UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission file number: 1-10989

Ventas, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		61-1055020 (I.R.S. Employer Identification No.)

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

60606
(Zip Code)

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

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

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

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

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

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

Class of Common Stock:		Outstanding at August 1, 2011:
Common Stock, $0.25 par value		287,919,941

 

 

VENTAS, INC.
FORM 10-Q

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			3
Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010			3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2011 and 2010			4
Consolidated Statements of Equity for the Six Months Ended June 30, 2011 and the Year Ended December 31, 2010			5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			39
Item 3. Quantitative and Qualitative Disclosures About Market Risk			62
Item 4. Controls and Procedures			64
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			65
Item 1A. Risk Factors			65
Item 6. Exhibits			68
Exhibit 3.1
Exhibit 3.2
Exhibit 12.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I—FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS

VENTAS, INC.

		June 30,				December 31,
		2011				2010
		(Unaudited)				(Audited)
Assets
Real estate investments:
Land		$	854,055			$	559,072
Buildings and improvements			8,969,465				6,035,295
Construction in progress			41,240				6,519
Acquired lease intangibles			317,850				146,813
			10,182,610				6,747,699
Accumulated depreciation and amortization			(1,601,662	)			(1,468,180	)
Net real estate property			8,580,948				5,279,519
Loans receivable, net			634,472				149,263
Investments in unconsolidated entities			14,765				15,332
Net real estate investments			9,230,185				5,444,114
Cash and cash equivalents			26,702				21,812
Escrow deposits and restricted cash			64,261				38,940
Deferred financing costs, net			16,129				19,533
Other assets			296,756				233,622
Total assets		$	9,634,033			$	5,758,021
Liabilities and equity
Liabilities:
Senior notes payable and other debt		$	5,007,080			$	2,900,044
Accrued interest			26,558				19,296
Accounts payable and other liabilities			401,151				207,143
Deferred income taxes			279,668				241,333
Total liabilities			5,714,457				3,367,816
Commitments and contingencies
Equity:
Ventas stockholders’ equity:
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued			—				—
Common stock, $0.25 par value; 300,000 shares authorized; 188,106 and 157,279 shares issued at June 30, 2011 and December 31, 2010, respectively			47,063				39,391
Capital in excess of par value			4,254,137				2,576,843
Accumulated other comprehensive income			28,212				26,868
Retained earnings (deficit)			(412,694	)			(255,628	)
Treasury stock, 0 and 14 shares at June 30, 2011 and December 31, 2010, respectively			—				(748	)
Total Ventas stockholders’ equity			3,916,718				2,386,726
Noncontrolling interest			2,858				3,479
Total equity			3,919,576				2,390,205
Total liabilities and equity		$	9,634,033			$	5,758,021

See accompanying notes.

VENTAS, INC.

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2011				2010				2011				2010
Revenues:
Rental income:
Triple-net leased		$	120,129			$	117,386			$	238,732			$	233,719
Medical office buildings			23,758				12,240				47,994				24,429
			143,887				129,626				286,726				258,148
Resident fees and services			202,482				109,867				316,984				218,353
Medical office building services revenue			9,822				—				16,779				—
Income from loans and investments			8,391				3,705				14,476				7,322
Interest and other income			78				122				156				385
Total revenues			364,660				243,320				635,121				484,208
Expenses:
Interest			53,732				43,840				96,290				87,930
Depreciation and amortization			80,755				50,040				132,514				102,354
Property-level operating expenses:
Senior living			136,739				71,059				214,850				145,736
Medical office buildings			8,278				4,124				16,954				8,326
			145,017				75,183				231,804				154,062
Medical office building services costs			7,954				—				13,490				—
General, administrative and professional fees (including non-cash stock-based compensation expense of $4,352 and $3,057 for the three months ended 2011 and 2010, respectively, and $8,368 and $6,089 for the six months ended 2011 and 2010, respectively)			15,554				9,858				30,386				20,541
Loss on extinguishment of debt			6				6,549				16,526				6,549
Merger-related expenses and deal costs			55,807				4,207				62,256				6,526
Other			(7,773	)			121				(7,772	)			15
Total expenses			351,052				189,798				575,494				377,977
Income before loss from unconsolidated entities, income taxes, discontinued operations and noncontrolling interest			13,608				53,522				59,627				106,231
Loss from unconsolidated entities			(83	)			—				(253	)			—
Income tax benefit (expense)			6,209				(409	)			9,406				(695	)
Income from continuing operations			19,734				53,113				68,780				105,536
Discontinued operations			—				5,852				—				6,597
Net income			19,734				58,965				68,780				112,133
Net income attributable to noncontrolling interest (net of tax of $0 and $559 for the three months ended 2011 and 2010, respectively, and $0 and $978 for the six months ended 2011 and 2010, respectively)			58				898				120				1,447
Net income attributable to common stockholders		$	19,676			$	58,067			$	68,660			$	110,686
Earnings per common share:
Basic:
Income from continuing operations attributable to common stockholders		$	0.11			$	0.33			$	0.41			$	0.67
Discontinued operations			—				0.04				—				0.04
Net income attributable to common stockholders		$	0.11			$	0.37			$	0.41			$	0.71
Diluted:
Income from continuing operations attributable to common stockholders		$	0.11			$	0.33			$	0.40			$	0.66
Discontinued operations			—				0.04				—				0.04
Net income attributable to common stockholders		$	0.11			$	0.37			$	0.40			$	0.70
Weighted average shares used in computing earnings per common share:
Basic			176,262				156,611				168,369				156,533
Diluted			177,945				157,441				170,013				157,206
Dividends declared per common share		$	0.7014			$	0.535			$	1.2764			$	1.07

See accompanying notes.

VENTAS, INC.

										Accumulated
		Common				Capital in				Other				Retained								Total Ventas
		Stock Par				Excess of				Comprehensive				Earnings				Treasury				Stockholders’				Noncontrolling
		Value				Par Value				Income				(Deficit)				Stock				Equity				Interest				Total Equity
Balance at January 1, 2010		$	39,160			$	2,573,039			$	19,669			$	(165,710	)		$	(647	)		$	2,465,511			$	18,549			$	2,484,060
Comprehensive Income:
Net income			—				—				—				246,167				—				246,167				3,562				249,729
Foreign currency translation			—				—				6,951				—				—				6,951				—				6,951
Change in unrealized gain on marketable debt securities			—				—				354				—				—				354				—				354
Other			—				—				(106	)			—				—				(106	)			—				(106	)
Comprehensive income			—				—				—				—				—				253,366				3,562				256,928
Net change in noncontrolling interest			—				(18,503	)			—				—				—				(18,503	)			(18,632	)			(37,135	)
Dividends to common stockholders — $2.14 per share			—				—				—				(336,085	)			—				(336,085	)			—				(336,085	)
Issuance of common stock for stock plans			197				21,076				—				—				3,371				24,644				—				24,644
Grant of restricted stock, net of forfeitures			34				1,231				—				—				(3,472	)			(2,207	)			—				(2,207	)
Balance at December 31, 2010			39,391				2,576,843				26,868				(255,628	)			(748	)			2,386,726				3,479				2,390,205
Comprehensive Income:
Net income			—				—				—				68,660				—				68,660				120				68,780
Foreign currency translation			—				—				3,059				—				—				3,059				—				3,059
Change in unrealized gain on marketable debt securities			—				—				(1,679	)			—				—				(1,679	)			—				(1,679	)
Other			—				—				(36	)			—				—				(36	)			—				(36	)
Comprehensive income			—				—				—				—				—				70,004				120				70,124
Net change in noncontrolling interest			—				(3,170	)			—				—				—				(3,170	)			(741	)			(3,911	)
Dividends to common stockholders — $1.2764 per share			—				—				—				(225,726	)			—				(225,726	)			—				(225,726	)
Issuance of common stock			7,631				1,673,209				—				—				—				1,680,840				—				1,680,840
Issuance of common stock for stock plans			8				8,285				—				—				223				8,516				—				8,516
Grant of restricted stock, net of forfeitures			33				(1,030	)			—				—				525				(472	)			—				(472	)
Balance at June 30, 2011		$	47,063			$	4,254,137			$	28,212			$	(412,694	)		$	—			$	3,916,718			$	2,858			$	3,919,576

See accompanying notes.

VENTAS, INC.

