment Act (“CISADA”) or any similar law or regulation with respect to Iran or any other country, the Sudan Accountability and Divestment Act, any OFAC Sanctions Program, or any economic sanctions regulations administered and enforced by the United States or any enabling legislation or executive order relating to any of the foregoing (collectively, “U.S. Economic Sanctions”) (each OFAC Listed Person and each other Person, entity, organization and government of a country described in clause (i), clause (ii) or clause (iii), a “Blocked Person”).  Neither the Company nor any Controlled Entity has been notified that its name appears or may in the future appear on a state list of Persons that engage in investment or other commercial activities in Iran or any other country that is subject to U.S. Economic Sanctions.

(b) No part of the proceeds from the sale of the Notes hereunder constitutes or will constitute funds obtained on behalf of any Blocked Person or will otherwise be used by the Company or any Controlled Entity, directly or indirectly, (i) in connection with any investment in, or any transactions or dealings with, any Blocked Person, or (ii) otherwise in violation of U.S. Economic Sanctions.

(c) Neither the Company nor any Controlled Entity (i) has been found in violation of, charged with, or convicted of, money laundering, drug trafficking, terrorist-related activities or other money laundering predicate crimes under the Currency and Foreign Transactions Reporting Act of 1970 (otherwise known as the Bank Secrecy Act), the USA PATRIOT Act or any other United States law or regulation governing such activities (collectively, “Anti-Money Laundering Laws”) or any U.S. Economic Sanctions violations, (ii) to the Company’s actual knowledge after making due inquiry, is under investigation by any Governmental Authority for possible violation of Anti-Money Laundering Laws or any U.S. Economic Sanctions violations, (iii) has been assessed civil penalties under any Anti-Money Laundering Laws or any U.S. Economic Sanctions, or (iv) has had any of its funds seized or forfeited in an action under any Anti-Money Laundering Laws. The Company has established procedures and controls which it reasonably believes are adequate (and otherwise comply with applicable law) to ensure that the Company and each Controlled Entity is and will continue to be in compliance with all applicable current and future Anti-Money Laundering Laws and U.S. Economic Sanctions.

(d) (i)Neither the Company nor any Controlled Entity (1) has been charged with, or convicted of bribery or any other anti-corruption related activity under any applicable law or regulation in a United States of America or any non-United States of America country or jurisdiction, including but not limited to, the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010 (collectively, “Anti-Corruption Laws”), (2) to the Company’s best knowledge, is under investigation by any United States of America or non-United States of AmericaGovernmental Authority for possible violation of Anti-Corruption Laws, (3) has been assessed civil or criminal penalties under any Anti-Corruption Laws, or (4) has been or is the target of sanctions imposed by the United Nations or the European Union.

(ii)To the Company’s best knowledge, neither the Company nor any Controlled Entity has, within the last five years, directly or indirectly offered, promised, given, paid or authorized the offer, promise, giving or payment of anything of value to a

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Governmental Official or a commercial counterparty for the purposes of:(1) influencing any act, decision or failure to act by such Government Official in his or her official capacity or such commercial counterparty; (2)inducing a Governmental Official to do or omit to do any act in violation of the Governmental Official’s lawful duty; or (3) inducing a Governmental Official or a commercial counterparty to use his or her influence with a government or instrumentality to affect any act or decision of such government or entity; in each case which is contrary to applicable law; and

(iii)No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for any improper payments, including bribes, to any Governmental Official or commercial counterparty in order to obtain, retain or direct business or obtain any improper advantage, in each case which would cause any holder of a Note to be in violation of applicable Anti-Corruption Laws.  The Company has established procedures and controls which it reasonably believes are adequate (and otherwise comply with applicable law) to ensure that the Companyand each Controlled Entity is and will continue to be in compliance with all applicable Anti-Corruption Laws.

5.17Status under Certain Statutes.

Neither the Company nor any of its Subsidiaries is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 2005, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended.

5.18Environmental Matters.

(a) Neither the Company nor any Subsidiary has actual knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect.

(b) Neither the Company nor any Subsidiary has actual knowledge of any claim or has actual knowledge that any of its tenants has received any notice of any claim, and neither the Company nor any Subsidiary has actual knowledge that any proceeding has been instituted raising any claim against any tenant of the Company or its Subsidiaries with respect to their use of any real properties or other assets now or formerly owned, leased or operated by any of the Company or its Subsidiaries, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect.

(c) Neither the Company nor any Subsidiary has actual knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect.

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(d) Neither the Company nor any Subsidiary has, and to the actual knowledge of the Company and its Subsidiaries none of its tenants has, stored any material quantities of Hazardous Materials on real properties now or formerly owned, leased or operated by any of the Company or its Subsidiaries; and neither the Company nor any Subsidiary has, and to the actual knowledge of the Company and its Subsidiaries none of its tenants or any other Person has, disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect;

(e) To the actual knowledge of the Company and its Subsidiaries, the tenants of the Company and its Subsidiaries have obtained all governmental approvals required for the operation of the Properties under applicable Environmental Laws, except such as could not reasonably be expected to result in a Material Adverse Effect; and

(f) To the actual knowledge of the Company, all buildings on all real properties now owned, leased or operated by the Company or any Subsidiary are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.

5.19Stock of the Company.

As of the date hereof, the entire outstanding capital stock of the Company consists of:  (i) Series C Cumulative Convertible Preferred Stock, 2,000,000 shares outstanding; and (ii) Common Stock, 35,540,762shares outstanding.

5.20Condition of Property; Casualties; Condemnation.

To the actual knowledge of the Company orits Unencumbered Asset Subsidiaries, and except such as has not had, and could not reasonably be expected to have, a Material Adverse Effect, each Property owned by them (a) is in good repair, working order and condition, normal wear andtear excepted, (b) is free of structural defects, (c) is not subject to material deferred maintenance, and (d) has and will have all building systemscontained therein in good repair, working order and condition, normal wear and tear excepted. To the actual knowledge of the Company or of any ofits Subsidiaries, and except such as has not had, and could not reasonably be expected to have, a Material Adverse Effect, none of the Properties owned by them is currently affected as a result of any fire, explosion,earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or cancellation ofcontracts, permits or concessions by a Governmental Authority, riot, activities of armed forces or acts of God or of any public enemy. Nocondemnation or other like proceedings that has had, or could reasonably be expected to result in, a Material Adverse Effect, are pending and servednor, to the actual knowledge of the Company or its Subsidiaries, threatened against any Property owned by it or any of its Subsidiaries in any manner whatsoever. No casualty has occurred toany such Property that could reasonably be expected to have a Material Adverse Effect.

5.21Legal Requirements and Zoning.

To the actual knowledge of the Company and its Subsidiaries, the use and operation ofeach Property owned by the Companyor its Subsidiaries constitutes a legal use under applicable

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zoning regulations (as the same may be modifiedby special use permits or the granting of variances) and complies in all material respects with all Legal Requirements, and does not violate in anymaterial respect any material approvals, material restrictions of record or any material agreement affecting any such Property (or any portion thereof).

5.22[Intentionally Omitted].

5.23Solvency.

The Company and each of its Subsidiaries are solvent, able to pay their debts as they become due, and have sufficientcapital to carry on their business as currently conducted.

5.24Hostile Tender Offers.

None of the proceeds of the sale of any Notes will be used to finance a Hostile Acquisition.

6Representations of the Purchasers.

6.1Purchase for Investment.Each Purchaser of any Series of Shelf Notes severally represents that it is purchasing such Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser’s or their property shall at all times be within such Purchaser’s or their control.  Each such Purchaser understands that such Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register such Notes.

6.2Source of Funds.

Each Purchaser of any Series of Shelf Notes severally represents that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by such Purchaser to pay the purchase price of such Notes to be purchased by such Purchaser hereunder:

(a) the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the “NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

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(b) the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

(c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1, or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

(d) the Source constitutes assets of an “investment fund” (within the meaning of Part VI of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part VI of the QPAM Exemption), no employee benefit plan’s assets that are managed by the QPAM in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, represent more than 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM maintains an ownership interest in the Company that would cause the QPAM and the Company to be “related” within the meaning of Part VI(h) of the QPAM Exemption and (i) the identity of such QPAM, and (ii) the names of any employee benefit plans whose assets in the investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization, represent 10% or more of the assets of such investment fund, have been disclosed to the Company in writing pursuant to this clause (d); or

(e) the Source constitutes assets of a “plan(s)” (within the meaning of Part IV(h) of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV(a) of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in Part IV(d)(3) of the INHAM Exemption) owns a 10% or more interest in the Company and (i) the identity of such INHAM, and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or

(f) the Source is a governmental plan; or

(g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or

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(h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan”, “governmental plan”, and “separate account” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

7Information as to the Company.

The Company covenants that during the Issuance Period and so long thereafter as any Notes remain outstanding or any amounts owing under the Transaction Documents remain unpaid:

7.1Financial and Business Information.  The Company shall deliver to each holder of Notes that is an Institutional Investor:

(a) Quarterly Statements — as soon as available, and in any event within 45 days after the close of each of the first three (3) Fiscal Quarters of each Fiscal Year of the Company a copy of the consolidated balance sheet of the Company and its Subsidiaries as of the last day of such Fiscal Quarter and the consolidated statements of income and cash flows of the Company and its Subsidiaries for such quarter and for the fiscal year-to-date period then ended, each in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous Fiscal Year, prepared by the Company in accordance with GAAP and certified to by its chief financial officer or another officer of the Company acceptable to the Required Holders (the filing within the time period specified above of the Company’s Form 10-Q for such Fiscal Quarter on the EDGAR system shall satisfy this requirement);

(b) Annual Statements — as soon as available, and in any event within 90 days after the end of each Fiscal Year of the Company, duplicate copies of

(i)a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and

(ii)consolidated statements of income, changes in stockholders’ equity and cash flows of the Company and its Subsidiaries for such year,

setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances,

provided that the filing within the time period specified above of the Company’s Form 10-K for such Fiscal Year (together with the Company’s annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act, provided that such annual report need not be filed until required to be filed pursuant to SEC requirements) prepared in accordance with the

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requirements therefor and filed with the SEC shall be deemed to satisfy the requirements of this Section 7.1(b);

(c) [Intentionally Omitted];

(d) Annual List of Subsidiaries.  As soon as available, and in any event within 90 days after the close of each Fiscal Year of the Company, a complete and correct list that identifies as of the close of such Fiscal Year each of the Subsidiaries of the Company, showing, as to each such Subsidiary,  whether such Subsidiary is an Unencumbered Asset Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and the other Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares or units of each class issued and outstanding;

(e) Annual Projections — as soon as available, and in any event within 90 days after the last day of each Fiscal Year of the Company, a copy of the Company’s consolidated projections for the then current Fiscal Year of revenues, expenses and balance sheet on a quarter-by-quarter basis, with such projections in reasonable detail prepared by the Company and in form satisfactory to the Required Holders (which shall include a summary of all significant assumptions made in preparing such business plan);

(f) SEC and Other Reports — promptly upon their becoming available, (i) one copy of each financial statement, report or notice sent by the Company or any Subsidiary to its principal lending banks as a whole (excluding any information sent to such banks in the ordinary course of administration of a bank facility, such as information relating to pricing and borrowing availability), and (ii) each report on Form 8-K (or any similar successor form) and all amendments thereto (which documents may be delivered by email) filed by the Company or any Subsidiary with the SEC;

(g) Notice of Default or Event of Default — promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

(h) Notices from Governmental Authority — promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect;

(i) Other Notices — promptly after knowledge thereof shall have come to the attention of any Responsible Officer of the Company, written notice of any threatened or pending litigation or governmental or arbitration proceeding or labor controversy against the

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Company or any Subsidiary or any of their Property which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

(j) ERISA Matters — promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

(i)with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or

(ii)the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multi-employer Plan that such action has been taken by the PBGC with respect to such Multi-employer Plan; or

(iii)any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; and

(k) Requested Information — with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes.

7.2Officer’s Certificate.  Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a Senior Financial Officer, substantially in the form of Exhibit E attached hereto, setting forth:

(a) Covenant Compliance — (x) the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.2, Section 10.3, Section 10.9 and the requirements of any additional Financial Covenants incorporated herein pursuant to Section 10.10 during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, (i) the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence, and (ii) a reconciliation from GAAP, as reflected in the statements then being furnished, to the calculation of the financial covenants in

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Section 10.2, Section 10.3, Section 10.9 and any additional Financial Covenants incorporated herein pursuant to Section 10.10, after giving effect to the exclusion from GAAP of the effects of Accounting Standards Codification 825-10-25 (previously referred to as SFAS 159) or any successor or similar provision to the extent it relates to “fair value” accounting for liabilities), and (y) a listing of the Unencumbered Assets and Qualified Mortgage Loans as of the end of the quarterly or annual period covered by the statements then being furnished; and

(b) Event of Default — a statement that such Senior Financial Officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.

7.3Visitation.  The Company shall permit the representatives of each holder of Notes that is an Institutional Investor:

(a) No Default — if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company’s officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and

(b) Default — if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.

8Prepayment of the Notes.

The Series A Notes, the Series B Notes and any Shelf Notes shall be subject to required prepayment as and to the extent provided in Section 8.1.  The Series A Notes, the Series B Notes and any Shelf Notes shall also be subject to prepayment under the circumstances set forth in Section 8.2.

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8.1Required Prepayments.

(a) Series A-1 Notes.  As provided therein, the entire unpaid principal balance of the Series A-1 Notes shall be due and payable on the stated maturity date thereof.

(b) Series A-2 Notes.On January 14, 2014 and on each January 14 thereafter to and including January 14, 2018 the Company will prepay $4,166,666.67 principal amount (or such lesser principal amount as shall then be outstanding) of the Series A-2 Notes at par and without payment of the Make-Whole Amount or any premium; provided that upon any partial prepayment of the Series A-2 Notes pursuant to Section 8.2 or any partial purchase of Series A-2 Notes pursuant to Section 8.5, the principal amount of each required prepayment of the Series A-2 Notes becoming due under this Section 8.1(b) on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Series A-2 Notes is reduced as a result of such prepayment or purchase.

(c) Series B Notes, Series C Notes, Series D Notes and Shelf Notes.Each Series B Note, each Series C Note, each Series D Note and each Shelf Note shall be subject to required prepayments, if any, set forth therein; provided that upon any partial prepayment of any such Series of Notes pursuant to Section 8.2, the principal amount of each required prepayment of such Note becoming due on and after the date of such partial prepayment shall be reduced in the same proportion as the aggregate principal amount of such Note is reduced as a result of such prepayment.

8.2Optional Prepayments with Make-Whole Amount.

The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes of any Series (to the exclusion of all other Series), in an amount not less than $1,000,000 (and increments of $100,000 in excess thereof) of the aggregate principal amount of the Notes of such Series then outstanding in the case of a partial prepayment, or such lesser principal amount of the Notes of such Series as shall then be outstanding, at 100% of the principal amount so prepaid, plus interest thereon to the prepayment date and the Make-Whole Amount determined for the prepayment date with respect to such principal amount.  The Company will give each holder of Notes of such Series written notice of each optional prepayment under this Section 8.2 not less than 5 Business Days and not more than 60 days prior to the date (which shall be a Business Day) fixed for such prepayment.  Each such notice shall specify such date, the Series of Notes to be prepaid, the aggregate principal amount of such Notes to be prepaid on such date, the principal amount of each Note of such Series held by the registered holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid.

8.3Allocation of Partial Prepayments.

In the case of each partial prepayment of the Notes of each Series under Section 8.1(b) or Section 8.2, the principal amount prepaid shall be allocated among the Notes of such Series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore prepaid.

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8.4Maturity; Surrender, Etc.

In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day), together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any.  From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue.  Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

8.5Purchase of Notes.

The Company will not, and will not permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes of any Series except (i) upon the payment or prepayment of the Notes of such Series in accordance with the terms of this Agreement and the Notes of such Series, or (ii) pursuant to a written offer to purchase any outstanding Notes of such Series made by the Company or an Affiliate pro rata to the holders of all Notes of such Series at the time outstanding upon the same terms and conditions.  The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement, and no Notes may be issued in substitution or exchange for any such Notes.

8.6Make-Whole Amount.

The term “Make-Whole Amount” means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal; provided that the Make-Whole Amount may in no event be less than zero.  For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

“Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

“Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (i) the ask side yields reported, as of 10:00 a.m. (New York City local time) on the Business Day next preceding the Settlement Date with respect to such Called Principal, for actively traded United States treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date on the display

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designated as “Page PX1” on Bloomberg Financial Markets (“Bloomberg”) (or, if Bloomberg shall cease to report such yields on Page PX1 or shall cease to be PIM’s customary source of information for calculating make-whole amounts on privately placed notes, then such source as is then PIM’s customary source of such information), or if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for the latest day for which such yields shall have been so reported as of the second Business Day next preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded United States treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  Such implied yield shall be determined, if necessary, by (a) converting United States treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice, and (b) interpolating linearly between (1) the actively traded United States treasury security with the maturity closest to and greater than the Remaining Average Life of such Called Principal, and (2) the actively traded United States treasury security with the maturity closest to and less than the Remaining Average Life of such Called Principal.  The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.

“Remaining Average Life”  means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date; provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or Section 12.1.

