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ACQUISITIONS OF REAL ESTATE PROPERTY | 9 Months Ended
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Sep. 30, 2016
Business Combinations [Abstract] |
ACQUISITIONS OF REAL ESTATE PROPERTY | NOTE 4—ACQUISITIONS OF REAL ESTATE PROPERTY The following summarizes our acquisition and development activities during the nine months ended September 30, 2016 and the year ended December 31, 2015. We acquire and invest in seniors housing and healthcare properties primarily to achieve an expected yield on investment, to grow and diversify our portfolio and revenue base, and to reduce our dependence on any single tenant, operator or manager, geographic location, asset type, business model or revenue source. 2016 Acquisitions Wexford Acquisition In September 2016, we completed the acquisition of substantially all of the university affiliated life science and innovation real estate assets of Wexford from Blackstone for total consideration of $1.5 billion. The Wexford Acquisition added to our portfolio 23 operating properties, two development assets and nine future development sites. The properties acquired will continue to be managed by Wexford, which will remain a separate management company owned and operated by the existing Wexford management team. We have exclusive rights to fund and own future life science projects developed by Wexford. Other 2016 Acquisitions During the nine months ended September 30, 2016, we made other investments totaling approximately $42 million, including the acquisition of one triple-net leased property and two MOBs. Completed Developments During 2016, we completed the development of three triple-net leased properties (two of which were expansions of existing seniors housing assets), representing $31.6 million of net real estate property on our Consolidated Balance Sheets as of September 30, 2016. Estimated Fair Value We are accounting for our 2016 acquisitions under the acquisition method in accordance with ASC 805 and have completed our initial accounting, which is subject to further adjustment. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed in our 2016 real estate acquisitions, which we determined using level two and level three inputs:
|  | Triple-Net Leased Properties |  | Office Operations |  | Total
| (In thousands)
Land and improvements |  | $ | 1,279 |  |  | $ | 48,366 |  |  | $ | 49,645 |
Buildings and improvements |  | 12,558 |  |  | 1,322,598 |  |  | 1,335,156 |
Acquired lease intangibles |  | 163 |  |  | 203,174 |  |  | 203,337 |
Other assets |  | — |  |  | 98,137 |  |  | 98,137 |
Total assets acquired |  | 14,000 |  |  | 1,672,275 |  |  | 1,686,275 |
Notes payable and other debt |  | — |  |  | 47,641 |  |  | 47,641 |
Intangible liabilities |  | — |  |  | 108,132 |  |  | 108,132 |
Other liabilities |  | 380 |  |  | 60,233 |  |  | 60,613 |
Total liabilities assumed |  | 380 |  |  | 216,006 |  |  | 216,386 |
Noncontrolling interest assumed |  | — |  |  | 22,225 |  |  | 22,225 |
Net assets acquired |  | 13,620 |  |  | 1,434,044 |  |  | 1,447,664 |
Cash acquired |  | — |  |  | 19,119 |  |  | 19,119 |
Total cash used |  | $ | 13,620 |  |  | $ | 1,414,925 |  |  | $ | 1,428,545 |
Aggregate Revenue and NOI For the three months ended September 30, 2016, aggregate revenue and net operating income (“NOI”) derived from our completed 2016 acquisitions during our period of ownership were $14.0 million and $9.6 million, respectively. For the nine months ended September 30, 2016, aggregate revenue and NOI derived from our completed 2016 acquisitions during our period of ownership were $14.7 million and $10.2 million, respectively. Transaction Costs Transaction costs are expensed as incurred and included in merger-related expenses and deal costs in our Consolidated Statements of Income. For the three and nine months ended September 30, 2016, we expensed as incurred $14.0 million and $18.6 million, respectively, related to our completed 2016 transactions. 