		For the Six Months Ended June 30,
		2011				2010
Cash flows from operating activities:
Net income		$	68,780			$	112,133
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including amounts in discontinued operations)			132,514				102,722
Amortization of deferred revenue and lease intangibles, net			(5,333	)			(2,943	)
Other amortization expenses			3,366				4,367
Capital lease non-cash interest			(307	)			—
Change in fair value of interest rate swaps			(8,887	)			—
Stock-based compensation			8,368				6,089
Straight-lining of rental income			(3,749	)			(4,975	)
Loss on extinguishment of debt			16,526				6,549
Net gain on sale of real estate assets (including amounts in discontinued operations)			—				(5,225	)
Gain on real estate loan investments			(3,255	)			—
Gain on sale of marketable securities			(733	)			—
Income tax (benefit) expense			(9,404	)			695
Loss from unconsolidated entities			253				—
Other			689				(238	)
Changes in operating assets and liabilities:
Increase in other assets			(9,940	)			(5,174	)
Increase (decrease) in accrued interest			4,008				(1,292	)
Decrease in accounts payable and other liabilities			(6,596	)			(4,991	)
Net cash provided by operating activities			186,300				207,717
Cash flows from investing activities:
Net investment in real estate property			(264,464	)			(22,915	)
Purchase of noncontrolling interest			(3,319	)			—
Investment in loans receivable			(612,925	)			(15,796	)
Proceeds from real estate disposals			—				23,029
Proceeds from loans receivable			132,363				1,323
Proceeds from sale of marketable securities			23,050				—
Capital expenditures			(19,236	)			(7,078	)
Other			(75	)			—
Net cash used in investing activities			(744,606	)			(21,437	)
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities			99,500				117,280
Proceeds from debt			704,111				696
Repayment of debt			(337,427	)			(215,171	)
Payment of deferred financing costs			(1,363	)			(1,840	)
Issuance of common stock, net			299,884				—
Cash distribution to common stockholders			(201,949	)			(167,829	)
Contributions from noncontrolling interest			—				633
Distributions to noncontrolling interest			(616	)			(4,277	)
Other			955				4,673
Net cash provided by (used in) financing activities			563,095				(265,835	)
Net increase (decrease) in cash and cash equivalents			4,789				(79,555	)
Effect of foreign currency translation on cash and cash equivalents			101				(48	)
Cash and cash equivalents at beginning of period			21,812				107,397
Cash and cash equivalents at end of period		$	26,702			$	27,794
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments		$	3,140,924			$	496
Other assets acquired			110,722				(355	)
Debt assumed			1,621,641				—
Other liabilities			200,962				141
Deferred taxes			48,087				—
Equity issued			1,380,956				—

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”) is a real estate investment trust (“REIT”) with a geographically diverse portfolio of seniors housing and healthcare properties in the United States and Canada. As of June 30, 2011, our portfolio consisted of 719 properties: 357 seniors housing communities, 187 skilled nursing facilities, 40 hospitals and 135 medical office buildings (“MOBs”) and other properties in 43 states, the District of Columbia and two Canadian provinces. We are a constituent member of the S&P 500^® index, a leading indicator of the large cap U.S. equities market, with our headquarters located in Chicago, Illinois.

Our primary business consists of acquiring, financing and owning seniors housing and healthcare properties and leasing those properties to third parties or operating those properties through independent third party managers. Through our Lillibridge Healthcare Services, Inc. (“Lillibridge”) subsidiary, we also provide management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make real estate loan and other investments relating to seniors housing and healthcare companies or properties.

As of June 30, 2011, we leased 393 of our properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses, and we engaged independent third parties, such as Sunrise Senior Living, Inc. (together with its subsidiaries, “Sunrise”) and Atria Senior Living, Inc. (“Atria”), to manage 199 of our seniors housing communities pursuant to long-term management agreements.

NOTE 2 — ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three and six months ended June 30, 2011 are not necessarily an indication of the results that may be expected for the year ending December 31, 2011. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on February 18, 2011. Certain prior period amounts have been reclassified to conform to the current period presentation.

Revenue Recognition

Triple-Net Leased Properties and MOB Operations

Certain of our triple-net leased properties, including the majority of our leases with Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), and the majority of our MOB leases provide for periodic and determinable increases in base rent. We recognize base rental revenues under these leases on a straight-line basis over the term of the applicable lease. Income on our straight-line revenue is recognized when collectibility is reasonably assured, and in the event we determine that collectibility of straight-line revenue is not reasonably assured, we establish an allowance for estimated losses. Recognizing rental income on a straight-line basis results in recognized revenue exceeding cash amounts contractually due from our tenants during the first half of the term for leases that have straight-line treatment. The cumulative excess is included in other assets, net of allowances, on our Consolidated Balance Sheets and totaled $90.0 million and $86.3 million at June 30, 2011 and December 31, 2010, respectively.

Our master lease agreements with Kindred Healthcare, Inc. (together with its subsidiaries, “Kindred”) (the “Kindred Master Leases”) and certain of our other leases provide for an annual increase in rental payments only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases only if such parameters or contingencies are met, rather than on a straight-line basis over the term of the applicable lease.

Senior Living Operations

We recognize resident fees and services, other than move-in fees, monthly as services are provided. We recognize move-in fees on a straight-line basis over the average resident stay. Our lease agreements with residents generally have a term of twelve to eighteen months and are cancelable by the resident with 30 days’ notice.

We recognize income from rent, lease termination fees, management advisory services and all other income when all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104: (i) the applicable agreement has been fully executed and delivered; (ii) services have been rendered; (iii) the amount is fixed or determinable; and (iv) collectibility is reasonably assured.

Long-Lived Assets and Intangibles

We record investments in real estate assets at cost. We account for acquisitions using the acquisition method and allocate the cost of the properties acquired among tangible and recognized intangible assets and liabilities based upon their estimated fair values as of the acquisition date. Recognized intangibles primarily include the value of in-place leases, acquired lease contracts, tenant and customer relationships, trade names/trademarks and goodwill.

We estimate the fair value of buildings acquired on an as-if-vacant basis and depreciate the building value over the estimated remaining life of the building. We determine the allocated value of other fixed assets, such as site improvements and furniture, fixtures and equipment, based upon the replacement cost and depreciate such value over the assets’ estimated remaining useful lives. We determine the value of land by considering the sales prices of similar properties in recent transactions or based on (i) internal analyses of recently acquired and existing comparable properties within our portfolio or (ii) real estate tax assessed values in relation to the total value of the asset. The fair value of acquired lease intangibles, if any, reflects (i) the estimated value of any above and/or below market leases, determined by discounting the difference between the estimated market rent and the in-place lease rent, the resulting intangible asset or liability of which is amortized to revenue over the remaining life of the associated lease plus any bargain renewal periods and (ii) the estimated value of in-place leases related to the cost to obtain tenants, including tenant allowances, tenant improvements and leasing commissions, and an estimated value of the absorption period to reflect the value of the rent and recovery costs foregone during a reasonable lease-up period as if the acquired space was vacant, which is amortized to amortization expense over the remaining life of the associated lease. We estimate the fair value of tenant or other customer relationships acquired, if any, by considering the nature and extent of existing business relationships with the tenant or customer, growth prospects for developing new business with the tenant or customer, the tenant’s credit quality, expectations of lease renewals with the tenant, and the potential for significant, additional future leasing arrangements with the tenant and amortize that value over the expected life of the associated arrangements or leases, including the remaining terms of the related leases and any expected renewal periods. We estimate the fair value of trade names/trademarks using a royalty rate methodology and amortize that value over the estimated useful life of the trade name/trademark.

In connection with a business combination, we may assume the rights and obligations of certain lease agreements pursuant to which we become the lessee of a given property. We assume the lease classification previously determined by the prior lessee absent a modification in the assumed lease agreement. For capital leases we have assumed that contain bargain purchase options, we recognize an asset based on the acquisition date fair value of the underlying asset and a liability based on the fair value of the capital lease obligation. Assets recognized under capital leases that contain bargain purchase options are depreciated over the asset’s useful life. Assumed operating leases, including ground leases, are assessed to determine if the lease terms are favorable or unfavorable given current market conditions on the acquisition date. To the extent the lease arrangement is favorable or unfavorable relative to market conditions on the acquisition date, we recognize an asset or liability at fair value.

All lease related intangible assets are included within acquired lease intangibles and all lease related intangible liabilities are included within accounts payable and other liabilities on our Consolidated Balance Sheets. In addition, operating lease intangibles are valued utilizing discounted cash flow projections. The recognized asset or liability for these leases is amortized to rental expense over the term of the lease and is included in our Consolidated Statements of Income.

We calculate the fair value of long-term debt by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which we approximate based on the rate we would expect to incur to replace each instrument on the date of acquisition, and recognize any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument. If applicable, we record a liability for contingent consideration at fair value as of the acquisition date (included in accounts payable and other liabilities on our Consolidated Balance Sheets) and reassess the fair value at the end of each reporting period, with any changes being recognized in earnings. Increases or decreases in the fair value of contingent consideration can result from changes in discount periods, discount rates and probabilities that contingencies will be met. We do not amortize goodwill, which is included in other assets on our Consolidated Balance Sheets and represents the excess of the purchase price paid over the fair value of the net assets of the acquired business.