“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2, or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

9Affirmative Covenants

The Company covenants that during the Issuance Period and for so long thereafter as any of the Notes are outstanding or any amounts owing under the Transaction Documents remain unpaid:

9.1Compliance with Laws and Contractual Obligations.(a)Without limiting Section 10.12, the Company will, and will cause each of its Subsidiaries to, comply with (i) all laws, ordinances or governmental rules or regulations to which each of them is subject,

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including, without limitation, ERISA, the USA PATRIOT Act, Environmental Laws, and the other laws and regulations that are referenced in Section 5.16, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective Properties or to the conduct of their respective businesses and (ii) all contractual obligations, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations or non-compliance with such contractual obligations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) Without limiting the agreements set forth in Section 9.1(a) above, for each of its owned Properties, respectively, the Company will, and will cause each of its Subsidiaries to, require that each tenant and subtenant, if any, of any of the Properties or any part thereof, at all times, do the following to the extent the failure to do so, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect:  (i) comply in all material respects with all applicable Environmental Laws; (ii) obtain and maintain in full force and effect all material governmental approvals required by any applicable Environmental Law for operations at each of the Properties; (iii) cause to be cured any material violation by it or at any of the Properties of applicable Environmental Laws; (iv) not allow the presence or operation at any of the Properties of any (1) landfill or dump or (2) hazardous waste management facility or solid waste disposal facility as defined pursuant to RCRA or any comparable state law; (v) not manufacture, use, generate, transport, treat, store, release, dispose or handle any Hazardous Material at any of the Properties except in the ordinary course of its business and in de minimis amounts; (vi) within ten (10) Business Days notify the holders of Notes in writing of, and provide any reasonably requested documents upon learning of, any of the following in connection with the Company or any Subsidiary or any of the Properties:  (1) any material liability for response or corrective action, natural resource damage or other harm pursuant to CERCLA, RCRA or any comparable state law, (2) any material Environmental Claim, (3) any material violation of an Environmental Law or material Release, threatened Release or disposal of a Hazardous Material, (4) any restriction on the ownership, occupancy, use or transferability arising pursuant to any (x) Release, threatened Release or disposal of a Hazardous Material or (y) Environmental Law, or (5) any environmental, natural resource, health or safety condition, which could reasonably be expected to have a Material Adverse Effect; (vii) conduct at its expense any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any material Release, threatened Release or disposal of a Hazardous Material as required by any applicable Environmental Law; (viii) abide by and observe any restrictions on the use of the Properties imposed by any Governmental Authority as set forth in a deed or other instrument affecting the Company’s or any Subsidiary’s interest therein; (ix) promptly provide or otherwise make available to the holders of Notes any reasonably requested environmental record concerning the Properties which the Company or any Subsidiary possesses or can reasonably obtain; and (x) perform, satisfy, and implement any operation or maintenance actions required by any Governmental Authority or Environmental Law, or included in any no further action letter or covenant not to sue issued by any Governmental Authority under any Environmental Law.

9.2Insurance.The Company will, and will cause each of its Subsidiaries to, maintain and cause their respective tenants to maintain, with financially sound and reputable

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insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business, similarly situated, and operating like Properties.  The Company shall, upon the request of the Required Holders, furnish to the holders of Notes certificates of insurance setting forth in summary form the nature and extent of the insurance maintained on the Properties.

9.3Maintenance of Properties.  The Company will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept (including, without limitation, by their respective tenants), their respective Properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its Properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

9.4Payment of Taxes and Claims.  The Company will cause each of its tenants to duly pay and discharge, all taxes, rates, assessments, fees, and governmental charges upon or against it or its Property relating to such Property, that individually or collectively would materially impair the value of such Property, and in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.

The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their Properties, assets, income or franchises, to the extent the same have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on Properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary, or (ii) the nonpayment of all such taxes, assessments, charges, levies and claims in the aggregate could not reasonably be expected to have a Material Adverse Effect.

9.5Maintenance of Existence, Etc.  Subject to Section 10.3, the Company will at all times preserve and keep in full force and effect its corporate or similar existence and the corporate or similar existence of each of its Subsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect.

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9.6Books and Records.  The Company will, and will cause each of its Subsidiaries to, maintain proper books of record and account in conformity with GAAP and all applicable requirements of any Governmental Authority having legal or regulatory jurisdiction over the Company or such Subsidiary, as the case may be.

9.7Maintenance of REIT Status.  The Company will, at all times, conduct its affairs and the affairs of its Subsidiaries in a manner so as to continue to qualify as a REIT and elect to be treated as a REIT under all applicable laws, rules and regulations.

9.8Listing of Common Stock; Filing of Reports.  The Company will (i) at all times cause its common stock to be duly listed on the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation or other national stock exchange, and (ii) timely file all reports required to be filed by it with the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation and the Securities and Exchange Commission.

9.9Limitations on Guaranties of Indebtedness.  Concurrent with (i) any Subsidiary issuing Unsecured Debtor becoming a guarantor or other obligor with respect to Unsecured Debt, or (ii) any Secured Debtbecoming Unsecured Debt, the Company shall cause each Subsidiary described in clause (i) and each Subsidiary which is the issuer or a guarantor or other obligor with respect to Unsecured Debt described in clause (ii) (if the applicable Subsidiary is not then a guarantor or other obligor of the Notes) to execute and deliver to the holders of the Notes a guaranty of the obligations evidenced by the Notes, together with such other instruments, documents, certificates and opinions reasonably required by the Required Holders in connection therewith, each of the foregoing being in form and substance customary and appropriate for financings of this type.

9.10Information Required by Rule 144A.  Upon the request of the holder of any Note, the Company will promptly provide to such holder, and to any Qualified Institutional Buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.

10Negative Covenants.

The Company covenants that, during the Issuance Period and for so long thereafter as any of the Notes are outstanding or any amounts owing under the Transaction Documents remain unpaid:

10.1Liens, Etc.The Company will not, nor shall it permit any Subsidiary to, create, incur or permit to exist any Lien of any kind on any Property owned by any such Person; provided,  however, that the foregoing shall not apply to nor operate to prevent any Permitted Liens.  Without limitation of the immediately preceding sentence, the Company will not permit any Principal Credit Facility (including the Credit Agreement and the 2012 Note Agreement) to be secured by any consensual Lien unless the Notes are simultaneously secured pursuant to terms and provisions, including an intercreditor agreement, satisfactory to the Required Holders.

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10.2Investments, Acquisitions, Loans and Advances.The Company will not, nor will it permit any Subsidiary to, (i) directly or indirectly, make, retain or have outstanding any investments (whether through the purchase of stock or obligations or otherwise) in any Person, real property or improvement on real property, or any loans, advances, lines of credit, mortgage loans or other financings (including pursuant to sale/leaseback transactions) to any other Person, or (ii) acquire any real property, improvements on real property or all or any substantial part of the assets or business of any other Person or division thereof; provided,  however, that the foregoing shall not apply to nor operate to prevent:

(a) investments in direct obligations of the United States of America or any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof;

(b) investments in commercial paper rated at least P-1 by Moody’s and at least A-1 by S&P maturing within one year of the date of issuance thereof;

(c) investments in certificates of deposit issued by any Lender (as defined in the Credit Agreement) or by any United States commercial bank having capital and surplus of not less than $100,000,000 which have a maturity of one year or less;

(d) investments in repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in subsection (a) above entered into with any bank meeting the qualifications specified in subsection (c) above, provided all such agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System;

(e) investments in money market funds that invest solely, and which are restricted by their respective charters to invest solely, in investments of the type described in the immediately preceding subsections (a), (b), (c), and (d) above;

(f) the Company’s investments from time to time in its Subsidiaries, and investments made from time to time by a Subsidiary in one or more of its Subsidiaries;

(g) intercompany loans or advances made from time to time among the Company and its Subsidiaries forgeneral companypurposes;

(h) investments in Permitted Acquisitions, other than those described in clauses (j), (k) or (l) below;

(i) investments held by the Company and its Subsidiaries as of the date hereof and disclosed in Schedule 10.2;

(j) investments in joint ventures which are Permitted Acquisitions and are in an amount not to exceed in the aggregate at any one time outstanding 15% of the Total Asset Value of the Company and its Subsidiaries at such time;

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(k) investments in Assets Under Development which are Permitted Acquisitions and are in an amount not to exceed in the aggregate at any one time outstanding 20% of the Total Asset Value of the Company and its Subsidiaries at such time;

(l) investments in Redevelopment Asset which are Permitted Acquisitions and are in an amount not to exceed in the aggregate at any one time outstanding 20% of the Total Asset Value of the Company and its Subsidiaries at such time;

(m) investments received in connection with a workout of any obligation owed to the Company or its Subsidiaries; and

(n) investments other than those otherwise permitted under this Section in an amount not to exceed in the aggregate at any one time outstanding 15% of the Total Asset Value of the Company and its Subsidiaries at such time.

Investments made after the date hereof of the type described in Sections (j), (k), (l) and (n) immediately preceding shall at no time exceed in the aggregate at any one time outstanding 30% of the Total Asset Value of the Company and its Subsidiaries at such time.  In determining the amount of investments, acquisitions, loans, and advances permitted under this Section, investments and acquisitions shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein), and loans and advances shall be taken at the principal amount thereof then remaining unpaid.

10.3Mergers, Consolidations and Sales.The Company will not merge or consolidate with or into, or convey, transfer or otherwise dispose of (whether in one transaction or a series of transactions) any of its Property (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person, or permit any Subsidiary to do so; provided,  however, that the Company may merge or consolidate with another Person, including a Subsidiary, if (A) the Company is the surviving corporation, (B) the Company will be in pro forma compliance with all provisions of this Agreement upon and after such merger or consolidation, and (C) the Company will not engage in any material line of business substantially different from that engaged in on the date hereof and; provided further, that so long as no Default or Event of Default exists this Section shall not apply to nor operate to prevent:

(a) the sale, transfer or other disposition of Property of the Company and its Subsidiaries to one another in the ordinary course of its business;

(b) the merger of any Subsidiary with and into the Company or any other Subsidiary, provided that, in the case of any merger involving the Company, the Company is the corporation surviving the merger;

(c) the sale, transfer or other disposition of (i) any tangible personal property that, in the reasonable business judgment of the Company or its Subsidiary, has become obsolete or worn out, and which is disposed of in the ordinary course of business, or (ii) for the avoidance of doubt, capital stock of the Company held by the Company as treasury stock; and

(d) the sale, transfer or other disposition of Property of the Company or any Subsidiary (including any disposition of Property as part of a sale and leaseback transaction);

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provided, that if the Gross Book Value of such sale, transfer or disposition during any Fiscal Quarter exceeds $10,000,000 and together with any other sales, transfers or dispositions made during such Fiscal Quarter in the aggregate exceed an amount equal to $100,000,000, then for such sales, transfers or dispositions, the Company shall provide to the holders of Notes covenant calculations for the covenants contained in Section 10.9, showing that, after giving effect to such sales, transfers or dispositions, the Company shall be in pro forma compliance with such covenants for the Fiscal Quarter then most recently ended for which financial statements have been provided hereunder.

10.4No Burdensome Contracts With Affiliates.The Company shall not, nor shall it permit any Subsidiary to, enter into any contract, agreement or business arrangement with any of its Affiliates (other than with Wholly-owned Subsidiaries) on terms and conditions which are less favorable to the Company or such Subsidiary than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other.

10.5No Changes in Fiscal Year.The Fiscal Year of the Company ends on December 31st of each year; and the Company shall not change its Fiscal Year from its present basis.

10.6Change in the Nature of Business.The Company will not, nor shall it permit any Subsidiary to, engage in any business or activity if as a result the general nature of the business of the Company and its Subsidiaries would be changed in any material respect from the general nature of the business engaged in by it as of the date hereof.  As of the date hereof, the general nature of the business of the Company and its Subsidiaries is primarily the business of the acquisition, financing and ownership of Senior Housing Assets and other business activities incidentalthereto.

10.7Use of Proceeds of Notes.The Company will not use the credit extended under this Agreement for any purpose other than solely the purposes set forth in, or otherwise contemplated by, Section 5.14 hereof.

10.8No Restrictions.Except as provided herein, the Company will not, nor will it permit any Subsidiary (except for bankruptcy remote subsidiaries established in connection with (i) any securitization or participation transaction or with any Permitted Lien, or (ii) any ownership of fee simple real estate Properties not exceeding $200,000,000 individually or in the aggregate) to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of the Company or any Subsidiary to:  (a) pay dividends or make any other distributions on any Subsidiary’s capital stock or other equity interests owned by the Company or any other Subsidiary, (b) pay any indebtedness owed to the Company or any other Subsidiary, (c) make loans or advances to the Company or any other Subsidiary, (d) transfer any of its Property to the Company or any other Subsidiary, providedhowever, that the foregoing does not impose any limitation on transfers of property that is subject to a Permitted Lien, or (e) guarantee the obligations evidenced by the Notes or under this Agreement and/or grant Liens on its assets to a collateral agent for the ratable benefit of the holders from time to time of the Notes, the 2012 Noteholders, the Lenders under (and as defined in) the Credit Agreement and other indebtedness as required by the Transaction Documents.

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10.9Financial Covenants.

(a) Maximum Total Indebtedness to Total Asset Value Ratio.As of the last day of each FiscalQuarter of the Company, the Company shall not permit the ratio of Total Indebtedness to Total Asset Value to be greater than 0.50 to 1.00.

(b) Maximum Secured Debt to Total Asset Value Ratio.As of the last day of each Fiscal Quarter of the Company, the Company shallnot permit the ratio of Secured Debt to Total Asset Value to be greater than 0.35 to 1.00.

(c) Maximum Unsecured Debt to Unencumbered Asset Value.  As of the last day of each Fiscal Quarter of the Company, the Company shall not permit the ratio of Unsecured Debt of the Company and its Subsidiaries to Unencumbered Asset Value to be greater than 0.60 to 1.00.

(d) Minimum EBITDA to Fixed Charges Ratio.As of the last day of each Rolling Period of the Company, the Company shall not permitthe ratio of EBITDA for such Rolling Period to Fixed Charges for such Rolling Period to be less than 1.50 to 1.00.

(e) Maintenance of Tangible Net Worth.The Company shall not permit at any time Tangible Net Worth to be less than the sum of (a) $472,485,456plus (b) 75% of the aggregate net proceeds received by the Company or any of its Subsidiaries after October 14, 2014 in connectionwith any offering of capital stock or other equity interests of the Company or the Subsidiaries,but only to the extent that such net proceeds are not used to redeem existing capital stock or other equity interests of the Company or the Subsidiaries.

(f) Minimum Eligible Property NOI to Interest Expense on Unsecured Debt Ratio.  As of the last day of each Rolling Period of the Company, the Company shall not permit the ratio of Eligible Property NOI for such Rolling Period to Interest Expense on Unsecured Debt for such Rolling Period to be less than 2.00 to 1.00.

10.10Two-Way Most Favored Lender.If at any time after October 14, 2014 the Credit Agreement is amended or otherwise modified, or any agreement related to the Credit Agreement is entered into or is amended or otherwise modified, and as a result of any of the foregoing any Financial Covenant for the Bank Facility is modified (whether in a manner to be more beneficial or less beneficial to the lenders under the Credit Agreement) or eliminated, or any Financial Covenant is added for the Bank Facility (in each such case, a “Modified Bank Financial Covenant”), then (i) the corresponding Financial Covenant in this Agreement shall be deemed automatically modified in such manner or eliminated, as the case may be, or such additional Financial Covenant for the Bank Facility shall be deemed automatically incorporated by reference, in each case mutatismutandis, as if such modified or additional Financial Covenant were set forth fully herein or such eliminated Financial Covenant were deleted herefrom, as applicable, and (ii) the Company shall promptly, and in any event within five (5) Business Days after entering into any such Modified Bank Financial Covenant, advise the holders of Notes in writing of such Modified Bank Financial Covenant.  Thereafter, upon the request of the Required Holders, the Company shall enter into an amendment to this Agreement with the Required Holders evidencing the incorporation of such Modified Bank Financial Covenant, it being agreed

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that any failure to make such request or to enter into any such amendment shall in no way qualify or limit the effectiveness of the deemed modification or elimination, as the case may be, of the applicable Financial Covenant in this Agreement, or the incorporation by reference into this Agreement of the applicable additional Financial Covenant, in each case as described in clause (i) of the immediately preceding sentence.