2015 Acquisitions HCT Acquisition In January 2015, we acquired American Realty Healthcare Trust, Inc. (“HCT”) in a stock and cash transaction, which added 152 properties to our portfolio. At the effective time of the merger, each share of HCT common stock outstanding (other than shares held by us, HCT or our respective subsidiaries, which shares were canceled) was converted into the right to receive either 0.1688 shares of our common stock (with cash paid in lieu of fractional shares) or $11.33 per share in cash, at the election of each HCT shareholder. Shares of HCT common stock for which a valid election was not made were converted into the stock consideration. We funded the transaction through the issuance of approximately 28.4 million shares of our common stock and 1.1 million limited partnership units that are redeemable for shares of our common stock and the payment of approximately $11.0 million in cash (excluding cash in lieu of fractional shares). In addition, we assumed $167.0 million of mortgage debt and repaid approximately $730.0 million of debt, net of HCT cash on hand. In August 2015, 20 of the properties that we acquired in the HCT acquisition were disposed of as part of the CCP Spin-Off. Ardent Health Services Acquisition On August 4, 2015, we completed our acquisition of Ardent Health Services, Inc. (“AHS”) and simultaneous separation and sale of Ardent to a consortium composed of an entity controlled by Equity Group Investments, Ardent’s management team and us (collectively the “Ardent Transaction”). As of the acquisition date, we recorded the estimated fair value of our investment in owned hospital and other real estate of approximately $1.3 billion. At closing, we paid $26.3 million for our 9.9% interest in Ardent which represents our estimate of the acquisition date fair value of this interest. Upon closing, we entered into a long-term triple-net master lease with Ardent to operate the 10 hospitals and other real estate we acquired. Other 2015 Acquisitions In 2015, we made other investments totaling approximately $612.0 million, including the acquisition of 11 triple-net leased properties; 11 MOBs (including eight MOBs that we had previously accounted for as investments in unconsolidated entities; and 12 skilled nursing facilities (all of which were disposed of as part of the CCP Spin-Off). Completed Developments During 2015, we completed the development of one triple-net leased seniors housing community, representing $9.3 million of net real estate property on our Consolidated Balance Sheets as of December 31, 2015. Estimated Fair Value We are accounting for our 2015 acquisitions under the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”). Our initial accounting for acquisitions completed during the year ended December 31, 2015 remains subject to further adjustment. 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:
| Triple-Net Leased Properties |  | Senior Living Operations |  | Office Operations |  | Total
| (In thousands)
Land and improvements | $ | 190,566 |  |  | $ | 70,713 |  |  | $ | 173,307 |  |  | $ | 434,586 |
Buildings and improvements | 1,726,064 |  |  | 703,080 |  |  | 1,214,403 |  |  | 3,643,547 |
Acquired lease intangibles | 169,362 |  |  | 83,867 |  |  | 184,540 |  |  | 437,769 |
Other assets | 174,093 |  |  | 272,888 |  |  | 403,046 |  |  | 850,027 |
Total assets acquired | 2,260,085 |  |  | 1,130,548 |  |  | 1,975,296 |  |  | 5,365,929 |
Notes payable and other debt | — |  |  | 77,940 |  |  | 99,917 |  |  | 177,857 |
Other liabilities | 45,924 |  |  | 45,408 |  |  | 46,734 |  |  | 138,066 |
Total liabilities assumed | 45,924 |  |  | 123,348 |  |  | 146,651 |  |  | 315,923 |
Net assets acquired | 2,214,161 |  |  | 1,007,200 |  |  | 1,828,645 |  |  | 5,050,006 |
Redeemable OP unitholder interests assumed |  |  |  |  |  |  | 88,085 |
Cash acquired |  |  |  |  |  |  | 59,584 |
Equity issued |  |  |  |  |  |  | 2,216,355 |
Total cash used |  |  |  |  |  |  | $ | 2,685,982 |
Included in other assets above is $746.9 million of goodwill, which represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed as of the acquisition date. Goodwill has been allocated to our reportable business segments based on the respective fair value of the net assets acquired, as follows: triple-net leased properties - $133.6 million; senior living operations - $219.1 million; and office operations - $394.2 million.

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