Furniture, fixtures and equipment, with a net book value of $97.0 million and $34.5 million at June 30, 2011 and December 31, 2010, respectively, is included in net real estate property on our Consolidated Balance Sheets. We record depreciation on a straight-line basis, using estimated useful lives ranging from 20 to 50 years for buildings and improvements and three to ten years for furniture, fixtures and equipment. Depreciation is discontinued when a property is identified as held-for-sale.

Leases

We include assets under capital leases within net real estate assets, and we include capital lease obligations within senior notes payable and other debt on our Consolidated Balance Sheets. Lease payments under capital lease arrangements are segregated between interest expense and a reduction to the outstanding principal balance, using the effective interest method. We account for payments made pursuant to operating leases as lease expense within property-level operating expenses in our Consolidated Statements of Income based on actual rent paid, plus or minus a straight-line rent adjustment for minimum lease escalators.

Derivative Instruments

We recognize all derivative instruments in either other assets or accounts payable and accrued liabilities on our Consolidated Balance Sheets at fair value as of the reporting date. We recognize changes in the fair value of derivative instruments in other expenses on our Consolidated Statements of Income or accumulated other comprehensive income on our Consolidated Balance Sheets, depending on the intended use of the derivative and our designation of the instrument.

We do not use our derivative financial instruments, including interest rate caps, interest rate swaps, and foreign currency forward contracts, for trading or speculative purposes. Our interest rate caps were designated as having a hedging relationship with their underlying securities and therefore qualified for hedge accounting under GAAP. Our interest rate caps are recorded on our Consolidated Balance Sheets at fair value, and we recognize changes in the fair value of these instruments in accumulated other comprehensive income on our Consolidated Balance Sheets. Our interest rate swaps and foreign currency forward contracts were not designated as having a hedging relationship with their underlying securities and therefore do not qualify for hedge accounting under GAAP. Our interest rate swaps and foreign currency forward contracts are recorded on our Consolidated Balance Sheets at fair value, and we recognize changes in the fair value of these instruments in current earnings in other expenses on our Consolidated Statements of Income.

Fair Values of Financial Instruments

Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

Level one inputs utilize unadjusted quoted prices for identical assets or liabilities in active markets that the reporting entity has the ability to access. Level two inputs are inputs other than quoted prices included in level one that are directly or indirectly observable for the asset or liability. Level two inputs may include quoted prices for similar assets and liabilities in active markets, as well as other observable inputs for the asset or liability, such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level three inputs are unobservable inputs for the asset or liability, which are typically based on the reporting entity’s own assumptions, as there is little, if any, related market activity. If the determination of the fair value measurement is based on inputs from different levels of the hierarchy, the level within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

We use the following methods and assumptions in estimating fair value of financial instruments.

•

Cash and cash equivalents: The carrying amount of unrestricted cash and cash equivalents reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.

•

Loans receivable: We estimate the fair value of loans receivable by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings. The inputs used to measure the fair value of our loans receivable are level two and level three inputs. Additionally, we determine the valuation allowance for loan losses based on level three inputs. See “Note 5—Loans Receivable.”

•

Marketable debt securities: We estimate the fair value of marketable debt securities using quoted prices for similar assets or liabilities in active markets that we have the ability to access. The inputs used to measure the fair value of our marketable debt securities are level two inputs.

•

Derivative instruments: With the assistance of a third party, we estimate the fair value of our derivative instruments, including interest rate caps, interest rate swaps, and foreign currency forward contracts, using level two inputs. We determine the fair value of interest rate caps using forward yield curves and other relevant information. We estimate the fair value of interest rate swaps using alternative financing rates derived from market-based financing rates, forward yield curves and discount rates. We determine the fair value of foreign currency forward contracts by estimating the future values of the two currency tranches using forward exchange rates that are based on traded forward points and calculating a present value of the net amount using a discount factor based on observable traded interest rates.

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Senior notes payable and other debt: We estimate the fair value of borrowings by discounting the future cash flows using current interest rates at which we could make similar borrowings. The inputs used to measure the fair value of our senior notes payable and other debt are level two inputs.

•

Contingent consideration: We estimate the fair value of contingent consideration using probability assessments of expected future cash flows over the period in which the obligation is expected to be settled, and by applying a discount rate that appropriately captures a market participant’s view of the risk associated with the obligation. The inputs we use to determine fair value of contingent consideration are considered level three inputs.

Recently Issued or Adopted Accounting Standards

In June 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), which amends current guidance found in ASC Topic 220, Comprehensive Income (“ASC 220”). ASU 2011-05 requires entities to present comprehensive income in either: (i) one continuous financial statement or (ii) two separate but consecutive statements that display net income and the components of other comprehensive income. Totals and individual components of both net income and other comprehensive income must be included in either presentation. The provisions of ASU 2011-05 are effective for us beginning with the first quarter of 2012, but we do not expect ASU 2011-05 to have a significant impact on our Consolidated Financial Statements.

On January 1, 2011, we adopted ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (“ASU 2010-29”), which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. ASU 2010-29 specifies that a public entity presenting comparative financial statements should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual reporting period when preparing the pro forma financial information for both the current and prior reporting periods. This guidance, which is effective for business combinations consummated in periods beginning after December 15, 2010, also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination(s) included in reported pro forma revenues and earnings. We have presented supplementary pro forma information related to our acquisition of substantially all of the real estate assets and working capital of Atria Senior Living Group, Inc. (together with its affiliates, “Atria Senior Living”) in May 2011 and our acquisition of Nationwide Health Properties, Inc. (“NHP”) in July 2011 in “Note 4—Acquisitions of Real Estate Property.”

On January 1, 2011, we adopted ASU 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 states that if a reporting unit has a carrying amount equal to or less than zero and there are qualitative factors that indicate it is more likely than not that a goodwill impairment exists, Step 2 of the goodwill impairment test must be performed. The adoption of ASU 2010-28 did not impact our Consolidated Financial Statements.

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”), which expands required disclosures related to an entity’s fair value measurements. Certain provisions of ASU 2010-06 were effective for interim and annual reporting periods beginning after December 15, 2009, and we adopted those provisions as of January 1, 2010. The remaining provisions, which were effective for interim and annual reporting periods beginning after December 15, 2010, require additional disclosures related to purchases, sales, issuances and settlements in an entity’s reconciliation of recurring level three investments. We adopted the final provisions of ASU 2010-06 as of January 1, 2011. The adoption of ASU 2010-06 did not impact our Consolidated Financial Statements.

NOTE 3 — CONCENTRATION OF CREDIT RISK

As of June 30, 2011, Atria, Sunrise, Brookdale Senior Living and Kindred managed or operated approximately 31.5%, 24.4%, 12.6% and 8.4%, respectively, of our properties based on their gross book value. Also, as of June 30, 2011, seniors housing communities constituted approximately 76.4% of our portfolio based on gross book value, with skilled nursing facilities, hospitals, MOBs and other healthcare assets collectively comprising the remaining 23.6%. Our properties were located in 43 states, the District of Columbia and two Canadian provinces as of June 30, 2011, with properties in only one state (California) accounting for 10% or more of our total revenues for the six months then ended.

Triple-Net Leased Properties

Approximately 19.8% and 25.2% of our total revenues and 32.3% and 37.0% of our total net operating income (“NOI,” which is defined as total revenues, excluding interest and other income, less property-level operating expenses and medical office building services costs) (including amounts in discontinued operations) for the six months ended June 30, 2011 and 2010, respectively, were derived from our four Kindred Master Leases. Approximately 9.3% and 12.5% of our total revenues and 15.1% and 18.3% of our total NOI (including amounts in discontinued operations) for the six months ended June 30, 2011 and 2010, respectively, were derived from our lease agreements with Brookdale Senior Living. Each of the Kindred Master Leases and our leases with Brookdale Senior Living is a triple-net lease pursuant to which the tenant is required to pay all insurance, taxes, utilities and maintenance and repairs related to the properties and to comply with the terms of the mortgage financing documents, if any, affecting the properties.

Because Kindred and Brookdale Senior Living are large tenants and account for a significant portion of our total revenues and NOI, their financial condition and ability and willingness to satisfy their obligations under their respective leases and other agreements with us, and their willingness to renew those leases upon expiration of the terms thereof, have a considerable impact on our results of operations and ability to service our indebtedness and to make distributions to our stockholders. We cannot assure you that either Kindred or Brookdale Senior Living will have sufficient assets, income and access to financing to enable it to satisfy its obligations, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and other obligations and on our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that either Kindred or Brookdale Senior Living will elect to renew its leases with us upon expiration of the initial base terms or any renewal terms thereof or that, if some or all of those leases are not renewed, we will be able to reposition the affected properties on a timely basis or on the same or better terms, if at all.

