(11) Commitments and Contingencies

Legal Proceedings

From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Company’s business. The Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s business, prospects, financial condition, results of operations or cash flows. The Company’s policy is to expense legal costs as they are incurred.

Concentration of Credit Risk

Concentrations of credit risks arise when one or more operators, tenants or obligors related to the Company’s investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors various segments of its portfolio to assess potential concentrations of risks. The Company does not have significant foreign operations.

The following table provides information regarding the Company’s concentrations with respect to certain operators and tenants; the information provided is presented for the gross assets and revenues that are associated with certain operators and tenants as percentages of the respective segment’s and total Company’s assets and revenues:

The following table lists the Company’s senior housing concentrations:

	Percentage of Senior Housing Gross Assets				Percentage of Senior Housing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2014		2013		2014		2013
HCR ManorCare	11	%	11	%	10	%	10	%
Emeritus (1)	37		37		34		35
Sunrise Senior Living (“Sunrise”)(2)	17		17		11		13
Brookdale Senior Living (“Brookdale”)(1) (3)	11		11		12		12

The following table lists the Company’s post-acute/skilled nursing concentrations:

	Percentage of Post-Acute/ Skilled Nursing Gross Assets				Percentage of Post-Acute/ Skilled Nursing Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2014		2013		2014		2013
HCR ManorCare	89	%	88	%	86	%	88	%

The following table lists the total Company concentrations:

	Percentage of Total Company Assets				Percentage of Total Company Revenues
	March 31,		December 31,		Three Months Ended March 31,
Operators	2014		2013		2014		2013
HCR ManorCare	32	%	32	%	28	%	28	%
Emeritus(1)	15		14		12		13
Sunrise(2)	7		7		4		5
Brookdale(1) (3)	4		4		4		4

(1) On February 20, 2014, Brookdale and Emeritus signed definitive agreements to merge; the merger is anticipated to close in the third quarter of 2014. Contingent on the closing of this merger, on April 23, 2014, the Company agreed to amend all of its leases with Emeritus and enter into two RIDEA joint ventures with Brookdale (see Note 20 for additional information regarding these potential transactions).

(2) Certain of the Company’s properties are leased to tenants who have entered into management contracts with Sunrise to operate the respective property on their behalf. The Company’s concentration of gross assets includes properties directly leased to Sunrise and properties that are managed by Sunrise on behalf of third party tenants.

(3) Percentages do not include senior housing facilities that Brookdale operates on the Company’s behalf under a RIDEA structure.

HCR ManorCare’s summarized condensed consolidated financial information follows (in millions):

	March 31,		December 31,
	2014		2013
Real estate and other property, net	$	2,984.1	$	2,996.8
Cash and cash equivalents	169.7		141.8
Goodwill, intangible and other assets, net	5,170.0		5,171.3
Total assets	$	8,323.8	$	8,309.9

Debt and financing obligations	$	6,227.6	$	6,258.5
Accounts payable, accrued liabilities and other	1,049.7		1,013.4
Total equity	1,046.5		1,038.0
Total liabilities and equity	$	8,323.8	$	8,309.9

	Three Months Ended March 31,
	2014			2013

Revenues	$	1,054.3		$	1,066.3
Operating, general and administrative expense	(904.6		)	(907.7		)
Depreciation and amortization expense	(35.6		)	(36.8		)
Interest expense	(102.7		)	(104.4		)
Other income, net	2.9			2.3
Income from continuing operations before income taxes	14.3			19.7
Income taxes	(5.9		)	(6.3		)
Income from continuing operations	8.4			13.4
Loss from discontinued operations, net of taxes	—			(1.7		)
Net income	$	8.4		$	11.7

To mitigate the credit risk of leasing properties to certain senior housing and post-acute/skilled nursing operators, leases with operators are often combined into portfolios that contain cross-default terms, so that if a tenant of any of the properties in a portfolio defaults on its obligations under its lease, the Company may pursue its remedies under the lease with respect to any of the properties in the portfolio. Certain portfolios also contain terms whereby the net operating profits of the properties are combined for the purpose of securing the funding of rental payments due under each lease.

Credit Enhancement Guarantee

Certain of the Company’s senior housing facilities serve as collateral for $110 million of debt (maturing May 1, 2025) that is owed by a previous owner of the facilities. This indebtedness is guaranteed by the previous owner who has an investment grade credit rating. These senior housing facilities, which are classified as DFLs, had a carrying value of $373 million as of March 31, 2014.