Notwithstanding anything to the contrary in the immediately preceding paragraph of this Section 10.10:  (a) no such modification of a Financial Covenant hereunder that would be less beneficial to the holders of the Notes, and no such elimination hereunder of a Financial Covenant, shall be effective if a Default or Event of Default has occurred and is continuing immediately prior to the time such Modified Bank Financial Covenant becomes effective; (b) no modification or series of modifications effected pursuant to the provisions of this Section 10.10 shall be effective to (w) increase the maximum permitted ratio of Total Indebtedness to Total Asset Value as set forth in Section 10.9(a) of this Agreement to a level greater than 0.60 to 1.00 (assuming such Financial Covenant were calculated on a basis consistent with the manner in which it is calculated on the date hereof pursuant to this Agreement) or eliminate such Financial Covenant set forth in Section 10.9(a) from this Agreement, (x) increase the maximum permitted ratio of Secured Debt to Total Asset Value as set forth in Section 10.9(b) of this Agreement to a level greater than 0.40 to 1.00 (assuming such Financial Covenant were calculated on a basis consistent with the manner in which it is calculated on the date hereof pursuant to this Agreement) or eliminate such Financial Covenant set forth in Section 10.9(b) from this Agreement, (y) (i) increase the maximum permitted ratio of Unsecured Debt of the Company and its Subsidiaries to Unencumbered Asset Value as set forth in Section 10.9(c) of this Agreement to a level greater than 0.6667 to 1.00 (assuming such Financial Covenant were calculated on a basis consistent with the manner in which it is calculated on the date hereof pursuant to this Agreement), or (ii) modify the definition of “Capitalization Rate” such that the capitalization rate for ALFs would be lower than 7.00%, the capitalization rate for continuum of care facilities would be lower than 7.50%, any capitalization rate set forth in such definition on the date hereof as 10% would be lower than 8.50%, or any capitalization rate set forth in such definition on the date hereof as 11.5% would be lower than 11.5%, or (iii) eliminate such Financial Covenant set forth in Section10.9(c) from this Agreement unless (1) such Financial Covenant is replaced with a Financial Covenant prohibiting the ratio of Total Asset Value (but computed solely for unencumbered assets of the Company and its Subsidiaries) to Unsecured Debt, or a formulation for such replacement Financial Covenant which is substantially similar thereto, from being less than 1.50 to 1.00 as of the last day of each Fiscal Quarter of the Company, (2) a customary priority debt covenant satisfactory to the Required Holders is added to Section 10.9 and (3)Section 10.1 is modified in a manner consistent with such newly added priority debt covenant and reasonably satisfactory to the Required Holders, provided that if such Financial Covenant set forth in Section 10.9(c) is eliminated as provided in this clause (y)(iii), then the immediately preceding clauses (y)(i) and (y)(ii) will not be applicable or (z) decrease the minimum required ratio of EBITDA for any Rolling Period to Fixed Charges for such Rolling Period as set forth in Section 10.9(d) of this Agreement to a level less than 1.50 to 1.00 (assuming such Financial Covenant were calculated on a basis consistent with the manner in which it is calculated on the date hereof pursuant to this Agreement) or eliminate such Financial Covenant set forth in Section 10.9(d) from this Agreement; and (c) in the event the Bank Facility is terminated, all Financial Covenants hereunder shall be unaffected and shall remain in effect in the same manner as they existed immediately prior to such termination.

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10.11Redemption of Stock, Etc.The Company will not, and will not permit any Subsidiary to, (a) redeem, purchase or otherwise acquire, refinance or repay any preferred stock of the Company or any Subsidiary if an Event of Default exists at such time or immediately after giving effect thereto, or (b) redeem, purchase or otherwise acquire, refinance or repay any preferred stock of the Company or any Subsidiary with the proceeds from, or in exchange for, the issuance of capital stock which is mandatorily redeemable, preferred stock which is redeemable at the election of the holder thereof or preferred stock with respect to which any holder thereof has a put or similar right to require the Company or any Subsidiary to purchase, re-purchase or otherwise acquire such preferred stock.

10.12Terrorism Sanctions Regulations.The Company will not and will not permit any Controlled Entity (a) to become (including by virtue of being owned or controlled by a Blocked Person), own or control a Blocked Person or any Person that is the target of sanctions imposed by the United Nations or by the European Union, or (b) directly or indirectly to have any investment in or engage in any dealing or transaction (including, without limitation, any investment, dealing or transaction involving the proceeds of the Notes) with any Person if such investment, dealing or transaction (i) would cause any holder to be in violation of any law or regulation applicable to such holder, or (ii) is prohibited by or subject to sanctions under any U.S. Economic Sanctions, or (c) to engage, nor shall any Affiliate of either engage, in any activity that could subject such Person or any holder to sanctions under CISADA or any similar law or regulation with respect to Iran or any other country that is subject to U.S. Economic Sanctions.

11Events Of Default.

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

(a) The Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

(b) the Company defaults in the payment of any interest on any Note for more than three Business Days after the same becomes due and payable; or

(c) the Company defaults in the performance of or compliance with any term contained in Sections 9.5 (to the extent that Section 9.5 pertains to the maintenance and keeping in full force and effect of the Company’s existence), 9.9 or 10; or

(d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) or in any other Transaction Document and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default, and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this paragraph (d) of Section 11); or

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(e) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any other Transaction Document or in any writing furnished in connection with the transactions contemplated hereby or thereby proves to have been false or incorrect in any material respect on the date as of which made; or

(f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness for Borrowed Money that is outstanding beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness for Borrowed Money or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness for Borrowed Money has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness for Borrowed Money to be), due and payable before its stated maturity or before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness for Borrowed Money to convert such Indebtedness for Borrowed Money into equity interests), (x) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness for Borrowed Money before its regular maturity or before its regularly scheduled dates of payment, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness for Borrowed Money; provided that (i) the aggregate amount of all Indebtedness for Borrowed Money to which such a payment default shall occur and be continuing or such a failure or other event causing or permitting acceleration (or resale to the Company or any Subsidiary) shall occur and be continuing exceeds 3% of the Applicable Total Asset Value or (ii) if such default results solely from a payment not paid when due, there shall be a five (5) day cure period so long as the maturity date with respect to the subject Indebtedness for Borrowed Money has not been accelerated; or

(g) the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

(h) a court or Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Company or any of the Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of the Subsidiaries, or any such petition shall be filed against

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the Company or any of the Subsidiaries and such petition shall not be dismissed within 60 days; or

(i) one or more final judgments or orders(including any such final order enforcing a binding arbitration decision) for the payment of money in an aggregate amount in excess of $25,000,000 (except to the extent fully covered by insurance pursuant to which the insurer has accepted liability therefor in writing)are rendered against one or more of the Company and its Subsidiaries and which judgments or orders are not, within 30 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 30 days after the expiration of such stay;

(j) if (i) any Plan shall fail to satisfy the minimum funding standards of the Pension Funding Rules for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under the Pension Funding Rules, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate “amount of unfunded benefit liabilities” (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $25,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or

(k) a Change of Control shall occur; or

(l) [Intentionally Omitted]; or

(m) there shall be a determination from the applicable Governmental Authority from which no appeal can be taken that the Company’s tax status as a REIT has been lost; or

(n) the Company at any time hereafter fails to cause its common stock to be duly listed on the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation; or

(o) any provision of any Transaction Document shall for any reason (other than pursuant to the terms thereof) cease to be valid and binding on or enforceable in any material respect against the Company, or the Company shall so state in writing.

As used in Section 11(j), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

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12Remedies On Default, Etc.

12.1Acceleration.

(a) If an Event of Default with respect to the Company described in Section 11(g) or (h) (other than an Event of Default described in clause (i) of Section 11(g) or described in clause (vi) of Section 11(g) by virtue of the fact that such clause encompasses clause (i) of Section 11(g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

(b) If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, in addition to any action that may be taken pursuant to Section 12.1(c), any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

(c) If any other Event of Default has occurred and is continuing, any holder or holders of a majority in principal amount of the Notes of any Series at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes of such Series then outstanding to be immediately due and payable.

Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon (including, but not limited to, interest accrued thereon at the Default Rate) and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.  The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from prepayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.

12.2Other Remedies.

If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

12.3Rescission.

At any time after any Notes of any Series have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than a majority in principal amount of the Notes

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of such Series then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes of such Series, all principal of and Make-Whole Amount, if any, on any Notes of such Series that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes of such Series, at the Default Rate, (b) neither the Company nor any other Person shall have paid any amounts which have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (d) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes.  No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

12.4No Waivers or Election of Remedies, Expenses, Etc.

No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies.  No right, power or remedy conferred by this Agreement, any Note or any other Transaction Document upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise.  Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys’ fees, expenses and disbursements.

13Registration; Exchange; Substitution Of Notes.

13.1Registration of Notes.

The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes.  The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register.  Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary.  The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.

13.2Transfer and Exchange of Notes.

Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)), for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder’s attorney duly authorized in

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writing and accompanied by the relevant name, address and other information for notices of each transferee of such Note or part thereof), within ten Business Days thereafter, the Company shall execute and deliver, at the Company’s expense (except as provided below), one or more replacement Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note.  Each such replacement Note shall be payable to such Person as such holder may request and shall be substantially in the form of the Note so surrendered.  Each such replacement Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon.  The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes.  Notes shall not be transferred in denominations of less than $1,000,000; provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes of a Series, one Note may be in a denomination of less than $1,000,000.  Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2.

13.3Replacement of Notes.

Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and

(a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $5,000,000 or a Qualified Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or

(b) in the case of mutilation, upon surrender and cancellation thereof,within ten Business Days thereafter, the Company at its own expense shall execute and deliver, in lieu thereof, a replacement Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon; provided, that in no event shall the Company be required to pay any interest or principal with respect to a replacement Note if such amounts have previously been paid with respect to the original Note.

14Payments On Notes.

14.1Place of Payment.

Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in New York, New York at the principal office of JPMorgan Chase Bank in such jurisdiction.  The holder of a Note may at any time, by notice to the Company, change the place of payment of the Notes so long as such place of

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payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

14.2Home Office Payment.

So long as a Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose, in the case of the Series A Notes or the Series B Notes, on the Purchaser Schedule Relating to Series A Notes or Purchaser Schedule Relating to Series B Notes, as applicable, attached hereto as Schedule A and, in the case of any Series C Note, any Series D Note or any Shelf Note, on the Purchaser Schedule attached to the Confirmation of Acceptance with respect to such Note, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1.  Prior to any sale or other disposition of any Note held by any Purchaser or its nominee such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a replacement Note or Notes pursuant to Section 13.2.  The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by any Purchaser under this Agreement and that has made the same agreement relating to such Note as each Purchaser has made in this Section 14.2.

15Expenses, Etc.

15.1Transaction Expenses.

Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys’ fees of a special counsel and, if reasonably required by the Required Holders, local or other counsel) incurred by PIM, the Purchasers or any holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Notes or any of the other Transaction Documents (whether or not such amendment, waiver or consent becomes effective), including, without limitation:  (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes or any of the other Transaction Documents or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes or any of the other Transaction Documents, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors’ fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby, by the Notes and the other Transaction Documents.  The Company will pay, and will save PIM, each

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Purchaser and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders.

15.2Survival.

The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.

16Survival Of Representations And Warranties; Entire Agreement.

All representations and warranties contained herein or in any of the other Transaction Documents shall survive the execution and delivery of this Agreement, the Notes and the other Transaction Documents, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of any Purchaser or any other holder of a Note.  All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement or any of the other Transaction Documents shall be deemed representations and warranties of the Company under this Agreement or such other Transaction Document.  Subject to the preceding sentence, this Agreement, the Notes and the other Transaction Documents embody the entire agreement and understanding among PIM, the Purchasers and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

17Amendment And Waiver.

17.1Requirements.

This Agreement, the Notes and the other Transaction Documents may be amended, and the Company may take any action herein or therein prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent to such amendment, action or omission to act, of the Required Holder(s) of the Notes of each Series except that, (i) with the written consent of the holders of all Notes of a particular Series, and if an Event of Default shall have occurred and be continuing, of the holders of all Notes of all Series, at the time outstanding (and not without such written consents), the Notes of such Series may be amended or the provisions thereof waived to change the maturity thereof, to change or affect the principal thereof, or to change or affect the rate or time of payment of interest on or any Make-Whole Amount payable with respect to the Notes of such Series, (ii) without the written consent of the holder or holders of all Notes at the time outstanding, no amendment to or waiver of the provisions of this Agreement shall change or affect the provisions of Section 12 or this Section 17 insofar as such provisions relate to proportions of the principal amount of the Notes of any Series, or the rights of any individual holder of Notes, required with respect to any declaration of Notes to be due and payable or with respect to any consent, amendment, waiver or declaration, (iii) with the written consent of PIM (and not without the written consent of PIM) the provisions of Section 2B may be amended or waived (except insofar as any such amendment or waiver would affect any rights or obligations with respect to the purchase and sale of Notes which shall

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have become Accepted Notes prior to such amendment or waiver), and (iv) with the written consent of all of the Purchasers which shall have become obligated to purchase Accepted Notes of any Series (and not without the written consent of all such Purchasers), any of the provisions of Sections 2B and 4 may be amended or waived insofar as such amendment or waiver would affect only rights or obligations with respect to the purchase and sale of the Accepted Notes of such Series or the terms and provisions of such Accepted Notes.  Each holder of any Note at the time or thereafter outstanding shall be bound by any consent authorized by this Section 17, whether or not such Note shall have been marked to indicate such consent, but any Notes issued thereafter may bear a notation referring to any such consent.

17.2Solicitation of Holders of Notes.

(a) Solicitation.  The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes.  The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.

(b) Payment.  The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment.

17.3Binding Effect. Etc.

Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver.  No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon.  No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note.  As used herein, the term “this Agreement” and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

17.4Notes Held by Company, Etc.

Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes or any Series thereof then outstanding have approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes

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or any Series thereof, or have directed the taking of any action provided herein or in the Notes or any Series thereof to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes or any Series thereof then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.

18Notices.

All notices and communications provided for hereunder (other than communications provided for in Section 2) shall be in writing and sent (a) by facsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid).  Any such notice must be sent:

(i)if to any Series A Purchaser or its nominee or any Series B Purchaser or its nominee, to such Person at the address specified for such communications in the Purchaser Schedule Relating to Series A Notes or Purchaser Schedule Relating to Series B Notes, as applicable, attached hereto as Schedule A and, in the case of a Purchaser of any Series C Note or its nominee, any Series D Note or its nominee, or any Shelf Note or its nominee, to such Person at the address specified for such communications in the Purchaser Schedule attached to the Confirmation of Acceptance with respect to such Shelf Note, or at such other address as such Person or it shall have specified to the Company in writing;

(ii)if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing; or

(iii)if to the Company, at its address set forth at the beginning hereof to the attention of the Chief Financial Officer, or at such other address as the Company, shall have specified to the holder of each Note in writing.

Notices under this Section 18 will be deemed to have been given and received when delivered at the address so specified.  Any communication pursuant to Section 2 shall be made by the method specified for such communication in Section 2, and shall be effective to create any rights or obligations under this Agreement only if, in the case of a telephone communication, an Authorized Officer of the party conveying the information and of the party receiving the information are parties to the telephone call, and in the case of a facsimile communication, the communication is signed by an Authorized Officer of the party conveying the information, addressed to the attention of an Authorized Officer of the party receiving the information, and in fact received at the facsimile number that is listed for the party receiving the communication on the Information Schedule or at such other facsimile number as the party receiving the information shall have specified in writing to the party sending such information.

19Reproduction Of Documents.

This Agreement, and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser on any Closing Day (except the Notes themselves), and (c) financial statements,

47

certificates and other information previously or hereafter furnished to any Purchaser, may be reproduced by such Purchaser by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and such Purchaser may destroy any original document so reproduced.  To the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.  This Section 19 shall not prohibit any party hereto from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

20CONFIDENTIALITY.

For the purposes of this Section 20,  “Confidential Information” means information delivered to any Purchaser by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such Purchaser or any person acting on such Purchaser’s behalf, (c) otherwise becomes known to such Purchaser other than through disclosure by the Company or any Subsidiary, or (d) constitutes financial statements delivered to such Purchaser under Section 7.1 that are otherwise publicly available.  Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to (i) its directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by its Notes), (ii) its financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which it sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which it offers to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over such Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such Purchaser’s investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser is a party, or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchaser’s Notes and this Agreement.  Each holder of a Note, by its acceptance of a

48

Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement.  On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20.

21MISCELLANEOUS.

21.1Successors and Assigns.

All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including any subsequent holder of a Note) whether so expressed or not.

21.2Payments Due on Non-Business Days.

Anything in this Agreement or the Notes to the contrary notwithstanding (but without limiting the requirement in Section 8.4 that the notice of any optional prepayment specify a Business Day as the date fixed for such prepayment), any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a New York Business Day shall be made on the next succeeding New York Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding New York Business Day; provided that if the maturity date of any Note is a date other than a Business Day, the payment otherwise due on such maturity date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.

21.3Accounting Terms.

All accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP.  Except as otherwise specifically provided herein, (i) all computations made pursuant to this Agreement shall be made in accordance with GAAP, and (ii) all financial statements shall be prepared in accordance with GAAP.  If, after the date of this Agreement, there shall occur any change in GAAP from those used in the preparation of the financial statements referred to in Section7.1(b) hereof for the Fiscal Year ended December 31, 2012 and such change shall result in a change in the method of calculation of any financial covenant, standard or term found in this Agreement, either the Company or the Required Holders may by notice to the holders of the Notes and the Company, respectively, require that the holders of the Notes and the Company negotiate in good faith to amend such covenants, standards, and terms so as equitably to reflect such change in accounting principles, with the desired result being that the criteria for evaluating the financial condition of the Company and its Subsidiaries shall be the same as if such change had not been made.  No delay by the Company or the Required Holders in requiring such negotiation shall limit their right to so require such a negotiation at any time after such a change in accounting principles.  Until any such covenant, standard, or term is amended in accordance with this Section 21.3,

49

financial covenants shall be computed and determined in accordance with GAAP in effect prior to such change in accounting principles.

21.4Severability.

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

21.5Construction.

Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant.  Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall be deemed to be a part hereof.

21.6Counterparts.

This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument.  Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

21.7Governing Law.

This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such state that would permit the application of the laws of a jurisdiction other than such state.