Senior Living Operations

As of June 30, 2011, Sunrise and Atria, collectively, provided comprehensive property management and accounting services with respect to 196 of our seniors housing communities for which we pay an annual management fee pursuant to long-term management agreements. Each management agreement with Sunrise has a term of 30 years, and each management agreement with Atria has a term of ten years, subject to successive automatic ten-year renewal periods. Because Sunrise and Atria do not lease properties from us, we are not directly exposed to their credit risk. However, Sunrise’s and Atria’s inability to efficiently and effectively manage our properties and to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. Although we have various rights as owner under the Sunrise and Atria management agreements, we rely on Sunrise’s and Atria’s personnel, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment to manage our seniors housing communities efficiently and effectively. We also rely on Sunrise and Atria to set resident fees and otherwise operate those properties in compliance with our management agreements. Sunrise’s or Atria’s inability or unwillingness to satisfy its obligations under our management agreements, changes in Sunrise’s or Atria’s senior management or any adverse developments in Sunrise’s or Atria’s business and affairs or financial condition could have a Material Adverse Effect on us.

Kindred, Brookdale Senior Living, Sunrise and Atria Information

Each of Kindred, Brookdale Senior Living and Sunrise is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Kindred, Brookdale Senior Living and Sunrise contained or referred to in this Quarterly Report on Form 10-Q is derived from filings made by Kindred, Brookdale Senior Living or Sunrise, as the case may be, with the SEC or other publicly available information, or has been provided to us by Kindred, Brookdale Senior Living or Sunrise. We have not verified this information either through an independent investigation or by reviewing Kindred’s, Brookdale Senior Living’s or Sunrise’s public filings. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate. Kindred’s, Brookdale Senior Living’s and Sunrise’s filings with the SEC can be found at the SEC’s website at www.sec.gov. We are providing this data for informational purposes only, and you are encouraged to obtain Kindred’s, Brookdale Senior Living’s and Sunrise’s publicly available filings from the SEC.

Atria is not subject to the reporting requirements of the SEC. The information related to Atria contained or referred to within this Quarterly Report on Form 10-Q is derived from information provided to us by Atria. We have not verified this information through an independent investigation. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you that all of this information is accurate.

NOTE 4 — ACQUISITIONS OF REAL ESTATE PROPERTY

We engage in acquisition activity primarily to invest in additional seniors housing and healthcare properties and achieve an expected yield on investment, to grow and diversify our portfolio and revenue base and to reduce our dependence on any single operator, geography or asset type.

Atria Senior Living Acquisition

On May 12, 2011, we acquired substantially all of the real estate assets and working capital of privately-owned Atria Senior Living for a total purchase price of $3.4 billion, which we funded in part through the issuance of 24.96 million shares of our common stock (which shares had a total value of $1.38 billion based on the May 12, 2011 closing price of our common stock of $55.33 per share). As a result of the transaction, we added to our senior living operating portfolio 117 private pay seniors housing communities and one development land parcel located primarily in affluent coastal markets such as the New York metropolitan area, New England and California. Prior to the closing, Atria Senior Living spun off its management operations to a newly formed entity, Atria, which continues to operate the acquired assets under long-term management agreements with us. For both the three and six months ended June 30, 2011, we recorded revenues and NOI from the acquired assets of $85.7 million and $26.2 million, respectively.

We are accounting for the acquisition under the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”), and our initial accounting for this business combination is essentially complete. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed, which we determined using level two and level three inputs (in thousands):

Land		$	293,550
Buildings and improvements			2,941,478
Acquired lease intangibles			170,360
Other assets			188,440
Total assets acquired			3,593,828
Notes payable and other debt			1,621,641
Deferred tax liability			48,087
Other liabilities			200,962
Total liabilities assumed			1,870,690
Net assets acquired			1,723,138
Cash acquired			77,718
Equity issued			1,380,956
Total cash used		$	264,464

As of June 30, 2011, we had incurred a total of $51.0 million of acquisition-related costs related to the Atria Senior Living transaction, all of which were expensed as incurred and included in merger-related expenses and deal costs on our Consolidated Statements of Income for the applicable periods. For the three and six months ended June 30, 2011, we expensed $43.5 million and $46.7 million, respectively, of acquisition-related costs related to the Atria Senior Living acquisition.

As partial consideration for the Atria Senior Living acquisition, the sellers received the right to earn additional amounts (“contingent consideration”) based upon the achievement of certain performance metrics, including the future operating results of the acquired assets, and other factors. The contingent consideration, if any, will be payable to the sellers following the applicable measurement date for the period ending December 31, 2014 or December 31, 2015, at the election of the sellers. We cannot determine the actual amount of contingent consideration, if any, that may become due to the sellers because it is dependent on various factors, such as the future performance of the acquired assets and our equity multiple, which are subject to many risks and uncertainties beyond our control. We are also unable to estimate a range of potential amounts for the same reason. Therefore, we estimated the fair value of contingent consideration as of the acquisition date and as of June 30, 2011 using probability assessments of expected future cash flows over the period in which the obligation is expected to be settled, and by applying a discount rate that appropriately captures a market participant’s view of the risk associated with the obligation. This contingent consideration liability is carried on our Consolidated Balance Sheets as of June 30, 2011 at its fair value, and we will record any changes in fair value in earnings on our Consolidated Statements of Income. As of the acquisition date and June 30, 2011, the estimated fair value of contingent consideration was $44.2 million, which is included in accounts payable and other liabilities on our Consolidated Balance Sheets, and our Consolidated Statements of Income for the three and six months ended June 30, 2011 reflect no change in the fair value of contingent consideration.

NHP Acquisition

On July 1, 2011, we acquired NHP in a stock-for-stock transaction. Pursuant to the terms and subject to the conditions set forth in the agreement and plan of merger dated as of February 27, 2011, at the effective time of the merger, each outstanding share of NHP common stock (other than shares owned by us or any of our subsidiaries or any wholly owned subsidiary of NHP) was converted into the right to receive 0.7866 shares of our common stock, with cash paid in lieu of fractional shares. As a result of the transaction, we added 654 seniors housing and healthcare properties to our portfolio. Since the transaction was consummated after June 30, 2011, we recognized no revenues or NOI from NHP’s operations for the three and six months ended June 30, 2011.

We are accounting for the NHP acquisition under the acquisition method in accordance with ASC 805. The preliminary purchase price is being allocated among tangible and intangible real estate assets ($8.4 billion), other liabilities, net ($0.8 billion), debt ($2.2 billion) and equity issued ($5.4 billion). Because the NHP transaction was consummated after June 30, 2011, our initial accounting for the NHP business combination is a preliminary assessment only. Our assessment of fair value and the allocation of the NHP purchase price to the identified tangible and intangible assets is our current best estimate of fair value.

As of June 30, 2011, we had incurred a total of $12.3 million of acquisition-related costs related to the NHP transaction, all of which we expensed as incurred and included in merger-related expenses and deal costs on our Consolidated Statements of Income for the applicable periods. For the three and six months ended June 30, 2011, we expensed $10.4 million and $12.3 million, respectively, of acquisition-related costs related to the NHP acquisition.

Lillibridge Acquisition

On July 1, 2010, we completed the acquisition of businesses owned and operated by Lillibridge and its related entities and their real estate interests in 96 MOBs and ambulatory facilities for approximately $381 million, including the assumption of $79.5 million of mortgage debt.

As a result of the transaction, we acquired: a 100% interest in Lillibridge’s property management, leasing, marketing, facility development, and advisory services business; a 100% interest in 38 MOBs; a 20% joint venture interest in 24 MOBs; and a 5% joint venture interest in 34 MOBs. We are the managing member of these joint ventures and the property manager for the joint venture properties. Two institutional third parties hold the controlling interests in these joint ventures, and we have a right of first offer on those interests. We funded the acquisition with cash on hand, borrowings under our unsecured revolving credit facilities and the assumption of mortgage debt. In connection with the acquisition, $132.7 million of mortgage debt was repaid.

Other 2010 Acquisitions

In December 2010, we acquired Sunrise’s noncontrolling interests in 58 of our seniors housing communities currently managed by Sunrise for a total valuation of approximately $186 million, including assumption of Sunrise’s share of mortgage debt totaling $144 million. The noncontrolling interests acquired represented between 15% and 25% ownership interests in the communities, and we now own 100% of all 79 of our Sunrise-managed seniors housing communities. We recorded the difference between the consideration paid and the noncontrolling interest balance as a component of equity in capital in excess of par value on our Consolidated Balance Sheets.

Also in December 2010, we purchased five MOBs under our Lillibridge platform for a purchase price of $36.6 million.

