(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				Percentage of Senior Housing Revenues
	June 30,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,
Operators	2014		2013		2014		2013		2014		2013
HCR ManorCare	11	%	11	%	10	%	10	%	10	%	10	%
Brookdale Senior Living (“Brookdale”)(1)	46		48		46		46		46		46
Sunrise Senior Living (“Sunrise”)(2)	17		17		11		13		11		13

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				Percentage of Post-Acute/ Skilled Nursing Revenues
	June 30,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,
Operators	2014		2013		2014		2013		2014		2013
HCR ManorCare	89	%	89	%	86	%	87	%	86	%	88	%

The following table lists the total Company concentrations:

	Percentage of Total Company Assets				Percentage of Total Company Revenues				Percentage of Total Company Revenues
	June 30,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,
Operators	2014		2013		2014		2013		2014		2013
HCR ManorCare	32	%	32	%	28	%	29	%	28	%	28	%
Brookdale(1)	19		19		17		17		17		17
Sunrise(2)	7		7		4		5		4		5

(1) On July 31, 2014, Brookdale completed its acquisition of Emeritus Corporation ("Emeritus"). These percentages of segment revenues, total revenues, segment assets and total assets for all periods presented are prepared on a pro forma basis to reflect the combined concentration for Brookdale and Emeritus, as if the merger had occurred as of the beginning of the periods presented. Additionally, on April 23, 2014, the Company agreed to amend or terminate its Emeritus (pre-merger) leases and enter into two RIDEA joint ventures with Brookdale (see Note 20 for additional information regarding these potential transactions).Percentages do not include senior housing facilities that Brookdale manages (is not a tenant) on behalf of the Company, under a RIDEA structure.

(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.

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

	June 30,		December 31,
	2014		2013
Real estate and other property, net	$	2,970.7	$	2,993.2
Cash and cash equivalents	150.7		141.8
Goodwill, intangible and other assets, net	5,099.9		5,174.9
Total assets	$	8,221.3	$	8,309.9

Debt and financing obligations	$	6,191.7	$	6,258.5
Accounts payable, accrued liabilities and other	996.4		1,013.4
Total equity	1,033.2		1,038.0
Total liabilities and equity	$	8,221.3	$	8,309.9

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013

Revenues	$	1,039.1		$	1,024.3		$	2,086.7		$	2,083.8
Operating, general and administrative expense	(914.5		)	(864.4		)	(1,810.3		)	(1,764.0		)
Depreciation and amortization expense	(35.3		)	(35.7		)	(70.9		)	(72.4		)
Interest expense	(102.2		)	(103.9		)	(204.7		)	(208.1		)
Other income (expense), net	1.6			(0.5		)	4.5			1.7
(Loss) income from continuing operations before income tax benefit (expense)	(11.3		)	19.8			5.3			41.0
Income tax benefit (expense)	4.6			(6.7		)	(2.2		)	(13.5		)
(Loss) income from continuing operations	(6.7		)	13.1			3.1			27.5
Loss from discontinued operations, net of taxes	(4.2		)	(3.0		)	(5.6		)	(5.7		)
Net (loss) income	$	(10.9	)	$	10.1		$	(2.5	)	$	21.8

Brookdale is subject to the registration and 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 Brookdale contained or referred to in this Quarterly Report on Form 10-Q has been derived from SEC filings made by Brookdale, as the case may be, or other publicly available information, or was provided to the Company by Brookdale, and the Company has not verified this information through an independent investigation or otherwise. The Company has no reason to believe that this information is inaccurate in any material respect, but the Company cannot assure the reader of its accuracy. The Company is providing this data for informational purposes only, and encourages the reader to obtain Brookdale’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.

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 $108 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 $372 million as of June 30, 2014.