21.8Jurisdiction and Process.(a)The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes.  To the fullest extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

(b) The Company consents to process being served by or on behalf of any

50

holder of Notes in any suit, action or proceeding of the nature referred to in Section 21.8(a) by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, return receipt requested, to it at its address specified in Section 18 or at such other address of which such holder shall then have been notified pursuant to said Section.  The Company agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding, and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to it.  Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.

(c) Nothing in this Section 21.8 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

21.9Waiver of Jury Trial.THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY, if an action or other proceeding is brought in the State of California and if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them concerning this Agreement, the Notes, the other Transaction Documents and the matters contemplated hereby or thereby (each, a “Claim”), including any and all questions of law or fact relating thereto, shall be determined by judicial reference pursuant to the California Code of Civil Procedure (“Reference”).  The parties shall select a single neutral referee, who shall be a retired state or federal judge.  In the event that the parties cannot agree upon a referee, the referee shall be appointed by the court.  The referee shall report a statement of decision to the court.  Nothing in this paragraph shall limit the right of any party at any time to exercise any self-help remedies, foreclose against any collateral or obtain provisional remedies.  The Company shall bear the fees and expenses of the referee unless the referee orders otherwise.  The referee shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

21.10Transaction References.The Company agrees that Prudential Capital Group may (a) refer to its role in the origination of the purchase of the Notes from the Company, as well as the identity of the Company and the aggregate principal amount and issue date of the Notes, on its internet site or in marketing materials, press releases, published “tombstone” announcements or any other print or electronic medium, and (b) display the Company’s corporate logo in conjunction with any such reference.

21.11No Novation.  This Agreement amends, restates and replacesthe Prior Agreement and is not intended to constitute a novation thereof (it being acknowledged and

51

agreed that the Company’s covenants in the Prior Agreement shall remain operative for periods prior to the effectiveness of this Agreement, and any unwaived breach of such covenants or any unwaived breach of representations and warranties under the Prior Agreement made prior to the effectiveness of this Agreement, in each case if such unwaived breach constituted a Default or Event of Default under the Prior Agreement immediately prior to the effectiveness of this Agreement, shall constitute a Default or Event of Default, as applicable, under this Agreement).

*    *    *    *    *

52

	Very truly yours,
THE COMPANY:	LTC PROPERTIES, INC.
	By:	/s/ Wendy Simpson
	Name:	Wendy Simpson
	Title:	Chairman, Chief Executive Officer and President
	By:	/s/ Pamela Shelley-Kessler
	Name:	Pamela J. Shelley-Kessler
	Title:	Executive Vice President, Chief Financial Officer and Secretary

The foregoing is hereby agreed to as of the date thereof.
PRUDENTIAL INVESTMENT MANAGEMENT, INC.
By:	/s/ Cornelia Cheng
	Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as a holder of Series A-1 Notes, Series B Notes, Series C Notes and Series D Notes
By:	/s/ Cornelia Cheng
	Vice President
PRUCO LIFE INSURANCE COMPANY, as a holder of Series A-2 Notes and Series B Notes
By:	/s/ Cornelia Cheng
	Assistant Vice President
UNITED OF OMAHA LIFE INSURANCE COMPANY, as a holder of Series A-2 Notes
By:	Prudential Private Placement Investors, L.P., (as Investment Advisor)
By:	Prudential Private Placement Investors, Inc., (as its General Partner)
By:	/s/ Cornelia Cheng
Title:	Vice President

/s/ Cornelia Cheng
PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY, as a holder of Series B Notes and Series C Notes
By:	Prudential Investment Management, Inc., as investment advisor
By:	/s/ Cornelia Cheng
Title:	Vice President
FARMERS NEW WORLD LIFE INSURANCE COMPANY, as a holder of Series C Notes
By:	Prudential Private Placement Investors, L.P., (as Investment Advisor)
By:	Prudential Private Placement Investors, Inc., (as its General Partner)
By:	/s/ Cornelia Cheng
Title:	Vice President
AMERICAN INCOME LIFE INSURANCE COMPANY, as a holder of Series D Notes
By:	Prudential Private Placement Investors, L.P., (as Investment Advisor)
By:	Prudential Private Placement Investors, Inc., (as its General Partner)
By:	/s/ Cornelia Cheng
Title:	Vice President

LIBERTY NATIONAL LIFE INSURANCE COMPANY, as a holder of Series D Notes
By:	Prudential Private Placement Investors, L.P., (as Investment Advisor)
By:	Prudential Private Placement Investors, Inc., (as its General Partner)
By:	/s/ Cornelia Cheng
Title:	Vice President
FAMILY HERITAGE LIFE INSURANCE COMPANY OF AMERICA, as a holder of Series D Notes
By:	Prudential Private Placement Investors, L.P., (as Investment Advisor)
By:	Prudential Private Placement Investors, Inc., (as its General Partner)
By:	/s/ Cornelia Cheng
Title:	Vice President

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES‑OXLEY ACT OF 2002

I, Wendy L. Simpson, certify that:

1. I have reviewed this quarterly report on Form 10‑Q of LTC Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Wendy L. Simpson

Wendy L. Simpson

Chairman, Chief Executive Officer and President

(Principal Executive Officer)

April 30, 2015

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES‑OXLEY ACT OF 2002

I, Pamela Kessler, certify that:

1. I have reviewed this quarterly report on Form 10‑Q of LTC Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Pamela Kessler

Pamela Kessler

Executive Vice President, Chief Financial Officer

and Corporate Secretary

(Principal Financial and Accounting Officer)

April 30, 2015

EX-32

Exhibit 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of LTC Properties, Inc. (the “Company”) hereby certifies with respect to the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31,2015 as filed with the Securities and Exchange Commission (the “Report”) that to her knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 30, 2015	/s/ Wendy L. Simpson
	Wendy L. Simpson Chairman, Chief Executive Officer and President
Date: April 30, 2015	/s/ Pamela Kessler
	Pamela Kessler Executive Vice President, Chief Financial Officer and Corporate Secretary

This certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Act of 1934 (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

XML

Subsequent Events (Details) (Subsequent Event [Member], USD $)	Mar. 31, 2015
Dividend Declared [Member]
Equity
Cash dividend declared per common share per month (in dollars per share)	$ 0.17
Amended and Restated Uncommitted Private Shelf Agreement [Member]
Debt Obligations
Maximum availability under the private shelf agreement for senior unsecured term note issuances	$ 102,000,000

XML

Equity (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014	Apr. 30, 2015
Equity
Preferred shares outstanding	2,000,000		2,000,000
Dividend Distributions
Declared	$ 18,934,000	$ 18,560,000
Paid	18,934,000	18,560,000
Dividends declared and paid per common share per month (in dollars per share)	$ 0.17	$ 0.17
Accumulated other comprehensive income
Accumulated other comprehensive income	73,000		82,000
Subsequent Event [Member] | Dividend Declared [Member]
Dividend Distributions
Cash dividend declared per common share per month (in dollars per share)	$ 0.17
Shelf Registration [Member]
Equity
Maximum offering capacity under shelf registration statement	800,000,000
Amount available under effective shelf registration statement	775,100,000
Series C Preferred Stock [Member]
Equity
Preferred shares outstanding	2,000,000
Dividend Rate (as a percent)	8.50%
Number of shares of common stock to be issued upon conversion	2,000,000
Conversion price per share	$ 19.25
Total shares reserved for issuance of common stock related to the conversion of preferred stock	2,000,000
Dividend Distributions
Declared	818,000	818,000
Paid	818,000	818,000
Common Stock [Member]
Equity
Number of shares repurchased	4,609	200
Dividend Distributions
Declared	18,116,000	17,742,000
Paid	$ 18,116,000	$ 17,742,000
Common Stock [Member] | Subsequent Event [Member]
Dividend Distributions
Cash dividend declared per common share per month (in dollars per share)				$ 0.17

XML

Real Estate Investments (Details) (Real Estate Investment [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 item state property
Real Estate Investments
Gross Investments	$ 983,585
Percentage of Investments	100.00%
Number of properties	162
Number of states	27
Number of operators	29
Operating leases
Number of ways to compute annual rent increases	4
Minimum [Member]
Operating leases
Initial term of operating lease	10 years
Specified annual increase over the prior year's rent (as a percent)	2.00%
Maximum [Member]
Operating leases
Initial term of operating lease	15 years
Specified annual increase over the prior year's rent (as a percent)	3.00%
Skilled Nursing Facility Beds [Member]
Real Estate Investments
Number of Beds/Units	9,147
Assisted Living Facility Units [Member]
Real Estate Investments
Number of Beds/Units	4,510
Assisted Living Properties [Member]
Real Estate Investments
Gross Investments	416,079
Percentage of Investments	42.30%
Number of properties	85
Average Investment per Bed/Unit	98.22
Assisted Living Properties [Member] | Assisted Living Facility Units [Member]
Real Estate Investments
Number of Beds/Units	4,236
Skilled Nursing Properties [Member]
Real Estate Investments
Gross Investments	499,580
Percentage of Investments	50.80%
Number of properties	69
Average Investment per Bed/Unit	58.68
Skilled Nursing Properties [Member] | Skilled Nursing Facility Beds [Member]
Real Estate Investments
Number of Beds/Units	8,513
Range of Care Properties [Member]
Real Estate Investments
Gross Investments	43,907
Percentage of Investments	4.50%
Number of properties	7
Average Investment per Bed/Unit	48.36
Range of Care Properties [Member] | Skilled Nursing Facility Beds [Member]
Real Estate Investments
Number of Beds/Units	634
Range of Care Properties [Member] | Assisted Living Facility Units [Member]
Real Estate Investments
Number of Beds/Units	274
Properties under Development [Member]
Real Estate Investments
Gross Investments	13,136
Percentage of Investments	1.30%
Other Senior Housing Properties [Member]
Real Estate Investments
Gross Investments	$ 10,883
Percentage of Investments	1.10%
Number of properties	1
Number of parcels of land	5
Schools [Member]
Real Estate Investments
Number of properties	1
Memory Care Property [Member]
Real Estate Investments
Number of beds/units under development	122
Assisted Living and Memory Care Properties [Member]
Real Estate Investments
Number of beds/units under development	89

XML

Earnings per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net Income Per Common Share
Net income	$ 17,552	$ 17,004
Less net income allocated to participating securities:
Nonforfeitable dividends on participating securities	(123)	(103)
Total net income allocated to participating securities	(123)	(103)
Less net income allocated to preferred stockholders:
Preferred stock dividends	(818)	(818)
Total net income allocated to preferred stockholders	(818)	(818)
Income from continuing operations available to common stockholders	16,611	16,083
Net income available to common stockholders	16,611	16,083
Effect of dilutive securities:
Convertible preferred securities	818	818
Total effect of dilutive securities	818	818
Net income for diluted net income per share	$ 17,429	$ 16,901
Shares for basic net income per share	35,277	34,586
Effect of dilutive securities:
Stock options (in shares)	15	25
Convertible preferred securities (in shares)	2,000	2,000
Total effect of dilutive securities (in shares)	2,015	2,025
Shares for diluted net income per share	37,292	36,611
Basic net income per share (in dollars per share)	$ 0.47	$ 0.47
Diluted net income per share (in dollars per share)	$ 0.47	$ 0.46

XML

Investment in Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2015

Investment in Unconsolidated Joint Ventures

Investment in Unconsolidated Joint Ventures

3.Investment in Unconsolidated Joint Ventures

During the three months ended March 31, 2015, we made a preferred equity investment in an entity (the JV) that owns four properties providing independent, assisted living and memory care services. These properties are located in Arizona. At closing, we provided an initial preferred capital contribution of $20,143,000 and have committed to contribute an additional preferred capital contribution of $5,507,000 for a total preferred capital contribution of $25,650,000. As the preferred member of the JV, we are not entitled to share in the JV’s earnings or losses. Rather, we are entitled to receive a 15% preferred return, a portion of which is paid in cash and a portion of which is deferred if the cash flow of the JV is insufficient to pay all of the accrued preferred return. The unpaid accrued preferred return will be added to the balance of the preferred equity investment and will be repaid upon redemption. In addition, we have the option to purchase either the properties owned by the JV or 100% of the common membership interest in the JV, which is exercisable between the 37th month and the 54th month from the commencement of the JV. If we elect not to exercise our purchase option, we have the right to put our preferred equity interest to the common member after the 54th month for an amount equal to the unpaid preferred equity investment balance and accrued preferred return thereon. The common equity member has the right to call our preferred interest at any time for an amount equal to the preferred equity investment balance and accrued preferred return thereon that would be due for the first 36 months, less amounts paid to us prior to the redemption date.

The JV is intended to be self-financing, other than our preferred capital contributions, no direct support will be provided by us. As a result, we believe our maximum exposure to loss due to our investment in the JV would be limited to our preferred capital contributions. We have concluded that the JV meets the accounting criteria to be considered as a variable interest entity (or VIE). However, because we do not control the entity, nor do we have any role in the day-to-day management, we are not the primary beneficiary of the JV. Therefore, we account for our JV investment using the equity method. During the three months ended March 31, 2015, we recognized $116,000 in income from our preferred equity investment in the JV.

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Investment in Unconsolidated Joint Ventures (Details) (USD $)	3 Months Ended
	Mar. 31, 2015
Investment in Unconsolidated Joint Ventures
Initial preferred capital contribution in joint venture provided at closing.	$ 20,143,000
Income from unconsolidated joint venture	116,000
Joint Venture [Member]
Investment in Unconsolidated Joint Ventures
Number of properties owned by joint venture	4
Initial preferred capital contribution in joint venture provided at closing.	20,143,000
Additional preferred capital contributions in joint venture commited	5,507,000
Total preferred capital contributions in joint venture	25,650,000
Preferred return percentage	15.00%
Percentage of common membership interest in the joint venture that may be purchased by the Company	100.00%
Period of payment of the preferred equity investment balance if the common equity member elects to call the preferred interest	36 months
Income from unconsolidated joint venture	$ 116,000