Unaudited Pro Forma

The following table illustrates the effect on net income and earnings per share as if we had consummated the Atria Senior Living and NHP acquisitions as of January 1, 2010:

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
		(In thousands, except per share amounts)
Revenues		$	553,797			$	503,600			$	1,099,099			$	1,004,767
Income from continuing operations attributable to common stockholders			90,650				73,466				158,181				137,704
Discontinued operations			—				5,852				—				6,597
Net income attributable to common stockholders			90,650				79,318				158,181				144,301
Earnings per common share:
Basic:
Income from continuing operations attributable to common stockholders		$	0.32			$	0.26			$	0.55			$	0.49
Discontinued operations			—				0.02				—				0.02
Net income attributable to common stockholders		$	0.32			$	0.28			$	0.55			$	0.51
Diluted:
Income from continuing operations attributable to common stockholders		$	0.31			$	0.26			$	0.55			$	0.49
Discontinued operations			—				0.02				—				0.02
Net income attributable to common stockholders		$	0.31			$	0.28			$	0.55			$	0.51
Weighted average shares used in computing earnings per common share:
Basic			287,357				281,419				286,282				281,341
Diluted			289,040				282,249				287,926				282,014

Acquisition-related costs related to the Atria Senior Living and NHP acquisitions are not expected to have a continuing impact and therefore have been excluded from these pro forma results. The pro forma results also do not include the impact of any synergies that may be achieved in the transactions, any lower costs of borrowing resulting from the transactions or any strategies that management may consider in order to continue to efficiently manage our operations, nor do they give pro forma effect to any other acquisitions, dispositions or capital markets transactions that we completed during the periods presented. These pro forma results are not necessarily indicative of the operating results that would have been obtained had the Atria Senior Living and NHP acquisitions occurred at the beginning of the periods presented, nor are they necessarily indicative of future operating results.

NOTE 5 — LOANS RECEIVABLE

As of June 30, 2011 and December 31, 2010, we had $634.5 million and $149.3 million, respectively, of net loans receivable relating to seniors housing and healthcare companies or properties.

In June 2011, we made a first mortgage loan in the aggregate principal amount of $12.9 million, bearing interest at a fixed rate of 9.0% per annum and maturing in 2016.

In May 2011, we made a senior unsecured term loan to NHP in the aggregate principal amount of $600.0 million, bearing interest at a fixed rate of 5.0% per annum and maturing in 2021.

In April 2011, we received proceeds of $112.4 million in final repayment of a first mortgage loan and recognized a gain of $3.3 million in income from loans and investments on our Consolidated Statements of Income in connection with this repayment in the second quarter of 2011.

In March 2011, we received proceeds of $19.9 million in final repayment of a first mortgage loan and recognized a gain of $0.8 million in income from loans and investments on our Consolidated Statements of Income in connection with this repayment in the first quarter of 2011.

NOTE 6 — INVESTMENTS IN UNCONSOLIDATED ENTITIES

We report investments in unconsolidated entities, which we acquired in connection with the 2010 Lillibridge acquisition, over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We serve as the managing member of each unconsolidated entity and provide various services in exchange for fees and reimbursements. Our joint venture partners have significant participating rights, and, therefore, we are not required to consolidate these entities. Additionally, these entities are not considered variable interest entities as they are viable entities controlled by equity holders with sufficient capital. At June 30, 2011, we owned interests in 58 properties that were accounted for under the equity method. Our net investment in these properties as of June 30, 2011 and December 31, 2010 was $14.8 million and $15.3 million, respectively. For the three months ended June 30, 2011 and 2010, we recorded a loss from unconsolidated entities of $0.1 million and $0, respectively. For the six months ended June 30, 2011 and 2010, we recorded a loss from unconsolidated entities of $0.3 million and $0, respectively.

NOTE 7 — INTANGIBLES

The following is a summary of our intangibles as of June 30, 2011 and December 31, 2010:

		June 30,				December 31,
		2011				2010
		(Dollars in thousands)
Intangible assets:
Above market lease intangibles		$	13,620			$	13,232
In-place and other lease intangibles			304,230				125,452
Other intangibles			17,452				21,779
Accumulated amortization			(119,154	)			(100,808	)
Goodwill			74,099				19,901
Net intangible assets		$	290,247			$	79,556
Remaining weighted average amortization period of lease-related intangible assets in years			9.1				18.5
Intangible liabilities:
Below market lease intangibles		$	51,333			$	22,398
Accumulated amortization			(14,393	)			(12,495	)
Net intangible liabilities		$	36,940			$	9,903
Remaining weighted average amortization period of lease-related intangible liabilities in years			6.0				6.9

Above market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements and trade names/trademarks) and goodwill are included in other assets on our Consolidated Balance Sheets. Below market lease intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets. The net amortization expense related to these intangibles was $14.8 million and $0.8 million for the three months ended June 30, 2011 and 2010, respectively. The net amortization expense related to these intangibles was $17.8 million and $1.6 million for the six months ended June 30, 2011 and 2010, respectively. The estimated net amortization expense related to these intangibles for each of the next five years is as follows: 2012 —$63.1 million; 2013 —$7.6 million; 2014 —$7.1 million; 2015 —$6.0 million; and 2016 —$4.6 million.

NOTE 8 — SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt as of June 30, 2011 and December 31, 2010:

		June 30,				December 31,
		2011				2010
		(In thousands)
Unsecured revolving credit facilities		$	139,500			$	40,000
37/8% Convertible Senior Notes due 2011			230,000				230,000
9% Senior Notes due 2012			82,433				82,433
Unsecured term loan due 2013			200,000				200,000
3.125% Senior Notes due 2015			400,000				400,000
61/2% Senior Notes due 2016			400,000				400,000
63/4% Senior Notes due 2017			225,000				225,000
4.750% Senior Notes due 2021			700,000				—
Mortgage loans and other			2,244,441				1,349,521
Total			4,621,374				2,926,954
Capital lease obligations			355,807				—
Unamortized fair value adjustment			74,150				11,790
Unamortized commission fees and discounts			(44,251	)			(38,700	)
Senior notes payable and other debt		$	5,007,080			$	2,900,044

As of June 30, 2011, our joint venture partners’ share of total debt was $10.5 million with respect to four of our properties owned through consolidated joint ventures. As of December 31, 2010, our joint venture partners’ share of total debt was $4.8 million with respect to three of our properties owned through consolidated joint ventures. Total debt does not include our portion of debt related to our investments in unconsolidated entities, which was $45.5 million and $45.9 million at June 30, 2011 and December 31, 2010, respectively.

As of June 30, 2011, our indebtedness (excluding capital lease obligations) had the following maturities:

						Unsecured
		Principal Amount				Revolving Credit				Scheduled Periodic
		Due at Maturity				Facilities (1)				Amortization				Total Maturities
		(In thousands)
2011		$	230,700			$	—			$	20,137			$	250,837
2012			185,684				139,500				41,821				367,005
2013			558,075				—				35,701				593,776
2014			186,740				—				32,208				218,948
2015			575,377				—				25,509				600,886
Thereafter			2,436,484				—				153,438				2,589,922
Total maturities		$	4,173,060			$	139,500			$	308,814			$	4,621,374

(1)		At June 30, 2011, we had $26.7 million of unrestricted cash and cash equivalents, for $112.8 million of net borrowings outstanding under our unsecured revolving credit facilities.

Unsecured Revolving Credit Facilities and Term Loan

As of June 30, 2011, we had $1.0 billion of aggregate borrowing capacity under our unsecured revolving credit facilities, all of which matures on April 26, 2012. Borrowings under our unsecured revolving credit facilities bear interest at a fluctuating rate per annum (based on U.S. or Canadian LIBOR, the Canadian Bankers’ Acceptance rate, or the U.S. or Canadian Prime rate), plus an applicable percentage based on our consolidated leverage. At June 30, 2011, the applicable percentage was 2.30%. Our unsecured revolving credit facilities also have a 20 basis point facility fee. At June 30, 2011, we had $139.5 million of borrowings outstanding, $9.3 million of outstanding letters of credit and $851.2 million of available borrowing capacity under our unsecured revolving credit facilities.

In connection with the NHP acquisition, we acquired additional liquidity from an $800.0 million senior unsecured term loan previously extended to NHP. At our option, borrowings under the term loan, which are available from time to time on a non-revolving basis, bear interest at the applicable LIBOR plus 1.50% (1.69% at June 30, 2011) or the “Alternate Base Rate” plus 0.50% (3.75% at June 30, 2011). We pay a facility fee of 0.10% per annum on the unused commitments under the term loan agreement. Borrowings under the term loan mature on June 1, 2012. As of the date of this filing, there was approximately $250.0 million of borrowings outstanding under the term loan, and we were in compliance with all covenants under the term loan.

Mortgages

We assumed mortgage debt of $1.2 billion and $0.4 billion, respectively, in connection with the Atria Senior Living and NHP acquisitions.