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Real Estate Investments (Details 4) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2013 item property
Mortgage Loans
Scheduled principal payments received	$ 2,786,000	$ 519,000
Amount Funded	13,831,000
Amount funded under loan	892,000
Loan commitment	4,288,000
Remaining loan commitments	1,954,000
Investment Commitments.	90,643,000
Remaining Commitment	69,944,000
Commitments funded	20,699,000
Real Estate Investment [Member]
Mortgage Loans
Gross Investments	983,585,000
Percentage of Investments	100.00%
Number of Properties	162
Number of states	27
Number of operators	29
Amount Funded	11,081,000
Investment Commitments.	52,365,000
Remaining Commitment	39,196,000
Commitments funded	13,169,000
Mortgage Loans on Real Estate [Member]
Mortgage Loans
Gross Investments	165,300,000
Percentage of Investments	100.00%
Number of Loans	18
Number of Properties	37
Number of states	7
Number of operators	10
Interest rate for mortgage loans, low end of range (as a percent)	7.10%
Interest rate for mortgage loans, high end of range (as a percent)	13.90%
Scheduled principal payments received	501,000	519,000
Loan commitment			176,387,000
Forward commitments for capital improvements			12,000,000
Additional loan proceeds committed	40,000,000		40,000,000
Additional loan proceeds available annually	10,000,000
Period additional loan proceeds are limited to $10M	12 months
Mortgage Loans on Real Estate [Member] | Minimum [Member]
Mortgage Loans
General amortization schedule of mortgage loans	20 years
Specified basis points for annual increase in interest rate (as a percent)	0.10%
Mortgage Loans on Real Estate [Member] | Maximum [Member]
Mortgage Loans
General amortization schedule of mortgage loans	30 years
Specified basis points for annual increase in interest rate (as a percent)	0.25%
Mortgage Loans on Real Estate [Member] | Prestige Healthcare [Member]
Mortgage Loans
Loan commitment	196,387,000
Number of properties securing loan	2
Number of parcels of land	2
Mortgage Loans on Real Estate [Member] | Prestige Healthcare [Member] | Maximum [Member]
Mortgage Loans
Percentage of outstanding mortgage loan balance that may be prepaid without penalty	50.00%
Additional loan proceeds available for expansion and renovation	20,000,000
Mortgage and Construction Loans on Real Estate [Member] | Wisconsin
Mortgage Loans
Number of beds or units securing loan	106
Loan commitment under which the purchase option was exercised	10,600,000
Capital Improvement Loan Investment [Member]
Mortgage Loans
Amount Funded	1,858,000
Loan commitment	12,000,000
Capital Improvement Loan Investment [Member] | Prestige Healthcare [Member]
Mortgage Loans
Remaining loan commitments	6,804,000
Capital Improvement Loan Investment Two [Member] | Prestige Healthcare [Member]
Mortgage Loans
Loan commitment	32,000,000
Skilled Nursing Facility Beds [Member] | Real Estate Investment [Member]
Mortgage Loans
Number of Beds/Units	9,147
Skilled Nursing Facility Beds [Member] | Mortgage Loans on Real Estate [Member]
Mortgage Loans
Number of Beds/Units	3,701
Assisted Living Facility Units [Member] | Real Estate Investment [Member]
Mortgage Loans
Number of Beds/Units	4,510
Assisted Living Facility Units [Member] | Mortgage Loans on Real Estate [Member]
Mortgage Loans
Number of Beds/Units	270
Skilled Nursing Properties [Member] | Real Estate Investment [Member]
Mortgage Loans
Gross Investments	499,580,000
Percentage of Investments	50.80%
Number of Properties	69
Investment per Bed/Unit	58.68
Amount Funded	25,000
Investment Commitments.	6,600,000
Remaining Commitment	6,575,000
Commitments funded	25,000
Skilled Nursing Properties [Member] | Real Estate Investment [Member] | Wisconsin
Mortgage Loans
Purchase Price	13,946,000
Skilled Nursing Properties [Member] | Mortgage Loans on Real Estate [Member]
Mortgage Loans
Gross Investments	151,352,000
Percentage of Investments	91.60%
Number of Loans	15
Number of Properties	29
Investment per Bed/Unit	40.89
Skilled Nursing Properties [Member] | Mortgage Loans on Real Estate [Member] | Michigan
Mortgage Loans
Amount funded under loan			124,387,000
Number of properties securing loan	15		15
Number of beds or units securing loan			2,058
Skilled Nursing Properties [Member] | Mortgage Loans on Real Estate [Member] | Prestige Healthcare [Member] | Michigan
Mortgage Loans
Amount Funded	9,500,000
Loan commitment	11,000,000
Number of beds or units securing loan	157
Interest rate for first five years	9.41%
Period during which loan bears the initial specified interest rate	5 years
Annual increase in interest rate (as percent)	2.25%
Term of mortgage loan receivable	30 years
Period of interest-only payments	3 years
Skilled Nursing Properties [Member] | Mortgage and Construction Loans on Real Estate [Member] | Wisconsin
Mortgage Loans
Loan commitment under which the purchase option was exercised	10,600,000
Skilled Nursing Properties [Member] | Skilled Nursing Facility Beds [Member] | Real Estate Investment [Member]
Mortgage Loans
Number of Beds/Units	8,513
Skilled Nursing Properties [Member] | Skilled Nursing Facility Beds [Member] | Mortgage Loans on Real Estate [Member]
Mortgage Loans
Number of Beds/Units	3,701
Assisted Living Properties [Member] | Real Estate Investment [Member]
Mortgage Loans
Gross Investments	416,079,000
Percentage of Investments	42.30%
Number of Properties	85
Investment per Bed/Unit	98.22
Amount Funded	11,056,000
Investment Commitments.	45,765,000
Remaining Commitment	32,621,000
Commitments funded	13,144,000
Assisted Living Properties [Member] | Mortgage Loans on Real Estate [Member]
Mortgage Loans
Gross Investments	13,948,000
Percentage of Investments	8.40%
Number of Loans	3
Number of Properties	8
Investment per Bed/Unit	51.66
Assisted Living Properties [Member] | Assisted Living Facility Units [Member] | Real Estate Investment [Member]
Mortgage Loans
Number of Beds/Units	4,236
Assisted Living Properties [Member] | Assisted Living Facility Units [Member] | Mortgage Loans on Real Estate [Member]
Mortgage Loans
Number of Beds/Units	270
Range of Care Properties [Member] | California
Mortgage Loans
Proceeds received from the payoff of a mortgage loan	2,285,000
Range of Care Properties [Member] | Real Estate Investment [Member]
Mortgage Loans
Gross Investments	$ 43,907,000
Percentage of Investments	4.50%
Number of Properties	7
Investment per Bed/Unit	48.36
Range of Care Properties [Member] | Skilled Nursing Facility Beds [Member] | Real Estate Investment [Member]
Mortgage Loans
Number of Beds/Units	634
Range of Care Properties [Member] | Assisted Living Facility Units [Member] | Real Estate Investment [Member]
Mortgage Loans
Number of Beds/Units	274

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Notes Receivable (Details) (USD $)	3 Months Ended
	Mar. 31, 2015 loan
Notes Receivable
Amount funded	$ 892,000
Number of Loans	12
Loan commitment	4,288,000
Weighted average interest rate (as a percent)	10.80%
Total funded loan commitments	2,334,000
Remaining loan commitments	$ 1,954,000

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Debt Obligations (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014 property
Debt Obligations
Amount outstanding Senior Unsecured Notes	$ 277,467,000		281,633,000
Amount outstanding under Unsecured Credit Agreement	36,500,000
Line of Credit [Member]
Debt Obligations
Maximum availability under Unsecured Credit Agreement	400,000,000
Possible total maximum availability under Unsecured Credit Agreement	600,000,000
Additional extension period option	1 year
Unused commitment fee (as a percent)	0.30%
Amount borrowed	36,500,000	20,000,000
Amount outstanding under Unsecured Credit Agreement	36,500,000
Amount available for borrowing under Unsecured Credit Agreement	363,500,000
Line of Credit [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Obligations
Description of interest rate	LIBOR
Basis spread over base rate (as a percent)	1.25%
Senior Unsecured Debt [Member]
Debt Obligations
Repayments of debt	4,167,000	4,167,000
Amount outstanding Senior Unsecured Notes	277,467,000		281,633,000
Senior Unsecured Debt [Member] | Weighted Average [Member]
Debt Obligations
Weighted average interest rate (as a percent)	4.80%
Amended and Restated Uncommitted Private Shelf Agreement [Member] | Subsequent Event [Member]
Debt Obligations
Debt instrument term	3 years
Maximum available for issuance	200,000,000
Maximum availability under the private shelf agreement for senior unsecured term note issuances	102,000,000
Maximum average life of the loan from the date of original issuance	12 years
Amended and Restated Uncommitted Private Shelf Agreement [Member] | Subsequent Event [Member] | Maximum [Member]
Debt Obligations
Maximum maturity period of each debt issuance under the shelf agreement	15 years
Bonds [Member]
Debt Obligations
Repayments of debt		$ 635,000
Number of assisted living properties securing debt instruments			5

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Real Estate Investments

3 Months Ended

Mar. 31, 2015

Real Estate Investments

Real Estate Investments

2.Real Estate Investments

Assisted living properties, independent living properties, memory care properties, and combinations thereof are included in the assisted living property type. Range of care properties (or ROC) property type consists of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services.

Any reference to the number of properties, number of units, number of beds, and yield on investments in real estate are unaudited and outside the scope of our independent registered public accounting firm’s review of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Owned Properties.The following table summarizes our investments in owned properties at March 31, 2015 (dollar amounts in thousands):

								Average
			Percentage		Number	Number of		Investment
	Gross		of		of	SNF	ALF	per
Type of Property	Investments		Investments		Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	499,580	50.8	%	69	8,513	—	$	58.68
Assisted Living		416,079	42.3	%	85	—	4,236	$	98.22
Range of Care		43,907	4.5	%	7	634	274	$	48.36
Under Development(2)		13,136	1.3	%	—	—	—		—
Other(3)		10,883	1.1	%	1	—	—		—
Totals	$	983,585	100.0	%	162	9,147	4,510

(1) We own properties in 27 states that are leased to 29 different operators.

(2) Includes twoMC developments with a total of 122 units and a combination ALF and MC development with 89 units.

(3) Includes one school property and five parcels of land held-for-use.

Owned properties are leased pursuant to non-cancelable operating leases generally with an initial term of 10 to 15 years.  Each lease is a triple net lease which requires the lessee to pay all taxes, insurance, maintenance and repairs, capital and non-capital expenditures and other costs necessary in the operations of the facilities.  Many of the leases contain renewal options. The leases provide for fixed minimum base rent during the initial and renewal periods.  The majority of our leases contain provisions for specified annual increases over the rents of the prior year that are generally computed in one of four ways depending on specific provisions of each lease:

(i) a specified percentage increase over the prior year’s rent, generally between 2.0% and 3.0%;

(ii) a calculation based on the Consumer Price Index;

(iii) as a percentage of facility net patient revenues in excess of base amounts; or

(iv) specific dollar increases.

During the three months ended March 31, 2015, we funded $7,195,000 under a $12,182,000 development commitment to purchase the land and existing improvements and then complete the related development of a 56-unit memory care property currently under construction in Texas. In conjunction with this commitment, we entered into a master lease agreement for an initial term of 15 years with three5-year renewal options at an initial cash yield of 8.75%. The master lease provides for our payment of a lease inducement of up to $1,589,000. Also, the master lease gives us a right to provide similar financing for certain future development opportunities.

During the three months ended March 31, 2015, we elected to exercise our right to provide financing for one such opportunity, adding to the master lease a parcel of land purchased in South Carolina for $2,490,000as part of our commitment to provide the operator with up to $16,535,000, including the land purchase, for the development of an 89-unit combination assisted living and memory care property. In conjunction with this new development commitment, the master lease provides for an additional $2,363,000 lease inducement payment. See Note 7. Commitments and Contingencies for further discussion of the lease inducement commitments. 

During the quarter ended March 31, 2015, we purchased and equipped a 106-bed skilled nursing property in Wisconsin for a total of $13,946,000 by exercising our purchase option under a $10,600,000 mortgage and construction loan. The property was added to an existing master lease at a lease rate equivalent to the interest rate in effect on the loan at the time the purchase option was exercised. Additionally, we paid the lessee a $1,054,000 lease inducement which will be amortized as a yield adjustment over the life of the lease term. See Mortgage Loans below for further discussion of the loan agreement.

The following table summarizes our completed development and improvement projects and amounts funded during the three months ended March 31, 2015 (dollar amounts in thousands):

	Number		Number
	of	Type of	of
Type of Project	Properties	Property	Beds/Units	State	2015 Funding			Total Funding
Development	1	ALF	60	Colorado	$	1,360		$	10,541	(1)
Renovation	1	SNF	121	California		1,481			1,481
Renovation	2	SNF	141	Tennessee		40			2,200
	4		322		$	2,881	(2)	$	14,222

(1) Completed a MC property in February 2015.

(2) Excludes $5,692 of funding on projects that were completed during 2014.

The following table summarizes our investment commitments as of March 31, 2015, and amounts funded under these projects (excludes capitalized interest, dollar amounts in thousands):

									Number	Number
	Investment		2015		Commitment		Remaining		of	of
Type of Property	Commitment		Funding(2)		Funded		Commitment		Properties	Beds/Units
Skilled Nursing	$	6,600	$	25	$	25	$	6,575	3	510
Assisted Living(1)		45,765		11,056		13,144		32,621	27	1,240
Totals	$	52,365	$	11,081	$	13,169	$	39,196	30	1,750

(1) Includes the development of two MC properties for a total commitment of $24,430 andone ALF/MC property for a total commitment of $16,535. Also, includes three commitments for renovation projects on 24 ALFs totaling $4,800.

(2) Excludes funding for completed development and improvement projects discussed above. Includes $7,195 of land and improvements acquired for the development of a 56-unit MC property and $2,490 of land acquired for the development of an 89-unit ALF/MC property, as previously discussed.

Our construction in progress (or CIP) activity during the three months ended March 31, 2015 for our development, redevelopment, renovation, and expansion projects is as follows (dollar amounts in thousands):

	CIP								CIP
	Balance at				Capitalized		Conversions		Balance at
Properties	12/31/2014		Funded(1)		Interest		out of CIP		3/31/2015
Development projects:
Assisted living	$	8,671	$	8,961	$	147	$	(9,413)	$	8,366
Subtotal		8,671		8,961		147		(9,413)		8,366
Redevelopment, renovation and expansion projects:
Skilled nursing		—		25		—		—		25
Subtotal		—		25		—		—		25
Total	$	8,671	$	8,986	$	147	$	(9,413)	$	8,391

(1) Excludes $7,298of funding on development and renovations projects which was capitalized directly into building and includes the acquisition of the existing improvements of the 56-unit MC property for $6,315, as previously discussed.

Mortgage Loans.The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2015 (dollar amounts in thousands):

			Percentage		Number	Number	Number of		Investment
	Gross		of		of	of	SNF	ALF	per
Type of Property	Investments		Investments		Loans	Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	151,352	91.6	%	15	29	3,701	—	$	40.89
Assisted Living		13,948	8.4	%	3	8	—	270	$	51.66
Totals	$	165,300	100.0	%	18	37	3,701	270

(1) We have investments in properties located in 7 states that include mortgages to 10 different operators.

At March 31, 2015, the mortgage loans had interest rates ranging from 7.1% to 13.9% and maturities ranging from 2016 to 2045.  In addition, some loans contain certain guarantees, provide for certain facility fees and generally have 20-year to 30-year amortization schedules.  The majority of the mortgage loans provide for annual increases in the interest rate based upon a specified increase of 10 to 25 basis points. During the three months ended March 31, 2015, we received $2,285,000 plus accrued interest related to the payoff of a mortgage loan secured by a  range of care property located in California. During the three months ended March 31, 2015 and 2014, we received $501,000 and $519,000, respectively, in regularly scheduled principal payments.

During 2013, we funded the initial amount of $124,387,000 under a mortgage loan with a third‑party borrower secured by 15 skilled nursing properties with a total of 2,058 beds in Michigan. The loan agreement provides for additional commitments of $12,000,000 for capital improvements and up to $40,000,000 of additional proceeds, for a total loan commitment of up to $176,387,000. See Note 7. Commitments and Contingencies for further discussion of the additional $40,000,000 loan commitment. During the three months ended March 31, 2015, we funded $1,858,000 under the $12,000,000 capital improvement commitment with $6,804,000 remaining as of March 31, 2015.

In addition, this mortgage loan provided the borrower a one‑time option to prepay up to 50% of the then outstanding loan balance without penalty. During the three months ended March 31, 2015, we amended this mortgage loan to provide up to an additional $20,000,000 in loan proceeds for the expansion of two properties securing the loan (increasing the total capital improvement commitment to $32,000,000 and the total loan commitment to $196,387,000) and agreed to convey, to the borrower,  two parcels of land held-for-use adjacent to these properties to facilitate the projects. As partial consideration for the increased commitment and associated conveyance, the borrower forfeited their prepayment option.

Additionally, during the quarter ended March 31, 2015, we originated an $11,000,000 mortgage loan with the borrower concurrently funding $9,500,000 with a commitment to fund the balance for approved capital improvement projects. The loan is secured by a 157-bed skilled nursing property in Michigan and bears interest at 9.41% for five years, escalating annually thereafter by 2.25%. The term is 30 years with interest-only payments for the initial three years. Additionally, we have the option to purchase the property under certain circumstances, including a change in regulatory environment.

We had a $10,600,000 mortgage and construction loan that afforded the borrower to develop a new 106-bed skilled nursing property in Wisconsin to replace an old existing skilled nursing property. Upon completion of construction and relocation of the residents from the old property to the replacement property in 2014, the old property was sold and released as collateral. During the three months ended March 31, 2015, we purchased and equipped the replacement property for a total of $13,946,000 by exercising our right under the agreement including applying amounts otherwise due to us under the underlying loan as a closing adjustment. See Owned Properties above for further discussion of the property purchase.

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Equity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Equity activity
Beginning balance	$ 660,121
Net income	17,552	17,004
Vesting of stock option and restricted common stock	982	666
Reclassification adjustment	(9)	(9)
Preferred stock dividends	(818)
Common stock dividends	(18,116)
Other	(328)
Ending balance	$ 659,384

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CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2015	Dec. 31, 2014
Real estate investments:
Land	$ 83,858,000	$ 80,024,000
Buildings and improvements	899,727,000	869,814,000
Accumulated depreciation and amortization	(230,071,000)	(223,315,000)
Net operating real estate property	753,514,000	726,523,000
Mortgage loans receivable, net of loan loss reserve: 2015—$1,653; 2014—$1,673	163,647,000	165,656,000
Real estate investments, net	917,161,000	892,179,000
Investment in unconsolidated joint ventures	20,220,000
Investments, net	937,381,000	892,179,000
Other assets:
Cash and cash equivalents	3,417,000	25,237,000
Debt issue costs, net	3,561,000	3,782,000
Interest receivable	1,167,000	597,000
Straight-line rent receivable, net of allowance for doubtful accounts: 2015—$754; 2014—$731	34,903,000	32,651,000
Prepaid expenses and other assets	12,657,000	9,931,000
Notes receivable	2,334,000	1,442,000
Total assets	995,420,000	965,819,000
LIABILITIES
Bank borrowings	36,500,000
Senior unsecured notes	277,467,000	281,633,000
Accrued interest	2,472,000	3,556,000
Earn-out liabilities	3,313,000	3,258,000
Accrued expenses and other liabilities	16,284,000	17,251,000
Total liabilities	336,036,000	305,698,000
Stockholders' equity:
Preferred stock $0.01 par value; 15,000 shares authorized; shares issued and outstanding: 2015—2,000; 2014—2,000	38,500,000	38,500,000
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2015—35,541; 2014—35,480	355,000	355,000
Capital in excess of par value	718,050,000	717,396,000
Cumulative net income	872,799,000	855,247,000
Accumulated other comprehensive income	73,000	82,000
Cumulative distributions	(970,393,000)	(951,459,000)
Total equity	659,384,000	660,121,000
Total liabilities and equity	$ 995,420,000	$ 965,819,000