In February 2011, we repaid in full mortgage loans outstanding in the aggregate principal amount of $307.2 million and recognized a loss on extinguishment of debt of $16.5 million in connection with this repayment in the first quarter of 2011.

Senior Notes

In May 2011, we issued and sold $700.0 million aggregate principal amount of 4.750% senior notes due 2021, at a public offering price equal to 99.132% of par for total proceeds of $693.9 million, before the underwriting discount and expenses.

In July 2011, we redeemed $200.0 million principal amount of our outstanding 6¹/2% senior notes due 2016, at a redemption price equal to 103.25% of par, plus accrued and unpaid interest to the redemption date, pursuant to the call option contained in the indenture governing the notes. As a result, we paid a total of approximately $206.5 million, plus accrued and unpaid interest, on the redemption date and expect to recognize a loss on extinguishment of debt of $8.7 million during the third quarter of 2011.

As a result of the NHP acquisition, we assumed approximately $991.7 million aggregate principal amount of outstanding unsecured senior notes of NHP. On July 15, 2011, we repaid in full, at par, $339.0 million principal amount then outstanding of NHP’s 6.50% senior notes due 2011 upon maturity. The remaining NHP senior notes outstanding bear interest at fixed rates ranging from 6.00% to 8.25% per annum and have maturity dates ranging between July 1, 2012 and July 7, 2038, subject in certain cases to earlier repayments at the option of the holder.

Capital Leases

As of June 30, 2011, we leased from NHP twelve seniors housing communities pursuant to arrangements that we assumed in connection with the Atria Senior Living acquisition and that were accounted for as capital leases. We have excluded these leases with NHP (which was a $209.9 million capital lease obligation as of June 30, 2011) for purposes of the presentation below, as they are being eliminated in consolidation within our Consolidated Balance Sheet as of July 1, 2011.

As of June 30, 2011, we leased from another party eight seniors housing communities pursuant to arrangements that we also assumed in connection with the Atria Senior Living acquisition and that were accounted for as capital leases. Rent under the capital leases is subject to increase based upon changes in the Consumer Price Index or gross revenues attributable to the property, subject to certain limits, as defined in the individual lease agreements. Pursuant to the capital lease agreements, we have bargain options to purchase each leased property and an option to exercise renewal terms.

Future minimum lease payments required under the capital lease agreements, including amounts that would be due under purchase options, as of June 30, 2011 are as follows (in thousands):

2011		$	4,686
2012			9,447
2013			9,573
2014			9,700
2015			9,826
Thereafter			172,553
Total minimum lease payments			215,785
Less: Amount related to interest			(72,554	)
		$	143,231

Net assets held under capital leases are included in net real estate investments on our Consolidated Balance Sheets and totaled $228.9 million and $0 as of June 30, 2011 and December 31, 2010, respectively.

NOTE 9 — FAIR VALUES OF FINANCIAL INSTRUMENTS

As of June 30, 2011 and December 31, 2010, the carrying amounts and fair values of our financial instruments were as follows:

		June 30, 2011								December 31, 2010
		Carrying								Carrying
		Amount				Fair Value				Amount				Fair Value
		(In thousands)
Assets:
Cash and cash equivalents		$	26,702			$	26,702			$	21,812			$	21,812
Loans receivable, net			634,472				635,077				149,263				155,377
Marketable debt securities			43,813				43,813				66,675				66,675
Liabilities:
Senior notes payable and other debt, gross			4,621,374				4,593,327				2,926,954				3,055,435
Derivative instruments			21,655				21,655				3,722				3,722
Contingent consideration liability			44,200				44,200				—				—

Fair value estimates are subjective in nature and depend upon several important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument. The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.

At June 30, 2011, we held corporate marketable debt securities, classified as available-for-sale, with an aggregate amortized cost basis and fair value of $40.7 million and $43.8 million, respectively, and included these securities within other assets on our Consolidated Balance Sheets. At December 31, 2010, our marketable debt securities had an aggregate amortized cost basis and fair value of $61.9 million and $66.7 million, respectively. The contractual maturities of our marketable debt securities range from October 1, 2012 to April 15, 2016. In January and March 2011, we sold certain marketable debt securities and received proceeds of approximately $10.6 million and $12.5 million, respectively. We recognized aggregate gains from these sales of approximately $1.8 million in income from loans and investments on our Consolidated Statements of Income during the first quarter of 2011.

NOTE 10 — LITIGATION

Litigation Relating to the Sunrise REIT Acquisition

On May 3, 2007, we filed a lawsuit against HCP, Inc. (“HCP”) in the United States District Court for the Western District of Kentucky (the “District Court”), entitled Ventas, Inc. v. HCP, Inc., Case No. 07-cv-238-JGH. We asserted claims of tortious interference with contract and tortious interference with prospective business advantage. Our complaint alleged that HCP interfered with our purchase agreement to acquire the assets and liabilities of Sunrise Senior Living Real Estate Investment Trust (“Sunrise REIT”) and with the process for unitholder consideration of the purchase agreement. The complaint alleged, among other things, that HCP made certain improper and misleading public statements and/or offers to acquire Sunrise REIT and that HCP’s actions caused us to suffer substantial damages, including, among other things, the payment of materially greater consideration to acquire Sunrise REIT resulting from the substantial increase in the purchase price above the original contract price necessary to obtain unitholder approval and increased costs associated with the delay in closing the acquisition, including increased costs to finance the transaction as a result of the delay.

HCP brought counterclaims against us alleging misrepresentation and negligent misrepresentation by Sunrise REIT related to its sale process, claiming that we were responsible for those actions as successor. HCP sought compensatory and punitive damages. On March 25, 2009, the District Court granted us judgment on the pleadings against all counterclaims brought by HCP and dismissed HCP’s counterclaims with prejudice. Thereafter, the District Court confirmed the dismissal of HCP’s counterclaims.

On July 16, 2009, the District Court denied HCP’s summary judgment motion as to our claim for tortious interference with business advantage, permitting us to present that claim against HCP at trial. The District Court granted HCP’s motion for summary judgment as to our claim for tortious interference with contract and dismissed that claim. The District Court also ruled that we could not seek to recover a portion of our alleged damages.

On September 4, 2009, the jury unanimously held that HCP tortiously interfered with our business expectation to acquire Sunrise REIT at the agreed price by employing significantly wrongful means such as fraudulent misrepresentation, deceit and coercion. The jury awarded us $101.6 million in compensatory damages, which is the full amount of damages the District Court permitted us to seek at trial. The District Court entered judgment on the jury’s verdict on September 8, 2009.

On November 16, 2009, the District Court affirmed the jury’s verdict and denied all of HCP’s post-trial motions, including a motion requesting that the District Court overturn the jury’s verdict and enter judgment for HCP or, in the alternative, award HCP a new trial. The District Court also denied our motion for pre-judgment interest and/or to modify the jury award to increase it to reflect the currency rates in effect on September 8, 2009, the date of entry of the judgment.

On November 17, 2009, HCP appealed the District Court’s judgment to the United States Court of Appeals for the Sixth Circuit (the “Sixth Circuit”). HCP argued that the judgment against it should be vacated and the case remanded for a new trial and/or that judgment should be entered in its favor as a matter of law.

On November 24, 2009, we filed a cross-appeal to the Sixth Circuit. In addition to maintaining the full benefit of our favorable jury verdict, in our cross-appeal, we asserted that we are entitled to substantial monetary relief in addition to the jury verdict, including punitive damages, additional compensatory damages and pre-judgment interest.

On December 11, 2009, HCP posted a $102.8 million letter of credit in our favor to serve as security to stay execution of the jury verdict pending the appellate proceedings.

On May 17, 2011, the Sixth Circuit unanimously affirmed the $101.6 million jury verdict in our favor and ruled that we are entitled to seek punitive damages against HCP for its conduct. The Sixth Circuit also denied our appeal seeking additional compensatory damages and pre-judgment interest. On June 27, 2011, the Sixth Circuit denied HCP’s motion to request a rehearing with respect to its decision.

On July 5, 2011, the Sixth Circuit issued a mandate terminating the appellate proceedings and transferring jurisdiction back to the District Court for the enforcement of the $101.6 million compensatory damages award and the trial for punitive damages. On July 26, 2011, the District Court issued an order scheduling a jury trial on the matter of punitive damages for February 21, 2012.

We are vigorously pursuing proceedings in the District Court on the matter of punitive damages and to collect the $101.6 million compensatory damages judgment against HCP.