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
OPERATING ACTIVITIES:
Net income	$ 17,552	$ 17,004
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,779	6,298
Stock-based compensation expense	982	666
Income from unconsolidated joint venture	(116)
Straight-line rental income	(2,275)	(639)
Amortization of lease inducement	352	165
Provision (recovery) for doubtful accounts	3	27
Non-cash interest related to earn-out liabilities	55
Other non-cash items, net	215	204
(Increase) decrease in interest receivable	(570)	5
Decrease in accrued interest payable	(1,084)	(1,074)
Net change in other assets and liabilities	(4,029)	(2,827)
Net cash provided by operating activities	17,864	19,829
INVESTING ACTIVITIES:
Investment in real estate properties, net	(13,031)
Investment in real estate developments, net	(5,041)	(6,157)
Investment in real estate capital improvements, net	(4,928)	(7,410)
Capitalized interest	(147)	(307)
Advances under mortgage loans receivable	(1,858)	(2,568)
Investment in real estate mortgages	(9,500)
Principal payments received on mortgage loans receivable	2,786	519
Investment in unconsolidated joint ventures	(20,143)
Advances under notes receivable	(892)
Net cash used in investing activities	(52,754)	(15,923)
FINANCING ACTIVITIES:
Bank borrowings	36,500	20,000
Principal payments on senior unsecured notes	(4,167)	(4,167)
Principal payments on mortgage loan payable and bonds payable		(635)
Stock option exercises		238
Distributions paid to stockholders	(18,934)	(18,560)
Other	(329)	(18)
Net cash (used in) provided by financing activities	13,070	(3,142)
(Decrease) increase in cash and cash equivalents	(21,820)	764
Cash and cash equivalents, beginning of period	25,237	6,778
Cash and cash equivalents, end of period	3,417	7,542
Supplemental disclosure of cash flow information:
Interest paid	4,774	4,375
Non-cash investing and financing transactions:
Mortgage loan receivable applied against purchase price to acquire real estate (Note 2)	$ 10,600

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Commitments and Contingencies (Details) (USD $)	3 Months Ended	1 Months Ended
	Mar. 31, 2015	Dec. 31, 2014 item	Dec. 31, 2013
Commitments and Contingencies
Contingent liabilities	$ 3,313,000	$ 3,258,000
Investment Commitment	90,643,000
Amount Funded	13,831,000
Commitments funded	20,699,000
Remaining commitment	69,944,000
Real Estate Properties Commitments [Member]
Commitments and Contingencies
Investment Commitment	52,365,000
Amount Funded	11,081,000
Commitments funded	13,169,000
Remaining commitment	39,196,000
Mortgage Loans Commitments [Member]
Commitments and Contingencies
Investment Commitment	33,990,000
Amount Funded	1,858,000
Commitments funded	5,196,000
Remaining commitment	28,794,000
Notes Receivable Commitments [Member]
Commitments and Contingencies
Investment Commitment	4,288,000
Amount Funded	892,000
Commitments funded	2,334,000
Remaining commitment	1,954,000
Mortgage Loans on Real Estate [Member]
Commitments and Contingencies
Additional loan proceeds committed	40,000,000		40,000,000
Additional loan proceeds available annually	10,000,000
Period additional loan proceeds are limited to $10M	12 months
Real Estate Investment [Member]
Commitments and Contingencies
Non-cash interest expense	55,000
Investment Commitment	52,365,000
Amount Funded	11,081,000
Commitments funded	13,169,000
Remaining commitment	39,196,000
Number of Properties	30
Number of Beds/Units	1,750
Real Estate Investment [Member] | Scenario, Forecast [Member]
Commitments and Contingencies
Number of earn-out payments		2
Incremental earn-out liability payments		2,000,000
Real Estate Investment [Member] | Estimate of Fair Value Measurement [Member]
Commitments and Contingencies
Contingent liabilities	3,313,000	3,240,000
Real Estate Investment [Member] | Real Estate Development Commitments [Member]
Commitments and Contingencies
Number of development commitments	2
Investment Commitment	28,717,000
Number of Parcels of Land	2
Number of Lease Inducement Fee Payments	2
Total lease inducement payments	3,952,000
Maximum percentage of lease inducement fee currently available for funding	25.00%
Amount funded under lease inducement commitment	44,000
Remaining commitment under lease inducement commitment	944,000
Maximum [Member] | Real Estate Investment [Member] | Scenario, Forecast [Member]
Commitments and Contingencies
Contingent earn-out payments		4,000,000
Memory Care Property [Member] | Real Estate Investment [Member] | Real Estate Development Commitments [Member]
Commitments and Contingencies
Investment Commitment	24,430,000
Number of Properties	2
Number of Beds/Units	56
Assisted Living and Memory Care Properties [Member] | Real Estate Investment [Member] | Real Estate Development Commitments [Member]
Commitments and Contingencies
Investment Commitment	16,535,000
Number of Properties	1
Number of Beds/Units	89
Skilled Nursing Properties [Member] | Mortgage Loans on Real Estate [Member] | Michigan
Commitments and Contingencies
Number of properties securing loan	15		15
Skilled Nursing Properties [Member] | Real Estate Investment [Member]
Commitments and Contingencies
Investment Commitment	6,600,000
Amount Funded	25,000
Commitments funded	25,000
Remaining commitment	6,575,000
Number of Properties	3
Number of Beds/Units	510
Prestige Healthcare [Member] | Mortgage Loans on Real Estate [Member]
Commitments and Contingencies
Number of Parcels of Land	2
Number of properties securing loan	2
Prestige Healthcare [Member] | Skilled Nursing Properties [Member] | Mortgage Loans on Real Estate [Member] | Michigan
Commitments and Contingencies
Amount Funded	$ 9,500,000

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Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2015

Net Income Per Common Share

Schedule of basic and diluted net income per share

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

	Three Months Ended
	March 31,
	2015		2014
Net income	$	17,552	$	17,004
Less net income allocated to participating securities:
Non-forfeitable dividends on participating securities		(123)		(103)
Total net income allocated to participating securities		(123)		(103)
Less net income allocated to preferred stockholders:
Preferred stock dividends		(818)		(818)
Total net income allocated to preferred stockholders		(818)		(818)
Net income available to common stockholders		16,611		16,083
Effect of dilutive securities:
Convertible preferred securities		818		818
Total effect of dilutive securities		818		818
Net income for diluted net income per share	$	17,429	$	16,901
Shares for basic net income per share		35,277		34,586
Effect of dilutive securities:
Stock options		15		25
Convertible preferred securities		2,000		2,000
Total effect of dilutive securities		2,015		2,025
Shares for diluted net income per share		37,292		36,611
Basic net income per share	$	0.47	$	0.47
Diluted net income per share	$	0.47	$	0.46

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Major Operators (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 item	Dec. 31, 2014
Major Operators
Number of major operators	3
Percentage of combined rental and interest income derived from each of the major operators	10.00%
Total assets	$ 995,420	$ 965,819
Operator Concentration Risk [Member] | Prestige Healthcare [Member] | Skilled Nursing Facility Beds [Member]
Major Operators
Number of beds/units	2,333
Operator Concentration Risk [Member] | Prestige Healthcare [Member] | Assisted Living Facility Units [Member]
Major Operators
Number of beds/units	93
Operator Concentration Risk [Member] | Prestige Healthcare [Member] | Skilled Nursing Properties [Member]
Major Operators
Number of properties leased	16
Operator Concentration Risk [Member] | Prestige Healthcare [Member] | Range of Care Properties [Member]
Major Operators
Number of properties leased	2
Operator Concentration Risk [Member] | Prestige Healthcare [Member] | Land [Member]
Major Operators
Number of parcels of land managed	5
Operator Concentration Risk [Member] | Senior Care Centers LLC [Member] | Skilled Nursing Properties [Member]
Major Operators
Number of properties leased	9
Operator Concentration Risk [Member] | Senior Care Centers LLC [Member] | Skilled Nursing Properties [Member] | Skilled Nursing Facility Beds [Member]
Major Operators
Number of beds/units	1,190
Operator Concentration Risk [Member] | Brookdale [Member] | Assisted Living Properties [Member]
Major Operators
Number of properties leased	37
Number of beds/units	1,704
Assets, Total [Member] | Operator Concentration Risk [Member] | Prestige Healthcare [Member]
Major Operators
Concentration risk (as a percent)	15.00%
Assets, Total [Member] | Operator Concentration Risk [Member] | Senior Care Centers LLC [Member]
Major Operators
Concentration risk (as a percent)	10.10%
Assets, Total [Member] | Operator Concentration Risk [Member] | Brookdale [Member]
Major Operators
Concentration risk (as a percent)	8.20%
Rental Revenue and Interest Income from Mortgage Loans [Member] | Operator Concentration Risk [Member] | Prestige Healthcare [Member]
Major Operators
Concentration risk (as a percent)	13.20%
Rental Revenue and Interest Income from Mortgage Loans [Member] | Operator Concentration Risk [Member] | Senior Care Centers LLC [Member]
Major Operators
Concentration risk (as a percent)	9.90%
Rental Revenue and Interest Income from Mortgage Loans [Member] | Operator Concentration Risk [Member] | Brookdale [Member]
Major Operators
Percentage of combined rental and interest income derived from each of the major operators	12.40%

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General (Details) (USD $)	3 Months Ended
	Mar. 31, 2015 segment
General
Number of operating segments	1
Provision for federal or state income taxes	$ 0

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General

3 Months Ended

Mar. 31, 2015

General

General

1.General

LTC Properties, Inc., a health care real estate investment trust (or REIT), was incorporated on May 12, 1992 in the State of Maryland and commenced operations on August 25, 1992.  We invest primarily in senior housing and long-term health care properties through acquisitions, development, mortgage loans and other investments. We conduct and manage our business as one operating segment, rather than multiple operating segments, for internal reporting and internal decision making purposes.   Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in senior housing and long-term health care properties managed by experienced operators.  Our primary senior housing and long-term health care property types include skilled nursing properties (or SNF), assisted living properties (or ALF), independent living properties (or ILF), memory care properties (or MC) and combinations thereof. To meet these objectives, we attempt to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location, operator, property type and form of investment.

We have prepared consolidated financial statements included herein without audit and in the opinion of management have included all adjustments necessary for a fair presentation of the consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (or SEC).  Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (or GAAP) have been condensed or omitted pursuant to rules and regulations governing the presentation of interim financial statements.  The accompanying consolidated financial statements include the accounts of our company, its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.  The results of operations for the three months ended March 31, 2015 and 2014 are not necessarily indicative of the results for a full year.

No provision has been made for federal or state income taxes.  Our company qualifies as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended.  As such, we generally are not taxed on income that is distributed to our stockholders.

Investments in unconsolidated joint ventures

From time to time, the Company may make investments in unconsolidated entities, which may be in the form of common equity, preferred equity, or debt (in the form of an acquisition, development or construction or “ADC” loan, or similar arrangement). The Company evaluates each investment pursuant to ASC 805, Consolidation, to determine whether it meets the definition of a variable interest entity (or VIE) and whether the Company is the primary beneficiary. If the entity is deemed to be a VIE but the Company is not the primary beneficiary, or if the entity is deemed to be a voting interest entity but the Company does not have a controlling financial interest, it accounts for its investment using the equity method. Under the equity method, the Company initially records its investment at cost and subsequently recognizes the Company’s share of net earnings or losses and other comprehensive income or loss, cash contributions made and distributions received, and other adjustments, as appropriate.  Allocations of net income or loss may be subject to preferred returns or allocation formulas defined in operating agreements and may not be according to percentage interests of the members. In certain circumstances where the Company has a substantive profit-sharing arrangement which provides a priority return on its investment, a portion of its equity in earnings may consist of a change in its claim on the net assets of the underlying joint venture. Distributions of operating profit from the joint ventures are reported as part of operating cash flows, while distributions related to a capital transaction, such as a refinancing transaction or sale, are reported as investing activities.

The Company performs a quarterly evaluation of its investments in unconsolidated joint ventures to determine whether the fair value of each investment is less than the carrying value, and, if such decrease in value is deemed to be other-than-temporary, writes the investment down to its estimated fair value as of the measurement date.

Impact of New Accounting Pronouncements.

In May 2014, the FASB issued Accounting Standards Update (or ASU) No. 2014-09 (or ASU 2014-09), Revenue from Contracts with Customers: Topic 606. ASU 2014-09 provides for a single comprehensive principles based standard for the recognition of revenue across all industries. ASU 2014-09 requires expanded disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. On April 1, 2015, FASB voted for a one-year deferral of the effective date to December 15, 2017. Also, FASB will permit public companies to adopt the amendment as of the original effective date. We are currently evaluating the effects of this adoption on our consolidated financial statements.

In January 2015, FASB issued ASU No. 2015-01 (or ASU 2015-01), Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the separate classification, presentation and disclosure of extraordinary events and transactions. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We elected early adoption of ASU 2015-01 as of January 1, 2015. The adoption did not have a material impact on our consolidated financial statements.

In February 2015, FASB issued ASU No. 2015-02 (or ASU 2015-02), Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 amends the consolidation guidance for variable interest entities and voting interest entities, among other items, by eliminating the consolidation model previously applied to limited partnerships, emphasizing the risk of loss when determining a controlling financial interest and reducing the frequency of the application of related-party guidance when determining a controlling financial interest. ASU 2015-02 is effective for periods beginning after December 15, 2015, for public companies. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the effects of this adoption on our consolidated financial statements.

In April 2015, FASB issued ASU No. 2015-03 (ASU 2015-03), Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effects of this adoption on our consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
CONSOLIDATED BALANCE SHEETS
Mortgage loans receivable, loan loss reserve	$ 1,653	$ 1,673
Straight-line rent receivable, allowance for doubtful accounts	$ 754	$ 731
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	15,000	15,000
Preferred stock, shares issued	2,000	2,000
Preferred stock, shares outstanding	2,000	2,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	60,000	60,000
Common stock, shares issued	35,541	35,480
Common stock, shares outstanding	35,541	35,480

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Subsequent Events

3 Months Ended

Mar. 31, 2015

Subsequent Events

Subsequent Events

11.Subsequent Events

Subsequent to March 31, 2015 the following events occurred.

Debt Obligations:  We amended and restated our note purchase and private shelf agreement with Prudential which provides for the possible issuance of up to $102,000,000 of senior unsecured fixed interest rate term notes. See Note 5. Debt Obligations for further discussion.

Equity: We declared a monthly cash dividend of $0.17 per share on our common stock for the months of April, May and June, payable on April 30, May 29, and June 30, 2015, respectively, to stockholders of record on April 22, May 21, and June 22, 2015, respectively.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015	Apr. 23, 2015
Document and Entity Information
Entity Registrant Name	LTC PROPERTIES INC
Entity Central Index Key	0000887905
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		35,540,762
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

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General (Policies)

3 Months Ended

Mar. 31, 2015

General

Impact of New Accounting Pronouncement

Impact of New Accounting Pronouncements.

In May 2014, the FASB issued Accounting Standards Update (or ASU) No. 2014-09 (or ASU 2014-09), Revenue from Contracts with Customers: Topic 606. ASU 2014-09 provides for a single comprehensive principles based standard for the recognition of revenue across all industries. ASU 2014-09 requires expanded disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. On April 1, 2015, FASB voted for a one-year deferral of the effective date to December 15, 2017. Also, FASB will permit public companies to adopt the amendment as of the original effective date. We are currently evaluating the effects of this adoption on our consolidated financial statements.

In January 2015, FASB issued ASU No. 2015-01 (or ASU 2015-01), Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the separate classification, presentation and disclosure of extraordinary events and transactions. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We elected early adoption of ASU 2015-01 as of January 1, 2015. The adoption did not have a material impact on our consolidated financial statements.

In February 2015, FASB issued ASU No. 2015-02 (or ASU 2015-02), Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 amends the consolidation guidance for variable interest entities and voting interest entities, among other items, by eliminating the consolidation model previously applied to limited partnerships, emphasizing the risk of loss when determining a controlling financial interest and reducing the frequency of the application of related-party guidance when determining a controlling financial interest. ASU 2015-02 is effective for periods beginning after December 15, 2015, for public companies. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the effects of this adoption on our consolidated financial statements.

In April 2015, FASB issued ASU No. 2015-03 (ASU 2015-03), Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effects of this adoption on our consolidated financial statements.

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenues:
Rental income	$ 26,678	$ 25,252
Interest income from mortgage loans	4,607	4,093
Interest and other income	195	93
Total revenues	31,480	29,438
Expenses:
Interest expense	3,766	3,187
Depreciation and amortization	6,779	6,298
General and administrative expenses	3,499	2,949
Total expenses	14,044	12,434
Operating income	17,436	17,004
Income from unconsolidated joint venture	116
Net income	17,552	17,004
Income allocated to participating securities	(123)	(103)
Income allocated to preferred stockholders	(818)	(818)
Net income available to common stockholders	$ 16,611	$ 16,083
Basic earnings per common share
Net income available to common stockholders	$ 0.47	$ 0.47
Diluted earnings per common share
Net income available to common stockholders	$ 0.47	$ 0.46
Weighted average shares used to calculate earnings per common share
Basic (in shares)	35,277	34,586
Diluted (in shares)	37,292	36,611
Dividends declared and paid per common share (in dollars per share)	$ 0.510	$ 0.510

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Equity

3 Months Ended

Mar. 31, 2015

Equity

Equity

6.Equity

Equity activity was as follows (in thousands):

	Total
	Equity
Balance at December 31, 2014	$	660,121
Net income		17,552
Vesting of stock option and restricted common stock		982
Reclassification adjustment		(9)
Preferred stock dividends		(818)
Common stock dividends		(18,116)
Other		(328)
Balance at March 31, 2015	$	659,384

Preferred Stock.  At March 31, 2015, we had 2,000,000 shares of our 8.5% Series C Cumulative Convertible Preferred Stock (or Series C preferred stock) outstanding.  Our Series C preferred stock is convertible into 2,000,000 shares of our common stock at $19.25 per share.  Total shares reserved for issuance of common stock related to the conversion of Series C preferred stock were 2,000,000 shares at March 31, 2015.

Common Stock.  During the three months ended March 31, 2015 and 2014, we acquired 4,609 shares and 200 shares respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Available Shelf Registrations.  Our shelf registration statement provides us with the capacity to offer up to $800,000,000 in common stock, preferred stock, warrants, debt, depositary shares, or units.  We may from time to time raise capital under this current shelf registration in amounts, at prices, and on terms to be announced when and if the securities are offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. At March 31, 2015, we had availability of $775,100,000 under our effective shelf registration which expires on July 19, 2016.

Distributions.We declared and paid the following cash dividends (in thousands):

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
	Declared		Paid		Declared		Paid
Preferred Stock Series C	$	818	$	818	$	818	$	818
Common Stock(1)		18,116		18,116		17,742		17,742
Total	$	18,934	$	18,934	$	18,560	$	18,560

(1) Represents $0.17per share per month for each of the three months ended March 31, 2015 and 2014, respectively.

In April 2015, we declared a monthly cash dividend of $0.17 per share on our common stock for the months of April, May and June, payable on April 30, May 29, and June 30, 2015, respectively, to stockholders of record on April 22, May 21, and June 22, 2015, respectively.

Accumulated Other Comprehensive Income.At March 31, 2015 and December 31, 2014, accumulated comprehensive income of $73,000 and $82,000, respectively, represents the net unrealized holding gains on available-for-sale REMIC Certificates recorded in 2005 when we repurchased the loans in the underlying loan pool.  This amount is being amortized to increase interest income over the remaining life of the loans that we repurchased from the REMIC Pool.

Stock-Based Compensation.  During the three months ended March 31, 2015, no stock options were granted or exercised. In the comparable 2014 period, we granted 15,000 options to purchase common stock at an exercise price of $38.43 per share.  These stock options vest ratably over a three-year period from the grant date. Additionally, during the three months ended March 31, 2014, a total of 10,000 stock options were exercised at a total option value of $238,000 and a total market value on the date of exercise of $390,000. At March 31, 2015, we had 43,334 stock options outstanding and 33,334 stock options are exercisable.

At March 31, 2015, the total number of stock options that are scheduled to vest through December 31, 2015, 2016 and 2017 is 0;5,000 and 5,000, respectively.  We have no stock options outstanding that are scheduled to vest beyond 2017. Compensation expense related to the vesting of stock options for the three months ended March 31, 2015 and 2014, was $4,000 and $1,000, respectively. The remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options for 2015, 2016 and 2017 is $11,000;$15,000 and $2,000, respectively.

During the first quarter of March 31, 2015, we cancelled 640 shares of restricted stock. During the three months ended March 31, 2015 and 2014, we granted 65,750 and 62,000 shares of restricted common stock, respectively, as follows:

		Price per
Year	No. of Shares	Share		Vesting Period
2015
	65,750	$	44.45	ratably over 3 years
	65,750
2014
	59,000	$	36.81	ratably over 3 years
	3,000	$	38.43	ratably over 3 years
	62,000

At March 31, 2015, we had 255,815 restricted common shares outstanding. The total number of restricted common shares that are scheduled to vest through December 31, 2015, 2016, 2017 and 2018 is 94,168;88,360;51,367 and 21,920, respectively.  We have no restricted common stock that is scheduled to vest beyond 2018. During the three months ended March 31, 2015 and 2014, we recognized $978,000 and $665,000, respectively, of compensation expense related to the vesting of restricted common stock. The remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock for 2015, 2016, 2017, and 2018 is $2,648,000;$2,227,000;$1,162,000 and $81,000, respectively.

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Debt Obligations

3 Months Ended

Mar. 31, 2015

Debt Obligations

Debt Obligations

5.Debt Obligations

Bank Borrowings. We have an Unsecured Credit Agreement that provides for a revolving line of credit up to $400,000,000 with the opportunity to increase the credit amount up to a total of $600,000,000.  The Unsecured Credit Agreement matures on October 14, 2018 and provides for a one-year extension option at our discretion, subject to customary conditions.  Based on our leverage at March 31, 2015, the facility provides for interest annually at LIBOR plus 125 basis points and an unused commitment fee of 30 basis points. During the three months ended March 31, 2015 and 2014 we borrowed $36,500,000 and $20,000,000, respectively, under our Unsecured Credit Agreement. At March 31, 2015, we had $36,500,000 outstanding and $363,500,000 available for borrowing. At March 31, 2015, we were in compliance with all covenants.

Senior Unsecured Notes.  At March 31, 2015 and December 31, 2014, we had $277,467,000 and $281,633,000, respectively, outstanding under our Senior Unsecured Notes with a weighted average interest rate of 4.8%. During each of the three months ended March 31, 2015 and 2014, we paid $4,167,000 in regular scheduled principal payments.

Subsequent to March 31, 2015, we entered into a third amended and restated $200,000,000 private shelf agreement with Prudential Investment Management, Inc. (or Prudential) for a three year term. The agreement provides for the possible issuance of up to an additional $102,000,000 of senior unsecured fixed interest rate term notes.  After July 14, 2015 and for the balance of the term, the agreement provides for the possible issuance of additional senior unsecured fixed interest rate term notes up to the maximum availability upon us making our scheduled principal payments on existing notes then outstanding. Interest rates on any issuance under the shelf agreement will be set at a spread over applicable Treasury rates. Maturities of each issuance are at our election for up to 15 years from the date of issuance with a maximum average life of 12 years from the date of original issuance.     

Bonds Payable.  We had a multifamily tax-exempt revenue bonds that was secured by five assisted living properties in Washington which were paid off during 2014. For the three months ended March 31, 2014, we paid $635,000 in regularly scheduled principal payments.

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Measurements

Schedule of carrying value and fair value of the entity's financial instruments

The carrying value and fair value of our financial instruments as of March 31, 2015 and December 31, 2014 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):

	At March 31, 2015					At December 31, 2014
	Carrying					Carrying
	Value		Fair Value			Value		Fair Value
Mortgage loans receivable	$	163,647	$	196,024	(1)	$	165,656	$	198,977	(1)
Bank borrowings		36,500		36,500	(2)		—		—	(2)
Senior unsecured notes		277,467		286,181	(3)		281,633		283,933	(3)
Contingent liabilities		3,313		3,313	(4)		3,258		3,258	(4)

(1) Our investment in mortgage loans receivable is classified as Level 3.  The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows.  The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments.  The discount rate used to value our future cash inflows of the mortgage loans receivable at March 31, 2015 and December 31, 2014 was 8.7% and 8.6%, respectively.

(2) Our bank borrowings are at a variable interest rate.  The estimated fair value of our bank borrowings approximated their carrying values at March 31, 2015 and December 31, 2014 based upon prevailing market interest rates for similar debt arrangements.

(3) Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows.  The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities.  At March 31, 2015,  the discount rate used to value our future cash outflow of our senior unsecured notes was 3.75% for those maturing before year 2020 and 4.0% for those maturing beyond year 2020. At December 31, 2014, the discount rate used to value our future cash outflow of our senior unsecured notes was 3.8% for those maturing before year 2020 and 4.55% for those maturing beyond year 2020.

Our contingent obligation under the earn‑out liabilities is classified as Level 3. We estimated the fair value of the contingent earn‑out payments using a discounted cash flow analysis. The discount rate that we use consists of a risk‑free U.S. Treasury rate plus a company specific credit spread which we believe is acceptable by willing market participants. At March 31, 2015 and December 31, 2014, the discount rate used to value our future cash outflow of the earn-out liability was 6.1% and 6.2%, respectively.

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Real Estate Investments (Tables)

3 Months Ended

Mar. 31, 2015

Summary of investments in owned properties

The following table summarizes our investments in owned properties at March 31, 2015 (dollar amounts in thousands):

								Average
			Percentage		Number	Number of		Investment
	Gross		of		of	SNF	ALF	per
Type of Property	Investments		Investments		Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	499,580	50.8	%	69	8,513	—	$	58.68
Assisted Living		416,079	42.3	%	85	—	4,236	$	98.22
Range of Care		43,907	4.5	%	7	634	274	$	48.36
Under Development(2)		13,136	1.3	%	—	—	—		—
Other(3)		10,883	1.1	%	1	—	—		—
Totals	$	983,585	100.0	%	162	9,147	4,510

(1) We own properties in 27 states that are leased to 29 different operators.

(2) Includes twoMC developments with a total of 122 units and a combination ALF and MC development with 89 units.

Includes one school property and five parcels of land held-for-use.

Schedule of completed development, improvement and construction projects

The following table summarizes our completed development and improvement projects and amounts funded during the three months ended March 31, 2015 (dollar amounts in thousands):

	Number		Number
	of	Type of	of
Type of Project	Properties	Property	Beds/Units	State	2015 Funding			Total Funding
Development	1	ALF	60	Colorado	$	1,360		$	10,541	(1)
Renovation	1	SNF	121	California		1,481			1,481
Renovation	2	SNF	141	Tennessee		40			2,200
	4		322		$	2,881	(2)	$	14,222

(1) Completed a MC property in February 2015.

Excludes $5,692 of funding on projects that were completed during 2014.

Schedule of commitments

At March 31, 2015, we had additional commitments as follows (in thousands):

	Investment			2015		Commitment		Remaining
	Commitment			Funding		Funded		Commitment
Real estate properties(See Note 2)	$	52,365	(1)	$	11,081	$	13,169	$	39,196
Mortgage loans (See Note 2)		33,990	(1)		1,858		5,196		28,794
Notes receivable (See Note 4)		4,288	(2)		892		2,334		1,954
Totals	$	90,643		$	13,831	$	20,699	$	69,944

(1) Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand senior housing and long term care properties.

Represents loan and line of credit commitments.

Schedule of development, redevelopment, renovation, and expansion activity

Our construction in progress (or CIP) activity during the three months ended March 31, 2015 for our development, redevelopment, renovation, and expansion projects is as follows (dollar amounts in thousands):

	CIP								CIP
	Balance at				Capitalized		Conversions		Balance at
Properties	12/31/2014		Funded(1)		Interest		out of CIP		3/31/2015
Development projects:
Assisted living	$	8,671	$	8,961	$	147	$	(9,413)	$	8,366
Subtotal		8,671		8,961		147		(9,413)		8,366
Redevelopment, renovation and expansion projects:
Skilled nursing		—		25		—		—		25
Subtotal		—		25		—		—		25
Total	$	8,671	$	8,986	$	147	$	(9,413)	$	8,391

Excludes $7,298of funding on development and renovations projects which was capitalized directly into building and includes the acquisition of the existing improvements of the 56-unit MC property for $6,315, as previously discussed.

Summary of investments in mortgage loans secured by first mortgages

The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2015 (dollar amounts in thousands):

			Percentage		Number	Number	Number of		Investment
	Gross		of		of	of	SNF	ALF	per
Type of Property	Investments		Investments		Loans	Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	151,352	91.6	%	15	29	3,701	—	$	40.89
Assisted Living		13,948	8.4	%	3	8	—	270	$	51.66
Totals	$	165,300	100.0	%	18	37	3,701	270

We have investments in properties located in 7 states that include mortgages to 10 different operators.

Real Estate Properties Commitments [Member]

Schedule of commitments

The following table summarizes our investment commitments as of March 31, 2015, and amounts funded under these projects (excludes capitalized interest, dollar amounts in thousands):

									Number	Number
	Investment		2015		Commitment		Remaining		of	of
Type of Property	Commitment		Funding(2)		Funded		Commitment		Properties	Beds/Units
Skilled Nursing	$	6,600	$	25	$	25	$	6,575	3	510
Assisted Living(1)		45,765		11,056		13,144		32,621	27	1,240
Totals	$	52,365	$	11,081	$	13,169	$	39,196	30	1,750

(1) Includes the development of two MC properties for a total commitment of $24,430 andone ALF/MC property for a total commitment of $16,535. Also, includes three commitments for renovation projects on 24 ALFs totaling $4,800.

Excludes funding for completed development and improvement projects discussed above. Includes $7,195 of land and improvements acquired for the development of a 56-unit MC property and $2,490 of land acquired for the development of an 89-unit ALF/MC property, as previously discussed.

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Earnings per Share

3 Months Ended

Mar. 31, 2015

Net Income Per Common Share

Net Income Per Common Share

9.Earnings per Share

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

	Three Months Ended
	March 31,
	2015		2014
Net income	$	17,552	$	17,004
Less net income allocated to participating securities:
Non-forfeitable dividends on participating securities		(123)		(103)
Total net income allocated to participating securities		(123)		(103)
Less net income allocated to preferred stockholders:
Preferred stock dividends		(818)		(818)
Total net income allocated to preferred stockholders		(818)		(818)
Net income available to common stockholders		16,611		16,083
Effect of dilutive securities:
Convertible preferred securities		818		818
Total effect of dilutive securities		818		818
Net income for diluted net income per share	$	17,429	$	16,901
Shares for basic net income per share		35,277		34,586
Effect of dilutive securities:
Stock options		15		25
Convertible preferred securities		2,000		2,000
Total effect of dilutive securities		2,015		2,025
Shares for diluted net income per share		37,292		36,611
Basic net income per share	$	0.47	$	0.47
Diluted net income per share	$	0.47	$	0.46

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies

Commitments and Contingencies

7.Commitments and Contingencies

As part of an acquisition in December 2014, we committed to provide two contingent payments totaling up to $4,000,000 payable in increments of $2,000,000 upon the property achieving a sustainable stipulated rent coverage ratio. We estimated the fair value of the contingent payment using a discounted cash flow analysis. This fair value measurement is based on significant input not observable in the market and thus represents a Level 3 measurement. These contingent payments were recorded at the date of the acquisition in the amount of $3,240,000 and we are accreting the contingent liability up to the estimated settlement amount as of the estimated payment dates. The fair value of these contingent liabilities are evaluated on a quarterly basis based on changes in estimates of future operating results and changes in market discount rates. During the three months ended March 31, 2015, we recorded non‑cash interest expense of $55,000 related to these contingent liabilities and the fair value of these contingent payments was $3,313,000 at March 31, 2015.

During the three months ended March 31, 2015, we entered into two development commitments totaling $28,717,000 to acquire two parcels of land and an existing improvement and to construct a 56-unit memory care property and an 89-unit combination assisted living and memory care property. Concurrent with these commitments, we entered into a master lease agreement which provides for two lease inducement payments totaling $3,952,000, which will be amortized as a yield adjustment over the lease term. Up to 25% of the fee is currently available for funding with the remaining balance available following the issuance of a certificate of occupancy and receipt of regulatory approval required for the operation of the newly constructed properties. As of March 31, 2015, we have funded $44,000 and have a remaining commitment of $944,000 under the available lease inducement commitment. See Note 2. Real Estate Investments for further discussion of the acquisition and master lease terms.

At March 31, 2015, we had a commitment to provide a borrower an additional $40,000,000 of loan proceeds under a mortgage loan secured by 15 skilled nursing properties in Michigan. The additional proceeds are contingent on certain conditions and are based on certain operating metrics and valuation thresholds. Also, the additional proceeds are limited to $10,000,000 in any twelve month period. See Note 2. Real Estate Investments for further discussion of this mortgage loan.

At March 31, 2015, we had additional commitments as follows (in thousands):

	Investment			2015		Commitment		Remaining
	Commitment			Funding		Funded		Commitment
Real estate properties(See Note 2)	$	52,365	(1)	$	11,081	$	13,169	$	39,196
Mortgage loans (See Note 2)		33,990	(1)		1,858		5,196		28,794
Notes receivable (See Note 4)		4,288	(2)		892		2,334		1,954
Totals	$	90,643		$	13,831	$	20,699	$	69,944

(1) Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand senior housing and long term care properties.

(2) Represents loan and line of credit commitments.

We are a party from time to time to various general and professional liability claims and lawsuits asserted against the lessees or borrowers of our properties, which in our opinion are not singularly or in the aggregate material to our results of operations or financial condition. These types of claims and lawsuits may include matters involving general or professional liability, which we believe under applicable legal principles are not our responsibility as a non-possessory landlord or mortgage holder. We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principles and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims.

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Major Operators

3 Months Ended

Mar. 31, 2015

Major Operators

Major Operators

8.Major Operators

We have three operators from each of which we derive approximately 10% of our combined rental revenue and interest income from mortgage loans.

Prestige Healthcare (or Prestige) is a privately held company and operates 16 skilled nursing properties and two range of care properties that we own or on which we hold mortgages secured by first trust deeds. These properties consist of a total of 2,333 skilled nursing beds and 93 assisted living units. Additionally, Prestige manages five parcels of land that we own. These assets represent 15.0% of our total assets at March 31, 2015 and generated 13.2% of our combined rental revenue and interest income from mortgage loans recognized for the three months ended March 31, 2015.   

In July 2014, Brookdale Senior Living, Inc. (or Brookdale), parent company of Brookdale Senior Living Communities, Inc. (or Brookdale Communities), merged with Emeritus Corporation. Brookdale Communities leases 37 assisted living properties with a total of 1,704 units owned by us representing approximately 8.2% of our total assets at March 31, 2015 and 12.4% of our combined rental revenue and interest income from mortgage loans recognized for the three months ended March 31, 2015.