Litigation Relating to the NHP Acquisition

In the weeks following the announcement of our acquisition of NHP on February 28, 2011, purported stockholders of NHP filed seven lawsuits against NHP and its directors. Six of these lawsuits also named Ventas, Inc. as a defendant and five named our subsidiary, Needles Acquisition LLC, as a defendant. The purported stockholder plaintiffs commenced these actions in two jurisdictions: the Superior Court of the State of California, Orange County (the “California State Court”); and the Circuit Court for Baltimore City, Maryland (the “Maryland State Court”). All of these actions were brought as putative class actions, and two also purport to assert derivative claims on behalf of NHP. All of these stockholder complaints allege that NHP’s directors breached certain alleged duties to NHP’s stockholders by approving the merger agreement with us, and certain complaints allege that NHP aided and abetted those breaches. Those complaints that name Ventas, Inc. and Needles Acquisition LLC allege that we aided and abetted the purported breaches of certain alleged duties by NHP’s directors. All of the complaints request an injunction of the merger. Certain of the complaints also seek damages.

In the California State Court, the following actions were filed purportedly on behalf of NHP stockholders: on February 28, 2011, a putative class action entitled Palma v. Nationwide Health Properties, Inc., et al.; on March 3, 2011, a putative class action entitled Barker v. Nationwide Health Properties, Inc., et al.; and on March 3, 2011, a putative class action entitled Davis v. Nationwide Health Properties, Inc., et al., which was subsequently amended on March 11, 2011 under the caption Davids v. Nationwide Health Properties, Inc., et al. Each action names NHP and members of the NHP board of directors as defendants. The Barker and Davids actions also name Ventas, Inc. as a defendant, and the Davids action names Needles Acquisition LLC as a defendant. Each complaint alleges, among other things, that NHP’s directors breached certain alleged duties by approving the merger agreement between us and NHP because the proposed transaction purportedly fails to maximize stockholder value and provides the directors personal benefits not shared by NHP stockholders, and the Barker and Davids actions allege that we aided and abetted those purported breaches. Along with other relief, the complaints seek an injunction against the closing of the proposed merger. On April 4, 2011, the defendants demurred and moved to stay the Palma, Barker, and Davids actions in favor of the parallel litigation in the Maryland State Court described below. On April 27, 2011, all three actions were consolidated pursuant to a Stipulation and Proposed Order on Consolidation of Related Actions signed by the parties on March 22, 2011. On May 12, 2011, the California State Court granted the defendants’ motion to stay.

In the Maryland State Court, the following actions were filed purportedly on behalf of NHP stockholders: on March 7, 2011, a putative class action entitled Crowley v. Nationwide Health Properties, Inc., et al.; on March 10, 2011, a putative class action entitled Taylor v. Nationwide Health Properties, Inc., et. al.; on March 17, 2011, a putative class action entitled Haughey Family Trust v. Pasquale, et al.; and on March 31, 2011, a putative class action entitled Rappoport v. Pasquale, et al. All four actions name NHP, its directors, Ventas, Inc. and Needles Acquisition LLC as defendants. All four actions allege, among other things, that NHP’s directors breached certain alleged duties by approving the merger agreement between us and NHP because the proposed transaction purportedly fails to maximize stockholder value and provides certain directors personal benefits not shared by NHP stockholders and that we aided and abetted those purported breaches. In addition to asserting direct claims on behalf of a putative class of NHP shareholders, the Haughey and Rappoport actions purport to bring derivative claims on behalf of NHP, asserting breaches of certain alleged duties by NHP’s directors in connection with their approval of the proposed transaction. All four actions seek to enjoin the proposed merger, and the Taylor action seeks damages.

On March 30, 2011, pursuant to stipulation of the parties, the Maryland State Court entered an order consolidating the Crowley, Taylor and Haughey actions. The Rappoport action was consolidated with the other actions on April 15, 2011.

On April 1, 2011, pursuant to stipulation of the parties, the Maryland State Court entered an order: (i) certifying a class of NHP shareholders; and (ii) providing for the plaintiffs to file a consolidated amended complaint. The plaintiffs filed a consolidated amended complaint on April 19, 2011, which the defendants moved to dismiss on April 29, 2011. Plaintiffs opposed that motion on May 9, 2011. Plaintiffs moved for expedited discovery on April 19, 2011, and the defendants simultaneously opposed that motion and moved for a protective order staying discovery on April 26, 2011. The Maryland State Court denied plaintiffs’ motion for expedited discovery and granted defendants’ motion for a protective order on May 3, 2011. On May 6, 2011, plaintiffs moved for reconsideration of the Maryland State Court’s grant of the protective order. The Maryland State Court denied the plaintiffs’ motion for reconsideration on May 11, 2011. On May 27, 2011, the Maryland State Court entered an order dismissing the consolidated action with prejudice. Plaintiffs moved for reconsideration of that order on June 6, 2011.

On June 9, 2011, we and NHP agreed on a settlement in principle with the plaintiffs in the consolidated action pending in Maryland State Court, which required us and NHP to make certain supplemental disclosures to stockholders concerning the merger. We and NHP made the supplemental disclosures on June 10, 2011. The settlement is subject to appropriate documentation by the parties and approval by the Maryland State Court.

We believe that each of these actions is without merit.

Proceedings against Tenants, Operators and Managers

From time to time, Kindred, Brookdale Senior Living, Sunrise, Atria and our other tenants, operators and managers are parties to certain legal actions, regulatory investigations and claims arising in the conduct of their business and operations. Even though we are not party to these proceedings, the unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect such tenants’, operators’ or managers’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.

Proceedings Indemnified and Defended by Third Parties

From time to time, we are party to certain legal actions, regulatory investigations and claims against which third parties are contractually obligated to indemnify and defend us and hold us harmless. The tenants of our triple-net leased properties and, in some cases, affiliates of the tenants are required by the terms of their leases and other agreements with us to indemnify, defend and hold us harmless against certain actions, investigations and claims arising in the course of their business and related to the operations of our triple-net leased properties. In addition, third parties from whom we acquired certain of our assets are required by the terms of the related conveyance documents to indemnify, defend and hold us harmless against certain actions, investigations and claims related to the conveyed assets and arising prior to our ownership. In some cases, we hold a portion of the purchase price consideration in escrow as collateral for the indemnification obligations of third parties related to acquired assets. Certain tenants and other obligated third parties are currently defending us in these types of matters. We cannot assure you that our tenants or their affiliates or other obligated third parties will continue to defend us in these matters, that our tenants or their affiliates or other obligated third parties will have sufficient assets, income and access to financing to enable them to satisfy their defense and indemnification obligations to us or that any purchase price consideration held in escrow will be sufficient to satisfy claims for which we are entitled to indemnification. The unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect our tenants’ or other obligated third parties’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.

Proceedings Arising in Connection with Senior Living and MOB Operations; Other Litigation

From time to time, we are also party to various legal actions, regulatory investigations and claims (some of which may not be insured) arising in connection with our senior living and MOB operations or otherwise in the course of our business. In limited circumstances, the manager of the applicable seniors housing community or MOB may be contractually obligated to indemnify, defend and hold us harmless against such actions, investigations and claims. It is the opinion of management that, except as otherwise set forth in this Note 10, the disposition of any such actions, investigations and claims that are currently pending will not, individually or in the aggregate, have a Material Adverse Effect on us. However, regardless of their merits, these matters may force us to expend significant financial resources. We are unable to predict the ultimate outcome of these actions, investigations and claims, and if management’s assessment of our liability with respect thereto is incorrect, such actions, investigations and claims could have a Material Adverse Effect on us.

NOTE 11 — INCOME TAXES

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the year ended December 31, 1999. We have also elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal and state income taxes. Although the TRS entities were not liable for any cash federal income taxes for the six months ended June 30, 2011, their federal income tax liabilities may increase in future periods as we exhaust net operating loss carryforwards and as our senior living operations and MOB operations reportable segments grow. Such increases could be significant.

Our consolidated provision for income taxes for the three months ended June 30, 2011 and 2010 was a benefit of $6.2 million and an expense of $0.4 million, respectively. These amounts were adjusted by income tax expense of $0 million and $0.6 million, respectively, related to the noncontrolling interest share of net income. Our consolidated provision for income taxes for the six months ended June 30, 2011 and 2010 was a benefit of $9.4 million and an expense of $0.7 million, respectively. These amounts were adjusted by income tax expense of $0 million and $1.0 million, respectively, related to the noncontrolling interest share of net income. A substantial portion of the $9.4 million benefit relates to the reversal of the deferred tax liability established for the Atria Senior Living acquisition. Realization of a deferred tax benefit related to net operating losses is dependent in part upon generating sufficient taxable income in future periods. Our net operating loss carryforwards begin to expire in 2024 with respect to our TRS entities and in 2020 with respect to our other entities.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax liabilities with respect to our TRS entities totaled $279.7 million and $241.3 million at June 30, 2011 and December 31, 2010, respectively, and related primarily to differences between the financial reporting and tax bases of fixed and intangible assets and to net operating losses. This amount includes the initial net deferred tax liability related to the Atria Senior Living acquisition of $48.1 million as adjusted for activity for the period from May 12, 2011 through June 30, 2011.

Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2007 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2006 and subsequent years. We are also subject to audit by the Canada Revenue Agency and provincial authorities generally for periods subsequent to 2004 related to entities acquired or formed in connection with our Sunrise REIT acquisition.

NOTE 12 — STOCKHOLDERS’ EQUITY

On July 1, 2011, following approval by our stockholders, we amended our Amended and Restated Certificate of Incorporation, as previously amended, to increase the number of authorized shares of our capital stock to 610,000,000, comprised of 600,000,000 shares of common stock, par value $0.25 per share, and 10,000,000 shares of preferred stock, par value $1.00 per share.

On July 1, 2011, in connection with the NHP acquisition, we issued 99,849,106 shares of our common stock to NHP stockholders and holders of NHP equity awards, and reserved 2,253,366 additional shares of our common stock for issuance in connection with equity awards and other convertible or exchangeable securities that we assumed in connection with the transaction.

In connection with the NHP acquisition, on June 20, 2011, our Board of Directors declared a prorated third quarter dividend on our common stock, payable in cash to stockholders of record at the close of business on June 30, 2011. At June 30, 2011, we recorded an accrued dividend of $23.8 million ($0.1264 per share) for this prorated dividend, which is included in accounts payable and other liabilities on our Consolidated Balance Sheets. The prorated dividend was paid on July 12, 2011.

On May 12, 2011, as partial consideration for the Atria Senior Living assets, we issued to the sellers in a private placement 24,958,543 shares of our common stock (which shares had a total value of $1.38 billion based on the May 12, 2011 closing price of our common stock of $55.33 per share). On May 19, 2011, we filed a shelf registration statement relating to the resale of those shares by the selling stockholders.

In February 2011, we completed the sale of 5,563,000 shares of our common stock in an underwritten public offering pursuant to our existing shelf registration statement. We received $300.0 million in aggregate proceeds from the sale, which we used to repay existing mortgage debt and for working capital and other general corporate purposes.

Accumulated Other Comprehensive Income

The following is a summary of our accumulated other comprehensive income as of June 30, 2011 and December 31, 2010:

		June 30,				December 31,
		2011				2010
		(In thousands)
Foreign currency translation		$	26,069			$	23,010
Unrealized gain on marketable debt securities			3,115				4,794
Other			(972	)			(936	)
Total accumulated other comprehensive income		$	28,212			$	26,868

NOTE 13 — EARNINGS PER COMMON SHARE

The following table shows the amounts used in computing basic and diluted earnings per common share:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2011				2010				2011				2010
		(In thousands, except per share amounts)
Numerator for basic and diluted earnings per share:
Income from continuing operations attributable to common stockholders		$	19,676			$	52,215			$	68,660			$	104,089
Discontinued operations			—				5,852				—				6,597
Net income attributable to common stockholders		$	19,676			$	58,067			$	68,660			$	110,686
Denominator:
Denominator for basic earnings per share — weighted average shares			176,262				156,611				168,369				156,533
Effect of dilutive securities:
Stock options			487				357				483				337
Restricted stock awards			66				48				67				45
Convertible notes			1,130				425				1,094				291
Denominator for diluted earnings per share — adjusted weighted average shares			177,945				157,441				170,013				157,206
Basic earnings per share:
Income from continuing operations attributable to common stockholders		$	0.11			$	0.33			$	0.41			$	0.67
Discontinued operations			—				0.04				—				0.04
Net income attributable to common stockholders		$	0.11			$	0.37			$	0.41			$	0.71
Diluted earnings per share:
Income from continuing operations attributable to common stockholders		$	0.11			$	0.33			$	0.40			$	0.66
Discontinued operations			—				0.04				—				0.04
Net income attributable to common stockholders		$	0.11			$	0.37			$	0.40			$	0.70

NOTE 14 — RELATED PARTY TRANSACTIONS

Upon consummation of the Atria Senior Living acquisition, we entered into long-term management agreements with Atria to operate the acquired assets. Atria is owned by private equity funds managed by Lazard Real Estate Partners LLC (“LREP”). Effective May 13, 2011, LREP Chief Executive Officer and Managing Principal and Atria Chairman Matthew J. Lustig was appointed to our Board of Directors. For the three and six months ended June 30, 2011, we paid Atria $4.3 million in management fees related to the Atria Senior Living properties. See “Note 4—Acquisitions of Real Estate Property.”

From time to time, we may engage Cushman & Wakefield, a global commercial real estate firm, to act as a leasing agent with respect to certain of our MOBs. Cushman & Wakefield President and Chief Executive Officer Glenn J. Rufrano has served as a member of our Board of Directors since June 2010. We believe the brokers’ fees we pay to Cushman & Wakefield in connection with the provision of these services are customary and represent market rates. Total fees we paid to Cushman & Wakefield in 2010 and the first six months of 2011 were de minimis.

Effective upon consummation of the NHP acquisition, Richard I. Gilchrist, a former NHP director, was appointed to our Board of Directors. Mr. Gilchrist currently serves as Senior Advisor to The Irvine Company, and from 2006 until July 2011, he served as President of The Irvine Company’s Investment Properties Group, from whom NHP leased its corporate headquarters prior to the acquisition. In 2010, NHP paid approximately $536,000 in rent to The Irvine Company. Nationwide Health Properties, LLC, our wholly owned subsidiary, continues to rent office space in the building owned by The Irvine Company.

NOTE 15 — SEGMENT INFORMATION

As of June 30, 2011, we operated through three reportable business segments: triple-net leased properties, senior living operations and MOB operations. Our triple-net leased properties segment consists of acquiring and owning seniors housing and healthcare properties in the United States and leasing those properties to healthcare operating companies under “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our senior living operations segment consists of investments in seniors housing communities located in the United States and Canada for which we engage independent third parties, such as Sunrise and Atria, to manage the operations. Our MOB operations segment primarily consists of acquiring, owning, developing, leasing and managing MOBs. Information provided for “all other” includes revenues such as income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to our three reportable business segments. Assets included in all other consist primarily of corporate assets, including cash, restricted cash, deferred financing costs, notes receivable and miscellaneous accounts receivable.

With the addition of the Lillibridge businesses and properties in July 2010, we believed the segregation of our MOB operations into its own reportable business segment would be useful in assessing the performance of this portion of our business in the same way that management reviews our performance and makes operating decisions. Prior to the Lillibridge acquisition, we operated through two reportable business segments: triple-net leased properties and senior living operations. Prior year amounts have been restated to reflect the segregation of our MOB operations into a reportable business segment.

We evaluate performance of the combined properties in each reportable business segment based on segment profit, which we define as NOI adjusted for gain/loss from unconsolidated entities. We define NOI as total revenues, less interest and other income, property-level operating expenses and medical office building services costs. We believe that net income, as defined by GAAP, is the most appropriate earnings measurement. However, we believe that segment profit serves as a useful supplement to net income because it allows investors, analysts and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies and between periods on a consistent basis. Segment profit should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance. In order to facilitate a clear understanding of our consolidated historical operating results, segment profit should be examined in conjunction with net income as presented in our Consolidated Financial Statements and data included elsewhere in this Quarterly Report on Form 10-Q.

Interest expense, depreciation and amortization, general, administrative and professional fees and non-property specific revenues and expenses are not allocated to individual reportable business segments for purposes of assessing segment performance. There are no intersegment sales or transfers.

Summary information by reportable business segment is as follows:

For the three months ended June 30, 2011:

		Triple-Net				Senior
		Leased				Living				MOB				All
		Properties				Operations				Operations				Other				Total
		(In thousands)
Revenues:
Rental income		$	120,129			$	—			$	23,758			$	—			$	143,887
Resident fees and services			—				202,482				—				—				202,482
Medical office building services revenue			—				—				9,822				—				9,822
Income from loans and investments			—				—				—				8,391				8,391
Interest and other income			—				—				—				78				78
Total revenues		$	120,129			$	202,482			$	33,580			$	8,469			$	364,660
Total revenues		$	120,129			$	202,482			$	33,580			$	8,469			$	364,660
Less:
Interest and other income			—				—				—				78				78
Property-level operating expenses			—				136,739				8,278				—				145,017
Medical office building services costs			—				—				7,954				—				7,954
Segment NOI			120,129				65,743				17,348				8,391				211,611
Loss from unconsolidated entities			—				—				(83	)			—				(83	)
Segment profit		$	120,129			$	65,743			$	17,265			$	8,391				211,528
Interest and other income																			78
Interest expense																			(53,732	)
Depreciation and amortization																			(80,755	)
General, administrative and professional fees																			(15,554	)
Loss on extinguishment of debt																			(6	)
Merger-related expenses and deal costs																			(55,807	)
Other																			7,773
Income tax benefit																			6,209
Net income																		$	19,734