Senior Care Centers, LLC (or Senior Care) is a privately held company. Senior Care leases nine skilled nursing properties with a total of 1,190 beds owned by us representing approximately 10.1% of our total assets at March 31, 2015 and generated 9.9% of our combined rental revenue and interest income from mortgage loans recognized for the three months ended March 31, 2015.

Our financial position and ability to make distributions may be adversely affected by financial difficulties experienced by Brookdale Communities, Prestige Healthcare, Senior Care, or any of our lessees and borrowers, including any bankruptcies, inability to emerge from bankruptcy, insolvency or general downturn in business of any such operator, or in the event any such operator does not renew and/or extend its relationship with us or our borrowers when it expires.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Measurements

Fair Value Measurements

10.Fair Value Measurements

In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses reported in earnings.  We did not adopt the elective fair value option for our financial assets and financial liabilities.

The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments. We do not invest our cash in auction rate securities. The carrying value and fair value of our financial instruments as of March 31, 2015 and December 31, 2014 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):

	At March 31, 2015					At December 31, 2014
	Carrying					Carrying
	Value		Fair Value			Value		Fair Value
Mortgage loans receivable	$	163,647	$	196,024	(1)	$	165,656	$	198,977	(1)
Bank borrowings		36,500		36,500	(2)		—		—	(2)
Senior unsecured notes		277,467		286,181	(3)		281,633		283,933	(3)
Contingent liabilities		3,313		3,313	(4)		3,258		3,258	(4)

(1) Our investment in mortgage loans receivable is classified as Level 3.  The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows.  The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments.  The discount rate used to value our future cash inflows of the mortgage loans receivable at March 31, 2015 and December 31, 2014 was 8.7% and 8.6%, respectively.

(2) Our bank borrowings are at a variable interest rate.  The estimated fair value of our bank borrowings approximated their carrying values at March 31, 2015 and December 31, 2014 based upon prevailing market interest rates for similar debt arrangements.

(3) Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows.  The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities.  At March 31, 2015,  the discount rate used to value our future cash outflow of our senior unsecured notes was 3.75% for those maturing before year 2020 and 4.0% for those maturing beyond year 2020. At December 31, 2014, the discount rate used to value our future cash outflow of our senior unsecured notes was 3.8% for those maturing before year 2020 and 4.55% for those maturing beyond year 2020.

(4) Our contingent obligation under the earn‑out liabilities is classified as Level 3. We estimated the fair value of the contingent earn‑out payments using a discounted cash flow analysis. The discount rate that we use consists of a risk‑free U.S. Treasury rate plus a company specific credit spread which we believe is acceptable by willing market participants. At March 31, 2015 and December 31, 2014, the discount rate used to value our future cash outflow of the earn-out liability was 6.1% and 6.2%, respectively.

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Equity (Details 3) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Employee Stock Option [Member]
Stock Based Compensation Plans
Options granted (in shares)	0	15,000
Option exercised (in shares)	0	10,000
Options granted (in dollars per share)		$ 38.43
Vesting period		3 years
Value of options exercised		$ 238,000
Market value of options on the date of exercise		390,000
Options outstanding at end of the period (in shares)	43,334
Options exercisable at end of the period (in shares)	33,334
Compensation expense related to the vesting of stock awards	4,000	1,000
Remaining compensation expense to be recognized related to the future service period
2015	11,000
2016	15,000
2017	2,000
Employee Stock Option [Member] | Vesting Through December 31 2015 [Member]
Stock Based Compensation Plans
Options scheduled to vest (in shares)	0
Employee Stock Option [Member] | Vesting Through December 31 2016 [Member]
Stock Based Compensation Plans
Options scheduled to vest (in shares)	5,000
Employee Stock Option [Member] | Vesting Through December 31 2017 [Member]
Stock Based Compensation Plans
Options scheduled to vest (in shares)	5,000
Employee Stock Option [Member] | Vesting Beyond 2017 [Member]
Stock Based Compensation Plans
Options scheduled to vest (in shares)	0
Restricted Stock [Member]
Stock Based Compensation Plans
Compensation expense related to the vesting of stock awards	978,000	665,000
Remaining compensation expense to be recognized related to the future service period
2015	2,648,000
2016	2,227,000
2017	1,162,000
2018	$ 81,000
Restricted stock activity
Number of shares cancelled (in shares)	640
Granted (in shares)	65,750	62,000
Outstanding (in shares)	255,815
Restricted Stock [Member] | Vesting Through December 31 2015 [Member]
Restricted stock activity
Expected to vest (in shares)	94,168
Restricted Stock [Member] | Vesting Through December 31 2016 [Member]
Restricted stock activity
Expected to vest (in shares)	88,360
Restricted Stock [Member] | Vesting Through December 31 2017 [Member]
Restricted stock activity
Expected to vest (in shares)	51,367
Restricted Stock [Member] | Vesting Through December 31, 2018 [Member]
Restricted stock activity
Expected to vest (in shares)	21,920
Restricted Stock [Member] | Vesting Beyond 2018 [Member]
Restricted stock activity
Expected to vest (in shares)	0
Restricted Stock [Member] | Grant Date Price 44.45 [Member] | Vesting over Three Year Period from Grant Date [Member]
Stock Based Compensation Plans
Vesting period	3 years
Restricted stock activity
Granted (in shares)	65,750
Price per share	$ 44.45
Restricted Stock [Member] | Grant Date Price 36.81 [Member] | Vesting over Three Year Period from Grant Date [Member]
Stock Based Compensation Plans
Vesting period		3 years
Restricted stock activity
Granted (in shares)		59,000
Price per share		$ 36.81
Restricted Stock [Member] | Grant Date Price 38.43 [Member] | Vesting over Three Year Period from Grant Date [Member]
Stock Based Compensation Plans
Vesting period		3 years
Restricted stock activity
Granted (in shares)		3,000
Price per share		$ 38.43

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies

Schedule of commitments

At March 31, 2015, we had additional commitments as follows (in thousands):

	Investment			2015		Commitment		Remaining
	Commitment			Funding		Funded		Commitment
Real estate properties(See Note 2)	$	52,365	(1)	$	11,081	$	13,169	$	39,196
Mortgage loans (See Note 2)		33,990	(1)		1,858		5,196		28,794
Notes receivable (See Note 4)		4,288	(2)		892		2,334		1,954
Totals	$	90,643		$	13,831	$	20,699	$	69,944

(1) Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand senior housing and long term care properties.

Represents loan and line of credit commitments.

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Real Estate Investments (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2015
Real estate investments
Commitments funded	$ 13,831,000
Investment Commitment	90,643,000
Remaining Commitment	69,944,000
Lease inducement fee payments	1,054,000
Real Estate Investment [Member]
Real estate investments
Commitments funded	11,081,000
Investment Commitment	52,365,000
Number of Beds/Units	1,750
Remaining Commitment	39,196,000
Number of Properties	30
Mortgage and Construction Loans on Real Estate [Member] | Wisconsin
Real estate investments
Loan commitment under which the purchase option was exercised	10,600,000
Real Estate Investment Completed Projects [Member]
Completed development and improvement projects
Number of Properties	4
Number of Beds/Units	322
Funding	2,881,000
Total Funding	14,222,000
Amount funded during the period for commitments on completed capital projects	5,692,000
Maximum [Member] | Real Estate Investment [Member]
Real estate investments
Initial term of operating lease	15 years
Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Real estate investments
Investment Commitment	28,717,000
Lease Inducement Fee	3,952,000
Skilled Nursing Properties [Member] | Real Estate Investment [Member]
Real estate investments
Commitments funded	25,000
Investment Commitment	6,600,000
Number of Beds/Units	510
Remaining Commitment	6,575,000
Number of Properties	3
Skilled Nursing Properties [Member] | Real Estate Investment [Member] | Wisconsin
Real estate investments
Purchase Price	13,946,000
Number of beds/units acquired	106
Skilled Nursing Properties [Member] | Mortgage and Construction Loans on Real Estate [Member] | Wisconsin
Real estate investments
Loan commitment under which the purchase option was exercised	10,600,000
Assisted Living and Memory Care Properties [Member] | Real Estate Investment [Member]
Real estate investments
Acquired land	2,490,000
Assisted Living and Memory Care Properties [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Real estate investments
Investment Commitment	16,535,000
Number of Beds/Units	89
Number of Properties	1
Assisted Living and Memory Care Properties [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member] | South Carolina
Real estate investments
Number of Beds/Units	89
Lease Inducement Fee	2,363,000
Assisted Living and Memory Care Properties [Member] | Real Estate Development Commitments [Member] | Maximum [Member] | Real Estate Investment [Member] | South Carolina
Real estate investments
Investment Commitment	16,535,000
Assisted Living Properties [Member] | Real Estate Investment [Member]
Real estate investments
Commitments funded	11,056,000
Investment Commitment	45,765,000
Number of Beds/Units	1,240
Remaining Commitment	32,621,000
Number of Properties	27
Assisted Living Properties [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Real estate investments
Number of Properties	24
Memory Care Property [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Real estate investments
Investment Commitment	24,430,000
Number of Beds/Units	56
Number of Properties	2
Memory Care Property [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member] | Texas
Real estate investments
Commitments funded	7,195,000
Investment Commitment	12,182,000
Number of Beds/Units	56
Initial term of operating lease	15 years
Number of renewal options	3
Term of each renewal option	5 years
Initial cash yield (as a percent)	8.75%
Memory Care Property [Member] | Real Estate Development Commitments [Member] | Maximum [Member] | Real Estate Investment [Member] | Texas
Real estate investments
Lease Inducement Fee	1,589,000
Land [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member] | South Carolina
Real estate investments
Purchase Price	2,490,000
Development Project [Member] | Assisted Living Properties [Member] | Real Estate Investment Completed Projects [Member] | Colorado
Completed development and improvement projects
Number of Properties	1
Number of Beds/Units	60
Funding	1,360,000
Total Funding	10,541,000
Renovation Project [Member] | Skilled Nursing Properties [Member] | Real Estate Investment Completed Projects [Member] | California
Completed development and improvement projects
Number of Properties	1
Number of Beds/Units	121
Funding	1,481,000
Total Funding	1,481,000
Renovation Project [Member] | Skilled Nursing Properties [Member] | Real Estate Investment Completed Projects [Member] | Tennessee
Completed development and improvement projects
Number of Properties	2
Number of Beds/Units	141
Funding	40,000
Total Funding	$ 2,200,000

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 17,552	$ 17,004
Reclassification adjustment (Note 6)	(9)	(9)
Comprehensive income	$ 17,543	$ 16,995

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Notes Receivable

3 Months Ended

Mar. 31, 2015

Notes Receivable

Notes Receivable

4.Notes Receivable

Notes receivable consists of various loans and line of credit agreements with certain operators. During the three months ended March 31, 2015, we funded $892,000 in principal under these notes. In the comparable 2014 period, we did not receive or fund any principal under these notes. At March 31, 2015, we had twelve loans and line of credit agreements with commitments totaling $4,288,000 and weighted average interest rate of 10.8%.  As of March 31, 2015, we funded $2,334,000 under these commitments and we have a remaining commitment of $1,954,000.

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Real Estate Investmentss (Details 3) (USD $)	3 Months Ended
	Mar. 31, 2015
Investment commitments
Investment Commitment	$ 90,643,000
Funding	13,831,000
Commitment Funded	20,699,000
Remaining Commitment	69,944,000
Real Estate Investment [Member]
Investment commitments
Investment Commitment	52,365,000
Funding	11,081,000
Commitment Funded	13,169,000
Remaining Commitment	39,196,000
Number of Properties	30
Number of Beds/Units	1,750
Real Estate Investment Development Redevelopment Renovation and Expansion Projects [Member]
Development, redevelopment, renovation, and expansion activity
CIP, Balance at the beginning of the period	8,671,000
Funded	8,986,000
Capitalized Interest	147,000
Conversions out of CIP	(9,413,000)
CIP, Balance at the end of the period	8,391,000
Amount funded during the period for commitments on completed capital projects capitalized directly into building	7,298,000
Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Investment commitments
Investment Commitment	28,717,000
Skilled Nursing Properties [Member] | Real Estate Investment [Member]
Investment commitments
Investment Commitment	6,600,000
Funding	25,000
Commitment Funded	25,000
Remaining Commitment	6,575,000
Number of Properties	3
Number of Beds/Units	510
Assisted Living and Memory Care Properties [Member] | Real Estate Investment [Member]
Investment commitments
Acquired land	2,490,000
Assisted Living and Memory Care Properties [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Investment commitments
Investment Commitment	16,535,000
Number of Properties	1
Number of Beds/Units	89
Assisted Living Properties [Member] | Real Estate Investment [Member]
Investment commitments
Investment Commitment	45,765,000
Funding	11,056,000
Commitment Funded	13,144,000
Remaining Commitment	32,621,000
Number of Properties	27
Number of Beds/Units	1,240
Number of investment commitments	3
Assisted Living Properties [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Investment commitments
Number of Properties	24
Amount invested for expansion, renovation and construction of properties	4,800,000
Memory Care Property [Member] | Real Estate Investment [Member]
Investment commitments
Acquired land and improvements	7,195,000
Memory Care Property [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member]
Investment commitments
Investment Commitment	24,430,000
Number of Properties	2
Number of Beds/Units	56
Number of developments	2
Memory Care Property [Member] | Real Estate Development Commitments [Member] | Real Estate Investment [Member] | Texas
Investment commitments
Investment Commitment	12,182,000
Funding	7,195,000
Number of Beds/Units	56
Development Project [Member] | Real Estate Investment Development Redevelopment Renovation and Expansion Projects [Member]
Development, redevelopment, renovation, and expansion activity
CIP, Balance at the beginning of the period	8,671,000
Funded	8,961,000
Capitalized Interest	147,000
Conversions out of CIP	(9,413,000)
CIP, Balance at the end of the period	8,366,000
Development Project [Member] | Assisted Living Properties [Member] | Real Estate Investment Development Redevelopment Renovation and Expansion Projects [Member]
Development, redevelopment, renovation, and expansion activity
CIP, Balance at the beginning of the period	8,671,000
Funded	8,961,000
Capitalized Interest	147,000
Conversions out of CIP	(9,413,000)
CIP, Balance at the end of the period	8,366,000
Redevelopment Renovation Expansion Projects [Member] | Real Estate Investment Development Redevelopment Renovation and Expansion Projects [Member]
Development, redevelopment, renovation, and expansion activity
Funded	25,000
CIP, Balance at the end of the period	25,000
Redevelopment Renovation Expansion Projects [Member] | Skilled Nursing Properties [Member] | Real Estate Investment Development Redevelopment Renovation and Expansion Projects [Member]
Development, redevelopment, renovation, and expansion activity
Funded	25,000
CIP, Balance at the end of the period	$ 25,000

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Fair Value Measurements (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Fair value measurements
Mortgage loans receivable	163,647,000	165,656,000
Senior unsecured notes	277,467,000	281,633,000
Contingent liabilities	3,313,000	3,258,000
Fair Value, Inputs, Level 3 [Member] | Senior Unsecured Notes Maturing Prior To 2020 Member
Fair value measurements
Discount rate (as a percent)	3.75%	3.80%
Fair Value, Inputs, Level 3 [Member] | Senior Unsecured Notes Maturing Beyond 2020 [Member]
Fair value measurements
Discount rate (as a percent)	4.00%	4.55%
Fair Value, Inputs, Level 3 [Member] | Contingent Earn Out Liabilities [Member]
Fair value measurements
Discount rate (as a percent)	6.10%	6.20%
Fair Value, Inputs, Level 3 [Member] | Mortgage Receivable [Member]
Fair value measurements
Discount rate (as a percent)	8.70%	8.60%
Reported Value Measurement [Member]
Fair value measurements
Bank borrowings	36,500,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value measurements
Mortgage loans receivable	163,647,000	165,656,000
Senior unsecured notes	277,467,000	281,633,000
Contingent liabilities	3,313,000	3,258,000
Estimate of Fair Value Measurement [Member]
Fair value measurements
Bank borrowings	36,500,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Fair value measurements
Mortgage loans receivable	196,024,000	198,977,000
Senior unsecured notes	286,181,000	283,933,000
Contingent liabilities	3,313,000	3,258,000

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Equity (Tables)

3 Months Ended

Mar. 31, 2015

Equity

Schedule of equity

Equity activity was as follows (in thousands):

	Total
	Equity
Balance at December 31, 2014	$	660,121
Net income		17,552
Vesting of stock option and restricted common stock		982
Reclassification adjustment		(9)
Preferred stock dividends		(818)
Common stock dividends		(18,116)
Other		(328)
Balance at March 31, 2015	$	659,384

Schedule of cash dividends declared and paid

We declared and paid the following cash dividends (in thousands):

	Three Months Ended March 31, 2015				Three Months Ended March 31, 2014
	Declared		Paid		Declared		Paid
Preferred Stock Series C	$	818	$	818	$	818	$	818
Common Stock(1)		18,116		18,116		17,742		17,742
Total	$	18,934	$	18,934	$	18,560	$	18,560

Represents $0.17per share per month for each of the three months ended March 31, 2015 and 2014, respectively.

Schedule of restricted stock granted

		Price per
Year	No. of Shares	Share		Vesting Period
2015
	65,750	$	44.45	ratably over 3 years
	65,750
2014
	59,000	$	36.81	ratably over 3 years
	3,000	$	38.43	ratably over 3 years
	62,000